May 16th, 2024 by James Goudie KC

A force majeure clause relieves a party from its obligation to perform under a contract on the occurrence of specified events that are beyond the reasonable control of the parties.  Force majeure clauses commonly include, expressly or impliedly, a “reasonable endeavours” proviso, stating that a party cannot however rely on what would otherwise be a force majeure event if that party could avoid the effects of the event by the exercise of “reasonable endeavours”.  The appeal to the Supreme Court in RTI v MUR (2024) UKSC 18 concerned the interpretation of a force majeure clause in a shipping contract.  However, the central issue in the appeal was whether the exercise of reasonable endeavour may require the party affected, if it is to be entitled to rely on the force majeure clause, to accept an offer of non-contractual performance from the other contracting party in order to overcome the effects of the specified event.  Although this question arose in relation to a specific force majeure clause, it has significant implications for the interpretation of reasonable endeavours provisos and force majeure clauses more generally.

The Supreme Court unanimously allowed the appeal.  MUR’s rejection of RTI’s offer of non-contractual performance did not constitute a failure to exercise reasonable endeavours.  Therefore the reasonable endeavours proviso did not prevent MUR from relying on the force majeure clause.  MUR was correct that, absent express wording, a reasonable endeavours proviso does not require acceptance of an offer of non-contractual performance.  This conclusion is supported by principle and by the authorities.

There are several reasons of principle which support MUR’s case.

First, force majeure clauses, and reasonable endeavours provisos, concern the casual effects of impediments to contractual performance. The party affected must be able to show that the force majeure event caused the failure to perform. That means establishing that the failure to perform could not have been avoided by the exercise of reasonable endeavours.  Contractual performance means performance of the contract according to its terms.  Failure to perform means a failing to perform in accordance with those terms.  The casual question is to be addressed by reference to the parameters of the contract.  The object of a reasonable endeavours proviso is to maintain, not alter that contractual performance.

Second, the principle of freedom of contract includes the freedom not to contract.  This extends to the freedom not to accept non-contractual performance.

Third, clear words are needed to forego valuable contractual rights.  RTI’s interpretation is inconsistent with the general principle that contractual parties do not forego their valuable rights without it being made clear that that was their intention.

Fourth, certainty and predictability are of particular importance in the context of English commercial law.  MUR’s case is straightforward: absent clear wording, a reasonable endeavours proviso does not require acceptance of an offer of non-contractual performance. The focus of the reasonable endeavours inquiry is clear: what steps can reasonably be taken to ensure contractual performance.  The limits to that inquiry are also clear; they are provided by the contract.

By contrast, RTI’s case is not anchored to the contract.  It begs a number of questions and gives rise to considerable legal and factual uncertainty.  In particular, it requires inquiries into whether the acceptance of non-contractual performance would: (i) involve no detriment or other prejudice to the party seeking to invoke force majeure, and (ii) achieve the same result as performance of the contractual obligation in question.  There is no justification for creating needless additional uncertainty by departing from the standard of performance provided by the terms of the contract.

Comments are closed.