Businesses operating in the UK are discovering that events outside their control, such as armed conflicts, restrictions imposed by the government, and supply chain blockages, pose real threats to contractual performance. These events can be described as force majeure events: unforeseeable and extraordinary circumstances out of a party’s control, that prevent or delay them from fulfilling their obligations under a contract. As a result of this, while often ignored, force majeure clauses have become a critical tool in contracts for managing risk.

This article explains how modern disruptions, such as war-related sanctions, can affect UK commercial contracts and why carefully drafted wording in force majeure clauses matters more than ever. This article also outlines practical drafting tips for businesses to future-proof their contracts and navigate the increasing unpredictability of the global trade market.

The Context

Back in 2024, the UK Supreme Court provided clarity on how force majeure clauses work, especially in the context of sanctions and restrictions on transferring money, through the 2024 decision of RTI Ltd v MUR Shipping BV (UKSC 2024). This article breaks down this ruling, which clarified that parties are not required to accept fundamentally different performance of an obligation under a contract to avoid a force majeure event. 

Considering recent tensions, we have also produced this article to highlight how UK contract law is impacted by these events, and how force majeure clauses come into play. 

What Are Force Majeure Clauses?

Force majeure clauses are essentially a contract provision that excuses or delays a party’s obligations when extraordinary events such as natural disasters, war, or government actions prevent them from performing. A force majeure clause in a contract aims to exclude liability on a party if they cannot perform their obligations when such events arise. These clauses are often drafted to suspend or terminate the contract until the situation is resolved. 

Where no force majeure clause exists, or if parties are unable to rely on a force majeure clause, parties may instead look to the doctrine of frustration. This doctrine may give parties a right to bring a contract to an end when an unforeseeable event makes performance of a party’s obligations under a contract impossible. However, this remedy is notoriously difficult to rely on under UK law.

What Happens When A Force Majeure Clause Is Not In Place?

Under UK contract law, a force majeure clause is not a doctrine recognised in its own right and will not be implied into agreements. The effect of a force majeure clause depends entirely on the wording expressly agreed between the parties.  Such clauses commonly reference events such as war, embargoes, government regulations, and restrictions on monetary transfers. They usually contain risks increasingly relevant due to the global geopolitical climate, for example, it is now common to see pandemics contained in the clauses following COVID. 

However, it is not quite right to suggest that the absence of a force majeure clause leaves the parties without any protection. In some cases, the doctrine of frustration may be relied on to bring the contract to an end where a supervening event means performance of the contract is impossible, or transfers obligations into something fundamentally different to what was originally agreed. Having said this, frustration is difficult to rely on and cannot be applied simply because performance has become more difficult, expensive or commercially unattractive. 

Therefore, in practice, force majeure clauses remain the principal tool for allocating risk in this area, and this underscores the importance of careful and precise drafting in agreements to ensure that foreseeable risks are properly addressed.

The Supreme Court Ruling Every Business Should Know: RTI v MUR

The UK Supreme Court decision  RTI v MUR is one of the most significant clarifications of force majeure principles.

The Core Issue: The “Reasonable Endeavours” Debate

Part of the force majeure clause covers “reasonable endeavours”. The question at the heart of this case was: Does the clause require a party to accept a non-standard workaround, like getting paid in a different currency, to get around the disruption? 

The Background Of RTI v MUR

• Under the contract, MUR was entitled to be paid in US dollars. 
• In April 2018, US sanctions were imposed on RTI’s parent company, and RTI fell subject to the same restrictions as a majority-owned subsidiary. 
• MUR gave notice of force majeure and suspended shipments. RTI disputed this and offered to pay in euros and cover any additional conversion costs. MUR refused to accept this non-contractual workaround. 

Supreme Court’s Unanimous Holding

The UK Supreme Court unanimously held that the affected party, MUR in this case, is not required to accept a non-standard workaround, such as accepting payment in a different currency, even if doing this might assist in reducing the impact of the force majeure event. 

What The Judgement Means For Contract Drafting

The judgment:

• Highlights that core contractual rights, like a right to be paid in a specific currency, cannot be replaced without clear wording. 
• Confirms that “reasonable endeavours” does not extend to accepting a fundamentally different performance of the contract, like paying in a different currency.
• Provides commercial certainty, especially when considering disruptions which are driven by sanctions.

This decision therefore strengthens a party’s ability to rely on force majeure clauses where sanctions arising from war impede contractual obligations.

Tips For Drafting Force Majeure Clauses

Businesses should continue to reassess how their force majeure clauses are drafted, considering the current state of the global economic climate. Businesses are recommended to:

• Precisely define the events covered 

Clauses should list traditional risks such as war, embargoes, terrorism, and any emerging threats such as cyberattacks, pandemics, government shutdowns, and monetary transfer restrictions. 

• Set out clear notice requirements

Parties should specify how and when notices for a force majeure claim must be given and what documentation must accompany it. 

• Clarify the scope of “Reasonable Endeavours”

Following the decision in RTI v MUR, parties should consider whether they want to:

• expressly allow or exclude obligations to accept alternative performance of the contract; 

• expand or limit the obligations in the contract for a party to mitigate when sanctions or monetary restrictions apply;

• address jurisdictional differences, as some countries do not recognise force majeure; and

• review existing and future contracts to ensure that appropriate protections are included for force majeure events.

Preparing For The Unpredictable: Final Thoughts For Businesses

Force majeure clauses in UK contract law have entered a new era. This era is shaped by global conflict, economic sanctions, and insistence from the courts on parties’ certainty of their contracts.

The UK courts have acknowledged that such war-related sanctions and government restrictions can severely disturb international contractual arrangements. 

The decision in RTI v MUR is a reminder to businesses that parties cannot just abandon their contractual obligations in crisis conditions.

Businesses must remember:

• Good drafting is essential: contracts must clearly set out the scope of force majeure protection. The courts have a strict approach to interpreting force majeure clauses; parties must rely on the wording they have negotiated.
• Sanctions and monetary restrictions must be explicitly addressed: especially where international payments or supply chains are involved.

In conclusion, force majeure is no longer a boilerplate clause. It is a strategic tool for managing global instability. Businesses that proactively update their contracts will be better able to handle the risks caused by war, sanctions and global tensions, which in the current world state, is of vital importance.

For businesses reassessing their contracts in light of current global instability, we are here to help provide clear, practical support. Our expert Business Team can help businesses strengthen their force majeure clauses to ensure they properly address modern risks and minimise disruption. Please do not hesitate to contact a member of our team today.