Court Rules Force Majeure Clause Encompasses COVID-19 Pandemic Repercussions

Court Rules Force Majeure Clause Encompasses COVID-19 Pandemic Repercussions

Written By
Joy Cunanan
Updated on
July 22, 2024
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An appeals court in Singapore recently issued a ruling that sheds light on the interpretation and scope of the term 'force majeure' within construction contracts. The court's decision affirmed that the COVID-19 pandemic and its consequential effects fall within the ambit of force majeure, a concept we have discussed previously in our article entitled “Frustration of Contracts After COVID-19.”

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Construction contract lawyers Bae Huey Tan and Glenn Sim, representing Pinsent Masons MPillay, a joint law venture between MPillay and Pinsent Masons in Singapore, expressed their agreement with the ruling. They noted that the court's interpretation aligns with the prevailing consensus among legal professionals, which recognizes the need for a broad and generous interpretation of force majeure clauses in light of the unprecedented circumstances presented by the pandemic.

The case at hand involved the court's analysis of the 'extension of time' clause within the standard form Singapore Institute of Architects Articles and Conditions of Building Contract – Lump Sum Contract (9th Edition) 2010 (the SIA Conditions). However, Tan emphasized that this ruling could have broader implications for the interpretation of force majeure clauses in other commonly used standard-form construction contracts.

Force majeure clauses are contractual provisions that modify the obligations and liabilities of parties under a contract when unforeseen and extraordinary events or circumstances beyond their control prevent them from fulfilling their contractual obligations.

Depending on their wording, these clauses can have various effects, including excusing a party from performance, granting an extension of time to perform, or even providing the right to terminate the contract. In a separate blog article, we delved into the basics of drafting 

The Singapore High Court Appellate Division examined the concept of force majeure in the context of a long-standing dispute between Ser Kim Koi and the contractors, GTMS Construction Pte Ltd (GTMS), and the architect, Chan Sau Yan, whom Koi had engaged for a housebuilding project.

One of the key issues under appeal was whether Yan had correctly granted an extension of time to GTMS based on force majeure, considering the Energy Market Authority's requirement for the installation of an overground distribution box to connect the main power supply for the houses. The court ruled that the authority's requirement did not constitute a force majeure event under the extension of time clause, as it did not meet the criteria of being an unforeseeable or external event beyond the control or contemplation of the parties.

In rendering its decision, the court provided valuable insights into the operation of force majeure clauses, as highlighted by Glenn Sim.

The court stressed that the "most crucial principle" in relation to force majeure clauses is to thoroughly analyze their precise construction, as it is pivotal to determining the exact scope and extent of the clause. You may also check out this article for more information on contract terms like force majeure and other clauses that may be included in contracts. 

In this particular case, since the contract did not contain a definition of 'force majeure,' the court referred to academic literature and previous judicial pronouncements to discern its meaning. The court concluded that "the essence of a force majeure event is a radical event that prevents the performance of the relevant obligation (and not merely making it more onerous), and which is due to circumstances beyond the parties' control." 

Regarding the clause's scope, Sim observed that the court seemed to view the standalone term 'force majeure'—one of several grounds for extension of time listed in the SIA Conditions—as a catch-all provision that complements the more specific grounds for extension of time specified in the contract.

Clause 23(1) of the SIA Conditions outlines the grounds for extending and recalculating the contract period and completion date. The first ground listed is 'force majeure,' followed by more specific grounds such as 'exceptionally adverse weather events' and 'war, hostilities, insurgency, terrorism, civil commotion, or riots.'

The court made a notable observation regarding the relationship between specific grounds and the general 'force majeure' provision within the clause. While acknowledging that many circumstances listed in the specific grounds could potentially qualify as force majeure events and circumstances, the court emphasized that the separate treatment of these instances in the clause indicated that the general 'force majeure' provision encompassed a broader range of circumstances beyond those explicitly specified.

To illustrate this point, the court specifically referenced the COVID-19 pandemic and its consequences as falling within the scope of the general 'force majeure' provision. It clarified that the term encompassed various aspects related to the pandemic, including the lockdown measures implemented during a substantial portion of 2020 and 2021, labor and material shortages resulting from the lockdowns, travel restrictions between countries, and the subsequent disruptions in supply chains and manufacturing processes.

However, it is important to note that certain disruptions, such as delays in receiving timely instructions or drawings from consultants and variations in the permanent and temporary works, were deemed as relatively common occurrences and not covered by the force majeure provision. The court reasoned that these events were expected and did not meet the criteria of unforeseeable circumstances beyond the parties' control.

Furthermore, the court clarified that there is no universally applicable principle stipulating that a party can only invoke a force majeure clause if it has taken all reasonable measures to mitigate the effects of the event. The determination of such matters depends on the specific contractual provisions. In this particular case, the extension of time clause explicitly required GTMS to demonstrate "due diligence and the taking of all reasonable steps... to avoid or minimize the same" before being eligible for an extension of time under clause 23(1).

Bae Huey Tan highlighted the significant impact of the COVID-19 pandemic on commercial activities and anticipated that future contractual provisions addressing similar circumstances would also account for extensions of time and monetary claims. In cases where explicit relief is not provided in the contract, this decision by the Singapore High Court Appellate Division reinforces the understanding that such events are likely to be regarded as force majeure events, subject to the specific language and provisions of the relevant contract.

Court Rules Force Majeure Clause Encompasses COVID-19 Pandemic Repercussions
Joy Cunanan
Joy is the Digital Transformation Manager at Lexagle. As a marketing professional in the Tech and B2B industry for over seven years, she is always on the lookout for the next best solution in the ever-changing online world. With a passion for helping businesses thrive and optimize operations, she shares her expertise in the power of contract lifecycle management and its capacity of easing the contracting process for busy organizations worldwide.

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