Force majeure — what does it mean and what does it cover?

By Nick Fischl

In 2012, an initial period of drought and water use restriction in certain parts of the country was followed by rainfall that made it one of the wettest years for half a century. Such conditions inevitably had an impact on food crops grown in the UK in terms of both yield and quality. Shortages or quality issues in relation to certain crops or varieties led inevitably to some price spikes, which meant that securing replacement crops at comparable prices elsewhere was difficult if not impossible. These kinds of conditions have in some cases left growers or others in the supply chain who have committed to supply a particular quantity or variety of crop at a fixed price at the beginning of the season facing serious commercial problems on two fronts. First, there will be the consequences arising from a poor crop resulting in generally poor returns. Second, there may be the prospect of defaulting on supply commitments leading to claims from the customer, whether a retailer, wholesaler or pack house, based on the additional cost that will be incurred in obtaining replacement supplies on the open market.

These kinds of weather-related issues have not surprisingly caused growers and others in the supply chain to take a careful look at their trading terms, and in particular the ‘force majeure’ clause, to see if these will excuse the supplier from meeting its obligations and hence avoiding liability for customer claims for the cost of replacement stock.

So what are the key points to consider in relation to ‘force majeure’ clauses? …


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