Frustration and hardship in
commercial contracts: a comparative law perspective
The common law
doctrine of frustration and the civil law doctrine of force majeure are both doctrines of respectable antiquity
that can trace their origins back to Roman law. The recent Coronavirus pandemic
(and its unprecedented impact on business) has focused attention on the way in
which these doctrines have been developed by courts in different jurisdictions
and prompted debate as to whether such developments now strike the right
balance between legal certainty on the one hand, and fairness to the
contracting parties on the other. Given Jersey’s unique status as a
“mixed” civil and common law jurisdiction, a comparison of English
law and French law in this area offers some interesting insights into the
likely scope of a modern Jersey customary law doctrine of force majeure.
1 The outbreak of the coronavirus pandemic
has sparked much debate amongst legal practitioners and academics about the way
in which different legal systems have grappled with the thorny question of when
a supervening event will excuse the non-performance of or a delay in
performance of a party’s contractual obligations.
2 The threat posed to public health by the
virus itself, coupled with the unprecedented measures taken by governments
around the world to protect their citizens, has caused widespread disruption to
many businesses and commercial enterprises. The kind of difficulties currently
being encountered include the closure of workplaces, interruptions to supply
and distribution channels (including the requisitioning by governments of
certain goods), the restriction of free movement of
personnel and resulting shortage of labour, the cancellation or postponement of
events and, last but no means least, severely weakened consumer demand.
of these difficulties are likely to prevent, or at least hinder, businesses
from fulfilling their contractual obligations. And even if performance is not
rendered physically or commercial impossible, it may still have become
this disruption, businesses will no doubt be asking whether such events are
capable of operating to relieve them from the performance of their contractual
and, if so, how this will impact on the rights of the other contracting party.
article seeks to address these questions from a comparative law perspective. We
shall therefore begin with an overview of the way in which French law and
English law have approached the issue of how supervening events impact upon
contractual obligations, both in circumstances where the parties’
agreement makes express provision for such events (a so-called “force
majeure” clause) and where it does not. We shall then look at how
Jersey law has approached this question by reference to the existing case law
and to other relevant sources of contract law. We shall conclude with some
observations about how the Jersey courts might look to develop the law in this
Where the contract contains a force majeure clause
commercial contracts will contain an express clause covering the circumstances
and effects of supervening and unforeseen external events affecting performance
of the contract. Such force majeure
clauses are generally part of the boilerplate provisions of most professionally
drafted commercial contracts. In general terms, the objective of a force majeure clause is to allow parties
to bring the contract to an end or excuse performance of the contract, entirely
or partially, or suspend that performance, on the occurrence of specified
circumstances beyond their control.
They are thus a form of contractual safeguard against supervening and
is possible to identify five major elements of a force majeure clause.
one finds the general definition of the force
majeure doctrine, although the adoption of a broad, definitional aspect of
the clause may be more commonly a feature of civil law/international drafting
than common law contracts. Wording can of course vary but in general the
requirement is for an external supervening event which is unforeseeable and
unavoidable. The ICC model clause for force
majeure and hardship clauses thus requires it to be shown that the force majeure event presents three
characteristics, as follows:
“[a] that such impediment is beyond its reasonable
control; and [b] that it could not reasonably have been foreseen at the time of
the conclusion of the contract; and [c] that the effects of the impediment
could not reasonably have been avoided or overcome by the affected
the trigger event which actually activates the operation of the clause itself.
In many common law contracts, the clause will list the specific events which
trigger the clause. These typically include circumstances as many and varied as
war, riot, natural disasters, acts of God, terrorist attacks, famine, strikes, embargo, epidemic, plague, civic
disturbance and government action.
common law systems, the contractual provisions concerning the triggering events
are often long and comprehensive as the parties will be dependent upon the
specific wording of the clauses, and will not be supplemented by any codified
provisions. As a result, drafters will often choose to include non-specific
language in the clauses designed to be a “catch-all” provision of
such significant external events, though subject to the ordinary rules of
example of such language would be “and similar events beyond the
reasonable control of the parties” or “or any other such causes
beyond the control of the parties.” Such attempts to broaden the ambit of
the force majeure clause are not,
however, always successful as the decision in Tandrin Aviation Holdings Ltd v Aero Toy Store LLC illustrates.
facts of that case were that Tandrin Aviation
(“Tandrin”) had agreed to sell an executive jet to
Aero Toy Store (“ATS”) for $31.75m. ATS paid a deposit of $3m to an escrow agent
and the balance was due on delivery of the jet. The world financial crisis of
2008 then intervened. ATS refused to take delivery of the jet, and Tandrin exercised a contractual right to terminate the
contract and claimed liquidated damages.
contract between Tandrin and ATS contained a force
majeure clause which included the following “catch-all”
provision: “any other cause
beyond the Seller’s reasonable control”. ATS sought to argue
that the “unanticipated,
unforeseeable and cataclysmic downwards spiral of the world’s financial
markets” was a “cause
beyond the Seller’s control” and thus triggered the force
argument was rejected by Hamblen J who held that that there was no basis for
construing the wording on which ATS sought to rely as including a downturn in
some civil law contracts, reference will be sometimes be made to the case law
provided scenarios of force majeure
(as per below) rather than a long list of specific events, a feature often
associated with common law drafting.
there is the impact of the triggering event on the performance of the contract.
Reference is generally made to events which render performance impossible. The
flexibility of the contractual route allows however for a lower bar to be
framed so that clauses may merely require that the performance becomes
“impracticable”, “delayed” or “hindered”.
There might also be an issue of causation, with certain clauses requiring the
party relying upon the force majeure
clause to show that the impact on performance was actually caused by the force majeure event in question, rather
than some unconnected cause.
there will be notification obligations whereby the other contracting party will
need to be formally informed within a reasonable time of the occurrence of the
triggering event, and of the impact that this will have on contractual
performance. Evidence may also be required of the force majeure event. This is an important provision allowing the
other side to react to the occurrence of a force
majeure event and undertake counter-measures or activate contingencies.
Indeed, the application of a force
majeure clause might expressly be subject to the timely notification to the
other side; in other words, failure to respect the notification procedure may
result in the party forfeiting their right to rely on the clause. Linked to
this, there may also be an obligation on the party who relies on the force majeure clause to ensure that its
effect is mitigated by taking all reasonable measures to limit the effect of
the triggering event.
there is the issue of the effect of the force majeure event on the
obligation under the contract. This obviously depends on the exact drafting but
the general consequence of successfully invoking force majeure is that the party invoking the clause is relieved
from its duty to perform and from responsibility for damages thereto from the
date of occurrence of the event. A force
majeure clause may allow a contracting party to terminate its contractual
obligations, or alternatively, in case of a temporary event, provide that
obligations are merely suspended until the impediment ceases. Another
possibility, illustrated by the French hardship procedure (examined further
below) is an obligation to renegotiate, whereby the hardship event obligates
the parties to discuss contractual modifications in light of the new circumstances.
a practical perspective, various comments can be made about the operation of
such clauses. (1) In most systems, the burden of proof falls on the party
intending to rely on the force majeure
provisions. In English law, it was held by Parker LJ in Channel Islands
Ferries Ltd v Sealink UK Ltd:
“it is for the party relying on a force
majeure clause to bring himself squarely within that clause”. It will
thus be beholden on that party to show that the circumstances in question make
out the elements referred to above as outlined in the contractual clause on
which they are relying.
Issues of construction of the relevant clause may arise in practice. It seems
in most systems that the provisions are construed narrowly against the party invoking
the clause (in English law, by virtue of the contra proferentem rule).
Problems can arise out of the fact that force
majeure clauses are rarely bespoke provisions—they are often inserted
by parties as boilerplate provisions as noted above, and may not always be
tailored to the specific contractual context. As is well-known, in English law,
there is a detailed set of rules relating to construction of contracts,
underpinned by objective principles.
many commercial contracts will of course include detailed force majeure
provisions, where this is not the case and contracts are silent on such issues,
then contracting parties will need to fall back on pre-existing doctrines, and
so we will turn to examine that question now.
Where the contract does not contain a force
the absence of an express force majeure clause, the question arises as
to whether a particular supervening event is capable of operating as a matter
of law to excuse non-performance and/or a delay in performance.
the next part of this article we shall consider this question first under French
law, and then under English law.
Overview of position under French law
23 Force majeure has long been
a part of French law.
The original 1804 version of the Code Civil set out in art 1148
“Il n’y a lieu à aucun dommages
et intérêts lorsque, par suite d’une force majeure ou
d’un cas fortuit, le débiteur a été
empêché de donner ou de faire ce à quoi il était
obligé, ou a fait ce qui lui était interdit. ”
definition was given of the doctrine, and it was thus left to the case law to flesh
out its constituent elements. Without entering into the subtle debate and
fluctuating cases in detail,
it has long been a feature of French law that it must be shown that a force majeure event has the following
characteristics: “irresistibility”, unforeseeability
and exteriority. “Irresistible” means that the event is not one
which the party could have prevented and that it renders the contractual
performance impossible rather than just simply more onerous. The lack of
foreseeability of the supervening event at the time of contracting is
essentially a fact-sensitive issue to be decided by the trial judge. The fact
that the force majeure event was
“exterior” entails that it was beyond the control of the party
invoking it, though certain cases cast doubt upon whether this element was
for effects of the finding of a force
majeure, the response was encapsulated by reference to the French
principle, “à l’impossible, nul n’est tenu.”
In case of a force majeure event of a
temporary duration, the contract was simply suspended for the duration of the
impediment. On the other hand, in case of a permanent impediment, the contract
was subject to résolution (and
thus discharged—see below), and the party in question was no longer under
any duty to undertake its contractual obligations (due to impossibility),
nor was he or she liable in damages.
The modern test for force majeure under French law
legal provisions concerning force majeure
were updated when the contract section of the Civil Code was reformed in 2016.
It is thereby stated in art 1218 that:
“Force majeure occurs in contractual matters
when an event beyond the control of the debtor, which could not reasonably be
expected at the time of the conclusion of the contract and the effects of which
cannot be avoided using appropriate means, prevents the performance of the
debtor’s obligation. If this situation is temporary, the performance of
the obligation is suspended unless the resulting delay justifies the
termination of the contract. If the difficulty is permanent, the contract is
automatically terminated and the parties are released from their obligations as
provided for under Articles 1351 and 1351–1.”
new text was supposed to be a restatement of the current case law rather than a
radical reform of the law, bringing together the aforementioned case law.
However, one area where commentators have observed a change in the law is in
respect of the now “automatic” termination on occasion of a
permanent force majeure event. In other words, unlike in the previous
regime where—despite doctrinal critique—termination/résolution for force majeure had to be ordered by the court,
the new approach allows specifically for an automatic (i.e. non-judicial) résolution
of contracts on occurrence of a force
majeure event. This was said to have been inspired by the various
international harmonisation projects:
“By providing for the termination (resolution) to
occur ‘by operation of law’, in order words automatically, without
a decision of the judge, the new law follows the solutions proposed by
different European harmonisation projects.”
It is also in line
with a more general liberalising of the approach to non-judicial résolution found in the new Civil
case of partial force majeure has
been covered by the new provisions. In such a case, where the impossibility
stemming from the force majeure event
is only partial (i.e. only affecting
part of the overall obligations), then the other non-affected obligations
remain due by the debtor.
Pandemic diseases under French law
the rich and interesting French case law on force majeure, there have
actually been many cases on pandemics. The French courts have indicated that an
epidemic can constitute a force majeure event,
though most such claims have not however been successful. In certain cases, the
French courts have found that the pandemic was not a force majeure event
as it was foreseeable given that the disease was already present/predicted in
the area in question;
or where the disease is minor or treatable then various courts have determined
that the force majeure event is not
commentators have thus concluded that it can be difficult to show that a
disease/pandemic will have the necessary features to constitute a force majeure.
The coronavirus pandemic may however be different, given the characteristics of
the current crisis: the new strain of the coronavirus, its highly contagious
nature and the speed with which it has spread worldwide, the severity of the
disease it causes and lack of any treatment as yet and, crucially, the
stringent governmental measures that have been taken in reaction to it, such as
lockdowns, social distancing and enforced closure of certain businesses.
Much of this suggests that the triggering event itself, namely the pandemic and
the ensuing governmental measures, are likely to satisfy the criterion of lack
of foreseeability given its sudden nature and global scope (unless the contract
was concluded since the outbreak of the disease) and, depending upon the exact
contract and sector of commercial activity, in many cases also irresistibility,
because many contracts will become impossible to perform due to the closure of
business and restrictions on movements (e.g.
in the hospitality and tourist sector).
2016 reform of the French Civil Code also ushered in a new doctrine of hardship
(imprévision) in art 1195 of the Code.
Inspired by the European and international projects,
this provision allows for the revision of a contract “[i]f an unforeseeable change of circumstances at the
time of the conclusion of the contract renders the performance excessively
onerous for a party that had not accepted to bear the risk.”
Professor Fauvarque-Cosson, one of the key academics
behind the reform of the Code, has acknowledged—
“Article 1195 of the Code Civil is one of
the most striking illustrations of the phenomena of hybridisation across legal
families and is also a testimony to legal pluralism within Europe. It draws its
inspiration from the European and international environment, whilst
differentiating itself from them in several respects.”
mechanism of the hardship/imprévision
provisions operates incrementally in different stages. The first part of the
provision sets out the conditions for the operation of the doctrine: where a
“unforeseeable change of
circumstances” entails that the contract becomes
“excessively onerous” for one of the parties. The notion of
“excessively onerous” has not yet been tested extensively in the
case law, but one commentator has drawn the parallel—interestingly from a
the Roman law doctrine of laesio enormis (i.e.
the doctrine of lésion)—
“the generally accepted idea is that the gap
between what one party receives and what the other provides must be so great
that a parallel is sometimes made . . . with laesio
second stage, which these pre-conditions activate, is that the contracting
party affected can ask the other party to renegotiate the contract. This has no
effect on the contract, which continues to apply.
third stage, set out in the second paragraph of art 1195, is that if that
renegotiation is not successful (“in case of a refusal or failure of the
renegotiations”), the parties (jointly) can ask the court to terminate or
adapt the contract. Finally, if all else fails, the one of the parties can
instead seise the court and request that it
intervenes to revise or terminate the contract.
developments in French contract law can be seen as a shift in policy in favour
of “contractual justice”, and away from a strict adherence to the
traditional doctrines of sanctity and the binding nature of a contract. As Professor
Fauvarque-Cosson has observed: “The traditional
conception of the judge, a simple servant of the contract, gives way to a new
‘contractual morality’ based on good faith and fairness.”
The reform was however supported by business with the Chamber of Commerce being
one of the driving forces behind the change due in part to the “desire
for greater flexibility and adaptability in the face of economic developments,
and of the fact that contractual relations are themselves becoming more and
hardship remedy could be relevant to the current circumstances (though
applicable only to contracts concluded after 1 October 2016). Its scope is much
broader than that of the force majeure
doctrine, as can be seen from the constituent elements outlined above. Its
obligatory ADR aspect, namely that of a compulsory renegotiation by the
contracting parties seems also to be well adapted to the current circumstances
of a global pandemic to which pragmatic solutions will be necessary between
economic operators, rather than simply a flood of commercial litigation.
English doctrine of “frustration”
to the decision of the English court in Taylor v Caldwell,
English common law did not regard a supervening event as an excuse for
non-performance of contractual obligations.
Instead, the courts applied the rule
that, once a contracting party had assumed an obligation, he was bound to
application of this rule of so called “absolute”
contracts is illustrated by the decision in Paradine v Jane. The defendant
lessee was sued for arrears of rent. He defended the claim on the
ground that he had been evicted from the property and kept out of possession by
an “alien enemy”.
This state of affairs, which the defendant could neither have foreseen nor
prevented, had deprived him of the income he had expected to receive from the
property and thus the source from which the rent was to be paid.
arguments cut no ice with the court, which held that he was liable to pay the
arrears in full. The ground for the court’s decision was as follows:
“. . . where the law creates a duty or
charge and the party is disabled to perform it and hath no remedy over, there
the law will excuse him . . . but when the party of his own contract
creates a duty or charge upon himself, he is bound to make it good, if he may,
notwithstanding any accident by inevitable necessity, because he might have
provided against it by his contract”.
“absolute” contract rule continued to be applied by the English
courts for some 200 years until its scope was substantially reduced by the
decision in Taylor. The
plaintiff in that case had entered into a contract for the use of a music hall
on four days for the purpose of giving four “grand concerts”. After
the contract was concluded, but before the first day on which a concert was to
be given, the hall was completely destroyed by a fire. It was accepted that
neither party was responsible for the fire.
the plaintiff had incurred substantial costs in preparing for the concerts and,
following their cancellation, found himself significantly out of pocket. He
therefore brought a claim against the defendant seeking compensation. The issue
which the court was therefore required to determine was who should bear the
losses that had been incurred.
court began by noting that the “parties
when framing their agreement evidently had not present to their minds the
possibility of such a disaster”, and accordingly that they had not
made any express stipulation with regard to it. The court acknowledged that,
where a contract was “positive
and absolute”, the usual rule was that the contracting party must
perform its terms even if, in consequence of an unforeseen event, the
performance had become unexpectedly burdensome or even impossible.
however, the court went on to hold that this rule did not apply to contracts
which were subject to a condition, whether express or implied. Further, where
it appeared from the nature of a contract that the parties must have known that
it could not be fulfilled unless some particular object continued to exist, it
followed, the court said, that when entering into contract they must have contemplated
such continuing existence as the “foundation”
of the contract. In those circumstances, and in the absence of any express or
implied warranty that the object would continue to exist, the contract was to
be construed as subject to an implied condition that the parties would be
excused from performance if performance became impossible because the object
had perished without any fault on the part of the contracting parties. The
plaintiff’s claim for damages was therefore dismissed.
is interesting about this decision from a comparative law perspective is that,
in reaching the conclusion that it did, the English court drew heavily on
principles adopted by the civil law. The court cited provisions of the Digest
which showed that Roman law had implied the same term which the court had
implied into the contract between the parties in Taylor into every obligation classified as an “obligation de certo
corpore” (i.e. an
obligation which has something certain as its object). The court also cited
commentary in Pothier’s Traité
des Obligations to the effect that a contracting
party is freed from his obligation when the subject matter of the obligation
has perished through no fault of his own, unless he has taken on himself the
risk of the particular misfortune which has occurred.
court then went on to hold as follows:
“Although the civil law is not of itself authority
in an English Court, it affords great
assistance in investigating the principles on which the law is grounded.
And it seems to us that the common law authorities establish that in such a
contract the same condition of the continued existence of the thing is implied
by English law.” [Emphasis added.]
principle laid down in Taylor
was soon applied in other cases. It was also incorporated into statute.
barely a decade after the doctrine was first introduced into English law, its
ambit was significantly extended in the case of Jackson v Union Marine Ins Co Ltd to encompass situations where the
parties’ “commercial adventure”
had been fundamentally impacted in some way by events beyond their control.
49 Jackson concerned a dispute between the parties to a
charter party agreement. Before the charter began, the ship ran aground. The
resulting repairs took nearly eight months to complete. The court held that the
charterer should be discharged from its obligations under the agreement because
“a voyage undertaken after the
ship was sufficiently repaired would have been a different voyage
. . . different as a different adventure”. [Emphasis
The modern test for frustration under
modern test for frustration was laid down by the House of Lords in Davis Contractors Ltd v Fareham
“So frustration occurs whenever the law recognises
that, without default of either party, a contractual obligation has become
incapable of being performed because the circumstances in which performance is
called for would render it a thing radically different from that which was
undertaken by the contract. Non haec in foedera veni. It was not this
that I promised to do . . . There must be . . . such a
change in the significance of the obligation that the thing undertaken would,
if performed, be a different thing from that contracted for.”
“The question is whether the contract which they
did make is, on its true construction, wide enough to apply to the new
situation: if it is not, then it is at an end.”
test laid down in Davis
was approved in National Carriers
Ltd v Panalpina (Northern) Ltd:
“Frustration of a contract takes place when there
supervenes an event (without default of either party and for which the contract
makes no sufficient provision) which so significantly changes the nature (but
not merely the expense or onerousness) of the outstanding contractual rights
and/or obligations from what the parties could reasonably have contemplated at
the time of its execution that it would be unjust to hold them to the literal
sense of its stipulations in the new circumstances; in such cases the law
declares the parties to be discharged from further performance.”
recent authorities suggest that, when applying the tests described above the courts
will generally adopt what is sometimes referred to as a “multi-factorial”
approach. This requires the court to have regard to a variety of matters,
including the terms of the contract itself, construed against the relevant
factual matrix; the parties’ knowledge, expectations, assumptions (and in
particular their assumptions as to risk at the time of the contract) at least
so far as these can be ascribed mutually and objectively;
the nature of the supervening event; and the parties’ reasonable and
objectively ascertainable assessments of possibilities of future performance in
the new circumstances.
The relevance of foreseeability
occurrence of an event which was actually foreseen by the parties will
generally exclude the operation of the English doctrine of frustration.
Where a supervening event was foreseeable (albeit not actually foreseen by the
parties) the issue the court has to consider is whether one or other of the
parties should, nonetheless, be taken to have assumed the risk of the
occurrence of the event as a matter of construction of the contract.
the degree of foreseeability required to exclude the doctrine would seem to be
a high one, namely whether the event was one which any person of ordinary
intelligence would regard as “likely” to occur.
Illustrations of the scope of the modern
English doctrine of frustration
will be clear from the way in which the test for frustration has been framed by
the English courts that the application of the doctrine is highly fact
specific. Previous decisions of the courts are therefore likely to be of
limited assistance in predicting the outcome of future cases. However, examples
of cases in which the doctrine of frustration has been successfully invoked may
offer some guidance as to the likely scope of the doctrine.
the courts have held contracts to be frustrated where:
(i) performance of the
contract has become unlawful for one party by reason of a supervening change in
the law or as a result of a supervening change of circumstances which rendered
unlawful that which was previously lawful;
(ii) the subject matter of
the contract has been destroyed;
(iii) in the case of a
contract for personal services, the performing party has died or has otherwise
become incapable of performing;
(iv) there has been a delay
in performance which is sufficiently long to frustrate the parties’
cancellation of an expected event may also operate to frustrate a contract. In Krell v Henry, the defendant agreed to hire rooms in
the plaintiff’s flat in Pall Mall on 26 and 27 June 1902 in order to see
the coronation processions of King Edward VII. The written contract made no
reference to the processions but it was clear from the relevant factual
background that both parties regarded the viewing of the processions as the
sole purpose of the hiring.
Unfortunately, the King fell ill and the processions were postponed. The
defendant refused to pay the balance of the rent and sought to be discharged
from his obligations under the agreement.
Court of Appeal upheld his refusal to pay on the grounds that “[t]he Coronation procession was the
foundation of this contract and that the non-happening of it prevented the
performance of the contract”. [Emphasis added.]
a different result was reached in Herne
Bay Steamboat Co v Hutton and the cases are not entirely
easy to reconcile.
commentators have tended to regard Krell
as the “exceptional” case; and in Maritime National Fish Ltd v Ocean Trawlers Ltd, Lord
Wright said that it was “certainly
not” an authority to be extended.
law has great difficulty in dealing with cases where part of a contract (but
not the whole contract) has become impossible of performance.
are certain cases, however, where the English courts have permitted a
contracting party to rely on a partial excuse for non-performance of a
contractual obligation. Thus, in Cricklewood
Property & Investment Trust Ltd v Leightons Investment Trust Ltd it was held that although temporary
war-time restrictions did not operate to frustrate a long-term lease, whilst
those restrictions were in effect they did provide a temporary excuse for not
complying with a covenant in the lease.
precise limits of the doctrine of “partial frustration” are,
however, difficult to discern, and the authorities do not always speak with one
Legal consequences of frustration
64 Frustration operates to “kill” the contract and to
discharge the parties from further liability under it. The contract is brought
to an end “forthwith, without more and automatically” (dicta of Bingham, LJ in J Lauritzen AS v Wijsmuller
BV (The Super Servant Two).
approach of the English common law was, broadly, to let losses lie where they
fell. Thus, a party who had paid money pursuant to the contract prior to the
happening of the frustrating event would have no grounds for recovering such
unsatisfactory nature of this principle led to the passing of the Law Reform
(Frustrated Contracts) Act 1943 (“the LRA”). The LRA only applies to contracts which are governed
by English law. A detailed analysis of its provisions is outside the scope of
this article, but in brief summary:
(i) There is provision
for (i) recovery of payments paid prior to the frustrating event (ii) relieving
payer from liability to make payments payable prior to frustrating event but
(ii) The payee is entitled to
set off “the amount of any
expenses incurred before the time of discharge . . . in or for the
purpose of the performance of the contract”;
(iii) The court has power to
award a sum of money payable in respect of any “valuable benefit” received by the paying party prior
to the discharge of the contract;
(iv) “Where a contract
can be divided into severable obligations, the LRA has no application to any
obligation which has been completely performed”;
(v) The parties may
“contract out” of the LRA.
The impact of supervening
events on contractual obligations under Jersey law
extent of the authority in Jersey as to the circumstances in which a
supervening event will operate to excuse a party from non-performance of his
contractual obligations is, unfortunately, rather scant.
construction of a force majeure
clause was, however, touched upon in the case of Mobil Sales & Supply Corp v Transoil
a case which concerned a contract for the supply of oil. The contract had been
concluded orally and there was a dispute about whether a force majeure
clause was an express or implied term of the oral contract.
Royal Court confirmed the use of such clauses in commercial contracts and went
on to provide the following overview of such clauses:
“It is clear from the authorities that a ‘force
majeure’ clause is frequently to be found in commercial contracts, that
such clauses vary in their terms and that where such a clause is included in a
contract it must be construed with due regard to the nature and general terms
of the contract and in particular with regard to the precise terms of the
the particular facts of this case, the court held that the contract did not
contain a force majeure clause in the
terms contended for by the defendant, but that even if it had the events that
had occurred would not have triggered it.
court then went on briefly to consider the question of whether the contract was
“frustrated”. Somewhat surprisingly, the court proceeded on the
basis that the principles to be applied were those of the English doctrine of
frustration. It went on to hold that, on the particular facts of the case, the
defendant had failed to show that the parties’ “commercial
venture” had been frustrated.
Mobil Sales case is also well-known
for having adopted an “objective” approach to the contract in
question, whereby the perspective of a reasonable person was to predominate
over that of the subjective understanding of the actual parties.
However, care needs to be taken as this approach in Mobil Sales has been
doubted in later cases.
The question of whether an objective or subjective approach should be adopted
in contract law has divided legal opinion in Jersey,
and the Jersey courts have yet to adopt an authoritative position on this
to the decision in Mobil Sales, the effect of a supervening event on a
contract governed by Jersey law arose again for determination in the case of Hotel de France (Jersey) Ltd v Chartered
Institute of Bankers (21 December 1995, unreported).
facts of that case were that the Chartered Institute of Bankers (“CIB”) entered into a contract
with the Hotel de France (“the Hotel”),
pursuant to which it was agreed that the CIB would hold their annual dinner in
a room at the hotel known as the “Empire Room”. Two days before the
dinner was due to take place, a fire broke out at the hotel. The Empire Room
was badly damaged. Although the hotel offered the CIB the use of an alternative
room, the CIB decided not to proceed with the dinner. The hotel then brought a
claim against the CIB for breach of contract.
Royal Court rejected the hotel’s claim. Without providing any reasons, it
simply held that “[t]he fire was
a ‘cas fortuit’ which threw the contract into a
position where it was not possible to perform the contract in the Empire
So, although the
judgment is helpful in clarifying that the doctrine of force majeure
does indeed form part of Jersey contract law, there is little guidance
to be derived from it as to the scope of that doctrine or the nature of its
Instead, the court confined its analysis to the question of whether the CIB
should have made an application to court for an order for résolution.
It held an application did not have to be made in cases of real urgency,
but that such cases were “exceptional”.
the absence of any meaningful guidance to be derived from case law, the Jersey courts
have frequently turned to the writings of Pothier when seeking to determine
questions of Jersey contract law. Indeed, as every student of Jersey law knows,
Pothier has often been described by the Jersey courts as the “surest” guide to contract law
in the Island.
deals with the doctrine of force majeure at various points in his Traité des Obligations.
He states that a party who has assumed an obligation to give a particular
object or thing (“corps certain”) to another will not be
held to that obligation in the case of a cas
fortuit or force majeure. There are,
however, three exceptions to this rule: the first is where the obligor is
already in breach of his obligation and has been called upon to perform by the
other party (“mis en demeure”);
the second is where there is an express agreement to the contrary; and the
third is where the obligor is at fault for the “force majeure”
having occurred in the first place.
illustrates the application of the doctrine with the example of a person who
borrows a horse from another and is then set upon by robbers who steal or kill
the horse. This event will relieve the borrower from his obligation to return
the horse to the lender, unless the reason he was set upon because he had
imprudently chosen to take a road which was known to be rife with robbers.
development of Jersey doctrine of force majeure
the principles expounded by Pothier provide a clear framework for the doctrine
of force majeure in Jersey law, the Jersey courts will inevitably have
to refine those principles and indeed to flesh them out so that they are
capable of application in new circumstances never conceived of by Pothier. As
the Royal Court frankly acknowledged in Selby v Romeril,
Jersey customary law cannot “be
set in the aspic of the 18th century”.
It must be flexible and capable of application to new circumstances as society
itself develops and changes. This does, however, beg a rather contentious
question: to what sources should the Jersey courts look when developing the
Jersey doctrine of force majeure?
obvious answer is the most recent version of the French Code Civil
together with decisions of the French courts interpreting those provisions. It
is right, however, to acknowledge that the modern French doctrine of force
majeure only applies to the situation where a supervening event has made
the performance of a contractual obligation impossible.
As such, it is narrower in scope than the modern English doctrine of
frustration, which as we have seen extends to the situation where the
parties’ “commercial adventure” has been frustrated.
It was in order to address this perceived lacuna that France introduced the
statutory right for parties to re-negotiate contracts in case of
“hardship” to which we have referred above.
the narrowness of the French doctrine,
there may be those who argue that Jersey law should simply adopt the modern
English law of frustration. However, we would caution against such an approach,
not least because there are aspects of the English doctrine which are
example, an unforeseen event which rather than preventing the performance of an
obligation merely delays its
performance will not operate to discharge the contract on the grounds of
frustration, unless the delay is such as to change the nature of the contract: Jackson. It follows, therefore,
that in the absence of a suitably worded force majeure clause,
the performing party may find himself liable in damages for the delay even
though it arose by reason of factors outside his control and which he could not
have foreseen. By contrast, as noted above, the French doctrine of force
majeure is sufficiently broad to encompass cases of delay, as long as the
other relevant conditions are made out (and in which case the contractual
obligations will merely be suspended).
English law has struggled to deal with what happens where an unforeseen event
leads to partial, but not total, non-performance of an obligation. Thus, in Cricklewood,
although the court did eventually hold that the parties’ obligations
under the lease were suspended during the period when the tenant was prevented
from occupying the property, the legal basis for the finding remains uncertain.
The court also expressly held that the contract was not frustrated. Again, the
French doctrine is sufficiently broad to encompass such cases.
further significant area of difficulty with the English doctrine of frustration
is that, although the test for “frustration of purpose” has been
set out by the English courts on many occasions (most recently in Canary Wharf (BP4) T1 Ltd v European
it remains extremely difficult to apply in practice. The authors of Chitty
note that the doctrine of frustration has an “affinity” with the
doctrine of mistake. This is because both doctrines seek to address the
question of whether a promisor should be held to his promise in circumstances
where the background against which the contract was originally negotiated has
changed fundamentally. In the case of frustration, the change has come about by
reason of a supervening and unforeseen event; in the case of mistake, it has
come about because the promisor was mistaken as to the true position from the
outset. Both cases, however, raise the question of whether the promisor can
justifiably say “It was not this that I promised to do”.
In seeking to define the ambit of the doctrine of frustration the English courts
have therefore encountered the same problems that they have encountered when
deciding what constitutes an operative mistake.
By contrast, however, the scope of the French doctrine (whilst narrow) is at
least—relatively!—clear and well defined.
in terms of remedies, the English common law broadly let losses lie where they
fell. It was in order to mitigate this unsatisfactory situation that the LRA
came to be passed. Similarly, the French Civil Code was modified by legislative
intervention to introduce the notion of hardship to allow for the courts, in
the absence of successful renegotiation by the parties, to have the power to
revise the contract.
proposals for reform?
began this article by posing a simple question: will the impact of the coronavirus
pandemic operate to excuse the non-performance, or delay in performance of
contracts governed by Jersey law?
short answer is that it depends. Most professionally drafted commercial
contracts will contain an express force majeure clause. Although the
precise scope of such a clause will be a matter of construction in each case,
the nature and scale of the disruption being caused by the pandemic should
trigger a typical force majeure clause.
a contract does not contain a force majeure clause, the customary law
doctrine will come into play. Although each case will turn very much on its own
facts, it is possible to state some general propositions.
given the wholly unprecedented scale and severity of the pandemic and of the
measures being taken to contain it, it seems unlikely that the Jersey courts
would hold that it was a foreseeable event so as to preclude the application of
the doctrine of force majeure.
a party is likely to be entitled to invoke the Jersey doctrine of force
majeure if he can show that the pandemic (or the government restrictions imposed
in order to contain it) has made performance of his obligation impossible.
Such cases might, for example, arise in the hospitality and entertainment sector,
where events such as weddings and concerts have had to be cancelled at short
notice due to unforeseen circumstances, such as unprecedented levels of staff
it will not be enough to show that the contract has become more onerous or less
profitable for the performing party. Nor is it likely to be enough to show that
there has been a radical change in the nature of the performing party’s
For example, the fact that the purchaser under a supply contract can no longer
achieve the margins he was hoping to achieve due to a lack of consumer demand
will not, of itself, excuse him from performing his obligations. If the
contract can be performed, it must be performed.
recent years, the perceived narrowness of the doctrine of force majeure
in France has led to calls for reform. As noted above, this culminated in 2016
in the introduction of the new doctrine of hardship (imprévision)
in art 1995 of the Code. It seems that the advent of the coronavirus pandemic
is now prompting similar discussions in England. Thus, in April of this year,
The British Institute of International
and Comparative Law hosted a meeting attended by
senior retired members of the English judiciary, academics and members of the
English Bar. The
purpose of the meeting was to consider whether there was a case for adopting
“a more creative, graded, but
nevertheless rigorous approach” to businesses and individuals
unable to fulfil their contractual obligations due to the pandemic. The likely
outcome of these discussions is of course yet to be known, but no doubt there
will be many in Jersey who will follow these developments with considerable
Duncan Fairgrieve is Senior Fellow in Comparative Law, British
Institute of International and Comparative Law, and Professor of Comparative
Law, Université Paris Dauphine PSL. He is a
barrister at 1 Crown Office Row, London and a French avocat.
Nicole Langlois is an advocate of the Royal Court of Jersey and an
English barrister specialising in commercial chancery work that is often
multi-jurisdictional. She practises from XXIV Old
Buildings in London.