When businesses operate in a state of uncertainty or in the face of major disruptions, they often seek contractual or statutory relief. One of the options companies can resort to is relying on force majeure clauses in their contracts to excuse non-performance under specified circumstances. In this article, we discuss how force majeure clauses apply in Singapore and focus on the key provisions to review in your contracts.
Key Takeaways
- In Singapore, force majeure only applies if it is clearly specified in the contract between the parties.
- Singapore courts interpret force majeure clauses strictly and narrowly according to the wording of individual agreements.
- A Singapore force majeure lawyer can help with reviewing your contracts, negotiating with the other party, or drafting new force majeure provisions to ensure contractual relief in unforeseen circumstances.
Are Force Majeure Clauses Applicable in Singapore?
In Singapore, there is no blanket force majeure provision. Force majeure in Singapore only exists if it is expressly provided in the contract. Conversely, if the contract does not contain a force majeure clause, neither party can be excused for non-performance by claiming force majeure.
For this reason, a carefully drafted force majeure clause is critical to provide relief where the performance of a contract is hindered, delayed or rendered impossible. Singapore companies operating in conditions of high uncertainty or facing sustained disruptions due to causes such as a Hormuz blockade or similar events need to view force majeure clauses as an essential contractual safeguard.
How Do Singaporean Courts Interpret Force Majeure Clauses?
In turn, Singapore courts interpret force majeure clauses strictly and narrowly based on the wording of the contracts. Generally, the approach of Singaporean courts to interpreting force majeure clauses is based on the following principles:
- The event should fall squarely within the force majeure clause.
- The non-performance must directly result from the event; any indirect or incidental connections may not suffice.
- The burden of proof of the force majeure event lies with the non-performing party.
- The party relying on a force majeure clause should show that it has taken all reasonable steps to mitigate its consequences.
Key Provisions to Review in a Force Majeure Clause
Since the wording of a force majeure clause defines the extent to which non-performance may be excused, companies need to review their contracts to ensure the following key provisions are addressed.
What Force Majeure Events Are Covered and What Are Not
A well-drafted force majeure clause should clearly identify the most common events that would excuse non-performance, while remaining broad enough to capture unforeseen circumstances. Common examples of force majeure events include war, acts of terrorism, blockades, strikes, fire damage, floods, unforeseen absence or shortages of manpower, energy, or raw materials, and regulatory action.
How a Force Majeure Clause Is Invoked
In addition to describing the type of force majeure events, the provisions of the contract need to specify when specified events excuse liability for non-performance. For example, the parties may determine that a force majeure clause is triggered when a specific event prevents or hinders performance.
Duration of Force Majeure
Generally, contracts limit the duration of force majeure to a specific period during which unforeseen events exclude liability. The parties may further agree that if force majeure continues beyond this period, the contract may be terminated.
Force Majeure Notice Requirements
The contract should include specific requirements for giving notice of unforeseen circumstances that hinder performance, including the timing, the method of delivery, and the content of the notice. A failure to identify such requirements for the notice or comply with them may invalidate the claim.
Mitigation Obligations
According to existing practice, Singapore courts expect the party claiming force majeure to exercise “reasonable endeavours” and take reasonable mitigation steps to overcome the consequences of force majeure events. The parties to the contract may further clarify expected mitigation efforts to minimise uncertainty and set out mutual obligations.
What Are the Risks of Wrongly Invoking a Force Majeure Clause?
When a contracting party wishes to invoke force majeure provisions, they need to determine whether the event falls squarely within the clause. The affected party needs to further clarify if their non-performance directly results from the unforeseen events and if these events affect them as described in the contract.
Since the Singapore courts interpret force majeure clauses narrowly, the wording of the contract becomes critical. Misinterpretation of force majeure provisions or wrongly invoking them may lead to liability for wrongful breach of the contract or repudiation.
When to Seek Advice from a Singapore Force Majeure Lawyer?
Generally, involving a lawyer is recommended in most cases when contractual performance is already affected or could be negatively impacted by any unforeseen events such as global disruptions, blockades or narrowing of the supply routes, such as the Hormuz crisis.
A Singapore force majeure lawyer can help take pre-emptive action by reviewing the existing contracts to determine whether they cover non-performance due to unforeseen events or are applicable in specific circumstances. If your contract lacks a force majeure provision, a lawyer can help draft new clauses and negotiate them with the other party. For more information, please don’t hesitate to contact the IRB Law corporate and commercial lawyers for a personalised consultation.
FAQs
Does force majeure apply in Singapore if a contract does not include a force majeure clause?
No, in Singapore, force majeure clauses only apply if they are specified in the contract. In cases where unforeseen events lead to non-performance in the absence of a force majeure clause, you may consider resorting to the frustration of the contract.
Can increased operational costs amount to force majeure?
Generally, increased operational costs do not amount to force majeure unless specifically included in the contract among the other factors that excuse non-performance. Any specific relief is available if provided in the contract and depends on its wording.
Does force majeure excuse payment obligations?
Not necessarily. Depending on the wording, force majeure clauses can excuse non-performance but may not automatically relieve a party from payment obligations, unless specifically provided in the contract.
What is the difference between force majeure and frustration of contract?
Unlike force majeure clauses, which apply only if specified in the contract, frustration of contract is governed by the Frustrated Contracts Act 1959. However, the parties can claim frustration of contract only in very exceptional circumstances that have a fundamental impact on performance.
Can parties add force majeure clauses after a contract is already signed?
Yes, the parties can draft and negotiate new force majeure clauses or add new provisions to the existing ones after signing the contract. However, any changes must be agreed upon between the parties and properly documented to ensure they are enforceable.
