Key takeaways
Wording of force majeure clause is decisive
Outcome depends entirely on how the clause is drafted, especially the scope of events and thresholds such as 'prevent', 'hinder' or 'delay'.
Not all disruption qualifies as force majeure
Geopolitical tension or supply chain issues will not suspend performance unless they directly impact the specific project and are the true cause of the delay.
Mitigation steps are essential
Shipyards must show they took proactive steps to mitigate the disruption.
Recent geopolitical tension has again highlighted the vulnerability of global maritime supply chains. For the superyacht sector - where construction relies on complex logistics and tightly sequenced schedules - these disruptions raise a critical question: when can a shipyard legitimately rely on force majeure (FM) to justify delay or non performance?
In English law, the right to invoke FM exists only when, and in the terms, expressly provided for in the contract. This means the wording of any FM clause will ultimately determine the outcome.
When assessing a FM claim, courts or arbitration tribunals will generally consider:
whether the alleged FM event (FM Event) falls within the express definition of a FM Event (e.g. war, strikes, pandemic, unforeseen events beyond the reasonable control of the shipyard which actually affect progress of the construction);
whether notice requirements were strictly complied with;
whether the party was otherwise ready and willing to perform its obligations and the FM Event is truly the cause of delay; and
whether the invoking party used reasonable endeavours to avoid or overcome the FM Event.
Causation
A critical requirement for invoking FM is causation. In Classic Maritime Inc -v- Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102, the Court of Appeal held that a party invoking FM must demonstrate that it would have performed but for the FM Event.
This principle can be significant in yacht construction disputes. A yard cannot rely on geopolitical disruptions if delays were already, or in fact arising, due to unrelated issues such as workforce shortages or project management problems. The actual impact of the FM Event on the construction of the specific project must be shown.
Additionally, FM declarations issued by upstream suppliers or subcontractors do not automatically apply throughout the contractual chain. Each party must independently establish that the FM clause in its own contract has been triggered and that the specific contractual requirements (i.e., notice and mitigation) have been satisfied.
Prevention, hindrance and delay
Many contracts distinguish between events that 'prevent', 'hinder' or 'delay' performance:
Prevention usually requires objective impossibility and sets a very high threshold.
Hindrance or delay clauses are easier to establish but once again the actual impact on the construction project must be demonstrated: is the overall delivery of the construction actually held back by the shipyard’s inability to progress a particular element of the construction at this time?
Supply chain disruption and mitigation
Superyacht construction is vulnerable to supply chain disruptions.
English courts expect a party invoking FM to show that they actively attempted to overcome the disruption. In Seadrill Ghana Operations Ltd -v- Tullow Ghana Ltd [2018] EWHC 1640 (Comm), a drilling moratorium did not excuse performance where alternative options had not been sufficiently explored.
Applied to yacht construction projects, this may require a yard to demonstrate that it has attempted to:
source materials or equipment from alternative suppliers; and/or
arrange alternative shipping routes/logistics (via Red Sea or via EU logistics hubs).
The shipyard is not excused from performance and entitled to FM permissible delay simply because its own performance has become more difficult or more expensive. Furthermore, unless the contract provides otherwise, the Buyer is generally entitled to insist on performance in accordance with the original specification and not obliged to accept adverse deviations, for example cheaper and poorer quality materials.
Practical considerations for Buyers and shipyards
Review FM clauses carefully, particularly the wording of triggering FM Events and thresholds such as 'prevent', 'hinder' or 'delay'.
Ensure strict compliance with notice provisions.
Document and interrogate causation on the construction project and mitigation steps to determine whether the alleged FM Event is genuinely and legitimately the reason for the delay being claimed.
This article was co-authored by Associate, Mary Passa.
