Force Majeure

in Australian Contract Law

Rafia Islam
ACICIS Intern
 The declaration of COVID-19 as a
pandemic led to mass border closures,
social distancing measures and domestic
health and safety regulations.

Background: The legal impacts of COVID-19 particular

has been particularly difficult on business
Impact of COVID-19 and commercial contracts with many
parties left being unable to perform their
contractual obligations.Here is where the
consideration of force majeure as a
contractual remedy is relevant.

Can COVID-19 be treated as a force

majeure event?
 In Australia, force majeure is not a common law
remedy.

Rather force majeure is seen as a product of

contractual mechanisms, only applicable if it is
specifically provided for within the concerning
Force Majeure contract.

in Australian Broadly, the purpose of a force majeure clause is to

relieve parties of liability, either fully or partially,
Law under the circumstance that they are unable to
perform their contractual obligations due to the
occurrence of events and conditions which are
beyond their reasonable control

The scope of the clause and how much protection it

offers the relying party is dependent on how it has
been defined in the contract.
 Where there is no operative force majeure
clause, parties may look to the Doctrine of
Frustration which is recognised under common
law in Australia.

Test for Frustration from Davis Contractors Ltd v

The Doctrine Fareham Urban District Council [1956] AC 696:

of Frustration 1. Frustrated event causes the performance

impossible or circumstances radically
different to what was negotiated when the
contract was initially entered into
2. Frustrated event was not caused at the
fault of either contracting party
3. Contract does not include any other
process or solution to dealing with the
frustrated event
 Criteria to be considered as a force majeure
event includes:
1. Occurred without human intervention.
2. Could not have been reasonably
foreseen.
3. Beyond the control and prevention
capabilities of the party.

Force Majeure To determine if a particular event will be

Events considered as force majeure, the parties will

need to look to the wording of the terms and
conditions stipulated in the contract. The scope
and effect of force majeure clauses differ
contract to contract.

Australian Courts interpret force majeure

clauses strictly because they want to ensure
that parties are abiding by the rules of contract
as close as possible.
 Looking to key elements of force majeure events,
COVID-19 satisfies the condition of being beyond
control of parties.

However since it is a contractual remedy, parties

need to look at the specific details of the force
Is COVID-19 a majeure provision in their contract and consider
the impact the pandemic has on their
force majeure performance obligation. Since COVID-19 has led
to other major regulation changes particularly in
event? Australia, parties can also look for expressions
such as ‘government action’ or ‘border closure’.

Additionally, it is likely that many contracts may

now exclude COVID-19 as a force majeure event
since they are aware of its impacts. This had
occurred to insurance contracts after SARS in
early 2000.
 General principle: party that relies on the force
majeure event carries the burden of proof and
must demonstrate evidence that the event has
caused an actual inability to perform promised
obligations.

Liabilities of Impacted party cannot rely on force majeure

reasons of uneconomic impact or that it will cost
parties & them more to follow through with the obligation.

burden of proof Additionally, the impacted party also need to

make sure they take all steps necessary to
mitigate or lessen the effects of the force majeure
event.

This was demonstrated in the case of Yara Nipro

Pty Ltd v Interfert Australia Pty Ltd [2010] QCA
164.
 Important to note: Since force majeure is not a
common law concept it is difficult to rely on
precedence.

Regardless, there a number of cases that

consider the operation of force majeure clauses.

Australian Case These two judgements in particular are

insightful:
Law
1. Hyundai Merchant Marine Co Ltd v Dartbook
Coal (Sales) Pty Ltd (2006) 236 ALR 115.

2. Gardiner v Agricultural and Rural Finance

Pty Ltd [2008] HCA 57.
 While force majeure is not recognised in Australian
common law, the concept is recognised in Indonesian Law
through the Indonesian Civil Code ("ICC”) under Article
1244 and 1245.

Both Australian and Indonesian law consider that force

Comparing Force majeure events are generally stipulated by terms and
conditions within the concerned contract between the
Majeure in parties.

Indonesia & Under Indonesian Law, certain situations, events

categorised as force majeure may even be established by
Australia the effect of relevant laws and regulations. An example of
this was the Ministry of Transportation which outlined
force majeure events such as forest fires within the
aviation sector.

Additionally while Australian law recognises the doctrine of

frustration as an alternative form of relief when there is no
force majeure clause, Indonesian law suggests that the
provisions of the ICC above will prevail.
End of Presentation
Thank you for listening!