WhatisForceMajeure?
March2,2017
WhatisForceMajeure?
ForceMajeurecomesfromaFrenchtermmeaning“agreaterorsuperiorforce”.Itmustbeanextraordinary
eventthatisoutsidethecontrolofeithercontractparties.Itmayincludenaturalevents(“actsofGod”),such
ashurricane,flood,orearthquake,oractsofpeople,suchaswarorcivildisturbance.Butthat’snottheonly
qualificationforForceMajeure.Generally,foraneventtobeconsideredForceMajeure,itneedstomeet
certainqualifications:
• Itwasunforeseen.Hurricanesinacoastalareasandearthquakesinareaswithseismicactivitymay
notcount.
• Theeventwasunavoidableandtherewerenoreasonablealternatives.Ifahurricanewasexpected
andtheshipmentcouldhavebeenreroutedtoadifferentport,itisnotForceMajeure.
• Ittrulyanddirectlyhinderedtheperformanceoftheobligation.Iftherewasanywayadiligentparty
couldhavestillreasonablyfulfilledtheobligation,itisnotForceMajeure.
• Theeventisexternal(oroutsidethecontrol)ofthepartiestothecontract
Itisalsoimportanttonotethatdifferentjurisdictionsmayapplytheseconceptsdifferently.
Arethereaddedcost?
Youmaythinkthatinsurancewillfullycoveryouwhenshippingcargo.However,cargoinsuranceisoftenonly
forthephysicallossordamagetocargo.AForceMajeuredeclarationmayresultinothercoststhatthecargo
ownerisresponsiblefor.For example, if a Force Majeure declaration caused a shipment to be rerouted to a
different port, theremaybeunintendedconsequences.
• Therewillbeadditionalcosttogetthecargotoitsfinaldestination.Thismayincludehiringanother
carriertotransportthecargofromthealternateport.
• Cargocoveragemayceasewhencargoistakenoutofthe“duecourseoftransit.”
• Cargocoveragemayceasewhenthecargoisdischargedatthealternateport.Inthiscase,itwould
beuninsuredfortherestofthetransit.
Even though Force Majeure is commonly found in contracts and it may seem standard, their ramifications can
be costly. Make sure you understand what you are signing.
Want to learn more about Force Majeure? Avalon’s RVP, Wanda Sample will provide an in-depth discussion
and provide claim examples in an NEI webinar coming up on March 17th. Click here for more information or
to register. This course is worth 1CCS/CES credit.
The Quest Newsletter is designed to provide critical information in the transportation industry. Avalon Risk Management is not responsible for the
accuracy or reliability of information contained in articles. The reader/user assumes all risk in the use of such information.
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