Who does this affect?

Construction, mining and resources industry participants.

What do you need to do?

When drafting a force majeure clause, look at the whole contract. We can help.

Authors
Scott Budd  
Partner

Mark Darian-Smith  
Partner

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Scott Budd  
Partner
T +61 7 3244 8054

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Mark Darian-Smith  
Partner
T +61 2 9296 2082

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Contractor required to make-up for short fall caused by force majeure event (FM Event)

The Queensland Court of Appeal upheld the Supreme Court’s decision that a force majeure (FM) clause in a coal supply contract did not prevent the customer from increasing future coal orders to make up for a short fall in supply caused by a force majeure event.

The contract provided that the parties’ contractual obligations were suspended during a FM Event. Numerous FM Events occurred, which prevented the production of coal, in turn causing a shortfall in supply. The FM provision also provided that the supplier was not required to make up any shortfall in coal supply caused by FM Events.

However, the customer was permitted by the contract to vary the amount of coal required each month provided that the total required did not exceed prescribed minimum and maximum supply tonnages.

After the end of the FM Events, the customer gave notice under the contract purporting to increase its future monthly requirements so as to recover the amount of the shortfall. The supplier argued that the FM clause operated such that it did not have to supply the extra coal. The Court of Appeal upheld the trial judge’s decision that the FM provisions had to be read with the contract as a whole and ruled that that the FM clause did not override the express entitlement of the customer to vary its required monthly tonnages as long as the varied amounts remained within the prescribed limits.