Global Conflict with Local Consequences
The escalating conflict in the Middle East has caused significant disruption to global energy markets, shipping routes, and supply chains. For Australian businesses, in particular, primary producers reliant on fuel, fertilizer and exports, these disruptions pose immediate commercial pressures.
As costs rise and supply becomes uncertain, many businesses are turning to force majeure clauses to assess whether contractual relief is available to them. However, the question of whether such relief is available is not straightforward and is heavily influenced by contractual wording and legal requirements.
What is Force Majeure?
Force majeure is a French term translating to “superior force”. In legal terms, it refers to unforeseen events outside a party’s control that prevents contractual performance. Examples can include war, natural disasters, pandemics, and civil unrest. The event must prevent or hinder performance, not just make it more expensive.
Under Australian law:
- Force majeure is not implied. It only applies if it is expressly included in a contract
- Courts interpret these clauses strictly and narrowly
- Relief depends entirely on the specific drafting of the clause
Impact on primary producers
If fuel shortages persist and supply conditions continue to deteriorate, some of these disruptions may give rise to potential force majeure claims. However, relief will only be available where the disruption renders performance impossible, unlawful, or fundamentally different, not merely more expensive or commercially difficult.
Practical Steps for Businesses
In light of ongoing disruption, primary producers should:
- Review existing contracts to identify force majeure clauses and their scope
- Carefully document supply chain disruptions and mitigation efforts
- Issue any required notices as early as possible
- Engage with counterparties to negotiate extensions or variations
- Seek legal advice before suspending or changing contractual performance
How M+E can support your business
Our Corporate + Commercial team assists clients in navigating supply chain disruptions by advising on force majeure risks, contractual compliance, and practical solutions. Timely, tailored advice can help protect your contractual and commercial position. Please contact Isabel: isabel@morganenglish.com.au
