Latest developments in force majeure clause interpretation: what does this mean for commercial leases?

The recent case of NKD Maritime Ltd v Bart Maritime (No. 2) Inc [2022] EWHC 1615 (Comm) considered whether temporary lockdown restrictions imposed as a result of Covid-19 activated a force majeure clause. The High Court held that the lockdown restrictions imposed by the Government of India did not amount to force majeure.

What is a force majeure clause?

A definition of force majeure is usually included in a contract. Broadly, a force majeure is an act, circumstance or event which is out with the control of the parties. Natural disasters or wars are commonly included as force majeure events.

A force majeure clause usually relieves one or both parties from performing their contractual obligations when specified events occur. The clause suspends the parties' obligations whilst a course of rectification is sought.

Applicability to commercial leases

Most commercial leases contain a force majeure clause.

The High Court found there had not been a force majeure as the lockdown restrictions in place in India did not satisfy the requirements for this type of clause. The court emphasised that the restrictions may have "delayed" or "hindered" performance but, they did not amount to an "inability" to perform. After the lockdown restrictions eased, the Seller would have been able to fulfil their contractual obligations.

Furthermore, a 12-month forced closure in the context of a 15-year contract (such as a lease) would not make the contract impossible to perform or radically different from what was originally planned. It was only temporary.

It is also useful to note that the court in NKD Maritime found that even if the lockdown restriction were long-lasting, meaning that the Seller was "unable" to perform, this would have had to undermine the parties "commercial adventure", which it had not.

The decision of the court in NKD Maritime reinforces the view that the outbreak of Covid-19 and subsequent lockdowns imposed by Governments and Local Authorities is unlikely to qualify as a force majeure event. For it to do so, the force majeure clause would need to include them as trigger events.