In the unpredictable world of construction, even the most carefully managed projects can face disruption. When extreme events hit, from natural disasters to pandemics, a force majeure clause may provide breathing room.
But how does such a clause actually operate once it’s in the contract?
This article provides a practical guide for principals and contractors to understand the mechanics of force majeure clauses in Australian construction contracts.
Force Majeure Is Contractual, Not Automatic
In Australia, force majeure is not a legal right that applies by default. It exists only if included in the contract. There’s no statutory backup and no implied term — and the common law doctrine of frustration is a higher standard and far more drastic, typically ending the contract altogether.
So once a force majeure clause is in place, everything turns on how it’s drafted and how it’s applied when the unexpected occurs.
When and How a Force Majeure Clause Is Triggered
A force majeure clause can’t be invoked lightly. In practice, a party seeking to rely on it must usually satisfy a few conditions:
- An event listed (or captured) by the clause has occurred
- The event was beyond the party’s control
- It prevented or substantially hindered performance
- The party took reasonable steps to avoid or overcome its effects
Courts expect parties to prove a real causal link, not just inconvenience. For example, supply delays caused by labour shortages may not be enough unless directly tied to a qualifying force majeure event.
In South32 Aluminium v Alinta Sales [2015] WASC 450, a gas supplier failed to prove that it couldn’t reasonably mitigate disruption from a pipeline explosion. The court held the force majeure clause didn’t apply, despite the severity of the event, because the supplier hadn’t explored alternative options.
The takeaway: not every disruption will meet the threshold, and effort to minimise impact is essential.
Notice Requirements: Strict and Time-Sensitive
Force majeure clauses almost always include strict notice obligations. Affected parties must give written notice promptly (often within 7–14 days) outlining:
- The nature of the event
- How it affects performance
- What measures are being taken
- An estimate of delay duration (if possible)
Failure to meet these timing or content requirements can result in loss of entitlement, even if the event itself qualifies. Some clauses also require an update when the event ends or performance resumes.
In practice, contractors should treat these requirements as compliance obligations, not just formalities.
What Relief Does the Clause Provide?
Relief varies between contracts, but generally falls into these categories:
Suspension of Obligations
The affected party is temporarily excused from performance of impacted duties, without being considered in breach.
Extension of Time (EOT)
This is the most common outcome. Contractors may receive more time to complete the works, avoiding liability for delay liquidated damages.
Cost Relief (Less Common)
Some clauses allow recovery of costs incurred due to the delay, but many contracts expressly exclude financial relief unless the principal agrees or the event triggers another clause (e.g. change in law).
Termination Rights for Prolonged Events
If the force majeure event persists beyond a defined period (often 90 to 120 days) either party may have a right to terminate the contract without fault. The clause should set out how payments, demobilisation and handover will be handled.
Interplay with Other Contractual Mechanisms
Force majeure doesn’t operate in a vacuum. Contractors and principals must consider how it interacts with:
EOT Provisions
Some contracts integrate force majeure directly into delay clauses, meaning the contractor simply claims an EOT on that basis. Others treat it as a separate process, with unique notice and proof requirements.
Suspension Rights
Principals may have a separate right to suspend works for force majeure events, with different financial consequences. For instance, suspension by the principal may carry cost consequences which are not equivalent not to force majeure.
Change in Law or Government Orders
In events like COVID-19 lockdowns, a force majeure clause may overlap with a “change in law” clause. Depending on the wording, one may offer broader or more favourable relief, especially where costs are concerned.
Insurance and Risk Allocation
A force majeure clause may suspend obligations, but it won’t fund recovery. Insurance policies (such as contract works or business interruption cover) should be reviewed in parallel to assess how insured events align with the contract’s list of force majeure triggers.
Enforcement and Risk of Dispute
Force majeure claims are sometimes challenged by the other party, especially where:
- The event was arguably foreseeable or manageable
- Delays were already occurring before the event
- Notice requirements weren’t properly followed
- The party claiming relief failed to mitigate
To reduce risk of dispute, ensure that:
- Notices are detailed and timely
- Evidence is kept (e.g. supplier letters, government orders)
- Alternative solutions are documented (even if unsuccessful)
The more transparent and diligent the approach, the more likely a force majeure claim will hold up under scrutiny.
Final Thoughts
Force majeure clauses are not just legal jargon tucked away in the back of a contract. They are operational tools that can make or break a party’s ability to survive a crisis without breaching the contract.
Once in place, the clause demands careful handling. For principals and contractors alike, success depends on:
- Understanding how the clause is triggered
- Following procedures to the letter
- Being able to show reasonable efforts to continue performance
- Navigating overlaps with other contract provisions
Done right, a force majeure clause gives both sides the flexibility to manage uncertainty – without opening the door to costly disputes.
