Force Majeure clause – contract of affreightment – charterers not able to perform for reasons other than the force majeure event not entitled to rely on clause – substantial damages awarded on appeal to the Court of Appeal
A long term contract of affreightment was entered into between Classic Maritime, ship owners, and Limbungan, charterers, to ship iron ore pellets from Brazil to Malaysia.
Charterers were a subsidiary of steel producers in Malaysia who used the pellets in steel production.
The contract contained the following clause (32):
“Neither the vessel, her master or owners, nor the charterers, shippers or receivers shall be responsible for loss of or damage to, or failure to supply, load, discharge or deliver the cargo resulting from: Act of God…floods…accidents at the mine or production facility … or any other cause beyond the owners’, charterers’, shippers’ or receivers’ control; always provided that such events directly affect the performance of either party under this charterparty…”
During the term of the COA an accident happened at one, but not the only, mine in Brazil capable of supplying iron ore pellets for shipment to Malaysia.
Due to complex trading conditions both in Malaysia and Brazil, the charterers would not have been able to perform despite the force majeure event, in this case, the collapse of a dam.
Teare J held that the charterers were not entitled to rely on the clause because they wouldn’t have been able to perform in any event. They were thus in breach of contract.
Nevertheless, by reason of the compensatory principle in the law of damages, owners could not recover substantial damages because the charterers would have been excused the by the force majeure event irrespective of entitlement to rely on clause 32. He expressed his conclusion as a refusal to conflate breach of contract with measure of damages.
On the question of liability, he distinguished cases on the GAFTA contract where shippers were excused from performance by a stipulated force majeure event irrespective of their objective ability to perform.
Males LJ agreed with the finding on the first point but not the second and ordered substantial damages to be paid.
The error into which Teare J fell was caused by compartmentalising his analysis – clause 32 applied to both questions: liability and damages.
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