University of York law student Phoebe Parker explores the implications of unexpected events in today’s rapidly changing world
How do you define an act of God? At first glance, this question doesn’t appear to have much to do with law. In contract law, however, the existence of the force majeure clause means that contracting parties are forced to answer that question.
Setting the scene
A force majeure clause allows for the suspension or termination of a contract if its performance is heavily delayed or made entirely impossible by an event so far beyond the control of either party that it can be considered an “act of God”. Via a handful of current examples, this article demonstrates how the perhaps seemingly niche clause can be a point of contention, due to an increase in drastic world events. Moreover, this clause can also boost fairness in the competitive world of commercial law, allow the law to protect weaker stakeholders and allow contracting parties to effectively mitigate risk.
Case study one: Pfizer and pilfered supplies
The Covid-19 pandemic was an uncontrollable act of God which delayed, frustrated and otherwise kiboshed hundreds of thousands of contracts, resulting in terminations and suspensions on a global scale.
One recent, and perhaps ironic, example, occurred in late 2022, when Poland claimed force majeure against Pfizer due to the pandemic subsiding unpredictably and uncontrollably. They have since refused to accept or pay for vaccines.
Pfizer acquired a contract with the 27 member states of the European Union (EU) for billions of vaccines in 2020, before they had even been approved for production. Now, as interest has plummeted and supplies have amassed, it faces contention from contracting parties like Poland. It is difficult to argue that the pandemic’s end is any more or less predictable than its beginning and it is unlikely that this will be the last time force majeure is evoked on this basis.
Most recently, in June 2023, the European Commission came to an agreement with Pfizer, but Poland continues to refuse to do so. The Polish Health Minister, in an interview with the Polish Press Agency, stated that the country “continued to believe that the conditions negotiated by the Commission… with Pfizer are completely inadequate”.
Case study two: Wildfires and withholding refunds
A type of event often incorporated into force majeure clauses is natural disasters, such as the 2023 Greek wildfires which started in July. The extent of the fires is certainly unpredictable and devastating but holiday operators are still attempting to mitigate their losses.
An article in the Financial Times noted that while some operators are offering refunds to those due to travel before 31 July, those who do not wish to risk it after this date may find themselves shouldering the cost. Equally, no Foreign, Commonwealth & Development Office (FCDO) warning has been issued against travel to the areas affected, further limiting the scope of refunds and rebooking. Travel insurance policies typically require FCDO travel advisories to have been issued before they will consider trip cancellation and interruption claims. Therefore, the lack of a formal advisory in the current circumstances leaves travellers with no contractual grounds on which to make claims.
As our climate continues to change, it is likely that there will be more events like this. The force majeure clauses present in contracts between holiday operators, travel insurers, holidaymakers and other key parties are, therefore, likely to be of increasing interest. A balance will have to be struck between financial surety for businesses and the facility for individuals to be reimbursed for loss over which they had no control.
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Find out moreFairness and Laissez-Faire
The world of business, especially in the United Kingdom, is often defined as laissez-faire, with contracting parties being, in many ways, free to set their own standards of fairness. It is a key concept of contract law that the law will not necessarily quash a clause because it is unreasonably detrimental to one party.
In force majeure clauses the same emphasis applies, with good drafting being key to the clause benefiting both parties. An example of where a force majeure clause could be used to enforce fairness or morality is a business extracting itself from Russia due to the conflict in Ukraine. Armed conflict can and has been included in definitions of an act of God. The war in Ukraine has taken an incalculable toll on the country and businesses can withdraw from Russia as an act of moral activism on the basis that it is entirely beyond their prediction or control.
As force majeure has no intrinsic meaning in English law, it is a concept which can be manipulated to best serve contracting parties. This type of clause, therefore, is a key example of the law adapting to serve those it governs.
AI and adapting employment contacts
Much like climate change, artificial intelligence (AI) continues to develop at a rapid rate and will have immeasurable, unpredictable consequences. This is especially the case when it comes to employment.
Even within the legal field, there is much talk of the administrative work often left to trainees being entrusted to AI instead. While this may sound a plot line from The Matrix or a vision from a dystopian future, a quick conversation with Google’s AI programme Bard, or OpenAI’s ChatGPT, will demonstrate that this is very much reality.
I asked ChatGPT what it thought of the premise of this article and within a few seconds it gave me a comprehensive 200-word answer, raising points around Covid-19 without any prompting. Force majeure clauses, then, could be used in the future to protect employees from unfair dismissal as a result of AI being able to carry out their jobs.
It is inevitable that AI will develop to fulfil certain roles far more cheaply and efficiently than human beings, but individuals having their jobs usurped in this way is not particularly fair and high levels of unemployment rarely contribute to a prosperous, lawful society.
Force majeure clauses in employment contracts could be drafted to include the advancement of AI as an unforeseeable act of God, beyond the control of the employee, thereby disallowing any termination of such contracts on this basis. This expansion of the concept of force majeure would protect the weaker contracting party in the face of an unimaginable event.
Concluding thoughts
Force majeure clauses are a staple of contract law. They require a logical consideration of the nebulous, perhaps philosophical, concept of what can be defined as an “act of God.”.
Due to an apparent increase in unpredictable events, like the start and end of the Covid-19 pandemic and climate change events like the Greek wildfires, this type of clause will continue to be a point of contention. The flexibility of the term, however, allows it to be manipulated to enforce fairness in the law. Looking to the future of the concept means that it can, and hopefully will, be expanded to protect vulnerable parties, like those employees who might be replaced by AI.
Phoebe Parker is a second-year law student at the University of York. Her research interests lie in corporate law, particularly in insolvency and interbank lending.
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