Force Majeure Clauses and Construction Contracts

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FORCE MAJEURE CLAUSES IN CONSTRUCTION CONTRACTS

Prepared by Lowell A. Westersund, Q.C. Partner Fraser Milner Casgrain LLP

March, 2008

Montréal Ottawa Toronto Edmonton Calgary Vancouver New York www.fmc-law.com The primary purposes of construction contracts are to clarify responsibilities (including performance and payment obligations) and to allocate risk. It is in regard to the latter purpose that the concept of force majeure plays an important role. Such clauses serve to deal with the risk of events which fall short of frustration. Such clauses can be successfully employed to recognize industry or project specific risks. By way of example, a number of years ago the writer dealt with a pipeline claim that arose from the
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3 It is the intention of this article to highlight elements that require careful and specific consideration of the drafting of force majeure clauses. I. Purpose of Force Majeure Clauses

Force majeure clauses exist to exclude liability where unforeseen events beyond a party 's control prevent the performance of its contractual obligations. The Supreme Court of Canada in Atlantic
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Atlantic Paper Stock Ltd. v. St. Anne-Nackwawic Pulp & Paper Co., (1975), 56 D.L.R. (3d) 409 (S.C.C.) [Atlantic Paper]. 2 Atlantic Paper, ibid.; Tennants (Lancashire) Limited v. C. S. Wilson & Company Limited [1917] A.C. 495 (H.L.); Brauer & Co. Ltd. v. James Clark (Rush Materials), Ltd., [1952] 2 All E.R. 497 (C.A.); Re: Tom Jones & Sons Ltd. v. The Queen in Right of Ontario (1981), 119 D.L.R. (3d) 684 (Ont. H.C.); Northern Indiana Public Service Company v. Carnon County Coal Company, 799 F. 2d 265 (1986); Langham-Hill Petroleum, Inc. v. Southern Fuels Co. 813 F. 2d 1327 Cert. denied, 108 S.Ct. 99 (1987); Blythe & Co. v. Richards Turpin & Co. (1916), 85 L.J.K.B. 1425. 3 As cited in Lyman, infra note 14 at 35.

-3Paper Stock Ltd. v. St. Anne-Nackwawic Pulp & Paper Co. 4 , the leading Canadian force majeure decision, describe the purpose of force majeure clauses as follows: [A force majeure clause] generally operates to discharge a contracting party
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