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"War and geopolitical instability have pushed force majeure provisions from boilerplate to board‑level, particularly for construction supply chains exposed to sanctions, currency restrictions and government action."
War and geopolitical instability have pushed force majeure provisions from boilerplate to board‑level, particularly for construction supply chains exposed to sanctions, currency restrictions and government action.
The UK Supreme Court’s recent guidance in RTI Ltd v MUR Shipping BV [2024] UKSC 18 underscores that English courts will enforce contracts according to their terms whilst recognising that “reasonable endeavours” to overcome an impediment do not extend to accepting non‑contractual performance (such as payment in a different currency) – a point with clear relevance where sanctions or wartime measures disrupt payment mechanics.
For construction stakeholders, the immediate takeaway is twofold. First, expect courts to read force majeure clauses strictly, because relief turns on the language you agreed. Second, in conflict‑driven scenarios such as sanctions, embargoes or navigational hazards, parties must evidence the causal link between the event and the inability to perform and take realistic steps to overcome it without being compelled to accept a fundamentally different bargain.
Armed conflict and global instability often generate steep increases in the cost of key construction materials, such as steel, fuel, copper or timber and create severe supply‑chain delays. Wars disrupt logistics, trigger sanctions and inflate energy prices, all of which feed directly into construction cost escalation. For example, the Russian war in Ukraine caused significant increases in the price of steel and fuel and created widespread supply‑chain disruption, forcing contractors to revisit their risk allocation for cost increases. Similarly, broader tariff regimes and economic retaliations that are often politically driven, have had inflationary effects on construction materials, making fixed‑price contracting markedly riskier.
Force Majeure under English Law
Under English law there is no standalone doctrine of force majeure, the concept operates only if the parties have included an express clause allocating risk for supervening events outside their control (for example, war, terrorism, blockade or government action). In practice, this means the availability and scope of relief depend entirely on the drafting, definitions (what counts as a qualifying event), thresholds (“prevented”, “hindered” or “delayed”) and procedural steps (notice and mitigation) vary widely between contracts and will be applied as written.
To rely on force majeure, a party typically must demonstrate (i) a contractually defined event occurred; (ii) that event caused the non‑performance or delay; and (iii) the party complied strictly with the clause’s notice and mitigation requirements.
Importantly, shortfalls on notice can be fatal. English courts also scrutinise “reasonable endeavours” obligations. Whilst parties may be required to take practical steps (for example, licensing to permit sanctioned payments), they are not required to accept non‑contractual performance to “cure” the impediment. This is an approach confirmed by the Supreme Court and one of direct significance in wartime and sanctions contexts.
A party trying to rely on a force majeure clause must usually also show that it has taken reasonable steps to avoid the impact of the force majeure event.
Extension of Time as relief for Force Majeure
Because the force majeure remedy is contractual, the consequences of a valid force majeure event are those the contract specifies, typically suspension of obligations, relief from liability for delay, extension of time and (if the event persists) termination rights, rather than compensation. There must be a causative link between the event and the delay in performance for which the party seeks an extension of time. A delay will usually be at the contractor’s risk, unless there is an express provision in the contract for an extension of time in force majeure circumstances.
Careful drafting and strict compliance are therefore central to securing protection when conflict disrupts construction projects.
Increased Costs
Employers and funders have traditionally expected the contractor to take the risk of fluctuations in labour and materials prices. Increased costs alone, no matter how extreme, rarely qualify as force majeure. Force majeure clauses typically deal with inability to perform, not performance that is merely more expensive or less profitable. This is consistent with the baseline rule recognised in case law, where contractors generally bear the risk of material price increases arising out of conflict unless the contract expressly provides otherwise.
In practice, this means that even war‑driven shortages and cost spikes will not usually excuse performance unless (i) they fall within the contract’s defined force‑majeure events and (ii) they prevent or hinder performance, rather than simply increase costs.
Under NEC contracts, events such as adverse weather conditions and force majeure will both entitle the contractor to additional payment, unlike under JCT or ICC forms where these are typically time-only events.
"Force majeure clauses typically deal with inability to perform, not performance that is merely more expensive or less profitable."
Where a contract includes a price‑escalation clause, this is the primary mechanism through which a contractor can seek compensation for increased material or labour costs. These clauses may take several forms. Any‑increase clauses, entitling a contractor to reimbursement for any price increase occurring after contract execution. Threshold clauses, where only “significant” increases, above a set percentage or comparable benchmark, are compensable. Delay‑linked escalation clauses, which permit recovery only where project delays push procurement into a more expensive market.
Escalation clauses were once uncommon, but rising tariffs and post‑pandemic volatility have prompted widespread adoption in sophisticated construction contracts. We wrote about trade tariffs in our recent article here.
In case there are no price‑escalation clauses in the contract, parties will look at force majeure, even if it is not the best solution for pure cost-increases issue. Force majeure clauses may excuse delay caused by war‑induced shortages but will very rarely justify additional payment. Traditionally, force majeure relief under English law results in time, not money.
If the force majeure clause is broadly drafted (e.g. includes “government action”, “blockade”, “acts of war”), a contractor may seek to argue that cost‑induced delays are excusable, but this almost never translates into entitlement to additional payment unless the clause explicitly allows it.
Given that war regularly triggers sanctions, export bans, tariffs and currency controls, contractors may seek relief through change‑in‑law clauses. Modern drafting guidance recommends explicitly including tariffs, trade restrictions and import/export controls within these provisions to allow for monetary adjustment.
Reduction of LADs when Extensions of Time are Granted
Where a contractor is awarded an Extension of Time (“EOT”), the primary commercial effect is the reduction or elimination of exposure to Liquidated and Ascertained Damages (“LADs”). Recent commentary highlights that contractors often pursue EOTs specifically to avoid LAD liability, with the connection between the two concepts firmly embedded in UK construction law. Under the prevention principle, an employer cannot impose LADs for delay they themselves caused.
Recent analysis also notes that time-bar provisions and strict notice compliance particularly in JCT contracts can be fatal to both EOT and associated LAD relief, as emphasised in FES Ltd v HFD Construction Group Ltd [2024] CSIH 37, where failure to meet contractual notice requirements jeopardised the contractor’s entitlement.
Suspension rights
Suspension rights in UK construction law arise only under contract or statute, with no freestanding common‑law right to suspend. The Technology & Construction Court confirmed this in Energy Works (Hull) Ltd v MW High Tech Projects (UK) Ltd (2023), firmly rejecting the proposition that a contractor may suspend works at will where the contract is silent. The court reiterated that even where the employer is in breach, the innocent party must either affirm or terminate the contract; there is “no third way” allowing suspension without consequence. Wrongful suspension exposes the contractor to termination or damages claims, underscoring the need for careful compliance with any express contractual or statutory mechanism.
Where contracts do provide a suspension mechanism most commonly for non‑payment, strict adherence is required. Under the Act, a statutory right to suspend arises only where a notified sum has not been paid by the final date for payment. Commentary following Multiplex Construction Europe Ltd v R&F One (UK) Ltd [2019] EWHC 3464 (TCC) confirms that bespoke clauses expanding suspension rights will be enforced if drafted clearly, but contractors must still apply the contractual mechanism precisely. Failure to follow the mandated procedure renders the suspension wrongful, with courts and practitioners repeatedly warning of the severity of the consequences.
Comparison of JCT, NEC and FIDIC on Price Adjustment
JCT contracts traditionally take a risk‑allocation model in which the contractor bears the risk of price fluctuations unless a fluctuation or change-in-law clause applies. JCT forms emphasise certainty and traditional allocation of commercial risk where the risk is allocated towards the contractor and away from the employer. Accordingly, unless amended, JCT provides limited avenues for contractors to recover wartime or force majeure‑driven cost escalation, even where such events cause material price swings.
NEC4, by contrast, adopts a proactive, compensation‑event framework, allowing cost recovery where certain events materially impact the works, including force majeure-like circumstances.
FIDIC sits between the two. While traditionally retrospective in its cost assessment, its Red, Yellow and Silver Books allow monetary adjustment through defined contractual mechanisms, though still with more limited flexibility than NEC.
Contractors Keeping Good Records of Mitigation Efforts
Parties should keep in mind, that it is not only their duty to mitigate, but also their duty to prove mitigation efforts via contemporaneous records.
In Southampton Container Terminals v Hansa Schiffahrts [2001] EWCA Civ 717, the Court of Appeal examined the claimant’s actions following the negligent berthing of the Maersk Colombo, which toppled a 1,200-tonne quayside crane. The claimant sought the full cost of reinstatement, while the defendant argued for market value damages. The court scrutinised whether the claimant’s decision-making process had been reasonable, including how the crane’s position was managed, what precautions were taken and whether steps could or should have been taken to avoid or limit the loss. Critically, the judgment noted the operator’s own operational manuals and internal procedures, and whether contemporaneous evidence showed they had been followed. The claimant was found contributorily negligent and the absence of proper contemporaneous precautionary records contributed to the 15% reduction in damages.
In The Board of Governors of the Hospitals for Sick Children v McLaughlin & Harvey, the court addressed the reasonableness of remedial schemes and emphasised that when reinstatement works are technically complex, the plaintiff’s reliance on expert advice must be evidenced.
"In short, parties must act reasonably in choosing remedial options and maintain evidence justifying their decisions."
And in McGlinn v Waltham Contractors [2007] EWHC 149 (TCC), the court conducted a detailed analysis of whether demolition was a reasonable step and placed considerable weight on the claimant’s contemporaneous records, expert reports, investigative documentation and correspondence leading up to the demolition. Whilst the court accepted that expert-led decisions may justify more extensive remedial works, it stressed that such decisions must be supported by contemporaneous evidence, showing why repair was not feasible and why demolition was necessary. In the absence of such a record, the claimant risks failing to meet the threshold of demonstrating reasonable mitigation.
In short, parties must act reasonably in choosing remedial options and maintain evidence justifying their decisions.
Record‑keeping has also been a significant factor in the recent decision in BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235 (TCC), where the High Court affirmed that lack of contemporaneous records is not a defence and may prejudice a contractor facing claims long after completion. The case, arising 20 years after completion, highlights the need for robust document management practices to defend or substantiate mitigation efforts. Failure to retain adequate site records, correspondence and decision logs may critically undermine both entitlement and defence.
Insurance Coverage for War and Force Majeure‑Related Events
Insurance may provide partial protection against some events that might also trigger force majeure clauses, but cover varies significantly by policy. Force majeure does not automatically equal insurable loss, and many policies restrict cover to defined perils such as natural disasters, government action, terrorism or political violence. Parties should therefore scrutinise policy definitions, exclusions and notification requirements, as standard policies may exclude supply‑chain disruption, sanctions‑driven non‑performance or cost escalation arising from geopolitical events.
Recent decision in RTI Ltd v MUR Shipping BV (2024) underscores that force majeure interacts with but does not expand insurance cover. Even where sanctions or wartime restrictions impede contractual performance, the affected party must still show they took reasonable steps to overcome the impediment (short of accepting non‑contractual performance). This principle highlights the need for alignment between force‑majeure drafting and insurance arrangements, ensuring that insured perils match the contractual risk profile relevant during periods of political instability or war.
