Preamble
Whereas a force majeure clause is an agreement as to how outstanding obligations should be resolved upon the onset of a foreseeable event, the doctrine of frustration concerns the treatment of contractual obligations from the onset of an unforeseeable event: see the decision of this court in Glahe International Expo AG v ACS Computer Pte Ltd [1999] 2 SLR 620 (“Glahe”) at [26]. The prevalent practice of incorporating force majeure clauses into commercial contracts today stems largely from the blunt nature of the doctrine of frustration as a tool to allocate loss. It has often been said that the juridical basis for the doctrine of frustration is unclear, the doctrine is difficult to invoke and the consequences of its operation are drastic, in the sense that the contract is automatically brought to an end. Parties therefore often include force majeure clauses in their contracts to avoid the uncertainty and hardship that might otherwise result from relying on the common law doctrine of frustration. Uncertainty and inconvenience are avoided by incorporating a well-drafted clause that clearly defines the events or circumstances that constitute force majeure. Hardship is also minimised in so far as a force majeure clause can be crafted to provide a more nuanced response to events of force majeure. For example, it may be provided that, in circumstances constituting force majeure, an extension of time may be granted to the party in default, there may be cancellation of the contract at the option of one party, or the defaulting party’s duty to perform the S/N 1pehTOU85Ua3x8sCs2fd4w contract will be suspended. The contract is thus not automatically brought to an end. [57] Despite this conceptual distinction, we are of the view that the principles relating to the doctrine of frustration are, in the vast majority of cases, still relevant to the construction and interpretation of force majeure clauses. In this regard, it is important to note that, by their very nature and function, force majeure clauses would – in the ordinary course of events – be triggered only where there was a radical external event that supervened and that was not due to the fault of either of the contracting parties. It will be immediately noticed that this is also a prerequisite to the invocation of the doctrine of frustration. However, this, admittedly, is not invariably the case. There might, for instance, be force majeure clauses, the language of which falls short of meeting the criteria required with respect to the doctrine of frustration at common law (this is clearly envisaged, for example, by Prof Treitel in the passage quoted in [55] above and see also Frustration and Force Majeure ( [55] supra) at para 12-017). We should think, however, that this would not be common, especially if one accepts the basic premise that the doctrine of frustration centres (in large part at least) on the absence of reasonable control on the part of the contracting parties. As S Rajendran J observed in the Singapore High Court decision of Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 3 SLR 62 at 78, [60] (“Magenta Resources”) (affirmed in China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd [1997] 1 SLR 707, but without apparent consideration of this particular point): What is referred to as force majeure in our law (as opposed to French law from which that term originates) is really no more than a convenient way of referring to contractual terms that the parties have agreed upon to deal with situations that might arise, over S/N 1pehTOU85Ua3x8sCs2fd4w which the parties have little or no control, that might impede or obstruct the performance of the contract. There can therefore be no general rule as to what constitutes a situation of force majeure. Whether such a (force majeure) situation arises, and, where it does arise, the rights and obligations that follow, would all depend on what the parties, in their contract, have provided for. [emphasis added] [58] Everything depends, in the final analysis, on the precise language and actual facts of the case at hand (as pointed out both in the quotation above as well as at [54] above). In the present appeal, for example, the force majeure clauses in the Contract (reproduced at [9] above) refer to causes that are “beyond the supplier’s control”. Depending on the precise facts before the court, the cause or event in question could be beyond the supplier’s (here, the Defendant’s) control and, yet, not beyond the other party’s control (here, the Plaintiff). [59] In this regard, it should be emphasised that the doctrine of frustration can be successfully invoked only if the alleged frustrating event is an external one that is, ex hypothesi, beyond the control of both contracting parties (also bearing in mind the important complementary principle that there can be no self-induced frustration). In the oft-cited words of Lord Radcliffe in the House of Lords decision of Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 729: [Frustration occurs whenever the law recognizes that without the default of either party - a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thingradically different from that which was undertaken by the contract. [emphasis added] S/N 1pehTOU85Ua3x8sCs2fd4w Similarly, in the construction of a force majeure clause (similar to those found in the present case), the courts will apply “the presumption that the expression force majeure is likely to be restricted to supervening events which arise without the fault of either party and for which neither of them has undertaken responsibility” [emphasis added]: see the English High Court decision of The Kriti Rex [1996] 2 Lloyd’s Rep 171 at 196, per Moore-Bick J (as he then was). [60] However, whatever the precise content of a force majeure clause (which, coupled with the precise facts of the case, would determine, in turn, the precise relationship between that clause and the doctrine of frustration), it is important to emphasise that where a force majeure clause excludes the doctrine of frustration, the principal effect and difference between the two is with respect to the nature of the relief. The relief available under a force majeure clause will, of course, be determined by the specific content of that clause itself. In a situation where the doctrine of frustration is sought to be excluded, the clause concerned would expressly stipulate that the contract is not to be discharged despite the fact that the situation would otherwise be one that would have frustrated the contract. [61] The force majeure clauses in the Contract in the present appeal are a paradigm illustration. Whilst they are triggered or catalysed only if the relevant event is “beyond the supplier’s control” and, to that extent, appear to embody some of the common law principles relating to the frustration of a contract, the crucial difference lies, as mentioned in the preceding paragraph, in the nature of the relief that will be granted. If these clauses apply, the Contract “shall be suspended or limited until such circumstance ceases” [emphasis added]. In contrast, where a contract is frustrated under the common law, it is automatically S/N 1pehTOU85Ua3x8sCs2fd4w discharged by operation of law and the precise relief would be determined by the provisions of the Frustrated Contracts Act (Cap 115, 1985 Rev Ed) (“the Act”) instead (and see generally Andrew Stewart & J W Carter, “Frustrated Contracts and Statutory Adjustment: The Case for a Reappraisal” [1992] CLJ 66). It should also be noted that s 3(3) of the Act itself clearly stipulates thus with respect to its very limited applicability in the context of force majeure clauses (this provision was in fact referred to in the Singapore High Court decision of Chan Buck Kia v Naga Shipping & Trading Co Ltd [1963] MLJ 159 at 160): Where any contract to which this Act applies contains any provision which, upon the true construction of the contract, is intended to have effect in the event of circumstances arising which operate, or would but for that provision operate, to frustrate the contract, or is intended to have effect whether such circumstances arise or not, the court shall give effect to that provision and shall only give effect to section 2 to such extent, if any, as appears to the court to be consistent with that provision. [62] On the other hand, where the force majeure clause concerned does not exclude the doctrine of frustration, then, if the supervening event is indeed a frustrating event that, ex hypothesi, lies beyond the boundaries of that clause, the legal consequences as described above (ie, which flow from an application of the common law doctrine of frustration and which entail an application of the relevant provisions of the Act) would follow instead. It is important, however, to note that there is no need to canvass the issue of relief in the present appeal as the only issue before us is whether or not the force majeure clauses in the Contract apply to the facts at hand. Indeed, no attempt was, in any event, made to argue that the doctrine of frustration applied to the present case. S/N 1pehTOU85Ua3x8sCs2fd4w [63] As we have already seen, it is clear that a force majeure clause can seek to exclude the doctrine of frustration. It is important, in this regard, to reiterate the basic proposition that contracting parties are, of course, free to exclude the doctrine and, as emphasised above, the court must give full effect to such an agreement on the basis that these parties are at liberty to allocate the possible risks between them in any manner they see fit. Nevertheless, it is clear that in order to actually exclude the doctrine of frustration, the clause concerned must be clear and unambiguous. It should be noted, however, that the case law suggests that courts will construe force majeure clauses strictly: see, for example, the oft-cited House of Lords decisions of Metropolitan Water Board v Dick, Kerr and Company, Limited [1918] AC 119 (“Metropolitan Water Board”) and Bank Line, Limited v Arthur Capel and Company [1919] AC 435. In other words, what often appears, at first blush at least, to be an express provision covering the event concerned is often interpreted by the courts as not intended by the contracting parties to cover so drastic an event as a frustrating event; hence, the doctrine of frustration would continue, with the attendant consequences or relief briefly outlined in the paragraphs above. Indeed, it has been observed as follows (see Ewan McKendrick, Force Majeure and Frustration of Contract (Lloyd’s of London Press Ltd, 2nd Ed, 1995) at p 36): It is, therefore, extremely difficult, if not impossible, to draft a force majeure clause which shuts out the doctrine of frustration completely, because even the widest of clauses may be held not to cover a particular catastrophic event [such as in Metropolitan Water Board] … S/N 1pehTOU85Ua3x8sCs2fd4w [64] Another general principle to note is that a party who relies on the force majeure clause must show not only that it has brought itself within the clause concerned (a separate and extremely important point in itself: see below at [65]) but also that it has taken all reasonable steps to avoid its operation, or mitigate its results: see the English Court of Appeal decision of Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323 (“Channel Island Ferries”) at 327. This principle is not only commonsensical but is also consistent with (and may even be a corollary of) the very nature and function of a force majeure clause which we have in fact elaborated upon above (at [53]). To briefly recapitulate, such a clause presupposes that events falling within its scope and ambit are beyond the control of the contracting parties and that language to this effect will invariably be utilised in the clause itself. Thus, in the English High Court decision of Continental Grain Export Corporation v STM Grain Ltd [1979] 2 Lloyd’s Rep 460 (“Continental Grain Export”), Robert Goff J (as he then was) said (at 473) that a seller who invoked a “prohibition of export” clause (where the rubric of “impossibility” was utilised) had to prove that: (a) no goods of the contract description were available to him to fulfil his contract; and (b) he could not, following notice of the event, obtain any such goods “by the exercise of any means reasonably open to him”. This was approved (in relation to a similar clause) by the English Court of Appeal inAndre & Cie SA v Tradax Export SA [1983] 1 Lloyd’s Rep 254 at 258. [65] Finally, it should also be noted that a party who relies on a force majeure clause has the burden of bringing himself squarely within that clause: see Channel Island Ferries( at 327); Magenta Resources ([57]; supra at 86, [98]); and Chitty on Contracts (Sweet & Maxwell, 29th Ed, 2004) vol 1 at para 14-140.” S/N 1pehTOU85Ua3x8sCs2fd4w Pandemik Covid-19 Dan Prinsip Undang-Undang Kontrak [57] Pandemik Covid-19 telah mencabar kebijaksanaan penggubal undang-undang bagi memperkenalkan undang-undang dalam usaha menangani kesan Pandemik Covid-19 tersebut kepada kehidupan. Misalnya di dalam kegiatan ekonomi yang melibatkan kontrak di antara pihak-pihak di dalam suatu urus niaga. Di Malaysia Rang Undang-undang Langkah-langkah Sementara Bagi mengurangkan Kesan Penyakit Koronavirus 2019 (Covid-19) 2020 telah dibentangkan pada 25.08.2020. Menteri Di Jabatan Perdana Menteri (Parlimen dan Undang-undang) Dato’ Takiyuddin bin Hassan menyatakan seperti berikut: “ Rang undang-undang ini memberikan suatu pelepasan sementara ataupun temporary relief daripada tanggungjawab perjanjian contractual obligation, dengan izin atau pematuhan kepada perundangan tertentu bagi satu tempoh yang ditetapkan demi kelangsungan hidup rakyat. Persoalan sama ada rang undang-undang ini dengan izin too little too late ataupun better late than never adalah tidak berbangkit kerana isu yang dihadapi kesan daripada wabak COVID-19 bukan sahaja diambil tindakan oleh kerajaan melalui pakej rangsangan ekonomi malah telah diselesaikan dengan menggunakan perundangan sedia ada termasuk melalui pindaan kepada perundangan subsidiari seperti perintah dan peraturan ataupun diselesaikan secara pentadbiran oleh kementerian, jabatan dan agensi kerajaan. Sehingga kini, saya ingin menjelaskan bahawa sebanyak 58 peraturan dan perintah telah disediakan atau dipinda bagi menangani kesan akibat COVID-19 ini. Daripada jumlah 58 peraturan ini sebanyak S/N 1pehTOU85Ua3x8sCs2fd4w 24 peraturan dan perintah adalah yang berkaitan dengan kegiatan dan aktiviti ekonomi sahaja.” [58] Ketika menyentuh Fasal 7 Bahagian 2 Rang Undang-undang tersebut telah menyatakan seperti berikut: “ Fasal 7 Bahagian II bertujuan untuk memperuntukkan bahawa ketidakupayaan mana-mana pihak untuk melaksanakan obligasi contractual berbangkit daripada mana-mana kategori kontrak yang dinyatakan di dalam Jadual. Tidak membolehkan pihak lain menjalankan haknya di bawah kontrak itu. Kategori kontrak yang disenaraikan dalam Jadual dikenal pasti sebagai kategori yang paling terkesan akibat COVID-19. Dalam hubungan ini, jika diperhatikan kontrak yang berkaitan perkhidmatan perlu (essential services) tidak dimasukkan di dalam Jadual seperti kontrak bekalan makanan, perkhidmatan perbankan dan kewangan, elektrik dan tenaga serta penjagaan kesihatan dan perubatan. Ini memandangkan kerajaan telah memastikan perkhidmatan tersebut perlu berjalan walaupun Perintah Kawalan Pergerakan sedang berlangsung. Walau bagaimanapun, Menteri diperuntukkan kuasa untuk meminda Jadual kepada bahagian ini sekiranya terdapat keperluan untuk menambah kategori kontrak yang mempunyai kaitan ataupun yang mempunyai isu berkaitan COVID-19 yang perlu ditangani.” [59] Malahan di beberapa negara Pandemik Covid-19 ini telah menyebabkan tafsiran berkenaan dengan kontrak juga telah diberikan nafas baharu bagi membolehkan undang-undang dapat menangani isu-isu yang berbangkit ekoran daripada Pandemik Covid-19. Ini dapat dilihat dalam artikel bertajuk The Contract Clause: Reawakened In S/N 1pehTOU85Ua3x8sCs2fd4w The Aged Of Covid-19, Havard Law Review 2023 Vol. 136:2130 seperti berikut: “Even so, the Contract Clause and its broad language remain a topic of litigation today, especially in the context of the COVID-19 pandemic. Litigants protesting against eviction moratoria and other rent assistance, recall ordinances, and even vaccine mandates have looked to the Contract Clause for relief. Few have succeeded, but those recent triumphs may augur a reevaluation of the Contract Clause. If even COVID-19 failed to justify state governments’ exersice of police power, the clause may furnish even more successful challenges in a postpandemic world.” [60] Persoalan seterusnya yang mahkamah perlu teliti ialah sama ada prinsip kekecewaan kontrak dan force majeure mempunyai kaitan dengan Akta Covid-19. Ini adalah disebabkan jika diteliti kepada Akta itu sendiri dan penjelasan di dalam Penyata Rasmi Parlimen ia merupakan langkah sementara sehingga selesainya Pandemik Covid-