Force majeure events in construction industry

Abstract

In recent years, there have been increasing questions about force majeure events, especially after COVID-19 affected the entire Malaysian construction industry. This also made the participants in the construction industry aware of the insufficient understanding of the force majeure clause. Therefore, this study aims to improve the understanding of force majeure clauses in Malaysia and under what circumstances a party may invoke the clause to relieve liability for failure to perform the contract. In this study, documentary analysis was adopted. The standard forms of contract of the Public Works Department (PWD), Pertubuhan Arkitek Malaysia (PAM), The Institution of Engineers, Malaysia (IEM), Construction Industry and Development Board (CIDB) and International Federation of Consulting Engineers (FIDIC) were studied. These standard forms of contract have been chosen as they are commonly used by the Malaysian construction industry. In addition, a legal analysis of past law cases was carried out. Based on the findings, it was concluded that force majeure is any situation or circumstance beyond the control of both parties, usually including war (or similar), acts of terrorism, riot (other than that caused by the contractor's employees, subcontractors or agents), natural disasters (see the list provided in the clause), governmental acts and epidemics. The force majeure clause may be triggered or relied upon when the related party able to prove that (i) the facts within the scope of the force majeure clause, (ii) the force majeure event prevented, hindered or delayed its performance of the contract, (iii) the non-performance was caused by circumstances beyond party’s control, and (iv) all reasonable steps were taken to avert the alleged force majeure event. In conclusion, this study provides a clearer definition of force majeure and a useful reference for construction industry participants on the issue of force majeure.