Applicability of force majeure clause in construction contract in Malaysia

Abstract

Force majeure clause is essentially a contractual risk allocation tool. Its purpose is to excuse a party from performance of a contractual obligation which may have been rendered impossible by some event beyond that party’s control. Force majeure clauses were widely used long time ago in almost every contract. However, none of the Malaysia’s law cases regarding the force majeure clause was brought to the court and this bring to the question that is how far the use of force majeure clause in the contraction can exclude liability of the parties involved where unforeseen events beyond a party’s control prevent the performance of its contractual obligations happen.The issue arises is whether these force majeure clauses are applicable to being used in construction contracts, specifically in Malaysia or under similar common law jurisdiction. This is because there is no extensive research regarding the use of force majeure clause in the construction contract in Malaysia. The objective of this study is to determine the applicability of force majeure clause in construction contract in Malaysia. Studies W'H be conducted on relevant provision in Standard Forms of Contract used in Malaysia i.e. PWD 203, PAM 2006, CIDB 2000 and provision under Common Law. Besides, the approach adopted in this research is law case methodology assessed from Lexis Nexis. The relevence of the use of force majeure clause depends on the unforeseen events and that event must be unforeseen when the contract is made. Force majeure includes two other classifying term s in its scope which is ‘act of God’ and ‘vis major’. ‘Act of god’ is an extraordinary occurrence or circumstance which could not have been foreseen and which could not have been guarded against, or more accurately, as an accident due to natural causes. ‘Vis major’ is includes many things described as the ‘act of God’ and the events which may be with human intervention. To summarised, the applicability of the force majeure clause is depends on the events of force majeure. From the analysis of the law cases, it was found that, besides ‘act of God’, only those events that held under the meaning of force majeure can be used in the circumstances of Malaysia’s construction industry, such as breakdown of m achinery, strikes of labour, government interference. However, there are also other events that held were not under the meaning of force majeure clause such as defective materials, error in judgements, the events which are within the control of party relying on force majeure and the events which are common or usual events which can be expected to occur in industry. Therefore, it is proved that force majeure clause is applicable to be used in the construction contract in Malaysia, but only for the events that were held under the meaning of force majeure.