Force majeure: MUR Shipping BV v RTI Ltd Supreme Court decision

In January 2023 we reported on the Court of Appeal’s decision in the case of MUR Shipping BV v RTI Ltd [2022], which clarified when a force majeure clause can be relied upon if there is a reasonable alternative. The case was subsequently referred to the Supreme Court, which overturned the Court of Appeal’s decision, concluding that a “reasonable endeavours” provision in a force majeure clause did not require a party to accept non-contractual performance.

Background

The case involved a contract for the carriage of goods by sea, pursuant to which RTI was to pay MUR in US dollars. Following the United States imposing sanctions on the owner of RTI, MUR serviced a force majeure notice on RTI and stated that accepting dollar payment for cargoes would breach the sanction which had been imposed.

RTI offered to make future payments in euros and to cover the conversion costs, and MUR waited 15 days before confirming that it would continue the contractual relationship. The dispute was referred to arbitration to consider whether MUR could rely on the force majeure clause.

In this case, the force majeure clause was drafted to mean a state of affairs which, amongst other criteria, “cannot be overcome by reasonable endeavours of the party affected”. In arbitration it was decided that accepting payment in euros was a realistic alternative. The High Court held that payment in euros would not be contractual performance. The Court of Appeal found that the force majeure clause could not be relied upon, and payment in euros overcame the state of affairs which had been caused by the sanctions.

Supreme Court decision

It was acknowledged that parties to a contract may provide for reasonable endeavours to include accepting an offer of non-contractual performance from the other party, if clearly stated in the terms of the contract.

However, that was not the case in this instance. The Supreme Court, therefore, unanimously found that “reasonable endeavours” did not extend to requiring MUR to accept payment under the contract in euros when the contract specifically provided for payment in US dollars.

Practical steps

A well-drafted force majeure clause is essential in any commercial contract, and the decision of the Supreme Court highlights that the wording of a force majeure clause is key. When entering into commercial contracts, we always recommend that you seek advice to ensure that key terms such as term, pricing, liability, termination and, of course, force majeure, are drafted in the interest of the school.