The Private Sector Contract (PSC) is a form of contract, based on the Public Works Contract, for building and engineering work launched in September 2020 and which is published jointly by Engineers Ireland in conjunction with the Construction Industry Federation (CIF) and the Society of Chartered Surveyors Ireland (SCSI).

It is administered by a standing committee comprised of John Curtin, Ciaran Fahy (chair), Conor Hogan, Anthony Hussey, Tony McCauley, Gerard Monaghan and Paul Sheridan. The article has been prepared by the standing committee to serve as an introduction to a webinar which is to take place at 10am on July 13, 2021.

Prompted by the Covid pandemic the standing committee appointed by the sponsoring institutions of the Private Sector Contract are considering the possibility of an amendment to cater for force majeure events.

Set out below is a link to a table  indicating the approach taken in various national and international contracts.

Although the Public Works Contract does not expressly cover force majeure events, it is thought that the effect of Article 4 is to disallow any extension of time except in respect of those specific events listed at clause 3.1. Due to the different wording of Article 4 in the Private Sector Contract, it may be considered that the contract is silent on the issue, one way or the other.

The definition of force majeure events varies considerably from contract to contract. In essence however they are extreme events which either could not have been predicted at all or if predictable are so rare that the parties could not be considered to have provided for them when entering into the contract.

The term therefore covers a huge range of events some of which the parties could not even have imagined occurring when they entered into the contract. This being the case there is an argument for not seeking to provide for the matter in the contract.

This is on the basis that it is better that the parties would be forced to negotiate a solution when the event occurs in the knowledge of the relevant facts rather than impose a solution on the basis of one solution being appropriate for all circumstances.

The purpose of this article is to promote a debate on the issue not just in the context of the Covid epidemic but generally. The committee is arranging a webinar on July 13 to consider the issue of whether it is desirable to have a force majeure clause in the contract and, if so, the appropriate wording thereof.

The history of force majeure

Traditionally, force majeure is a term which is encountered in building forms of contract but not in engineering forms. For example, the RIAI form has for many years included force majeure as a cause of delay leading to an extension of time in clause 30.

The JCT form has force majeure as a Relevant Event providing a basis for an extension of time; force majeure is not defined in either the RIAI or JCT form of contract. This similarity of approach presumably reflects the common origins in the RIBA form of contract.

The ICE form of contract never had a force majeure provision but instead, in all its editions, had a War Clause and a Frustration Clause. This practice was closely followed in Ireland in the IEI form of contract first published in 1959 and which continued to the fourth edition in 1995.

Internationally, the FIDIC Red Book was first published in 1957 and was based on the ICE form; by the time of the second edition in 1969 it contained a Special Risks Clause, broader than the ICE War Clause as well as a Frustration Clause. Broadly, this approach continued until the 1999 edition of the Red Book which contained a force majeure clause drawing the earlier two clauses together and providing a definition of force majeure.

This clause 19 set out the consequences of a force majeure event and also provided for optional termination by either party in certain circumstances. This approach has been continued in the 2017 edition of the Red Book where all reference to force majeure has been dropped and the term has been replaced by Exceptional Events, which is also the title of the relevant clause 18.

The major issues

Apart from the question of whether or not a contract should seek to cover the consequences of a force majeure event, it seems to the committee that the main issues are as follows:

  1. Should a force majeure event, if it does give rise to an entitlement to an extension of time or otherwise, be deemed to have occurred by reason of the event being unpredictable or by reason that the parties (usually the Contractor) could not reasonably have allowed for the event in the tender. It is to be noted that the latter is the case in respect of the FIDIC contract but that the other contracts considered are more in keeping with the former.
  2. If the force majeure event involves the Contractor in additional cost, should it be compensated for that cost? All of the contracts considered providing for force majeure allow the Contractor time but few allow the Contractor compensation. Where compensation is allowed, it is usually confined to actual cost.
  3. In what circumstances, if any, should either party be entitled to terminate the contract by reason of force majeure? Given that most contracts allow the Employer to terminate at any time for its own convenience, this issue really relates to the Contractor. Given the unpredictability of force majeure events and their consequences, one might expect the Contractor to have the entitlement to terminate in extreme circumstances, but few of the contracts considered provide for this.
  4. If the Contractor is to be allowed terminate in certain circumstances by reason of a force majeure event in what circumstances will that entitlement arise, what notice is required to terminate and what are the financial consequences of termination?

Conclusions to be drawn from the table

A variety of approaches to dealing with the issue across the major forms of contract is set out in the  table. While a degree of commonality exists to some extent on certain aspects of the topic it is difficult and in fact impossible to draw an overall conclusion. Rather a set of themes or patterns can be discerned. 

The majority of the forms of contract considered make express provision for force majeure. Neither the Irish Public Works Contracts nor the Private Sector Contract make express provision although specific employer risks are included at Clause 3.1 of a type which may usually be considered force majeure. 

Where express force majeure type provisions are included their application depends on the event not being reasonably anticipated, not being reasonably expected to have been provided for, or the works being physically impossible or illegal to complete. 

In other instances, force majeure is not defined and is simply stated as a relevant event. Where a force majeure provision exists, and the event occurs all forms provide for a time extension. 

Only the FIDIC and NEC forms provide an additional allowance for cost and in both cases it is actual costs only. Furthermore, where force majeure type provisions exist, all forms, with the exception of the RIAI, make provision for a right of termination in the event by the Employer. 

The equivalent right of termination on behalf of the Contractor exists only in the FIDIC, ICC, World Bank and JCT forms. Interestingly the PWC and PSC allow termination by the Contractor where events make it physically impossible or contrary to the law to fulfil its obligations although no provision for costs in such circumstances appears to exist. Where the other forms provide for early termination compensation by way of actual costs generally exists. 

Ciarán Fahy

Author: Ciarán Fahy trained as a civil engineer and is a Chartered Engineer, a Fellow of Engineers Ireland in private practice since 1985 and has worked in dispute resolution since 2003 as arbitrator, conciliator, mediator and adjudicator. He is a former chair of the Ethics and Disciplinary Board and the Dispute Resolution Board at Engineers Ireland. He is chair of the Standing Committee for the Private Sector Contract (PSC).