Article 56 Force majeure

Purpose of this Article

56.1 This Article sets out the circumstances under which a Party may invoke Force Majeure to be released from its obligations. The Article also sets out the contractual consequences of such a situation.

Definition of Force Majeure

56.2 Unless otherwise agreed in the Subcontract between the Parties expressly or impliedly, where a Party fails to perform one or more of its contractual duties, the consequences set out in Articles 56.5 through 56.10 will follow if and to the extent that that Party proves that:

  1. its failure to perform was caused by an impediment beyond its reasonable control;
  2. it could not reasonably have been expected to have taken the occurrence of the impediment into account at the time of the conclusion of the Subcontract; and
  3. it could not reasonably have avoided or overcome the effects of the impediment.

56.3 Where a Party fails to perform one or more of its contractual duties because of default by a third party whom it has engaged to perform the whole or part of the Subcontract, the consequences set out in Articles 56.5 through 56.10 will apply to the Party only if and to the extent that the Party:

  1. establishes the requirements set out in Article 56.2; and
  2. proves that the same requirements apply to the third party.

56.4 In the absence of proof to the contrary and unless otherwise agreed in the Subcontract between the Parties expressly or impliedly, a Party invoking this Article shall be presumed to have established the conditions described in Articles 56.2(a) and (b) in the case of the occurrence of one or more of the following impediments:

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  1. war (whether declared or not), armed conflict or the serious threat of the same (including, without limitation, hostile attack, blockade or military embargo), hostilities, invasion, act of a foreign enemy, and/or extensive military mobilization;
  2. civil war, riot, rebellion, revolution, military or usurped power, insurrection, civil commotion or disorder, mob violence, and/or act of civil disobedience;
  3. act of terrorism;
  4. act of authority whether lawful or unlawful, compliance with any law or governmental order, rule, regulation or direction, curfew restriction, expropriation, compulsory acquisition, seizure of works, requisition, and/or nationalization;
  5. act of God, plague, epidemic, natural disaster including, without limitation, violent storm, cyclone, typhoon, hurricane, tornado, blizzard, earthquake, volcanic activity, landslide, tidal wave, tsunami, flood, damage or destruction by lightning, and/or drought;
  6. act of sabotage or piracy;
  7. explosion, fire, destruction of machines, equipment, factories and of any kind of installation, prolonged breakdown of transport, telecommunication or electric current; or
  8. general or regional labour disturbance including, but not limited to boycott, strike and lock-out, go-slow, or occupation of factories and premises.

Consequences of Force Majeure

56.5 A Party successfully invoking this Article 56 is, subject to Article 56.7, relieved from its duty to perform its obligations under the Subcontract from the time at which the impediment causes the failure to perform if Notice thereof is given without delay or, if Notice thereof is not given without delay, from the time at which Notice thereof reaches the other Party.

56.6 A Party successfully invoking this Article 56 is, subject to Article 56.7, relieved from any liability in damages or any other contractual remedy for breach of contract from the time indicated in Article 56.5.

56.7 Where the effect of the impediment or event invoked is temporary, the consequences set out under Articles 56.5 and 56.6 shall apply only insofar, to the extent that and as long as, the impediment or the listed event invoked impedes performance by the Party invoking this Article 56 of its contractual duties.

56.8 Where this Article 56 applies, the Party invoking this Article is under an obligation to notify the other Party as soon as the impediment or listed event ceases to impede performance of its contractual duties.

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56.9 A Party invoking this Article 56 is under an obligation to take all reasonable means to limit the effect upon performance of its contractual duties of the impediment or event invoked. Where the duration of the impediment invoked under Article 56.2 or of the listed event invoked under Article 56.4 has the effect of substantially depriving either or both of the Parties of what they were reasonably entitled to expect under the Subcontract, Articles 56.13 and 56.14 shall apply unless otherwise agreed.

Revised Schedule of Subcontractual Dates

56.10 Any time period specified in this Subcontract for the performance of an obligation shall, upon request of the affected Party, be appropriately extended by reference to the effect of the Force Majeure event.

Consultation over possible remedial actions

56.11 The Parties shall consult with each other to develop and implement, if practicable, a plan of remedial and/or reasonable alternative measures to deal with the Force Majeure and to minimize the losses of each Party resulting from it.

Increase in the Subcontract Price

56.12 If the Subcontract Works suffer loss or damage prior to transfer of risk and such loss or damage is due to one or more circumstances listed in Article 56.4 (a) through 56.4 (h) and Subcontractor is not entitled to receive insurance proceeds under the Marine Cargo or the Construction/Erection All Risk Insurance, then the Main Contractor shall fully compensate the Subcontractor for such loss of or damage to the Subcontract Works.

Optional termination, payment and release

56.13 If one or more events of Force Majeure shall impede either Party’s performance for longer than a total of 150 Days from the Date of the Notice of such event, the Parties shall decide through consultation the terms upon which either to continue the performance of this Subcontract or to terminate this Subcontract by mutual agreement.

56.14 If the Parties are unable to agree on such terms or to terminate this Subcontract by mutual agreement within 180 Days of the Date of the Notice of such Force Majeure, either Party may then terminate this Subcontract immediately by written Notice to the other Party, however, if the Subcontractor intends to terminate, not until the Main Contract has been terminated or an additional grace period of 30 Days has elapsed, whichever occurs earlier. If the Subcontract is terminated under this Article 56, the provisions of Chapter 6 shall apply and the Main Contractor in consultation with the Subcontractor shall determine the relevant portion of the Subcontract Price for the work done, based upon:

  1. the value of any work that has been carried out and for which the Subcontractor has not been paid; [Page69:]
  2. the Cost of Plant and materials ordered for the Subcontract Works that have been delivered to the Subcontractor, or of which the Subcontractor is liable to accept delivery; such goods, materials and Plant shall become the property of (and be at the risk of) the Main Contractor when paid for by the Main Contractor, and the Subcontractor shall place the same at the Main Contractor's disposal;
  3. any other Cost or liability that in the circumstances was reasonably incurred by the Subcontractor in the expectation of completing the Subcontract Works;
  4. the reasonable Cost of removal of Temporary Subcontract Works and Subcontractor's Equipment from the Site and the return of such items to the Subcontractor's works in its country (or to any other destination at no greater Cost); and
  5. the reasonable Cost of repatriation of the Subcontractor's staff and labour employed wholly in connection with the Subcontract Works at the Date of such termination.

issue a Payment Certificate in accordance with Article 42, and pay the Subcontractor accordingly.

Article 57 suspension and/or termination of the subcontract

Suspension of the Subcontract Works or a Section of the Subcontract Works by the Main Contractor

57.1 The Main Contractor may at any time instruct the Subcontractor to suspend progress of a Section or all of the Subcontract Works. During suspension, the Subcontractor shall take all reasonable steps in the circumstances to protect, store and secure such part or the Subcontract Works against any deterioration, loss or damage.

Suspension by the Subcontractor

57.2 If suspension is necessary for the protection of the Subcontract Works or human safety, the Subcontractor may with Notice to the Main Contractor also suspend all or a Section of the Subcontract Works. During suspension, the Subcontractor shall take all reasonable steps in the circumstances to protect, store and secure such part or the Subcontract Works against any deterioration, loss or damage.

Reimbursement of Cost and payment in the event of suspension

57.3 If the Subcontractor suffers delay and/or incurs Cost as a result of suspension under Articles 57.1 or 57.2, the Subcontractor shall give Notice to the Main Contractor and shall be entitled to reimbursement of such Costs, including any storage expenses resulting from the suspension. It shall also be entitled to payment for goods and/or materials and/or Plant that have not been delivered to Site, if the work on Plant or delivery of Plant and/or materials has been [Page70:]suspended. This entitlement shall be to payment of the value as at the Date of Notice to the Main Contractor of such Costs of labour, other subcontractors, demobilization, Plant and/or materials, if:

  1. the Subcontractor has indicated the Plant and/or materials are the Main Contractor's property, by marking or otherwise; and
  2. the suspension is not due to a cause attributable to the Subcontractor and only in the proportion of the Main Contractor’s rights against the Employer to reimbursement of costs and payment in the event of suspension.

The Main Contractor shall thereafter, if requested by the Subcontractor, take over the responsibility for protection, storage, security and insurance of such Plant and/or materials, and the risk of loss or damage.

Prolonged suspension

57.4 If suspension under Article 57.1 or Article 57.2 has lasted for a continuous period of more than 120 Days or, if the period is not continuous, for a total of more than 180 Days in the aggregate and the suspension is not due primarily to a cause attributable to the Subcontractor, the Subcontractor may by Notice to the Main Contractor require agreement to proceed from the Main Contractor within 35 Days. If agreement is not given within that time, the Subcontractor may treat the suspension as an omission by Variation under Article 35 of the affected part of the Subcontract Works. If such suspension affects the whole of the Subcontract Works, the Subcontractor may terminate the Subcontract under the termination provisions of Article 57.15.

57.5 If the suspension is due to reasons for which the Subcontractor is responsible, the provisions of Articles 57.3 through 57.4 do not apply. The Subcontractor will not be entitled to any extension of the Time to Taking-Over under Article 36.4 or additional payment under the Subcontract.

Resumption of work

57.6 After receipt of permission or of an Instruction to proceed, the Subcontractor shall, after Notice to the Main Contractor and together with the Main Contractor, examine the Subcontract Works and the Plant and materials affected by the suspension. The Subcontractor shall remobilize and thereafter make good any deterioration or Defect in or loss of the Subcontract Works or Plant or materials that has occurred during the suspension. The value of such remobilization and making good shall be a Variation, unless the suspension was caused by reasons attributable to the Subcontractor.

57.7 If the Main Contractor has taken over risk and responsibility for the suspended Subcontract Works under Article 57.3, risk and responsibility shall revert to the Subcontractor 14 Days (or such other period as may be agreed) after receipt of the agreement or Instruction to proceed.

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Suspension or termination for fault

57.8 Either Party may suspend its performance of the Subcontract or terminate this Subcontract upon the occurrence of a material breach of contract by the other Party. Notices of suspension under this Article 57 must be given at least 14 Days prior to the first Day of the suspension. Notice of termination must be given (whether or not there has been a prior Notice of suspension) at least 63 Days prior to the Date of termination. Any such Notice will become ineffective if the breach complained of has been cured, or there has been an undertaking to cure it as soon as possible in the circumstances.

57.9 Material breaches by the Main Contractor include, but are not limited to:

  1. persistent failure or refusal to finalize the Main Contractor’s Requirements;
  2. regularly instructing Variations or instructing a major Variation without acknowledging that the change or changes are Variations;
  3. failing for whatever reason to give possession of the Site or Sections thereof at the agreed time or times of handover and/or failing thereafter to agree to extensions of time;
  4. failing to have access to the funds necessary to pay sums due under the Subcontract as they are or become due; or
  5. persistently or seriously hindering or delaying the Subcontractor.

57.10 Material breaches by the Subcontractor include, but are not limited to:

  1. a substantial and continuing failure to proceed with the Subcontract Works with appropriate diligence despite at least two warnings given 30 Days apart that it is failing to do so in respect of specified areas of the Subcontract Works; or

  1. failure to achieve Taking-Over/Provisional Acceptance of the Subcontract Works after the period when the maximum amount of Delay Damages applies and there has been a continuing failure despite at least two warnings given 30 Days apart.

57.11 Material breaches by either Party include, but are not limited to:

  1. persistently failing to produce Design documents allocated to it pursuant to Article 32.1 according to the Schedule of Subcontractual Dates or any agreed revision thereof;
  2. failing without express or implied agreement from the other Party to pay sums due under the Subcontract on more than two separate occasions and/or for more than 30 Days from the due Date; [Page72:]
  3. failing to comply with important elements of decisions of the arbitral tribunal or entity rendering a decision in accordance with Chapter 13;
  4. bankruptcy or insolvency or a failure to be able to meet its debts as they fall due (unless such a position arises from the other Party’s failure to pay sums due);
  5. failing to produce the guarantees, bonds or other securities required by the Subcontract within the time specified in the Subcontract or a reasonable time thereafter.

57.12 In addition to service by any other method, all Notices under this Article must be served by courier or hand delivery with signed acknowledgement of delivery or receipt, unless such acknowledgement is refused.

57.13 Any Party served with a Notice of termination shall have the opportunity to cure the breach complained of within a reasonable time, which under no circumstances shall be less than 21 Days.

Consequences of termination

57.14 In all cases of termination of the Subcontract by any method, including under this Article 57, the limitation- and exclusion-of-liability provisions of this Subcontract shall continue to apply.

57.15 If the Subcontractor terminates pursuant to Article 57.8, it will be entitled to the valuation set out in Article 56.14, plus lost profit (if any) on the Costs of the whole Subcontract as damages. If the Project is a Build Operate Transfer or similar project, it will not be entitled to damages for lost profit for operating the Project, or parts thereof, (or similar rights) for the concession period.

57.16 If the Main Contractor terminates pursuant to Article 57.8, the Subcontractor will be entitled to the compensation set out in Articles 56.14 (a) and (b), but not to that set out in Articles 56.14 (c), (d) or (e). In addition to transfer of title and risk in all goods, materials, and Plant, the Main Contractor has paid for, the Main Contractor shall be entitled to recover the reasonable additional Costs incurred in completing the Subcontract Works. Further, the Main Contractor shall be entitled to use all the Subcontractor’s Equipment on Site at the Date of termination, and is considered by the fact of termination pursuant to this Article 57, to have been granted by the Subcontractor a transferable royalty- and fee-free licence to use such Equipment until the Subcontract Works are complete. The Main Contractor is entitled to free use of consumables and perishable items left on Site and shall not be responsible for fair wear or tear or depreciation/deterioration to Subcontractor’s Equipment of which it has thus temporarily taken use. On completion of the Subcontract Works, all such Subcontractor’s Equipment and remaining consumables shall be placed at the disposal of the Subcontractor.

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Chapters surviving termination

57.18 Without affecting the enduring nature of any other term of this Subcontract and notwithstanding any other provision of this Subcontract or the applicable laws, it is agreed and understood that Chapters 9, 10, 12 and 13 of the Subcontract survive any termination or alleged termination or avoidance of this Subcontract, however such circumstances may come about.

57.19 The provisions of this Article 57 shall (to the extent permitted by the mandatory provisions of the applicable law) be to the exclusion of any suspension and/or termination (including rescission) rights that would otherwise be available under the applicable law.