Navigating construction projects through a coup
The recent coup in Niger underscores the importance of force majeure clauses in construction projects.
The recent declaration of force majeure by China Gezhouba Group (CGGC) on the Kandadji hydroelectric dam project following the 26 July Niger coup underscores the significant role of force majeure clauses in construction projects.
This article explores the relevance and benefits of force majeure clauses in such scenarios, as well as providing insight into crafting robust force majeure clauses.
The force majeure clause serves to relieve a party from contractual obligations when an unforeseen, often exceptional event beyond their control, renders performance impossible. Within construction projects, this clause plays a pivotal role for both contractors and employers. As parties commit to completing works within specified timelines, the force majeure clause offers a safety net against unpredictable external events that could disrupt progress.
In a construction contract, parties are bound to fulfil their respective obligations by the stipulated completion date or risk incurring liquidated damages. However, events beyond their control can hinder performance. The force majeure clause comes into play when unforeseen circumstances - such as security issues and financial sanctions resulting from the Niger coup - impede a party's ability to fulfil its obligations. This clause extends the time for fulfilling duties and temporarily relieves the affected party from their contractual commitments during the event's occurrence. Essentially, the force majeure clause acknowledges that contract obligations are contingent on existing conditions.
CGGC's decision to trigger the force majeure clause in response to the Niger coup highlights the practicality of this provision in complex situations. The coup led to financial sanctions and security concerns, rendering CGGC incapable of continuing its work. By invoking the force majeure clause, CGGC safeguards itself against the forfeiture of performance securities and liquidated damages. Depending on the contract terms, CGGC might be entitled to additional time and costs to account for delays caused by the coup.
Crafting Effective Force Majeure Clauses
To maximise the utility of the force majeure clause, contractors should strive for well-crafted contract language.
Two key considerations include:
Comprehensive Scope: The force majeure clause should encompass a wide range of potential events, both foreseeable and unforeseeable. This non-exhaustive approach guards against the unexpected, as exemplified by events like the Niger coup, the COVID-19 pandemic or geopolitical conflicts.
Timely Termination Provision: To mitigate prolonged project disruptions, parties can consider incorporating a termination option if the force majeure event endures beyond a reasonable duration. This safeguards both parties' interests and prevents extended periods of project stagnation. FIDIC contracts, for instance, provide a guideline for terminating the contract after a specific period of continuous non-execution of works.
The recent instance of the Niger coup and the subsequent force majeure declaration by CGGC underscores the strategic significance of the force majeure clause in construction projects.
By acknowledging the unpredictable nature of external events, this clause offers a protective mechanism that benefits both contractors and employers. To ensure its efficacy, crafting a comprehensive force majeure clause is essential, taking into account both the broad spectrum of potential events and a clear termination provision.
By implementing robust force majeure clauses, construction projects can navigate unforeseen challenges while maintaining contractual integrity and safeguarding the interests of all parties involved.
Photo: A dam (© Skylightpictures | Dreamstime)
Osinachi Nwandem is a lawyer and arbitrator with vast experience and expertise in construction law and arbitration. He also had prior exposure to litigation and arbitration in a range of commercial disputes ranging from contracts, labour and employment, debt recovery, telecommunications, maritime and taxation.
He practices at the law firm of Aluko & Oyebode, which is based in Nigeria and has been rated as one of Africa's leading law firms.
Osinachi received his law degree from the Rivers State University of Science and Technology, Port Harcourt Nigeria. He obtained his LL.M. degree from the University of Ibadan, Nigeria.
He has a particular interest in assisting clients to resolve their construction disputes and is passionate about developing the practice of construction law in Nigeria. He is a member of the Institute of Construction Industry Arbitrators (ICIArb), the International Bar Association and the Nigeria Bar Association – Section on Business Law.
Osinachi is a regular contributor to several peer-review journals, texts and publication platforms including the Gravitas Law Review, AELEX Article Series and Mondaq, where he proffers viewpoints on recent developments in construction disputes and contracts.