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BREACH OF CONTRACT – FORCE MAJEURE – FORCE MAJEURE UNPACKED: WHEN ‘REASONABLE ENDEAVOURS’ DON’T BEND CONTRACT TERMS

Summary and Facts

In RTI Ltd v MUR Shipping BV [2024] 1 Lloyd’s Rep 621, the UK Supreme Court examined the scope of a force majeure clause and the reasonable endeavours obligation in a contract of affreightment. RTI Ltd, a charterer, entered a contract with MUR Shipping BV for the transport of bauxite, requiring payment in U.S. dollars. When U.S. sanctions affected RTI’s parent company, MUR claimed force majeure, asserting the sanctions hindered their ability to receive payments in dollars. RTI offered to pay in euros and cover any currency conversion costs, but MUR refused, arguing that the force majeure clause did not require them to accept a non-contractual payment method.

Legal Issues

  • Whether the reasonable endeavours provision required MUR to accept an alternative payment in euros?
  • Whether force majeure applied if payment issues could be addressed through alternative means?
  • Whether a reasonable endeavours clause can obligate a party to alter its contractual rights?

Court Findings

  • The Supreme Court of the United Kingdom upheld MUR’s position, emphasizing that reasonable endeavours under a force majeure clause do not extend to accepting alternative performance that diverges from the contract terms unless clearly stipulated.
  • The court highlighted that reasonable endeavours clauses are intended to preserve the original obligations of the contract, rather than modifying them to fit unforeseen circumstances.

Practical Implications

  • This decision reinforces the importance of precise drafting in force majeure clauses. Businesses should clarify whether reasonable endeavours include accepting non-standard performance, particularly in cases where external sanctions or restrictions may apply.
  • This ruling emphasizes that courts are likely to uphold contractual certainty and parties’ rights to adhere strictly to agreed terms unless explicit flexibility is built into the contract.
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