Force Majeure clauses in property contracts - what are they and when can they be invoked

If you have bought a property abroad in the last 10 to 15 years in countries such as Cape Verde, Turkey, Morocco, Brazil or the UAE then the likelihood is that the property was still being built when you committed to buy. This is commonly known as buying a property “off plan” – i.e. you can’t view the completed property but can look at the future plans for the project and or property.
 
When you buy a property off plan the purchase contract should have a clause which provides a deadline for the completion of the unit; i.e. when the developer should deliver or “hand over” the property to the Buyer. This relevant clause should set out clearly what penalties will apply to the developer and what legal (and financial) redress a purchaser would be entitled to expect should the developer fail to deliver the property within those parameters. 
 

In addition, most purchase agreements will also include a supplemental clause setting out that in certain circumstances a developer can be excused from going past that proposed completion deadline without any penalty. This is commonly referred to as the “Force majeure” clause. Essentially it is an unforeseen event that prohibits the contract being completed on time or ever; in extreme conditions.
 
Force majeure is a French term and literally translates as “superior force”. In reality what this means is an act outside the control of the person involved. Force Majeure is also sometimes referred to as “An Act of God” and is also prevalent in insurance contracts.

Force Majeure sign

Some developers in recent years have heavily relied upon the Force Majeure clause in their contracts to cover themselves and therefore it is worth looking at what is and what isn’t deemed an Act of God.
 
There is no doubt that if natural climatic events such as hurricanes, lightning strikes and flooding, damage a property in the course of construction and, as a direct result, these events put back the construction; then this is something deemed completely outside the control of the developer or builder and would be considered to be a Force Majeure occurrence.
 
Equally if there is a war or a terrorist attack or a general labour strike that stops construction then this could also be seen as Force Majeure occurrence.
 
However, if it could be reasonably known that a particular event or a set of events were going to happen when the contract was signed, and could therefore have been foreseen, then legally this may not be considered to constitute Force Majeure.
 
Force Majeure clauses should, ideally, set out the examples of what would be considered to be Force Majeure for the purposes of that contract. By doing so the contracts - and both parties - have an element of certainty and a framework to assess what is covered by that clause. However, some developers have been reluctant to do this, and in time claim that any delay, even events which are clearly attributable to the developer, are in fact Force Majeure.
 
We have seen over recent years seen some foreign property developers try and claim that the failure to obtain planning permission for their project constitutes a Force Majeure event. It does not. The failure to obtain planning permission in virtually all cases is entirely down to the developer as they should not start to build, market or sell any given project unless it is expressly stated the planning permissions are subject to future approvals, and that the purchasers as a consequence will have the right to terminate the contract and recover any invested amounts paid to that date should those permissions ultimately be withheld.
 
In the United Arab Emirates and in Cape Verde, we have seen extreme examples of developers claiming that certain building plots are made up of  the “wrong type of sand” for building upon and therefore, they cannot meet their contracted construction deadlines. Again, this would not constitute the Force Majeure clause being invoked or any legal justification or argument for a delay to the delivery of the unit and we have successfully challenged these arguments in the courts.
 
Force Majeure clauses are useful in allowing unforeseen events not to frustrate a contract but should not be seen as a potential get out of jail free card for foreign property developers.
 
If you have a potential problem with a property that is being built off plan abroad and hasn’t been completed on time and would like some advice about your options, you can speak to one of our overseas property legal team
 
Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.