[Newsletter] Delay and Exceptions to Performance under Contract: Middle East and West Africa

In the wake of the on-going crisis in Iraq and conflict in Syria, Japanese employees of several energy companies have been repatriated, work has been suspended and new sources of oil, outside of the Middle East, are being considered. Similarly, the imposition of trade sanctions and economic embargoes has in some cases left parties unable to meet their contractual arrangements. In West Africa, the development of the Ebola pandemic has, according to a recent report by the World Health Organisation (WHO), resulted in over 4,000 deaths and led to President Obama describing it as a "threat to global security". The head of WHO has commented on the threat the epidemic presents to the "very survival" of societies and the risk it could lead to failed states. Not surprisingly, this is turn has caused companies to evacuate foreign employees and suspend work on several projects, including the recent declaration of force majeure by contractors in connection with work on an iron ore mine expansion project in Liberia.

Many Japanese businesses are active in these parts of the world and have therefore been required to consider carefully the scope of their contractual obligations and the grounds on which performance may be suspended in circumstances of on-going delay. Whether they are faced by a civil emergency caused by an outbreak of disease or a violent conflict which puts civilians at risk, delays to project works are often unavoidable. In normal circumstances, delays to performance can give rise to claims for damages for breach of contract. However, in circumstances where it is claimed that the cause of the delay was either unforeseeable or beyond the control of the parties, a right to recover damages may not arise if there is either a force majeure clause in the relevant contract or the doctrine of frustration applies.

In this update, we review some of the issues that parties are likely to face when managing the impact on performance of their contractual obligations and the associated costs of delay.

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