A corn Odyssey: questions about force majeure

A dispute over a ship stranded in the Black Sea raised two interesting points on force majeure: the meaning of “unforeseeable” and whether a notice requirement was a condition precedent.

A grain deal gone wrong

Inerco agreed to sell Ukrainian corn to ADM Israel, due to be shipped between April and May 2023. A force majeure clause dealing with “prevention of shipment” covered “unforeseeable … impediments” and required notice “within 7 consecutive days of the occurrence”. A separate extension clause required notice “not later than the next business day” after the “originally stipulated period”. 

Due to the invasion of Ukraine, ships entering the Black Sea to load grain were inspected. In May, the Russian inspectors stopped inspecting inbound vessels. Inerco therefore invoked the force majeure clause. When ADM Israel rejected this, Inerco treated that as a renunciatory breach and terminated the contract. 

Foreseeable in theory, negligible in practice

ADM Israel argued that “foreseeable” bore its ordinary meaning: anything that could happen in the future, however rare, and sought to rely on the low threshold from tort (where a “real risk”, however small, suffices). The court disagreed. On that approach, most events listed under the force majeure clause (including “acts of terrorism” and “blockades”) would not be covered. That would not fit with the clause's purpose of allocating residual contractual risk. The court concluded that “unforeseeable” here meant a “negligible” chance of an event occurring, from the parties' perspective. “Unforeseeable” must be read in its contractual context, not by importing meanings from other areas of law.  

Simple terms, strict compliance  

The notice requirement in the force majeure clause was a condition precedent (and the arbitral tribunal that originally heard the dispute was wrong in law to find that it was not) since:

• it was proceeded by the phrase “provided that” – unmistakeably the language of condition precedent

•  there was nothing incongruous in it being a condition precedent

• there was no need to show prejudice, as the tribunal suggested, stemming from non-compliance in order for it to be a condition precedent

• there was no lack in commercial logic, as the tribunal suggested and indeed, the opposite was true; this was a "simple, precise, and unequivocal term" which ensured both parties knew where they stood

Judgment: ADM Israel v Inerco Trade