The Doctrine of Force Majeure and Frustration in Commercial Contracts in Kenya

1. The Doctrine of Force Majeure

Definition

The terms “force majeure,” “frustration,” and “act of God” are frequently used interchangeably. However, it is important to note that while they are similar, as both force majeure and frustration result in discharging parties from contractual obligations, they are not one and the same.

According to Black’s Law Dictionary (11th Edition), “act of God” refers to:

“An overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood or tornado. The definition has been statutorily broadened to include all natural phenomena that are exceptional, inevitable and irresistible, the effects of which could not be prevented or avoided by the exercise of due care or foresight.”

Force majeure is defined as follows:

“[Law French “a superior force”] (1883) An event or effect that can be neither anticipated nor controlled. The term includes both acts of nature (e.g. floods and hurricanes) and acts of people (e.g. riots, strikes and wars)

Force majeure clause – a contractual provision allocating the risks of loss if performance becomes impossible or impracticable, esp. as a result of an event or effect that the parties could not have anticipated or controlled.”

The doctrine of force majeure has its origin in French law, where there are express force majeure provisions in the French civil code which excuse contractual performance where events have happened outside the parties’ control, which could not have been foreseen at the time of contracting and which could not have been avoided by appropriate measures. The doctrine of force majeure has expanded to include events caused by both human actions and natural occurrences, defining situations beyond the control of parties that prevent them from meeting contractual obligations. Further, the interpretation the courts give is dependent on the choice of wording and events delineated by the parties in their contract.

Force majeure applies to contracts to excuse further performance due to both natural disasters and human-caused events such as wars or strikes that prevent a contract from being fulfilled. It must be written into the contract, specifying what kinds of events would apply.

Essential Elements of Force Majeure

A valid force majeure clause typically includes:

• Explicitly Enumerated Events: A force majeure must be included in the contract and cannot be implied. It includes events such as: Natural disasters (earthquakes, floods, droughts, storms), war, strikes, epidemics & pandemics, government actions (regulatory bans, change of laws) etc.
• External Causation: The event is caused by circumstances beyond either party’s control or fault.
• Unforeseeability: The event must be unforeseeable at the time of contracting.

• Impossibility or Hindrance: The event prevents, delays, or makes the contractual duty impossible or radically different from what was originally agreed.

• Notice & Mitigation Duty: Many contracts require the affected party to notify the other promptly and take reasonable steps to mitigate the effect.

For a party to successfully invoke the defense of force majeure, the above-discussed pertinent conditions must be fulfilled. Force majeure clauses generally include notice provisions, which are part of the steps which must be taken to mitigate the losses that may be occasioned upon the other party.

Importance of Force Majeure Clauses

Including a force majeure clause, also referred to as boilerplate clauses:

• Protects parties from being held liable for non-performance arising from uncontrollable events.
• Provides a clear framework for managing contract suspension, extension, or termination.
• Allocates risks fairly, enabling business continuity planning.

When a contract lacks a force majeure clause, parties may rely on the judicial doctrine of frustration, which has a narrower application.

N.B. Unlike frustration, which is a statutory/common law doctrine, force majeure operates as an express contractual clause. That is, courts will enforce the force majeure doctrine only when it is explicitly stated in contracts.

1. The Doctrine of Frustration

Definition

Frustration occurs when an unforeseen event fundamentally alters the nature of the contract, making performance impossible or radically different from what was agreed. It is implied under common law and does not require a contractual clause.

Black’s Law Dictionary defines frustration as:

“An excuse for a party’s non-performance because of some unforeseeable and uncontrollable circumstance.”

The Kenyan Courts acknowledge that the doctrine of frustration, first established in Taylor v Caldwell 122 Eng Rep 309 (1863), discharges parties from a contract when unforeseen events destroy the subject matter or render performance impossible without fault from either party.

In summary, the doctrine of frustration releases parties from their contractual obligations when an unforeseen event fundamentally alters the nature of the contract, rendering further performance impossible or significantly different from the original agreement.

Examples of frustration include:

• Destruction of the subject matter (e.g., leased premises burn down).
• Change in law rendering the contract unlawful.
• Cancellation of an event central to the contract (e.g., hiring space for a cancelled trade fair).

Key Principles of the Doctrine of Frustration

• Unforeseen Event: Must not be contemplated by the parties.
• Radical Change: Must render the contract’s purpose meaningless.
• No Fault: The event must not be self-induced.
• Automatic Discharge: The contract ends immediately upon frustration.
• Discharge of Liability: Once invoked, the contract ends, and parties are fully discharged from further liability under the contract from the moment the frustrating event occurs.

As a matter of logic, the doctrine of frustration operates to discharge a contract, bringing it to an immediate and definitive end. Once the doctrine is applied, the contract cannot be deemed suspended or temporarily inoperative; it is terminated entirely unless the parties expressly agree to revive it through a subsequent agreement.

Subsequently, there is no partial discharge under the doctrine of frustration. A contract is either frustrated or remains in force. There is no such concept as partial or temporary discharge frustration on account of partial or temporary impossibility

Key Differences of Frustration from Force Majeure

Aspect	Frustration	Force Majeure
Source of Law	Operates automatically under common law/statute (no need for a clause).	Must be expressly included in the contract to apply.
Effect on Contract	Usually terminates the contract, discharging parties from future obligations and liability.	May suspend performance, extend timelines, or allow termination depending on the clause.
Scope	Very narrow and strictly applied — does not cover mere hardship, increased cost, or inconvenience.	Broad and flexible — parties can define events (e.g., pandemics, strikes, disasters) and how to deal with them.
Threshold to Prove	High threshold: event must make performance impossible, illegal, or radically different.	Lower threshold: as long as the event falls within the enumerated force majeure events.
Risk Allocation	Risk is not allocated in advance — the law steps in only when performance becomes impossible.	Risk is pre-allocated by the parties through careful drafting of the force majeure clause.
Commercial Flexibility	Rigid — may abruptly end commercial relationships.	Flexible — can suspend, renegotiate, or restructure performance obligations.

3. Other Doctrines Impacting Commercial Contracts

1. Doctrine of Impossibility/ Impracticability

The doctrines of impossibility and impracticability excuse contractual performance when an unanticipated event, unforeseeable and beyond the parties’ control, makes performance impossible or commercially unreasonable.

• Impossibility applies where actual, objective performance is no longer possible, for instance, when the subject matter is destroyed.
• Impracticability applies where performance is not strictly impossible, but fulfilling the obligation would be objectively unreasonable, such that the entire industry would view it as commercially futile.

Courts applying impracticability look beyond mere increased costs or reduced profits; performance must require so much beyond the parties’ original contemplation that it becomes an exercise in futility.

2. Material Adverse Effect (MAE) / Material Adverse Change (MAC) Clauses

Commercial contracts, particularly mergers and acquisitions (M&A), financing, and joint ventures, often include MAE/MAC clauses. These provisions allow a party to avoid or renegotiate performance obligations if a fundamental negative change occurs.

To successfully invoke a MAE/MAC clause, the invoking party bears the burden of proof. Courts and tribunals typically consider:

1. Foreseeability – Was the alleged event foreseeable at the time of contracting?
2. Risk Allocation – Did the parties allocate this risk in the contract?
3. Durational Significance – Is the adverse effect long-lasting relative to the transaction?
4. Industry vs Company-Specific Impact – Is the change an industry-wide downturn (less likely to trigger) or unique to the company?

Importantly, no single factor is decisive, and courts are often reluctant to uphold MAE/MAC claims based on foreseeable risks, short-term downturns, or industry-wide trends. Invoking a MAE/MAC usually requires robust factual evidence, expert testimony, and sometimes expedited proceedings.

Essentials of Contract Drafting

To safeguard against legal uncertainty and disputes, contracts should be carefully structured with clauses that anticipate risks, allocate responsibilities, and provide clear remedies. Some of the most critical clauses include:

Clause Type	Purpose	Drafting Tip
Force Majeure Clause	Excuses performance when uncontrollable events (e.g., pandemics, natural disasters, strikes) occur.	List specific events, require notice and mitigation, and clarify whether obligations are suspended or terminated.
Termination Clause	Defines the terms and conditions under which parties can exit the agreement.	State clear triggers (e.g., breach, insolvency, prolonged force majeure) and set notice periods to avoid abrupt termination.
Dispute Resolution Clause	Provides mechanisms for resolving disagreements without prolonged litigation.	Consider arbitration, mediation, or expert determination, specify governing law and jurisdiction.
Mitigation Clause	Requires parties to minimize losses in case of breach or disruption.	Clarify that failure to mitigate may affect the damages recoverable.
Material Adverse Effect (MAE/MAC) Clause	Protects parties against fundamental adverse changes (common in M&A and finance).	Define the scope (e.g., industry-wide vs. company-specific), durational impact, and carve-outs.