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FORCE MAJEURE, FRUSTRATION AND EXCEPTIONS CLAUSES: DAMAGES IN HINDSIGHT

Lloyd's Maritime and Commercial Law Quarterly

FORCE MAJEURE, FRUSTRATION AND EXCEPTIONS CLAUSES: DAMAGES IN HINDSIGHT

M N Howard* and John Knott

Classic Maritime v Limbungan

1. Introduction

Because of the intervals, first, between a breach of contract and the damage which flows from it, and, second, between the damage occurring and the hearing of a resultant claim, a whole range of puzzles presents itself in relation to changes which occur during those periods and which have a bearing on the loss. These include the situation which arises where the damage is suffered after some collateral event has occurred which would have brought about the same result independently of the acts of the parties. This in its turn may give rise to nice questions of causation: was the loss caused by the breach or by the extraneous events or by both? Questions such as these have been considered in both the House of Lords1 and the Supreme Court2 in recent years and presented themselves again in Classic Maritime Inc v Limbungan Makmur Sdn Bhd.3
In this case, the problem was complicated by a clause, variously characterised by the parties as an exceptions clause, a force majeure clause and a contractual frustration clause, which listed a series of events which exonerated both parties from liability in the event of their occurrence. The extent to which such events had to be causative of the relevant failure to perform was at the centre of the debate.

2. The facts

By a long-term contract of affreightment (COA), the defendants, Limbungan Makmur SDN BHD (“Limbungan”) agreed to supply cargoes of iron ore pellets to be shipped from Tubarao or Ponta Ubu in Brazil to Malaysia in tonnage to be provided by the claimants, Classic Maritime Inc (“Classic”). Limbungan was in fact a special purpose vehicle (SPV), created to supply iron ore to associated companies in Malaysia. The claim was concerned

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