On 15 May 2024, the Supreme Court handed down judgment in RTI Ltd v MUR Shipping BV [2024] UKSC 18, in which it unanimously allowed MUR’s appeal. The Court (Lords Hodge, Lloyd-Jones, Hamblen, Burrows and Richards) held that MUR’s rejection of RTI’s offer of non-contractual performance did not constitute a failure to exercise reasonable endeavours and therefore that MUR were entitled to rely on the force majeure clause.
The case is of significance for parties considering the exercise of a force majeure clause, which commonly contain a reasonable endeavours proviso, either expressly or impliedly. The Supreme Court held that as a matter of principle, and as strongly supported by authority (including Bulman v Fenwick [1894] 1 QB 179 and the Vancouver Strikes case [1963] AC 691), the requirement to exercise reasonable endeavours did not extend to accepting an offer of non-contractual performance.
The Supreme court held that as a matter of principle: (1) reasonable endeavours clauses are concerned to ensure there is a causal connection between the force majeure event and the failure to perform, which means performance of the contract according to its terms; (2) the fundamental principle of freedom to contract extends to the freedom not to accept an offer of a non-contractual performance; (3) clear words are needed to forego valuable contractual rights; and (4) MUR’s approach promoted certainty and predictability, which are of particular importance in English commercial law (as recently observed by the Supreme Court in JTI Polska sp z oo v Jakubowski [2023] UKSC 19).
Read the full judgment here.
Nigel Eaton KC and Adam Woolnough represented the appellants, MUR Shipping, instructed by Stuart Dench of Hannaford Turner LLP.
