RTI Ltd v MUR Shipping BV [2024] UKSC 18
RTI Ltd v MUR Shipping BV decides how a reasonable endeavours proviso operates within a force majeure clause. Unless the contract clearly says otherwise, the affected party does not have to accept a different, non-contractual performance simply because it would avoid the practical consequences of the event.
Facts
MUR Shipping and RTI entered a long-term contract of affreightment for the carriage of bauxite. The agreement required RTI to pay freight in United States dollars and contained a force majeure clause. That clause required the affected event to be beyond the parties' reasonable control and stated that it could not be overcome by reasonable endeavours. When the United States imposed sanctions on RTI's parent company, MUR said that dollar payments would be delayed and invoked the clause. RTI offered to pay in euros and to meet the costs of converting the money into dollars, which would have left MUR no worse off financially. MUR rejected the offer because euro payment was not the performance for which the contract provided.
Legal Issue
Did the duty to use reasonable endeavours to overcome the force majeure event require MUR to accept RTI's offer of payment in euros instead of the contractually specified United States dollars?
Held
The Supreme Court unanimously allowed MUR's appeal. The reasonable endeavours proviso did not require MUR to accept non-contractual performance. To overcome the relevant state of affairs meant enabling the contract to be performed according to its terms, including the right to receive payment in United States dollars. An offer that achieved an equivalent economic result through euros was still different performance. The court relied on party autonomy, the need for certainty in commercial contracts and the undesirability of assessing after the event whether an alternative caused sufficient detriment. Clear words could require acceptance of substitute performance, but this clause did not. The court did not decide that a party may ignore practical steps towards contractual performance; its conclusion concerned surrender of an express contractual right.
⭐ Legal Principle
A reasonable endeavours obligation in a force majeure clause ordinarily requires endeavours directed towards contractual performance. It does not, without clear wording, compel the affected party to accept an offer of different performance or give up an express contractual right, even where the proposed substitute would achieve a similar practical result.
Significance
The case gives a clear default rule for construing force majeure clauses, which depend on their wording rather than a general common-law doctrine. It overturned the Court of Appeal majority's more pragmatic focus on avoiding the event's effects. The decision protects certainty and freedom of contract, especially in international trade, while leaving parties free to draft broader provisions. Students should distinguish force majeure from frustration under Taylor v Caldwell: force majeure allocates risk by agreement, whereas frustration operates by law when its strict requirements are met.
Common exam questions about this case
Why was MUR not required to accept payment in euros?
The contract gave MUR a right to payment in United States dollars. The reasonable endeavours proviso required efforts to achieve performance of the contract, not acceptance of a different performance selected by RTI. Although RTI offered to cover conversion costs and the economic result might have been similar, nothing in the clause clearly required MUR to surrender its right to dollar payment.
Does RTI establish a universal rule for every reasonable endeavours clause?
No. The decision supplies a starting point based on the language and function of the clause before the court. Parties can expressly require consideration or acceptance of alternative performance if they choose. Other reasonable endeavours obligations must still be interpreted in their contractual setting. The key conclusion is that clear wording is needed before such an obligation removes an express contractual right.
How does contractual force majeure differ from frustration?
A force majeure clause is an agreed allocation of risk, so its wording determines which events qualify and what consequences follow. Frustration is a narrow common-law doctrine that may discharge a contract when an unforeseen event makes performance radically different. RTI concerned interpretation of an express clause and did not expand or replace the separate rules governing frustration.