In 2024, the UK Supreme Court (UKSC) in RTI Ltd v MUR Shipping BV (hereinafter: the ‘RTI case’, or ‘RTI v MUR’) held a significant ruling in contract law that has arguably reshaped the legal architecture of English contract and company laws, precisely as it relates to the doctrine of force majeure, privity of contract, corporate personality, and the duty to mitigate or overcome a force majeure event by reasonable endeavors. Its crucial importance is further underscored by the unpredictable trade and political sanctions among major economies of the world, and how international businesses relying on contractual performance face increased uncertainty in light of the preexisting canons of contractual interpretation.

The Claimant, RTI Ltd is a Jersey-based 100 % subsidiary of UC Rusal, a Russian company. RTI Ltd was the charterer of the vessels in the contract of affreightment (the ‘COA’ or ‘Contract’) between it and the Defendant, MUR Shipping BV, a Dutch shipping corporation and the owner of the vessels under the COA. In 2016, both parties entered into the COA in which MUR was to ship approximately 280,000 metric tons of bauxite per month from Guinea to Ukraine. Both parties agreed under the Contract that payments would be made in US dollars. Use of US dollars as the contractual currency implicated involvement of US intermediary banks in processing the contractual payments.

Additionally, the COA included a force majeure clause, which operated to excuse either party from performance if certain events beyond their control occurred, provided they “could not be overcome by reasonable endeavors.” Indeed, clause 36 of the COA provides for force majeure as follows:

“36.1. Subject to the terms of this Clause 36, neither Owners nor Charterers shall be liable to the other for loss, damage, delay or failure in performance caused by a Force Majeure Event as hereinafter defined. While such Force Majeure Event is in operation the obligation of each Party to perform this Charter Party (other than an accrued obligation to pay monies in respect of a previous voyage) shall be suspended.

36.2. Following the end of the Force Majeure Event, the Parties shall consult in good faith to make such adjustments as may be appropriate to the shipment schedule under this Charter Party.

36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:

a) It is outside the immediate control of the Party giving the Force Majeure Notice;

b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;

c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;

d) It cannot be overcome by reasonable endeavors from the Party affected.

36.4. A Party wishing to claim force majeure in respect of a Force Majeure Event must give the other Party a Force Majeure Notice within 48 hours (Saturdays, Sundays and holidays excepted) of becoming aware of the Force Majeure Event. Such Force Majeure Notice shall be a notice in writing which:

a) sets out or attaches details of the Force Majeure Event, and

b) states that the Party giving the Force Majeure Notice wishes to claim force majeure in respect of such Force Majeure Event.

c) gives reasonable estimated duration of the Force Majeure Event to the extend [sic] it is reasonably possible to do so at the time of giving the Force Majeure Notice.

36.5. A Party which fails to give a Force Majeure Notice upon the occurrence of a Force Majeure Event in accordance with Clause 36.4 shall not be permitted to claim force majeure in respect of such Force Majeure Event.

36.6. Without prejudice to the generality of this Force Majeure Clause, time lost while waiting for berth at or off the loading port or discharge port and/or time lost while at berth at the loading port or discharge port by reason of a Force Majeure Event or one or more of the port authority imposing restrictions in relation to safe navigation in the port, the restraint of Princes, strikes, riots, lockouts of men, accidents, vessel being inoperative or rendered inoperative due to the terms and conditions of employments of the Officers and Crew, shall not count as laytime or time on demurrage.

In April 2018, sanctions were imposed by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) against RTI’s parent-company, raising fears of significant banking complications that could mature into delays of performing the COA. In effect, per MUR’s view, the payment in US dollars required that a US intermediary bank would process the transfer payments and a US bank could not have afforded to violate the OFAC sanction regulations. Although this point was hardly emphasized during the trial, it is important to note that RTI itself was not directly sanctioned. However, per the COA which covered government regulations, the ownership of RTI by a sanctioned Russian entity allegedly raised “compliance and reputational risks” for MUR’s banks. Clause 36.3 (d) of the COA required each party to ‘overcome’ a force majeure event with ‘reasonable endeavors’.

On the basis of the forgoing clause, RTI offered to make payments in euros, and guaranteed to bear any conversion costs in order for MUR to receive full payment in their US dollar account. It was thought by RTI that their offer (if accepted) would be a sufficient reasonable endeavor to overcome the force majeure event, given the offer’s practical effect of completely neutralizing the impact of the sanctions on MUR. The offer was however rejected by MUR, consequently invoking the force majeure clause and suspending its obligations under the Contract. MUR argued that the US dollar payment obligation had become impossible to perform, and that the force majeure clause was therefore triggered. Its force majeure notice to RTI contended that continued performance of the Contract would breach the US government sanctions against RTI’s parent company. Similarly, it argued that the potential involvement of US intermediary banks in processing US dollar payments indicates a possibility that the sanctions would prevent or significantly delay the processing of payment under the Contract ( Kaiser & Hovsepyan, 2024 ).

At the arbitration, the Tribunal held in favor of RTI, finding that MUR could have used “reasonable endeavors” to accept the offer of RTI to pay in euros as well as its promise to bear the cost of the payment conversion to US dollars: RTI contended that its proposed workaround would have prevented the force majeure clause from being triggered into effect. ²⁶ The High Court overturned the arbitral award, siding with MUR. The Court of Appeal of England and Wales restored the arbitral award, siding with RTI. The matter then proceeded to the UK Supreme Court (UKSC). At UKSC, a unanimous majority held for MUR. ²⁷ Arguably, the UKSC did not satisfactorily resolve some of the underlying issues (e.g., the doctrines of privity and separate corporate personality) that border on some aspects of contract and company laws.

The obligation by RTI to utilize ‘reasonable endeavours’ in mitigating the force majeure event so that MUR’s payment would not be delayed, was assessed by the UKSC solely within the ambit of contractual rights. Similarly, it was determined whether such use of reasonable endeavours to mitigate force majeure required MUR to accept a non-contractual performance, such as acceptance of RTI’s offer to pay in euros instead of in US dollars even if MUR will eventually receive its full payment in US dollars upon conversion. The UKSC held that the Contract specifically required US dollar payments. Thus, the offer to accept payment in euros, even if economically equivalent, would amount to accepting a non-contractual performance. According to it, there was no obligation to accept an alternative performance that departed from the express terms, even if it ultimately overcame the force majeure: in the Court’s view, the requirement to use ‘reasonable endeavours’ to mitigate force majeure by a party, does not require the counterparty to accept non-contractual terms. ²⁸

In Tennants (Lancashire) Ltd v CS Wilson and Co Ltd, ²⁹ Lord Atkinson provided an illuminating perspective on the threshold required to mitigate a force majeure event. The word being considered in Tennants was ‘prevention’ and his Lordship stated that its meaning must be something reasonably impossible for the mitigating party to undertake: ‘“Preventing” delivery means, in my view, rendering delivery impossible; and “hindering” delivery means something less than this, namely, rendering delivery more or less difficult, but not impossible...’. ³⁰ Tennants and other cases show that prior to the RTI case, the jurisprudence vis-à-vis mitigation of force majeure was solution-driven and had maintained a practical rather than a theoretical appreciation of contractual performance: in other words, to successfully invoke force majeure, it must be clearly demonstrated that no other reasonable effort within the powers of the mitigating party was left unexplored.

In part three below, the article discusses some of the conflicting legal issues that are implicated in the RTI case, which were arguably not reconciled by the UKSC.

Firstly, it was surprising that the doctrine of separate corporate personality as established in Salomon v Salomon & Co Ltd, ³¹ was never raised or sufficiently discussed in the RTI case even though the doctrine was arguably implicated by the act of deeming RTI and its parent-company as one and the same without any justifiable basis. RTI is a Jersey-registered company under the jurisdiction of the United Kingdom, and as such, is subject to English law. The basis on which MUR Shipping triggered the force majeure clause was that RTI’s parent-company (UC RUSAL, a company registered in Russia), came under sanctions by the US government. The sanctions were not directly imposed on RTI Ltd. Even as a subsidiary, RTI’s corporate personality entails that it is separate from its parent-company/shareholder (s), and any sanctions meted on the latter could not have vicariously (and directly) impacted on RTI, on account of the separate corporate personality principle. ³²

Based on the notable exceptions of this company law principle as discussed by the UK Supreme Court in Prest v Petrodel Resources Ltd, ³³ RTI’s separate corporate personality could only be unveiled if there was an element of fraud or collusion with its parent that consequently stained its hands in the transactions with MUR Shipping. ³⁴ However, there was no accusation of fraud or collusion, or any evidence that RTI was involved in any fraudulent activity whatsoever. Therefore, the separate corporate personality principle should have been sufficient to shield it from any impact of the US sanctions against its parent-company. ³⁵ The UKSC ruling in this case has inarguably challenged the sufficiency of the protection conferred by separate corporate personality outside the context of fraud warranting the invocation of its exceptions.

Moreover, English courts have emphasized that piercing the corporate veil is only permissible in highly limited and exceptional circumstances. A recent reaffirmation can be found in Vedanta Resources Plc v Lungowe, ³⁶ and more pointedly in Okpabi v Royal Dutch Shell Plc, ³⁷ where the UK Supreme Court made clear that there is nothing inherently special or conclusive about the bare relationship of parent and subsidiary when determining liability. The existence of group structures does not, of itself, impose legal responsibility on the parent for the acts of its subsidiary; rather, responsibility must be established on ordinary principles of law, such as assumption of duty or control, and not by disregarding the doctrine of separate corporate personality. This underscores that even under contemporary pressures of sanctions regimes, veil piercing remains a remedy of last resort, requiring proof of impropriety or evasion of legal obligations.

Secondly, the RTI ruling challenged the issue of jurisdiction which is conferred by the applicable law of a contract. The COA was being governed by English law and courts. Based on the established English law on personal jurisdiction, ³⁸ RTI was not personally subject to US jurisdiction and therefore could not have been subject to OFAC sanctions. Indisputably, a Jersey-registered company with a separate corporate personality, operating an English governed contract ought not to have been vicariously impacted by US sanctions against a Russian company with a distinct corporate personality, irrespective of whether the latter is the parent. ³⁹ More importantly, RTI’s parent-company was not signatory to the COA, neither was it mentioned as an agent of RTI for the purposes of performing the COA. Barring a few exceptions as established in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd, ⁴⁰ which do not apply in the circumstance, a contract binds only the parties that executed it. ⁴¹ Therefore, the parent-company’s relevance to the performance and interpretation of the COA are unsupported by the avalanche of English case law on privity of contract.

Generally, at the core of contract-making is party autonomy ( Barnett, 1986 ; Atiyah, 1979 ). This feature distinguishes contract from other sources of obligations such as those that arise by operation of law ( Beale, 2021 ). Based on the agency which contract law bequeaths to parties, English courts would only accept overpowering forces beyond a party’s control in order to excuse them from performance. In that sense, force majeure is not synonymous with hardship—courts do not consider the latter as sufficient to excuse performance. However, in ascertaining and acting on the basis of force majeure, good faith has enormous role to play in ensuring that a party’s reliance on it to excuse performance is devoid of opportunism. ⁴² For this reason, English courts have reiterated at various instances that the essence of contract is performance and nothing else. ⁴³ Thus, it is expected (to the extent it is reasonable to do so) that a party would accept the functional equivalence of their contractual bargain. However, in disputes, whereby the parties’ testimonies cannot be solely relied upon in ascertaining each of their intentions, courts have often reverted to finding out the purpose of contracting so as to narrow down to what could qualify as a reasonable alternative to contractual terms and performance ( Hoffmann, 1997 ; Mitchell, 2019 ).

Thus, even if the force majeure clause of a contract omitted the requirement for a party to take reasonable steps in overcoming a force majeure event prior to abdicating performance, the court in B & S Contracts and Design Ltd v Victor Green Publications Ltd, ⁴⁴ opined that courts could imply it into existence. This agrees with the doctrine of implied terms as well as the hardened judicial view on the essence of contract as being performance. As elucidated by the UK Supreme Court in Bunge SA v Nidera BV, ⁴⁵ mitigation efforts are generally assessed on the basis of effectiveness and commercial reasonableness as opposed to their strict alignment with contractual terms.

The expectation of reasonableness is not one-sided: it applies to both contracting parties by ensuring that each of them uses their best efforts to actualize performance and avoid escalation of losses. ⁴⁶ In the RTI case, clause 36.3 (d) requires that following the occurrence of a force majeure event, the performing party takes reasonable steps to overcome it. Since the scope of meaning and effect of taking reasonable steps to overcome a force majeure event was in contention, the resolution ought to have been based on established legal rules such as the legal tests for ascertaining implied terms through a reasonable person, business efficaciousness ⁴⁷ or an officious bystander’s perspective. ⁴⁸ The doctrine of implied terms has been well discussed in contract law and leaves little or no room for misconception. ⁴⁹ The traditional tests for ascertaining implied terms are Lord Bowen’s Business Efficacy test and Lord Mackinnon’s Officious Bystander test ( Peel, 2001 ; Hooley, 2013 ; Mitchell, 2003 ). None of the tests was analyzed by the UKSC majority in the RTI case, to ascertain whether RTI’s offer to make payment in euros with the possibility that MUR ultimately receives US dollars upon conversion, could be understood by an officious bystander as being part of the COA’s express terms.

Similarly, although the parties did not include the possibility to pay in another currency other than US dollars, any officious bystander eavesdropping at the parties’ conversation about contract terms, would likely agree that an ultimate payment in US dollars following a transfer of euros could, of course, be implied into the parties’ Contract. Similarly, transfer of euros in the circumstance could be implied on the basis of business efficacy: the UKSC in Marks and Spencer Plc held that terms could be implied into a contract if they are “necessary for business efficacy”. ⁵⁰ Based on court decisions regarding the forgoing tests for implied terms, it is argued that the RTI set of facts, particularly as it relates to overcoming the force majeure event through the offer to transfer euros for conversion, instead of US dollars, could have easily met the threshold of the ‘business efficacy’ test, and an officious bystander could have likely deemed RTI’s offer to pay in an alternative currency as an integral element of the express term.

However, the core challenge with the forgoing tests is the fact that only the sitting judge can apply them—the judge is the one who determines whether an effort by a contracting party is sufficiently business efficacious, and he or she is also the so-called officious bystander. Thus it was understandable why these tests were not examined for potential application in the RTI case, given that the judges had the power to jettison their application.

As Lord Radcliffe opined in Campbell Discount Co Ltd v Bridge, ⁵¹ contractual parties are inherently aware that externally overpowering factors may restrict a full-scale enjoyment of their contractual rights or performance of their obligations. ⁵² A force majeure (FM) clause for example is an acknowledgment of this possibility. Thus, it is implied that for an event to qualify as force majeure and thus discharge a party from performance, such a party must have nothing left within their powers to reasonably mitigate the force majeure event. This, or a similar view, has to be the perception of force majeure in commercial settings whereby the primary focus or purpose of contract is performance. If English law is truly committed to its longstanding position that a party cannot be discharged from performance on the basis of hardship, ⁵³ then it should not allow its counterparty to refuse acceptance of it owing to an opportunistic use of force majeure, especially where the performing party has shown good faith by using reasonable endeavors to overcome the FM event.

In the RTI case, MUR arguably weaponized force majeure as a renegotiation tactic given that the cost of chartering replacement vessels had significantly increased beyond the COA price. ⁵⁴ Perceptibly, it was using the FM clause to wriggle away from hardship given that continuous performance had become less profitable compared to the opportunity cost of utilizing the same vessels to perform new contracts at the forgoing market rates. The fact that RTI and MUR agreed on a term and further agreed in the FM clause to use reasonable endeavors to overcome a force majeure event is indicative of their common prediction that the chosen currency of payment (US dollars) will likely become difficult (but not impossible) to fulfill. ⁵⁵ In that circumstance, it makes sense that use of reasonable endeavor to overcome the FM challenge cannot be the same method (or currency) that has proved impracticable to actualize under the express words of the Contract. The duty to mitigate an FM event ought to include the exploration of other acceptable methods of performance in the market which stand in close proximity with the contractual method as well as commercial reasonableness.

A functionally equivalent (hypothetical) example of the problems underlying the RTI decision could be stated as follows: assume that under a contract with a force majeure clause similar to that of RTI v MUR, Mr. A residing in point Y, agreed over a period of twelve months to transport a certain quantity of goods by road each month to Mr. B, residing in point Z, through the only bridge that links points Y and Z. Then it happened that the bridge collapsed in the tenth month of performance of the contract. Based on this scenario, if Mr. A offers to deliver the remaining goods to Mr. B, by flying them across at his (Mr. A’s) own expense, would Mr. B be reasonably entitled to refuse such a non-contractual performance?

Before the UKSC decision in RTI, most common law courts would agree that such an offer to remedy the FM event through air transportation would qualify as a reasonable endeavor to overcome the FM event. A court focusing on outcome, performance, fairness and continuity of commercial relations which reasonable contractual parties are assumed to desire, would see good reasons to uphold the perspective of Mr. A in the forgoing hypothetical scenario, and by extension that of RTI in the case. Similarly, Mr. B’s undertaking to fly the remaining goods at his own expense would also prevent a backward chain of breaches if he (Mr. B) had relied on other contracts with people to perform its contract with Mr. A. ⁵⁶ Based on the UKSC position in the RTI case, an FM event can hardly be remedied by a non-contractual method that is business efficacious, even when the party offering it promises to shoulder whatever extra cost or responsibility that would be implicated in the mitigation process. However, this article’s view would be different if MUR was the party unilaterally imposing the burden by requiring RTI to perform the contract by a non-contractual means and at RTI’s expense.

The market is imperfect and unstable. Therefore, UKSC’s strict binary classification of performance into contractual and non-contractual in the RTI case radically departs from its previous holdings, and would likely be a problematic precedent due to the seeming incompatibility with commercial realities. Similarly, it is unrealistic for the Court to justify such a strict stance on the basis of party autonomy and freedom of contract even though English courts arm-twist contractual parties all the time by overlooking their contractual terms and insisting on reasonableness and justice. ⁵⁷ Moreover, in the circumstance, MUR was under a Braganza duty, ⁵⁸ which is applicable where parties rely on mutual trust and cooperation. Since its creation in 2015, the Braganza duty is now typically implied in English contract law, and requires a party with contractual discretion to exercise that discretion reasonably and bona fide. The UKSC has a judicial notice of the Braganza duty, and should have analyzed it to essentially require MUR to act honestly, rationally, and not in an arbitrary or capricious way since it was in a position of making decisions that significantly affected it and RTI in the Contract. ⁵⁹

In light of the forgoing, it is important to note for example, that transfer of euros instead of US dollars is different from payment in cryptocurrency—in the RTI case, while payment in euros or cryptocurrency would have broadly qualified as a non-contractual performance, there is no doubt to any reasonable person that both are uniquely different in the business world and cannot therefore be treated similarly by the law in respect of monetary payments. At least the court should have made such a distinction, and also straighten the line between where the reasonable endeavor to overcome a FM event is undertaken willingly and at the expense of the party offering such non-contractual performance, and where it is being imposed by a party who will not bear the cost.

It is common knowledge that contracting parties generally care more about monetary gains and losses: this, perhaps, is why compensatory damages focuses solely on monetary loss. ⁶⁰ In terms of pecuniary cost, MUR did not lose any money prior to invoking the FM clause, and could not have lost any money in respect of its fears of not being paid in US dollars since RTI promised to shoulder any conversion costs. MUR would have still been paid in US dollars at the end of the conversion, and there was no concrete evidence (other than mere speculations) that its payment was (or would be) delayed: its argument of delay was solely based on perceptive fears that did not actually materialize.

Longmore LJ in Great Elephant Corp v Trafigura Beheer BV, ⁶¹ observed that corporations have a relatively high degree of control over their operations, and it is a high threshold for a corporation to show that a particular matter or event is ‘beyond their control’. ⁶² Thus, RTI’s willingness to pay in euros and cover any conversion fees proves their good faith and the higher threshold of responsibility it was willing to undertake towards fulfilling its duty to mitigate the FM event. In any case, English case law in relation to force majeure tends to prefer a low threshold meaning of delay—thus, its impact must be quite significant as to almost ground performance to a halt before it can trigger a force majeure. A case in point is Lord Esher’s opinion in Bulman & Dickson v Fenwick & Co, ⁶³ in relation to whether an exceptions clause did excuse charterers for late unloading caused by a strike. Lord Esher MR (with whom Lopes and Kay LJJ concurred) stated that:

“a strike would in itself not be sufficient to exonerate the charterers from doing the best they could to accept delivery, and would not entitle them to fold their arms and do nothing. If, notwithstanding the strike, they could by reasonable exertion have taken delivery of the cargo within the proper time, the strike would not have afforded them any defence.” ⁶⁴

In the RTI case, delay was merely speculated and thus unjustifiable when paired with Lord Tucker’s view in Fairclough, Clough, Dodd & Jones Ltd v JH Vantol. ⁶⁵ In that case, the relevant portion of the FM clause provided that “should the shipment be delayed by fire, strikes, …, or any other cause comprehended in the term force majeure other than war, hostilities, blockade, the time of shipment shall be extended by two months.” Lord Tucker, reading the word ‘delayed’ in the context of the FM clause considered that ‘delayed’ meant just that, and he did not consider that it should mean ‘shipment by the contract date be prevented’. ⁶⁶

Furthermore, on the authority of The Sea Angel, ⁶⁷ “the doctrine of frustration is not to be lightly invoked…mere incidence of expense or delay or onerousness is not sufficient…there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances.” ⁶⁸ Yet in the RTI case, delay was only speculated and MUR’s justification to discontinue performance was based on the likely restrictions the US government sanctions against RTI’s parent-company would have on RTI towards its own performance of the COA. It would have been different if MUR based its objection upon an actual experience: for example—if it had experienced delays in the past with RTI under the same or similar FM event, and was thus unprepared to relive the same experience—that would have been a satisfactory example in which it would be justified to cite RTI’s incapability to overcome the FM event through what it thought was a reasonable endeavor.

In any event, the burden was on MUR to prove that delay happened—it was insufficient to argue the possibility of delay when it did not happen or have any reasonable possibility of happening given that processing euro payment and converting same to US dollars is typically an instantaneous exercise. Even though the FM clause in the COA did not give MUR a one-sided power to determine what and when FM occurred, the way and manner in which it exercised its judgment seemed as if it had such a power. The case of Dwyer (UK Franchising) Ltd v Fredbar Ltd and Mr Shaun Rowland Bartlett, ⁶⁹ provides a good example of an instance in which a force majeure clause empowered a party to unilaterally declare a force majeure event. In that case, the FM clause of the franchise agreement read as follows:

‘This Agreement will be suspended during any period that either of the parties is prevented or hindered from complying with their respective obligations under any part of this Agreement by any cause which the Franchisor designates as force majeure including strikes, disruption to the supply chain, political unrest, financial distress, terrorism, fuel shortages, war, civil disorder, and natural disasters.’ ⁷⁰

Jones J held that Dwyer had to exercise this discretion in accordance with the Braganza duty or principle. ⁷¹ In the Braganza case, Lady Hale held that “[a] court would generally imply a term that the decision-making process in relation to the discretion was to be exercised lawfully and rationally in the public law sense.” ⁷² That is, the decision was made rationally, taking account of relevant considerations, and ignoring irrelevant considerations; made in good faith and in consistency with the purpose of the contract. ⁷³ Based on these Braganza principles, MUR’s insistence that an FM event had occurred and was incapable of being remedied based on RTI’s offer to transfer euros did not align with the requirements of consistence with good faith and contractual purpose.

Another important point to this discourse relates to the way courts treat specific performance and damages in contracts. Courts usually award either damages or specific performance following a breach of contract. The first option a court explores is compensatory damages, aimed at putting the innocent party to the position he would have been as far as money can do it, had the contract been performed. It is crucial to note that courts typically award specific performance when it can be determined that damages are an inadequate remedy for the breach, especially where the subject matter of the contract is unique or irreplaceable. A grant of specific performance compels the breaching party to fulfill its contractual obligations as agreed upon, rather than simply compensating the injured party with damages. In evaluating whether or not to grant it, courts will consider the existence of a reasonable alternative, fairness and justice in the case, and this includes assessing the conduct of both parties and to what extent a party had acted in good faith.

Prior to the UKSC decision in RTI, courts granted specific performance quite rarely by reserving it for instances where the subject matter of contract was unique and irreplaceable, especially if the performing party was willfully avoiding performance or saw payment of damages as an easier way out. This was not the case in the RTI case, in which RTI insisted on performance even though it would ultimately cost it more to actualize: thus, UKSC’s insistence on contractual performance which is another term for specific performance, was inconsistent with settled law as well as the Braganza principle.

Commercial contracts are largely underpinned in the concept of party autonomy and freedom of contract which emphasize the importance of contract language rather than its purposive meaning ( Nelson, 2005 ). In other words, the exact words used in drafting the terms of a contract arguably embody its complete meaning such that any attempt to import aid from pre-contract negotiations of the parties is viewed as an aberration of their contractual intention. Therefore, in dispute, the primary duty of a court exploring textualism would be to interpret the contract terms by exploring their ordinary dictionary meaning: ⁷⁴ this judicial exercise must also be accomplished without any exclusive reliance on each of the parties’ post-dispute account regarding their contractual intention.

The English commercial contract law developed from the activities of merchants whose sophistication underlines their heightened capacity to comprehend their actions vis-à-vis consensus ad idem. Texualism views a court’s intervention of exploring outside the four walls of contract as a rude disbelief in the contractual words of reasonable commercial parties and purporting to deem them incapable of making their own decisions. Textualism operates on the formalistic conception of law and the parol evidence rule holds the written words of a contract as the supreme version of the parties’ intention ( Posner, 1998 ; Zuppi, 2007 ). An integral part of textualism is the stipulation that the intention of parties must intrinsically be gleaned from the contract document without recourse to any pre-contract negotiations or what Lord Wilberforce refers to as the ‘matrix of facts’. ⁷⁵ In Melanesian Mission Trust Board v Australian Mutual Provident Society, ⁷⁶ Lord Hope stated that:

‘the intention of the parties is to be discovered from the words used in the document. Where ordinary words have been used they must be taken to have been used, according to the ordinary meaning of these words. If their meaning is clear and unambiguous, effect must be given to them because that is what the parties are taken to have agreed to by their contract.’ ⁷⁷

Given that English contract law positions itself as capable of being used globally by commercial parties, English courts have long seen themselves as the prevalent forum of choice for commercial dispute resolution. In that case, textualism offers that degree of certainty which sophisticated parties would need in order to forecast the consequences of their actions.

The Arnold case ⁷⁸ reasserted the importance of the actual language used, warning against overreliance on context or commercial common sense. In the case, Lord Neuberger said: “…the clearer the natural meaning, the more difficult it is to justify departing from it.” ⁷⁹ Thus, textualism’s primary focus on the ordinary meaning of contract words as appreciated in the English language dictionary basically underlines what a reasonable language user would understand from the terms. But textualism leaves an important exception to the effect that where the meaning of words as used would seem absurd in a given circumstance, the court is expected to jettison its application and explore any other suitable canons of interpretation. ⁸⁰ The challenge with textualism is its disinterestedness in context which may harbor crucial evidence—this lack of openness to consider background facts arguably contradicts with textualism’s ultimate ambition of finding the true intention of parties.

In the RTI case, the unanimous majority applied textualism, reinforcing the textualist view that the ultimate mission of finding the true intention of parties can only be safely achieved by limiting findings within the four walls of the contract. But in the Rainy Sky SA case, ⁸¹ Lord Clarke stated that ‘if there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.’ ⁸² Similarly, in Wood v Capita, ⁸³ the court stated that contractual interpretation is a ‘unitary exercise’: i.e. textual and contextual elements should be weighed together. ⁸⁴ Yet, judges including the UKSC unanimous majority in the RTI case, continue to be polarized on commercial interpretation.

English courts explore contextualism as another method of fathoming the intention of contracting parties by focusing on the surrounding context and commercial purpose of the contract rather than relying solely on the literal meaning of the words used in drafting the contract ( Gerhart & Kostritsky, 2015 ). Unlike textualism, words in the contextual approach derive their meaning from context, that is, the background facts known to both parties (or the factual matrix as Lord Wilberforce called it in Prenn v Simmonds), the commercial purpose of the contract (which can be ascertained from a contract’s recital and pre-contractual negotiations), the industry practices and reasonable expectations of parties. These important factors were largely ignored in the RTI case.

Lord Hoffmann is a towering and influential figure in English contract law. He deepened the popularity of contextual interpretation during his reign in the UK House of Lords. In his famous speech in Investors Compensation Scheme Ltd. v West Bromwich Building Society, ⁸⁵ he propounded five principles of contractual interpretation that seek to avoid unjust or absurd results that might arise from a literal interpretation of contract language. According to Hoffmann’s fourth restatement in the ICS case:

‘the meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.’ ⁸⁶

Thus, in ascertaining a contractual meaning the court must look beyond the blackletters of a contract into its background facts, knowledge, as well as the underlying purpose so as to truly determine what the parties mean. Similarly, Hoffmann warned in Mannai Investment Co Ltd v Eagle Star Assurance, ⁸⁷ that we must not ‘confuse the meaning of words with the question of what meaning the use of the words was intended to convey’. ⁸⁸ Therefore, if the rationes decidendi in ICS and Mannai Investment Co Ltd were considered in the RTI case, the court would likely have interpreted the FM clause in a way that prioritizes a reasonable overcoming and performance of the COA, even if by a non-contractual method rather than insistence upon an impracticable contractual method of performance that seemingly overrode the contractual purpose.

A contextual interpretation especially as advanced by Hoffmann aims ultimately at reflecting the real-world commercial environment in which the contract in question operates. However, the critics to this approach have bemoaned its tendency to create uncertainty due to its heavy dose of subjectivity which could create a needless room for disagreements, disputes, and longer trials that require courts to consider more evidence, even beyond the contract document. The relentless pursuit of finding the intention of parties at all cost through background facts seems to conflict with the speed that commercial parties generally crave in dispute resolution ( Havelock, 2016 ). ⁸⁹ Moreover, reliance on the contextualist approach does not seem to help England fulfill its promise to prospective litigants of being the jurisdiction of choice for commercial parties seeking to speedily resolve their disputes.

As earlier stated, the English contract law has a mercantile genealogy—this heritage is largely visible in how commercial disputes are interpreted. In between the wide spectrum of contractual interpretation, that is textualism and contextualism which according to McLauchlan (2009: p. 14) are ‘poles apart’, is the business common sense (BCS) rule which refers to the principle that commercial contracts should be interpreted in the light of how reasonable, practical, and commercially logical businesspeople would expect it. Lord Wilberforce developed a test for this approach in Prenn v Simmonds (supra) which it called the ‘commercial good sense.’ Lord Diplock later advanced it as a more coherent rule of interpretation in Antaios Cia Naviera S.A. v Salen Rederierna AB, ⁹⁰ when he said that “if detailed and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense it must yield to business common sense.” ⁹¹ In 2011, the UKSC in Rainy Sky SA (supra) stated that “if there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense.” ⁹²

The core underpinning of the BCS rule does not lie in rewriting contracts or rescuing parties from bad bargains, but to choose between competing meanings when a contract is ambiguous or unclear from a commercial lens such as the facts in the RTI case. In other words, if two competing interpretations of a contract clause are available, English courts, per the BCS rule, tend to choose the version that is more commercially sensible given that the commercial parties are transacting to achieve commercial outcomes. It is quite likely that the vastness of commercial contracts as well as the series of negotiations that often underpin them may expose them to the underbelly of drafting inadequacies such as ambiguities and unintended consequences. In such a situation, it would make little sense if a court were to become mechanical and unresponsive to background facts, ultimately failing to recognize what could be a glaring error or anti-business sense.

But Hoffmann tried to address this kind of possibility in his recommendation in Chartbrook v Persimon Homes Ltd. ⁹³ Although the BCS rule appears corrective in approach, it is not typically designed to rewrite the contract of parties where it is perfectly clear and reasonable. Instead, its sparing use eschews interpretations that are likely to produce absurd or irrational outcomes that ultimately undermine the parties’ commercial purpose, or provide a party with a platform to be opportunistic if a textual approach were to be exclusively explored such as in the RTI case where the UKSC decision seemed contradictory with how electronic money transfers work. The court’s understanding of money (and payment) in the RTI case seemed similar with the definition of money in the old English case of Moss v Hancock, ⁹⁴ where money was defined as ‘‘that which passes freely from hand to hand throughout the community in final discharge of debts... being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it…”. ⁹⁵ Arguably, the court misunderstood RTI’s remedial offer to send euros in MUR’s Dutch bank account with the promise that the latter would receive enough euros which could be converted to US dollars, including any conversion costs incurred by MUR’s bank in the process. In electronic banking terms, the timeframe for the entire process of receiving euros from RTI’s bank and converting same to US dollars would be nearly instantaneous and the issue of delay would never have arisen as to trigger the FM clause.

However, UKSC seemed to have appreciated the payment scenario from a physical (Moss v Hancock) perspective in which RTI’s proposal sounded as if it wanted to physically hand MUR some euro cash that is equivalent to the US dollars that was agreed. MUR’s refusal caused RTI to explore alternative charters at a substantially higher rate than that agreed with MUR under the COA. Based on the authority of B&S Contracts, ⁹⁶ which RTI correctly relied on, MUR’s insistence could qualify as an economic duress and RTI’s additionally incurred costs should have been recoverable after MUR resumed nomination of vessels to perform the remainder of the contract following the lifting of sanctions by the US government which permitted the contracting parties to finalize existing contracts.

UKSC’s erroneous conception of what the parties were trying to accomplish was visible in its distinction between a contractual and non-contractual performance in overcoming a force majeure event. Thus, based on the rich case law of BCS rule, which the English apex court created but ignored willfully in the circumstance, the RTI case would have been a perfect circumstance for applying the BCS rule. English contract law often boasts of being predictable or aspires to be so, but the unpredictable swings to different directions of contractual interpretations specifically undermine this claim or ambition. In the RTI case, the court did not to cite the leading cases in contractual interpretation, as if these decisions were totally irrelevant in determining the outcome of the RTI case. Thus, provided that no judicial or legislative effort has been launched to create a unitary system of commercial interpretation as envisaged by Lord Hodge in Wood v Capita (supra) ⁹⁷ , contractual parties utilizing English contract law will always be faced with multiple possibilities of their contractual actions.

Irrespective of the adopted canon of contractual interpretation, it is undeniable that some measure of common sense is necessary in arriving at fair and justifiable interpretations ( Kramer, 2003 ). Lord Wright’s bold comment on a ‘common sense’ approach is relevant here when he opined in Yorkshire Dale Steamship Co Ltd v Minister of War Transport, ⁹⁸ that:

‘this choice of the real or efficient cause from out of the whole complex of the facts must be made by applying commonsense standards. Causation is to be understood as the man in the street, and not as either the scientist or the metaphysician, would understand it. Cause here means what a business or seafaring man would take to be the cause without too microscopic analysis but on a broad view. Thus in the Lonides case, the court held that the cause of the loss was the fact that the captain was out of his reckoning to the extent of about 50 miles when he changed his course and that the extinction of the light was not the cause, though there was a remote chance that, if it had been alight as in peace time it used to be, the stranding might have been averted. The question always is what is the cause, not merely what is a cause. The cause so ascertained must then be within the description of consequences of warlike operations if the shipowner is to recover.’ ⁹⁹

The effect of force majeure largely depends on which party in a contract is seeking its application. In many circumstances, the party seeking to rely on force majeure is the performing party who would consequently be discharged if the FM clause is successfully triggered. For a long time, the position of law has been that force majeure clauses apply only when performance is rendered legally or factually impossible, not merely more difficult or inconvenient. Perhaps this is why English law does not accept hardship as a defence to a lack of performance. In the RTI case, RTI did not consider the restrictive sanctions on its parent as sufficient to render it incapable of continuing with performance. RTI was interested in mitigation by exploring a reasonable alternative that is agreeable to commerce and business common sense. However, irrespective of the supporting precedents, the court insisted that the duty to mitigate an FM event can only be fulfilled within the method chosen for contractual performance. The court insisted on a strict binary classification of performance into contractual and non-contractual methods—there was no room for a middle ground in assessing whether an offered alternative stands in reasonable proximity to the contractual method.

As stated earlier, based on the business common sense rule which English courts are highly familiar with, there is a world of difference between satisfying payment of debts in US dollars as agreed by contract on one hand, and seeking to pay the same debt with (euros or) cryptocurrency, on the other hand, as an alternative. While the alternative to pay in cryptocurrency (or euros) qualifies as a non-contractual method, many reasonable businesspeople would likely agree that US dollars and euros stand in very close proximity, while US dollars and cryptocurrency stand poles apart and could easily qualify as a non-contractual method. Inherent in the duty to mitigate an FM event is also the duty to accept a reasonable alternative.

Thus, MUR’s refusal to accept euros (which could have mitigated the force majeure) ought to sufficiently undermine its force majeure claim owing to its Braganza duty. English case law on contracts richly emphasizes business common sense and commercial pragmatism. In other words, alternatives need not be identical but must functionally achieve the contractual purpose. If this be the case, then a party should not be allowed to ignore practical solutions that ultimately achieve their contractual purpose. However, in the wake of the RTI decision, contracting parties may need to ensure that they specify exactly what would constitute mitigation of force majeure, and whether a non-contractual method can be explored for that purpose. Similarly, it is important to keep the records of every interaction before and after dispute to enable a party to prove or disprove the breach or satisfaction of the Braganza duty.

Although the RTI case revolved primarily around contract law, corporate law issues were implicated, even though their confluence was inadequately addressed by the court. Recall that RTI Ltd was not a Russian company and was not directly impacted by the US government sanctions. A limited liability company is separate from its parent or shareholders—in this case, there ought to be a distinction between RTI and its human or corporate shareholders unless there is a justifiable ground to lift the corporate veil, which was absent in the RTI case. Sanctions were meted on RTI’s parent-company—both the parent and subsidiary should not have been viewed as being jointly and severally liable in the circumstance.

Oddly, the doctrine of separate corporate personality was not discussed in the RTI case. RTI has its own corporate personality and signed the COA which binds it alone. The doctrine of privity of contract stipulates that only the parties that executed a contract would be bound by its provisions. Similarly, barring exceptions, the doctrine of separate corporate personality ensures that what an incorporated company does cannot be taken to have been done by its subsidiary or parent. Both of these concepts were not addressed by the court in the RTI case.

Although every FM clause is usually interpreted based on its own peculiar facts, the RTI case shows that contracting parties would need to be as imaginative and detailed as possible when drafting an FM clause. Precisely, if the parties are genuinely interested in performance of contract to actualize their economic purpose, then the duty to mitigate an FM event could specifically state that the party with the obligation to mitigate could explore both contractual and non-contractual methods. Such specificity would prevent literalist judges from ever deviating from the intention of parties.

Although a non-contractual method could mean different surprising things, judicial interpretations ought to limit them to commercially reasonable alternatives that satisfy business common sense and contractual purpose. In other words, while government/currency sanctions feature regularly in many FM clauses, parties can indicate what an alternative currency could be in the event the contractual currency is impacted by sanctions.

Given the geopolitical tensions in international trade as well as the proliferation of payment methods and currencies, such as cryptocurrencies, it is important that parties specifically mention or exclude the exact types of currency that would be acceptable as payment alternatives or what would happen in the event of trade sanctions such as an unexpected hike in tariffs.