Authored By: Obei Adam Dalil
University of Medical Sciences and Technology
1. Case Citation and Basic Information
Case: RTI Ltd v MUR Shipping BV
Citation: [2024] UKSC 18
Court: United Kingdom Supreme Court
Date of Judgment: 15 May 2024
Judges: Lord Hodge, Lord Lloyd-Jones, Lord Hamblen, Lord Burrows, and Lord Richards
Area of Law: Contract Law, Commercial Law, Force Majeure
2. Introduction
RTI Ltd v MUR Shipping BV [2024] UKSC 18 represents a major authority in contemporary English commercial law regarding the interpretation and implementation of force majeure clauses in commercial agreements.
The conflict emerged after the United States imposed economic sanctions on the parent company of RTI Ltd, which resulted in practical challenges in fulfilling obligations under a contract of affreightment established between RTI and MUR Shipping BV.
The primary legal question presented to the Supreme Court was whether a party intending to invoke a force majeure clause must accept an offer of non-contractual performance to mitigate the effects of a force majeure event.
The importance of the ruling lies in its elucidation of the scope of reasonable endeavours obligations within force majeure clauses and its reaffirmation of contractual certainty as a core tenet of English commercial law. The Supreme Court determined that, in the absence of explicit contractual provisions to the contrary, a party does not act unreasonably by declining non-contractual performance, even if such performance would yield a substantially similar commercial result.
3. Facts of the Case
In June 2016, MUR Shipping BV (“MUR”), a Dutch shipping company, entered into a contract of affreightment with RTI Ltd (“RTI”), a company incorporated in Jersey. Pursuant to the agreement, MUR undertook to transport substantial quantities of bauxite from Guinea to Ukraine over a two-year period. The contract expressly required freight payments to be made in United States dollars.
Clause 36 of the contract contained a force majeure provision under which a party would be excused from performance where a force majeure event occurred and could not be overcome through reasonable endeavours.
In April 2018, the United States Office of Foreign Assets Control (OFAC) introduced sanctions against United Company Rusal plc, the parent of RTI. RTI itself was not directly designated, but as a majority-owned subsidiary of a sanctioned entity, banks would not facilitate US dollar payments connected to it.
This situation became the grounds for MUR to issue a force majeure notice, thereby suspending performance of the contract.
RTI opposed this stance and made a counter-proposal: freight charges would be paid in euros rather than US dollars, with any loss from exchange-rate changes or conversion expenses to be borne by MUR. This would enable MUR to receive the exact dollar-equivalent amount without any financial disadvantage.
MUR nevertheless denied this suggestion and stood by the contractual provision for payment in US dollars. As a result, it stopped performing and refused to appoint any ships.
RTI filed for arbitration against MUR and sought compensation.
4. The Legal Issue
The main legal questions facing the Supreme Court were the following:
Issue 1: Whether a reasonable endeavours obligation contained within a force majeure clause requires a party to accept an offer of non-contractual performance where such performance would effectively eliminate the consequences of the force majeure event.
Issue 2: Whether RTI’s proposal to make payment in euros, while compensating MUR for any resulting losses, constituted a reasonable means of overcoming the force majeure event.
Issue 3: Whether a party may be required to relinquish a valuable contractual right in order to satisfy a reasonable endeavours obligation under a force majeure clause.
5. Arguments Put Forward
Appellant (MUR Shipping BV):
According to MUR, the force majeure clause safeguarded its contractual right to be paid in dollars. Under Clause 36, there was accordingly no obligation to make any effort towards performance in a manner other than the one stipulated by the contract itself.
In MUR’s view, accepting payment in euros amounted to accepting an alternative form of performance altogether, so there was no requirement for the appellant to waive any of its rights under Clause 36.
The appellant invoked Bulman & Dickson v Fenwick & Co [1894] 1 QB 179 and Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1963] AC 691 (the Vancouver Strikes case), both of which confirmed a party’s general entitlement to insist on its contractual rights.
MUR further argued that requiring judges to determine the equivalence of two different forms of performance would introduce a level of commercial uncertainty incompatible with English law.
Respondent (RTI Ltd):
RTI argued that the problem posed by the sanctions could be overcome by adopting its proposal to pay freight charges in euros.
The respondent noted that MUR would suffer no financial loss, given RTI’s promise to cover all exchange-rate movements and conversion costs. The appellant would therefore end up in the same economic position as if payment had been made in dollars.
In RTI’s view, the purpose of the agreement concerned payment of freight charges generally, not insistence on a particular currency. Refusal to accept payment in euros was, on this reasoning, commercially unreasonable.
6. Court’s Reasoning and Analysis
In a unanimous decision, the Supreme Court granted MUR’s appeal and rejected the reasoning of the majority in the Court of Appeal.
A. Focus on Contractual Performance
The Court ruled that the purpose of the force majeure clause was contractual performance, not equivalence of commercial interests. The question was whether, through reasonable endeavours, RTI could have fulfilled its duty of payment in US dollars.
Payment in euros did not constitute contractual performance, since it altered the terms of payment and substituted a different arrangement. The force majeure event had not, therefore, been remedied on the contract’s own terms.
B. Freedom of Contract
Another important aspect of the decision was freedom of contract. According to the Court, business entities are entitled to agree on terms and to rely on what has been agreed.
MUR had negotiated for the right to be paid in US dollars; requiring it to accept euros instead would deprive it of one of its bargained-for rights.
C. Protection of Contractual Rights
The Court pointed out that explicit provisions must exist before a party can be legally obligated to waive a valuable contractual right. Clause 36 contained no such provision requiring MUR to accept non-contractual performance.
The absence of such a provision meant that, in the Court’s view, it was improper to imply an obligation on MUR’s part to accept an alternative form of performance.
D. Certainty in Commercial Law
The Supreme Court placed considerable weight on predictability and certainty in commercial law. As suggested above, requiring an assessment of whether alternative performance produced the same effect as contractual performance would introduce significant uncertainty.
Questions of equivalence, commercial advantage, and allowable detriment would have been difficult to resolve without injecting uncertainty into English commercial law.
E. Prior Authorities
The leading cases cited in support of the Court’s conclusion were Bulman & Dickson and the Vancouver Strikes case, both of which reinforced the idea that a party has a right to receive the contractual benefits for which it bargained.
Other authorities on the doctrines of mitigation and frustration provided little guidance to the Supreme Court, since those doctrines raised different legal issues.
In summary, the Supreme Court determined that a reasonable endeavours obligation is aimed at achieving performance in line with the contract itself, and does not require acceptance of non-contractual alternatives unless expressly agreed.
7. Judgment and Ratio Decidendi
Judgment
The Supreme Court unanimously granted MUR’s appeal and reinstated the ruling made by Jacobs J at first instance.
The Court determined that MUR could invoke the force majeure clause and was not obligated to agree to RTI’s offer to remit freight charges in euros.
Ratio Decidendi
A reasonable endeavours requirement within a force majeure clause necessitates actions directed at fulfilling contractual obligations on the established terms. Unless the contract specifies otherwise, a party is not compelled to accept performance that deviates from the contract, even if that performance would yield a similar commercial result.
8. Critical Analysis
A. Significance of the Decision
This judgment represents one of the most important modern authorities on force majeure clauses under English law. It provides much-needed clarification regarding the scope of reasonable endeavours obligations and confirms that contractual performance remains the central focus of force majeure analysis.
The decision reinforces the principle that courts should respect the bargain struck by commercial parties rather than substitute alternative arrangements based on their own assessment of commercial reasonableness.
B. Implications and Impact
The ruling carries significant implications for international trade and commercial contracting.
First, it strengthens confidence in English law by emphasizing predictability and certainty. Commercial parties can be assured that courts will generally enforce contracts according to their express terms.
Second, the judgment provides important guidance for contract drafting. Parties wishing to require acceptance of alternative performance during disruptive events must now include clear and explicit language to that effect.
Third, the decision is likely to influence disputes arising from sanctions, supply-chain disruptions, pandemics, and other events commonly relied upon as force majeure circumstances.
C. Critical Evaluation
The Supreme Court’s reasoning is persuasive because it protects contractual autonomy and promotes legal certainty. Commercial actors frequently choose English law precisely because it prioritizes predictability and respects negotiated bargains.
Nevertheless, critics may argue that the judgment adopts an overly formalistic approach. RTI’s proposal would arguably have produced the same economic result while avoiding disruption and reducing losses, and a more flexible approach might have promoted commercial efficiency and practical problem-solving.
However, the Court was justified in recognizing that any attempt to assess whether alternative performance is “substantially equivalent” would inevitably generate uncertainty. Such an approach could encourage litigation and undermine confidence in contractual rights.
Overall, the judgment strikes a convincing balance between fairness and certainty, favouring clear legal rules over subjective assessments of commercial reasonableness.
9. Conclusion
RTI Ltd v MUR Shipping BV [2024] UKSC 18 is a seminal ruling on the interpretation of force majeure clauses and reasonable endeavours obligations in business contracts. The Supreme Court held that, unless the contract specifically requires it, a party is not obligated to accept non-contractual performance in order to overcome a force majeure event.
The ruling upholds key tenets of English contract law, including commercial certainty, protection of contractual rights, and freedom of contract. It will influence how force majeure clauses are drafted and interpreted across a wide range of international commercial agreements, not only shipping contracts. Ultimately, the decision confirms that English courts will prioritise contractual certainty over commercial equivalence, ensuring that parties remain bound by the terms they originally negotiated.
