Force majeure, exceptional events and change of circumstances in construction contracts

A flood destroys the temporary bridge serving a construction site. The access road disappears. Equipment is stranded on one side of the river. Several work fronts stop.

The contractor sends a letter headed “Force Majeure.”

Is that enough? Usually, no.

The real questions are more precise. What happened? Which contract applies? Did the event actually prevent contractual performance? For how long? Could its effects reasonably have been avoided or overcome? Was notice given on time? And does the contract provide time, money, both, or neither?

Those questions matter particularly in Nepal, where a single project may sit at the intersection of a PPMO standard bidding document, the Public Procurement Act and Regulations, FIDIC conditions, Particular Conditions and Nepalese contract law.

The distinction has become especially relevant after the devastating flash floods that struck Rasuwa and neighbouring districts on 26 August 2026. WHO reports that the floods affected communities along the Bhote Koshi and Trishuli corridors and damaged roads, bridges and hydropower infrastructure. ICIMOD described a sudden surge of water, sediment and boulders through the river systems and said the full impacts were still emerging.

For a construction contract, however, the disaster itself is only the beginning of the analysis.

The first rule: a disaster is not automatically a contractual entitlement

Construction contracts do not normally ask simply whether something terrible happened. They ask whether the event falls within a particular allocation of risk. That is why the same flood can produce different results under different contracts.

A contractor may obtain:

• an extension of time but no additional payment;
• both time and recoverable Cost;
• payment for repairing damaged Works but not for idle equipment;
• a right to suspend or terminate after prolonged prevention; or
• no contractual relief at all if the event was within an allocated contractor risk or its effects could reasonably have been overcome.

The label “force majeure” does not decide the result. The contract does.

Start with the contract, not with the disaster

Before analysing an event, identify the actual contract. A construction agreement may contain the Contract Agreement, Letter of Acceptance, General Conditions, Particular or Special Conditions, Employer's Requirements, specifications, drawings, BOQ, addenda and subsequent amendments.

The Particular Conditions are particularly important. They can change the risk allocation contained in the standard form.

This is especially important for PPMO contracts. PPMO maintains different standard bidding documents for different procurement procedures and contract types, and its current website now lists revised NCB works documents issued in September 2026, as well as an ICB works document revised in August 2026.

So an article about “PPMO force majeure” cannot safely assume there is one universal PPMO clause. There isn't. The applicable SBD, its edition, the Special Conditions and the governing law must be checked for the particular project.

What force majeure is really asking

The older FIDIC forms use the expression Force Majeure. FIDIC 2017 uses Exceptional Events. The terminology changed, but the practical inquiry remains familiar.

Broadly, the event must be outside the affected party's control, something that could not reasonably have been provided against before the contract, something that could not reasonably have been avoided or overcome after it arose, and something not substantially attributable to the other party.

That immediately explains why not every difficult event qualifies. A contractor cannot ordinarily convert ordinary construction risk into force majeure simply because the project became more expensive or inconvenient.

Consider two floods. In the first, a flash flood destroys the only access bridge and leaves the work fronts completely inaccessible. In the second, the same flood damages the normal access road, but a workable alternative route remains open, adding 60 kilometres to each haul.

The first scenario may involve prevention of performance. The second may involve additional cost and inconvenience without contractual prevention. That distinction can determine the claim.

Force majeure, hardship and impossibility are not the same thing

This is where construction claims often become confused. There are at least three different ideas in play.

Force majeure, or an Exceptional Event

This is primarily a contractual mechanism. The contract decides what event qualifies and what relief follows. Depending on the form, the relief may include extension of time, Cost, suspension or termination.

Change of circumstances, or hardship

Here, performance remains possible, but the circumstances have changed dramatically. For example, an alternative access route exists but increases transport costs substantially. That may be commercially serious. It does not automatically mean contractual performance has become impossible.

FIDIC does not generally contain a broad, free-standing hardship doctrine in its standard General Conditions. Instead, specific mechanisms deal with particular cost and risk issues, including variations and price adjustment.

Impossibility or fundamental change under Nepalese law

Nepalese law contains its own statutory framework. Section 502 of the National Civil Code addresses impossible obligations. Section 531 deals specifically with discharge of contracts following a fundamental change in circumstances. It expressly refers to events beyond human control, including war, flood, landslide, fire, earthquake and volcanic eruption, where those circumstances make contractual performance impossible. It also makes clear that mere difficulty, reduced profit or loss does not by itself constitute a fundamental change.

A contract becoming more expensive is not the same as a contract becoming impossible.

The Supreme Court's decision in Pradip Raj Pandey v. Karmalakshmi Kansakar is also commonly discussed in this context, particularly for the concepts of impossibility, illegality, destruction of the subject matter and incapacity of an essential party.

For construction professionals, the practical lesson is simple: do not use “force majeure”, “frustration”, “hardship” and “impossibility” as interchangeable labels. They can lead to different legal and contractual consequences.

The question that matters most: what did the event actually stop?

This is where a force majeure claim becomes a construction claim. Suppose a landslide closes a mountain road. It is not enough to say “the landslide delayed the project.” The contractor should be able to show:

That chain is far more useful than a general description of the disaster. The Engineer or Employer should be able to test each link.

• Was the road actually inaccessible?
• Was there another route?
• Could unaffected work continue?
• Was the affected activity critical?
• When did the delay start?
• When did access become available again?
• What mitigation was attempted?

This is why programmes, site diaries, photographs, drone records, delivery records, labour returns and equipment logs can become more important than the word “force majeure” appearing in the notice.

PPMO contracts: look at the actual SBD

The Public Procurement Act provides an important statutory framework for public construction contracts. Section 56 provides for extension of the procurement contract period in accordance with the contract and permits extension where it becomes inevitable because of force majeure, failure of the Public Entity to provide materials it was required to provide, or other reasonable causes, subject to the statutory procedure.

But this should not be read as a universal promise that a contractor will automatically receive additional payment. Time and money are separate questions.

The current PPMO landscape also makes caution particularly important. PPMO's official listings show revised September 2026 NCB works SBDs for contracts up to NRs. 20 million, above NRs. 20 million and design-and-build contracts, while an ICB works SBD was revised in August 2026.

That means an older PPMO document should not be used as though it were the current standard for every project. If the project was procured under an older SBD, however, that older document may still be contractually decisive.

This is why the correct question is not “what does PPMO say about force majeure?” It is: what force-majeure, delay, extension, payment and termination provisions are actually incorporated into this contract?

FIDIC 1999: Clause 19

Under the 1999 FIDIC forms, Clause 19 deals with Force Majeure. The clause sets out a four-part test and identifies examples including war, rebellion, terrorism, riots and certain strikes, munitions and radiation, and natural catastrophes such as earthquakes and volcanic activity.

For a contractor, the most important practical points are these.

First, notice matters. Clause 19.2 requires notice within 14 days after the affected party became aware, or should have become aware, of the event.

Second, the event must actually prevent contractual performance. A serious disruption is not necessarily the same thing as prevention.

Third, mitigation matters. The parties must use reasonable endeavours to minimise delay.

Fourth, EOT and Cost are different. For natural catastrophes, Clause 19.4 generally gives the contractor an extension of time but not Cost. That does not necessarily mean that every cost associated with a natural disaster is irrecoverable. Other provisions concerning Employer's Risks and damage to the Works can produce a different result.

This is one of the most important points in FIDIC disaster claims: do not analyse a flood under Clause 19 alone. Look at the extension-of-time provisions, damage-to-Works provisions, Employer's Risks, insurance provisions and claims procedure together.

MDB Harmonised Edition 2010: similar structure, different details

The MDB Harmonised Edition is based on the FIDIC 1999 Red Book but incorporates amendments required for multilateral development bank-financed projects. That makes it familiar to anyone who knows FIDIC 1999, but it should not be treated as identical to the 1999 Red Book.

The force-majeure provisions in Clause 19 were amended, and the precise wording of the MDB version matters when analysing entitlement. This is particularly important when assessing Cost.

The safest approach is to take the actual MDB General Conditions and Particular Conditions for the project and read the force-majeure clause together with the claims procedure, Employer's Risks, extension-of-time provisions and financing provisions. A contractor should never assume that “MDB Pink Book” means exactly the same entitlement as an unamended 1999 Red Book.

FIDIC 2017: Force Majeure becomes an Exceptional Event

FIDIC 2017 moved the subject from Clause 19 to Clause 18, Exceptional Events. FIDIC itself describes Clause 18 as covering the subject matter previously addressed by Clause 19 in the 1999 forms.

The terminology is significant because FIDIC wanted a contractual concept that would not necessarily import the different meanings that national laws may attach to “force majeure”. For contractors, however, the practical structure will look familiar. Clause 18 deals with:

• the definition of an Exceptional Event;
• notice;
• minimising delay;
• the consequences of the event;
• termination following prolonged prevention; and
• release under the governing law.

The notice period remains important. And there is another procedural point that deserves emphasis: Clause 18 notice and Clause 20 claims should not automatically be treated as the same notice.

Where the contract requires a Notice of Claim under Clause 20, the contractor should make sure that the contractual claims procedure is separately satisfied. Under the 2017 forms, continuing claims also require continuing updates and ultimately a final claim. For a major disaster, the paperwork can therefore become almost as important as the engineering response.

Red, Yellow and Silver: why the same flood can produce different results

The Red, Yellow and Silver Books are not interchangeable. The Red Book is generally used where the Employer is responsible for the design. The Yellow Book is generally used for Plant and Design-Build arrangements, with greater design responsibility on the Contractor. The Silver Book is designed for EPC and turnkey projects and places broader responsibility for design, execution and many project risks on the Contractor.

That does not mean that the Silver Book makes every disaster a contractor risk. Clause 18 still exists. But the surrounding risk allocation matters enormously.

For example, climatic and physical-condition provisions can differ between the Books. The Silver Book also takes a more stringent approach to the Contractor's responsibility for anticipating difficulties.

This matters in Nepal because a Himalayan infrastructure project may involve exactly the kinds of geological, hydrological and access risks that make the choice of contract form significant. A contractor bidding an EPC project in a remote mountain corridor should therefore ask not only “what happens if there is a flood?” but what risks have I contractually accepted before the flood ever occurs?

EOT is not money

This deserves its own section because it is one of the most common sources of misunderstanding. An extension of time protects the Contractor against the contractual consequences of completing late. It does not automatically reimburse the Contractor for the cost of being delayed.

Suppose a flood prevents work for 20 days. The contractor may establish 20 days of EOT. That does not answer whether it can recover:

• site overheads;
• equipment standby;
• additional supervision;
• remobilisation;
• temporary works;
• financing costs;
• additional insurance;
• acceleration costs; or
• lost profit.

Each item needs its own contractual basis. This is particularly important under FIDIC, where natural catastrophes may produce time entitlement without Cost under the Exceptional Event or Force Majeure clause itself, while another clause may govern damage to the Works.

The claim should therefore be broken down into separate heads rather than presented as “we claim all costs arising from the flood.”

Weather is where many claims go wrong

Nepal's construction environment makes weather claims especially difficult. A contractor working in the hills or mountains knows that monsoon rain, landslides, snow and difficult access are part of the construction environment. That does not mean every extreme event is automatically a contractor risk.

The key is the contract's weather baseline and risk allocation. Under the FIDIC 2017 Red and Yellow Books, climatic relief is tied to contractual criteria concerning what is Unforeseeable, including relevant climatic data. That makes historical records important.

For a Nepal project, the evidence may include:

• Department of Hydrology and Meteorology data;
• rainfall records;
• river levels;
• historical landslide information;
• flood-frequency information;
• glacial-lake and outburst-flood studies;
• tender-stage geotechnical and hydrological information; and
• the Contractor's own tender assumptions.

“It rained heavily” is a fact. “This rainfall was exceptionally adverse under the contract” is a contractual conclusion.

The second requires evidence.

The 26 August 2026 Rasuwa flood: what would happen to a construction contract?

The Rasuwa disaster provides a useful illustration because it shows why a major natural event does not automatically answer the contractual question.

On 26 August 2026, a major flash flood affected Rasuwa and surrounding areas. WHO reports that the flooding affected communities along the Bhote Koshi and Trishuli corridors and damaged roads, bridges and hydropower infrastructure. ICIMOD reported a sudden surge of water, sediment and boulders through the Bhote Koshi and Trishuli systems.

Now imagine a contractor working on a road project in the Rasuwagadhi corridor under a FIDIC 2017 Red Book-based contract. The project has a temporary bridge. The flood destroys it. Several work fronts become inaccessible. What happens next?

1. The flood is the event. It is not yet the entitlement.

The contractor must identify the actual contractual event and the relevant provision. A natural catastrophe may fit the Exceptional Event framework. But the contractor still has to satisfy the contractual test.

2. The tender-date risk matters

This is likely to be one of the most difficult questions. The Employer may point to the known history of floods, landslides and instability in the corridor and argue that the Contractor should have taken reasonable precautions. The Contractor may respond that the particular mechanism, magnitude or combination of events was outside what could reasonably have been provided against.

The question is not simply whether flooding was foreseeable in Nepal. The question is what this contract required this Contractor to provide against, based on the information and circumstances existing when the contract was made.

3. The Contractor must separate damage from delay

Was the temporary bridge destroyed? Were permanent Works damaged? Was the camp damaged? Was Contractor-owned equipment lost? Were materials washed away? Were workers unable to reach the site? These are different factual and contractual questions.

4. The Contractor must identify the critical delay

The statement “the whole project was stopped” is rarely enough. A good claim will identify the affected activities and show the impact on the accepted programme. If Work Front A was inaccessible but Work Front B remained available, the Contractor should explain what continued at B. If the destroyed bridge affected a critical activity, the programme analysis should show how.

5. Mitigation becomes important

Could the Contractor use another access route? Could it work from the opposite side? Could a temporary track be opened? Could a Bailey bridge be installed? Could unaffected works be resequenced? The answer does not have to be “yes”. But the Contractor should investigate and document the alternatives.

6. Notice cannot wait for the final claim

A contractor does not need to know the final number of days or rupees before giving the initial notice. The purpose of early notice is to put the other party on notice that an event has occurred and may affect contractual performance. The detailed claim can follow through the applicable claims procedure.

7. Cost must be analysed separately

Under FIDIC 2017, a natural catastrophe does not simply become a general Cost claim because it caused a major loss. The Contractor should identify whether payment arises under Clause 18, another risk provision, a variation, damage-to-Works provisions, insurance or some other contractual mechanism.

That is normal contractual risk allocation.

What should a force majeure notice actually say?

A good notice is factual and short. It should not attempt to prove the entire claim in the first letter. For example:

The important thing is not elegant drafting. It is timely notice, factual description, contractual reference and evidence of actual effect.

The documents that can win or lose the claim

After a major event, the Contractor should build the evidence contemporaneously. At minimum, preserve:

• dated photographs and videos;
• site diaries;
• weather and river-level records;
• drone surveys where available;
• labour and equipment records;
• material delivery records;
• pre-event progress photographs;
• equipment locations;
• damage inventories;
• correspondence with local authorities;
• road closure and reopening information;
• alternative-access investigations;
• revised programmes;
• daily records of affected activities; and
• records of mitigation measures.

The strongest claim is usually not the longest claim. It is the claim where another engineer can reconstruct the story from the records.

Insurance is a separate track

Contractual entitlement and insurance recovery should be investigated in parallel. A flood may damage permanent Works, temporary Works, Contractor's equipment, materials, third-party property and personnel. Each may be governed by a different policy or contractual allocation.

Do not assume that because an event is force majeure, the Contractor bears the loss. Do not assume the opposite either. The relevant questions are: what was insured? Who was insured? What is excluded? What is the deductible? What notice was required? Where must insurance proceeds go?

On a major disaster project, insurance notification should be treated as an immediate action rather than something left until the contractual claim is complete.

When does a disaster become a termination issue?

Force majeure provisions are not only about delay. They also recognise that sometimes a project cannot reasonably continue. Under the FIDIC 1999 and 2017 forms, prolonged prevention can lead to termination after the periods specified in the relevant clause. The precise notice and payment consequences must be checked against the applicable edition and Particular Conditions.

Under Nepalese law, fundamental change provisions can also become relevant where circumstances make contractual performance impossible. Section 531 is expressly concerned with this type of situation.

The important distinction is between temporary prevention, where the project can continue after the event, and fundamental impossibility, where the contractual performance itself can no longer reasonably occur. That distinction should not be assumed merely because the project has suffered extensive physical damage.

What contractors should do in the first 24 hours

After a major flood, landslide or earthquake, the Contractor's priority is safety. Once immediate safety measures are addressed, the contractual response should begin quickly.

1. Identify the event

Record exactly what happened, where and when.

2. Check the contract

Find the provisions dealing with Exceptional Events or Force Majeure, extension of time, claims, damage to Works, Employer's Risks, variations, suspension, termination and insurance.

3. Give the initial notice

Do not wait for the final quantum.

4. Protect the evidence

Photograph the site before debris is cleared, where safe to do so.

5. Protect the programme

Identify which activities were actually affected and whether they were critical.

6. Mitigate

Investigate alternative access, resequencing and temporary measures.

7. Notify insurers

Follow the policy notice requirements separately.

8. Keep time and money separate

First establish the delay. Then establish the financial consequences. Then identify the contractual provision supporting each head of cost.

Five questions an Engineer should ask before granting EOT

The same discipline applies to Employers and Engineers. Before accepting a disaster-related extension of time, ask:

• What precisely happened?
• What contractual provision applies?
• What work was actually prevented?
• How long did the critical delay last after reasonable mitigation?
• What records prove the claimed period?

That approach is better than either extreme: automatically rejecting every disaster claim, or automatically accepting every disaster as force majeure.

The most common mistake, and the final takeaway

A flood is not a claim. A landslide is not a claim. An earthquake is not a claim. The claim is the contractual consequence of the event. That distinction sounds simple, but it changes how the entire case should be prepared.

The Contractor should be able to tell a clear story:

In Nepal's construction industry, force majeure questions are becoming increasingly important as projects move into more difficult terrain and as major floods, landslides and other extreme events disrupt transport and infrastructure. But the answer will rarely be found in the words “force majeure” alone.

For a PPMO contract, start with the actual SBD and the applicable procurement law. For FIDIC 1999, start with Clause 19, but read it together with the delay, damage, risk, insurance and claims provisions. For the MDB Harmonised Edition, use the actual MDB wording rather than assuming that it is identical to the 1999 Red Book. For FIDIC 2017, look at Clause 18 and the separate Clause 20 claims procedure.

And in every case, ask the same practical questions. What happened? Was it a risk allocated to the Contractor or Employer? Did it actually prevent performance? For how long? Could its effects reasonably have been avoided or overcome? Was notice given on time? What does the contract actually provide — time, Cost, repair, suspension, termination or release?

The 26 August 2026 Rasuwa flood is a useful reminder of why those questions matter. A disaster can be extraordinary in the real world while its contractual consequences remain highly specific.

The strongest construction claim is not the one that says the event was catastrophic. It is the one that can prove, step by step, what the event changed, what the contract says about that change, and what relief follows.

This article is for general information and does not constitute legal advice. Construction entitlement depends on the executed contract, its Particular or Special Conditions, governing law, project facts, notices, records, insurance arrangements and applicable procurement rules. The applicable PPMO document should always be checked in its current or contractually incorporated edition.

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