Force Majeure and Handover Delays in Cambodia

Prepared by the NovAsia Editorial Team

An SPA may state a precise handover date: December 2028, perhaps followed by a limited grace period.

Nearby sits a force-majeure clause covering war, natural disaster, epidemic, government action and a long list of other events.

A buyer often reads that clause as a rare exception.

After delay, the developer may begin using it as the main explanation for almost everything:

• materials became more expensive;
• a permit took longer;
• the contractor changed;
• the rainy season was difficult;
• sales slowed;
• the bank released a tranche late.

Not every external difficulty is force majeure.

Even a genuine force-majeure event does not automatically justify the whole period of delay, release the developer from every obligation or keep the contract open indefinitely.

The analysis should separate four questions:

1. Did a qualifying event occur?
2. Did it actually delay this project and this obligation?
3. Did the developer comply with notice and mitigation duties?
4. What does the SPA permit after the maximum delay period?

This article provides general information, not legal advice. Force majeure, payment obligations, damages and termination should be analysed under the specific SPA and the project facts by a Cambodian lawyer.

Force majeure is an exception, not a replacement timetable

Force majeure is designed for events that a party does not control and whose consequences could not reasonably be prevented or overcome.

Cambodia’s Civil Code does not provide one universal force-majeure definition for every contract.

It regulates non-performance, damages and termination and refers to force majeure in particular contexts.

Cambodia’s Construction Law defines force majeure in terms of an event occurring against the person’s will that is unexpected and irresistible.

Legal commentary on Cambodian construction contracts has commonly described three cumulative elements:

• unexpected;
• irresistible;
• outside the party’s control.

That provides important context.

The SPA remains the first document for a buyer because the sale of a future unit and the construction contract between developer and contractor are not necessarily the same legal relationship.

A useful order of analysis is:

1. SPA wording.
2. Mandatory legal rules.
3. Civil Code principles.
4. Construction-law context.
5. Evidence of what actually happened.

The event and the delay must be proved separately

A dramatic event can occur without delaying the specific project.

Flooding in another province does not explain a Phnom Penh tower delay unless it affected the workforce, materials or access.

A border closure may delay imported lifts but not concrete work already planned on site.

A government order may stop work for two months. It does not automatically explain an additional year if work failed to restart after the order ended.

A credible causal chain identifies:

• event;
• start date;
• end date;
• affected obligation;
• affected activity;
• critical-path impact;
• days lost;
• alternative solutions considered;
• mitigation taken;
• concurrent delay.

The statement the global crisis affected the market is too general.

Force majeure concerns a real obstacle to performance, not economic background.

Foreseeability depends on when the SPA was signed

An event can be extraordinary for a contract signed before it became known and foreseeable for a contract signed later.

COVID-19 provided a clear example.

A party relying on unforeseeability faced a harder argument where the contract was signed after the pandemic and its supply-chain consequences were already widely understood.

The same logic applies to other events.

Where an import restriction already exists at SPA signing, it should not automatically extend the entire construction programme later.

Where a site is known for regular seasonal flooding, ordinary rainy-season disruption is harder to describe as unexpected.

Where a key permit has not been obtained and the SPA discloses that condition, subsequent delay should be assessed against what both parties knew.

Foreseeability does not mean every known risk is controllable.

An exceptional flood may still qualify in a country with a rainy season.

The scale and ability to plan for the event matter.

Ordinary weather and natural disaster are different

Cambodian construction schedules should account for:

• heat;
• humidity;
• normal rain;
• recurring seasonal disruption.

If every wet month automatically extends handover, the initial deadline has little meaning.

An event is more likely to support force majeure where it:

• materially exceeds normal seasonal conditions;
• damages the site;
• makes access impossible;
• triggers official evacuation or closure;
• destroys supply routes;
• requires extraordinary restoration.

Even then, the extension should correspond to proven impact.

Three weeks of inaccessible site do not automatically justify a twelve-month delay.

Additional time may be required for remobilisation and recovery, but it should be explained.

Funding shortages usually remain developer risk

Weak sales, insufficient cash flow, more expensive borrowing and refusal by investors to inject new capital are part of the commercial model.

These events may be serious.

They are not normally external physical barriers to performance.

If any lack of money qualifies as force majeure, the seller effectively gains a right to delay whenever the business plan underperforms.

The same caution applies to:

• inability to obtain planned financing;
• construction-cost overrun;
• reduced pre-sales;
• shareholder dispute;
• reduced profit margin;
• price fall;
• non-payment by other buyers;
• ordinary material-price increases.

The final legal conclusion depends on the SPA.

Some clauses include broad wording concerning economic events, lenders or financial markets.

Broad drafting still needs to be tested against:

• good faith;
• mandatory law;
• causal link;
• actual impossibility;
• commercial purpose of the contract.

An obligation becoming less profitable is not necessarily the same as becoming impossible.

Contractor problems do not automatically excuse the seller

The buyer contracts with the SPA seller.

The developer contracts separately with the main contractor.

If the contractor performs badly, becomes insolvent or leaves the site, the seller should explain why that risk could not reasonably be managed through:

• contractor selection;
• supervision;
• replacement;
• performance security;
• contingency planning.

A sudden shutdown of the only specialised supplier may create a stronger force-majeure argument than an ordinary contractor dispute or delayed contractor payment.

The seller should also show how the contractor’s problem affected the SPA handover obligation.

The buyer should not automatically bear every failure of a subcontractor chosen by the project company.

Permit delays require analysis of the cause

Government action often appears expressly in force-majeure clauses.

A late permit is not always government action against the developer.

The delay may arise from:

• new law;
• official moratorium;
• new mandatory technical rule;
• authority delay despite a complete application;
• incomplete submission;
• redesign by developer;
• non-compliance;
• late filing;
• land dispute;
• missing prerequisite.

The first group may support an external-event argument.

The second group may reflect project management.

The buyer should know whether the permit was:

• already obtained;
• still pending;
• disclosed as a condition;
• expected to be issued before a milestone.

A developer should not sell a project as ready for construction and later treat an unfiled or incomplete permit application as unforeseeable force majeure.

Material-price increases usually indicate hardship, not force majeure

Steel, glass, fuel and imported equipment can become more expensive.

A large price increase can damage the budget.

It often makes performance economically harder rather than physically impossible.

Force majeure and hardship are different concepts.

Force majeure concerns an obstacle to performance.

Hardship concerns a fundamental shift in the economic balance while performance remains possible.

An SPA may address hardship through:

• substitution;
• price adjustment;
• renegotiation;
• specification changes.

Without such a clause, the developer does not automatically gain an open-ended handover extension simply because construction became less profitable.

A true export ban, factory closure or legal prohibition may create a stronger case than ordinary inflation.

Notice is part of the force-majeure process

A well-drafted clause normally requires the affected party to:

• notify the other party promptly;
• identify the event;
• specify affected obligations;
• provide evidence;
• estimate duration;
• issue updates;
• mitigate;
• notify when the event ends;
• revise the programme.

If the developer first mentions force majeure after the handover deadline has already expired, the buyer can reasonably ask why no earlier notice was given.

Failure to notify does not always destroy the right automatically.

That depends on whether notice is drafted as:

• strict condition precedent;
• ordinary contractual obligation.

Late notice weakens the evidence and deprives the buyer of the chance to:

• verify the event;
• adjust finances;
• consider remedies;
• preserve records.

A social-media update is not necessarily formal notice under the SPA.

Mitigation shows whether the event was truly irresistible

A party invoking force majeure should not remain passive.

Possible mitigation includes:

• alternative supplier;
• changed shipping route;
• resequencing work;
• site protection;
• contractor replacement;
• local material substitution where contractually permitted;
• acceleration after restrictions end;
• early permit submissions;
• maintaining staff;
• recovery programme.

Mitigation does not require unlimited expenditure or impossible action.

It does require a reasonable response.

Where an obstacle could have been overcome through ordinary project management, the argument that it was irresistible becomes weaker.

The buyer should ask not only why work stopped, but how the developer plans to recover the delay.

The extension should correspond to the critical path

A construction project contains many parallel activities.

Late facade glass does not always stop internal electrical work.

A landscaping delay may not prevent apartment handover.

A one-month work prohibition can create a longer effect where critical sequencing is disrupted.

A professional time-impact analysis considers:

• baseline programme;
• critical path;
• affected activity;
• float;
• concurrent delay;
• mitigation;
• recovery schedule.

A retail buyer will rarely receive the full forensic schedule.

The developer should still explain the basic arithmetic:

• event duration;
• remobilisation;
• affected stage;
• resulting extension.

An automatic formula such as one day of event producing two days of extension requires a contractual basis.

Concurrent delay matters

Assume a government order stops work for two months.

Before the order, the project was already four months late because of contractor underperformance.

The project may end up six months behind.

The force-majeure event does not explain the entire delay.

Concurrent delay can arise where:

• financing problems existed earlier;
• permits were already late;
• contractor performance was weak;
• redesign was underway;
• restart after the event was slow;
• another tower continued under the same external conditions.

Force majeure should not erase pre-existing default.

The buyer can request a separation of causes even where exact forensic scheduling is unavailable.

Force majeure does not always eliminate damages

Civil Code principles allow damages for non-performance but can limit liability where the obligor proves absence of fault.

That makes force majeure important in relation to compensation.

The conclusion still depends on:

• actual absence of fault;
• SPA wording;
• liquidated-damages clause;
• length of proven impact;
• whether delay continued after the event.

The existence of force majeure does not necessarily remove:

• refund rights;
• title obligations;
• termination rights;
• every form of agreed compensation.

Different obligations can also be treated differently.

A buyer’s monetary obligation may continue even where the seller’s handover obligation is extended.

The statement force majeure means the developer owes nothing is too broad.

Absence of fault does not always prevent termination

Cambodian Civil Code principles concerning material breach are especially important.

Termination can become available where:

• the party fails to perform after a reasonable additional period;
• timing was essential to the transaction;
• performance becomes impossible;
• the breach destroys the purpose of the contract;
• trust in future performance can no longer reasonably be maintained.

The Civil Code also indicates that the non-performing party may not always defeat termination merely by showing absence of fault.

This means force majeure can reduce damages while still failing to preserve the contract indefinitely.

A buyer may have purchased for:

• relocation date;
• school year;
• planned rental season;
• related financing obligation.

A very late handover can defeat the commercial purpose even where the original disruption was outside the developer’s control.

The exact SPA may provide more detailed long-stop and termination rules.

A long-stop date limits uncertainty

A sensible deadline structure can contain:

1. Target completion date.
2. Grace period.
3. Proven force-majeure extension.
4. Long-stop date.
5. Cure period.
6. Termination right.

The target date sets the expected outcome.

The grace period absorbs normal construction variation.

Force majeure adds only the proven external impact.

The long-stop date gives the buyer an exit after excessive delay.

A weak SPA has:

• no long-stop;
• an open-ended event list;
• unilateral extension;
• no notice;
• no evidence requirement;
• no termination right;
• continuing buyer payments.

The absence of a long-stop does not automatically invalidate the SPA.

It increases dependence on general material-breach principles and a later dispute about what delay is excessive.

Buyer instalments do not move automatically

A developer announces that handover is postponed by one year.

The buyer may assume the payment plan moves by one year as well.

The SPA may say otherwise.

A calendar-based schedule can continue regardless of progress.

A milestone-based schedule becomes due only after the specified work.

A balloon payment may be linked to:

• fixed date;
• handover;
• title;
• notice of completion.

The force-majeure clause may suspend:

• only seller obligations;
• only affected obligations;
• all reciprocal obligations.

Stopping payment without a legal basis can create buyer default.

The buyer should determine:

1. Has the instalment become due?
2. Is it linked to the delayed obligation?
3. Does the SPA permit withholding?
4. Has the seller provided security or revised terms?

An oral statement from a sales manager does not necessarily amend the contract.

Delay compensation needs a defined formula

An SPA may provide liquidated damages or a penalty for late handover.

The buyer should check:

• when accrual starts;
• grace period;
• force-majeure exclusion;
• cap;
• calculation base;
• whether the buyer must remain current;
• whether the payment replaces other remedies;
• whether termination survives;
• payment timing;
• set-off against final instalment.

Cambodian Civil Code principles permit agreed damages and can allow judicial adjustment where the amount is grossly high or grossly low in the relevant circumstances.

A small penalty may simply become inexpensive financing for the developer.

The buyer should compare the amount with:

• rent lost;
• financing cost;
• alternative accommodation;
• capital tied up.

Construction-law policy provides useful context

Cambodia’s Construction Law requires construction contracts to address start, completion, handover, force majeure and dispute resolution.

It also restricts clauses in certain private residential construction contracts that release the contractor from timely completion except for force majeure or delay caused by the construction owner.

A buyer SPA and a contractor agreement are not always the same contract or relationship.

The construction-law provision should therefore be used carefully as context rather than automatically applied to every sale clause.

It still reflects an important policy principle:

A contractor or developer should not receive unlimited freedom to excuse ordinary delay.

Practical event matrix

The table is not a legal determination.

The same event can be treated differently depending on the SPA date, wording and evidence.

What a credible notice should contain

A strong notice normally identifies:

• SPA clause;
• event date;
• evidence;
• affected work;
• original deadline;
• extension calculation;
• mitigation;
• revised programme;
• effect on payments;
• updated handover date;
• next reporting date;
• obligations that continue.

A notice saying only the handover is postponed due to unforeseen circumstances gives the buyer almost nothing to verify.

Conclusion

Force majeure is not a universal explanation for every delay.

A credible claim normally requires:

• event outside control;
• unforeseeability or inability to account for it reasonably;
• inability to overcome the impact;
• proven causal connection to the obligation.

Ordinary weather, weak sales, lack of finance, cost increases, late permit applications and contractor management problems are more often project risks, although the final analysis always depends on the SPA and facts.

The developer should provide timely notice, evidence, mitigation and a proportionate extension.

Force majeure may reduce liability for damages where absence of fault is proved.

It does not necessarily preserve the SPA forever.

Cambodian Civil Code principles allow termination after a material breach even where the non-performing party was not at fault in the ordinary sense.

The buyer’s best protection is a clear structure:

• precise date;
• limited grace period;
• narrow clause;
• evidence of causal impact;
• long-stop date;
• delay compensation;
• exit right after excessive postponement.

Sources

1. JICA Legal and Judicial Development Project — Civil Code of Cambodia.
2. Kingdom of Cambodia — Law on Implementation of the Civil Code.
3. Kingdom of Cambodia — Law on Construction, 2019.
4. DFDL — Cambodia Legal Update: The Impact of COVID-19 on Construction Contracts, 2 April 2020.
5. DFDL — The Implementation of Cambodia’s New Civil Code.
6. DFDL — Liquidated Damages for Breach of Contract.

Frequently asked

Is every construction delay force majeure?

No. There must be an event outside the party’s control, an element of unforeseeability or inability to account for it reasonably, and a real causal effect on the relevant obligation. The precise test depends on the SPA and applicable law.

Can weak sales be treated as force majeure?

Usually that is a commercial risk of the developer rather than an external event. The final conclusion still depends on the contract wording and the actual cause of non-performance.

Must the buyer continue paying during force majeure?

That depends on the SPA and the payment structure. An extension of handover does not always move calendar-based instalments automatically, so stopping payment without advice can be risky.

Can the buyer terminate even where the developer was not at fault?

In some circumstances, yes. Cambodian Civil Code principles permit termination for material breach and indicate that absence of fault does not always prevent termination.