Conflict halfway around the world can freeze a port, spike fuel costs, and halt a construction site cold. Philippine law has an answer — but it is far narrower than most businesses hope.

War does not just redraw maps. It rewrites obligations. The moment armed conflict erupts somewhere in the supply chain — a blocked strait, a sanctioned regime, a closed port — Philippine companies in three sectors feel it first: fuel and petroleum, construction and infrastructure, and imports and international trade.

Across all three, the same urgent question surfaces in boardrooms and legal memos alike: can we legally walk away from our contracts?

The short answer is: sometimes. But courts demand considerably more than a newspaper headline about a distant war.

The Doctrine That Could Save or Sink Your Case

ARTICLE 1174, CIVIL CODE OF THE PHILIPPINES

"Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable."

This is the doctrine of force majeure — the legal shield against liability when performance becomes impossible due to an extraordinary, unavoidable event. The Supreme Court confirmed in Philippine Communications Satellite Corporation v. Globe Telecom, Inc. that armed conflict can, in principle, qualify.

The operative word is can. Courts don't hand this shield out freely. To successfully invoke force majeure, a business must prove all four of the following:

• The event was entirely beyond the party's control

• It could not have been foreseen, or if foreseeable, was inevitable

• Performance was made impossible, not merely more expensive or difficult

• The party did not contribute to the failure through its own negligence

This four-part test, reaffirmed in Awayan v. Sulu Resources Development Corporation, applies universally. What changes across industries is how the facts line up against it.

"The law may excuse what cannot be done. It will not excuse what can still be done — even at a loss."

Fuel & Petroleum: The Pricing Trap

Where force majeure is STRONG: Port closures, sanctions that make delivery legally impossible, blocked trade routes.

Where force majeure is WEAK: Surging freight costs, insurance spikes, pricing model disruption — where supply still exists.

War rarely stops a fuel company from delivering oil. It makes delivery ruinously expensive. Freight premiums balloon. Insurance becomes prohibitive. Global spot prices detach from contract prices. The supplier can still perform — it just cannot do so profitably.

That distinction is fatal to most force majeure claims in this sector. The legal test asks about impossibility, not unprofitability. A fuel company bleeding money on every delivery has a business crisis, not a legal defense.

Where the calculus genuinely shifts is when war creates a physical or legal barrier: a port closure, a government export ban, sanctions that make the transaction itself illegal. Republic Act No. 387 — the law governing petroleum operations in the Philippines — expressly treats war and similar disruptions as force majeure events in that context.

Outside those scenarios, the industry's real protection lies not in doctrine but in contract design: price escalation clauses tied to published fuel indices, freight adjustment formulas, and defined allocation rights during supply shortages. Companies without these provisions are left arguing force majeure where courts are least sympathetic.

Imports & Trade: The Clearest Battlefield

Where force majeure is STRONG: Port closures, shipping blockades, export bans, government-imposed embargoes.

Where force majeure is WEAK: Avoidable delays, failure to explore alternative routes, missed notice requirements.

Among the three sectors, importers occupy the strongest legal ground. When war physically closes a shipping route or triggers a government embargo, the importer may genuinely be unable to perform — not just unwilling. That is the essence of force majeure.

The Supreme Court addressed this directly in National Power Corporation v. Philipp Brothers Oceanic, Inc., upholding force majeure where delivery was delayed by circumstances beyond the supplier's control, buttressed by a contractual clause covering war, strikes, and government restrictions.

But importers frequently undermine their own cases. Courts will not excuse non-performance if an alternative route existed, if the delay was within the contract's tolerance window, or if the party failed to give the required notice of the force majeure event. The obligation to mitigate — to take reasonable steps to overcome the disruption — is built into the doctrine.

One rule cuts across every import dispute: force majeure excuses delivery; it almost never excuses payment. Buyers who withhold payment on grounds of upstream supply disruption typically find courts unsympathetic. Payment obligations are the last line to fall — and they rarely do.

Construction: Where Time and Cost Collide

Where force majeure is STRONG: Materials delivery physically halted, site work rendered impossible, labor disruptions.

Where force majeure is WEAK: Rising cement or fuel prices, reduced profit margins, poor procurement planning.

Construction sits at the uncomfortable intersection of supply disruption and financial pressure. War can stall the delivery of steel and imported components, halt site operations, and drive fuel and cement costs into territory the original contract price cannot absorb.

Philippine courts, consistent with Philippine Realty and Holdings Corporation v. Ley Construction, are generally willing to grant time extensions where force majeure genuinely prevented work. Penalty clauses and liquidated damages triggered by delays may be waived where disruption was real and documented.

Cost overruns are a different matter entirely. Surging material prices, however dramatic, do not transform an unprofitable contract into an impossible one. The contractor still can build — it just cannot build within budget. Courts treat that as a risk of doing business, not a legal defense.

Government contractors have a distinct avenue: Presidential Decree No. 454 allows price adjustment mechanisms for public contracts when costs increase due to factors outside the contractor's control, including fuel price movements. This reflects deliberate legal policy — manage price shocks through adjustment, not through excuse.

The warning from Awayan echoes loudly here: lack of funds is not force majeure. Increased cost is not impossibility. Poor planning never becomes a legal shield.

One Law, Three Very Different Realities

The same Article 1174 governs all three sectors. What differs is the nature of disruption each faces — and whether that disruption rises to genuine impossibility or merely painful difficulty.

• Fuel companies face price distortions — where force majeure fits most poorly

• Importers face logistics barriers — where force majeure fits most naturally

• Construction companies face a split verdict: sympathy on timeline, austerity on cost

But across all three, the single most important variable is neither doctrine nor case law. It is the contract itself. Philippine courts consistently uphold well-drafted force majeure clauses that explicitly cover war, sanctions, and government actions; specify notice timelines; impose mitigation obligations; and allocate supply rights during shortages. Companies with these provisions hold the high ground. Companies without them are left arguing narrow legal doctrines before skeptical courts.

Conclusion: The Law Excuses the Impossible, Not the Unprofitable

War creates genuine disruption. But Philippine law does not respond to disruption uniformly — it responds to impossibility. Fuel companies battling price spikes, importers navigating blocked routes, and contractors drowning in cost overruns are each fighting a different legal battle, even if the underlying crisis is the same.

For businesses caught in the crossfire, the path forward is clear: document everything, give notice immediately, mitigate where possible, and know precisely what your contract says before reaching for force majeure as a defense.

Because in the end, courts ask one question: could it be done? If the answer is yes — even at a loss — the contract survives.

References

Primary Legal Authority:

Article 1174, Civil Code of the Philippines — Force Majeure / Fortuitous Events

Article 1700, Civil Code of the Philippines — Labor contracts impressed with public interest

Republic Act No. 387 — Philippine Oil Exploration and Development Act

Presidential Decree No. 454 — Price adjustment for government construction contracts

Jurisprudence:

Philippine Communications Satellite Corporation v. Globe Telecom, Inc. — armed conflict as force majeure

Awayan v. Sulu Resources Development Corporation — four-part test for force majeure

National Power Corporation v. Philipp Brothers Oceanic, Inc. (NAPOCOR v. PHIBRO) — force majeure upheld; payment obligations carved out

Secondary Sources:

Freshfields, 2026 Data Law Trends Report

Baker McKenzie, 2026 Legal Trends to Watch