This report analyzes contract dispute prevention measures following a gas pipeline explosion accident in Selangor State, Malaysia.
Overview of the Accident and Impact on Companies
On April 1, 2025, at approximately 8:00 AM, a massive explosion and fire occurred at a Petronas gas pipeline in Putra Heights, Selangor State, resulting in approximately 150 injuries, damage to over 200 houses, and evacuation of more than 500 people. The fire was extinguished after about 7.5 hours, but investigation results released on June 30 attributed the accident to ground subsidence around the pipeline.
The accident seriously affected Japanese companies, with gas supply disruptions causing production shutdowns and manufacturing line delays even in the northern Penang State and east coast regions, far from the accident site. Although gas supply resumed in mid-April, it remained at only about 60% of required levels, forcing companies to use alternative fuels or purchase materials from competitors, leading some to consider damage compensation claims.
Legal Framework of Force Majeure Clauses
The possibility of damage compensation in such accidents depends decisively on force majeure clauses in contracts between parties. Force majeure clauses apply to "unpredictable external factors or circumstances that make contract performance substantially impossible or extremely difficult." While Malaysian contract law does not provide specific definitions, parties are not prohibited from establishing force majeure events.
Malaysia follows a common law system, which differs from Japan's civil law system. In contract interpretation, only matters stated in the contract are considered, and discussions or negotiation content between parties are generally not taken into account. Many English contracts include Entire Agreement Clauses that exclude any consideration of pre-contract discussions, making thorough legal review essential during the contract formation stage.
Contractual Considerations and Countermeasures
When force majeure clause application is declared, buyers must scrutinize whether the accident cause included human error and whether appropriate preventive measures could have prevented the accident. For gas suppliers with control over pipeline maintenance and inspection, supply disruptions may be considered controllable events, making force majeure clause application less likely to be accepted.
Important measures during contract formation include explicitly excluding "fire" and "explosion" from force majeure events and establishing provisions such as "matters whose occurrence could be prevented with reasonable care do not constitute force majeure." Additionally, alternative measure guarantee clauses (obligations to procure substitutes or bear costs) when supply disruption continues for a certain period can reduce supply disruption risks.
The article emphasizes avoiding simple use of standard language, excluding foreseeable events based on business characteristics, and conducting modification negotiations when necessary, proposing dispute prevention through limiting the scope of force majeure clause application in contracts.