Is COVID-19 A Force Majeure Event? A Highlight over the Contractual Obligations
19-Nov-2020
By: Dr. Nida’ N. Goussous
Talal Abu Ghazaleh Legal
COVID-19 the novel has been declared by the World Health Organization to be a pandemic on March 11, 2020. The question that arises in this context is whether this pandemic constitutes an even of force majeure in terms of performing commercial contracts.
What is “Force Majeure”?
Local laws refer to “force majeure” as the occurrence of an incident which is outside the reasonable control of a party in a contract, where that party becomes unable to perform his obligations, for instance, war, strike, riot, epidemic or an act of God, such as hurricane, flood, earthquake, volcanos, etc.
What are the Conditions of “Force Majeure”?
Considering a certain event as a “force majeure” requires the existence of three conditions which have to be founded jointly. Firstly, the event must be beyond the reasonable control of the affected party. Secondly, the occurrence of such event must have prevented the affected party from performing his obligations provided under the contract whether wholly or partially. Thirdly, the affected party must have taken all reasonable measures to avoid or mitigate the consequences of such event.
How Do We Deal with the Event of Force Majeure?
Typically, contracts provide for the event of force majeure and its contractual repercussions, whereas this event is usually considered as an excuse for not performing civil obligations. Though, it is to be highlighted that in case a contract does not provide for a force majeure clause, a party affected by such an event can rely on the protection provided under the Civil Law in case the scope of remedy provided under the contract is considered to be limited. However, in order to be eligible for this protection, the affected party must demonstrate that the relevant situation meets all the aforementioned conditions.
Contractual clause in terms of force majeure event usually requests the affected party- in order to benefit from the relief for force majeure- to notify the other party in writing regarding the occurrence of such event. Additionally, the contractual clause of force majeure may require the notification to indicate the anticipated consequences as well as the duration of the force majeure event.
In this context, COVID-19 event and particularly its consequences which would have serious impact over the ability of a party in a contract to fulfil the contractual obligations might be considered as a force majeure case in some countries while in others not. Also, the said event might be considered as an event of force majeure in certain sectors rather than others in the same country. Moreover, it is possible that in the same contract, certain obligations can be under the effect of force majeure while others are not, i.e. a partial event of force majeure.
Accordingly, it is crucial for parties performing their contract during the current event of COVID-19 the world is facing, to review the contract, particularly clauses of force majeure to determine whether the respective event is included as a force majeure and if not, it is important to seek for a legal advice to frame the situation within the suitable legal terms, in an attempt to re-arrange the contractual obligations in light of the current situation, determine the scope of inability to perform the obligations, determine the foreseen legal and financial repercussions thereof. Furthermore, the parties must consider the insurance clause and its applicability in relation to the respective event to cover the anticipated losses, if possible. Additionally, parties are required to fulfill any procedure required under the contract in the event of force majeure to save their rights and avoid any breach of contract.