A force majeure event refers to the occurrence of an event that is outside the control of a contractual party and which prevents that party from performing its obligations under a contract. A party’s ability to claim relief for a force majeure event depends upon the terms of the contract and how well the contract is drafted. With the COVID-19 pandemic devastating businesses and creating chaos, many businesses face non-performance of their contract with the pandemic as its center of reason. Though not all force majeure events are triggered by the pandemic, all the triggered events at this moment are because of the pandemic. There are many circumstances that are taken into account when giving relief to the party but those circumstances must be proven by the party requesting relief.
CONTENTS
Acknowledgement
Abstract
Introduction
Chapter
1 Force Majeure
1.1 What is Force Majeure
1.2 Scope and object of Force Majeure
1.3 Example of Force Majeure clause
2 The Pandemic and force majeure
2.1 Force majeure in Myanmar caused by the pandemic
2.2 International Force Majeure cases caused by the pandemic
2.3 Oil Crisis and Force Majeure
3 Legal Measures for the Pandemic
3.1 Myanmar legal measures for the Pandemic
3.2 ICC Force Majeure and Hardship Clause
3.3 United Nations Convention for International Sale of Goods Act17
3.4 Contract Act 1872
3.5 International legal measures for the Pandemic (Singapore)
4 The Aftermath prediction and suggestion
4.1 Post Covid-19 prediction
Conclusion
Bibliography
Acknowledgement
First of all I would like to thank all the teachers and lecturers who have taught and shared me their knowledge of Law.
I would also like to gratefully thank all those who have participated in my interviews, my friends and colleagues, authors of my references and my teachers who have taught me the necessary skills to conduct an academic survey and write a research paper.
A special thanks to all the healthcare professionals and volunteers who have sacrificed their lives on the frontline fight off the terrible disease and I sincerely hope everyone to be safe and maybe we all survive this pandemic.
Abstract
A force majeure event refers to the occurrence of an event which is outside the control of a contractual party and which prevents that party from performing its obligations under a contract. A party's ability to claim relief for a force majeure event depends upon the terms of the contract and how well the contract is drafted. With COVID-19 pandemic devastating businesses and creating chaos , many businesses face non-performance of their contract with the pandemic as its center of reasons. Though not all force majeure events are triggered by the pandemic, all the triggered events at this moment are because of the pandemic. There are many circumstances that is taken account of when giving relief to the party but those circumstances must be proven by the party requesting for relief.
Introduction
At the end of the year 2019 , a virus outbreak occurred in Wuhan city, Hubei Province in China and little did we know that it would soon become a global pandemic by March that would lead to thousands of lives lost with millions more infected and unemployed. As of this paper is written, the global pandemic known as COVID-19 is still going strong in some countries and it devastated the social order as we know.
Governments all around the world placed curfews, travel restrictions and even martial law to contain the viral infection as small as possible with as little casualty as possible. This leads to closing of many shops , a sudden halt in the economy and a great crisis for people with minimum wage. Since China host the largest economy in the world and followed by America, when both countries become disease ridden, the world's cashflow just stopped. This resulted in the main topic, the trigger of Force Majeure clause by the pandemic which either directly or indirectly influenced it.
The word “force majeure“ is French for “superior force“ , it is a clause in contract that on certain occasions, relieves the contracted parties from fulfilling their contractual obligations when circumstances beyond the control arise. In a situation like this when the force majeure clause is triggered, it makes performing the duties inadvisable, impracticable commercially, becomes illegal or impossible to carry out. In the absence of the clause, the parties to a contract are left to the decision of the common contract doctrines of “impracticability” and “frustration of purpose” which lacks in flexibility and most often resulting in forcing either party to be at mercy of the other.
Chapter 1 Force Majeure
Firstly, we will explore the concept of force majeure clause and its scope and object. It is a clause that is not often seen in local contracts but most often utilized in large corporate contracts as it allows flexibility and a fail safe in case something unexpected or uncontrollable happens.
Force majeure clause is not limiting to certain circumstances as its literal definition suggests which is superior force or the act of god. It can be applied to other man made disasters, economic situations, socio-cultural reasons, government and international politics.
In the past, force majeure clauses, in referring to circumstances beyond the control of contractual parties, were meant to deal with unforeseen acts of God or of sovereignty and regulatory bodies but in recent years, force majeure clauses have become a tool of flexibility that is drafted to cover a wider range of circumstances that might have effect on the commercial interests of the parties to the contract. The clause is now quite common to be dealt with not only the impossibility of performance , but also with questions of commercial impracticability. Its initial scope only covers the act of God, war and strikes , but its flexibility means that it could be invoked by other means that impacted in a way the contract cannot be fulfilled to its agreed potential.
1.1 What is Force Majeure ?
Force Majeure is a Civil Law concept which is similar to but not the same as frustration of contract under common law. The origin of the concept of force majeure started with Romans but it is later adopted by civil law countries and most distinctly found today in the French Civil Code ( The Napoleonic Code ) dating back to 1804. A force majeure event, when it is triggered, excuses the performance of the contract despite its specific instructions that obligate the parties to uphold their promise. It is in that way similar to other exceptions that excuse parties from the performance of the contract1.
The fore majeure in French Civil Code2requires no less than three criteria to be satisfied to be recognized as one of force majeure :
(a) Unpredictability
If the event could be foreseen at the time of entering into the con tract, it should have been provided for in the contract and the rely ing party is expected to have prepared for it or insert such event in the definition of force majeure under the contract. A party's failure to specify a foreseeable risk gives an assumption that the party intended to take such risk at the time of entering into the contract.
(b) Externality
The event must not be attributable to the fault of the relying party and the relying party must have had nothing to do with its occurrence.
(c) Irresistibility
The event must be insurmountable and the relying party could not have done anything to mitigate it or avoid its occurrence. Financial difficulty or economic hardship does not excuse non-performance as contracting par ties are expected to have reasonable business acumen and are expected to have calculated the economic risks of entering into particular contractual obligations. Meaning that the court must be satisfied that the performance of the contract is impossible to uphold by the reason of unforeseeable events that the parties are unable to prepare for and unable to adapt or cope with the circumstances which are seemingly uncontrollable and from external source.
1.2 Scope and object of force majeure clause
Until 1914, the French courts were extremely hesitant to accept an event as force majeure and protected the purity of the contract. This all changed because of the great war ,World War I , that the French Courts would started accepting the force majeure and terminating the contracts and obligations3.
Other ally countries such as United Kingdom and United States courts have similar attitude towards the force majeure events until after the Great War.
An example scenario would be a US company in contract with a German company would be unable to continue their business as according to Trading with the Enemy Act of 1917. The courts would have no choice but to terminate the contracts as civil law has to submit to war-time law.
A force majeure clause is solely a creation of a contract, thereby entailing an application of the general principles interpreted in the contract. A typical interpretation of a force majeure clause contains “catch-all phrases” to enable the flexibility of the exemption of liability. Examples of such catch-all phrases are “including but not limited to” and “any other event beyond the reasonable control of parties”. No matter how appealing these phrases seems to a party replying on it, courts require specificity in the list of circumstances that in order to exempt the parties from the liability4.
On several occasions, in accordance to the doctrine ofejusdem generiswhich literally means ‘of the same class' , the use of catch-all phrases might actually prove to be a hinderance to a party from relying on an event which in the absence of the ‘catch-all' phrase could have certainly trigger a force majeure event. An example of this principle being used is in the case ofMaralex Resources Incorporation v. Gilbreath (2003)where the Supreme Court of New Mexico stated that “ ... applying this doctrine, we look to the specific terms employed and seek the common characteristics among them, excluding anything that does not share those characteristics”. This means that if the list of circumstances stated in the contract are such as natural disasters, wars, government decisions or riots, succeeded by a catch-all phrase stating ‘any other event beyond the reasonable control', it could be interpreted as any other events that share the same characteristics or source of event as stated conditions can be considered a trigger for the force majeure event. However, on the contrary, it also means that any other events that do not share the source or similar trait as the above mentioned conditions would be automatically considered as non-trigger and would not exempt the liability of the parties5. Therefore, it is pertinent for the drafting lawyer to attain the right balance between specificity, broadness , predictability and externality of the force majeure clause.
1.3 Example of Force Majeure clause
Force Majeure clauses can vary from contract to contract, focusing on different risk and circumstances. Examples of force majeure clauses6are as below.
Subject to the provisions of clause 1.1, Events of Force Majeure shall include, but not be limited to:
(a) the following Natural Force Majeure Events:
- fire, chemical or radioactive contamination or ionising radiation, earthquakes, lightning, cyclones, hurricanes, floods, droughts or such other extreme weather or environmental conditions, unanticipated geological or ground conditions, epidemic, famine, plague or other natural calamities and acts of God;
- explosion, accident, breakage of a plant or equipment, structural collapse, or chemical contamination (other than resulting from an act of war, terrorism or sabotage), caused by a person not being the affected Party or one of its contractors or subcontractors or any of their respective employees or agents;
- to the extent that they do not involve [country] or take place outside of [country], acts of war (whether declared or undeclared), invasion, acts of terrorists, blockade, embargo, riot, public disorder, violent demonstrations, insurrection, rebellion, civil commotion and sabotage;
- strikes, lockouts, work stoppage, labour disputes, and such other industrial action by workers related to or in response to the terms and conditions of employment of those workers or others with whom they are affiliated save, when such event is directly related to, or in direct response to any employment policy or practice (with respect to wages or otherwise) of the party whose workers resort to such action;
[...]
1Azfar, F. (2012). The Force Majeure 'Excuse'. Arab Law Quarterly, 26(2), 249-253
2Teacher, Law. (November 2013). What is Force Majeure?. https://www.lawteacher.net/free-law- essays/commercial-law/what-is-force-majeure-law-essays.php?vref=1
3Van Schalkwyk, A. J. (2018). The nature and effect of force majeure clauses in the South African law of contract (Doctoral dissertation, University of Pretoria).
4Azfar, F. (2012). The Force Majeure 'Excuse'.Arab Law Quarterly, 26(2),249-253. Retrieved July 11, 2020, from www.jstor.org/stable/23234657
5Teacher, Law. (November 2013). What is Force Majeure?. https://www.lawteacher.net/free-law- essays/commercial-law/what-is-force-majeure-law-essays.php?vref=1
Frequently asked questions
What is "Force Majeure" about?
This document provides a comprehensive overview of Force Majeure, including its definition, scope, application, and impact, particularly in the context of the COVID-19 pandemic. It analyzes legal measures implemented during the pandemic and offers predictions and suggestions for the aftermath.
What are the key topics covered in the document?
The key topics include:
- Definition and scope of Force Majeure
- The impact of the COVID-19 pandemic on Force Majeure clauses
- Legal measures implemented in Myanmar and internationally in response to the pandemic
- Predictions and suggestions for the post-COVID-19 world
What is Force Majeure?
Force Majeure is a clause in contracts that relieves parties from fulfilling their contractual obligations when circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.
What are the criteria for an event to be considered Force Majeure under French Civil Code?
Under the French Civil Code, three criteria must be satisfied:
- Unpredictability: The event could not have been foreseen at the time of entering into the contract.
- Externality: The event must not be attributable to the fault of the relying party.
- Irresistibility: The event must be insurmountable, and the relying party could not have mitigated or avoided its occurrence.
How has the interpretation of Force Majeure clauses evolved over time?
Initially focused on unforeseen acts of God or sovereignty, Force Majeure clauses have evolved to cover a wider range of circumstances affecting commercial interests, including commercial impracticability.
What is the "ejusdem generis" doctrine, and how does it relate to Force Majeure clauses?
The doctrine of "ejusdem generis" (of the same class) means that general catch-all phrases in Force Majeure clauses are interpreted in light of the specific terms listed. If the listed circumstances are natural disasters, wars, etc., any other event must share similar characteristics to trigger the clause. Events that do not share those characteristics cannot be considered Force Majeure events.
What kind of events can be considered Force Majeure?
Events can range from man-made and natural disasters to government and international politics. The interpretation is determined by contract specifics and the definition of the trigger. Examples include, but are not limited to, fire, earthquakes, war (declared or undeclared), terrorist acts, public disorder, strikes, epidemics, and other industrial action
- Quote paper
- Thiha Thu Kyinn (Author), 2020, Force Majeure Clause by Covid-19 Pandemic and Aftermath Prediction, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/1352243
