Hola!
This blog post is really important and really relevant to anyone who has entered into any type of contract. So basically, everyone. We contract here, there, and everywhere these days, whether it’s signing on that dotted line for your dream home or clicking on the ‘buy’ button after an Internet shopping spree. These are just a few ways in which we contract with each other. Contracts really are everywhere and form part of our daily lives, but do you know your rights? If you have a contract which hasn’t been fulfilled because of COVID-19, then this blog post could be music to your ears. Go and dig out or CTRL and F a copy of the contract and see if a magical force majeure clause is included within in. Grab your favourite drink, get rid of any distractions, and prepare to be enlightened on force majeure. But we could be here a while, so get comfy.
COVID-19 is having a substantial economic impact on our world. Businesses need to consider the legal risks that arise and what they can do to protect themselves. The unprecedented measures of closing places of work and the disruption of production and supply chains, port closures, and suspension of air travel has caused widespread disruption throughout the world.
In such circumstances, force majeure claims may arise. However, whether the COVID-19 pandemic constitutes a force majeure event depends on the exact wording and scope of the force majeure provision in a contract.
I specialise in two legal jurisdictions: English and French law. That’s where I studied, trained and that’s where I have all my experience. If your contract is governed by English law, we will explore what this means for force majeure and we will also look at the role of force majeure under French law. These two jurisdictions provide for an interesting comparison as they are quite different, as you will. First up, it’s my first love…English law.
English Law
What is force majeure under English law?
Those linguists amongst you will have noticed that this doesn’t sound very English and you’d be correct. The words literally mean “superior force”. However, the words “force majeure” aren’t generally found in a contract governed by English law, as this is a civil law concept. The equivalent counterpart of frustration appears in contracts under common law.
Although the origin of force majeure is Roman, it was adopted by civil law countries and is most notably found today in the French Civil Code (the Napoleonic Code) dating back to 1804.
Let’s rewind for a minute. For those of you who don’t know, the English legal system is a common law system, whereas other jurisdictions such as France, Spain and Germany are civil law systems. That’s a blog post in itself, but it’s important to be aware of that distinction. Now let’s get back to today’s business.
Under common law (whether under English law or the law of another common law jurisdiction such as Australia), there is no doctrine of force majeure. Instead, the term is used to refer to contractual clauses which alter or relieve parties’ obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those obligations, such as natural disasters or war. Sound familiar? Did your ears just prick up?
A unique feature of common law contract law is that, subject to limited exceptions, the law leaves it up to the contracting parties to set out all the terms that will govern their contractual relationship in their contract. As such, it gives contracting parties the flexibility and freedom to decide the terms of their contract, and certainty that these terms will not be altered by legal principles existing outside of the contract itself. Let’s just hope you chose to include a force majeure clause before you signed on the dotted line.
If you included a force majeure clause in your contract, it may include events such as war, terrorism, earthquakes, hurricanes, acts of government, plagues, or epidemics. Where the term epidemic, or pandemic, has been used, that will clearly cover COVID-19.
An act of government will have occurred where a government body has imposed travel restrictions, quarantines, trade embargoes, or has closed buildings or borders. However, the position is less clear where the government makes recommendations rather than makes orders using legal powers. Most governments have made more than recommendations; I could have been fined or arrested for not complying with the quarantine restrictions here in Spain, and rightly so. An imposed quarantine such as that in the UK and in France should constitute an act of government.
But what happens if the term “epidemic” or “pandemic” isn’t explicitly referred to in the contract? That’s where the fun begins.
Where no relevant event is specifically mentioned, it is a question of interpretation of the clause whether the parties intended such an event to be covered.
In unprecedented circumstances like the ones we are currently living in, the courts are likely to be generous in their interpretation of this sort of wording when faced with parties who have encountered genuine difficulties in performing. However, such parties will still need to show that their non-performance, or late performance, was truly outside their control and couldn’t have been prevented or mitigated.
Consequences of force majeure
Under English law, this freedom for drafting contracts means that depending on their drafting, such clauses may have a variety of consequences, including:
- excusing the affected party from performing the contract in whole or in part;
- excusing that party from delay in performance, entitling them to suspend or claim an extension of time for performance;
- or giving that party a right to terminate.
This is in sharp contrast to contracts governed by French law. In France, force majeure is a general legal concept and courts may declare that a particular event, such as a global pandemic like COVID-19, is a force majeure event. But more on that later.
For this reason, it is common practice to include a force majeure clause in contracts, in order to relieve a party from performance of its contractual obligations where that performance is impacted by events outside its control.
In general, an effective force majeure clause will be made up of two main parts: the definition of what constitutes a “force majeure event” and the operative provisions which deal with what happens if there is a force majeure event.
There is no general right to be able to claim force majeure in a common law jurisdiction. If force majeure is to apply, this must be explicitly included in the contract (including a definition of what constitutes a force majeure). If there is no force majeure clause and the business fails to deliver on time, the other party to the contract may be entitled to claim damages or perhaps even terminate the contract.
The effects of relying on the force majeure clause
The force majeure clause will also need to deal with what the parties intend to happen if it is accepted that an force majeure event has prevented a party from being able to perform its obligations. The usual remedy if a force majeure clause is invoked is for one or more of the parties to be excused from its obligations and/or liability under the contract, without any damages being payable. Force majeure clauses also sometimes provide for extension of time, suspension of time, or termination in the event of continued delay or non-performance. A right of termination could be commercially important, as it may provide leverage to renegotiate contractual terms.
Some clauses also expressly provide that additional costs incurred due to the inability to perform or perform on time will be borne by a particular party. If not, then it is likely that costs will be borne by the party that has incurred them, because there is no contractual provision to override this.
Prove it
If there is in fact an event which falls within the relevant definition of a force majeure event, the party seeking relief from performance will generally be required to show that:
- it was prevented, hindered, or delayed from performing its contractual obligations as a result of the event;
- the event/inability to perform was beyond its control; and
- there were no reasonable steps the party could have taken to avoid the event or the consequences.
The term “prevent” has been interpreted to have quite a narrow meaning: the party claiming force majeure must show that performance of its obligations was legally or physically impossible, not just more expensive than what was originally anticipated.[1]
What if the force majeure isn’t with you because there is no force majeure clause in the contract?
Since force majeure is a creature of contract rather than a rule imposed by the common law, if there is no force majeure clause, an affected party will have to look to other provisions of the contract for potential courses of action. If the contract doesn’t provide any such courses for action, it may in certain circumstances be possible to rely on the doctrine of frustration of contract. It is extremely difficult to show that a contract has been frustrated so is it just you who is frustrated, or can you prove that your contract has been frustrated too?
The future of force majeure
COVID-19 is a timely reminder of the need to include force majeure clauses in contracts. I expect that from now on, contracts will make explicit reference to “national or global pandemics”, just as contracts were redrafted to include “volcanic eruption” after the eruptions of the Icelandic volcano which caused enormous disruption to air travel across western and northern Europe in April and May 2010. In the absence of the specific phrase of “national or global pandemics”, it is likely that “act of God” will include this unusual event. An act of God is an extraordinary event resulting from natural causes without human intervention and which couldn’t have been foreseen or guarded against. Depending on whether you believe the conspiracy theories or not, force majeure may or may not be included within this definition.
French Law
What is force majeure under French law?
Contractual force majeure is explicitly defined by French law, but this isn’t the case if the contract is governed by English law, as discussed above.
In most cases, contracts governed by French law won’t explicitly mention force majeure and therefore, it is necessary to refer to the texts and interpret them.
Force majeure is defined in Article 1218 (paragraph 1) of the French Civil code. This Article is applicable to contracts entered into after 1 October 2016. It provides the following:
Force majeure in contractual matters exists where an event beyond the control of the debtor, which could not have been reasonably foreseen at the time of the contract was entered into and whose effects cannot be avoided by appropriate measures, prevents the performance of its obligation by the debtor.
Article 1218 has taken over the previous case law criteria of unpredictability and irresistibility, abandoning the criterion of externality.
Any event which prevents a contracting party from performing its obligations may therefore be characterised as force majeure when satisfies the following three criteria:
- It was beyond the control of the party which can no longer perform its obligations.
- It was reasonably unforeseeable at the time the contract was entered into.
- It is irresistible during the performance of the contract. This irresistibility must make the performance of the contract impossible and not just more expensive or complicated.
The party seeking to invoke force majeure against the non-performing party must prove that these conditions are met.[2]
Now where does COVID-19 fit into all of this?
- French courts will consider whether the event can be attributed to that party, but a compulsory lockdown ordered by the local government would generally be deemed beyond the control of the party invoking force majeure.
- As French courts proceed on a case-by-case basis, a similar event may be held to be unforeseeable in some circumstances but not in others. A recurring epidemic, such as dengue fever, within the same area, may not be considered to be unforeseeable. However, a one-off and (hopefully) nonrecurring COVID-19 pandemic hopefully will be held to be unforeseeable.
- The simple fact that an obligation has become more onerous or difficult to perform will generally not be sufficient to qualify as a force majeure event. If the outbreak of COVID-19 merely makes production more difficult or expensive, it would most likely not be considered an impediment preventing the performance of contractual obligations.
Consequences of force majeure
If force majeure is established, it would have the following consequences:
- In the event of a temporary impediment, the performance of the contract will be suspended unless the delay resulting from such suspension justifies the termination of the contract.
- In the event of a definitive impediment, the contract will be terminated by operation of law and the parties released from their obligations pursuant to Article 1351 of the French Civil Code.
Article 1351 of the French Civil Code provides that “the inability to perform the service shall release the debtor accordingly where it is due to a force majeure event and is definitive, unless the debtor has agreed to perform the service or has been given prior formal notice”.
In other words, the party referring to the force majeure event will be released from its obligations and cannot be held liable for its contractual breach.
What if the force majeure isn’t with you because it doesn’t apply?
Perhaps Article 1195 of the French Civil Code could help you out. Hardship applies in any contractual relationship governed by French law entered into since the 1 October 2016 law. This provides for the possibility of renegotiating a contract in the event of “a change in circumstances unforeseeable at the time of entry into the contract which makes performance excessively onerous for a party who had not agreed to assume the risk.”
The term “unforeseeable” is used only if performance of the obligation hasn’t been made impossible, but only more difficult by the debtor, either because it will in return obtain only a performance whose value will have been considerably reduced, or because performance, while not impossible, will require greater effort and a longer period of time than initially envisaged.
If COVID-19 is considered “unforeseeable” and if the application of the above-mentioned provision isn’t excluded (which is contractually possible), the parties could always try to rely upon this provision as an alternative to force majeure, in order to try to renegotiate the existing contract.
So, is COVID-19 a force majeure?
Now that’s why you are all here. It really is the million dollar question. And, as a true lawyer at heart and as you can see from the legal analysis above, I’m going to leave you hanging with “it depends”.
Under English law, given the almost unprecedented nature of the COVID-19 outbreak and/or the actions of governments worldwide in response, it is likely that COVID-19 would constitute a force majeure event under many force majeure clauses. However, whether the COVID-19 pandemic constitutes a force majeure event depends on the exact wording and scope of the force majeure provision in a contract or in fact, the very existence of such a clause.
Nevertheless, just because a force majeure event has occurred doesn’t necessarily mean that the parties will be protected from liability for failing to perform or a delay in performance.
Under French law, force majeure is becoming more probable every day considering the rapidly evolving governmental decisions and the already available case law.
As force majeure provisions are not public policy provisions, the definition or the effects of force majeure may be subject to contractual arrangements, including a broader definition of force majeure.
These are some considerations to be considered when reviewing a force majeure provision:
- If the force majeure clause expressly specifies epidemics, diseases, and/or public health emergencies as qualifying force majeure events, it is likely that the COVID-19 pandemic would qualify.
- Even if epidemics, diseases, and public health emergencies aren’t expressly specified as being force majeure events in the contract, COVID-19 may nevertheless fall within the general force majeure wording as an unforeseeable event beyond the parties’ reasonable control.
- If the force majeure provision defines “acts of government” as being force majeure events, it can also be argued that government-imposed travel bans and restrictions, city lockdowns, and mandatory business closures constitute “acts of government” beyond the parties’ reasonable control that prevent the performance of contractual obligations.
- The party seeking to invoke force majeure will typically need to show a causal link between the force majeure event and the failure to perform contractual obligations, and the party must prove that COVID-19 has made it actually impossible for it to perform its contractual duties. It is unlikely that a party will be able to rely on force majeure simply because performing its contractual obligations has now become more expensive, onerous, or time-consuming due to COVID-19. For example, a party seeking to rely on force majeure may need to show that it was impossible for it to source for alternative suppliers, contractors, materials, or personnel.
- The existence of a pandemic or an epidemic is not always sufficient to constitute force majeure. French case law has ruled out this qualification for force majeure on several occasions:
- Plague (CA Paris, 25 September 1998, no. 1996/08159)
- Dengue Fever (CA Saint-Denis de la Réunion, 29 December 2009, no. 08/02114; CA Nancy, 22 November 2010, no. 09/00003)
- SARS (CA Paris, 29 June 2006, no. 04/09052)
- Chikungunya (CA Basse-Terre, 17 December 2018, no. 17/00739)
- H1N1 (CA Besançon, 8 January 2014, no. 12/02291)
- Ebola (CA Paris, 17 March 2016, no. 15/04263; CA Paris, 29 March 2016, no. 15/05607)
However, the pure scale of government measures in response to COVID-19 is exceptional and extraordinary in nature and is broader in scope than previous pandemics. The World Health Organization (WHO) has declared COVID-19 a public health emergency of international concern. This is only the sixth such declaration by WHO and supports the view that COVID-19 is an unprecedented event.
- Parties should also consider how long the contractual obligations will be suspended as a result of force majeure. Given the fluidity of the situation, it may be difficult to ascertain when an event of force majeure has commenced, and when it has ended.
- It should also be noted that on 12 March 2020 the Court of Appeal of Colmar ruled that COVID-19 is a force majeure event in the context of an administrative incident. However, nothing legally prohibits the application of the same rules to contractual obligations.[3]
While this may be the first decision of its kind on this issue in France, there is still a lot up for debate! It has been determined that COVID-19 should be treated as a force majeure in the context of French public procurement contracts, which protects companies with public procurement contracts from being penalised in the event of late performance. But what does this mean for B2B or B2C agreements?
The determination of the existence of a case of force majeure in contractual relations between businesses or with consumers is still up for debate and it’s a matter to be determined at the sole discretion of the French courts.
The judge will determine whether the coronavirus pandemic constitutes a force majeure event on the basis of the facts of each case, and in particular with regard to the possibility of implementing appropriate measures to avoid adverse effects on the performance of the contract (for example, use of alternative sources of supply, production at other sites etc).
Of course, this is only if the parties don’t fight it out amongst themselves (across a table) first.
Future of force majeure
Companies may draft their force majeure clauses more broadly in the future to clearly include pandemics and public health emergencies, without the need to rely on a force majeure certification. In some countries, such as China, government authorities will sometimes issue companies with “force majeure certificates” in cases where there is an event which has a broad impact (for example, the COVID-19 outbreak of 2020). In a common law jurisdiction such as English contract law, such a certificate may be useful evidence of the fact that a force majeure event has taken place, but it is unlikely that the existence of the certificate will be sufficient to invoke the application of the force majeure clause. Unless, the clause expressly refers to the issue of such a certificate as being a trigger.
How can I help you?
Any party wishing to rely upon force majeure must review relevant contracts immediately and seek legal advice from a qualified professional. Often clauses have provisions requiring immediate notification and a failure to comply with these can render a subsequent force majeure argument redundant.
I think we have established that force majeure is going to create a lot of work for French and English contract lawyers and legal translators too. This is where I come in.
As a legal translator with a qualifying English and French law degree, I am qualified to translate French contracts and documents into English. If you need my help with legal translation from French into English in this field, please don’t hesitate to contact me at info@coleytranslates.com.
I’ve already been able to help a number of clients in this field by translating their contracts for them at this very stressful time. Working on these projects on a regular basis since the COVID-19 outbreak guarantees that I understand the recent legal developments in this field. Rest assured that my current understanding of force majeure in English and French law allows me to make informed translation choices for you.
Alternatively, if you require any legal advice with regards to force majeure, please contact a qualified legal professional with respect to any particular issue or problem.
I would also love to hear your thoughts on what you are working on or blogging about and what content you would like to see in my blog. You can find me on all the usual types of social media or drop me an email at info@coleytranslates.com. I don’t bite, I promise!
Take care of yourselves and drop me a line if you fancy a chat.
Legally ginger,
Nicole
Disclaimer: This information is for informational purposes only and not for the purpose of providing legal advice.
[1] Tennants (Lancashire) Ltd v G.S. Wilson & Co. Ltd [1917] AC 495
[2] (Com., 17 March 1998, no. 95-21.547 D, RJDA 7/98 no. 753). See also CA Paris, 17 March 2016, no. 15/04263)
Legally Ginger 