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Thursday, 28 May 20
COVID-19: A FORCE MAJEURE EVENT? - KYPRIANOU
KNOWLEDGE TO ELEVATE
While seeing the unexpected COVID-19 outbreak expanding worldwide and the first cases being identified in Cyprus, the commercial sector does not remain unaffected. Emergency measures such as travel restrictions, citizens placed on quarantine and self-isolation are only some of the factors that started to impact parties to commercial transactions that render contract performance physically or commercially impossible. May a party invoke contractually agreed force majeure clauses or, the doctrine of frustration in an attempt to protect themselves from being unable to meet its contractual obligations?
Force Majeure
The concept of “force majeure” (meaning "superior force"), is used commonly in contracts as a clause that essentially releases both parties from liability or obligation when an unexpected event or circumstance beyond the control of the parties, prevents one or both parties from fulfilling their obligations under the contract.
Determining whether the Corona-virus outbreak constitutes a force majeure event, is a matter of construction and will depend on the specific wording and the scope of the clause.
It is the case that force majeure clauses often contain a list of events that qualify as force majeure events. For instance, terms such as “epidemic”, “pandemic”, or more generic terms such as “disease” and “illness” are often expressly listed as events of force majeure. In such cases, it will be easier to claim force majeure protection, as COVID-19 is likely to qualify as a force majeure event. Also, terms such as “acts of government” or “national or regional emergency” may be listed so as to cover emergency measures taken by the government such as travel bans or placing citizens in quarantine in case of this novel outbreak.
Additionally, under common law, a party seeking to invoke that its ability to perform the contract has been prevented by a force-majeure event, has the burden to prove certain elements. These are:
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that the event was unforeseeable;
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that it has taken all reasonable steps to avoid or mitigate the effects of the force majeure event; and
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that the event was beyond its control and thus impossible to overcome.
Most importantly, there must be a causal connection between the force majeure event that made it physically or legally impossible to perform the contractual obligations. With the COVID-19 case, the affected party has to show that due to the outbreak of Corona-virus and its resulting governmental measures, no alternative measures exist for performing its duties under the contract.
Frustration
In case the contract does not include any force majeure clause, the affected party may attempt to excuse its failure to perform its contractual obligations under the doctrine of frustration. Subject to Section 56(2) of the Contract Law Cap.149, as amended, “a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. As interpreted by Cyprus courts, section 56(2) is only applicable to an impossibility which destroys the foundation of the contract, which requires a high threshold for proof of frustration of a contractual undertaking.
Recommended actions
If you have executed a contract or are considering entering into new contract during this period, you should review the force majeure clauses carefully in order to understand the circumstances under which you can declare a force majeure and whether the Corona-virus outbreak and the resulting emergency measures may fall under its scope.
By Andria Kouloumi
Further, notification processes and deadlines should be also reviewed carefully, in order to ensure that your ability to claim force majeure protection is not precluded. Importantly, if you intend to enforce such force majeure clauses, you should consider your obligation to take all the reasonable measures to mitigate the effect of non-performance, otherwise your failure to perform your obligation may not be excused. If in doubt regarding how a force majeure provision applies and whether force majeure protection may cover you, it is recommended to seek legal advice prior to taking any action or sending notices.
Michael Kyprianou & Co LLC is ready to assist and advise you in relation to issues you may face, including by providing advice as to your options and requested objectives, enabling you to make an informed decision.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Andria Kouloumi, Associate, at Andria.Kouloumi (at) kyprianou.com
If you believe an article violates your rights or the rights of others, please contact us.
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- Africa Commodities Group - South Africa
- Bangladesh Power Developement Board
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Global Business Power Corporation, Philippines
- PTC India Limited - India
- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Sarangani Energy Corporation, Philippines
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Grasim Industreis Ltd - India
- Bukit Baiduri Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Therma Luzon, Inc, Philippines
- Tata Chemicals Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Singapore Mercantile Exchange
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Minerals Council of Australia
- Formosa Plastics Group - Taiwan
- McConnell Dowell - Australia
- PowerSource Philippines DevCo
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Kobexindo Tractors - Indoneisa
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Aditya Birla Group - India
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Lanco Infratech Ltd - India
- Georgia Ports Authority, United States
- Eastern Coal Council - USA
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- IEA Clean Coal Centre - UK
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- GAC Shipping (India) Pvt Ltd
- Maheswari Brothers Coal Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Thiess Contractors Indonesia
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- AsiaOL BioFuels Corp., Philippines
- The University of Queensland
- Eastern Energy - Thailand
- Ambuja Cements Ltd - India
- Vizag Seaport Private Limited - India
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Merrill Lynch Commodities Europe
- Barasentosa Lestari - Indonesia
- Bharathi Cement Corporation - India
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Petron Corporation, Philippines
- Electricity Generating Authority of Thailand
- Port Waratah Coal Services - Australia
- Karaikal Port Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Jaiprakash Power Ventures ltd
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Medco Energi Mining Internasional
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bhushan Steel Limited - India
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Economic Council, Georgia
- India Bulls Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Riau Bara Harum - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Parliament of New Zealand
- Wilmar Investment Holdings
- TNB Fuel Sdn Bhd - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jindal Steel & Power Ltd - India
- The Treasury - Australian Government
- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- Banpu Public Company Limited - Thailand
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
- Bhatia International Limited - India
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Ministry of Finance - Indonesia
- Tamil Nadu electricity Board
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Kepco SPC Power Corporation, Philippines
- Romanian Commodities Exchange
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- South Luzon Thermal Energy Corporation
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Rio Tinto Coal - Australia
- Price Waterhouse Coopers - Russia
- Anglo American - United Kingdom
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- Holcim Trading Pte Ltd - Singapore
- Bayan Resources Tbk. - Indonesia
- Oldendorff Carriers - Singapore
- Gujarat Sidhee Cement - India
- Indogreen Group - Indonesia
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- New Zealand Coal & Carbon
- Planning Commission, India
- Siam City Cement - Thailand
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- VISA Power Limited - India
- Salva Resources Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
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