Article by Arpita Dutta, Louis & Charles Attorneys at Law, Taiwan.
2020 will be marked in history due to the outbreak of the Novel Corona Virus (COVID-19).
Contractual obligations are now under question because the main trading partners around the world like China, India, the UK, the USA and Italy are in Lockdown and could not maintain operations 100%.
However, some countries are still under normal daily schedule. We have witnessed that several claims have not been performed due to this pandemic outbreak and parties are starving to have a response from their counterparties. We need to find out an answer to how FORCE MAJEURE would provide adequate relief to the effective party.
The ‘Force Majeure’ or ‘the Act of God’ is an adequate tool to excuse contracting parties from their obligations due to any unforeseeable event that is beyond their control. We have seen that sometimes clients do not have special demands and ignore the importance of the Article since FORCE MAJEURE is not a regular occurrence. 2020 pandemic has indicated that drafting an agreement is not to achieve today's goal but to help our client to prepare for the tides of consequences for a long-term negotiation.
There are two possible scenarios, clients’ existing contracts may have the FORCE MAJEURE relief or may not. If the agreement contains the clause, then the client may consider negotiating with the counterparty. However, if the agreement does not have the FORCE MAJEURE clause, then the affected party must notify the counterparty with proof of the FORCE MAJEURE occurrence and its impact on the country.
Such correspondence would be then considered as a further negotiating tool according to Article 79 of the United Nations Convention on Contracts for the International Sale of Goods - 1980 (Vienna Convention) which proclaims relief for such occurrence.
However, there is a chance that the court would reject the relief since the agreement does not contain any FORCE MAJEURE clause.
In addition, many countries are not a party to the Vienna Convention; therefore, the question would remain about the applicability of FORCE MAJEURE. In such a situation, we would need to find alternative remedies from the existing contract (Governing law/Remedies/ Damages) or best possible remedies from the Common/Civil law mechanisms to defend the nonperformance.
We would advise you to negotiate with the counterparty and revise the agreement as per the “AMENDMENT” clause of your exiting contact once the pandemic is over.