Given that the effect of force majeure clause is often suspension of contractual obligations and sometimes even providing for the right to terminate, Courts will be alive to opportunistic parties attempting to use the crisis as a chance to 'get out' of their contractual obligations. Neither medical professionals nor the WHO can yet predict how long the outbreak will last or how far it will spread globally. Chickens in Hubei are at risk of starvation. Does the contractual definition include specific designations such as PHEIC, pandemic, or epidemic? Some act of God provisions differentiate between naturally occurring disasters and government actions. Important – if you have Business Interruption Insurance which may respond to the Coronavirus crisis please also read our article – here. Where all the parties to a contract value the arrangement and expect to continue to work together, the best outcome may be to negotiate new terms that address delayed performance and future expectations. We are here to help. Partner, Dispute Resolution At what point do these events allow a party to a contract to delay performance, not perform, renege on agreed provisions, and/or renegotiate the terms of a business agreement? cast uncertainty on the US economic outlook, shall be considered a force majeure event in accordance to PRC law, our reports on breaking developments in the COVID-19 outbreak, Insurance, Real Estate, and Commercial Contracts, Litigation, Arbitration and Investigations. Acts of God are often defined as events that occur due to natural causes which cannot be avoided through the use of caution and preventative measures. What does it say? The wording in the contract may be clear as to what amounts to a force majeure and indeed a wide spreading virus such as COVID-19 may firmly fit into such a definition. Key themes and legal support. The next generation search tool for finding the right lawyer for you. Coronavirus (officially named COVID-19) has been declared by the World Health Organization to have "pandemic potential".

Whilst the Chinese government has been issuing 'force majeure certificates' to Chinese companies (with it reported that over 3,000 were issued in February alone) it is important to note that whether there has been a force majeure will nonetheless depend on the circumstances of each case and the specific drafting of the clause. For example, some act of God provisions may also trigger rights and remedies for the other party, such as the ability to terminate any exclusivity provisions or important master framework agreements. Power up your legal research with modern workflow tools, AI conceptual search and premium content sets that leverage Lexology's archive of 900,000+ articles contributed by the world's leading law firms. The relevant contractual provisions should therefore be considered urgently and with care. The relevant contractual provisions should therefore be considered urgently and with care. In the US, Federal Reserve officials suggested the outbreak may cast uncertainty on the US economic outlook. Does the contract define an Act of God or force majeure? If so, special issues may arise.Please refer to this article for more details. The party seeking this notice should also ensure that all evidence pertaining to the event and its direct causal link to the company’s inability to perform are properly documented and retained.

Manchester, UK. Can a force majeure clause help a party to avoid contractual liability for losses? Finally, and perhaps most importantly, if the time does come for a party to rely on a force majeure clause there are often strict notice provisions in the contract. Whether an event constitutes "force majeure" is a fact-specific issue and it is often difficult to predict how a Court will approach the interpretation of the clause. Medical supplies, such as face masks and certain drugs, have either been depleted or are running low. Would claiming protection allow a customer to break off an otherwise lucrative long-term partnership? Can a force majeure clause help a party to avoid contractual liability for losses? This is a sensible time to review your policy and remind yourself of its parameters, and to look ahead, proactively evaluating the adequacy of your current insurance coverage to mitigate any potential losses resulting from future infectious disease outbreaks. It is also likely that your customers may themselves be impacted by the outbreak.

This offers you an opportunity to work with them and find creative solutions via a “we’re all in this together” mindset. Examples of acts of God are natural disasters like earthquakes, tornadoes, or floods.

Contractual provisions may require that the party seeking to benefit from protection in an act of God event provide formal written notice as soon as that party becomes aware of the potential event. Interbank offered rates (IBOR) Transition, EBA Ready – Outsourcing Compliance made quick & easy, Healthcare Infrastructure and Public Sector, Private Health Providers, Operators and Insurers, Regulatory Investigations and Enforcement, Asset Based Lending, Trade and Supply Chain Finance, Pension and Life Assurance Trustee Services, Pension Products: SIPP, SSAS, EFRBS and QROPS, Charities and Not for Profit Organisations, Modern Slavery Act Transparency Statement. Supply chains are being affected and containers are backing up on Chinese docks.

An act of God may be interpreted as a defense against breach for failing to perform due to impossibility or impracticality; it could also provide a basis to renegotiate business arrangements affected by COVID-19. Is your contract governed under US, Hong Kong, or PRC law? Lobsters in New Zealand are being freed. Many Chinese citizens are increasingly bored and working from home (or not working), as a result of quarantines and restrictions on travel. With the virus spreading rapidly and 19 cases now reported in the UK, not only is the virus a major concern from a public health perspective, businesses are seeing disruptions which are only likely to increase in the coming weeks and months. With the virus spreading rapidly and 19 cases now reported in the UK, not only is the virus a major concern from a public health perspective, businesses are seeing disruptions which are only likely to increase in the coming weeks and months. The burden of proof is on the party attempting to rely on the clause and therefore if it is likely that a party may need to rely on a force majeure clause then all relevant evidence should be collated as the impact of the virus continues to unfold. Even if it COVID-19 can be classified as a force majeure event, there is then a question of how long for. COVID-19 is posing novel issues to businesses globally, and it is not possible to know the full effects it will have on business and trade. Some factories in China are only now slowly getting back online, while others do not plan to restart production for several more weeks. If you are on the receiving end of such a notice or anticipate that COVID-19 may pose an issue for your third-party vendors or suppliers in China, consider whether appropriate procedures and timely notification are being followed and that there is adequate documentation. If so, the promise is discharged because of unforeseen occurrences, which were unavoidable and would result in insurmountable delay, expense, or other material breach. WHO can also set global standards of practice during a PHEIC. The US Securities Exchange Commission, for example, is monitoring companies’ disclosures related to the impact of COVID-19 on businesses. If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries@lexology.com.

With major events such as exceptional storms and change in economic markets having not previously been classified as an 'act of God' by the Courts however, demonstrating an "act of God" is a high burden. If not, parties may be left relying on a more generic sweep-up phrase often included in force majeure clauses such as the event being an "act of God". In the law of contracts, an act of God may be interpreted as an implied defense under the rule of impossibility or impracticability. Whether it be due to workers not being able to attend work, delays in shipment or cancellation of major events, the virus is starting to have huge commercial implications across many industries. First, it is noteworthy that a force majeure clause cannot be implied into a contract and so there will need to be an express term of the relevant contract.



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