Force Majeure is a French term meaning “greater force”. Force Majeure events are wars and natural disasters, which are related to the concept “Act of God” which are typically natural events that cannot be prevented and no party can be held accountable, such as floods, earthquakes, tsunamis, hurricanes, etc.
The effects of COVID-19 disrupted economic activities and affected supply chains of many businesses around the world, thus making it impossible to fulfill existing contractual obligations. On March 11th, 2020, the World Health Organization officially declared the coronavirus outbreak (COVID-19) a “global pandemic”.
The applicability of Force Majeure, as an accepted legal standard, depends on the legal systems of different jurisdictions. Under Common Law jurisdictions, such as England and the United States, there is no doctrine of force majeure, therefore is generally found in contracts. Which is much more restrictive than the approach to force majeure taken under Civil Law Systems. This gives the parties the freedom to decide the terms of the contact, in which its terms will not be modified by legal principles existing outside the contract.
Force Majeure clauses are common in contracts, freeing or delaying a party from performing contractual obligations when performance of such obligation is effected by events outside the control of the party, hence alleging the force majeure event. A valid force majeure event will either suspend all the obligations of the contract, or terminate the contract by serving a notice to the other party.
Although, in certain Civil Law Jurisdictions, there may be provisions related to Force Majeure found in its civil law provisions that are implied into contracts, accordingly, making contracts governed by these doctrines.
Force Majeure Provisions
Force Majeure under the French Law
The concept Force Majeure has long been recognized by the French courts, however was only introduced in French statutory law in 2016. Under Article (1218/1) of the French Civil Code, Force Majeure has been defined as: “In contractual matters, there is force majeure where an event beyond the control of the debtor, which could not reasonably have been foreseen at the time of the conclusion of the contract and whose effects could not be avoided by appropriate measures, prevents performance of his obligation by the debtor”.
The following paragraph further stipulates, that the performance of the obligation is suspended if the prevention is temporary, unless the delay justifies termination of the contract. Whereas, the contract is terminated by operation of law and the parties are discharged from their obligations if the prevention is permanent.
In accordance to Article (1218/1) of the French Civil Code, three conditions must be met to qualify a force majeure event:
1. Exteriority (extériorité): means that the event prevents performance. Hence the event is beyond the affected party’s control and must not be attributable to the party claiming force majeure.
The COVID-19 pandemic, with no doubt, prevents performing certain contractual performances, which does not result from a fault of the debtor or persons under its control.
2. Un-foreseeability (imprévisibilité): is the fact that the event could not have been reasonably foreseen at the time of concluding the contract.
3. Unavoidability or Irresistibility (irrésistibilité): Irresistibility is the core requirement of claiming force majeure, which means that the effects of the event could not be avoided by appropriate measures, hence making the performance of the debtor’s obligations impossible in spite of its best efforts.
Also, under the French law, the party seeking to invoke force majeure needs to prove the occurrence and existence of the cumulative conditions aforementioned (Com., 17 March 1998, no. 95-21.547 D, RJDA 7/98 no. 753).
On the 12th of March 2020, The Court of Appeal of Colmar rendered the first decision in France ruling that COVID-19 constitutes a force majeure event (CA Colmar, chamber 6, 12 mars 2020, n° 20/01098). The Colmar Court of Appeal in its finding held that all three requirements of exteriority, un-foreseeability and irresistibility were met in the context of the immigration proceedings held in the party’s absence of appearance in court.
If the parties to the contract cannot rely on proving existence or conditions of force majeure, they might consider referring to Article (1195) of the French Civil Code, which provides the following: “If a change of circumstances that was unforeseeable at the time of the conclusion of the contract renders performance excessively onerous for a party who had not accepted the risk of such a change, that party may ask the other contracting party to renegotiate the contract. The first party must continue to perform his obligations during renegotiation”.
Accordingly, “unforeseeable” is used if the performing of the obligation became more difficult by the debtor, but has not been made impossible. As an alternative to force majeure, parties may always refer to Article (1195) to try to renegotiate the existing contract.
Force Majeure under the Bahraini Law
In the Kingdom of Bahrain, the Civil Code which has been promulgated according to the Legislative Decree No. (19) of 2001, clearly provides provisions permitting a party from relief of certain contractual obligations in the event of Force Majeure. Article (128) provides that the contract makes the law of the parties, which may be altered or revoked by mutual consent of the parties, or for inevitable reasons provided by the law. Hence, considering the COVID-19 pandemic as an inevitable reason to alter or revoke a contract.
Article (130) states: “When, however, as a result of exceptional and unpredictable events of a general character, the performance of the contractual obligation, without becoming impossible, becomes excessively onerous in such way as to threaten the debtor with exorbitant loss, the judge may, according to the circumstances, and after taking into consideration the interests of both parties, reduce to reasonable limits by lessening its extent or increasing its consideration, the obligation that has become excessive. Any agreement to the contrary is void”. Consequently, the Judge may reduce or limit a contractual obligation, when its performance becomes onerous, not impossible, on the party executing such obligation which might lead to exorbitant loss.
Furthermore, Article (165) provides: “If a person proves that the injury resulted from a cause beyond his control, such as unforeseen circumstances, force majeure, the fault of the victim or of a third party, he shall not be liable to make reparation unless there is a provision to the contrary”. Thus, damage that resulted from beyond a party’s control, being unforeseeable, exempts the party from the obligation of compensating the other party. In the end, there must be a connection between the Force Majeure event and the party’s failure to perform its obligation.
Being uncertain with the development of the pandemic, we cannot deny that with time parties might face crucial and financial implications when trying to fulfill their obligations. Therefore, parties when negotiating new contracts should consider including specific clauses that are appropriate for uncertain times. If necessary, parties could always agree on entering new agreements or addendums to their original contracts.