Coronavirus, a force majeur event ?

 

COVID-19 was declared as a pandemic by the WHO on 11 March 2020. Can force majeure then be raised to justify a temporary or permanent breach of contractual obligations?

I. CHARACTERIZATION OF FORCE MAJEURE (ARTICLE 1218 OF THE CIVIL CODE)

Article 1218 of the French Civil code, as amended by the Ordinance dated as of 10 February 2016, states as follows:

“There is force majeure in contractual situation when 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 cannot be avoided by appropriate measures, prevents the performance of its obligation by the debtor.

 If the prevention is temporary, the performance of the obligation is suspended except in case the delay which would then result justifies the termination of the contract. If the prevention is permanent, the contract is terminated by operation of law and the parties are released from their obligations under the conditions provided for in articles 1351 and 1351-1.”

  1. Characteristics of Force Majeure

Three cumulative characteristics constitute the existence of a force majeure event:

  • Exteriority: exteriority is an integral part of force majeure, but recent case law – prior to the Ordinance dated as of 10 February 2016 – tends not to consider this condition, particularly in the case of disease (French Supreme Court, General Chamber, 14 Apr. 2006, No. 02-11.168). Although linked to the person of the debtor by its very nature, disease is considered by the courts as an external element.
  • Unpredictability: it is an event which is unforeseeable by the contracting party. This knowledge shall be assessed at the execution date of the concerned agreement (French Supreme Court, First Civil Chamber, 4 February 1997, No 94-22-203; Court of appeal of Saint-Denis de la Réunion, 29 Dec. 2009, No 08/02114). The current epidemic, as severe and sudden it may be, might not be qualified as unforeseeable for contracts entered into after the revelation of the existence of this virus; a debate could arise regarding the specific date from which the consequences of the virus became foreseeable.
  • Irresistibility: the criterion of irresistibility entails the inevitability of the occurrence of the event. Courts will acknowledge the irresistibility characteristic in case the effects are unavoidable despite the implementation of appropriate measures. Irresistibility also refers to the insurmountable nature of the event, the impossibility to perform the contract. It is therefore advisable to be able to demonstrate that all measures have been implemented to avoid as much as possible the impact of the epidemic on contractual performance (delivery of goods, services, etc.).

2. A specific situation: “le fait du prince”

Le fait du prince is an act of public authorities consisting on a decision from the authority resulting on damages to a third party. In the present case, complete or partial containment measures decided by the government could be qualified as le fait du prince, provided that they possess the attributes of force majeure and thus prevent a service provider from fulfilling its commitments.

II. THE CONSEQUENCES OF FORCE MAJEURE: THE LACK OF LIABILITY AND THE RELEASE OF THE DEBTOR FROM ITS OBLIGATIONS UNDER CERTAIN CONDITIONS

The defaulting debtor shall not be liable in case of force majeure event that prevents the performance of its obligations as per the agreed conditions and deadlines, notwithstanding the damages suffered by the other contracting party as a result of such non-performance.

  1. Justified temporary or permanent non-performance (article 1231-1 of the Civil code)

If the impossibility to perform is only temporary, the event does not constitute a case of force majeure that definitively exonerates the debtor; indeed, according to case law (French Supreme Court, Third Civil Chamber, 22 February 2006, n°05-12.032), “force majeure exonerates the debtor from its obligations only during the period preventing it from giving or doing what it is obliged to do.

The debtor will then have to perform as soon as it can (within reasonable delay) and it is important for each party not only to follow the evolution of the events, in order to be able to observe when force majeure is no longer applicable, but also to ensure that the human and material means are always “available”, in order to return to the proper performance of its contractual obligations.

2. Suspensive or extinctive effect, complete or partial on the contract

Article 1218 of the Civil code allows the suspension of the contract for temporary impediment, or the termination of the contract when the impediment is definitive.

Nevertheless, debtors must remain vigilant because a force majeure event does not necessarily release the debtor from the performance of all of its obligations; this limit is expressly stated in Article 1351 of the Civil code, according to which “The impossibility of performing the service releases the debtor to the extent when it results from a case of force majeure and is final (…)”. The authors thus consider that, in these circumstances, “There is therefore not a disappearance but a rebalancing of the contract” (FABRE-MAGNAN, Droit des obligations, vol. 1, 4th ed., 2016, no. 669).

III. A CASE-BY-CASE ANALYSIS

For the record, Article 1218 of the Civil code is not a matter of public policy and it is permissible for parties to contractually derogate from it by extending or restricting definition of force majeure in their contracts. In practice, we have already encountered contracts in which it was expressly stated that diseases or epidemics do not constitute cases of force majeure; these clauses are often the result of specific negotiations or standard clauses recently inserted by companies having already faced similar situations (H1N1, SARS…). The statements made by the Minister of the Economy and Finance, Mr. Bruno Le Maire, according to which the current situation constitutes a case of force majeure only applies to public contracts and cannot as such justify the same qualification in private law relationships.

It is therefore mandatory to first check the provisions of the applicable contract before claiming that there would be a force majeure event.

Moreover, the person who pretends that there would be a force majeure event in order not to perform or pay will have to demonstrate that she/he has acted reasonably or appropriately to limit the negative consequences of the situation encountered. It will also be advisable to inform the other contracting party as soon as possible of her/his inability to do so.

It is therefore imperative to establish and keep a file recording all the steps taken and the exchanges between the parties. Phone communications (or even SMS messages, WhatsApp, etc.) must be documented as far as possible by written confirmations of the exchanges that have occurred.

Finally, the faults committed by a debtor, even unintentional faults, may prevent the debtor from the benefit of the force majeure regime. For example, the negligence committed by a debtor has already lead the court to exclude the advantage resulting from an existing force majeure event (see French Supreme Court, Commercial Chamber., 9 July 2013, n°12-22.240).

Force majeure is thus a useful concept to protect diligent and responsible professionals. It constitutes by no means a blank check for negligent operator or bad faith contractor.

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