In addition to generating a global health crisis, Covid-19 is indirectly impacting the economy, and particularly contractual relations.
In France, due to the unusual conditions created by the confinement measures, many contracts can no longer be performed under normal circumstances.
Accordingly, it is important to understand the legal recourse available to parties in this unprecedented situation.
Force majeure appears to be the preferred legal argument allowing parties to temporarily suspend the performance of their contract and, if possible in some situations, to terminate the contract and be released from their obligations.
That said, can the coronavirus be legally considered as a force majeure event?
Article 1218 of the French Civil Code gives the following definition of force majeure.
In contractual matters, force majeure is 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.
Thus, to meet the above definition of force majeure three criteria shall be met, i.e. an event that is beyond the debtor’s control, unforeseeable and unavoidable.
Beyond the debtor’s control
By definition, an epidemic is indisputably beyond human control.
As such, Covid-19 clearly qualifies as an event that meets this condition.
Unforeseeable
The unpredictability of an event is assessed as at the date of signing of the contract.
It is also important to ask the following question: on the date of signing of the contract, was the Covid 19 epidemic predictable in France?
It is reasonable to think that, for any contract concluded before the outbreak in China was announced, the answer to this question is “no”. It might be “yes”, however, for any contract concluded after the outbreak was announced, insofar as it was not unforeseeable that the epidemic would spread to France.
Nevertheless, in the event of a dispute, the answer to this question will be left to the trial judge, who may also consider Covid-19’s arrival in Europe or France, as well as the date on which the virus was classified as a “pandemic” by the World Health Organisation, as an argument in favour of predictability.
Unavoidable
Determining whether or not an event is avoidable is the most challenging of the three criteria.
In order to be able to claim that this particular event was unavoidable, the debtor shall demonstrate that the coronavirus, or the consequences thereof, made it completely and absolutely impossible for the debtor to meet its obligations, i.e. that the coronavirus prevented the debtor from implementing a replacement solution such as alternate channels or sources of supply.
The assessment of this criterion does not appear especially challenging when the debtor is a natural person suffering from the coronavirus, making it impossible for that individual to provide the contracted service.
However, when the debtor is not personally infected, demonstrating this condition may prove more difficult and will depend on each contractual situation.
In addition to demonstrating that all three criteria have been met, special care should be taken in examining the wording of any force majeure clause included in contracts, as such clauses may specifically exclude certain situations as constituting force majeure events (e.g. health risk) or may stipulate that contractual obligations will remain in effect if a force majeure event arises.
It is thus very important to refer to the clauses of your contract and/or any general terms and conditions of purchase or sale, before taking legal action.
In conclusion, debtors seeking to suspend their contractual obligations may claim force majeure, however the effectiveness of such claim will depend on the individual contractual situation.
The other legal argument available to debtors in order to amend their contract is unforeseeability.
Under the provisions of Article 1195 of the French Civil Code, a party may ask the other contracting party to renegotiate the contract if a change of circumstances that was unforeseeable at the date of signing renders performance excessively onerous.
The Parties are nevertheless required to continue performing their obligations during the renegotiation.
Accordingly, if appropriate measures could have been taken to avoid the effects of Covid-19 but proved excessively onerous, the debtor may ask the other contracting party to renegotiate the contract.
If the other party refuses or the renegotiation fails, the contract may be terminated by mutual agreement between the parties or submitted to a judge.
Once again, as the unforeseeability clause is subject to contractual freedom, the wording of any such clause should be carefully examined.
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Feel free to contact us if you have any questions regarding legal recourse with respect to Covid-19.
Our team is available to advise and guide you on these matters.
