Coronavirus Outbreak and Contract Drafting: force majeure clauses and the doctrine of frustration

The current outbreak of Coronavirus (COVID-19) (“Coronavirus”) was first reported from Wuhan, China on 31 December 2019. On 30 January 2020, the World Health Organisation (“WHO”) declared the outbreak of Coronavirus a global health emergency. Since then, over 100,000 cases of Coronavirus in 100 countries have been identified, as reported by the Director-General of the WHO on 10 March 2020.

As a result of this unexpected outbreak, parties to affected commercial contracts may rely on force majeure provisions stipulated in their contracts in order to justify delay or non-performance of their obligations.

The concept of force majeure is derived from French civil law and is not to the same extent recognised under common law and as such does not constitute an irrefutable legal doctrine. In English law, force majeure events must be clearly defined in a contract and as such, they are “creatures of contract”[1]. In this regard, whether an event constitutes a force majeure event will depend on the specific wording of the clause included in the contract and an objective test will be performed. Assuming the force majeure event falls within the contractual definition, it shall also need to be proven that (i) the force majeure event caused that party’s failure to perform its contractual obligations, and (ii) they have taken sufficient steps to minimise the issue caused by the force majeure event (they are often expressly required to take "reasonable steps"[2] or use "reasonable endeavours”[3].

Until recently, English courts applied a test of “unforeseeability” to force majeure events. In the recent English case of Classic Maritime Inc. v Limbungan Makmur Sdn Bhd & Anor [2018] EWHC 2389 (Comm) (13 September 2018) ("Classic Maritime"), Teare J decided that a "but for" test was appropriate to determine whether the defendant, Limbungan Makmur could rely on the force majeure clause to avoid liability to Classic Maritime[4].

Despite this recent English case, other common law jurisdictions may still impose the “unforeseeability” test. Hong Kong and Singapore courts have tended to follow the English courts' previous approach[5] and it is therefore quite possible that Cyprus courts may follow this approach also. As an EU jurisdiction, Cyprus courts shall also need to take into accountAnthony McNicholl Ltd and others v Minister for Agriculture[6] where it was held that “whilst the concept of force majeure does not presuppose absolute impossibility, it nevertheless requires the non-performance of the act in question to be due to circumstances beyond the control of the person claiming force majeure, which are abnormal and unforeseeable and of which the consequences could not have been avoided despite the exercise of all due care”.

Parties to affected contracts may have a remedy under the doctrine of frustration, which provides that, if after a contract is entered