By Anika Mardiah Chowdhury
Force majeure is a French word that means “superior force.” Black’s Law Dictionary defines force majeure as an event or effect that the parties could not anticipate or control. In other words, force majeure is a term used in contracts to refer to any events that are outside of any party’s control and are unexpected or disruptive. It serves to relieve a party from its obligations under the contract without liability. For example, acts of nature like floods or hurricanes or others and acts of people like riots, strikes, and wars.
There are two conditions to be fulfilled for force majeure. Firstly, the event in question must be unforeseeable and irresistible. However, the event doesn’t need to be external. Rather, the impossibility of performance is also considered an essential element of force majeure.
Secondly, if the performance is more difficult or more onerous, but his situation is assessed by the courts in abstract and not in the context encountered by the party to the contract who has difficulties in performing. Also, the court will focus on the measures that should have been taken and not on those that a party could take because of that specific situation.
There have some essential ingredients to find force majeure, these clauses are not specific rather there may have other elements also. The elements are as follows-
- There must be an unexpected, unforeseen intervening event that occurred,
- The parties of the agreement had an assumption that such an event would not occur,
- An event has made the performance of the contract impossible or impracticable,
- The parties have taken all such measures to perform their obligations under the contract agreement or at least to mitigate the damage,
- The affected party claiming relief under force majeure will have the burden of proof to show that the force majeure event has affected that party’s performance of the contract.
At present, a global crisis is going on around the world on account of COVID-19. COVID-19 has been declared a pandemic, and the impact of the pandemic is going through businesses along with the global economy and other commercial areas. The outbreak of COVID-19, however, has brought economies around the world to a halt, and a party without any fault on its part was not able to perform its part of the contract.
In considering the current scenario, it is important to analyze the commercial issues and the pandemic situation to see whether they can be considered as force majeure. Hence, this article will focus on the impact of the current pandemic scenario on business and the applicability of force majeure.
A force majeure clause usually relieves the contractual parties from their obligations or liabilities. A pandemic may not be considered force majeure if it does not contain the characteristics or elements of force majeure to that specific case. Therefore, to prove that the COVID-19 pandemic falls under force majeure, it has to prove that the elements of force majeure contained, but it is also to be mentioned that a specified doctrine of force majeure does not exist; thus, it is up to the parties to define the events if constitute force majeure events or not.
Under Common Law, the applicability of force majeure is purely contractual. On the other hand, in Bangladesh there have no direct statutory regarding the force majeure, therefore it primarily relied on the party’s agreement or contract terms. Therefore, the parties dealing in Bangladesh may rely wholly on contractual terms.
As we have seen, there is no specific statutory on force majeure, but there is the Contract Act 1872. Section 56 of the Contract Act 1872 states that a contract to do an act after the contract is made becomes impossible because of some event that the promisor could not prevent. Then, the contract becomes void when the act becomes impossible or unlawful. Section 56 of the Contract Act can be used to make any contract frustrated. Still, it has to be shown that the performance of the contract has become radically different because of the event than what the contracting parties initially intended. Therefore, by taking consideration of this provision in the absence of any specified statutory of force majeure, the parties to a contract have an option of relying upon this provision to excuse themselves from the timely performance of obligations.
Though Bangladesh still did not take the issue of COVID-19 as a force majeure event, other countries have already clearly stated that COVID-19 is to be treated as a force majeure event to avoid any ambiguity. For example, the Government of India issued a notice on 19 February 2020 that defines COVID-19 as a natural calamity and facilitates the force majeure clauses in contracts for such events.
Usually, in international commerce, the force majeure clause in a contract is precisely defined in the case of applicable circumstances. If the clauses are mentioned, then the party bearing the economic loss is less likely to bring legal action. These certificates are proof of the existence of relevant events that may constitute force majeure and impinge the company’s capacity to perform the contract.
As COVID-19 and the pandemic are causing huge losses in the business sector, the best way to mitigate losses can be by initiating a risk assessment and giving careful consideration to each of the terms of the contract and pre-plan a mutual gateway between the parties themselves along invoke a force majeure clause.
Also, mutual discussions between the parties may be initiated to mitigate the possible losses that may arise from non-performance. Then, we can take preparatory steps to minimize future loss and consider whether or not invoking the clause may eventually terminate the contract completely.
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