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 be anticipated or controlled. In other words, force majeure is a term used in contracts to refer to any events which are outside of any party’s control and unexpected or disruptive serving 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 have two conditions to be fulfilled for force majeure firstly, the event in question must be unforeseeable and irresistible. However, it is not necessary that the event must be external rather 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 occurred,
- The parties of the agreement had an assumption that such an event will 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 global crisis is going on around the world on account of covid-19. This covid-19 has been declared as a pandemic and the impact pandemic are going through on business along with global economic and other commercial areas. The outbreak of Covid-19 however has brought the economies around the world to a halt and wherein a party without any fault on its part were 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 whether can be considered as force majeure. Hence this article will focus on the current pandemic scenario’s impact 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 as 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 contains, 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 whole on contractual terms.
As we have seen there have no specific statutory on force majeure but there have the Contract Act 1872. Where section 56 of the Contract Act 1872 states that a contract to do an act which after the contract is made becomes impossible or because of some event which 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 but it has to be shown that the performance of the contract has become radically different because of the event than what the contracting parties have initially intended. Therefore, by taking consideration of this provision in absence of any specified statutory of force majeure, the parties to a contract have an option of relying upon this provision for excusing 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 has 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 making huge losses in the business sector, the best way to mitigate losses can be by initiate by 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 can make preparatory steps to minimize the future loss and consider whether invoking the clause may eventually terminate the contract completely or not.