Mr. YUAN Peihao is currently a PHD candidate at CUHK LAW. His main academic interest is international arbitration. He is a licensed lawyer in mainland China who has already represented both domestic and foreign clients in various international arbitration cases.
COVID-19 as force majeure event and exception form pacta sunt servanda?
Due to the Covid-19 outbreak, many countries have promulgated administrative measures such as quarantine, lockdown, and travel restriction, which greatly impede the performance of contracts. Accordingly, in the field of international trade, the contracting party may invoke force majeure to exempt itself from liability for breach of contract. Hence, force majeure entitles the contracting party to deviate from a basic principle of pacta sunt servanda.
In this context, Covid-19 becomes the common ground for force majeure in the dispute of international trade, and the following questions are prevalent and disputed in this time:
1. Under civil law, can Covid-19 constitute force majeure? Under common law, what if there is no provision concerning the epidemic in the force majeure clause of the contract? Can Covid-19 be an impediment under Article 79 of CISG?
2. How to determine the causation between Covid-19 and non-performance?
3. What is the requirement of a valid notice of force majeure?
It has been over one year since the Covid-19 outbreak took place in China, and there are many cases regarding defenses based on Covid-19 as force majeure before courts worldwide, which offers ample resources for the research on force majeure in the latest practice. This study adopts doctrinal comparative and empirical research methods with case analysis to analyze force majeure in the time of Covid-19. The first part of this paper considers whether Covid-19 can be a force majeure event under civil law, common law, and the CISG. The second part of this paper discusses the standard of causation between Covid-19 and non-performance. In the last part, the requirement of a notice of force majeure will be analyzed. Ultimately, this paper tries to figure out specific standards of force majeure, and protect the business in the shadow of Covid-19.