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Force Majeure and the impacts of Coronavirus on Business Continuity

Understanding what force majeure implies:

Force majeure is a Latin term, meaning "superior force". It is an indication and realization of the limits of human foreseeability and predictability into its own commitments. It can be defined as an unforeseen irresistible force, whereby, the performance of a contractual obligations becomes impossible.

Clause of Force Majeure in Contract

The law tries to harmonize the situation through an equitable remedy of exempting the parties from the liability under the contract. That solution is the clause of force majeure in the binding contracts and agreements. The boilerplate force majeure provisions often appear as a standard clause in all the contracts and agreements. the clause mitigates the risk of loss for the parties and save from the loss as the cause of loss was due to reasons which are beyond the control of the parties.

Enforcement of Force Majeure:

Most of the common law countries deems force majeure as a matter of concern only between the parties where the force majeure shall not be attracted in the absence of the force majeure clause in the Binding agreement. Whereas there are other jurisdictions where Force Majeure may be pursued by a party to a contract as a matter of law.

Enforcement of Force Majeure in the UAE:

United Arab Emirates (UAE) Legal system has recognized the force majeure as a matter of law where the de jure applies even without being expressly set out in the contract.

In practice, in the event of force majeure, the obligations and liabilities of parties can be amended, altered, extended or cancelled up to the extent and gravity of events subjects to the applicable laws and regulations. The nature and wordings of the clause in the binding contract and past approach of courts/ arbitration tribunals are of paramount importance.

Aspects of Force Majeure clauses:

The following elements are of high relevance while dealing with force majeure:

  • Coverage of force majeure events

  • Continue or Discontinue?

  • Mode of invoking the clause

  • Obligations of the parties

  • Local laws

  • Governmental interventions

  • Notice

  • Time limit

The impacts of Coronavirus COVID-19 on business:

The recent out break of Novel Corona Virus- COVID 19 has effected the life across the globe. Finance and business are not an exemption to it. The nation states are doing their best efforts to curb the out-break through appropriate preventive measures. All the industries are in some way or other the victim of this epidemic. 

Performance of contractual obligations are seriously at higher risk across the globe due the widespread of epidemic virus and its pandemic status. Here the Question of force majeure and its coverage to COVID-19 arise.

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