Undoubtedly, contracts are based on the idea of exchanging benefits and they are also based on the idea of a balance between the obligations stipulated by the contracting parties. However, an accident may occur that violates this balance, making one or both of the obligations of the parties very difficult to be implemented appropriately.
The instances when the execution of contractual obligations is not possible, then we may find ourselves in front of a breach of the contract that raises the responsibility of the party who was unable to perform its obligations. When the underlying reasons are external accidents, such as wars and natural disasters that made the execution of the contract impossible, impractical and exhausting to the parties, the responsibility of the violating party is not raised and this is what is known in the law by force majeure.In the current situation of coronavirus and global pandemic, thousands of Chinese companies are currently trying to heavily rely on force majeure clauses in order to terminate their contracts. Whether such attempts would hold up in the UAE or Egypt remains to be seen. This crucially depends on whether the companies actually had correctly written relevant clauses in their contracts as it may explicitly require to state the actual circumstances in which a party may rely on force majeure provisions. What is the force majeure in the law? Can coronavirus (COVID-19) pandemic be considered as force majeure that might hold the responsibility of everyone who breached an obligation because of such circumstances?
What is force majeure?
Force majeure is every external incident that is unpredictable and uncontrollable. Force majeure may arise either from the act of nature, such as earthquakes, lightning, floods and snow, or from man's action, such as wars, coups and political upheavals.Force majeure in legal relations affects civil, commercial transactions and employment contracts, so it may suspend the execution of contracts in whole or in part. The various laws have been subjected to this circumstance by establishing a legal framework governing the obligations in the case of force majeure, including the UAE Civil Transactions Law No. 5 of 1980 and the Egyptian Civil Code No. 131 of 1948, and we will highlight the definition of both laws to the concept of force majeure in general then follow it by answering the question of whether viruses and pandemics are considered to be force majeure in both legal systems or not.
What are the provisions of force majeure in civil and commercial transactions under the UAE law?
The Civil and Commercial Transactions Act No. 5 of 1980 in the United Arab Emirates defines force majeure in article (273) which established the legal framework of the contracts in the case of force majeure in two cases:
- the first is the impossibility of implementation in whole, and
- the second is the partly impossibility of implementation.
So what are the provisions of each of these cases? In the event that the obligations cannot be fully performed: the UAE Civil Transactions Act established a legal solution to this situation by providing that a contract was deemed to be terminated automatically if the obligation cannot be fully performed because of force majeure. And therefore the parties do not need either to obtain a judicial verdict to determine that the contract has been terminated nor to be compensated for the lack of performance.In the event that the performing of the obligations is partially suspended: the UAE Act states a legal solution to this situation by deciding a choice of two options, where:
- the party that has not been able to perform its obligations partly to request to cancel the obligations corresponding to the part only which could not be performed because of force majeure, and
- in the case of continuing contracts, the right to cancel the obligation was granted in the period when it was impossible to implement it because of force majeure, and the creditor has the right to revocation the contract provided that the debtor has notified the creditor of this.
What are the provisions of the force in The Egyptian Civil Code?
The Egyptian Civil Code No. 131 of 1948 established a legal framework governing legal relations in the case of force majeure, where stated a general rule that if the obligation was impossible to be performed because of external actions which is not related to him and plus succeeds in proving it to be so. The party may not comply to perform the obligations either of compensation or its main obligation in accordance with article (215) of the Egyptian Civil Code, and thus, in the event of any foreign action that does not involve the debtor and fails to perform the obligation in whole or partly, a creditor cannot raise the debtor's liability or claim for compensation.
Are viruses and pandemics a force majeure?
In most of the instances, the majority of contracts would explicitly state what actually constitutes a force majeure to be. However, force majeure under the law may require actual impossibility and not merely extreme difficulty. In addition, the seeking party to invoke the force majeure clause is required to demonstrate a causal link between the force majeure event and its failure to perform under the contract.Coronavirus (COVID-19) pandemic can be considered as force majeure because it is a public incident and cannot be controlled or prevented by a company or individual. According to the definition of force majeure in law, it is possible legally for certain individuals and commercial entities that have been directly and causally affected by pandemic to use the availability of a force majeure as a justification and a grounds to the revocations of the contracts on their own. One must address whether the coronavirus pandemic counts as a force majeure event under its own contract and closely examine the wordings of the force majeure provisions in such agreement.For more detailed information on the risks of viruses and is a force majeure, stay tuned to our upcoming article on "Epidemic and Virus Risk Insurance".
