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Thursday, 28 May 20
COVID-19: A FORCE MAJEURE EVENT? - KYPRIANOU
KNOWLEDGE TO ELEVATE
While seeing the unexpected COVID-19 outbreak expanding worldwide and the first cases being identified in Cyprus, the commercial sector does not remain unaffected. Emergency measures such as travel restrictions, citizens placed on quarantine and self-isolation are only some of the factors that started to impact parties to commercial transactions that render contract performance physically or commercially impossible. May a party invoke contractually agreed force majeure clauses or, the doctrine of frustration in an attempt to protect themselves from being unable to meet its contractual obligations?
Force Majeure
The concept of “force majeure” (meaning "superior force"), is used commonly in contracts as a clause that essentially releases both parties from liability or obligation when an unexpected event or circumstance beyond the control of the parties, prevents one or both parties from fulfilling their obligations under the contract.
Determining whether the Corona-virus outbreak constitutes a force majeure event, is a matter of construction and will depend on the specific wording and the scope of the clause.
It is the case that force majeure clauses often contain a list of events that qualify as force majeure events. For instance, terms such as “epidemic”, “pandemic”, or more generic terms such as “disease” and “illness” are often expressly listed as events of force majeure. In such cases, it will be easier to claim force majeure protection, as COVID-19 is likely to qualify as a force majeure event. Also, terms such as “acts of government” or “national or regional emergency” may be listed so as to cover emergency measures taken by the government such as travel bans or placing citizens in quarantine in case of this novel outbreak.
Additionally, under common law, a party seeking to invoke that its ability to perform the contract has been prevented by a force-majeure event, has the burden to prove certain elements. These are:
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that the event was unforeseeable;
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that it has taken all reasonable steps to avoid or mitigate the effects of the force majeure event; and
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that the event was beyond its control and thus impossible to overcome.
Most importantly, there must be a causal connection between the force majeure event that made it physically or legally impossible to perform the contractual obligations. With the COVID-19 case, the affected party has to show that due to the outbreak of Corona-virus and its resulting governmental measures, no alternative measures exist for performing its duties under the contract.
Frustration
In case the contract does not include any force majeure clause, the affected party may attempt to excuse its failure to perform its contractual obligations under the doctrine of frustration. Subject to Section 56(2) of the Contract Law Cap.149, as amended, “a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. As interpreted by Cyprus courts, section 56(2) is only applicable to an impossibility which destroys the foundation of the contract, which requires a high threshold for proof of frustration of a contractual undertaking.
Recommended actions
If you have executed a contract or are considering entering into new contract during this period, you should review the force majeure clauses carefully in order to understand the circumstances under which you can declare a force majeure and whether the Corona-virus outbreak and the resulting emergency measures may fall under its scope.
By Andria Kouloumi
Further, notification processes and deadlines should be also reviewed carefully, in order to ensure that your ability to claim force majeure protection is not precluded. Importantly, if you intend to enforce such force majeure clauses, you should consider your obligation to take all the reasonable measures to mitigate the effect of non-performance, otherwise your failure to perform your obligation may not be excused. If in doubt regarding how a force majeure provision applies and whether force majeure protection may cover you, it is recommended to seek legal advice prior to taking any action or sending notices.
Michael Kyprianou & Co LLC is ready to assist and advise you in relation to issues you may face, including by providing advice as to your options and requested objectives, enabling you to make an informed decision.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Andria Kouloumi, Associate, at Andria.Kouloumi (at) kyprianou.com
If you believe an article violates your rights or the rights of others, please contact us.
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Monday, 18 May 20
THERMAL COAL SPOT PRICE TUMBLES 25 PER CENT, PUTTING PRESSURE ON SOME PRODUCERS - ABC RURAL
The spot price for thermal coal has fallen 25 per cent per cent in the past month with one leading analyst saying it is because of a reduction in d ...
Monday, 18 May 20
CHINA'S COAL OUTPUT UP 1.3 PCT IN JANUARY-APRIL: XINHUA
Output of raw coal in China rose 1.3 percent year on year to 1.15 billion tonnes in the first four months this year, official data showed.
&nbs ...
Sunday, 17 May 20
A 55,000 OPEN ILIGAN FIXING AT $6,500 VIA INDONESIA REDELIVERY INDIA - BALTIC BRIEFING
Capesize
A precipitous fall in the market this week had the Capesize 5TC shedding over 50 per cent in value. A small rebound at the end of the ...
Friday, 15 May 20
CHINA'S COAL CONSUMPTION TO FALL Y/Y IN SECOND QUARTER, IMPROVEMENT EXPECTED IN SECOND HALF - INDUSTRY BODY: REUTERS
China’s coal consumption is expected to decline in the second quarter from a year earlier, but will see an improvement in the second half of ...
Thursday, 14 May 20
OPEC REVISES DOWN GLOBAL OIL DEMAND FORECAST AGAIN
Crude Oil Price Movements
Crude oil prices recorded a second sharp monthly drop in April, amid an increasing oil surplus in the spot market. Th ...
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- The University of Queensland
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- Kaltim Prima Coal - Indonesia
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Jaiprakash Power Ventures ltd
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- Semirara Mining Corp, Philippines
- India Bulls Power Limited - India
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- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
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- Sarangani Energy Corporation, Philippines
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- Indian Energy Exchange, India
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- Parliament of New Zealand
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- Power Finance Corporation Ltd., India
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- Directorate General of MIneral and Coal - Indonesia
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- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Price Waterhouse Coopers - Russia
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- CNBM International Corporation - China
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- Metalloyd Limited - United Kingdom
- Intertek Mineral Services - Indonesia
- Mintek Dendrill Indonesia
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- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- The Treasury - Australian Government
- Indian Oil Corporation Limited
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Economic Council, Georgia
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Energy Link Ltd, New Zealand
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
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- Petrochimia International Co. Ltd.- Taiwan
- Sindya Power Generating Company Private Ltd
- Leighton Contractors Pty Ltd - Australia
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- Sree Jayajothi Cements Limited - India
- Bukit Baiduri Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tamil Nadu electricity Board
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- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Merrill Lynch Commodities Europe
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- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Carbofer General Trading SA - India
- Chamber of Mines of South Africa
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- Maheswari Brothers Coal Limited - India
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- Krishnapatnam Port Company Ltd. - India
- ASAPP Information Group - India
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
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- IEA Clean Coal Centre - UK
- Trasteel International SA, Italy
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- Edison Trading Spa - Italy
- Vedanta Resources Plc - India
- Baramulti Group, Indonesia
- Ind-Barath Power Infra Limited - India
- Goldman Sachs - Singapore
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- Australian Coal Association
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- Romanian Commodities Exchange
- Karaikal Port Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parry Sugars Refinery, India
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