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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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Wednesday, 06 May 20
COST CHALLENGES IN A US$20/BBL WORLD - WOOD MACKENZIE
A new approach is needed to ensure supply sector resilience
How will US$20/bbl affect the oil and gas supply chain?
It’s going to g ...
Wednesday, 06 May 20
MARKET INSIGHT - INTERMODAL
It comes as no surprise that activity in the dry bulk SnP market remains soft, with asset values caught in the downward spiral generated by the Cov ...
Wednesday, 06 May 20
FLOATING STORAGE OF OIL CARGOES - STANDARD CLUB
KNOWLEDGE TO ELEVATE
Due to a combination of circumstances there is now a worldwide shortage of storage space ashore for both unrefi ...
Wednesday, 06 May 20
IRON ORE TRADE REMAINS REMARKABLY RESILIENT THIS YEAR, AT LEAST IN ASIA - BANCHERO COSTA
Iron ore trade remains remarkably resilient this year, at least in Asia, despite the global economic impact from COVID-19. In the first 4 months of ...
Tuesday, 05 May 20
SUPRAMAXES: YTD SLIDE HAS BEEN 45%, WITH THE AVERAGE FOR 2020 TCA HOLDING AT US$5,793 - ALLIED
It has been almost three months since the WHO officially categorized the current coronavirus outbreak as a global pandemic, an outbreak that has br ...
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- Australian Coal Association
- Gujarat Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- Eastern Energy - Thailand
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Salva Resources Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Essar Steel Hazira Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Medco Energi Mining Internasional
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Cigading International Bulk Terminal - Indonesia
- Rio Tinto Coal - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- Trasteel International SA, Italy
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Simpson Spence & Young - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kapuas Tunggal Persada - Indonesia
- International Coal Ventures Pvt Ltd - India
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- Madhucon Powers Ltd - India
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Aditya Birla Group - India
- GMR Energy Limited - India
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Chettinad Cement Corporation Ltd - India
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- OPG Power Generation Pvt Ltd - India
- Sical Logistics Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Vizag Seaport Private Limited - India
- India Bulls Power Limited - India
- Baramulti Group, Indonesia
- The State Trading Corporation of India Ltd
- Coastal Gujarat Power Limited - India
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Xindia Steels Limited - India
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bulk Trading Sa - Switzerland
- Sojitz Corporation - Japan
- CNBM International Corporation - China
- Holcim Trading Pte Ltd - Singapore
- TeaM Sual Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Indian Energy Exchange, India
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Ministry of Finance - Indonesia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Bhatia International Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Economic Council, Georgia
- SMC Global Power, Philippines
- Ambuja Cements Ltd - India
- Barasentosa Lestari - Indonesia
- Pendopo Energi Batubara - Indonesia
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- Globalindo Alam Lestari - Indonesia
- Latin American Coal - Colombia
- Agrawal Coal Company - India
- PowerSource Philippines DevCo
- Posco Energy - South Korea
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Gujarat Mineral Development Corp Ltd - India
- Central Electricity Authority - India
- Wilmar Investment Holdings
- Thiess Contractors Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Karaikal Port Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Antam Resourcindo - Indonesia
- Planning Commission, India
- GN Power Mariveles Coal Plant, Philippines
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- GAC Shipping (India) Pvt Ltd
- South Luzon Thermal Energy Corporation
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Bukit Makmur.PT - Indonesia
- Parry Sugars Refinery, India
- Minerals Council of Australia
- CIMB Investment Bank - Malaysia
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- VISA Power Limited - India
- Manunggal Multi Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Georgia Ports Authority, United States
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Vedanta Resources Plc - India
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Interocean Group of Companies - India
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- New Zealand Coal & Carbon
- Tata Chemicals Ltd - India
- Energy Development Corp, Philippines
- White Energy Company Limited
- Romanian Commodities Exchange
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Pipit Mutiara Jaya. PT, Indonesia
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