Force majeur

What is force majeure? Is the coronavirus force majeure? How does force majeure affect the relations between contractors?

Many people were affected by the circumstances concerned to covid-19. Restrictions of the border rules, quarantine, closure of factories - all this affects the performance of contractual obligations, both international and domestic. The law and contracts include the liability for late performance or non-fulfillment of obligations, but what to do when obligations cannot be fulfilled due to external circumstances outside of parties' control?

Thai law is defines force majeure as any event the happening or pernicious result of which could not be prevented even though a person against whom it happened or threatened to happen were to take such appropriate care as might be expected from him in his situation and in such condition. The circumstances of force majeure may release the parties from liability for failure to perform or delay in performing their obligations.

The spread of the coronavirus has affected many companies indeed but it does not mean that any company can decline to perform the contract obligations with a business partner due to force majeure.

The coronavirus must affect the ability of the party to fulfill its obligations. Then it will be considered a force majeure and will be the reason to extend the contract or refuse to perform it without penalties.

In any case, the party invoking force majeure must take all possible measures to mitigate its consequences. Many such circumstances don’t prevent the fulfillment of parties' obligations which can be performed partly, with the extension of the deadline or with engaging a third party.

Each situation will be unique and in a case of court procedure the decision will depend on the type of business, the impact of the coronavirus on it, the terms of the contract, the reaction of the parties and the measures taken to avoid the negative consequences of force majeure.

For today the consequences of covid-19 shall be a reason to negotiate and change the terms of contracts. Even if in some cases the law gives the counter party the full right to terminate the contract, partnership relations remain the main thing in business. Negotiating with the partner and searching for compromises is the only option to keep the business relationship and continue it after the circumstances of force majeure are gone.