FORCE MAJEURE AND COVID 19
At the time of this writing, businesses around the world are retrenching their labor force, Singapore Airlines has had to secure a US$13 billion liquidity rescue plan, and even Prince Charles and the English PM Borris Johnson has declared falling victim to the virus. Amidst the ongoing global economic downturn, businesses are seeking ways to relief themselves of their contractual burdens. Enter the Force Majeure Clause.
There is no single certain statutory provision governing and defining a Force Majeure Clause under Taiwanese law. Various legislative enactments like Article 11-3 of the Labour Standards Law and Article 69 of the Taiwan Maritime Code has touched on the issue with respects to the specific fields or industries they to address but none has set an overall standard for an across-the-board use and application of such a clause to contractual relationships in general.
The Taiwan Ministry of Justice in Notice Letter No.10603511560 dated 14 September 2017 defined Force Majeure as an intervening event that cannot be foreseen and prevented by human diligence. Therefore it would seem that a person relying on a Force Majeure Clause under Taiwanese law would need to at least show at the start:
- Parties’ agreement for the clause to form a part of the contractual relationship;
- The unforseeability of the triggering event;
- Due diligence in preventing the triggering event from happening; and,
- Causation between the triggering event and the failure to perform under contract.
Persons who seek to argue that Covid 19 falls under the ambit of the clause should also prove that this falls within the ambit of the clause to qualify it as a triggering event. Common triggering events in standard clauses would include acts of God, restraints of authorities, quarantine restrictions, epidemics etc. The issue would then be whether the current Covid situation can be regarded as coming within the scope of definition listed by the clause itself. Parties currently intending to invoke the clause on the grounds of Covid 19 will need to look carefully into its wording and construction. On the other hand Parties hoping to have recourse to Force Majeure on contract dealings in the future vis-a-vis an epidemic outbreak will need to draft the relevant wide enough so as to provide sufficient coverage.
Alternatively, parties can also consider pleading Article 227-2 of the Taiwan Civil Code should the matter be considered under Taiwanese law. This Article provides that a party may apply to court to terminate, relief, or alter his contractual obligations in the event of an unpredictable change of circumstances that had occurred after the formation of the contract. The prerequisites are that:
(i) A formal application for affirmation must be made into court which no doubt will result in an inter-partes hearing before a judge; and
(ii) The applicant will have to prove for unfairness to the court should his contractual obligation be required to continue.
PLEASE CONTACT the writer of this Article in the event of any questions or assistance required with regards to contractual issues that you would to discuss about.
Writer's information:
DARYL LAI
Email: daryl@jtjb-taipei.com
Telephone: 886-2-27720567