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COVID-19: A FORCE MAJEURE EVENT?

In light of the pandemic COVID-19 that has seized the world there is no doubt that parties may wish to assess applicability of force majeure clauses in their contractual arrangements to ascertain the possibility of termination or suspension of performance or any other legal consequences.

The question whether COVID-19 may be considered to be a force majeure event, such that it enables parties to temporarily or permanently be excused from performance of their contractual obligations, will depend on the circumstances, the nature and content of the contract in question. 

The term ‘force majeure’ does not have a universally recognised meaning under Cyprus laws and the courts will examine the wording and intention of the parties at the time of entry into the contract. In many instances, contracts will include a specific and “closed” list of events which are said to constitute force majeure such as acts of God, wars, riots, floods, typhoons, governmental or regulatory prohibitions. The COVID-19 pandemic is unique not only due its epidemiological and clinical features but also because it contains both a naturally occurring component which is the virus itself and a government action component such as the quarantines and travel bans put in place in response to the outbreak.

Therefore, there is no simple answer to whether COVID-19 would qualify as a force majeure event. This will necessarily depend on several factors including nature and content of the contract and its governing law.

Additionally, parties may seek relief under the doctrine of frustration as enshrined in section 56 of the Cyprus Contract Law Cap. 149, although this generally applies in cases of impossibility to perform the contract, for example due to destruction of the subject matter, supervening illegality, incapacity or death. Although it is difficult to envisage how the COVID-19 outbreak may justify invocation of the aforesaid provision, it remains to be seen how this will be interpreted and applied by the Cyprus courts.

In conclusion, force majeure scenarios are by nature fact-specific and dependent on the content and context of the contract in issue. Going forward parties may wish to pay more attention in drafting the relevant force majeure provisions by for example incorporating reference to pandemics and regulating the consequences in such eventuality.

You may contact our legal team for further assistance and legal advice.

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