What are force majeure circumstances? Can coronavirus be considered force majeure? How is force majeure applied in contractual relations?
Circumstances related to the coronavirus have affected many parties. Restrictions on cross-border movement, quarantine measures, and factory shutdowns all impact the performance of contractual obligations, both internationally and domestically. Laws and contracts typically provide liability for late performance or non-performance of obligations, but what happens when obligations cannot be fulfilled due to external circumstances beyond the control of the parties?
Under Thai law, force majeure is defined as circumstances beyond the control of the parties, which could not have been foreseen at the time of entering into the contract, and the consequences of which could not have been avoided once they occurred. Force majeure events may exempt parties from liability for non-performance or delayed performance of obligations.
The spread of coronavirus has indeed affected the operations of many companies, however this does not mean that any company can refuse to fulfill a contract with a business partner by simply invoking force majeure.
Coronavirus must directly affect the ability of one of the parties to perform its obligations. Only then can it be considered force majeure and serve as a basis for extending contractual deadlines or terminating obligations without penalties.
At the same time, in any case, the party invoking force majeure is obliged to take all possible measures to mitigate its consequences. In many situations, obligations can still be performed at least partially, with extended deadlines or by engaging third parties to fulfill them.
Each case is unique, and in court proceedings the decision will depend on the type of business, the extent of the impact of coronavirus, the terms of the contract, as well as the actions taken by the parties to avoid negative consequences of force majeure.
At present, the consequences of coronavirus serve as a reason for negotiations and revision of contract terms. Even in cases where the law grants a counterparty the full right to terminate a contract, business relationships remain the priority. Negotiating with partners and finding compromises is the only way to preserve business relationships and continue cooperation after the force majeure circumstances have ended.