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Coronavirus: Is it a Force Majeure?

The tragic consequences of the coronavirus continue to be reported around the world, with the World Health Organisation recently declaring the novel coronavirus a public health emergency of international concern.

In the commercial shipping sector, the impact of the coronavirus is also being felt: companies should not only consider the virus’ impact on their supply chains, but also their ability to meet obligations under customer contracts.

Since the outbreak of the coronavirus, officially Covid-19, we have received numerous enquiries from clients – many of whom operate in the logistics sector – for advice on issues relating to the ability to ship cargo from Chinese ports, the arrival of cargo and vessels from Chinese ports into non-Chinese ports and associated issues of demurrage and cost of delay.

One common question is whether the Coronavirus is an event of Force Majeure (“FM”).

Where an event of FM occurs, the contract will normally provide that the performance of the parties’ obligations under the contract are suspended. This prevents non-performance being considered as a breach of contract by the party affected by the FM event.

Under English Law, there is no implied term of FM; its scope is restricted to the words used by the parties (if any) in the contract.

Some FM clauses have a wide description of an FM event, which tend to provide a non-exhaustive list of examples of types of FM events.  In some cases, the list will include “epidemic” or “quarantine” which may have obvious relevance to the coronavirus. Other FM clauses are more restrictive and limit the scope of the clause to specific, named events and make clear that any other events will not be regarded as an event of FM.

 

Summary

Companies who are trading with China should seek advice as to whether the wording of the FM clause is such that it applies to the coronavirus. You should also keep up to date with the restrictions being imposed by the authorities in China or at the ports where the goods or vessels are bound.  It may be the case that the restrictions imposed by port or government authorities are considered events of FM, even if the virus itself is not.

For help and guidance on this issue, please get in touch with our shipping and transport team today by emailing dominic.ward@andrewjackson.co.uk or calling +44 (0)1482 325242

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