Gone Viral: Event Cancellations During Coronavirus Outbreak
Hong Kong has seen events cancelled and postponed for months now amid the steady stream of protests since last June. The Corvid-19 pandemic has now been classified as a public health emergency by the WHO. As such, more events planned for the near future in Hong Kong have been cancelled than ever before.
This opens up a host of questions on contractual obligations during this critical time. And whether it is possible to invoke the force majeure clause in a contract.
Broadly speaking, a force majeure clause gives the right to revise a contract or be excused from performance in unexpected circumstances outside of a contracting party’s reasonable control. The PRC Contract Law (1999) defines force majeure as any objective circumstance which is unforeseeable, unavoidable and insurmountable (Art. 117).
Despite its ubiquitous usage, the term “force majeure” is an ambiguous concept that refers to several legal principles of construction in common law jurisdictions. A contract must include an express force majeure provision for the triggering events that excuse performance by a party.
Most often, force majeure events cover events like extreme weather, war, and government strikes. It’s not as usual for a force majeure clause to cover a pandemic. Therefore you may want to review your contract closely before taking any action.
Reviewing Your Force Majeure Clause
When looking through your contract you need to look for whether the wording includes similar crisis situations to this current pandemic. Also, look for whether the clause covers delays and hindrances to completion of the contract. Also look for whether it covers non-performance in part or in whole.
Some force majeure clauses may also specify which party is to retain the benefit of monies paid or work done in the case of the force majeure event.
Under Hong Kong law, a party will need to demonstrate that the Coronavirus outbreak frustrated the purpose of the contract. This is a question of interpretation by the Hong Kong Court that depends upon the circumstances surrounding the event and contractual obligations. This is hard to forecast. However, the express inclusion of the word “epidemic” in a force majeure clause provision will certainly help further the argument that a force majeure event has occurred (but not that a contract party is necessarily relieved from performance).
Whether the Corvid-19 outbreak will qualify as a force majeure event will depend heavily on how the clause is drafted in each individual contract.
After reviewing your contract, you may find you have the right to suspend your contractual obligations. Or you may be able to renegotiate the terms or even to terminate the contract.
Keep detailed records of the event with timings and note all situations arising that have affected the event. Brainstorm ways in which you may be able to alternatively perform any obligations. Things like finding another supplier or location and might mitigate the detrimental effects of the situation. If you are entering into a new contract, make sure to draft the clause to cover public health emergencies in the future.
Most importantly, have a discussion with the other parties to decide ways to reduce the impact on both sides. This will hopefully achieve a compromise that will facilitate future opportunities to work together.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.