The outbreak and rapid escalation of the pandemic of COVID-19, has shaken the world, confronting it with an unheard-of and unprecedented, for modern society, situation. The evolving spread of COVID-19 has had numerous implications and has brought significant challenges, not only at global health level, but also in interpersonal and business relationships, in domestic and global, economic and business sectors.
Many people fail to comply with their contractual obligations, because of the unexpected outbreak of COVID-19 crisis, as well as a consequence of the measures that have been taken by the Government, aiming to minimise the effects and implications of COVID-19 crisis, including, but not limited to the temporary suspension of the operation of a huge number of businesses. Therefore, this reasonably raises the question as to whether the pandemic of COVID-19, could, indeed, be considered as a "force majeure" event, thereby justifying and relieving the party in default to comply with his contractual obligations and subsequently, from the obligation of paying damages to the innocent party.
What exactly constitutes a "force majeure" event has been, repeatedly, called upon to be interpreted by the Cypriot Courts, in numerous cases. No statutory interpretation exists of what precisely constitutes a "force majeure" event, but guiding principles have been emerged through the case law, of the District Courts and the Supreme Court, as well.
According to case law, the term "force majeure" refers to unforeseen and extraordinary events and/or circumstances, the occurrence of which, in any case, could not have been avoided despite the due diligence exercised by the party in default. In such a case, the party in default is relieved of responsibility. Therefore, the ultimate purpose of a "force majeure" clause is to safeguard the rights of the contracting parties, namely, to exempt them from complying with certain of their contractual obligations, under unforeseen circumstances which in no case fall within their sphere of control.
In many commercial agreements, a "force majeure" clause is observed, which includes, inter alia, possible definitions and examples of what could be deemed as a force majeure event. Nevertheless, a mere reference to "force majeure" does not, necessarily, provide certainty as to what is covered and/or has been construed to cover. For example, "force majeure" clauses usually refer to extraordinary circumstances, such as a war, strike, riot, crime, epidemic, and/or, any other events defined as acts of God (e.g. hurricanes, floods, earthquakes, volcanic eruptions, etc.). Nevertheless, in practice, most force majeure clauses do not justify a party's non-performance of its contractual obligations, altogether.
It is understood that whether, or, not, an incident constitutes an act of force majeure, is based on the special circumstances of each case, on the respective agreement between the Contracting Parties and in particular, as well as on the precise drafting of the relevant contractual clauses. Therefore, the force majeure clauses shall be drafted as clearly and precisely as possible.
Furthermore, it is worth mentioning that in absence of a force majeure clause, the party in default may, always pursuant to the specific circumstances of each case, possibly, rely on the common-law doctrine of frustration. Under the doctrine of frustration, the party in default may be relieved of any liability, because of an extraordinary and supervening event, which in no case falls within the sphere of control of either of the parties.
Regarding tenancy agreements, noted shall be that, among other governmental measures that have been undertaken for tackling COVID-19 crisis, the Cabinet approved a bill, suspending and/or freezing all Court proceedings and/or the execution of any eviction Court orders and/or decisions, based on non-payment of rents, until 31st of May 2020. In no case, however, this provision, exempts the tenants from their obligation to pay, the rents due, for the said period of time.
In light of the abovementioned, whether COVID-19 pandemic could be deemed a "force majeure" event, shall be examined on a case-by-case basis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
