- 1. Can covid-19 or in any case the restrictions adopted by the health authorities of the various countries justify the exemption from liability due to force majeure, as defined by the contract or applicable law?
- 2. What are the consequences of force majeure?
- 3. Shipping in the time of Covid-19
The epidemic from Covid19, in addition to the economic damage, causes legal issues that undermine, above all, the soundness of trade agreements, including transnational. In fact, the number of cases of termination of contracts, cancellations, cancellation of flights, problems of compensation, restrictions on trade, blocks of supply of raw materials are increasing, delays or inability to deliver the goods through a slender very fashionable of these times which is the ‘major force’.
For Italian law, force majeure is any cause not attributable to the debtor that makes it impossible to fulfill (article 1256, 1 Comma, Civil Code).
For Chinese law, force majeure corresponds to an objective, unpredictable, unavoidable and insurmountable situation (article 117 Contract Law of the People’s Republic of China).
For the article 79 of the Vienna Convention on the International Sale of Goods, ratified by both Italy and China, the force majeure is the impediment outside the control of a party, not reasonably foreseeable at the time of the signing of the contract, inevitable and not surmountable.
However, the concept of force majeure, which is found in countries of civil law (in French, German, Italian and even Chinese law), is not recognized in countries of common law. Therefore, in relationships governed solely by English or American law (thus, with the express exclusion of the Vienna Convention, in this case), a party may invoke force majeure only if such remedy is contractually governed.
In international contracts, as long as the party does not communicate to the other the existence of a force majeure, it is not exempt from fulfilling the contract and is liable for damages for the delay but this is also established by various national laws. It is therefore of paramount importance that the case of force majeure be notified in good time, since in some cases it may be penalised by the loss of the right to invoke force majeure.
This principle is expressly provided for by the Vienna Convention on the International Sale of Goods which, at the article 79 expressly provides that the party who has not notified the other party or has been unjustifiably late must compensate for the damage.
As for the evidence, it is for the party invoking force majeure to provide timely and sufficient evidence. Through the issuance of force majeure certificates at central level and via the web.
What are the consequences of force majeure?
n tIn the presence of a cause of force majeure, the alternatives may be:
• the termination of contracts;
• the suspension;
• the renegotiation
In the case of contracts of duration in particular, there is generally no provision for force majeure to justify the immediate termination of the international contract, which, however, becomes unavoidable where the service is impossible or no longer executable. The liquidation resulting from the termination of the contract – for (valid) force majeure -, will follow the criteria provided by the contract and by the applicable law, taking into account that the damages for breach cannot be compensated, including penalties, provided that the party was not already in default for other reasons and did not delay unjustifiably to communicate to the other the impediment of force majeure.
With regard to restorative profiles, such clauses are often found in international contracts, such as the Force Majeure model clause of the ICC (2003), which provides that the party who has received a benefit from the contract partially executed, However, it must compensate the other to an extent equivalent to the benefit received.
In international supply and distribution contracts, where there is a greater interest in maintaining the relationship, the remedy for the suspension is often provided and the duration of the suspension is indicated for a short time, ranging from a few weeks to a few months.
In such cases, in the absence of a specific agreement, each contracting party shall be deemed to bear its own costs and shall not be entitled to charge the party legitimately relying on force majeure. At the end of the suspension period the parties will agree whether to terminate or renegotiate the contract.
The renegotiation may, in the simplest cases, be:
– a written agreement on the terms of suspension and/or
– a mere shared reprogramming of delivery dates, or
– an agreed extension of the duration of the contract for a period equal to the suspension period; and
– in more complex cases, the aim will be to rebalance the performance of the parties by adapting them to the changed situation.
In the absence of a written agreement, reference shall be made to the law chosen by the parties in the contract or, in the absence of such a choice, to the law applicable to the contract.
It is not possible, of course, give account of all the cases, but it is clear that knowing the rules of the game also from a legal point of view prevents missteps that expose the company to litigation and, above all, serves for (re)negotiate at best, when it is necessary.
Shipping in the time of Covid-19
Can the foreign buyer legitimately refuse to receive goods from Italy on the grounds of force majeure in order to justify his default?
To date, such refusal can be considered suitable to terminate the sale and purchase contract only for specific restrictions on the import of certain goods/products from Italy imposed by the States of destination, or by international bodies. For this purpose, the seller shall require the foreign buyer who opposes force majeure to provide a certificate or equivalent documentation of the State of destination, or of international bodies, attesting to any specific restrictions on imports of goods from Italy.
In the event of delays or failure to deliver the goods, can the persons concerned seek redress from the insurer?
The most common Italian insurance policies of transported goods exclude that the damages deriving from the delay of the goods can be recoverable and it is necessary, therefore, to verify that its insurance policy provides specific guarantee for damages deriving from delay.
In general, the freight forwarder is not responsible for cases of late/missed delivery. At this stage, however, it is advisable that the freight forwarder deals with the corresponding forwarder of the state of origin/ destination, as well as with the navigation lines in order to constantly monitor the status of shipments, keeping the principal informed.
When the freight forwarder also assumes the role of carrier, the same can be held responsible for delays and non-delivery. In case of blockage of goods, the freight forwarder/carrier must:
• assume all information concerning the causes of the blockage of goods;
• if possible, request a certificate from the authorities of the country of provenance stating the situation of blockage/force;
• major (the Chinese authorities, for example, are issuing special Force Majeure certificates);
• immediately request all appropriate instructions from the principal.