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Coronavirus and international commercial contracts: French law perspective (I) - Verne Legal

Coronavirus and international commercial contracts: French law perspective (I)

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March 19, 2020

Due to the worldwide-spreading epidemic of Covid-19, numerous companies having their business activity in France have been experiencing difficulties with commercial contracts. They either find themselves unable to execute their own obligations or suffer the consequences of such non-performance by supply chain actors. Or most commonly, both.

In this article, Verne Legal demonstrates a brief analysis of a potentially applicable legal principle – force majeure – to the current Covid-19 outbreak.

In that respect, we analyze whether coronavirus outbreak can be admitted as a case of force majeure if the French law is governing the contractual relationship.

Firstly, we will explain what the force majeure exactly means under the French law (I). Secondly, we will present the relevant French case law and its suitability to the current situation (II).

1. What is a force majeure?

Force majeure is an event which is beyond the control of either contractual party, such as a natural disaster, major political event or a serious health crisis. Consequently, a force majeure clause allows a party to suspend or terminate the performance of its obligations under a contract. Being justified by the the occurrence of a force majeure event, it is not liable for a breach of the contract because of such non-performance.

To be qualified as a force majeure the event must meet the below criteria, cumulatively:

1. the relevant event is beyond the applicable party’s control, and as commonly researched by the French courts, is exterior to its actions;
2. the relevant event could not have been reasonably foreseen at the time the contract was entered into; and
3. the effects of such event could be avoided by appropriate measures.

The interesting point is that the same criteria apply to international sale of goods contracts falling under Vienna Convention [1]. Numerous international commercial contracts are concerned given that the Convention is applicable as long as it was not clearly excluded by the parties. The force majeure, qualified as “impediment”, is covered in the article 79.

Does coronavirus qualify as a force majeure under the French law? How have other epidemic situations been treated by the French courts?

2. Past epidemic situations reviewed by the French courts

In a vast majority of cases, French judges have refused to recognize pandemics as events of the force majeure. Such was the case for bacillus plague [2], Dengue virus (DENV) [3] or chikungunya virus (CHIKV)[4].

Regarding the H1N1, an influenza associated with the Spanish flu od 2009, the French courts have decided that the spread of the virus have been largely announced and foreseen, even before any sanitary measures had been adopted [5]. By analogy, it could be considered that the initial date of public information should go back to December 2019, the time when the coronavirus Covid-19 was broadly spreading in China.

We could also question the irresistibility of the current epidemic. In 2009, concerning the beforementioned H1N1, the Court of Appeal of Nancy has judged that “the spreading virus shall not be qualified as irresistible, as only 5% of the population has been concerned and it could have been avoided by the suggested prevention measures” [6]. It shall be reminded that as for March 15, 2020, only 3% of the population have been concerned by the Covid-19 virus. However, it is also worth pointing out that the situation will be appreciated after the fact, and in its global sphere. 

Therefore, to assess the irresistible character of the current outbreak, measures such as the ones announced on March 14, 2020 by the French Prime Minister Édouard Philippe, concerning the shutdown of “non-essential” to the existence of the public spaces, would be of significance.

For companies that are considering issuing force majeure notices as well as the companies that are receiving them, it is important to review the wording of the clauses included in the relevant agreement, as well as other contracts binding between the contracting parties.

However, it should be reminded that in order to assess any contractual situation, a fact-specific analysis is required.

More practical aspects of reviewing an international contractual agreement in this critical situation of Coronavirus epidemic will be found in the third part of this article series. The second part will be devoted to another potential legal justification of contract nonperformance: hardship (l’imprévision).

Verne Legal Team is there to assist all companies on their contractual situation as well as other obligatory measures that apply to businesses having their businesses activity in France.

Please be informed that Verne Legal is there to assist all companies having their commercial activity in France. Our team doubles its efforts in order to serve their clients in dealing with the current situation and its consequences.

To guarantee the health and security of our Team, we are available exclusively through phone/email/videoconference:

tel: + 33 (0) 4 30 05 09 04
email: info@vernelegal.com

Ewa Kaluzinska                        Nicolas Renault                         Iga Kurowska
Verne Legal, Partner                 Verne Legal, Lawyer                Verne Legal, Partner

Verne Legal provides a customized legal and tax advisory service to both French and foreign companies. It advises clients in running their business in France, offering strategic assistance enriched by multicultural sensitivity. For more information on the tax law in France, we invite you to download “Doing business in France” e-book and to contact our team at info@vernelegal.com.

[1] United Nations Convention on Contracts for the International Sale of Goods (CISG)
[2] CA Paris, 25 septembre 1998
[3] CA Nancy, 22 novembre 2010 – n°09/00003
[4] CA Basse-Terre,17 décembre 2018– n° 17/00739
[5] CA Besançon, 8 janvier 2014 – n°12/02291
[6] CA Nancy, 22 Novembre 2010 – n° 09/00003 « car seulement 5 % de la population a été touchée et que l’on peut s’en prémunir par des mesures de prévention »

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