Force Majeure and Coronavirus
Put simply, Force Majeure (FM) is a common clause in contracts that can excuse parties from performing their obligations or from doing them on time when circumstances beyond their control prevents them fulfilling such contractual obligations.
Depending on their drafting, such clauses may have a variety of consequences, including excusing the affected party from performing the contract in whole or in part; excusing that party from delay in performance; entitling them to suspend or claim an extension of time for performance, or giving that party a right to terminate.
One point that must be made is that for BIFA Members to benefit from the protection of Clause 24 of the BIFA Standard Trading Conditions (STC), which covers force majeure the STC must have been properly incorporated into the commercial contract.
Some shipping lines, airlines and other logistics providers have been issuing declarations that an overall FM is being applied, either in press releases or on website pages or quotations. BIFA members should be able to pass on that information to customers depending on the provider they are using and rely on it. In these sorts of situations communication is very important as customers need to know what the likely consequences are concerning their shipments.
The BIFA STC FM clause is robust and wide in that it contains a few types of specific FM events in 24(A) and has a sweep up provision in 24(B) covering “any cause or event which the Company is unable to avoid, and the consequences of which the Company is unable to prevent by the exercise of reasonable diligence”. The event of coronavirus clearly cannot have been avoided and members have to be able to show that they are unable to prevent any consequences arising from the existence of the virus and how it is being treated by various Governments that relate to inability to provide a service or increased costs or significant delays etc. by reasonable diligence. This means BIFA Members should collect evidence on each file to show what they have tried to do on a reasonable basis to try and prevent such consequences.
The BIFA clause would be overridden by any mandatorily applicable convention FM clause such as in Hague Visby Article IV which sets out a full list of events exempting the carrier from liability. CMR is different as some of the FM categories are rather different in relation to sea carriage.
Of course, any clause is down to applying it to the particular facts concerned and that depends on how the pandemic is affecting the performance of each individual contract and whether it specifically arises out of the pandemic or measures to deal with the pandemic. It should never be assumed that declaring of force majeure in a general statement is a “get-out-of-jail-free card”. Parties will have to demonstrate that the events are covered by the relevant clause were out of their control and, often, that they couldn't be planned for, avoided or worked around.
This document is general industry guidance and is not legal advice. Each situation may be different, and you are advised to consult a qualified lawyer for specific advice.