Whether or not a Force Majeure can be invoked primarily depends on the wording of the Force Majeure clause or, by default, the law. Parties can extend liability up to an abstract guarantee of performance or its limit is as long as it does not exclude performing the key obligations in advance.
We illustrate it with two examples of contractual force majeure clauses often seen in Dutch Agreements:
Example 1: Force Majeure shall mean: prevention of fulfillment of the Agreement as a result of fire, explosion, embargo, uprising, riot, war (whether or not declared), natural disasters (excluding disease) and flood, all other occurrences shall not constitute a force majeure.
Example 2: Force Majeure shall mean: any circumstance which is independent of the will of the parties, as a result of which performance of the contract cannot reasonably be required of Party A, whether temporarily or permanently and shall in any event include: (civil) war and the threat of (civil) war, natural disasters, an epidemic, strikes, excessive absenteeism of Party A’s employees, transport problems, fire, lack of raw materials, government measures by any government whether in the Netherlands or elsewhere, in any event including import and export prohibitions, quota schemes, and breakdowns at Party A or at suppliers of Party A, as well as nonperformance or force majeure on the part of suppliers as a result of which Party A is not or no longer able to meet its obligations to the Customer.
The Corona Virus would probably not be regarded as force majeure in example 1. Whilst example 2 explicitly mentions an epidemic so it’s safe to say – given substantial impact – it’s an example of force majeure. If the parties have not included a force majeure clause, the default article 6:75 of the DCC will apply.
What does it actually mean that a debtor cannot be blamed if he could not have reasonably foreseen and prevented the event that led to nonperformance and hereby avoided its consequences?
We illustrate it with the important generally accepted principles in Dutch law likely to be relevant in relation to the Coronavirus outbreak:
The cause of the hindrance was foreseeable at the time the contract was entered into
If at the time the obligation was entered, the impediment was such that a normal, prudent debtor with the same knowledge and experience as contracting party would have taken this into account, Force Majeure cannot be invoked.
Insolvency does not justify invoking Force Majeure, even if entirely beyond the control of the debtor and even if this would have been unforeseeable at the time.
Unless the debtor is the only one that is able to perform (e.g. a vocal artist), illness does not have to – generally – constitute Force Majeure as it only hinders one of the possible ways of performance. In general, the debtor of a – personal – service does not guarantee that the service will also be performed in the event of illness on his part. The creditor who stipulates such a performance must in turn consider the possibility of personal impediments which may affect everyone equally.
It will be different in case of an epidemic and the shortfall of labor forces a party to choose which creditor to serve first. Here it will also be key in which industry a case plays out. It’s for example highly likely that e.g. a B2B food supplier has to very carefully consider which customers to serve when. Typically, large retailers have very strict rules, that are penalized when not kept, on timely supply and detailed arrangements on rolling forecasts (more often than not unilaterally binding on for the supplier) and mandatory contingency plans. In such case it’s urgent to check whether or not the contingency plan is effectively in place, because the supplier will in that case probably not be able to immediately fall back on the Force Majeure clause in the agreement, or even not on the default regulation of Dutch law, as parties have considered a sudden supply shock (for whatever reason) that should have been covered.
Risk to life, health, freedom, etc.
In accordance with the same principles, the question whether Force Majeure is invoked is to be answered if the debtor, in fulfilling the obligation, would expose himself or his family to danger to life, health, honor, freedom or subsistence. Provided, again, that the conditions discussed (nonperformance, nonattributable, unforeseeable) are met, a claim to Force Majeure will generally be possible. For example, a seller may invoke Force Majeure vis-à-vis his buyer if, by concluding the sale, he would run the risk of being placed on a ‘black list’, which would actually put him out of business. Provided that the debtor’s fear in this example was objectively well-founded. In case of an epidemic with sudden lockdowns, one of the risks is also a limitation in the freedom of movement. Given what is possible in most jurisdictions when a state of emergency is declared, invoking Force Majeure because it is likely that a party will not be able to enter or leave an area, is very plausible and should be considered with urgence. Of course, this is typically also closely linked to the legal obligations and general duty of care an employer has towards his employees. In many cases the, employment, health and safety laws that have a mandatory character will have an overriding influence. In theory a sole entrepreneur could e.g. still be lawfully allowed to perform an obligation under an agreement. If however the same entrepreneur acts via his employees, the assessment will likely have a different outcome.
The debtor’s inexperience
The debtor will be held liable for mistakes which are the result of a lack of experience, even if he cannot be blamed for the fact that he carried out the conduct in which the error was contained, and even if the error was unforeseeable for him. The newly graduated doctor will be liable for the consequences of a malpractice that an experienced colleague would not have made.