Currently, stipulations on force majeure are mainly provided for in the PRC Civil Code, which enters into effect on 1 January 2021.
The most relevant stipulations are as follows:
- According to Article 180 of the PRC Civil Code, if civil obligations fail to be performed due to force majeure, no civil liability shall be borne. Where the laws provide otherwise, such provisions shall prevail. Force majeure refers to unforeseeable, unavoidable and insurmountable objective events.
- According to Article 194 of the PRC Civil Code, the limitation of action shall be suspended during the last six months of the limitation period if the right of claim cannot be exercised because of force majeure. In such a case, the limitation of action shall expire after six months from the date when the obstacles causing the suspension (i.e. the force majeure event) are eliminated.
- According to Article 563 of the PRC Civil Code, the parties to a contract may terminate the contract if the purpose of the contract is rendered impossible to achieve due to force majeure.
Accordingly, a contract can be terminated due to force majeure only if the force majeure event still makes it impossible to reach the purpose of the contract. This threshold is rather high and, despite of the occurrence of force majeure, termination may not be possible for many contracts according to such stipulation.
- According to Article 590 of the PRC Civil Code, where a contract cannot be performed due to force majeure, the liabilities shall be exempted in part or in whole in light of the effects of the force majeure event, except as otherwise provided by law. If either party to a contract is not able to perform the contract due to force majeure, the party shall give notice to the other party in due time so as to reduce the losses that may be caused to the other party and provide evidence within a reasonable time limit. If the force majeure occurs after one party has already delayed its performance, the liabilities of the party shall not be exempted.
The above stipulation shows that the consequences of force majeure and the extent of an exemption of the liability depend on the specific circumstances of the case in question. Each case must be checked individually and even if force majeure generally exists, this does not necessarily lead to the exemption of liabilities in the specific case.
As set out above, a party purportedly affected by force majeure should inform the other party of the contract as soon as possible. For the purposes of evidence, this should be done in writing. Furthermore, a party purportedly affected by force majeure should take reasonable measures to mitigate the losses of the other party. Otherwise, the party purportedly affected by force majeure may still face liabilities. In addition, evidence must be provided within a reasonable time limit. For this, the relevant governmental authorities should be contacted in case they are able to issue relevant certificates.
After the outbreak of COVID-19, the PRC Supreme People's Court ("SPC") promulgated the Guiding Opinions on Several Issues Concerning the Proper Trial of Civil Cases Involving the COVID-19 (I, II, III) respectively in April, May and June 2020. The Opinions contain the views of the SPC on how to deal with certain aspects of COVID-19 related civil cases, including but not limited to dispute resolution, performance of contracts, employment relationships, judicial assistance, more flexibility in property preservation measures, civil procedure-related time limits, application of law, foreign-related commercial cases, transportation contracts-related cases, admiralty and maritime disputes, etc.
In addition, on 13 May 2020 the SPC promulgated the Guiding Opinions on Several Issues Concerning the Proper Handling of Enforcement Cases Related to the Novel Coronavirus Pneumonia (COVID-19) Epidemic According to the Law, which provide guidance to the People’s Courts on how to deal with certain aspects of COVID-19 related judicial enforcement cases, including but not limited to suspension of the enforcement application period, legal limitations for seizure measures, disposal of enforcement assets, etc.
For more details on the guiding opinions issued by the SPC, refer to our newsletters:
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