On 30 January 2020, the World Health Organisation declared that the COVID-19 epidemic constitutes a public health emergency of international concern. On 11 March 2020 it declared that it is a pandemic. Travel restrictions have immediately followed: flights to and from China were largely cancelled, the USA banned travel from Europe and the European Commission banned travel from third countries into the European Union. On a national level, Malta has stopped all incoming flights as from the 21 March 2020.
Inevitably, in a world where free movement of people and of goods is the norm, this new reality has disrupted life as we know it, and has impacted several sectors, including contract performance and execution.
The legal implications of Maltese contract law may be vast in cases where a contractual obligation is delayed or not performed at all due to repercussions arising from measures taken in an effort to halt the spread of COVID-19. Is the counter-party able to sue for non-performance in such cases? Can force majeure be cited as a defence?
Definition of Force Majeure in Maltese law Contracts
The manner in which force majeure operates is primarily that it excuses the non-performance by a party of its contractual obligations, if such non-performance is attributed to the specific force majeure event. Force majeure can be claimed under the applicable legislation or under the terms of the contract, depending on the particular case.
Our Courts have reiterated that force majeure is a force to which it is impossible for one to resist, whilst a fortuitous event is one which could not have been anticipated by a person of ordinary diligence 1. This concept is long enshrined in the reasoning of our courts, where it has been long established that a fortuitous event or force majeure is an event not dependent on voluntary or negligent acts or omissions, unpredictable or at least not preventable 2. For the verification as to whether an event is unpredictable or at least not preventable the theory of the diligence of a bonus pater familias is applied, in the lack of which culpa is likely to be determined, which overcomes the concept of force majeure .3 This means that, if a person has undertaken the necessary standard of care, analogous to that of the reasonable man, and cannot be attributed any fault in relation to the happenings, the events may well be unpredictable and unpreventable. On the other hand, if the party contributed to the non-performance of the contractual obligation, then there is fault on such party and force majeure cannot be applied.
Our Courts have laid out the criteria for force majeure to be determined 4, namely:
- the event must be unusual;
- the event must be disproportionate;
- the event must be inevitable; and
- the event must not be able to be foreseen by a bonus paterfamilias.
Moreover, there must have been no contributory act or omission to the force majeure by the claiming party.
Is COVID-19 a Force Majeure in Contracts?
The force majeure clauses within contracts usually set out the events, upon the happening of which, force majeure is deemed to have ensued. In the event of force majeure, an extension of time for completion and/or relief from termination is usually provided for.
Most contracts, however, will not provide for pandemics, epidemics or diseases. Without a specific reference to such, one would need to analyse whether COVID-19 and the current situation would be considered a force majeure event or as an Act of God, or whether it would perhaps fall within the terms of a catch-all provision that might be present in the respective contract providing for events outside the control of the affected party.
The force majeure event need not be the pandemic in itself, but the impact such virus has on the performance of contractual obligations by the affected party.
Indeed, COVID-19 and its impact, may in principle, be considered force majeure. However, the context, the actions of the parties and the clauses of the particular contract would need to be specifically analysed to assess the position of the parties.
COVID-19’s Impact on Maltese Law Contracts: Recommended actions
In the light of the current COVID-19 pandemic, it would be prudent to review all active commercial contracts, giving particular attention to force majeure provisions and applicable law. Consequently, initiate discussions with the contracting party, if applicable, with an aim to amicably resolving the contractual position.
Particular attention and care should be exercised if new contractual agreements are being entered into at this time, particularly in relation to the force majeure clauses.
Before contacting the contracting party on the basis of a force majeure claim, legal assistance ought to be resorted to in order to avoid the consequences of a wrongful claim, which could be substantial.
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1 Albert Borg Falzon pro et noe –vs- Charles Darmanin pro et noe”, Commercial Appeal, 7 June 1940 (Vol XXX pI p869).
2 “Pubblio Azzopardi -vs- Antonio Arcicovich et”, Civil Appeal, 14 November 1919 (Vol XXIV p I p172).
3 Kurunell Hugh Philip Raymond noe -vs- Negte Manwel Busuttil pro et noe”, Commercial Appeal, 16 November 1942 (Kollez Vol XXXI pI p554).
4 “Valenzia nomine -vs- Camilleri”, Superior Civil Appeal, 27 June 2003
