By Pierre Mudet, Associate lawyer
In short
If the current pandemic instinctively seems to be a case of force majeure, legally things are less obvious.
Each contractual situation must be analyzed with precision in order to determine whether the current health crisis is likely to release, temporarily or definitively, commitments made.
Several questions can guide this analysis:
- on what date was my contract concluded?
- is my obligation monetary?
- is a plan B possible to execute me?
- is execution completely impossible or simply more expensive?
A single wrong answer calls into question the qualification of force majeure ...
The assessment of the current situation is essential for any company placed in the impossibility to honor its commitments and that to which one will oppose the force majeure.
In this troubled context, the questions are numerous:
Does Covid-19 constitute a case of force majeure? Do the measures taken to remedy this have an impact on the legal qualification of the pandemic? Which contracts are affected? Can a payment obligation be suspended due to force majeure? Can I partially comply? Opposing force majeure, is it a risky bet?
Since the appearance of Covid-19 in certain regions of China and its extension at the beginning of the year to several urban areas of the country, the situation has escalated. The Coronavirus now affects almost the entire globe.
To stem its spread, the affected countries urgently took several series of measures.
In France, the Prime Minister's intervention on March 14 marked the starting point of a considerable number of decisions, the list of which is growing day by day. Three of the most important decisions are made by the executive between March 14 and 16:
- decree of March 14, 2020: closure of places welcoming the public not essential to the life of the Nation
- decree of March 15, 2020: extension of the closing decree to sales stores and setting of non-conforming activities that may continue to receive from the public
- Decree of March 16, 2020: travel restrictions concerning the fight against the spread of the Covid-19 virus
The objective is laudable but the consequences on the economy are likely to be heavy.
One of the key questions is which companies will have to bear financially the consequences of these measures.
The Minister of the Economy and Finance, Bruno Lemaire, gave an early response during his statement on February 28: "The State considers the coronavirus to be a case of force majeure for companies »1. More recently, the Minister also called “ all major contractors to show solidarity with their suppliers and their subcontractors and also consider the coronavirus as a case of force majeure in the execution of contracts for private markets »2.
A secular legal mechanism, the notion of force majeure is making a strong comeback in the current circumstances and is establishing itself as one of the legal tools adapted to the situation.
Does Covid-19 constitute a case of force majeure?
The qualification of the current situation as an event characterizing a case of force majeure will be essential for companies placed in the impossibility of honoring their commitments and those to which force majeure will be opposed.
By its nature, scale and severity, the current pandemic at first glance appears to be a case of force majeure. Instinctively, to admit the opposite would even amount to calling into question this notion: if the appearance of Covid-19 does not characterize a case of force majeure then this notion could not exist.
What is it really?
Force majeure is a case of exemption from liability which releases, temporarily or definitively, a debtor from his obligations.
Legally consecrated in 2016, there is force majeure " when an event beyond the control of the debtor, which could not be reasonably foreseen when the contract was concluded and the effects of which cannot be avoided by appropriate measures, prevents the performance of its obligation by the debtor » 3.
The courts will tomorrow have to assess the Covid-19 pandemic on the basis of this text according to which is a case of force majeure, an event which:
- escapes the debtor's control ; that is to say, between or not in its sphere of control 4. The question posed by the text is that of the power of the debtor over the event and, in short, his power to prevent it. In other words, the event characterizing the force majeure must be uncontrollable by the debtor who invokes it
- could not be reasonably foreseen when entering into the contract ; that is to say unpredictable. The event characterizing force majeure must not be able, at the time of conclusion of the contract, to be reasonably envisaged with regard to an average standard of assessment.
- the effects of which cannot be avoided by appropriate measures et which prevents the performance of its obligation by the debtor ; that is to say irresistible. The event must therefore be inevitable, there is no suitable measure to prevent it, and insurmountable, its effects make any execution materially impossible
The idea is that of an event against which we can do nothing: I can neither face it, nor bypass it
Let us rule out from the outset the uncontrollable nature which will not raise questions, the current crisis will be assessed, for each given contractual situation, in the light of the criteria of unpredictability and irresistibility.
Unpredictability
It seems beforehand obvious that the current pandemic could not be foreseen a few months ago. The criterion ofunpredictability being assessed on the day of conclusion of the contract, only the commitments made prior to the appearance of the coronavirus are likely to meet this criterion.
Determining the moment from which knowledge of the current pandemic excludes the unforeseeable nature of force majeure is therefore essential: WHO press release, public authorities' decisions or simple press cuts relaying the situation?
A decision of the Besançon Court of Appeal rendered during the H1N1 flu epidemic sheds interesting light: “ It should be remembered, in law, that force majeure means an unforeseeable, irresistible and insurmountable event which makes performance of the obligation impossible. This is not the case with the H1N1 influenza epidemic which was widely announced and predicted, even before the implementation of the health regulations behind which the [concerned company] is trying to hide. "(CA Besançon, January 8, 2014 - n ° 12/02291).
This judgment must be compared with the principle of good faith which is the basis of contract law and by virtue of which the parties must, as far as possible, anticipate foreseeable risks likely to prevent or restrict the execution of their commitments. The mere knowledge of the risk, even possible, would therefore preclude any characterization of force majeure.
The dissemination by the media of the appearance of the epidemic thus marks the moment from which this event becomes foreseeable, regardless of the official position of the public authorities.
For Covid-19, it is reasonable to think that in France, the date from which the current pandemic has become foreseeable is not that of the first government decisions of March 14 and 15, nor that of the Minister's declarations. of the economy and finances of February 28 but that of the WHO communication of January 30 officially recognizing the coronavirus epidemic.
In other words, the current pandemic is likely to constitute a case of force majeure only for contracts subject to French law and concluded before January 30, 2020. After this date, the predictability of the Covid-19 epidemic should be an obstacle the recognition of any exemption from liability for force majeure.
Force majeure therefore constitutes a temporary legal weapon in a context with heavy economic consequences which are lasting.
Beyond that, the evolution of case law leads to questioning the applicability of the concept of force majeure in trade relations with Asia, more particularly China. The predictability of the risk of a pandemic itself can no longer be ruled out. Without going back to the 60s (Asian flu - 1 million deaths), this region of the world has experienced several recent pandemics, in particular, avian influenza / H5N1 in 1997 and SARS in 2003.
It will now be preferable to contractually foresee the consequences of these pandemics. We bet that one 'pandemic' clause should soon establish itself as one of the many boilerplate clauses present in international contracts.
Irresistibility
Once the first obstacle of the " unpredictability "Past, to characterize the force majeure will suppose to establish the character" irresistible " of the event.
One of the criteria that could be retained is the dangerousness of the virus itself.
In this regard, the current situation can be compared to the Dengue epidemic that occurred in Martinique in 2007 which was not considered to be " irresistible " by the Nancy Court of Appeal " because only 5% of the population has been affected and we can protect against it by protective measures (mosquito nets, wearing long clothing, use of repellents) "(CA Nancy, November 22, 2010 - n ° 09/00003).
Covid-19, because of its mode of transmission, the percentage of the population likely to be affected and the sufficiently substantiated health risks, should not raise questions on this point.
However, it is not enough for the epidemic to make it more difficult or more expensive 5 performance of an obligation, but makes it impossible. From this point of view, does the pandemic make the execution of a contract impossible on its own? Nothing is less certain. Take the example of stores. Except in the specific case of closing orders, the health risk does not prevent their opening. Of course, measures must be put in place: distancing, limiting the number of customers, markup, etc. Trade is degraded, not stopped. The health risk certainly makes execution more expensive, but rarely impossible. Special cases undoubtedly exist but, for the majority of businesses, the pandemic alone is not an inevitable event.
The risk for humans therefore does not seem sufficient to assess the character " irresistible Of the crisis. The measures taken by the authorities are also, if not primarily, to be taken into account.
These measures, legally qualified as " made of prince ”(Ban on gatherings, closure of stores not essential to the life of the Nation, confinement, etc.) are obviously likely to prevent the execution of the commitments made when they relate to activities that are henceforth prohibited or prevented and without the possibility of alternative solutions.
Concretely, a global assessment of the situation of each economic actor is necessary to assess the irresistibility of an event, that is to say an event making it materially impossible to execute a commitment.
Thus, the organization of events will be affected in an irresistible way:
- from March 4 for events bringing together more than 5000 people
- from March 9 for events bringing together more than 1000 people
- from March 14 for events bringing together more than 100 people
- from March 16 for all others
The " irresistibility "For economic actor does not necessarily mean" irresistibility »For another economic actor.
This is why the Covid-19 pandemic does not in itself, in abstracto, constitute a case of force majeure. This pandemic is simply such as to constitute a case of force majeure, the nature of which " irresistible Will have to be assessed on a case-by-case basis.
Which contracts are affected?
As we have seen, it is reasonable to think that in France, the date from which the current pandemic has become predictable is that of the official recognition by the WHO of the coronavirus epidemic on January 30.
The current situation is therefore likely to constitute a case of force majeure only for contracts subject to French law and concluded before January 30, 2020. After this date, the predictability of the Covid-19 epidemic should constitute an obstacle to recognition any exemption from liability under force majeure 6.
Can a payment obligation be suspended due to force majeure?
Payment obligations are subject to special treatment in terms of force majeure.
Case law in fact more or less easily admits the irresistible nature of force majeure depending on the prevented obligation in question.
For obligations to act, the recognition of a case of force majeure, if the conditions are obviously met, raises few questions. It is different with regard to the obligation to pay. The Court of Cassation recently stated that a person owing a sum of money and who has not complied cannot exonerate himself by invoking a case of force majeure.
Even serious financial difficulties cannot in fact present the character of " irresistibility »Necessary to characterize a case of force majeure. Alternative solutions still exist: use credit, ask for grace periods or even seek protective measures for insolvency proceedings.
Certain decisions were nevertheless able to admit incidentally the exemption of a monetary obligation. Thus, force majeure was retained by the Court of Cassation in the case of a person placed in theinability to benefit from the serviceto which she was entitled due to illness, thus freeing her from the monetary obligation to which she was held in return 7, or in the case of a bank which, due to a technical incident qualified as force majeure, was unable to make an agreed transfer in time 8.
A payment obligation cannot therefore, except in very specific cases, be suspended due to force majeure.
However, the debtor of a monetary obligation is not completely helpless. In the current context, it is in fact likely that his co-contracting party will find himself in a situation of impediment such that the execution of his commitment is clearly compromised.
The suspension of payments then arises.
Article 1220 of the Civil Code allows in certain cases to suspend the performance of its obligation, even monetary: " A party may refuse to perform its obligation, even though it is due, if the other does not perform its own and if this non-performance is sufficiently serious. ».
The question is then to know if an event presenting the characteristics of force majeure preventing a co-contracting party from performing authorizes the other party to suspend all payment?
Case law has been able to provide a positive response to this question: force majeure is a cause of exemption from contractual liability, but it does not preclude the exception of non-performance or judicial resolution. 9.
The Civil Code goes further and also authorizes the suspension of the performance of an obligation " as soon as it is clear that its co-contracting party will not perform on the due date and that the consequences of this non-performance are serious enough for it ».
The non-performance exception mechanism therefore makes it possible, under certain conditions, to suspend beforehand its own monetary obligation when it is "manifest" that its co-contracting party will be unable to perform its obligation.
Thus, it is possible to respond to force majeure with the exception of non-performance. In this case, the mechanism does not fulfill " a coercive function, but has a preventive aim (…) and operates as long as the partner's obligation is itself suspended due to force majeure ” 10.
The case of force majeure affecting my co-contracting party is therefore likely to allow me to suspend even beforehand my payment obligation.
Recourse to the exception of non-performance is carried out at the risk and peril of its author, the judge being able, a posteriori, to control the importance and the seriousness of this non-performance.
The only condition is that the suspension of payment must be notified as soon as possible to its co-contractor.
Can I partially perform?
It may be tempting for a co-contractor who is unable to perform a commitment in its entirety due to a case of force majeure (lack of labor, raw materials, etc.) to proceed with partial performance. .
Can it invoke the case of force majeure for the unfulfilled part of its obligation?
Since a case of force majeure must be insurmountable, the partial performance of an obligation may seem beforehand risky, because it is likely to hinder this qualification.
The answer is not explicitly provided for by article 1218 of the Civil Code. Nevertheless, several elements make it possible to establish that force majeure can be characterized even in the case of partial non-performance.
First of all, article 1351 of the Civil Code provides that “ the impossibility of performing the service releases the debtor for due amount when it arises from a case of force majeure and it is final (...) ».
The law therefore provides for the possibility of partial performance of the obligation. The defaulting party will then be partially released from its obligation, if and only if the force majeure is final. However, nothing is provided for in a case of force majeure the effects of which are temporary, which is not illogical insofar as article 1351 of the Civil Code deals with the (final) impossibilities of execution and not of a case of temporary suspension.
Be that as it may, the requirement of good faith and loyalty - inherent in any contractual relationship - requires the party who has the opportunity to perform its obligation, even in part, if it does not. is not prevented.
In reality, it is the total non-performance which would risk hindering the qualification of force majeure since, in part at least, the defaulting party would not be placed in an insurmountable situation.
The defaulting party is therefore, as far as possible, obliged to partially perform.
Partial performance of an obligation is not such as to call into question the characterization of force majeure for the unfulfilled part of the obligation.
Opposing force majeure, a risky bet?
In normal times, opposing force majeure often constitutes a bet motivated by real reasons, but a bet all the same as its assessment is uncertain in the event of a dispute.
Judicial decisions are indeed often not very enlightening and above all cannot be generalized.
A real risk therefore weighs on the party forced to oppose force majeure to be released, temporarily or definitively, from its obligations.
But the current period is, in the literal sense, extraordinary.
To face the situation, several orders had to be taken to adapt the law to this period of crisis. Ordinance n ° 2020-306 of March 25, 2020 relating to the extension of deadlines expired during the health emergency period allows us to completely reconsider the risk inherent in the force majeure mechanism.
Under the terms of its article 4, penalties, penalty clauses, termination clauses as well as clauses providing for forfeiture, when their purpose is to penalize the non-performance of an obligation within a determined period, are deemed to have no not taken short or effective, if this period ends during the period between March 12, 2020 and the expiration of a period of one month from the date of cessation of the state of health emergency.
Above all, these penalties and these clauses will only take effect from the expiration of a period of one month after the end of this period if the debtor has not performed his obligation before this term.
In other words, the protection mechanisms aimed at sanctioning the defaulting debtor are currently suspended and any default can be regularized up to one month after the date of cessation of the state of health emergency.
In the immediate future, arguing force majeure therefore presents a very relative risk.
This protection is however quite temporary but offers time to the debtor prevented, time which will allow him, among other things, to precisely assess his own situation with regard to the criteria of force majeure.
1 - Speech by Bruno Le Maire, Minister of the Economy and Finance of February 28, 2020
2 - Speech by Bruno Le Maire, Minister of the Economy and Finance of March 3, 2020
3 - Article 1218 of the Civil Code resulting from ordinance n] 2016-131 of February 10, 2016
4 - Muriel Fabre-Magnan, Law of obligations, Thémis, p. 715
5 - Civ. Jan 9, 1856, DP 1856, 1, 33
6 - Cass. Com. Sep 6, 2014, n ° 13-20.306
7 - Cass. Civ. 1st, 10 Feb. 1998, n ° 96-13.316
8 - Cass. Civ. 3rd, 17 Feb. 2010, n ° 08-20.943
9 - Cass. civ., 14 Apr. 1891: DP 1891, I, p. 329, notes M. Planiol quoted by M. Storck, Fasc. Sole: Contract - Non-performance of the contract, Exception of non-performance, Jurisclasseur Civil Code, May 4, 2017, n ° 40
10 - M. Storck (see above) quoting P.- H. Antonmattei, Contribution to the study of force majeure: LGDJ, 1992, n ° 318, p. 224
Pierre Mudet
Partner
Pierre Mudet works mainly in the areas of stock market law, mergers and acquisitions and company law with clients of listed and unlisted companies in the context of national and international transactions.
He advises industrial groups, banks, investment funds and innovative companies in the new technologies sector.
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