Is Coronavirus an Act of God - Force Majeure Event?

In legal usage throughout the English speaking world, an act of God is a natural hazard outside human control, such as an earthquake or tsunami for which no person can be held responsible. An act of God may amount to an exception to liability in contracts or it may be an "insured peril" in an insurance policy. By contrast, other extraordinary man-made or political events are deemed force majeure.

Is the Coronavirus outbreak also an Act of God? If so, will referencing a force majeure clause or right allow a party to wiggle out of a contract? With over half of its population subject to some form of travel restriction, Chinese productivity has struggled to rebound from the Chinese New Year vacation. Moreover, global supply chains, still hugely dependent on Chinese factories, are strained by the disruption caused both by this epidemic and sometimes heavy-handed government responses to it. Increasingly, foreign suppliers, particularly Chinese manufacturers, are digging through contractual boilerplate to review, perhaps for the first time, whether there is any force majeure relief.

Increasing, with Coronavirus outbreak outside China lately and implementation of travel restrictions, eg Italy, Iran and South Korea, globally it becomes more and more challenging to avoid and control a Pandemic outbreak. Therefore it is important for SME businesses and individuals in Australia to understand their legal positions in this area.

In the absence of a contract force majeure provision, the legal definition of an Act of God may be determined by the governing law of the contract. Force majeure is a recognized doctrine in civil law systems (China and the EU) but not in common law jurisdictions (the UK, the USA and Hong Kong). Local Chinese firms are likely to get a more sympathetic hearing in Chinese courts; on February 10, 2020, a spokesperson of the Legislative Affairs Commission of the Standing Committee of the National People’s Congress stated that the COVID-19 outbreak, and the government’s mitigation measures, constitute force majeure to contracting parties that cannot perform a contract because of those measures. The China Council for the Promotion of International Trade – an official body – issued over 1,600 ‘force majeure certificates’ to Chinese companies in February. The effectiveness of these force majeure certificates even under Chinese law is uncertain and untested. However, these certificates may help a party to a dispute in China to argue that the COVID-19 outbreak is force majeure. The Hubei Provincial High Court – at the epicenter of the outbreak – recently advised its lower courts that COVID 19 (and, importantly, related governmental measures) constitute force majeure. Of course, such determinations, and FM certificates, are likely to carry less weight with courts and arbitration tribunals outside China, which are more likely to focus on all the available evidence to determine whether an event of force majeure has occurred (in common law countries the principle of frustration may be the only ‘Hail Mary’ argument available).

We urge Australia Government to help SME and Individuals by providing clear interpretations and guidance in this "GREY" legal area!!!