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Is COVID-19 Still Considered a Force Majeure?

Whether COVID-19 can be considered a Force Majeure in a contract or not is still a somewhat debatable topic. By definition, which is regulated in Article 1244 and Article 1245 of Civil Code, Force Majeure is a situation that occurs suddenly and is beyond the control of the parties, which causes an agreement to be hampered or unable to be carried out at all. The key words are “beyond the control of the parties” and “causes the agreement to be hampered or unable to be carried out at all.”

Typically, the force majeure event is defined in the definition clause and examples of force majeure events are stipulated. To know whether the force event and its countermeasure were in line with the condition in the contract, it is important to review the procedures set out in the contract. For example, if there is a natural disaster, it is necessary to see whether the disaster affects the obligations of the parties or not. Further, we need to pay attention to whether notification of a force majeure event is mandatory in the contract. We need to see the evidence of how the events that occurred affect the existing obligations because not all disasters necessarily affect the contract performance of the parties.

In April 2020, the president issued Presidential Decree No. 12 of 2020 regarding the Determination of Non-Natural Disaster for the Spread of Corona Virus Disease 2019 (COVID-19) as a National Disaster. The arrival of the coronavirus in 2020 was indeed unexpected and caught all countries off guard so it fulfilled the criteria of beyond the control of the parties and causes the agreement to be hampered or unable to be carried out at all. However, it has been a year since the coronavirus appeared and various countermeasures have been researched and developed, such as maximizing the vaccination program, the policy of partial Work From Office, and several relaxations on social movement restriction, it is now difficult to say that the COVID-19 is “unforeseen” or “cannot be anticipated”.

But in the end, whether something is classified as Force Majeure in a contract can be negotiated by the parties because according to the Pacta Sunt Servanda Principle, which is regulated in Article 1338 Paragraph 1 Civil Code, all agreements made legally apply as a law to those who make them, which means that in a private relationship, such as a contract that is made legally, the provisions and agreements between the parties are what applies to them. When both parties negotiate, the parties will usually insist on their interest, and when that happens, it is possible to invite an independent mediator to mediate the parties.

Whether COVID-19 is classified as a Force Majeure and how it affects contract performance can be quite tricky and differs case by case. If you need help or consultation, we are more than happy to help and you can contact us at info@schinderlawfirm.com.

Author: Suryani Lim