All countries of the world face the challenge of Coronavirus uncontrollable rapid spreading and the protective measures imposed by the various governments in this respect which led to hindering the work of business sectors, transportation and trade as well as the prices, travel and circumstances of commercial exchange by air, land and sea. Consequently, the contracting parties became subject to risk of difficulties of fulfilling their obligations under a specific contract.
Possibilities under which the contracting party may face circumstances which can prevent it from fulfilling its obligation under the contract or make the fulfillment of such obligation hard or onerous for him. Such possibilities can be as follows:
- The contracting party himself may be infected by the Coronavirus which prevents him from fulfilling his obligation(s) under the contract.
- The protective measures taken by governments all over the world limit the contracting party’s capability to fulfill his obligation(s) under the contract.
Can the breakout of Coronavirus be considered an event of force majeure under the laws of Iraq? If yes, what are the consequential obligations which should be incurred by the contracting parties under a contract?
If the contracting party is infected by Coronavirus, this will not differ from being infected by any other virus or disease. In addition, such infection itself will not be considered an event of force majeure or a general exceptional event which can lead to application of the emergency circumstances theory; but it can be considered a justification for granting the debtor an additional period for fulfilling his obligation(s) under the contract he delayed to fulfill as a result of his infection provided that: (i) he was infected during the period stipulated for the implementation of the contract; and (ii) his sickness should be hard enough to prevent him from fulfilling his obligation(s) during the agreed period of time or he was subject to quarantine due to his sickness for an extended period of time which led to preventing him from fulfilling his obligation(s) under the contract within the agreed period.
In addition to the above, while the court is determining to grant the debtor an additional period for fulfilling his contractual obligations, it will not only examine the circumstances of the sick party solely but also it will examine the circumstances of the creditor for its favor the obligation has not been fulfilled within the agreed period; putting into consideration that the creditor may incur damages if the contract is implemented at a time after its expiry date as a result of not being able to use the materials agreed to be supplied under the contract if the said materials are supplied after the agreed date of supply. Therefore, the court has to examine the circumstances of the contracting parties at the time of deciding in respect to granting a period of time to the debtor.
Generally, the sickness itself (even if it is Coronavirus infection) is not considered a general exceptional event as it is an event relates to the infected debtor solely.
But in case the debtor could not fulfill its obligations as a result to the measures taken by the States for preventing the breakout of Coronavirus, this can be considered a general exceptional event which is fit to the application of emergency circumstances theory provided that such event caused the debtor to suffer from severe loss which can threaten the economic balance between the contracting parties such as price increase; but if such measures imposed as a result to the breakout of the Coronavirus caused that fulfilling the obligation of the debtor is impossible, this will be considered a force majeure event which releases the debtor from fulfilling its obligation and the contract will be considered rescinded according to Article 168 of the Iraqi Civil Code.
As Article 168 of the Iraqi Civil Code states that “If it is impossible for the obligee of a contract to perform his obligations specifically he will be adjudged to pay damages for non-performance of his obligation unless he establishes that the impossibility of the performance was due to a cause beyond his control; the adjudication will be the same if the obligee has delayed in the performance of his obligation.”
Impossibility of performance under the above article, is the case when the performance of the contractual obligation by the obligee is absolutely impossible such as destruction of the sold items in the sale agreement before delivering them for a reason; or the hand of the painter, who is obligated under a contract to draw a portrait, was cut; and the impossibility of performance may be due to a cause beyond the obligee’s control (force majeure – action of the damaged party).
Cause which falls beyond the control of the obligee can be classified as follows:
- Force majeure. Occurrence of the event causes that the performance of the obligation itself is impossible and this can be resulted from the act of the nature such as floods or earthquake or the act of human such as revolution, war, order of attachment, compulsory expropriation or a disease such as breakout of Coronavirus.
- Action of the damaged party. The other contracting party may commit an action which leads to making the performance of the obligation impossible such as if the purchaser intentionally or by his own fault destroys the purchased items before receiving them.
Impossibility of performance of a contractor agreement is governed by Article 886 of the Iraqi Civil Code which states that:
“1- Contractor Agreement shall terminate upon the impossibility of performing the agreed work.
2- If the performance falls impossible due to an event of force majeure, the contractor shall not be compensated in excess to the benefit utilized by the employer as mentioned in Article 889; but if it falls impossible due to the fault of the contractor, the aforementioned compensation shall apply and it shall be held responsible for its fault; and if such impossibility is due to the fault of the employer, provisions of the preceding article shall apply”
If the measures adopted in parallel to the breakout of Coronavirus led to the absolute impossibility of performing the obligation, such event will be considered a force majeure for exempting the debtor from the performance of its obligations and considering the contract automatically rescinded. As an example, if the State possesses the hotel of the debtor and use it as a quarantine and the obligee is unable to provide rooms for which it agreed to make them available for the tour agency.
For the purpose of meeting the absolute impossibility required for the application of force majeure provisions; it is conditional that such impossibility shall be irrelevant to the debtor solely due to his circumstances or special case; but it should be expected for each person which can be in his position.
If the measure of protection against Coronavirus breakout led to only delay in the performance of the obligation due to the curfew or likes, the debtor shall be entitled to claim the obligee to perform the obligation and claim compensation for such delay. Though the foregoing, the obligee may be exempted from compensation for such delay on the ground that the protective measures imposed against the breakout of Coronavirus are considered sufficient event of force majeure for the application of such exemption from the delayed performance compensation.
However, the force majeure is one of the emergency circumstances that makes the implementation of the obligation impossible and terminates the obligation of the debtor without bearing the consequence of its failure to implement it, and for that it is required that the force majeure occurs during the period specified for the implementation of the obligation; if it occurred after the expiry of such period, the debtor shall not be entitled to use it for getting rid of the consequences of non-performance or delay the performance of its obligation (Please refer to Dr. Abdulrazik Al Sanhouri – Al Wajeez in the General Theory of Obligation – modified by Counselor / Ahmed Medhat Al Maraghy- Former Chairman of the Court of Cassation – 2004- margin 1/b- page 295).
It worth to mention that the measures adopted in parallel to the breakout of Coronavirus cannot be counted as a force majeure or an emergency circumstance for all parties or all contracts. Rather, each case must be determined separately to know the extent and type of its effect on the contract.
However, if the breakout of the Coronavirus does not make the obligation impossible to be implemented, or if it does not cause a severe loss to the debtor in which the economic balance of the contract collapses, then the breakout of the virus is neither a force majeure nor an emergency circumstance, and the debtor can request an additional period of the contract and to be exempted from any compensation due to delay in implementation during the period in which the breakout of the virus prevented him from the implementation of his obligation.
Al Hadeel Al Hasan LLC
Baghdad – Iraq