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Executive Summaries Feb 5, 2020

COVID-19: When to Invoke Superior Force?

If your company has suppliers in China, you are probably starting to worry about the effects of the coronavirus on your supplies. Do you have any contracts that are based on these supplies that may be delayed due to the outbreak? Would you even be at risk of having to pay penalties or damages as a result of the delay? If so, it may be time to invoke superior force.

Most contracts include a clause that allows you to be exempted from liabilities in case of an event beyond your control, sometimes referred to as "superior force", "force majeure" or "act of God". The first step is therefore to review your contract and examine this clause to confirm its scope and identify the formalities required to invoke it.

If your contract does not include such a clause, don't panic. The concept of superior force is also provided for in the Civil Code of Québec. It is defined as an external event that the debtor could not foresee, nor could he resist it, and that made the realisation of the obligation impossible. Most jurisdictions also provide for similar cases of exoneration.

The current coronavirus epidemic meets the criteria of unpredictability, irresistibility and externality of superior force.

In certain cases, it may make it impossible for a Chinese company to perform its obligations to its Quebec buyer and, therefore, for a Quebec company to obtain its supplies from China.

It is often required by the terms of the contract, or at least advised, to give written notice to its co-contracting party to inform it of the existence of the superior force and of its intention to avail itself of it. It must be kept in mind that the burden of proof rests on the debtor. To facilitate this proof, the China Council for the Promotion of International Trade (CCPIT) offers to issue superior force certificates. Chinese suppliers are probably in the best position to request them. They must provide documents proving delays or cancellation, export contracts and customs declarations in support of their application. Quebec buyers who wish to take advantage of the exemption from superior force will thus be able to use this certificate themselves to demonstrate superior force.

If you have any questions about the possible impact of the coronavirus on your supplies, do not hesitate to contact Dominique Babin.

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