COVID-19: Force-Majeure and Maltese Contracts
Maltese contract law on ‘force-majeure’ and unprecedented business interruption.
On 30 January 2020, the World Health Organisation declared that the COVID-19 epidemic constitutes a public health emergency of international concern. On 11 March 2020 it declared that it is a pandemic. Travel restrictions have immediately followed: flights to and from China were largely cancelled, the USA banned travel from Europe and the European Commission banned travel from third countries into the European Union. On a national level, Malta has stopped all incoming flights as from the 21 March 2020.
Inevitably, in a world where free movement of people and of goods is the norm, this new reality has disrupted life as we know it, and has impacted several sectors, including contract performance and execution.
The legal implications of Maltese contract law may be vast in cases where a contractual obligation is delayed or not performed at all due to repercussions arising from measures taken in an effort to halt the spread of COVID-19. Is the counter-party able to sue for non-performance in such cases? Can force majeure be cited as a defence?
Definition of Force Majeure in Maltese law Contracts
The manner in which force majeure operates is primarily that it excuses the non-performance by a party of its contractual obligations, if such non-performance is attributed to the specific force majeure event. Force majeure can be claimed under the applicable legislation or under the terms of the contract, depending on the particular case.
Our Courts have reiterated that force majeure is a force to which it is impossible for one to resist, whilst a fortuitous event is one which could not have been anticipated by a person of ordinary diligence 1. This concept is long enshrined in the reasoning of our courts, where it has been long established that a fortuitous event or force majeure is an event not dependent on voluntary or negligent acts or omissions, unpredictable or at least not preventable 2. For the verification as to whether an event is unpredictable or at least not preventable the theory of the diligence of a bonus pater familias is applied, in the lack of which culpa is likely to be determined, which overcomes the concept of force majeure .3 This means that, if a person has undertaken the necessary standard of care, analogous to that of the reasonable man, and cannot be attributed any fault in relation to the happenings, the events may well be unpredictable and unpreventable. On the other hand, if the party contributed to the non-performance of the contractual obligation, then there is fault on such party and force majeure cannot be applied.
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