Coronavirus brings ‘force majeure’ into focus in yachting sector

By Robert Wielaard

AMSTERDAM – That coronavirus pandemic was force majeure, right? No yacht builder or supplier who reneged on a contractual obligation due to the global virus outbreak, will risk even a fine, right?

Well, maybe, maybe not.

A force majeure frees contracting parties from fulfilling a contract due to circumstances beyond their control or unpreventable events such as wars, strikes or hurricanes. If a contract has a force majeure clause, does it specifically cover an epidemic or pandemic? What if you cannot get any components? Is “inability to obtain components from suppliers” a force majeure?

A contract may cite “events beyond the reasonable control of the claiming party.” But, depending on the jurisdiction, courts may interpret that narrowly, or broadly. If a contract has no force majeure provision, will common law let you claim inability to complete a contract because the project is “frustrated by events beyond” your control?

In late March, Amsterdam-based SuperyachtTimes hosted a webinar on the impact of the coronavirus pandemic on the superyacht industry at which the force majeure issue was raised.

“I think it’s pretty clear that this pandemic is a force majeure, something that happens outside of the control of the parties,” said Miami-based Maritime Lawyer Robert Allen. “The way this is typically dealt with in contracts is through a list of circumstances that are defined as force majeure,” he added.

“If you are a person who wants to cancel a contract because of force majeure, look very carefully at the language of the contract to see if you can. Sometimes contracts have an absolute provision that says … unless the boat is delivered by a certain date, I don’t have to take it.”

Allen sees the market softening. “Deals that have been worked on for months or even years … are in limbo.” Economic hard times are no excuse. “The fact the stock market is down by 30% is not a force majeure.”

Away from the webinar, DLA Piper, an Australian law firm active in more than 40 countries, said in a notice on its site that “in most cases, force majeure events cover acts of God.”

Interestingly, it suggested a court may find that the 2003 SARS epidemic made the current coronavirus outbreak “reasonably foreseeable and could have been prevented.”