The article with the title “How to activate the term ‘force majeure’ in the contract with Covid-19 is presented based on some important contents in the recent talk show held on 01 May 2020 with the topic “Legal Issues Of Businesses From The Pandemic“ by Saigon Economic Times and Ho Chi Minh City Young Entrepreneurs Association. Accordingly, as keynote speakers, Lawyer Tran Thanh Tung of Global Vietnam Lawyers Law Firm (GV Lawyers) and Lawyer Tran Vo Quoc Son of Samsung Electronics Vietnam Co., Ltd. shared some opinions from the legal perspective about influence of COVID 19 on businesses and analyzed some legal solutions to minimize legal risks during COVID 19 period.
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The effects of Covid-19 may be considered a force majeure event, but actually implementing this clause of the contract is not easy.
Sharing at an online talk show held by Saigon Times in the morning of May 1, Lawyer Tran Thanh Tung of Global Vietnam Lawyers Law Firm said Covid-19 brought legal consequences upon many businesses.
Accordingly, some companies do not receive suppliers’ materials, resulting in the inability to complete signed orders. Epidemic control and social distancing also disturb business situation and human resource management. Lawyer Tung said that these conditions urge enterprises to terminate the contract under force majeure terms.
Among the three factors to be able to “activate” the contract termination under force majeure terms including objective impact, force majeure and non-remediability. According to Tung, Covid-19 may be considered a case to apply the force majeure clause, but it must be proved that the person responsible for implementing the contract cannot remedy any consequence despite exhaustion of his all efforts.
Lawyer Tran Vo Quoc Son, a legal head of Samsung Electronics Vietnam Co., Ltd. said that the actual implementation under force majeure terms has encountered many difficulties because it had to be placed in a specific contract to be identified. “To prove the contract performance impossible is an art coupled with soft power and convincement. This needs objectivity to satisfy any aspirations” Mr. Son said.
In order to apply force majeure event, first of all, the three important factors must be taken into account: contract scope, contract termination terms and preconditions. First, if you do not aim at force majeure issues, you should discuss contract termination terms ahead of time or contract amendments.
And for any contract with a separate force majeure clause, the matter, Son said, lies in the fact that the practice of the business tends to maintain the force majeure clause, listing the impact factors from Covid-19. But people forget about the system of laws on force majeure events varies from country to country. “Each international convention has different terms of application, so it depends on how the contract is negotiated in detail. Accordingly, the parties can decide to apply what way that will be best to benefit them,” Son said.
If either party applies the force majeure clause but the other party does not agree on it, according to Tung, it is necessary to handle it well to maintain relationship with customers. We should start to resolve for the benefit of both parties rather than through legal measures. Handling the matter legally is a last resort. At that point, it is necessary to see whether it is any force majeure event.
Lawyer Son said, this case should give priority to propose appropriate solutions for both parties. For example, for premises lease, there are cases where the partner amends the contract. For production activities, the partner will share the cost. “However, it should be noted that whether or not the application is successful is a highly sensitive and difficult issue. If ignoring any consideration, either party will go against the contract, impair the contract, erode any trust”, Mr. Son noted.
At present, some businesses as raw material importers are suffering from a high price by suppliers in China due to their relying on the pandemic as a force majeure reason to raise prices. According to lawyer Tran Thanh Tung, to solve this situation, it is necessary to answer questions such as: What is the deposit for the order? Is it difficult to find alternative materials? Does delivery occur weekly?
Attorney Tran Vo Quoc Son further noted that it is necessary to consider what this type of item is. It is difficult to apply force majeure if it is an essential product. If this product can only be produced by that unit, it may be considered to impose additional costs.
A pandemic is also a time for businesses to perfect the terms of force majeure events in contracts with partners. Lawyer Tran Thanh Tung said that Vietnamese businesses often copy model contracts. This is fine but it needs to be adapted to specific conditions.
In addition, the importance is that we should not recognize any contract through handling situations when there is a dispute. Instead, contract management needs to have a greater vision, with policies on procurement, selection of partners, suppliers, etc toward proactivity. At that time, the enterprise will maintain model contracts, then think about the actual situations to properly draft the contract.
Once the model contract is available, the enterprise must ask how to deal with the contract, which department will put forward the contract, which department will appraise and approve or finalize, and then use this model for negotiation and signing.
