What about the disruption of supply contract performance due to a neo-crown outbreak under US and Chinese law?

The outbreak of the novel coronavirus COVID-19, now considered a global pandemic by the World Health Organization (WHO), is Disruption of global supply chains, leaving many companies unable to fulfil contracts or supply products to their customers, and whether all companies affected by COVID-1 Are all companies affected by the epidemic exempt from liability? Both Chinese suppliers/buyers, who are now gradually returning to full production, and US suppliers/buyers, who are facing tough times, will need to We will pay more attention to this issue.

To this end, Mr. Chen Min, the director of Shanghai Founder Law Firm, and Mr. Chen Min, the director of Morningstar Law Group, have been working together on this issue. Partner Jennifer L. Van Doren, Attorney at Law, gives advice under U.S.-China law and hopes to contribute to the development of the U.S. economy. Companies facing this problem would benefit from.

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If your company is unable to supply products or perform its obligations under the contract due to COVID-19, first review the force majeure clause in the contract.

(i) There is a force majeure clause in the contract

1. If there is a force majeure clause in the contract, determine whether COVID-19 Pandemic is included in the definition of "Force Majeure". In particular, look for "epidemic" or "national/foreign" in the list of events constituting force majeure. In particular, in the list of events constituting force majeure look for "epidemic" or "national/ Global Pandemic Epidemic" (pandemic). Or, if your company is unable to perform operations because the component supplier is unavailable due to COVID-19 shutdown. Please check the force majeure clause for "inability to obtain components from the supplier". obtain components from suppliers") or "due to force majeure". The "supplier's failure to supply" ("supplier's failure to supply") was caused by an event in which the supplier was unable to supply. due to force majeure event") or similar expressions.

2. If the contract contains a force majeure clause but does not specify "epidemic infectious disease", "national/global pandemic "", "Unavailability of parts from suppliers" or similar examples, but it does contain all of the elements, e.g. "beyond reasonable bounds". events beyond the reasonable control of claiming party"), then you will need to hire a lawyer to retrieve the contract in question. of the law to guide whether COVID-19 should be considered force majeure. Some state laws (e.g., New York and Delaware laws) narrowly construe all of the provisions of the force majeure clause and may find that the Force Majeure events only include unforeseen events of the same kind or nature as those expressly set out in the terms of the contract.

3. If there is a force majeure clause in your contract and your company wishes to rely on the force majeure situation to protect itself against delay or delay in delivery. If performance fails and you are liable to the other contractual party for breach of contract, you must comply with the requirements of the force majeure clause, which may Includes.

(1) Promptly notify the counterparty of circumstances of force majeure that make performance impossible and (be sure to follow the procedure set out in the contract for sending the notice and for completing all required notifications).

(2.) Use commercially reasonable efforts to resume performance as soon as reasonably practicable.

4. Please note that if force majeure is not resolved within a certain period of time after receipt of notice of force majeure, certain force majeure provisions will be Allows the party affected by force majeure to terminate the contract. Alternatively, if the force majeure lasts for a longer period of time, the clause may require the parties to negotiate in good faith and in good faith with respect to the contract. Make appropriate amendments.

(ii) Absence of a force majeure clause in the contract

1. If there is no force majeure clause in the contract, consult your attorney for the relevant applicable law, common law for Treatment of force majeure exclusions or failure to achieve the purpose of the contract.

2. Even if the company cannot claim force majeure, it can claim that contract performance was prevented by events beyond its control. Again, this is usually a matter of state common law, and each state's law may have different rules.

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If your company receives a claim of force majeure from a contractual counterparty, the first step is also to review the force majeure provision in the contract.

(i) Review the other party's compliance with the force majeure provision

1. Is COVID-19 expressly included under force majeure in this clause? If not, do not be too quick to recognize COVID-19 as force majeure.

2. Whether the other party has complied with the requirements of the force majeure provision, such as fulfilling its obligation to provide timely and adequate notice and attempting to resume performance or Mitigating damage? If not, document any failure to comply.

(ii) Request for information/documentation and return to compliance plan

1. Even if not expressly required by the force majeure clause, the other party shall be required to provide in writing.

(1) Detailed information on the cause and extent of non-compliance.

(2) A plan and timetable for resuming compliance; and

(3) A description of other risk mitigation measures that the other party will employ.

2. If your company and the other party agree on a plan to mitigate the effects of force majeure, consider whether the plan should be included in the contract of the formal amendments, so that if the other party still fails to perform as agreed, your company can claim a breach of contract. Compensation for matters agreed upon in the amendment.

(iii) Other relevant provisions

In addition to the review of the force majeure provisions, other provisions of the affected contracts should be carefully examined. Supply contracts, in particular, may also be affected by COVID-19 and the resulting shortage of supplies, which may trigger other provisions. For example.

1. Unavailability: Buyers and suppliers of commodities affected by the global COVID-19 pandemic should review their supplies. "unavailability" clauses in the agreement, which may trigger buyers to purchase products from other suppliers, cancel orders The right to terminate the agreement or obtain other remedies.

2. Priority of supply: supply agreements may also contain clauses that prioritize the allocation of inventory in the event of a shortage of goods ( "Allocation Priority"). Such provisions may require suppliers to give priority to certain customers or to allocate goods proportionately among customers.

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The analysis of the application of force majeure clause to the performance of contract during the neocrown epidemic under Chinese law.

(I) The State's Principled Recognition of the Epidemic as "Force Majeure"

1. The Legislative Affairs Commission of the Standing Committee of the National People's Congress (NPC) clearly stated on 10 February 2020 that "the current epidemic of neocoronitis in our country, in order to... The protection of public health and the adoption by the government of appropriate measures to prevent and control the outbreak are unforeseeable for the party that cannot perform the contract as a result. force majeure that cannot be avoided and cannot be overcome." At the same time, courts around the world have also issued a contract performance during the epidemic applicable "force majeure" guidance, such as the Shanghai High Court A series of questions and answers on the application of the law in cases involving the neo-crown pneumonia epidemic was issued, and the question of whether the neo-crown pneumonia epidemic was a force majeure A clear answer was given: "In accordance with Article 180 of the General Principles of Civil Law of the People's Republic of China and the Contract Law of the People's Republic of China. Under Article 117, after the new coronary pneumonia epidemic has been recognized as a public health emergency, in order to protect the health of the people and the The government and relevant departments have taken corresponding measures to prevent and control the epidemic. For those who are unable to perform their contracts or exercise their rights in a timely manner as a result, the outbreak of the new coronary pneumonia epidemic should be considered unforeseeable and unavoidable. and insurmountable force majeure."

2. Whether, nevertheless, for the content of the particular contract, exposure to an epidemic is completely insurmountable and sufficient to render the contract incapable of Performance or the necessity of delaying performance needs to be considered in the context of the actual performance of the contract and the actual impact on the other party to the contract.

(ii) Examination of whether the contract provides for the application of Chinese law

1. When either party to a contract is unable to perform as contracted due to an epidemic, first consult the jurisdictional clause in the contract. If the contract is agreed to be governed by Chinese law, the applicable Chinese law provisions are primarily the provisions of the Contract Law on force majeure.

2. Where force majeure applies, the party claiming to have suffered force majeure shall take the following measures.

(1) Timely notification to the other party of the occurrence of force majeure (in the manner agreed in the contract) in order to mitigate possible damages to the other party.

(2) Provide certification within a reasonable time.

(3) Take appropriate measures to prevent damages from increasing.

3. If the force majeure continues to exist, the parties may negotiate to change the time of performance of the contract according to the time and extent of the effects of the force majeure. If the continuation of the contract is manifestly unfair to one of the parties or if the purpose of the contract cannot be achieved, it is possible to request the termination of the contract. .

(Ⅲ) Notary Public and China Council for the Promotion of International Trade (CCPIT) can provide force majeure certificate business.

1. In order to ensure that enterprises smoothly through this epidemic, notary offices around the world have provided enterprises with force majeure notary services opened " Green Channel", for example, Shanghai Oriental Notary provides online application service, a few simple steps online operation, you can complete the notary! Application, the main process is online application for notarization → choose to deal with force majeure notarization matters → upload materials → notarization certificate issued after examination and approval. This initiative provides favorable support for the healthy and smooth development of enterprises resuming work and production.

2. The China Council for the Promotion of International Trade (CCPIT) has also launched a commercial certification service for force majeure proof of factuality, helping Companies dealing with the emergence and impact of the neo-crown epidemic force majeure can also do so online. Just register your account with CCPIT Commercial Certification Platform and enter your information→select the type of certification as "new crown epidemic facticity". If you pass the examination, you will receive the certificate issued by CCPIT. Certificate of factuality of force majeure.

The impact of COVID-19 has spilled over into global supply chains and other contractual engagements. Please feel free to contact us if you need assistance in reviewing your contract or seeking legal advice to determine your rights.

Author

- Ms. Chen Min is a Bachelor of Law from the Shanghai University of International Business and Economics, a Master of Law from the East China University of Political Science and Law, an Adjunct Professor at the Shanghai University of Political Science and Law, a Lecturer at the Shanghai University of Finance and Economics, a Legal Advisor at the Consulate General of the Republic of India in Shanghai, and a Mediator at the China Council for the Promotion of International Trade and the China International Chamber of Commerce Mediation Center.

- Min Chen worked for Maersk LINE, the world's largest shipping company. With her excellent language skills and experience in the shipping industry, she has successfully undertaken many socially influential foreign-related litigation and arbitration cases, and is one of the top 1% of litigators in China who can undertake arbitrations in English.

- Since 2013, Ms. Chen has been invited to Istanbul, Doha, Delhi, Karakov, and other cities as a representative of Chinese law firms. Participation in Praelegal, WLN and other World Federation of Law Firms conferences. She has traveled to more than 20 countries and established friendships and business relationships with law firms in more than 100 countries.

- In recent years, Ms. Chen has focused on legal market development and legal services in the Belt and Road countries, and has worked with the Republic of India in Shanghai. Consulate General, Consulate General of the Kingdom of Thailand in Shanghai, Consulate General of Romania in China, Consulate General of Turkey in Shanghai. We have good cooperation with the Consulate General of Uzbekistan in Shanghai and the Chinese Consulate General in Uzbekistan. In addition, we rely on the resources of law firms in more than 140 countries and regions to escort Chinese enterprises "going out", and collaborate with other countries and regions to provide legal services. Lawyers are providing professional legal services in dispute resolution for Chinese companies in the Belt and Road countries.

-Jennifer (Collins) Van Doren is a technology and licensing attorney with more than 20 years of experience practicing and advising clients in intellectual property law and business transactions.

As a business attorney, Jennifer maintains a pragmatic, business-oriented approach to achieving the best results for her clients. . She has represented clients of all sizes, including Fortune 500 companies, in complex intellectual property transactions such as collaboration agreements. Joint development agreements, product divestitures, licensing agreements, and IT and business process outsourcing agreements. She also represents clients in advertising, promotion and sweepstakes compliance reviews.

-Before founding Morningstar Law Group, Jennifer was the founder of Womble Carlyle is a partner and leader of the firm's intellectual property transactions team. She began her legal career as a law clerk for the U.S. Magistrate Judge for the Eastern District of North Carolina.