COVID-19 has had an economic impact across a wide range of industries, including hospitality, airlines, automotive, construction, logistics, and more, and many performance obligations on contractual parties have been rendered impossible. However, many others—while certainly more difficult, complicated, or expensive—remain literally or legally possible.
While COVID-19 will continue to have a devastating impact on health and economies globally, governments—including Thailand’s—have implemented preventive and responsive measures in an attempt to mitigate that impact. On May 24, 2020, for example, the Committee for Government Procurement and Supplies Management circulated guidelines for the administration of contracts between private parties during the COVID-19 pandemic, announcing that the COVID-19 pandemic qualifies as a force majeure event. The specific period of force majeure in Thailand began with the government’s announcement of a state of emergency on March 26, 2020. See the previous article for more details on this measure.
As market circumstances continue to evolve along with the impact of COVID-19, companies in Thailand are paying special attention to the role force majeure plays in navigating the various legal implications of commercial contracts during the outbreak.
Force Majeure Clauses under Thai Law
In the midst of the COVID-19 pandemic many are wondering whether parties will be excused from performance under the doctrine of force majeure, by which parties can be excused from contractual performance that becomes impossible due to an extraordinary or exogenous event.
For contracts that have no force majeure clause, the definition of force majeure under section 8 of the Civil and Commercial Code will automatically be applied. However, parties may negotiate a force majeure clause and establish a course of action to follow in such events of force majeure. This clause can also pertain to things like excuse of liability, right to terminate or revise the contract, and distribution of damages due to force majeure.
Every force majeure clause should be considered and interpreted separately and in light of the contract as a whole, as the precise terms of that clause will control the outcome. It may be easier to argue COVID-19 has triggered a force majeure clause if the clause expressly includes a pandemic, epidemics, or quarantines as examples of events giving rise to the clause. For example, the WHO categorizing COVID-19 as a pandemic should lend support to parties seeking to enforce force majeure clauses in contracts that contain the term. In the absence of these examples, a party claiming the benefit of a force majeure clause would first have to demonstrate that COVID-19 is a circumstance that falls within the language of the provision.