Coronavirus Pandemic as Force Majeure and Its Effect on Contracts

With the infectious respiratory disease that originated in China and is known as Corona Virus (Covid-19) showing its effects worldwide in a short period of time and posing a global threat, the coronavirus was classified as a pandemic by the World Health Organization. While the problems caused by the pandemic in the economic sphere, as in many other areas, increase day by day, delays or difficulties in performance are likely to occur, particularly in commercial relationships. In our country as well, the disruptions that will arise as a result of the precautionary measures implemented against the pandemic raise the question of whether the coronavirus pandemic can be characterized as force majeure in law.

What is Force Majeure?

In order to interpret whether the coronavirus constitutes force majeure, it is first necessary to define force majeure. Force majeure, although not explicitly defined in legislation, can generally be defined as an event that occurs without any fault, and that is impossible to foresee and prevent. Although force majeure is not defined in legislation, certain conditions are prescribed by both doctrine and Court of Cassation decisions for an event to be considered force majeure. Generally, these conditions are:

• The event in question must have occurred without the fault of the parties
• It must be unforeseeable
• It must be impossible to prevent the event from rendering performance impossible despite all precautions

In addition to these fundamental conditions, the Court of Cassation also evaluates the impact of the event claimed to constitute force majeure on the country at large, its effect on similar legal events and relationships, and whether the parties are merchants. To summarize briefly, for an event to be characterized as force majeure, the elements of absence of fault, unforeseeability, and unavoidability must exist together. The event in question may be natural, social, legal, or human. In this context, earthquakes, floods, fires, and epidemic diseases are considered force majeure. Court of Cassation General Assembly of Civil Chambers, 2017/1190E. and 2018/1259K: "Force majeure is an extraordinary event that occurs outside the activity and enterprise of the responsible party or debtor, that absolutely and inevitably leads to the violation of a general norm of conduct or an obligation, and that is impossible to foresee and resist (Eren, F.: Law of Obligations General Provisions, Ankara 2017, p. 582). Natural disasters such as earthquakes, floods, fires, and epidemic diseases are considered force majeure." As clearly seen in the Court of Cassation decision, "epidemic diseases" that occur without any fault, are unforeseeable, and unavoidable are accepted as force majeure. Can the Coronavirus Be Considered as Force Majeure? Considering that the coronavirus is a type of epidemic disease, it has the adequacy to be accepted as force majeure in this regard. However, this alone should not be sufficient to claim force majeure. When determining the impact of the coronavirus and an event generally considered as force majeure, it is necessary to evaluate together whether there is a causal link between the force majeure and the impossibility of performance, the force majeure clauses of the contract and whether epidemic diseases are included within the scope of these clauses, and whether alternative performance options exist.

What Are the Consequences of Accepting the Coronavirus as Force Majeure?

If, upon evaluating all these matters together, the coronavirus is accepted as force majeure, the provisions regarding "impossibility of performance" regulated in Turkish Code of Obligations Article 136 shall apply. Accordingly:

1- The obligation is extinguished!

Turkish Code of Obligations Article 136/1: "If the performance of an obligation becomes impossible due to reasons for which the debtor cannot be held responsible, the obligation is extinguished." Pursuant to this provision, if the fulfillment of obligations under the contract becomes impossible without the fault of the debtor, the debtor's obligation to fulfill their duties is eliminated.

2- The debtor who is released from the obligation must return the performance received from the other party!

Even though the obligation is extinguished, pursuant to Article 136/2, the performance received under the contract whose performance has become impossible must be returned. Otherwise, a lawsuit may be filed under the provisions of unjust enrichment.

3- The debtor is obligated to notify the creditor without delay that performance has become impossible and to take the necessary measures to prevent the increase of damages!

In the event of impossibility of performance, pursuant to Article 136/3, the debtor who learns that the performance of the obligation has become impossible due to force majeure must notify the creditor of this situation as soon as possible. Otherwise, the debtor will be liable to compensate the creditor's damages arising from such failure.

4- If performance does not become impossible but becomes significantly more difficult, the relevant party may request adaptation!

In cases where performance has not become impossible due to force majeure but has become significantly more difficult, it is possible to request the adaptation of the contract to the new conditions pursuant to Turkish Code of Obligations Article 138, and in cases where adaptation is not possible, to exercise the right of rescission.

What Are the Required Conditions for Requesting Adaptation?

• There must be an extraordinary situation that arose after the contract was concluded
• The party requesting adaptation must not have been able to foresee this extraordinary situation
• The obligation must not yet have been performed, or must have been performed with the rights arising from the excessive difficulty of performance reserved
• Expecting the debtor to perform must constitute a violation of the "good faith" principle under Turkish Civil Code Article 2

Court of Cassation 3rd Civil Chamber, Decision dated 09.10.2019, Case 2018/5741E, Decision 2019/7695K

''In our law, the principles of pacta sunt servanda (binding force of contracts) and freedom of contract are accepted. According to these principles, a contract should be performed exactly as it was at the time it was concluded. In other words, even if the contract conditions have subsequently become more burdensome for the debtor and the balance of performances has changed due to subsequent events, the debtor must perform their obligation under the contract as agreed. The principle of binding force of contracts constitutes a fundamental principle of contract law as a requirement of legal certainty, good faith, and the rule of fairness. However, this principle has been limited by other principles of private law. In Turkish law as well, by drawing inspiration from Articles 2 and 4 of the Civil Code, it has long been accepted that adaptation lawsuits can be heard by applying both the clausula rebus sic stantibus principle and the Theory of Collapse of the Basis of the Transaction.'' As seen in the Court of Cassation decision, in cases where extraordinary situations arise after the conclusion of the contract that are unforeseeable and that disrupt the balance between performances, it is possible to request the adaptation of the contract to the changed conditions if the above-mentioned conditions are met. Therefore, in cases where performance becomes significantly more difficult due to the coronavirus pandemic, adaptation may also be requested if the necessary conditions are met. In conclusion; in light of all these explanations, the coronavirus, which was declared a "pandemic" by the World Health Organization and is rapidly spreading and showing its effects in many areas worldwide, is of a nature that can be accepted as force majeure. However, in order to prevent any loss of rights, this issue should be further examined within the context of each contract, taking into account the specific circumstances of the case. For the legal aspects, legislation, and latest developments regarding the Coronavirus Pandemic, click here. Atty. Kadir Kurtulus - Atty. Gulsah YAZMACI