1. May force majeure be relied on by a
party to a contract, even if the parties
have not included a force majeure clause?
No. Common law does not automatically apply the
principles of Force Majeure to contracts. In order for
Force Majeure to be invoked it needs to be covered in a
clause of the contract. Many commercial contracts
include “Force Majeure clauses” either as a separate
clause itself or equal wording is included within other
clauses (i.e. termination clause).
2. If so, please explain in which
circumstances force majeure may be relied
on.
Although Force Majeure has not been defined in law,
some guidance as to its definition can be found in the
case law of the Courts of Cyprus which follow common
law principles on the issue of Force Majeure. Force
Majeure comes into play when an unforeseeable event,
outside the control of parties to a contract, prevents one
or both parties from fulfilling their contractual
obligations. Force Majeure operates either through the
doctrine of Frustration or by specific provisions within
the contract of the parties themselves, the Force
Majeure Clauses.
A party to a contract will be allowed to suspend his
obligations depending on the wording of the Force
Majeure clause. Most often, Force Majeure clauses
specify whether contractual obligations are to be
suspended and if so for how long. Usually, it will be for
as long as Force Majeure lasts and hinders the parties’
ability to perform their contractual obligations.
In practice, most Force Majeure clauses are of a
suspensory nature and the contract is taken to resume
once the Force Majeure, incident comes to an end,
unless the parties agree otherwise. On the other hand, if
the event causing the inability to perform amounts to
frustration of the contract (another legal concept) then
the contract is automatically discharged and both parties
excused from performing their obligation.
3. Is the concept of force majeure
enshrined in legislation?
No. There is no statutory definition of “Force Majeure” in
Cyprus. Cyprus is a common law jurisdiction and the
term has not been universally recognised or defined in
common law jurisdictions.
Force Majeure clauses allocate risk between parties to a
contract when performance of contractual obligations
becomes impossible due to the occurrence of such an
event. In practice, it excuses one or both parties from
non-performance of contractual obligations, but it does
not necessarily imply the immediate termination of the
contract. Due to the fact that Force Majeure may only be
invoked if explicitly covered in the contract, the
consequences of such event occurring will be set out in
the contract itself. Hence, the Courts are tasked with
examining the wording of the agreement to ensure that
facts of a specific case fall within the ambit of a Force
Majeure clause and to assess the intentions of the
parties when contracting. A Force Majeure clause
commonly provides for the obligations of one, or both
parties, to be suspended and/or for the time within which
they should be performed extended and/or delayed
and/or even be altogether excused.
In the first instance case of Demetris Gerolemou a.o v.
Giovani Developers Limited a.o. Action No. 801/2012,
08/01/2018, the Court defined “Force Majeure” by
relying on the English case Greenock Corp. v Caledonian
Ry (1917) A.C.556, as a “random and unpredictable
event that falls outside the human factor and could not
be reasonably predicted”.
If an appropriate force majeure clause has not been
inserted in a contract, a party would be unable to rely on
an event of Force majeure, save where such an event
leads to a frustration of the contract. The doctrine of
frustration is a common law principle which has been
transplanted and codified into Cyprus Law under section
56 of the Cyprus Contract Law (Cap. 149) and states that
a contract will be deemed automatically discharged
where it becomes illegal or otherwise impossible to
perform (by an event unforeseeable at the time of
contract). However, if performing the contract would be
merely financially undesirable, a party will not be able to
argue that the contract is frustrated and therefore
terminated immediately.
4. If so, may the parties agree to derogate
from the provisions of this legislation?
As mentioned above, liability of a party to a contract will
depend on the content of the Force Majeure clause and
what is provided under the clause and the contract
between the parties in general. In most instances, it is
common that such Force Majeure clauses are specifically
inserted in a contract with the intention of avoiding
liability for such pre-defined Force Majeure events that
may occur and will allow the party relying on them to
either suspend performance or be excused all together.
5. What is the approach taken to drafting
force majeure clauses in your jurisdiction?
Force Majeure clauses need to be as specific and
detailed as possible to ensure proper allocation of risk in
the event that such a Force Majeure event occurs but
also to ensure that both parties agree to the events that
would qualify as Force Majeure if they occur. Most such
defined events are generally unforeseeable and the
interpretation of such events, as discussed above, is
generally narrow.
6. Is it common practice to include force
majeure clauses in commercial contracts?
Yes, in general such clauses are used in most
commercial contracts, ranging from commerce to
construction, as well as most commercial lease
agreements.
7. Would the courts be willing to imply
force majeure terms into contracts?
The approach taken by Cyprus courts, which follows the
English Court approach, is to apply a narrow scope for
the interpretation of Force Majeure clauses. A party
which relies on Force Majeure clause to avoid the
performance of contractual obligations due to an
increase in costs or difficulty tends to be discouraged by
the Courts. This is also due to the fact that Force
Majeure belongs in the category of exclusion or
limitation clauses; hence it should be narrowly
construed, as per relevant caselaw (National Bank of
Kazakhstan and another v The Bank of New York Mellon
SA/NV, London Branch [2018] EWCA Civ 1390).
Guided by Cypriot caselaw, in Cyprus Cinema & Theatre
Co. Ltd v. Christodoulos Karmiotis (1967) 1 CLR 42 the
Court refused to interpret facts as falling within the term
of “Force Majeure” because the relevant clause of the
contract did not refer to such circumstances.
In order to avoid liability and ensure that risk is properly
allocated during the occurrence of such events, it is
advisable to include precise and specific Force Majeure
clauses.
8. How do courts approach the exercise of
interpretation in relation to force majeure
clauses?
Most Force Majeure clauses will specifically describe
what shall constitute a Force Majeure event in the
context of the specific contract and what it shall cover.
Often, an exhaustive list of specific events amounting to
Force Majeure is included to ensure that the clause is
descriptive enough to reveal the intentions of the
parties. It is not uncommon however to have a Force
Majeure clause that is broader and/or non-exhaustive.
Nonetheless, it is not clear whether or not the Courts will
be willing to apply interpretation principles in trying to
assess whether or not an incident amounts to Force
Majeure under a contract.
9. Are there any legislative or statutory
controls on the use of force majeure
clauses?
Not as such. There is no provision in Contracts Law,
Cap.149 referring to the principle of Force Majeure. It is
worth mentioning that other principles similar to force
majeure have been codified into Cypriot legislation (i.e.
the doctrine of frustration).
10. Must an event have been
unforeseeable at the time of the contract
to permit a party to rely on it as force
majeure?
Most Force Majeure clauses included in commercial
contracts include a list of specific events that would
qualify as Force Majeure under the specific contract.
Such events include but are not limited to wars,
earthquakes, hurricanes, floods, typhoons, riots,
governmental prohibitions, epidemics or the more general reference to “acts of God” but can also include
strikes or shortage of labour and materials, especially in
construction contracts.
It is useful to highlight the English case of Lebeaupin v
Richard Crispin and Company [1920] 2 KB 714, which is
often relied upon by Cyprus Courts, where the High
Court undertook a useful review of previous authorities
and, by way of example, contrasted war, strikes, actions
of a state such as embargoes and licence refusal, all of
which may amount to Force Majeure, with bad weather,
funerals and the rising cost of fulfilling a contract, which
will not constitute Force Majeure.
11. What types of events are generally
recognized by courts of your jurisdiction as
being force majeure?
The Courts do not explicitly recognise certain events. It
is imperative to include (a) what Force Majeure means
under the contract especially given the lack of a
universally accepted or statutory definition (b) a list of
events that would qualify as Force Majeure and/or
events that would not qualify (c) provisions describing is
the remedies and action to be taken following a Force
Majeure event. For instance, whether contractual
obligations will be suspended, extended or excused and
for how long and where the termination of the contract is
automatic after the expiration thereof, and to ensure
that the terminating party is provided with a remedy in
some form.
12. What types of events have been
dismissed by courts of your jurisdiction as
not being force majeure?
In Cyprus Cinema (discussed above) the Court had to
interpret a clause of a contract providing for Force
Majeure. The clause provided that
“if any “injury or damage” is caused by fire or other
force majeure to the premises which would prevent the
holding of cinema performances, the tenant has two
options: (a) either to rescind the contract-and in the
present case there is not rescission or disclaimer of the
lease; or (b) to continue the lease without payment of
any rent for the period during which the premises will be
under repair (the landlord having covenanted to carry
out such repairs) or, during the period that such
premises will be closed.”
The Court had to consider whether in the case of Force
Majeure (excluding fire which was explicitly stated in the
clause) the phrase “injury, damage or other Force
Majeure” referred to not only structural damage of the
building but could also cover the case where the
premises were occupied by military forces which
prevented the holding of cinema performances. The
Court held that “If we were to hold so it would be
straining the meaning of the words in their context in
clause 6 beyond breaking point. We lay stress on the
meaning of the words in their context, and in this case
the expression “Force Majeure” (we note that the Greek
equivalent of the term had been used which offers no
legal certainty) following the word “fire” in clause 6 can
only mean an Act of God, that is, the operation of
uncontrollable natural forces, such as an earthquake,
flood, storm or lightning, which could not happen by the
intervention of man. For these reasons we hold against
the appellant on the first ground.”
Furthermore, in Gerolemou (discussed above) the Court
refused to recognise economic considerations as falling
within the ambit of a Force Majeure clause. In this case,
a contract provided that if the completion and delivery of
apartments did not take place within the period
prescribed in the contract due to a serious and justified
reasons or due to Force Majeure, the buyers would be
entitled to an extension of the completion date of the
project for as long as Force Majeure lasts. If it was to last
more than 12 months, each party would be entitled to
terminate the contract and in such a case, if a dispute
existed, it would be referred to arbitration. The Court
held that the disputed contract did not include a term or
a condition that the execution of the project by
Defendant 1 depended on receiving loans from banks
and thus the suspension of lending due to an economic
crisis could not fall within the ambit of “Force Majeure”.
It referred to, inter alia, case law by the Courts of Greece
to substantiate the position that Force Majeure does not
occur in the event that the claim falls within the scope of
business activity and in its sphere of risk, as this was
foreseeable and within common experience of business
and could thus be addressed
13. Have courts recognized the COVID-19
pandemic as force majeure in your
jurisdiction?
No judgements from Cypriot Courts have been issued yet
that provide any guidance on this issue. However, since
COVID-19 has been declared by the World Health
Organisation as a pandemic, it is likely to fall under the
categories of “pandemia” or “epidemia” in a Force
Majeure clause, provided that these are explicitly
included in the clause. In addition to those, the
consequences of COVID-19 may also fall under the
category of “governmental acts” because measures
have been put in place by governmental decrees or other emergency legislation that hinder certain activities such as travel restriction, prohibition of movement,
imposed closing down of business etc. Of course, even if
COVID-19 qualifies as Force Majeure it will have to be
proven that COVID-19 affected or hindered the
performance of contractual obligations as per the
wording of the clause, and that possible steps to
mitigate losses were taken.
English Courts, from whom Cyprus Courts take guidance,
have shown a willingness to recognise that the Covid-19
pandemic or related factors could amount to a force
majeure event, depending of course on the facts of each
case and the wording of the relevant Force Majeure
clause (a relevant judgment is the judgment of Dwyer
(UK) Franchising Ltd v Fredbar Ltd & Bartlett [2021]
EWHC 1218 (Ch)). Therefore, recognition of the
pandemic as a Force Majeure is a possibility, but this will
depend on the specific facts of the case and the drafting
of the applicable clause.
14. Would a governmental decision or
announcement that an event is a force
majeure influence courts of your
jurisdiction (e.g. force majeure certificates
provided by the Chinese Government to
Chinese companies during the covid19
pandemic)?
As discussed above under question 13, certain
businesses have been directly affected by the COVID-19
pandemic. For example, restaurants and shops were
ordered to remain closed for public health reasons for a
certain period of time. To this effect, it is likely that
these emergency government measures will influence
Court decisions as the inability to perform a contract by
a party was arguably in certain cases imposed by Law.
However, we do not expect that the government will
specifically designate this pandemic as a force majeure
event. Common law jurisdictions in general do not
depend on government designations as the Courts will
take recent events into account and the caselaw guiding
Force Majeure will evolve accordingly, and provide
enhanced guidance for the future, as the circumstances
of each case brought before the Courts are examined.
We expect that Courts will examine the nature and
extent of the government measures introduced on a
case by case scenario, as those affected some
businesses more than others.
15. Does force majeure allow a party to
suspend its obligations? If yes, for how
long?
A party to a contract will be allowed to suspend his
obligations depending on the wording of the Force
Majeure clause. Most often, Force Majeure clauses
specify whether contractual obligations are to be
suspended and if so for how long. Usually, it will be for
as long as Force Majeure lasts and hinders the parties’
ability to perform their contractual obligations.
In practice, most Force Majeure clauses are of a
suspensory nature and the contract is taken to resume
once the Force Majeure incident comes to an end, unless
the parties agree otherwise.
On the other hand, if the event causing the inability to
perform amounts to frustration of the contract then the
contract is automatically discharged and both parties
excused from performing.
16. Does force majeure allow a party to
totally or partially avoid liability for failure
or delay in performing its obligations?
Liability of a party to a contract will depend on the
content of the Force Majeure clause and what is
provided under the clause and the contract between the
parties in general. In most instances, it is common that
such Force Majeure clauses are specifically inserted in a
contract with the intention of avoiding liability for such
pre-defined Force Majeure events that may occur and
will allow the party relying on them to either suspend
performance or be excused all together. It is noted that
an event amounting to frustration will allow a party to
completely avoid liability.
17. Does force majeure give a party the
potential right to terminate the contract?
This will again depend on the wording of a Force Majeure
clause and the circumstances surrounding the
termination. A careful examination of the contract will be
necessary because such “Force Majeure clauses”,
depending on the nature of the agreement, may be
included under broader headings (for example under a
termination clause).
Nonetheless, in practice, Force Majeure clauses usually
provide for the suspension of contractual obligations
and/or extension of performance periods and can rarely
be relied upon to terminate altogether an agreement
unless this is explicitly provided for in the contract. In
common law systems, including Cyprus, the doctrine of
frustration, also defined under Cyprus Contract Law, is
more frequently relied on as a basis for the termination
of a contract as if applicable will automatically terminate
the contract
18. On whom would the burden of proof lie
when attempting to rely on force majeure?
The burden of proof lies on the party which relies on the
Force Majeure clause, in order to prove that the nonperformance
was solely due to the relevant event and
that the event falls within the clause (this is further
supported by caselaw, i.e. in Gerolemou discussed
above).
19. What would a party seeking to rely on
force majeure be required to show?
A very important factor in order to prove that the
circumstances were beyond the party’s control is the
close connection of the Force Majeure event with the
party’s non-performance as evidenced in English
caselaw which often offers guidance to Cypriot Courts
(i.e. National Bank of Kazakhstan and another v The
Bank of New York Mellon SA/NV, London Branch [2018]
EWCA Civ 1390). Additionally, it is also crucial that the
sole reason which allegedly deems a party unable to
perform its contractual obligation should be the Force
Majeure event and that such reason was communicated
to the other party (as discussed in Intertradex v Lesieur
[1978] 2 Lloyd’s Reports 509).
20. To what extent is a party required to
mitigate its position/losses before seeking
to rely on force majeure?
The rule that Force Majeure covers events outside the
control of the parties implies that reasonable steps were
taken if possible to mitigate the results of an event
occurring. Hence, even if a Force Majeure clause does
not explicitly provide for mitigation of loss, in practice, a
party may still be required to prove that he could not
mitigate losses as it would be reasonably expected.
Further to this point, In Channel Island Ferries Ltd v
Sealink UK Ltd [1988] 1 Lloyd’s Rep 323, the Court of
Appeal stated that any clause which included language
referring to events “beyond the control of the relevant
party” could only be relied on if that party had taken all
reasonable steps to avoid its operation or mitigate its
results.
21. Are there any applicable notice
requirements which an affected party
would be required to comply with before
invoking force majeure?
Force Majeure clauses may require parties to give notice
before invoking Force Majeure. Specifics as to notice
may also be set out in the relevant provision of how such
notice is to be given, within which particular time period
and the consequences.
22. What is the consequence of failing to
comply with such notice requirements?
This will again depend on the wording of the Force
Majeure clause. In the Gerolemou case (above) the
Court, having analysed the facts of the case, noted that
the Defendant Company relying on a Force Majeure
clause had not notified the Plaintiffs of the issues it was
facing and despite demanding for an extension of time
to perform its contractual obligations it never notified
the Plaintiffs of the alleged Force Majeure event or any
of the facts that it was alleging before the Court. This
played a significant role to the Court as the facts of the
case did not fall under the ambit of the Force Majeure
clause as alleged by the Defendant. Therefore it is
important to note that the occurrence of a Force Majeure
event should be explicitly stated on any such notice
along with details of such event and the effect on the
agreement.
23. What would be the impact of force
majeure on any prepayments made under
contractual arrangements?
This would depend on the specific agreement and
circumstances. For example if the agreement would
concern a recurring service, then service could be
discounted, delayed or any balances carried forward. A
refund is likely only when such an agreement would be
seriously affected by delay.
24. What contractual remedies are
available to affected parties, other than
force majeure?
As mentioned above, the doctrine of frustration would be
available to affected parties. The principle of frustration
is a common law principle which has been transplanted
and codified into Cyprus Law under section 56 of the
Cyprus Contract Law (Cap. 149) and states that a
contract will be deemed automatically discharged where
it becomes illegal or otherwise impossible to perform (by
an event unforeseeable at the time of contract).
Under normal circumstances, the use of frustration as a
principle is rare as the threshold for frustration, as
established by legal precedent, is very high. When
claiming frustration, the party seeking to terminate the
contract must prove that the obligations to perform
certain actions have become impossible, illegal, or
radically different from what was contemplated when the
contract was made. Further the party must be able to
prove that applying prudent business sense, it could not
have prevented or mitigated the causes leading to the
frustration of the contract.
25. What effect does force majeure have
on consumer contracts? When can a
producer or retailer effectively rely on this
concept?
For a trader to be able to effectively rely on a Force
Majeure clause for the suspension of the performance of
a contractual obligation, or to be excused from the
performance thereof altogether:
a. The term has to be incorporated in an effective
manner into the contract, determined and defined in line
with common law principles.
b. Limited in terms delays that are caused inevitably by
factors beyond his control.
c. The trader takes reasonable steps to prevent or
minimise delay.
d. If there is a risk of substantial delay, the consumer
shall have a right to terminate the contract.
A party would not be able to rely Force Majeure where it
is not explicitly stated in the clause of the contract.
However, depending on the nature of the consumer
agreement (i.e. provisions of goods, travel, banking)
certain specific legislation may apply that may provide
alternative remedies and/or insert different provisions
for consumers.
26. What type of insurance policy could
cover force majeure events in your
jurisdiction?
As there is no general rule or legislation guiding this
issue, it would depend on the circumstances of the case,
the specific clauses inserted in the insurance policy, the
type of insurance, and the wording of the applicable
Force Majeure clauses.
27. Are there any plans for reform in your
jurisdiction, in terms of enacting new
legislation or amending existing legislation
(both for the short-term and long-term), to
assist parties with force majeure, given the
recent COVID-19 pandemic?
Although a number of emergency legislative measures
have been implemented to assist business and
individuals to cope with the financial fallout from the
COVID-19 pandemic that range from eviction protection
to grants and loan subsidies, which although in 2021
have become more targeted to industries and individuals
that have been affected most by this pandemic, to the
best of our knowledge there are no plans to enact any
reforms concerning Force Majeure. As discussed above,
Force Majeure is not codified or enshrined in any
legislation in Cyprus and can be used by parties, at their
discretion, when drafting agreements in order to protect
from liability under unforeseen circumstances and it is
expected that case law in the future will provide
guidance for the future of this legal concept.