Q&A: shipbuilding in China – Lexology

Bizar Male

Participation and ownership

Restrictions on foreign participation and investment

Is the shipbuilding industry in your country open to foreign participation and investment? If it is open, please specify any restrictions on foreign participation.

Yes. In 2018, the State Council issued a circular to cancel or release restrictions on foreign investment in manufacturing sectors, including shipbuilding. The Ministry of Commerce and the National Development and Reform Commission jointly issued the Special Administrative Measures for Foreign Investment Access (Negative List) 2018, cancelling the requirements for designing, manufacturing and repairing of ships previously restricted by the Chinese authorities. Therefore, China has now fully opened up the shipbuilding and offshore equipment field to foreign participation.

So far all the restrictions relating to the shipbuilding industry have been lifted. Foreign participants may refer to the general and basic restrictions and requirements under the Foreign Investment Law of PRC or the Regulation for Implementing the Foreign Investment Law of PRC.

Government ownership of shipbuilding facilities

Does government retain ownership or control of any shipbuilding facilities and, if so, why? Are there any plans for the government divesting itself of that participation or control?

The government retains ownership and control of the main shipbuilding facilities. To develop the shipbuilding industry in China, improve its competitive edge in the global shipbuilding market and implement the Belt and Road Initiative, the government’s ownership and control can organise capital and the workforce more efficiently. The government’s present participation seems to be working effectively, and many state-owned companies are flourishing and expanding – for example the merger of China State Shipbuilding Corporation Limited and China Shipbuilding Industry Corporation, and the China Merchants Industry Holdings Corporation Limited has planned to integrate the shipbuilding business of China International Marine Containers Corporation Limited and Aviation Industry Corporation of China International Holding Limited.

Key contractual considerations

Statutory formalities

Are there any statutory formalities in your jurisdiction that must be complied with in entering into a shipbuilding contract?

No. However, the parties may need to follow the provisional rules of the Ships and Marine Technology Legal System Framework (2020) issued by the China Maritime Safety Administration.

Choice of law

May the parties to a shipbuilding contract select the law to apply to the contract, and is this choice of law upheld by the courts?

It is common for the parties to a shipbuilding contract to choose English law as the governing law and, if so, arbitrations will be the dispute resolution mechanism preferred by the parties to the contract.

However, the question of whether the parties can choose the governing law of the contract will depend on whether there are any foreign-related elements involved. The foreign-related elements include but are not limited to: (i) the parties; (ii) the habitual residence of the parties; (iii) the subject matter of the contract; and (iv) the legal facts. If there exists one or more foreign-related elements in the shipbuilding contract, the parties may select their own applicable governing law. Otherwise, only PRC law shall be adopted.

Nature of shipbuilding contracts

Is a shipbuilding contract regarded as a contract for the sale of goods, as a contract for the supply of workmanship and materials, or as a contract sui generis?

This depends on the agreement between the parties and the contractual terms. In theory, the shipbuilding contract can be agreed to be a contract for the supply of workmanship and materials in accordance with the definition in the Civil Code. However, for the construction of a vessel with large capital requirements and long shipbuilding period, the nature of a contract for the sale of goods is usually agreed between the parties.

Hull number

Is the hull number stated in the contract essential to the vessel’s description or is it a mere label?

The hull number stated in the contract is essential to the vessel’s description, and the shipbuilding contract can also be specified from the particular hull number. The hull number will usually be listed in the first line of the shipbuilding contract and draw the distinction between different ships and shipbuilding contracts. Currently, there are many ship codes and coding systems, including ship registration number, ship inspection registration number, ship call sign, IMO number, ship MMSI, and most importantly the Chinese permanent identification number. However, the hull number can be the initial number in the shipbuilding contract and available before the delivery. Other types of number can be applied after the construction of the ship.

Deviation from description

Do ‘approximate’ dimensions and description of the vessel allow the builder to deviate from the figure stated? If so, what latitude does the builder have?

The agreed dimensions and description should be strictly adhered to. Deviation from the figure stated can be allowed, subject to the agreed vessel specifications, the industry standard, the classification standard and national quality standard. The official quality standard is the China Shipbuilding Quality Standard (GB/T 34000-2016).

Guaranteed standards of performance

May parties incorporate guaranteed standards of performance whose breach entitles the buyer to liquidated damages or rescission? Are there any trade standards in your jurisdiction for coating, noise, vibration, etc?

Yes. The parties are free to incorporate guaranteed standards of performance. Where a party fails to perform its obligations, and the other party still suffers from other losses after the performance of the obligations or adoption of remedial measures, the party shall compensate the other party for such losses.

In addition, there are trade standards for coating, noise and vibration, such as Technical Requirement for Environmental Labelling Products – Ship Anti-fouling Paints (HJ 2515-2012) (China Environmental Labelling represents that the product not only is required to meet quality standards but also meets the specific requirements of environmental protection during production, use and disposal, which has the environmental advantages of low toxicity, less harm and saving resources as compared with other similar products) and Measurement of Noise on Board Vessels (GB/T 4595-2020).

Quality standards

Do statutory provisions or previous cases in your jurisdiction give greater definition to contractual quality standards?

Statutory provisions or previous cases rely on the general and basic quality standards. The quality standard in the contract will usually be interpreted according to the words used, taking into account the general requirements in regard to the relevant clauses, nature and purpose of the act, customs, and the principle of good faith (Article 142 of the Civil Code).

Classification society

Where the builder contracts with the classification society to ensure that construction of the vessel leads to the buyer’s desired class notation, does the society owe a duty of care to the buyer, or can the buyer successfully sue the classification society, if certain defects in the vessel escape the attention of the class surveyors?

In practice, the buyer would rarely sue the classification society for defects in the vessel escaping the attention of the class surveyors, and the classification society does not owe a duty of care to the buyer.

The classification society may bear a similar liability to an administrative institution. In accordance with the Measures on Investigating Work Faults of Ship Inspection Agencies and Ship Surveyors, amended in 2008, the class surveyor can be penalised based on different types of fault. However, the duty of care and compensation liability to the buyer are not mentioned in this regulation. If the classification society is the authorised institution bearing liability under the administrative law, the buyer may rely on the Law of the People’s Republic of China on State Compensation and claim for compensation. However, so far there is no precedent or practice adopting the above mechanism.

Flag-state authorities

Have the flag-state authorities of your jurisdiction outsourced compliance with flag-state legislation to the classification societies? If so, to what extent?

Yes, with the authorisation of the administrations of the flag state, China Classification Society (CCS) carries out statutory survey and other services as authorised by the administrations of PRC. The main responsibility of CCS is to perform statutory surveys for ships and offshore installations and it also provides verification surveys, notarial surveys, certification and accreditation and other services in accordance with international conventions, regulations and related rules of the authorising flag state.

Registration in the name of the builder or the buyer

Does your jurisdiction allow for registration of the vessel under construction in the local ships register in the name of the builder or the buyer? If this possibility exists, what are the legal consequences of this registration?

Yes.  It is permissible to register a local ship in the name of the builder or the buyer. The registration name is the prima facie evidence of the ownership of the ship. As such, the registered owner can operate the vessel or establish general mortgage or ship financing mortgage on the ship.

Title to the vessel

May the parties contract that title will pass from the builder to the buyer during construction? Will title pass gradually, upon the progress of the vessel’s construction, or at a certain stage? What is the earliest stage a buyer can obtain title to the vessel?

It depends on parties’ agreement and the nature of the contract. If it is a contract for the sale of goods, the ship shall be owned by the builder before delivery. In general, the builder should be entitled to the ownership of the ship before delivery based on the fact of construction. Further, it is usually agreed in the shipbuilding contract that the risks rest with the builder until delivery and acceptance. Hence, the title to the ship may remain with the builder until acceptance and delivery of the ship.

If it is a contract for the supply of workmanship and materials, then the ship shall be owned by the buyer as the ordering party after the commencement of construction. In accordance with the Civil Code, the ordering party under the contract for the supply of workmanship and materials may terminate the contract at any time before the contractor completes the work, but it shall be liable for compensating any losses suffered by the contractor. Hence, it is not beneficial to the builder to agree the contract as a contract for the supply of workmanship and materials.

Passing of risk

Will risk pass to the buyer with title, or will the risk remain with the builder until delivery and acceptance?

It depends on the parties’ agreement and the nature of the contract. The parties can reach agreement on risks in the shipbuilding contract. In practice, the mainstream view is that the shipbuilding contract is a contract for the sale of goods and the ship shall be owned by the shipbuilder before delivery. Accordingly, the risks shall remain with the builder until delivery and acceptance.

If the shipbuilding contract is a contract for the supply of workmanship and materials, then the buyer as the ordering party shall hold the ownership of the ship after construction commences. Thus, the risks will pass to the buyer.

Subcontracting

May a shipbuilder subcontract part or all of the contract and, if so, will this have a bearing on the builder’s liability towards the buyer? Is there a custom to include a maker’s list of major suppliers and subcontractors in the contract?

Subject to the buyer’s consent, the builder may delegate part of the contracted work to a subcontractor. The subcontractor shall be jointly and severally liable to the buyer in respect of the work completed by such contractor. However, the builder may not assign all of the contract to any subcontractors, or divide the whole construction into several parts and assign each part separately to a subcontractor under the guise of subcontracting.

It is the custom to include a list of major suppliers and subcontractors in the contract. A builder is prohibited from subcontracting any part of the construction to an entity which is not appropriately qualified.

Extraterritorial construction

Must the builder inform the buyer of any intention to have certain main items constructed in another country than that where the builder is located, or is it immaterial where and by whom certain performance of the contract is made?

Subject to the buyer’s consent and the terms of the contract, it is possible for the builder to have certain main items constructed in other countries. The builder as the contractor shall use its own equipment, skills and labour to complete the main part of the work, except as otherwise agreed upon by the parties.

Pricing, payment and financing

Fixed-price and labour-and-cost-plus contracts

Does the law in your country have different provisions for ‘fixed-price’ contracts and ‘labour-and-cost-plus’ contracts?

Neither ‘fixed price’ contracts nor ‘labour and cost plus’ contracts will be affected by the provisions. The parties are free to reach the agreement.

Price increases

Does the builder have any statutory remedies available to charge the buyer for price increases of labour and materials despite the contract having a fixed price?

Yes, however subject to particular conditions. Where the basic conditions of the shipbuilding contract undergo a material change that is unforeseeable by the parties at the time of contracting and which is not a commercial risk after the formation of the contract, and thereby the continuation of the performance of the contract will cause obvious unfairness to the builder, the buyer may renegotiate with the builder. If the renegotiation fails within a reasonable time limit, the parties may request the courts or arbitration institutions to amend or terminate the contract in accordance with the principle of fairness.

Retracting consent to a price increase

Can a buyer retract consent to an increase in price by arguing that consent was induced by economic duress?

Basically speaking, yes, however subject to proven authenticity. Where the consent to an increase in price is performed by the buyer contrary to their true will or intention as a result of duress by the builder, the buyer has a right to request the courts or arbitral institutions to revoke its consent. The burden of proof rests on the buyer.

Exclusions of buyers’ rights

May the builder and the buyer agree to exclude the buyer’s right to set off, suspend payment or deduct certain amounts?

Yes, the parties are at liberty to agree and modify the terms in the contract. However, when the builder incorporates standard terms that unreasonably exclude or limit its liability, aggravate the buyer’s liability or restrict the buyer’s major rights, such standard terms shall be invalid.

Refund guarantees

If the contract price is payable by the buyer in pre-delivery instalments, are there any rules in regard to the form and wording of refund guarantees? Is permission from any authority required for the builder to have the refund guarantees issued?

No particular rules stipulate the form and wording of refund guarantees and the parties are free to reach their own agreement. In general, it is not necessary to obtain permission from any authority unless this is required by the agreed bank of refund guarantees.

Advance payment and parent company guarantees

What formalities govern the issuance of advance payment guarantees and parent company guarantees?

There are no particular formalities regarding advance payment guarantees and parent company guarantees. The parties are free to agree on the form, wording, bank and coverage of the guarantees.

Financing of construction with a mortgage

Can the builder or buyer create and register a mortgage over the vessel under construction to secure construction financing?

Yes. Subject to the nature of the shipbuilding contract, the builder or buyer that holds ownership of the ship under construction can establish and register a mortgage to secure construction financing.

Default, liability and remedies

Liability for defective design (after delivery)

Do courts consider defective design to fall within the scope of poor workmanship for which the shipbuilder is liable under the warranty clause of the contract?

The courts will comprehensively consider the facts and investigate the causation in order to determine whether the builder is liable under the warranty clause of the contract for defective design.

Remedies for defectiveness (after delivery)

Are there any remedies available to third parties against the shipbuilder for defectiveness?

Third parties can claim against the builder for defectiveness based on the principle of tort. The third party will be entitled to compensation and to request the manufacturer or builder to undertake the tort liability by ceasing infringement, removing the obstruction or eliminating the danger.

When the ship under construction or the delivered off-spec ship has caused environmental pollution or ecological damage resulting in serious consequences, the builder will need to undertake the tort liability and compensate the third party.

Liquidated damages clauses

If the contract contains a liquidated damages clause or a penalty provision for late delivery or not meeting guaranteed performance criteria, must the agreed level of compensation represent a genuine link with the damage suffered? Can courts mitigate liquidated damages or penalties agreed in the contract, and for what reasons?

No genuine link with the damage suffered is compulsorily required when deciding the level of compensation. However, the courts or arbitration institutions may, at the request of a party, adjust the amount of liquidated damages agreed upon based on the damages suffered. PRC law does not expressly prohibit the stipulation of a ‘penalty’ in the contract. Nevertheless, there are certain limits – for instance, the liquidated damages cannot be ‘significantly higher’ than the damage suffered. Pursuant to the Interpretation II of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of PRC (expired now due to the Civil Code absorbing the PRC Contract Law, but this practice will generally be supported by the courts or arbitration institutions), if the liquidated damages sum agreed on by the parties exceeds the damage suffered by 30 per cent, generally it shall be deemed as ‘significantly higher’ and the courts or arbitration institutions may mitigate the agreed liquidated damages, at the request of a party. However, the party may still need to take the burden of proof for the damage suffered, for the courts to satisfy the 30 per cent threshold.

Preclusion from claiming higher actual damages

If the building contract contains a liquidated damages provision, for example, for late delivery, is the buyer then precluded from claiming proven higher damages?

The buyer will not be precluded from claiming proven higher damages and will be entitled to recover the same if ascertained by the courts or arbitration institutions. Where the amount of liquidated damages agreed upon is lower than the damages suffered, the courts or arbitration institutions may, at the request of the buyer, increase the amount of liquidated damages. Pursuant to Interpretation II of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of PRC, the amount of the liquidated damages after the increase shall not exceed the amount of the actual damages.

Force majeure

Are the parties free to design the force majeure clause of the contract?

Yes, the force majeure clause can include various force majeure events in detail. In order to rely on force majeure events and obtain an extension to the delivery date, the shipyard may consider establishing at least the following three points:

  • the event – there has been a force majeure event under the force majeure clause of the shipbuilding contract;
  • the causation – the delay to the construction process or delivery of the vessel is caused by the force majeure event; and
  • the notice requirements – the notice requirements set out in the force majeure clause are satisfied.

Umbrella insurance

Is certain ‘umbrella’ insurance available in the market covering the builder and all subcontractors of a particular project for the builder’s risks?

Yes. Subject to the terms and scope of the insurance policy, ‘umbrella’ insurance may cover the builder, all named subcontractors, the general contractor, the supervising engineer employed by the builder, and the individuals or enterprises having a close relationship with the project (eg, the loan banks or investors).

Disagreement on modifications

Will courts or arbitration tribunals in your jurisdiction be prepared to set terms if the parties are unable to reach agreement on alteration to key terms of the contract or a modification to the specification?

In general, the courts or arbitration tribunals will not make a decision to set terms, but award other remedies based on the legal facts and parties’ claims.

Acceptance of the vessel

Does the buyer’s signature of a protocol of delivery and acceptance, stating that the buyer’s acceptance of the vessel shall be final and binding so far as conformity of the vessel to the contract and specifications is concerned, preclude a subsequent claim for breach of performance warranties or for defects latent at the time of delivery?

No. In circumstances where the builder furnishes standard terms unreasonably excluding or limiting its liability, aggravating the liability of the buyer or restricting the main rights of the buyer, the standard terms shall be invalid.

Repair location and associated costs

When repairs or replacements covered under the warranty must be carried out, may the buyer insist they be carried out at a shipyard or facility not operated by the builder? Must the buyer bear all costs associated with moving the vessel to the location selected for the repair and replacement work and any sea trials? If the remedial work requires the vessel to be docked, will the costs be covered under the warranty, or will the buyer have to pay?

For the location of repairs or replacements and associated costs, the parties can reach further agreement and negotiate regarding the remedial measures. There are no statutory requirements as to how and to what extent to perform the remedial measures. However, the builder may rely on the protective standard terms in the contract and require to repair at its shipyard. If this is the case, the buyer may leave the issue to be determined by the courts.

Liens and encumbrances

Can suppliers or subcontractors of the shipbuilder exercise a lien over the vessel or work or equipment ready to be incorporated in the vessel for any unpaid invoices? Is there an implied term or statutory provision that at the time of delivery the vessel shall be free from all liens, charges and encumbrances?

Yes, it is legitimate for suppliers or subcontractors of the builder to exercise a lien. Unless otherwise provided by the law, the builder as the seller shall have the obligation to warrant that no third party has any right to the delivered ship. Hence, the builder shall warrant no liens, charges and encumbrances on the ship pursuant to the statutory provision.

Reservation of title in materials and equipment

Does a reservation of title by a subcontractor or supplier of materials and equipment survive affixing to or incorporation in the vessel under construction?

The different machinery, equipment, spare parts and structures will be mixed, processed and attached together to constitute the ship, and the ship can be the property arising from processing, attachment or mixing under Article 322 of the Civil Code; usually the ownership shall be determined under the principles of maximum use of the property and protection of innocent parties. Hence, the reservation of title in materials and equipment can only bind the builder, because the builder has the direct contractual relationship with the subcontractor or supplier, and the buyer’s ownership shall not be infringed by the reservation of title.

Third-party creditors’ security

Assuming title to the vessel under construction vests with the builder, can third-party creditors of the builder obtain a security attachment or enforcement lien over the vessel or equipment to be incorporated in the vessel to secure their claim against the builder?

In this case, the third-party creditors of the builder can apply to the courts to obtain or register a security attachment or enforcement lien over the vessel or equipment to secure their claim against the builder, and further have priority in receiving payment of compensation, namely, the third-party creditors will be awarded priority to receive compensation from the debtor as compared with other common creditors.

Subcontractor’s and manufacturer’s warranties

Can a subcontractor’s or manufacturer’s warranty be assigned to the buyer? Does legislation entitle the buyer to make a direct claim under the subcontractor’s or manufacturer’s warranty?

Unless otherwise modified by the parties, the subcontractor’s and manufacturer’s warranty can normally be assigned to the buyer. On condition of obtaining consent from the buyer, the builder may delegate part of the contracted work to a subcontractor. The subcontractor shall be jointly and severally liable to the buyer in respect of the work completed by the contractor. Thus, the buyer can make a direct claim under the warranty against the subcontractor or the manufacturer.

Meanwhile, based on the alternative remedy of tort, the buyer has the option to claim against the subcontractor or manufacturer for compensation of actual losses sustained as a result of the defectiveness of the product.

Default of the builder

Where a builder defaults in the performance of the contract, is there a legal requirement to put the builder in default by sending an official notice before the buyer’s remedies begin to accrue? What remedies will be open to the buyer?

Unless otherwise agreed in the shipbuilding contract, there is no compulsory requirement to put the builder in default by sending notice before the buyer’s remedies begin to accrue. The remedies can be specific performance or claim for damages or both, if applicable.

Remedies for protracted non-performance

Are there any remedies available to the shipowner in the event of protracted failure to construct or continue construction by the shipbuilder apart from the contractual provisions?

Where the builder fails to perform its obligations under the shipbuilding contract, or its performance fails to satisfy the terms of the contract, the builder shall take remedial measures, pay damages, or be otherwise held liable for breach of contract. Where the parties agree upon liquidated damages in respect of the delay in performance, the builder in breach shall still perform the obligations after paying the liquidated damages.

Builder’s insolvency

Would a buyer’s contractual right to terminate for the builder’s insolvency be enforceable in your jurisdiction?

Unless otherwise agreed in the shipbuilding contract that the buyer is entitled to terminate the contract for the builder’s insolvency, the insolvency administrator of the builder (if instructed) will normally be in charge of the builder’s business when the insolvency is declared and the administrator will decide whether to terminate the contract.

Judicial proceedings or arbitration

What institution will most commonly be agreed on by the parties to decide disputes?

The parties are free to agree qualified arbitration institutions – the most commonly agreed arbitration institutions under the general shipbuilding contract are the China Maritime Arbitration Commission and the China International Economic and Trade Commission.

In general, if no arbitration agreement can be reached by the parties or the shipbuilding contract does not include any ADR clauses, the relevant maritime court where the shipyard is located would have jurisdiction to deal with shipbuilding disputes.

Buyer’s right to complete construction

Would a buyer’s contractual right to take possession of the vessel under construction and continue construction survive the bankruptcy or moratorium of creditors of the builder?

In the event of the bankruptcy or moratorium of creditors of the builder, the bankruptcy administrator will be instructed to manage the business of the builder. The administrator will evaluate and decide whether to continue construction or terminate the contract. Hence, the buyer’s contractual right to take possession of the vessel under construction and continue construction will be influenced by the administrator’s decision.

ADR/mediation

In your jurisdiction, do parties tend to incorporate an ADR clause in shipbuilding contracts?

The trend is for the parties to incorporate an arbitration clause in the shipbuilding contract.

Default of the buyer

Where the buyer defaults in the performance of the contract, what remedies will be available to the builder? What are the consequences of the builder’s cancellation of the contract?

The parties can incorporate terms regarding the consequences and remedies in case of the buyer’s default and breach. For instance, the builder can retain the advance payment and instalments, resell the vessel to a third party and claim for costs, charges, expenses and a reasonable sum for loss of profit of construction incurred in consequence of such default.

Contract forms and assignment

Standard contract forms

Are any standard forms predominantly used in your jurisdiction as a starting point for drafting a shipbuilding contract?

The traditional standard form of the China Shipbuilding Trading Company is widely used in the shipbuilding industry. The China Maritime Arbitration Commission standard form, known as the ‘Shanghai form’, is becoming more common.

Assignment of the contract

What are the statutory requirements for assigning the contract to a third party?

In general, there are no statutory requirements for assignment of the shipbuilding contract. The parties are free to have an assignment clause in the contract. For stability and fairness of the contract, the parties can agree that it shall not be assigned to any person, firm, company or legal person, unless by mutual agreement of both parties. The ‘Shanghai form’ has included such a provision in clause 14.

In addition, the parties may agree on the assignment of the builder and the assignment of the buyer. After the assignment, the assigner usually remains as a responsible party and continues to undertake the obligations under the contract.

Where contractual rights and obligations are transferred together under a new deed of novation or novation agreement, the novation must be consented to by the other party of the former main contract, and the new deed or agreement will normally be in the form of a tripartite agreement. After the novation, the new assignee will assume all rights and obligations ab initio.

Update and trends

Recent developments

Are there any emerging trends or hot topics in shipbuilding law in your jurisdiction?

The new Civil Code came into effect on 1 January 2021. It repealed certain specific laws, including the PRC Contract Law, but systematically integrated its contents.

Coronavirus

What emergency legislation, relief programmes and other initiatives specific to your practice area has your state implemented to address the pandemic? Have any existing government programs, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

The Notice by the Supreme People’s Court Issuing the Guiding Opinions (Part I) on Several Issues of Properly Hearing Civil Cases concerning the COVID-19 Pandemic was issued to address the disputes arising from the pandemic. The courts will encourage parties in dispute to: comply with the non-litigation dispute resolution mechanism; consider giving priority to mediation; show willingness for conciliation under negotiation; share risks and work together to get through this challenging time; and take solid measures to settle disputes in the early stages and at the primary level. Some advice for clients:

  • immediately apply to the competent authorities for a certificate of force majeure (in accordance with the Articles of the China Council for the Promotion of International Trade (CCPIT) approved by the State Council, the CCPIT may issue a certificate of force majeure);
  • review the contract terms, and in particular the force majeure clause as to whether the application of the clause covers the epidemic and the consequences resulting from it, and what obligations are needed to be fulfilled to invoke force majeure (such as the obligation to notify, the obligation to reasonably mitigate loss etc); and then send adequate, timely notice to the buyer and keep the record of service (subject to the clause in the shipbuilding contract, the parties may stipulate the notification methods and require notification be sent within a time limit);
  • if the force majeure clause in the contract does not explicitly specify the event of ‘infectious disease’, it is necessary to liaise with the buyer and inquire about the buyer’s intention as soon as possible so as to adopt appropriate mitigating measures to avoid or reduce any impact on contractual performance; and
  • to avoid any obstacle or failure to identify liability, the parties need to collect and sort out the evidence of force majeure event(s) and of the delay or obstruction of the performance of the contractual obligations resulting from such event(s), and assess whether the relevant evidence is sufficient to support the establishment of force majeure event(s) and whether the delay or obstruction of the performance was indeed caused by force majeure event(s).

Law Stated Date

Correct On

Give the date on which the information above is accurate.

8 March 2021.

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