Originally from Force Majeure and Hardship in the Asia-Pacific Region

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Questions

I.     Force majeure

A.  Background and definition of force majeure in the People’s Republic of China (“China”)

1.    Does China recognize force majeure or any other legal concept similar to force majeure such as frustration, etc. (in the following: “force majeure”)? Are there any statutory provisions or is there any case law setting forth the definition of force majeure?

Force majeure is recognized as a legal cause of exemption of liability under Chinese law. Pursuant to Article 180 of the Civil Code of the People’s Republic of China (《中华人民共和国民法典》, the “Civil Code”), promulgated on 28 May 2020 and effective as of 1 January 2021, “a force majeure means any objective circumstances which are unforeseeable, unavoidable, and insurmountable”.

In the Interpretations of the Contract Law of the People's Republic of China (3rd edition), a publication written by the Legislative Affairs Commission of the Standing Committee of the National People’s Congress (全国人大法工委), i.e., the legislature in China, force majeure is further clarified as “any objective circumstances that are unforeseeable at the time when the contract is entered into, unavoidable of its occurrence, and insurmountable by human power, such as natural disasters and wars, etc.”

For force majeure to be relied upon as an exemption of contractual obligation, a causal link must be established between the force majeure event and the claiming party’s failure to perform. In this regard, a force majeure event does not have to be the sole or critical factor resulting in the non-performance. Where a force majeure event is a contributing factor, it still can, partially, exempt the party affected thereby from the liability for breach of contract.

Parties to a contract are free to agree upon circumstances that may constitute force majeure events under the contract. However, they cannot preclude the statutory force majeure events prescribed in the Civil Code, i.e., objective circumstances that are unforeseeable, unavoidable, and insurmountable. In other words, a court may still find a non-provided-for circumstance as a force majeure event as long as it satisfies statutory requirements.