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Edited Time: April 25, 2022Edited by: adminCategory: Publications

This is to further address some relevant common queries related to the epidemic and the corresponding measures in the way of Q&A.

Question 3: Is COVID-19 pandemic a “force majeure event” under China laws? If yes, does it mean that the contract cannot be performed?

According to the Civil Code of the People’s Republic of China (the “Civil Code”), a force majeure means any objective circumstance that is unforeseeable, inevitable, and insurmountable. Therefore, during the outbreak of the COVID-19 pandemic in 2020, the Legal Affairs Commission of the National People’s Congress stated that the COVID-19 pandemic was a force majeure event for parties who are unable to perform their contracts as a result.

So, whether the COVID-19 pandemic shall be rightfully regarded as a force majeure event to the performance of the contract? The answer is NO. According to Article 590 of the Civil Code, where a party is unable to perform the contract due to a force majeure event, he shall be exempted from liability in whole or in part according to the impact of the force majeure event, unless otherwise provided by law. The party unable to perform the contract due to force majeure event shall promptly notify the other party to mitigate the losses that may be caused to the other party, and shall provide proof of the force majeure event within a reasonable period of time. Where the force majeure event occurs after a party’s delay in performance, such party’s default liability shall not be exempted.

Therefore, you may, as the counterparty to a contract, understand and apply force majeure to the performance of the contract from the following aspects:

• The causality between the contract performance and epidemic impact. First, we shall not deem that all the contracts are unable to perform during the outbreak of the COVID-19 pandemic, since there may not be causality between the contract performance and the epidemic impact. Even if there is causality, we still need to prove that it’s partially or completely exempted from responsibility due to the specific impact on the performance of the contract (for example, the shopping center has suspended business due to varying levels of lockdown imposed by local government). Second, in case one party is not able to perform the contract due to force majeure, this party shall notify the other party(ies) in a timely manner to reduce the losses that might be caused to the other party(ies) and shall provide proof within a reasonable period, otherwise, this party will be claimed to bear the liability for breach of contract. Last, supposing that force majeure event occurs after one party has delayed performing its liability under the contract, this party cannot claim exemption from liability for the breach on the ground of force majeure.

• Generally, the continued performance of the contract will be encouraged. If the contracts can be performed during the outbreak of the COVID-19 pandemic, then all the parties thereunder are encouraged to continue performing the contract, otherwise, any party(ies) who refused to do so shall bear the liability for breach of contract. In case the contract really cannot be performed due to the COVID-19 pandemic, the parties may negotiate to perform the contract in an alternative way or be delayed performing it. If the contract cannot be performed in an alternative way or the purpose of the contract cannot be achieved by delaying performance, then the parties may request to dissolve the contract.

Question 4: How to pay the salary of employees who are not able to work normally due to isolation treatment, medical observation, or other quarantine measures? How to deal with the labor contracts which will be expired during the above periods?

According to the Notice for Concerning Properly Handling Labor Relations during the Prevention and Control of the Outbreak of Novel Coronavirus Pneumonia (COVID-19) (Document Number: No.5 [2020] of the General Office of the Ministry of Human Resources and Social Security) issued by the General Office of the Ministry of Human Resources and Social Security, for employees who are patients or suspected patients infected with COVID-19 or their close contacts during the period of receiving treatment in isolation or the medical observation period and who are unable to normally provide work as a result of the quarantine measures or other emergency measures taken by the government, their employers shall pay remuneration to such employees during the periods and shall not terminate employment contracts with such employees in accordance with Articles 40 and 41 of the Employment Contract Law.

If employment contracts expire during the periods, the employment contracts will automatically extend until the expiration of the medical treatment period, the medical observation period or the quarantine period, or the end of emergency measures taken by the government.