Coronavirus – possible effects on contracts and precautions for mariners

Effects on contracts
Precautions


Effects on contracts

Following the coronavirus outbreak, the concept of frustration and contractually agreed force majeure clauses may become relevant in the event that the performance of a contract is affected.

Section 56(2) of the Contract Law provides that a contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, become voids when the act becomes impossible or unlawful. Although Section 56 differs from common law to a large extent, it was held that the spirit of the English authorities should be followed and that Section 56(2) applies only to an impossibility which destroys the foundation of a contract (see Cyprus Prus Cinema & Theatre Co Ltd v Christodoulos Karmiotis (1967) 1 CLR 42). Accordingly, the concept of frustration is strictly applied. In general, just because performance is made harder, this does not equal impossibility.

Whether the outbreak of coronavirus constitutes force majeure under a contract will be ultimately a matter of interpretation of the relevant wording of a contract.

Precautions

In the meantime, the Deputy Ministry of Shipping has issued a circular on measures to minimise the risks to seafarers, passengers and others on board ships and directed interested parties to the International Maritime Organisation's (IMO's) Circular Letter 4204 of 31 January 2020, which provides additional guidance on how to minimise risks to the maritime industry from novel coronavirus.

IMO Circular Letter 4204 is based on recommendations developed by the World Health Organisation (WHO) and contains advice on key preventative measures and a non-exhaustive list of links providing advice and guidance to seafarers and the shipping industry.(1)

All owners and managers of ships flying the Cyprus flag are strongly urged to promulgate the information in IMO Circular Letter 4204 to ensure that seafarers, passengers and others on board ships are provided with accurate and relevant information on the coronavirus outbreak and the preventative measures to reduce the risk of exposure for ships trading with ports in coronavirus-affected states.

For further information on this topic please contact Costas Stamatiou or Vasileios Psyrras at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email (costas.stamatiou@neo.law or vassilis.psyrras@neocleous.com). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.

Endnotes

(1) Please see here and here.