The term “force majeure” appears in virtually every contract drafted for use in China. The clause typically lists events that excuse performance — war, natural disaster, government action, epidemic — and the parties move on to the next section without thinking much about it.
Until something happens, and one party wants to rely on the clause, and the other party wants to know exactly what legal effect it has. The answer matters because China’s legal treatment of force majeure is both statutory and contractual, and the interaction between the two can produce results that surprise parties from common law jurisdictions.
The Statutory Framework
Force majeure in China is primarily a creature of statute, not contract. Article 180 of the Civil Code defines force majeure as objective circumstances that are unforeseeable, unavoidable, and insurmountable. If a force majeure event prevents performance of a contractual obligation, the affected party is exempted from liability for non-performance, though the exemption is limited to the extent of the force majeure’s impact.
This statutory definition is important because it means the Chinese courts don’t just look at the contractual force majeure clause — they also apply the statutory framework. A clause that attempts to define force majeure more broadly than the statutory definition may be given effect to the extent consistent with the statutory framework, or it may be interpreted in light of the statutory definition.
The three-part test — unforeseeable, unavoidable, and insurmountable — is strict. An event that was foreseeable when the contract was signed is not force majeure. An event that could have been avoided with reasonable measures is not force majeure. An event that made performance more difficult or expensive but not impossible is generally not force majeure, though it may trigger the separate doctrine of change of circumstances.
What Courts Have Accepted and Rejected
The Chinese courts have accepted force majeure claims in circumstances that most commercial parties would expect. Natural disasters — floods, earthquakes, typhoons — have been consistently recognized as force majeure events. Government actions that prevent performance, such as expropriation orders, import bans, and mandatory production shutdowns ordered by regulators, have been accepted. War and armed conflict are textbook force majeure events.
The COVID-19 pandemic tested the force majeure framework on a massive scale. The Chinese courts generally accepted the pandemic itself as a force majeure event for contracts whose performance was directly prevented by pandemic control measures — for example, a contract to provide in-person services that was rendered impossible by mandatory lockdowns. But the courts drew a distinction between contracts that were impossible to perform and contracts that were merely more expensive or inconvenient to perform. A supply contract that could still be performed, albeit with higher costs due to disrupted logistics, was not excused by force majeure.
Economic events — currency devaluation, commodity price spikes, loss of a key customer — are consistently rejected as force majeure. These are business risks that contracting parties assume. A contract to supply goods at a fixed price that becomes unprofitable because the input costs doubled is not discharged by force majeure.
The Notice Requirement
A party claiming force majeure must notify the other party promptly. The notice should state the nature of the force majeure event, its expected duration, and its impact on performance. A failure to give timely notice can result in the loss of the force majeure defense for the period before notice was given, and may expose the non-performing party to liability for losses that could have been mitigated if notice had been given earlier.
The notice should be in writing, should be specific, and should be supported by evidence. A general notice saying “we are experiencing force majeure” is unlikely to be effective. A notice that identifies a specific government order preventing performance, attaches a copy of the order, and explains which contractual obligations are affected is more likely to be accepted.
The notice also creates contemporaneous evidence. If the dispute goes to court, the notice shows that the party genuinely believed performance was impossible at the time, which supports the argument that the event was unforeseeable and unavoidable. A party that first raises force majeure in litigation, months after the event, will face skepticism about whether the event was really what prevented performance.
The Mitigation Obligation
The party claiming force majeure has an obligation to mitigate the effects of the event. If performance can be partially performed, the party must perform to the extent possible. If alternative means of performance are available, the party must use them if reasonable.
The mitigation obligation is often the battleground in force majeure disputes. The performing party argues that alternatives were not available or were commercially unreasonable. The non-performing party argues that alternatives existed and were not pursued. The court’s analysis typically focuses on whether a reasonable commercial party in the same circumstances would have taken the alternative measures that the non-performing party claims should have been taken.
Duration and Termination
A force majeure event that temporarily prevents performance suspends the obligation rather than extinguishing it. Performance resumes when the force majeure event ends. The contract remains in force, and the performing party must catch up on delayed performance within a reasonable time.
A force majeure event that permanently prevents performance discharges the obligation. If the subject matter of the contract is destroyed — a specific piece of equipment that was to be delivered is destroyed in a flood — the obligation to deliver that equipment is discharged. The contract may be terminated, and the parties are restored to their pre-contract positions to the extent possible.
Most commercial contracts include a provision allowing either party to terminate if the force majeure event continues beyond a specified period — sixty days, ninety days, one hundred and eighty days. This is a useful provision because it prevents a contract from remaining in limbo indefinitely. Without a termination provision, the parties may need to go to court to determine whether the force majeure event has permanently prevented performance, which takes time and creates uncertainty.
Drafting for Effectiveness
A well-drafted force majeure clause specifies the events that are covered, provides a non-exhaustive list of examples, and explicitly references the statutory framework. It sets a notice period — typically seven to fourteen days from the occurrence of the event — and specifies what the notice must contain. It states the consequences of the event — suspension, extension of time, termination after a specified period. It addresses the allocation of costs during the force majeure period and the post-termination settlement mechanism.
The clause should also address what is not force majeure. Events that are specifically excluded — changes in market conditions, changes in the performing party’s financial circumstances, strikes affecting only the performing party — reduce the scope for argument about whether a particular event qualifies.
The governing law and dispute resolution provisions become particularly important in force majeure disputes. A contract governed by Chinese law will be interpreted in light of the Civil Code’s force majeure provisions regardless of what the contract says. A contract governed by another country’s law will be interpreted according to that law, and the Chinese court’s approach to force majeure from the Civil Code may not apply, even if the dispute is heard in China.
