编者按：近期，法律界人士对新型冠状病毒疫情引发的法律问题进行了大量讨论，国双律师事务所在此前也发表了相关文章（参见《新型冠状病毒疫情引发合同履行问题的法律救济——不可抗力or情势变更?》），现发布英文版以飨读者。

—— By Hongyong JI, Grand Soul Law Firm  

国双律师事务所  纪红勇

Recently, the novel coronavirus pneumonia epidemic outbroke in China. All the people in China are united in their efforts to fight against the virus. During this period, the author received several questions about how to avoid liability or reduce liability legally due to difficulties in contract performance caused by the epidemic. At the same time, many articles are posed on the Internet regarding whether the novel coronavirus epidemic constitutes a situation of force majeure. Some of these articles are reasonable and comprehensive in their analysis, while others believe that the epidemic shall constitute force majeure and the party who fails to perform contract should be exempted from liability in any case after the epidemic outbreak, which is somehow arbitrary. In order to find whether the novel coronavirus epidemic constitutes force majeure or not, the author has carried on the following research on related issues.

 1. Possible legal remedies for contract performance problems caused by novel coronavirus epidemic -- force majeure & principle of change of circumstances

 1.1 Force majeure and the legal basis thereof.

It is stipulated in both article 180 of the General Provisions of the Civil Law and article 117 of the Contract Law of the People's Republic of China that "force majeure shall refer to objective situations that are unforeseeable, unavoidable and insurmountable." This provision reflects the core characteristics of force majeure as follows: unforeseeable, unavoidable and insurmountable.

 Although the law does not specify which events constitute force majeure events, catastrophic events affecting the performance of the contract are generally regarded as force majeure events, including natural forces, such as earthquake, flood, drought, snowstorm, etc. It also includes social abnormal actions, such as war, riot, military blockade and so on.

 Article 180 of the General Provisions of the Civil Law stipulates that If a party is unable to perform the civil obligation due to force majeure, the party shall not bear the civil liability, unless otherwise stipulated by law. Under the article 117 of the Contract Law of the People's Republic of China, if a contract cannot be performed due to a force majeure event, liabilities may be exempted in whole or in part depending on the impact of the force majeure event. Therefore, if a party is unable to perform its obligations under contract due to force majeure events, the party may claim exemption from civil liability in accordance with the above force majeure clauses.

 In addition, according to article 94 of the Contract Law of People’s Republic of China, if the purpose of the contract cannot be attained due to force majeure, the parties may terminate the contract.

 1.2 The principle of change of circumstances and the legal basis thereof.

The principle of change of circumstances means that after the effective establishment of the contract, the essential basis of the contract is affected by a fundamental change of circumstances which is attributable to neither party, therefore it would be unfair to continue to perform the contract. Under this situation, parties are allowed to change the content of the contract or terminate the contract through negotiation or judicial proceedings.

 Principle of change of circumstances is stipulated in the laws of many countries and international treaties. Some distinguish it from force majeure, while others do not. Statute laws in China have not directly introduced the principle of change of circumstances, while the Supreme People's Court have accepted the principle of change of circumstances by judicial interpretation and lots of courts have applied the principle in their judgements.

 As early as 1993, the Supreme People's Court pointed out in the Memo of a Working Conference on National Economic Adjudication that where the objective conditions on which the contract was based had changed fundamentally, which could not be attributed to either party, and continued performance of the contract was obviously unfair. Under this situation, at the request of the parties, the contract might be amended or terminated in accordance with the principle of change of circumstances. This conference memo is an earlier document issued by the Supreme People’s Court affirming the principle of change of circumstances in China.

 After that, the Notice of Supreme People’s Court on Ensuring Related Trials and Enforcement during the Period of Prevention and Control of Epidemic Severe Acute Respiratory Syndrome (abolished) stipulates, when the performance of a contract may pose great impact on the interests of one party to the contract due to the SARS epidemic situation, the case concerning the disputes of such contract may be handled based on the principle of fairness and with reference to the actual situation.

 Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of the Contract Law of the People's Republic of China (II) (hereinafter referred to as Judicial Interpretation of Contract Law (II)), which came into force on May 13, 2009, clearly explains the principle of change of circumstances due to need of legal practices. According to the article 26 of the above judicial interpretation, where, after the conclusion of the contract, the objective situation undergoes significant changes that were unforeseeable by the concerned parties at the time of conclusion of the contract, and such changes are not caused by force majeure and do not constitute commercial risks, and to continue with the performance of the contract will be obviously unfair to one concerned party or will not realize the purpose for which such contract was concluded, the people's court shall, upon the request for modifying or terminating the contract by a concerned party , determine whether to modify or terminate the contract on the basis of the principles of fairness and by considering the actual situation prevalent in the case. Although there is some controversy over the article 26 of Judicial Interpretation of Contract Law (II), it is the most authoritative legal basis for the principle of change of circumstances.

 And we also should note that the article 26 of Judicial Interpretation of Contract Law(II) was mostly accepted by the Civil Code of People’s Republic of China (draft) published at the end of 2019. The article 533 of the Civil Code states: "Where, after the conclusion of the contract, the objective situation undergoes significant changes that were unforeseeable by the concerned parties at the time of conclusion of the contract, and such changes are not caused by force majeure and do not constitute commercial risks, and to continue with the performance of the contract will be obviously unfair to one concerned party or will not realize the purpose for which such contract was concluded, the adversely affected party may renegotiate with the other party; If negotiation fails within a reasonable period of time, the parties may request the people's court or an arbitration institution to modify or terminate the contract. the people's court or arbitration institution shall, upon the request for modifying or terminating the contract by a concerned party, determine whether to modify or terminate the contract on the basis of the principles of fairness and by considering the actual situation prevalent in the case."

 2. The distinction between force majeure and change of circumstances

The difference between force majeure and change of circumstances is sometimes difficult to distinguish in theory, and laws of many countries just recognize them as a same thing. Based on the existing legal provisions and judicial practice in China, this author makes the following general distinctions between force majeure and change of circumstances:

 2.1 Different conditions of application.

The condition for the force majeure is where unforeseeable, unavoidable and insurmountable objective events occur, which cause the failure to perform civil obligations objectively or to perform as scheduled; while the applicable condition for the change of circumstances is where the unforeseeable objective circumstances changes occur, and continued performance of the contract is obviously unfair.

 2.2 Different purposes of the establishment.

The purpose of force majeure is to relieve the civil liability for the objective failure to perform the civil obligations caused by force majeure; however, the purpose of the change of circumstances focuses on solving the imbalance of rights and interests between the parties at the discretion of the judge by applying the principle of fairness.

 2.3 Different nature of rights.

The right of direct exemption from liability stipulated by law on force majeure is the right of formation, which give one party the right to terminate contract legally as long as the other party is notified. The right of modification and termination of the contract based on change of circumstances shall be a right of claim. If change of circumstances occurs, the party may request the court to decide whether the contract shall be modified or terminate.

 2.4 Different scope of application.

Force majeure could be applied not only to contracts but also to torts; The change of circumstances only can be applied to contracts. In addition, force majeure generally cannot be applied to pecuniary payments disputes.

 2.5 Different impact on the statute of limitation.

According to article 194 of the General Provisions of the Civil Law, a limitation of action shall be suspended due to force majeure; not the change of circumstances.

 In addition to the difference between force majeure and change of circumstances, itis important to distinguish change of circumstances from commercial risk. They are different in the degree of unpredictability to the occurrence of objective circumstances change. Commercial risk is what the parties have been able to foresee or should have foreseen at the time of conclusion of the contract.

 3. Specific application of force majeure and the change of circumstances as legal remedies for contract performance problems caused by the novel coronavirus epidemic 

 As mentioned above, the principle of change of circumstances has not been stipulated by statute law in China，it is only provided in judicial interpretation, and also different opinions about it appear in judicial practice, therefore, whether force majeure and the change of circumstances may be applied as legal remedies or exemptions from liability for the contract performance problems caused by the novel coronavirus epidemic, and which one of them should be applied, are all hard to answer. Hereinafter, this paper just tries to give opinions on application of force majeure and the principle of change of circumstances according to statute laws, judicial interpretations and summary of the majority opinion of judicial judgments.

 3.1 Is the outbreak of the novel coronavirus a force majeure event?

A number of articles recently discuss that whether the novel coronavirus outbreak is a force majeure event or not. Some opinions believe it is, while others say the government's restraining order is a force majeure event, not the epidemic itself. This author believes that, generally speaking, this novel coronavirus outbreak conforms to the characteristics of being unforeseeable, unavoidable and insurmountable, and belongs to the force majeure events.

 However, in specific cases, there should be a causal relationship between the result of relevant failure to perform obligations and the force majeure. If no causal relationship is formed, force majeure cannot be applied. But in the absence of force majeure, there is still the possibility of application of change of circumstances. Therefore, whether novel coronavirus epidemic constitutes force majeure or change of circumstances, should be analyzed case-by-case.

 3.2 The specific analysis of application of force majeure and the change of circumstances to the contract performance problems caused by the novel coronavirus epidemic.

In practice, the typical types of contracts applicable to force majeure and change of circumstances caused by the novel coronavirus epidemic include sales contracts, leasing contracts, labor contracts, travel contracts and construction project contracts，etc. It should be analyzed that whether force majeure and change of circumstances are applicable to these contracts and which one is applicable case by case.

 3.2.1 With regard to the sales contract, if the non-delivery or overdue delivery is objectively caused by the novel coronavirus epidemic, the seller shall be exempted from liability based on force majeure. For example, if the seller in Wuhan fails to fulfill the delivery obligation due to the policy of quarantine, which constitutes force majeure，therefore the seller shall be exempted from liability.

 3.2.2 As to rental contracts concerning restaurants, shopping malls or other venue, the novel coronavirus outbreak will lead to a significant reduction of customers, and the income of tenants will plummet, therefore it would be unfair to continue to perform the original leasing contracts, so the tenant may negotiate with lessor to reduce rent, if agreement can’t be reached, the tenant can consider to file a petition to the people's court, on the ground of principle of change of circumstances to modify the lease contract and reduce the rent.

 As in Li Peiyan VS. Xiguan Residents Committee of Yong’an Road Subdistrict of Laizhou City (No. 2018 Lu 06 Civil Final 268), both of courts in the first and second instance held that "SARS" was epidemic of unpredictable disasters, which resulted in close of business of the hotel rented by appellant Li Peiyan and caused objectively economic damage to Li Peiyan, and the loss was beyond the scope of market risks, therefore, there was legal basis to apply the principle of change of circumstances to appropriately reduce part of rent borne by Li Peiyan

 3.2.3 Regarding to the contract of personal dependence such as labor service and other services, if the provider is really unable to provide labor service or other services due to objective reasons such as infection with the novel coronavirus, the contract may be terminated according to force majeure without liability for breach of contract. But denial of labor service or other services just for fear of virus infection is generally considered improper to apply force majeure.

 3.2.4 As for the tourism contract, the Tourism Law stipulates specific application of force majeure and the principle of change of circumstances in different situations. The relevant provisions of the Tourism Law can be applied to the novel coronavirus epidemic. Article 67 of the Tourism Law stipulates: “In cases where the trip itinerary is affected due to force majeure events or other events which are unavoidable even though travel agencies or contract performance assisting parties have performed the obligation of due care, the cases shall be handled according to the following provisions:

a. Where it is impossible to continue the performance of contracts, both the travel agencies and the tourists may rescind contracts; where it is impossible to fully perform the contracts, the travel agencies may make explanations to the tourists and change the contracts within a reasonable scope; and where tourists disagree to the changes, the two parties may rescind the contracts;

b. Where the contracts have been rescinded, the group tour organizing agencies shall refund the balance of the payment for the tour to the tourists after deducting the expenses which have been paid to the local reception agencies or contract performance assisting and therefore nonrefundable; where the contracts have been changed, additional payment for the tour resulted from such change shall be borne by the tourists and the expenses decreased as the result thereof shall be returned to the tourists;

c. Where the personal or property safety of the tourists is endangered, the travel agencies shall take corresponding safety measures and the expenses thus incurred shall be shared by the travel agencies and the tourists; and

Where it causes tourists left stranded, the travel agencies shall make appropriate arrangements; the accommodation expenses thus incurred shall be borne by the tourists and the increased expenses of return trip shall be shared by the travel agencies and the tourists.”

 3.2.5 With regard to the construction project contract, the project delay caused by SARS has been considered by some courts as force majeure, by others as non-force majeure. And some courts also applied the principle of change of circumstances to these cases. As for the project delay caused by the novel coronavirus epidemic the Notice of Supreme People’s Court on Ensuring Related Trials and Enforcement during the Period of Prevention and Control of Epidemic Severe Acute Respiratory Syndrome should be strongly recommended to be referred.

 According to article 3. (3) of the Notice, when the performance of a contract may pose great impact on the interests of one party to the contract due to the SARS epidemic situation, the case concerning the disputes of such contract may be handled based on the principle of fairness and with reference to the actual situation(application of change of circumstances).

If any administrative measures taken by the government and the relevant agencies to prevent and control the SARS epidemic situation directly causes any unenforceable contract or if the influence of the SARS epidemic situation causes the parties to the contract unable to perform the contract, the disputes arising therefrom shall be properly handled according to Articles 117 and 118 of the Contract Law of the People's Republic of China (application of force majeure).

 3.2.6 As for the contracts related to temple fairs and other large-scale activities, if the government explicitly requires to cancel these activities, organizers of temple fairs and other activities have objectively been unable to perform the contracts, force majeure can be applied to terminate the contracts with relevant parties.

 3.3 Some points that should be paid attention to in the application of force majeure.

In practice, if force majeure is applicable for legal remedy, the following points should be noted:

 Firstly, if one party is unable to perform the contract due to force majeure, he shall promptly notify the other party so as to mitigate the possible losses of the other party. If the other party fails to mitigate the loss due to the failure of timely notification, such part of the loss shall not be exempted from liability based on force majeure.

 Secondly, besides the well-known events, the parties who claim that the epidemic constitutes force majeure should provide relevant evidence. On January 30, China council for the Promotion of International Trade (CCPIT) has issued a notice, if due to outbreak of the novel coronavirus pneumonia, enterprises who fail to perform as scheduled or unable to perform international trade contracts, may apply to CCPIT for proof of fact related to force majeure. It should be noted that international trade contracts may be subject to foreign laws or international treaties, and there may be some differences in the applicable rules of force majeure.

 At last, if force majeure occurs after delay in performance, there should be no room for exemption from liability based on force majeure. Article 117 of the Contract Law of the People's Republic of China stipulates that if a force majeure event occurs after the delayed performance by a party concerned, the party may not be exempted from liabilities.

致谢：本文英文版的完成得到了中国政法大学法律翻译研究中心主任沙丽金教授的斧正，以及郭聪聪女士、牛蒙先生的倾情帮助，在此表示衷心的感谢！