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COVID-19 and Force Majeure 

by Lia Alizia, Rudy Sitorus, Heru Mardijarto, Dirgantara Nugroho

Published: March, 2020

Submission: March, 2020

 



COVID-19 continues to spread rapidly around the globe, including Indonesia. Consequently, on 12 March 2020, COVID-19 was declared a pandemic by the World Health Organization.


Due to this pandemic, many businesses and factories are temporarily closed causing critical implications for businesses, both international and domestic. This is especially true for projects at the construction stage, as the raw materials, machinery and manpower needed for construction rely heavily on industries in the affected areas.


In this five-page advisory, we explore the concept of force majeure under contracts into which entered in Indonesia. The basic and main concept of force majeure is recognized under Indonesian law, ie under Article 1244 and 1245 of the Indonesian Civil Code (“ICC”).


The publication also discusses about:


  • Is a Pandemic a Force Majeure Event?
  • The Consequences of Force Majeure
  • Force Majeure in Construction Contract

Based on the examination above, this advisory concludes as follows:


  • Force majeure provisions are recognized under Articles 1244 and 1245 of the ICC. However, whether the current COVID-19 pandemic can be recognized as a force majeure event and its consequences depend on the force majeure clause of the contract. It must therefore be assessed on a case-by-case basis.
  • In the wake of COVID-19 pandemic, we believe there will be numerous contractors claiming for the event of force majeure under the relevant contract and to seek extension of time and recovery of cost, and therefore the contractor and employer may need to discuss the foregoing issues, for example, whether any amendments to the existing contract is required.
  • Taking an example in a construction contract, in the event of force majeure event, it is important to also check several provisions that is relevant to a force majeure event such as (i) force majeure provisions; (ii) extension of time; (iii) termination; and (iv) dispute resolution.

 



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