Force Majeure

[reader]

A term in common use in some contracts may be worth becoming familiar with in view of the current environment.

Extracted from Wikipedia

Force majeure meaning "superior force", also known as cas fortuit (French) or casus fortuitus (Latin) "chance occurrence, unavoidable accident", is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, plague, virus or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the force majeure.

Under international law, it refers to an irresistible force or unforeseen event beyond the control of a state making it materially impossible to fulfill an international obligation, and is related to the concept of a state of emergency.

Force majeure in any given situation is controlled by the law governing the contract, rather than general concepts of force majeure. The law of the contract often specified by a choice of law clause in the agreement, and if not is decided by a statute or principals of general law which apply to the contract.

For additional information

https://en.wikipedia.org/wiki/Force_majeure

[TotallyOz]

Curious. Are you sharing this based on insurance issues? I got an email from my insurance carrier that CoVid was covered 100%. Does changing terminology change this?

[reader]

No, wasn't referencing health insurance matters. I'd think terms pertinent to an insurance policy would be spelled out in the policy itself and any riders associated with it. But I'm neither an insurance or legal expert.

It's my understanding that If force majeure isn't specifically referenced in a contract or agreement, it does not apply. National and internal laws come into play and there's no hard one size fits all rule. In other words, you have to read the fine print.

My intent was to make readers aware of the term in case they come across it in any relative documents. In this time of an event, the likes of which we haven't seen for over a century, Covid19 may well trigger a force majeure clause.

The Wikipedia link should provide a better understanding. It includes some examples of what constitutes and does not constitute force majeure events.

Hope that helps.

(There's an interesting separate definition of force majeure that applies to international military protocols, also described in the link)

 

 

[reader]

One more reason to think twice before purchasing property in LOS.

Developers struggle with ‘guaranteed returns’ in Covid-19 property crisis

There is one key underlying fundamental for hotel branded residences returns, and the truism that best sums it up is that returns are a function of hotel trading performance and marketplace.

In Asia, the largest branded residences market is Thailand. According to C9 Hotelworks market research, the country represents 29% of regional supply with key markets being Bangkok, Pattaya, Phuket, Hua Hin and Chiang Mai.

In an evolving hotel ownership model that has developers passing on risk to residential property buyers, the question has to be what risks are inherent in this, given the current Covid-19 crisis? The answer is twofold in that some owners of existing units are currently under guaranteed return programs or those who are buying new projects and are expecting contracted returns.

Here in Thailand there are a variety of rental programs ranging from top line rental revenue splits to bottom line profit splits between the hotel and unit owner, and the increasingly popular lease-back arrangement. The latter was thought to be beneficial to the operator so that tenure is ensured in the project, and for unit owners who thought the lease amounted to a fixed-rental guarantee.

Commercially in Thailand, these types of contractual obligations are reflected in civil contracts and in the case of guarantees rarely are they backed by corporate undertakings, escrow accounts or bank guarantees. So in the case of a default, the only real remedy is a direct legal action. This sadly is often too costly or time consuming for single unit buyers to pursue.

With Covid-19, if force majeure is considered to be in place, a court action will have to determine who’s right and wrong. So essentially, let’s just say it’s complicated. During this past week we have seen three different projects in Thailand suspend guaranteed returns to buyers, and you can expect the number to jump in coming weeks.

The warning which is important for buyers of branded residences is that they are not purchasing a traditional real estate model, with the likely end game of capital appreciation. They are becoming de facto owners in a hotel, and as such need to carefully understand Thailand’s hotel supply and demand and performance metrics. Hotels are capital intensive and require a different standard of fit-out, operation and reinvestment vs pure residences.

https://thethaiger.com/coronavirus/thailands-developers-struggle-with-guaranteed-returns-in-covid-19-property-crisis