Gas Contract and Force Majeure

PetroChina suspends some gas contracts as coronavirus hits demand: sources

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Hey hey hey, is it Force Majeure?  A Chinese giant energy importer has suspended or canceled its contracts insisting Force Majeure, and Chinese authorities issued a number of Force Majeure certificate.

Under the common law, Force Majeure is a product of contracts, and in a usual standard contract such as LOGIC, FIDIC, etc, FM requires the following 4 elements. 

I) it is beyond a reasonable control of a Party,

II) the Party could not have reasonably provided at the time of entering the contract 

III) it is not attributable to the Party

IV) the Party shall exercise a reasonably care to avoid, mitigate or overcome the effect.

In a case like a gas purchase contract, performance of a purchaser is  accepting delivery and paying for it. Even if their sourcing needs dramatically reduced, such performance would not be barred except for a case such as a shutdown of their unloading port or stop of service there. 

Although, authorities issue a number of certificates, and it sounds persuasive to say everything is attributable to COVID-19, FM defense would always be subject to the court analysis of the requirements above. 

See Rembrandt Enters. v. Dahmes Stainless, Inc., 2017 U.S. Dist. LEXIS 144636 https://advance.lexis.com/api/document/collection/cases/id/5PDX-NVT1-F04D-508B-00000-00?cite=2017%20U.S.%20Dist.%20LEXIS%20144636&context=1000516

The court analyzed the insist of FM based on Aviation Flu and denied the defense.

The other defenses available such as Material Adverse Change, Change in Circusstance, Frustration would be subject to further analysis...