Phuket Post :: Article :: Of coups and contracts

It is not possible to accurately predict the legal effects of the coup in the coming months. However, from a civil perspective, when parties are in contract with each other and a major event such as a coup interferes in either parties� obligations, there can be a legitimate analysis of a contract to ensure hat there is provision for unforeseen events, beyond the control of the parties that may interfere with the fulfillment of their duties.

This is commonly referred to by the French tag � "Force Majeure" � which translates as "Superior Force". Sloppy draftspersons may simply use the term �force majeure� without any definition in the contract as to what this relates to or the effects of it.

The relevance of Force Majeure for any person or company entering into a contract is hugely significant. As we are on an island on which real estate plays a large factor in economics, I shall use a real estate example.

In a construction contract, a contractor may be under a strong obligation to complete certain works within a deadline or timeframe, with penalties for failing to complete by that time.

Canny developers will either avoid a penalty, knowing that delivery in Phuket is frequently untimely, or they will include in their contracts a wide and ambiguous �force majeure� clause, which they may seek to rely upon for virtually any event which may be beyond the developers control and could be linked to a delay.

This can be avoided by buyers if they bear in mind that any event, including a coup, if alleged by another party to have caused delay can be in a contract limited to time or the concept of what lawyers refer to �causation�.

The coup was peaceful, there were not any noticeable effects in Phuket and, therefore, it could be said that the coup did not cause any delay at all, other than closure of the government institutions and banks for one day.

If a �force majeure� clause in a contract is written so that one party may only delay
because of an event beyond its control "only for a period of time equal to the delay caused by the uncontrollable event" then there is at least some limitation on the excuses that could be made for failing to deliver.

At the other end of the spectrum in terms of detail in a contract regarding such events, a lawyer may well take the time to list out all of the events he or she envisages could cause a delay and would then go on to include a catch-all provision such as "and any other event beyond the control of the parties".

There will typically be a large list of disruptive events, such as civil commotion, earthquake, storm, tempest etc. and that list can certainly seem impressive.

However, I do not recall ever having seen specific reference to a coup.

I did see numerous references to Y2K (the Year 2000 computer �virus� predicted by many as being capable of potentially down-timing large institutions throughout the world) in contracts in the period leading up to 2000 and, unsurprisingly, these specific references disappeared when draftspersons struggled to provide and draft for something that hadn�t happened yet and the effects of which were unknown.

Likewise, we could now see references to coups or other specific political events in clauses.

The trick is actually to ensure that such a list is clearly demarked as not being an exhaustive list and that all such events are linked to events beyond the control of the parties and that they actually impact on the parties.

If there is a coup in Bangkok and it doesn�t affect Phuket and the contract is fulfilled in Phuket, there should be no excuse for non-compliance.

A word of caution to those that briefly scan such clauses and view them as �standard� or �boilerplate legal jargon� clauses: often, there will be buried in such a clause reference to �government office delay� or some vague reference to a government institution being involved in a process.

Any such a reference should be scrutinised in the context of the contract. Certainly, in terms of proof, it is exceedingly difficult to prove whether a delay at a government office is the fault of the applicant or the office itself.

However, to avoid one party using this as an excuse for excessive delay, there should be clarification in such a provision that one party using a government office has complied with all of its obligations and used best endeavours to furnish the government office with information and co-operate with requests for information.

This becomes an important issue when buyers or investors are waiting for their title documents and perhaps the application process has not been carried out as expeditiously as it should have been.

Desmond Hughes is a partner in Belmont Limcharoen.
desmond@belmontlimcharoen.com www.belmontlimcharoen.com