Chile: Force Majeure

Force majeure is defined in Article 45 of the Civil Code as “an unforeseen event that cannot be resisted”. This definition and its consequences apply to any contract, even if the parties did not expressly included clauses.

If an event meets the requirements of the definition -an unforeseeable event whose consequences are irresistible- it may be qualified as force majeure and invoke its effects.

Yes. Apart from its legal definition, as explained in answer number 1, it has also been developed by scholars and case law.

Yes. The parties may derogate the effects of force majeure and make themselves liable under any circumstance.

When included, force majeure clauses may provide a more specific definition, or even a different one, than that stablished in the law, or may specify the effects that follow the occurrence of the event.

It is common in more sophisticated contracts. Standard commercial contracts do not necessarily include these types of clauses.

When parties do not include force majeure clauses, the legal definition and its consequences apply. Therefore, if no terms are provided courts will apply legal regulation.

In general, courts tend to be highly strict when analysing and checking the unforeseeable and irresistible feature of the force majeure event.

Courts in Chile operate on a case-by-case basis and tend to understand that the impossibility feature of the event needs to be absolute and objective for any person who is in that same situation, although there is a tendency to switch to more flexible criteria.

No, just a legal definition. Therefore, insofar as the parties do not distort the nature of force majeure (in which case their precise will should be interpreted and followed), they may modify or specify the boundaries of the concept of force majeure to be used in one specific contract or alter its effects in whatever way is suitable for their interests.

Unless parties agree otherwise, yes, the event to be qualified as force majeure must be unforeseeable at the time of the contract.

Article 45 of the Civil Code explicitly mentions as examples shipwrecks, earthquakes, capture of enemies and acts of authority executed by a public official. Nonetheless, its characterization and ability to be considered as something impossible that cannot be resisted depends on the specific case (an earthquake may be considered force majeure in a context, but not in others). Likewise, acts of authority such as a quarantine, have often been considered as force majeure.

There is no consistency as for what events are not considered force majeure. Each individual case must be analysed. To this end, if the parties have not stipulated anything in the contract, the party alleging the unforeseen event must prove that the requirements of force majeure have been met.

So far, there have been only few cases decided on COVID-19 and force majeure but only on a first instance level and in very specific topics such as lease contracts. Therefore, it cannot be stated that courts are definite and consistent on this matter.

No. Courts are independent from government to determine if an event counts as force majeure and, in any case, this is analysed on a case-by-case basis.

If the contract does not provide a specific consequence, in principle, force majeure is legally regulated as an exoneration of liability. This means that if one party suffers an event of force majeure, said party will not be liable for damages caused by it. However, scholars and case law have established that force majeure also allows a party to suspend its obligations for as long as the force majeure event lasts.

This may be regulated by the parties in a contract. If not, force majeure does allow a party to avoid liability for both failure and delay in performing its obligation insofar said liability is a direct consequence of the event of force majeure.

If the contract does not provide anything specific, force majeure might allow the party who did not suffer its consequences to terminate the contract based on the failure or delay of performance of the other party’s obligation. The party who suffers the consequences of the event of force majeure may not terminate the contract but, as said, may avoid liability and suspend its obligation.

The party who claims a force majeure event as an excuse for failure or delay in performing its obligation is required to prove it.

In general, it should prove the event itself (unless it is a public and notorious fact), and that the event was unforeseen and irresistible.

However, a criterion of reasonableness also tends to operate, mainly in more sophisticated commercial contracts, where these assumptions have been more regulated and the parties often incorporate clauses regulating cases of force majeure and their effects, with force majeure often referring to consequences that cannot reasonably be avoided.

In general terms, there is a principle in our legislation to mitigate the effects of force majeure, that derives from the general principle of good faith that parties must observe. This is also related to reasonableness, and in more sophisticated contracts the parties expressly regulate it as an obligation to mitigate the damages that can reasonably be expected. For the affected party, it is quite possible that the contract contains an obligation to mitigate the effects of force majeure, and even if it does not, given the principles of good faith it is advisable to do so. For the same reason, a proactive and collaborative attitude is always convenient.

When regulated in the contract, it is usual to include a notice requirement when a force majeure event occurs. When not, the law does not provide for any notice requirement, but scholars and case law have stated that said notice is required based on good faith and as a form of meeting the burden of mitigating losses.

When regulated in the contract, the consequence is the one agreed by the parties. When not, in case such failure notice is considered as a bad faith behaviour, then the party that does not give notice may be deemed responsible for its own damage, or even be liable for the damages caused to its counterparty if any.

In general, if prepayments were made by the party not affected by force majeure, it may claim the restitution of said payments.

The party not affected by force majeure may suspend the performance of its own obligation based on the failure or delay of the other’s. If the failure or delay is material, the party not affected by force majeure may claim the termination of the contract.

In our consumer protection law, force majeure is not expressly regulated, so the general rules of the Civil Code apply. However, because of Covid-19, the National Consumer Service

issued an instruction on good practices to protect the interests of consumers. In addition, the National Consumer Service has issued other resolutions to protect consumers during the health crisis, including, for example, suspension of warranty periods, information duties, regulation of distance contracts, risk prevention and protection of consumer life and health.

In general terms, there is no specific type of policy for this as it depends on each individual insurance policy.

However, as for the coronavirus it is possible to distinguish mainly two areas for analysis in this matter:

With respect to life insurance, the determining factor will always be the coverage and exclusions contained in the respective policies, without prejudice to the fact that it is typical on this type of insurance that a deterioration in health or even the death of a person as a result of a virus is included in the coverage.

With respect to damage insurance, although there is a presumption of coverage in these insurances, the exclusions contained in the policies are also decisive, since it is possible that epidemics or pandemics are excluded from coverage in certain insurances.

Yes. There are some bills which intend to explicitly recognize material adverse effects (“Teoría de la Imprevisión”, in our legal tradition), since it is a matter not regulated in the Law, which has been applied only exceptionally in our case law.