Coronavirus And Force Majeure In English Law

What does the Coronavirus mean for supply contracts, and is it possible for parties to avoid contractual obligations due to low demand?

• Under English law, force majeure clauses in contracts may allow parties to avoid their performance obligations in certain extreme circumstances, as defined by the contract.
• It is unlikely that a low demand for LNG in China would reach the level of extreme circumstances required to invoke a force majeure clause of the type we are used to seeing in long term LNG supply contracts under English law.
• Force majeure provisions usually contain requirements to use reasonable endeavours to avoid the effects of the extreme circumstance.

In the last fortnight there has been news in the press that CNOOC and PetroChina have invoked force majeure clauses in their long-term LNG supply contracts and that Sinopec and China National Petroleum Corporation are considering doing likewise. In the case of PetroChina, it has been reported that