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Does the law protect us against unforeseen events?
https://www.dhakatribune.com/opinion/op-ed/2021/08/05/op-ed-does-the-law-protect-us-against-unforeseen-events
M S Siddiqui
• Published at 03:36 am August 5th, 2021
BIGSTOCK
Why Bangladesh needs force majeure clauses
RMG retailers in the West rely on timely shipments to fulfil time-sensitive
customer orders that impose penalties on Bangladeshi garments exporters for
late delivery. Bangladesh is not a party to the UN conventions on international
sales contracts to safeguard the interests of exporters.
In the coronavirus situation, some Western buyers of RMG expressed that they
are in economic hardship, and there is no space in the warehouses. They are
asking for either cancellation of orders or delayed/deferred shipment until their
warehouses are vacant to intake the cargo.
Usually, international supply chain contracts have a force majeure clause that
excuses or extends performance upon the occurrence of certain unforeseen
contingencies. But the RMG supply contracts hardly contain any force majeure
clauses. In many cases, even RMG supplies have no formal contract.
In Bangladesh, there is no statute that directly governs the doctrine of force
majeure or gives effect to it in express terms. Under English Common Law, the
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applicability of force majeure is purely contractual. Therefore, Bangladeshi
exporters may also rely on the parties’ agreement and the respective terms of the
contract entered into between the contracting parties.
Under public procurement law, clause 38-41 of General Conditions of Contract
(GCC) of Standard Tender Document (STD), PG-4 published by the Central
Procurement Technical Unit (CPTU) at the Implementation, Monitoring, and
Evaluation Division IMED of the Ministry of Planning defines the modality of
application of the force majeure clause. This document is applicable for
international government purchase. The rule has defined the force majeure in our
jurisdiction.
If a contract does not have a force majeure clause, the RMG exporters may find
some comfort in the doctrine of commercial impracticality codified in some laws.
It is not easy to take advantage. The first question is which law applies. The
contract may specify the origin of the laws to be applicable for the contract.
There is the other challenge of enforcement of judgment of one legal system in
other jurisdictions. In order to meet the challenges of different laws in different
jurisdictions, there are some international conventions to resolve these issues.
The United Nations Convention on Contracts for the International Sale of Goods
(CISG) governs supply agreements and international sales contracts between
countries that have adopted the UN convention, unless another governing law is
expressly stated in the contract and/or the CISG is expressly excluded.
The Principles of International Commercial Contracts (PICC) of 2010 is another
document prepared by the UNIDROIT that intends to assist in the harmonization
of international laws used in commercial contracts.
Most of Western countries are parties to these UN conventions. If a contract is
governed by the laws of Western countries and does not explicitly disclaim
application of the CISG or PICC, these conventions are deemed to supplant that
laws of the countries ratified and adapted, since the CISG is a treaty that
overrides national law. If, on the other hand, the contract is governed by the law
of another country, the exporters must look to the laws of that country.
Unfortunately, Bangladesh has yet to ratify both the conventions: The United
Nations Convention on Contracts for the International Sale of Goods (CISG) and
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the Principles of International Commercial Contracts (PICC) are missing the
opportunity to avail the force majeure under these conventions.
Therefore, in the absence of an appropriately worded force majeure clause in a
contract, the parties in Bangladesh may have the option of relying on the existing
provisions of Bangladeshi law -- in particular, Section 56 of the Act of 1872 -- in
order to excuse itself from the timely performance of their respective obligations
under the contract. It is common practice in international commerce to insert a
force majeure clause in sales contracts that precisely defines the applicable
circumstances. A properly drafted force majeure clause has the potential to
minimize a dispute. The parties can agree on the contingencies that will excuse
performance. If the contingencies are mentioned clearly, the party bearing the
economic loss is less likely to bring legal action.
Other countries that have decided to avoid any ambiguity on the subject have
already issued circulars clearly stating that Covid-19 is to be treated as a force
majeure event. For example, the government of India has issued a notice on
February 19, 2020, that Covid-19 was a natural calamity and facilitated the force
majeure clauses in contracts for such events. The China Council for the
Promotion of International Trade (CCPIT), a quasi-governmental entity, issued a
few thousand force majeure certificates to exempt Chinese companies from their
contractual obligations. These certificates are proof of the existence of relevant
events that may constitute force majeure and impinge the company’s capacity to
perform the contract. These certificates, however, are not legal documents and
do not have direct executive or legal effects. They only attest the factual details
instead of certifying that those events are indeed force majeure in law.
Bangladeshi RMG exporters should sign contracts of export with properly drafted
clauses of force majeure, and the Bangladeshi government should ratify The
United Nations Convention on Contracts for the International Sale of Goods
(CISG) and The Principles of International Commercial Contracts (PICC) at an
early date.
M S Siddiqui is a legal economist. He can be contacted at