In this article, Tal Fadlon, Credorax’s Card Scheme Specialist, analyses the impact of Coronavirus through the lens of natural disasters (‘force majeure’ in legal terms) and discusses how it can lead to high rates of undesired, and sometimes unnecessary, chargebacks. Tal also provides some useful tips on how to prevent these chargebacks in a time when business-as-usual is disrupted.

The spread of the Coronavirus worldwide means that some merchants are encountering the idea of force majeure (French for ‘greater force’) for the very first time. 

In legal terms, force majeure refers to catastrophic events that stop things from running as you’d normally expect. It could be a natural disaster – ‘acts of God’ like an earthquake or a flood. Or it could be a manmade disaster, like armed conflict or an economic crisis. For an event to be considered force majeure, it must be external, unpredictable and unavoidable. In the case of the Coronavirus, it’s a viral outbreak which falls under the force majeure definition. 

These situations often cause disruptions that mean businesses can’t meet their contractual obligations. For example, if an airline operating flights into a city affected by a Coronavirus outbreak is asked by the government to cancel those flights, it’s not the airline’s fault. From the airline’s perspective, this event is external, unpredictable and unavoidable, and force majeure should apply. Which means the airline, to use the legal terminology, is ‘released from its legal obligations’ and can’t be held accountable for the cancelled flights. 

However, it’s worth noting that, even though the airline is released from its obligations, they’re not eligible for what’s called ‘unjustified enrichment’ – the legal term for when one party unfairly benefits at the expense of the other. It’s not the customer’s fault that the flight got cancelled either and they shouldn’t lose their money. 

But of course, with a force majeure such as the Coronavirus, it’s not only airlines that are likely to lose money. Less air travel means cancelled holidays, which in turn leads to less tourism, cancelled car rentals, cancelled hotel bookings and of course, less spending in preparation for holidays and in general, as people shop less both in stores and online. Not to mention the impact felt by businesses on their supply chains… 

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Avoiding force majeure commerce chargebacks

If you read the fine print with force majeure, it releases all parties from their obligations – cardholders too. And, in situations like the Coronavirus outbreak, card schemes like Visa and Mastercard tend to side with the cardholders. In fact, the schemes also say that cardholders suffering any kind of service disruption as a result are likely to file a chargeback claim for ‘goods or services not delivered’.

Naturally, merchants should try to avoid chargebacks whenever possible. So, if the Coronavirus situation (or a situation like it) causes disruption for your business and customers, the schemes recommend the following to avoid commerce chargebacks:

  • Merchants should let cardholders reschedule any hotel reservations, flight bookings or holiday packages. 


  • Drop no show fees if travel restrictions prevent customers from using your services.


  • If a reschedule isn’t possible, offer a refund. This is particularly important if you were unable to provide the service to the customer – for example, flight cancellations. 


  • Even merchants that are still able to provide goods or services should consider refunds if the customer asks for one – for example, if a holidaymaker wants to cancel their vacation to an area officially declared as a Coronavirus outbreak zone.


The travel industry is particularly vulnerable to force majeure events like the Coronavirus outbreak. It’s possible that further travel restrictions will be put in place as the situation develops. Companies are also limiting business-related travel; appetite for travel overall might dip as people put off trips or holidays, even to areas not directly affected by the virus, until the situation stabilizes. And we can expect that similar trends will continue in other industries that are also impacted as the virus spreads throughout the globe, making it more crucial than ever for merchants to prepare for and adapt to the situation and their customers’ needs.

In these circumstances, it’s important for organizations to understand the impact that force majeure events can have on their business and to prepare accordingly. 

Read more about keeping your business immune during times of change: 

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