18 March, 2020
The coronavirus outbreak has been labelled a pandemic by the World Health Organisation. This raises questions such as whether COVID-19 is a force majeure event and whether an organisation can be excused from its contractual obligations in the circumstances.
Force majeure events refer to acts, events or circumstances that are unforeseeable and beyond the reasonable control of the party concerned. A force majeure clause typically excuses one or both parties from performance of the contract in some way following the occurrence of this type of event.
Force majeure can only be invoked if the contract specifically provides for it, so the first thing to check is whether the contract contains a force majeure clause. If it does, check whether the clause lists "pandemic", "epidemic" or "diseases" as a force majeure event.
If the clause does not include pandemic or similar, it will be necessary to consider whether COVID-19, or its impact on business, is captured by the clause's catch-all provision such as "events beyond a party's reasonable control". Only contractual obligations made illegal or impossible are likely to invoke force majeure. Obligations that are simply made more difficult or expensive to perform are unlikely to be ones to which force majeure would apply.
A party wishing to rely on a force majeure clause to excuse its non-performance should follow all formalities prescribed under the contract for doing so. This may include delivery of written notice. Parties should also keep detailed records of interruption to their business and factors leading to illegality or impossibility.
In addition, a party seeking to invoke a force majeure clause must show that it has taken all reasonable steps to prevent, or at least mitigate the effects of the unforeseen event.
Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period, a clause may entitle the parties to terminate the contract.
For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.