COVID-19 has already caused significant and widespread issues for healthcare providers and businesses, many of whom have simply been unable to perform their contractual obligations. In the early months of the pandemic a lot of attention was focused on force majeure clauses. A force majeure (“superior force”) clause acts to exclude liability or excuse non-performance of a contract where a specified event occurs which is outside the contracting parties’ control but it does not always automatically entitle the parties to terminate the contract.
Typical examples of force majeure events include wars and natural disasters like hurricanes, earthquakes and lightning. With restrictions easing and guidance changing, parties will need to carefully consider whether COVID-19 was, and remains, a force majeure event and what that means in the particular circumstances.
When considering force majeure the first step will be to determine whether a helpful clause is present in the contract and, if so, carefully consider whether the definition of the force majeure event will extend to the COVID-19 pandemic. The second step is to consider the drafting of the clause. For example, does the clause set out that the triggering event must make performance impossible? If so, it may be difficult to rely on the clause for relief if performance is simply more difficult or expensive.
It is also worth considering if the contract has been ‘frustrated’ as that would release a party from its contractual obligations. This doctrine can be invoked when a party cannot perform its obligations because it is physically or commercially impossible or would render performance radically different. This is a high bar and the courts are often reluctant to determine that a contract has been frustrated. For example, the High Court recently ruled that Brexit was not a frustrating event in the context of a lease.
Capsticks has extensive experience in contract performance issues and handles over a hundred contract disputes every year. If you are concerned about the impact that COVID-19 may have on your contractual obligations, or the disruption that it may cause, please contact Hugh Wooster on firstname.lastname@example.org or 020 8780 4692.