The devastation and impact of Covid-19 continue to grip businesses more and more by the day. Every aspect of the way businesses operate, from dealing with supply chains to serving customers, is being severely hampered by both the virus itself and the efforts in place to try and prevent its spread. This means the frustration of contract becomes a pressing topic, as more businesses find themselves unable to meet their obligations.
If your business has a force majeure clause in its contract, you’re likely wondering if Covid-19 and its effects are suitable grounds to trigger it.
What are force majeure clauses?
Force majeure clauses are elements of a contract that change the nature of the parties’ obligations and liabilities. Force majeure literally means “greater force” and is taken to mean any event or set of circumstances that is reasonably out of the control of the contracted parties. In certain parts of the world force majeure, and other “Acts of God” are well established common law principles.
It’s important to note, however, that the UK is NOT one of those places. Force majeure is an accepted exemption clause of contracts, but only when it has been specifically notarised as a part of the contract. It has no general legal basis.
Can Covid-19 be considered force majeure?
There is no simple answer, as it depends on the way the force majeure clause is included in the contract. If there is no force majeure clause then it cannot be relied on, as mentioned above there is no general legal basis for it in English and Scots law.
If there is a clause then likely must be a part of the accepted exemptions listed after the force majeure clause as examples of reasonable force majeure events. Terrorism, war, acts of Government, and plagues, and epidemics are often specifically mentioned clauses. In this case, the Covid-19 outbreak will be clearly covered under the epidemic (or pandemic, if that’s the word that has been used) element of the clause.
If the term force majeure is used on its own with no qualifying examples of events, it becomes more difficult as it’s a matter of interpretation on both party’s accounts – given the circumstances, courts may be generous in their interpretation of clauses.
What must be shown for the clause?
The presence of a force majeure clause alone is not enough. A business seeking to use the clause as an exemption must also show that they have been prevented, hindered, or delayed in meeting their contract requirements as a result of the pandemic. They must show that the event itself (in this case Covid-19) was the cause of their inability to meet their contract requirements, that said inability was reasonably beyond their control, and that there were no reasonable steps that could otherwise have been taken to mitigate the event or its consequences’ severity.
In conclusion regarding Covid-19 as force majeure
Yes, you can claim Covid-19 as a force majeure event, but only in cases where your contract has an explicit force majeure clause relating to pandemics, epidemics, or the effects of emergency government action, and there were no reasonable steps available to have avoided its impact. If your contract doesn’t have a force majeure clause you will not be able to claim it, as it has no accepted general legal basis in English and Scots law.
Need help understanding how Covid-19 and a force majeure could impact your business? Contact one of our legal team today to discuss how we can help you.
