Is coronavirus a force majeure?

08 April 2020
PANDEMIC

 

Extraordinary times call for extraordinary measures – but relying on force majeure in the age of COVID—19 is not always straightforward. Our solicitor Jonathan Mackinder explains

Force majeure is a term that’s under the spotlight, but what is it? Put simply it’s a contractual clause that allows parties to pause or step away from their obligations following an extraordinary event or circumstance – one that’s usually outside the control of the parties. Force majeure clauses are a very common part of most contracts, but one of the least discussed.

That’s because it’s highly unlikely that they will be triggered. Especially here in the UK, where we’re less prone to extreme natural disasters and other destabilising events.

What about coronavirus?

So does the COVID—19 pandemic constitute a force majeure? It’s clearly something on our clients’ minds – we’ve experienced a surge in enquiries about this very subject. That’s testament to the unprecedented disruption being felt by businesses across the UK.

Here’s the underlying question: to what extent do force majeure clauses allow a party to pause or step away from its obligations under a commercial contract?

Creature of contract

The key point about force majeure clauses is that they are a creature of contract, not common law. What this means in non-legal wording, is that there are no hard-and-fast rules which say what qualifies as ‘a force majeure event’. Nor is there any universal acceptance of when the clause will be triggered or what the consequences of invoking the clause are.

In each case, it will depend entirely on the precise wording of your contract. And a party seeking to rely on ‘force majeure’ will usually be required to demonstrate that it’s taken all reasonable steps to mitigate its losses arising from the force majeure event.

As such, there are steps that business can be taking now to mitigate their losses and records should be kept of such steps where possible.

Take a close look

Have a look at your contract. Look at the force majeure clauses carefully. These key questions should be considered before relying on force majeure:

  1. Does the Covid—19 pandemic qualify as a ‘force majeure event’ under the wording of the contract? Does the clause refer to specific list of events, or seek to refer to events more generally?
  2. What is the threshold required for the force majeure clause to be triggered? Must the event prevent, hinder or merely delay the contractual obligations?
  3. What are the consequences of relying on force majeure? Will it trigger a penalty or other provisions of the contract? Does it release you from your obligations to the extent that you are seeking? Will it also release the other party from their obligations?

The answers to these questions will inevitably turn on the precise wording of each contract. We recommend that you seek legal advice as early as possible in order to inform your business’s response.

Contact us

Our team of experts are here to help. Call Jonathan Mackinder in our Corporate and Commercial team on 01522 515009 or email jonathan.mackinder@wilkinchapman.co.uk


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