What impact is the of Covid-19 on commercial contracts? Is there anything that can be done?

The answer is one of construct, i.e. What are the terms of said contract in question and more importantly does it contain a force majeure clause?

The purpose of a force majeure clause is to excuse a party from performance of a contract, following the occurrence of an event beyond the reasonable control of the party, which has hindered performance or made it impossible.

In order to apply this concept to a commercial agreement, there must be a specific force majeure clause included in the contract, including a definition of what constitutes a force majeure event. Exactly what constitutes a force majeure event will vary from one agreement to the next.

If the contract in question specifically contains the word ‘epidemic’ or ‘pandemic’ and there is evidence to support that Covid-19 is either of those, then it can be argued that Covid-19 falls within the confines of force majeure.

Force Majeure

But what if a commercial contract contains a simple or non-specific force majeure clause?

This then makes the position a lot trickier and will depend on other relevant factors, such as whether COVID-19 has hindered performance of the contract or made it impossible, whether such outbreak was foreseeable at the time the contract was made, what the rest of the contract says and the facts and context surrounding the contract and the parties.

Other relevant considerations include whether there were any reasonable steps the party seeking to rely on the clause could have taken to avoid the effects of the force majeure event and whether it complied with the notice (and any other) requirements of the clause.

The courts generally interpret force majeure clauses strictly. They may, for instance, distinguish between a force majeure event that “prevents” performance altogether and one that merely “hinders” it.

If you/your business has been effected by COVID-19 and are unsure what your obligations are regarding the commercial contracts you may have, call our commercial litigation expert team on 0207 936 6329 or email info@monangozzett.com.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

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