What does the coronavirus mean for my contract?
The current pandemic is causing major issues not only to businesses but also individuals. Numerous restrictions have been placed on everyday public life, resulting from the cancellation of world events to a downturn in footfall to high street businesses.
These restrictions have also caused havoc for businesses trying to fulfill their contractual obligations and left many asking what exactly is to happen in the event they physically cannot perform what they are meant to do.
The exact answer to this question is yet to be answered, given that this is an unprecedented event or at least something that has not happened in the last generation. There are, however, at least two considerations that parties to a contract can look at:-
Force Majeure
For those unfamiliar with this type of clause, by definition “force majeure” means “unforeseeable circumstances that prevent someone from fulfilling a contract”. Each individual contract ought to contain its own definition of force majeure. This definition will typically include things such as wars or natural events, basically things that are out of a person’s control.
The first port of call therefore will be for parties to a contract to check and see if such a clause exists in their own.
That is not the end of the matter. From there the next question will be whether the clause itself is triggered i.e. has come into play. Parties will also need to understand what the consequences are of such a clause being activated. It is these questions that are likely to require the input of legal advisors, as the advice will be specific to each circumstance.
Frustration
If the agreement does not have a force majeure clause then the parties could potentially turn to the legal doctrine of “frustration”. This common law right is somewhat ironically named as the bar to meet to show that a contract has been “frustrated” is very high. A party to a contract would need to show that it ought to be discharged from its obligations if the circumstances makes it commercially or physically impossible to perform them, or would mean that performance would be radically different to what was intended.
Again, it is recommended that the input of a legal advisor is sought, as the circumstances in which this doctrine can be relied upon is narrow. However, that does not mean that this pandemic will not warrant such claims being made, but is likely to be restricted to very exceptional circumstances.
What should I do
Parties would be well advised to seek out legal help as soon as they can should their work be interrupted. It would also be prudent to consider their insurance policies to see whether any claims can be made, such as for business interruption. It is worthwhile noting that most insurance policies contain a short and strict time limit within in which notification of a claim must be made. If a claim is not made within that time then it could be lost.
