COVID-19 And The Performance Of Contracts In England & Wales

With the COVID-19 pandemic causing major disruption globally, the incidence of commercial parties seeking to avoid liability for failure to perform by reliance on force majeure (FM) clauses is set to increase. While FM clauses may appear straightforward, they can be anything but - the fact that an event has occurred that may constitute an FM event is just the first step. The operation of these clauses is highly fact-specific. Whichever side of the contractual relationship you are on, close attention must be given to the precise wording of the clause and the circumstances of the performing party.

In England & Wales, FM clauses are contractual terms that excuse a party from performance in specified circumstances. English law will not imply the principle of FM into a contract; an express term is required. The scope of the excusal from performance will be dictated by the specific wording of the clause. Any assertion of FM in the current circumstances must address the following:

Are COVID-19 and/or related events capable of constituting an FM event? Do COVID-19 and/or related events have the required impact on the performing party's ability to perform? What mitigation is required under the contract? What notice is required under the contract? There may also be an issue as to whether the legal doctrine of frustration applies to certain English contracts that do not contain an FM clause. The threshold to establish frustration is generally higher than for FM. The party asserting frustration is required to prove that the event:

Occurred after execution of the contract; Was not foreseeable at that time; Was not the fault of either party; and Made performance impossible or fundamentally different from that which was agreed. We explore these concepts in a little further detail below.

Force majeure

Are COVID-19 and/or related events capable of constituting an FM event under the contract?

FM clauses will often list specific circumstances that may constitute FM events and include general wording to capture other, unspecified events beyond the parties' control.

Disease, epidemics and/or pandemics may be specifically listed. If not, consideration should be given to whether the current circumstances would be captured by another specified event, such as acts of state or government action. Whether or not a pandemic is an Act of God has yet to be judicially determined.

If COVID-19 is not within the scope of specified events, it may fall within the general...