COVID-19 (Coronavirus): A Force Majeure Event?

• Published date: 06 July 2020
• Subject Matter: Coronavirus (COVID-19), Litigation, Contracts and Force Majeure
• Law Firm: Rollits LLP
• Author: Mr Keith Benton

It goes without saying that we are currently living in extraordinary times. Many thought that 2020 would be the year of scrutinising contracts as a result of Brexit, but now a new menace has emerged, one which couldn't be accounted for, and which usurps Brexit as the number one issue for most organisations: Coronavirus.

With the public being told to avoid all social gatherings, and with a large proportion of organisations operating with a skeleton staff as a result of self, or forced, isolation, not to mention the measures put in place by our friends overseas, it is clear that domestic and international trade has encountered unprecedented interruption and will continue to do so over the coming weeks and months.

Many organisations will need to consider the force majeure clause in a contract, possibly for the first time. A force majeure clause enables a party to be excused from, or to suspend performance of, its obligations on the occurrence of certain events which are outside of that party's control. Generally speaking, there must be a force majeure clause in a contract for a party to be able to rely on a force majeure event because the term "force majeure" has no recognised meaning in English law.

The force majeure clause must be broad enough in scope to cover the relevant event. The event might be mentioned in the clause for example, "pandemic" which would include Coronavirus, or it might be included in all embracing wording such as "any event beyond the reasonable control of a party".

If the clause requires the event to "prevent" performance, then performance must be legally or physically impossible as a result of the relevant event, not just more difficult or more costly. If the clause refers to the event "hindering" or "delaying" performance the clause will allow the contract to be temporarily suspended whilst the force majeure event continues, for example, a delay in obtaining materials that are essential for the timely performance of the contract.

It is also necessary to consider what the force majeure clause says about the long term consequences of the force majeure event. Some clauses will merely excuse...