Does A Force Majeure Clause Help Deal With Contractual Performance Issues Now Arising?

Businesses need to understand the liability they have or can avoid due to the impacts and consequences of COVID-19. Here are some of the key considerations to think about now:

1. Can I avoid performing a contract because of the pandemic?

   First you need to check whether your contract has a clause for "impossibility/force majeure/events outside your control". This clause is used to relieve parties of their liability for non-performance where non-performance is due to circumstances beyond their control. If a contract contains such a term, the wording needs to be carefully reviewed to check whether it offers the relief you need in the situation you are relying on it for. To be useful against the effects of COVID-19 the clause would need to cover epidemics, pandemics, quarantines, acts of public/governmental authorities or wider language such as an Act of God. Under English law, the value of a clause to any party depends very much on the wording and circumstances as there is no statutory meaning to force majeure. Contracting parties who wish to seek to rely on this clause must consider all alternatives and be prepared to justify why their performance was impossible and could not have been completed by any other means within their control. A party must also prove that the event was the only cause of its breach i.e. if it would not have been able to meet its obligation in any event, for some other reason, then such an argument will fail. If your contract does not include the above clause or you cannot rely on it, check any terms relating to cancellation: this clause will set out the liability and notice requirements in the event that a party terminates a contract by their own choice (e.g. taking a precautionary and proactive approach to protect the health and safety of employees or customers), in which case they are usually expected to bear a reasonable share of the cost or loss to the other party, as the cancellation is not forced beyond their control. Any charge should be based on a reasonable and proportionate attempt to predict and recover the other parties' actual costs and losses and should not penalise the cancelling party or create a profit for the other party. It is reasonable to request the evidential basis of any such charges. If you still cannot find a useful way out, check for any terms allowing for variation, suspension or termination: any terms relating to these are worth checking to see if they provide the parties with the freedom...