We are all trying to keep safe and maintain a normal daily life as much as possible during these difficult times. Covid-19 or coronavirus has affected us all.
A lot of our clients are asking whether Covid-19 is considered a force majeure event that would permit the parties to a commercial contract to walk away from it.
So first of all, what is a force majeure clause and how is it used?
Force majeure clauses are usually found in commercial contracts, where the parties try to predict events beyond their control that would make performance of the contract almost impossible and therefore allow them to walk away from it.
A force majeure event typically includes acts, events or circumstances beyond the reasonable control of the party seeking to rely on it. The term “force majeure” derives from French law and has no identifiable meaning in English law. Therefore, if your contract simply states that “the usual force majeure clauses will apply” you will not be able to rely on it, as the term is not sufficiently identified.
It is important when negotiating a commercial contract to think carefully what will constitute force majeure events based on the particular circumstances of the parties. Seeking the advice of an experienced commercial solicitor, who will be able to draft a suitable force majeure clause to include in your contract, will also go a long way in protecting your interests.
So can Covid-19 be considered a force majeure event?
Nobody expected Covid-19 to happen or to have the disastrous effects we are all experiencing in every aspect of our lives, from our personal to our business activities. We can all agree that it is an event or circumstance beyond anyone’s reasonable control. However, it does not necessarily follow that you will be able to rely on it to stop performing your obligations under your contract, as what constitutes a force majeure event will vary from one agreement to the next.
Even if your contract has a definition of “force majeure”, is the definition drafted in such a way that a pandemic such as Covid-19 would fall under the definition? Even if it does, there are other factors that will also need to be considered.
For example, is the performance of the contract stalled or made impossible due to Covid-19? Was it possible at the time the contract was made to foresee Covid-19? What does the rest of the contract state and what are the facts and the context surrounding the contract and the parties? Where there any reasonable steps you could have taken to mitigate the consequences of a force majeure event?
If you are not certain whether your commercial contract includes a force majeure clause or if it does whether Covid-19 would be caught by it, we can help. Our experienced commercial solicitors can review your agreement and help you bring a bit of certainty in these uncertain times.Back
Niki works in our corporate and commercial department. Her dual qualification in civil and common law jurisdictions give her a unique perspective and understanding when advising firms throughout their business cycle.
Niki Polymeridou - Solicitor
To discuss how Glaisyers can assist you contact Niki Polymeridou on Niki.Polymeridou@glaisyers.com or via 0161 832 4666.