Will a Force Majeure clause cover you for COVID-19 business interruption?

December 17, 2020

If you have found yourself struggling to meet contractual obligations , or have had a problem with a supplier who has as a result of COVID-19, you will certainly not be alone and there will be many businesses digging out old contracts to see where they stand.

Most contracts nowadays contain a clause commonly termed the ‘Force Majeure’ clause. These clauses are aimed at providing certainty in scenarios where certainty is difficult to come by. The clause will most likely anticipate that there may be some form of supervening event that is beyond the control of the contracting parties and excuse one or both parties from performance of the contract in some way as a result of such an event.

The clause does not have to be labelled ‘Force Majeure’ to be effective as one, and you should look for reference of any events that prevent performance of the contract that are out of the parties’ control. If you are unsure as to whether your contract contains a force majeure clause, and whether this clause extends to COVID-19, please take legal advice.

Often the clause will list specific examples, which can be fairly lengthy (for example, fire, flood, acts of God) but in order to not exclude an event by omission, the drafter is likely to have included language to ‘sweep up’ other events so that the list in not exhaustive. Simply mentioning that ‘the usual force majeure events will apply’ is unlikely to provide sufficient certainty so as to be effective in court. You should therefore look for wording such as ‘epidemics, pandemics, acts of Government or public authority’ to cover the type of disruption that you may have encountered as a result of COVID-19. Unless the clause expressly states otherwise, an event does not have to have been unforeseeable at the time the contract was entered into to be deemed a force majeure event. If you wish to enter into a contract now but limit your liability for any further disruption which may come about due to COVID-19, please ask us for advice on how to draft the force majeure clause accordingly.

The party seeking to rely on the force majeure clause has the burden of proving that their non-performance was as a result of an event which falls within the meaning of the clause. Once again, look to the wording of the clause to see whether the performance of the contract must be impossible, or simply just more difficult as a result of the event. It is unlikely that an increase in the cost for performing the contract would on its own trigger the force majeure clause and it is usual for the clause to provide that the party must seek to mitigate the effects of the force majeure event wherever possible.

Force majeure clauses can have the effect of suspending the contractual obligation and removing the parties’ obligation for non-performance for the duration of the event, with obligations re-instated afterwards. Sometimes the clause may go further and allow the parties to terminate the contract after a specific period should the contract become commercially unviable if the event continued for such a length of time. 

The effectiveness of a Force Majeure clause is very dependent on the specific drafting of the clause and this area of law can be complicated and open to interpretation. Please contact us for any advice in reviewing existing Force Majeure clauses or drafting new ones to ensure that you are sufficiently covered by their terms.

Where an express Force Majeure clause does not exist, often the common law doctrine of ‘frustration’ will apply where performance of the contract has become impossible. For more advice regarding frustration, please contact our company and commercial team.

Wallace Robinson & Morgan Limited are based in Solihull & Dorridge and serve clients across Birmingham and the West Midlands, Warwickshire, Worcestershire and further afield. Our team of Company and Commercial Lawyers are happy to help if you would like advice about Force Majeure or contract law.

If you would like to discuss your matter, please call 0121 705 7571 and ask to speak to a member of the Company and Commercial law team or email us at commercial@wallacerobinson.co.uk.

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.