Covid-19 and commercial contracts

    Covid-19 and commercial contracts

    Below is a list of frequently asked questions about commercial contracts during the Covid-19 outbreak.

    Can I rely on Covid-19 as a trigger of a force majeure clause?

    This will depend on the drafting in the individual contract. The clause need not actually refer to ‘force majeure’. However, it should capture the principle of a supervening event beyond the control of the parties that affects the performance of a contract and provides contractual relief to either party from the duties by which they are otherwise bound.

    In some cases, the clause will make reference to specific examples of incidents to which force majeure will apply, for example, ‘epidemic and pandemic’. Wording of this type will be easier to apply to the Covid-19 crisis but other terms in the contract could impact how it can actually be utilised by the party seeking to rely on it.

    It is best to get advice before seeking to rely entirely on a force majeure clause for failure to meet contractual responsibilities.

    Do I have to honour my contractual obligations whilst the Covid-19 crisis continues?

    This will come down to the terms of the contract. Even if the pandemic falls within the terms of a force majeure clause in the agreement, the way it applies to the parties, if triggered, will determine the ongoing rights and duties of each.

    In the absence of a force majeure clause, the remaining terms of the contract will need to be considered as to whether there is any leverage for negotiation with the other party regards performance, payment, time extensions, etc.

    What if I don’t have a contract or it is silent on force majeure?

    As there is no rule of force majeure under English Law, unless variation is agreed by mutual consent, both parties will remain bound by their contractual obligations, without relaxation or remedy.

    As a consequence, a party who is no longer able to perform the contract due to Covid-19 may be in breach, even if performance is beyond control. The non-defaulting party may have rights to claim damages, terminate or obtain replacement goods and services from elsewhere. The terms of the contract will dictate the remedies available and the exposures to the parties in the circumstances.

    Advice is to be recommended where discussions of this nature arise.

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    This information is given to the best of our knowledge and does not constitute individual legal advice upon which you can rely. The situation relating to Covid-19 is constantly evolving and may have changed since this document was produced. For up to date advice on your own situation, please contact us before taking any action.

    Last updated 27 April 2020

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