COVID-19 is a superior force, but is it Force Majeure?

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By Rebecca Palmer, Solicitor and Director at Constructive Law

In these unprecedented times, it is, understandably, difficult to escape reading about anything other than the impact of COVID-19.

For those at the coal face so far as the administration of commercial contracts is concerned, this means that questions such as: “Will the COVID-19 outbreak be a force majeure event under any of our contracts?” are regularly at the forefront of our minds.

It is an important, and complicated, issue particularly given that so much depends on the specific drafting and interpretation of each individual contract.

As you would expect, of course we advocate swiftly and thoroughly reviewing all your key contracts to establish whether they anticipate events occurring, beyond the control of the contracting parties, that impact on performance. Irrespective of whether the term “force majeure” is used, such provisions need to be identified and then analysed to establish:

  • Whether or not the wording applies to the current COVID-19 scenario
  • What relief (if any) is available
  • How any such relief can be obtained

THE PUNCHLINE: Whilst checking for “force majeure” is a sensible first step, be sure to also check all clauses that relate to “change” (especially “material adverse change”), suspension, termination, illegality, progress, delay, notices and how to implement variations to the contract.  There really is no substitute for reviewing the contract from beginning to end (particularly as we regularly find important wording in unexpected places) but we appreciate this can be daunting.

Once armed with the detail of your legal position in respect of each contract, we can move forward to use this detail to identify, creatively, the options available to guide your commercial decisions accordingly. Each contract’s circumstances are different. Even where the wording is uniform from one contract to the next, an almost innumerable spectrum of possibilities is generated by the fact that we do not contract in a vacuum i.e. our contracting counterparties are different, the history of our commercial relationships with each counterparty differs and the nuances of each individual project pay testament to infinite variety.  In the ordinary course of events, this can be the variety on which we thrive; not so in the current testing circumstances. 

The myriad of options should, however, give us confidence that there is an answer in there somewhere. Litigation is unlikely to be attractive to anyone at present; the businesses most likely to get through the current crisis least scathed (appreciating that no one escapes unscathed) are those engaging pragmatically with creative problem solving and practical options to move forward. Whichever manner you and your business seek to adopt to move forward with your contracts, you can only expect to do so as efficiently and productively as possible if your commercial stance is informed by a clear understanding of your legal position. 

THE POSTSCRIPT: As you would expect (given that we are a legal practice) it is also critical that you adequately record the detail of what you and your contractual counterparties decide and why (you will need to be able to refer to it later) and keep records of all notices served.

If you would like to find out more, contact Rebecca Palmer on rpalmer@constructivelaw.co.uk or call 07533 541367.

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