Given the worsening Coronavirus crisis many businesses are concerned about their ongoing contractual arrangements. In these uncertain times Ellisons can provide clarity as to liability in the event contracts are not properly performed.
Coronavirus – Impact on contracts
If, as a result of the Coronavirus crisis, you are unable to perform any of your contractual obligations, that failure may require you to compensate the other party to the contract. However, if the Coronavirus crisis is the reason you were unable to fulfil your contractual obligations, you should consider whether you would be excused from liability on either of the two following grounds:
Force majeure clauses are designed to protect the parties to a contract by specifically referring to circumstances which the parties agree will make the contract impossible to perform. The effects of a force majeure clause will vary depending on its precise wording but include suspension of contractual obligations until the relevant force majeure event has ended. If the event continues for an extended period, the force majeure clause may allow for termination of the contract.
References to epidemic or pandemic in the specific wording of a force majeure clause are not uncommon but force majeure clauses can also be drafted more generally.
An alternative to a force majeure clause, is the common law doctrine of frustration. To rely on the doctrine of frustration, you must be able to demonstrate that a change in circumstances has caused performance of contractual obligations to become impossible or radically different.
Many of our clients have already expressed concerns about the performance of contracts following the coronavirus outbreak. We can assist you by reviewing contracts and advising you as to the options for protecting your business.