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Can Coronavirus be classed as a Force Majeure Event?

Can Coronavirus be classed as a Force Majeure Event?

The novel outbreak of coronavirus has been widely reported to have a huge impact on businesses where they may not be able to satisfy their contractual obligations and may face legal action as a consequence.

But whether the virus can be classed as a Force Majeure event is one which is strictly interpreted by the English Courts. A force majeure refers to a clause in contracts where liability can be prevented for natural and unavoidable disasters which restrict parties from fulfilling their obligations.

Can you rely on a Force Majeure clause if you fail to fulfil your contractual obligations?

This is a question which will be at the forefront of many businesses. To begin with, parties to a contract will only be able to consider force majeure if there is an express clause in their contract. Note that a force majeure clause cannot be implied in an English law contract. Albeit even if there is an express force majeure clause in a contract, this does not mean that the clause can be relied on to protect against claims for non – performance as a result of coronavirus. Due to the strict approach of the courts, it will be necessary to carefully analyse the clause.

Therefore if you are someone who has been affected by this or are worried you will be unable to satisfy your contractual obligations, feel free to give us a call to schedule a 30-minute free consultation on 01234 350 244.

In the wake of the global pandemic caused by the novel coronavirus, many businesses have found themselves grappling with unprecedented challenges. From disrupted supply chains to forced closures, the impacts of COVID-19 have been far-reaching and profound. In such uncertain times, one legal concept that has gained significant attention is "force majeure."

Force majeure, a French term meaning "superior force," refers to unforeseeable circumstances that prevent parties from fulfilling their contractual obligations. These circumstances typically include natural disasters, wars, and other extraordinary events beyond the parties' control. The question arises: can coronavirus be classified as a force majeure event?

Understanding Force Majeure Clauses

First and foremost, it's essential to understand the role of force majeure clauses in contracts. These clauses serve to excuse parties from performance obligations when extraordinary events occur that are beyond their control. However, the specific language of the force majeure clause is crucial, as it determines what events are covered and what remedies are available.

Typically, force majeure clauses list specific events such as acts of God, war, terrorism, and governmental actions. Some clauses may include catch-all language to encompass unforeseeable events beyond the listed examples. Whether coronavirus falls under such catch-all provisions depends on the wording of the clause and the interpretation by courts.

Legal Precedents and Interpretations

The classification of coronavirus as a force majeure event has been the subject of much debate and legal scrutiny. In some jurisdictions, courts have recognised the pandemic as a force majeure event, especially when government-imposed restrictions directly impact contractual performance. However, the outcome may vary depending on the specific circumstances and the applicable law.

Courts generally apply a two-step analysis when determining the applicability of force majeure:

  1. Is the Event Covered?: The first step involves assessing whether the event in question qualifies as a force majeure event under the contract. Given the unprecedented nature of the pandemic, courts may consider factors such as government-mandated lockdowns, travel restrictions, and supply chain disruptions.

  2. Was Performance Impossible?: Even if the event falls within the scope of force majeure, parties must demonstrate that their inability to perform was directly caused by the event. This requires evidence of a causal link between the pandemic and the failure to fulfil contractual obligations.

Practical Considerations for Businesses

For businesses navigating the complexities of force majeure amidst the pandemic, several practical considerations come into play:

  1. Review Contracts Carefully: Businesses should review existing contracts to determine whether force majeure clauses apply and what remedies are available in the event of non-performance.

  2. Communication is Key: Open and transparent communication with counterparties is essential. Parties should engage in dialogue to explore alternative solutions, such as renegotiating terms or invoking force majeure clauses where appropriate.

  3. Document Everything: Maintaining thorough documentation of how the pandemic has impacted business operations can strengthen a party's case when invoking force majeure.

  4. Seek Legal Advice: Given the complex legal landscape surrounding force majeure, seeking guidance from legal professionals can help businesses navigate potential disputes and mitigate risks effectively.

Conclusion

In conclusion, whether coronavirus constitutes a force majeure event depends on various factors, including contractual language, applicable law, and the specific circumstances of each case. While the pandemic has undoubtedly disrupted business operations worldwide, the interpretation and application of force majeure clauses remain subject to legal interpretation.

Businesses should approach the issue with caution, carefully evaluating contractual obligations and exploring all available options before invoking force majeure. By staying informed, communicating effectively, and seeking legal guidance when necessary, businesses can better navigate the legal implications of the pandemic and mitigate potential risks to their operations.

"Discover more dvsolicitors.com on our website about handling legal challenges during uncertain times. Empower yourself with the knowledge to safeguard your interests."

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DV Solicitors

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By: DV Solicitors
Date: April 1, 2020
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