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Coronavirus & Contracts – Force Majeure Event? - 4th March 2020 - Click for larger version Coronavirus & Contracts – Force Majeure Event? - 4th March 2020

The outbreak of the coronavirus is impacting all aspects of life, and business life is no exception.

With governments taking precautionary measures from everything between closing schools and reducing large scale events to restricting travelling within, as well as to and from countries, business contracts are inevitably being obstructed and delayed as a result of the coronavirus.

In these circumstances, it is easy for businesses to be in breach of contract as a result of being unable to fulfil their contractual obligations.

Businesses should carefully review their commercial contracts to (i) consider the likelihood of being able to perform their contractual obligations; and (ii) assess their rights and obligations in the face of a “force majeure event”.

Force Majeure Event

So what is a force majeure event? Quite simply, a force majeure event is an event which is outside of a party’s control.

This includes natural disasters, acts of God, acts of war or terrorism, political instability, intervention by governmental authorities and, most importantly, epidemics or pandemics.

To account for the occurrence of such an event, it is common for commercial contracts to include a force majeure clause.

The purpose of this clause is to excuse parties from performance of their obligations under the contract following the occurrence of an event beyond their reasonable control, such as the trigger events listed above.

Generally, force majeure clauses are drafted to ensure that these trigger events are interpreted with a wide scope and may be satisfied if performance of the contract has become substantially more onerous, rather than prevented completely.

If performance of your contract is being hindered or delayed as a result of the coronavirus outbreak, it is possible that this constitutes a force majeure event.

Ultimately, determining whether you or the counterparty may rely on a force majeure clause to avoid or delay contractual obligations due to the coronavirus outbreak is dependent on the specific wording of the contract.

What happens on a Force Majeure Event?

Once a force majeure event occurs, a force majeure clause will give the parties the right to continue the contract, to suspend it or to terminate it.

Fundamentally, a force majeure clause can provide the unaffected party with the right to serve notice terminating the contract after a specified period of non-performance due to the force majeure event.

However, determining what happens when there is a force majeure event will depend entirely on the specific contract in question.

How we can help

With the effects of the coronavirus suspected to continue for the coming months, this is an issue which is unlikely to regress.

If you are uncertain on how to deal with force majeure claims, whether you may rely on a force majeure clause in existing contracts or whether you should include force majeure clauses in new contracts going forward, the team at Macdonald Henderson can provide you with practical and down to earth legal advice.

With expertise in corporate and commercial law, we have the capability and know-how to advise you on all aspects of commercial contracts.

Key Contacts:

David Beveridge (db@macdonaldhenderson.co.uk)

Fraser Morrison (Fraser@macdonaldhenderson.co.uk)

Laura McKnight (Laura.McKnight@macdonaldhenderson.co.uk)

Last updated: 12.06pm, Wednesday 4th March 2020

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