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The Coronavirus or COVID-19 Pandemic currently ravaging the world is having a profound influence on most of our lives. Social distancing, isolation, and quarantining mean that people are unable to go about their lives as usual. We can no longer travel or gather with others the way we used to only a matter of weeks ago. Indeed, many are housebound except for essential and necessary outings.
One of the effects of being unable to congregate or travel is that many contracts are having to be cancelled often on very short notice. Whether it be cancelling air travel or a car rental, a hotel room or a convention hall, many people are now unable to abide by contractual commitments they made before the outbreak.
Generally, a person who does not fulfill their obligations under a contract is liable to make-good the losses the other party suffers as a result of that breach. But what of a person who is unable to meet their obligations due to circumstances entirely unforeseen and beyond their control, like the Coronavirus pandemic?
Parties looking to protect themselves against such unforeseen circumstances can include what is known as a force majeure clause in their contracts. French for “superior force”, a force majeure clause relieves the parties from having to fulfill their contractual obligations when they are prevented from doing so by forces beyond their control. Force majeure clauses can apply to natural disasters, war, terrorist acts, or “acts of God” among many others. Whether a force majeure clause will apply to excuse a party from performance in any particular scenario will depend on the precise wording of the clause. For that reason, it is best that such clauses be as complete and exact as possible.
Without an explicit and expansive force majeure clause, a party wishing to escape liability for the consequences of being unable to meet their contractual obligations will have to rely on common law doctrines such as frustration. Whether they are applicable depends wholly on the facts of a particular case. For that reason, a carefully drafted force majeure clause is always preferable.
