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Coronavirus – impact on commercial contracts

17 Mar 2020

This week the Chancellor announced £330 billion in loans to support struggling businesses through the developing coronavirus pandemic, but many businesses are still experiencing significant disruption.

Contractual commitments are being scrutinized, and “force majeure” is becoming a hot topic.

Can I rely on force majeure?

Force majeure basically means unforeseeable circumstances that prevent someone from fulfilling a contract.

Does it include coronavirus? Unfortunately the answer is, ”it depends”.

Unlike some other countries, English law does not define exactly what force majeure means, and the concept of force majeure will not be implied into a contract.  Which means you can only rely on force majeure to release you from your contractual obligations if it is expressly covered in your contract.

Whether force majeure is triggered by coronavirus will depend entirely on the words used in the contract, particularly the list of specific events that is usually included in force majeure clauses.

If force majeure is triggered, the options available will also depend on the words used in the contract.  These options often include extensions of time to fulfill contractual obligations.

Coronavirus

Next Steps

  • You should review all of your material contracts to work out whether they include force majeure clauses.
  • Do all of the contracting parties benefit from the force majeure clause, or is it one-sided?
  • Is pandemic specifically included in the clause’s list of force majeure events?
  • What options are available when force majeure applies, i.e. can performance of contractual obligations be suspended until the end of the force majeure event?
  • What if I can’t use force majeure?

We have extensive experience of advising on force majeure and liability under contracts and can undertake contract reviews quickly and efficiently. An increasing number of clients are asking us to do so.

Please do not hesitate to contact the Commercial Team if you require assistance.