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Covid-19

To what extent is the Covid-19 pandemic considered a “force majeure” excuse in contractual relations

Force majeure clause is commonly found in commercial contracts to protect parties who are unable to carry out their contractual obligations due to events beyond their control. The question of whether or not a party can rely on a force majeure clause depends on the facts and precise wording of the clause. A defaulting party may be able to rely on it even though most force majeure clauses contain catch all phrases such as an “act of God” or “epidemic” as opposed to an “outbreak” or “pandemic”.

Courts have held that a party wishing to rely on a force majeure clause to excuse from its performance bears the onus of proving that: 1. an event has occurred due to circumstances that are outside the parties’ reasonable control 2. the event prevented, hindered or delayed performance of the contract, and 3. the defaulting party has taken all reasonable steps to mitigate the event or its consequences.

In the context of commercial contracts to supply or buy goods or services, and where a defaulting party is unable to perform its contractual obligation due to the Covid-19 pandemic, it may be able to rely on the force majeure clause as carrying out its contractual performance would be physically or legally impossible thanks to the Government’s restrictive response to the pandemic.

However, this is not to say the defaulting party is completely off the hook as it still has an obligation to take all the reasonable steps (such as implementing contingencies and workarounds) to avoid or mitigate the effects of Covid-19 and its consequences on its performance, even if it means incurring further costs.