Basic contract law dictates that both parties to a contract must comply with the written obligations of that contract unless there is an express right not to do so. However, the unprecedented nature of Coronavirus gives rise to two possibilities for non-performance and avoiding legal liability:
- Force majeure (FM) – if the contract contains a written FM clause and Coronavirus comes within the definition of FM, there may be grounds for avoiding liability in the event of non-performance or delayed performance. If there is no FM clause, FM cannot apply at all. Although an FM event will not automatically terminate the contract, in many clauses, if the FM event goes on for a specified period, the other party can terminate (without liability on either side). There are no “standard” FM clauses and each needs to be considered carefully on its own merits.
- Frustration – exceptionally, a contract may be discharged on the ground of frustration when something occurs after the formation of the contract which renders it physically or commercially impossible to fulfill the contract, or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of entry into the contract. Generally speaking a frustrating event is one which is so fundamental as to be regarded by the law as striking to the root of the contract and as entirely beyond what was contemplated by the parties when they entered the contract.
Force majeure and frustration are exceptions to the rule that contracts must be performed and so are monitored strictly by the courts.
If you think either of these scenarios apply to you Wollens can provide professional advice on your position.
Contact [email protected] and we will forward your enquiry to one of our specialists.
Our commercial services can be found here