While this case found that the tenant was required to pay rent during the province-wide shutdown of non-essential businesses, this does not mean the same is true for all commercial tenants in Ontario. If it is a situation where the city entirely shuts down a business due to Covid restrictions, there is, in general, a really good argument that a Force Majeure has interrupted the business. Some clauses may be very specific, for example expressly … Note that some contracts only allow one party to rely on FM. The COVID-19 pandemic has no precedent; and boilerplate force majeure clauses typically do not expressly include a pandemic. Where there is no force majeure provision in your contract, or the definition does not extend to the effects of COVID-19, parties may be able to rely on the common law of frustration. For new contracts, FM provisions should be carefully considered as to how they may apply to performance. For example, a party seeking to rely on widely drafted and non-specific force majeure clause entered into since the outbreak in China came to light, may find it difficult to convince a judge that the parties did not foresee the risk of COVID-19 impacting the contract. Parties, when amending their force majeure clause, may decide either to introduce a clause ensuring that effects and governmental measures due to the ongoing COVID … Loans typically do not contain force majeure clauses. Finally, it will explore suggestions for how such clauses … There are three main factors to consider when determining the applicability of a force majeure clause to COVID-19. COVID-19 and Force Majeure . In reality, they differ from contract to contract. The exact scope and meaning of an FM clause will depend upon how the contract is drafted (although wars, strikes and natural disasters are examples of commonly stipulated FM events). What options do you have if your force majeure clause does not cover COVID-19? Many force majeure clauses set out specific triggering events, which tend to vary by contract. But, if the city only imposes a 50% occupancy restriction, then perhaps you have a hindrance (a word I've seen in one lease) but not a shut down and the Force Majeure clause probably does not come into play. COVID-19 as a force majeure. Whether COVID-19 is an FM under a contract depends on the clause’s specific wording within that contract, bearing in mind that FM clauses are typically interpreted narrowly. First, it must be shown that COVID-19 and the events that have transpired in relation to it fall within the force majeure terms of the relevant contract. It may therefore be difficult for a party to rely on an FM clause where there is some level of ambiguity over whether it applies to COVID-19. If you are experiencing financial hardship in your business or are concerned about a contract please contact David McKewin or Stephanie Forward at Rouse Lawyers on 07 3648 9900. This post will provide an overview of how Force Majeure works and then examine COVID-19 as a triggering event as applied in recent cases. An example of an exhaustive definition of . force majeure. In those circumstances, you will need to include alternative wording to allocate the risk for COVID-19. COVID-19 and force majeure clauses under English law ... Review the entire contract – provisions in addition to the FM clause may be relevant for example, exclusion/limitation clauses. The language of "force majeure" itself can sometimes be used in the clause to define and describe the relevant event triggering the clause: see, for example, clause 5(b) of the ISDA Master Agreement 2002. Typically, such a clause lists all the events that excuse or delay performance. It is not a free-standing common law concept and will not be implied into a contract otherwise. This is wider that the language of "Act of God" because it can extend to human interventions. Whether COVID-19 constitutes a force majeure event is contract specific and will vary depending on the wording of each individual force majeure clause. Even if your contract does not have a force majeure clause or your unique situation does not fall within the scope of the force majeure clause, there may be other remedies available to you. Ultimately, when determining whether COVID-19 classifies as force majeure, wording is the key. They are the excuses for non-performance. Banking contracts . A force majeure clause is a contractual provision which excuses one or both parties’ performance obligations when circumstances arise which are beyond the parties’ control and make performance of the contract impractical or impossible. Definition . Drafting force majeure clauses . Clauses that are silent on pandemics, epidemics, or other viral outbreaks are likely to be insufficient for a force majeure defense due to COVID-19, unless, of course, courts liberalize the force majeure analysis to account for market realities. First, you must determine how the contract defines a force majeure event. 1. Force majeure will only excuse non-performance of a contract if the contract contains a force majeure clause. In sum, a fact-specific analysis of the contract, insurance policy and business relationship must be undertaken to assess the impact of COVID-19 on your business. Many JCT contracts contain a force majeure provision, whereas NEC contracts contain the equivalent of a force majeure regime. Does COVID-19 Classify as a Force Majeure? Force Majeure clauses release a party from liability when an extraordinary event outside of their control makes the fulfilment of a contractual obligation impossible. March 4, 2020. Whether or not COVID-19-related events fall within a force majeure clause depends on the precise wording of the contract. However, the above causes demonstrate it is possible for a party to benefit from a force majeure clause in the context of COVID-19 if the party can show the pandemic causally rendered the contract impossible or near-impossible to perform. One major avenue of litigation is the invocation of Force Majeure clauses, which are provisions that excuse or delay contractual obligations due to the occurrence of an interrupting event. As with all contract terms, the starting point for interpreting force majeure clauses is the language used on the face of the contract. A contract is frustrated where the obligations or nature of the contract have become impossible to perform. Significantly, force majeure only applies if there is a force majeure clause in the contract – it is not a general legal principle of universal application. Because force majeure clauses are the product of commercial agreement, the scope and effect of a force majeure clause is determined on a case-by-case basis, by reference to the wording of the clause and the relevant facts. The WHO’s recent declaration of a pandemic will enliven many force majeure provisions which reference such declaration as the trigger to a force majeure event. We provide some sector examples below. An example of a force majeure clause is as follows: A party shall not be in breach of this agreement, nor liable for any failure or delay in performing any of its obligations under this agreement arising from or attributable to matters beyond its reasonable control. Every force majeure clause is different . Notwithstanding that such triggering may have occurred, it is also important to consider other limiting language in a clause. The following triggering events, if listed in a force majeure clause, may be implicated by COVID-19 and current events: Examples include war, riots, earthquakes, hurricanes, lightning and explosions, but can also include energy blackouts, unexpected legislation, lockouts, slowdown, and strikes. “The impact of Covid-19 itself is now foreseeable and so will not be covered by any force majeure clause in a new contract”. Sector examples of force majeure clauses. Is COVID-19 a force majeure event? This is likely the first of many Ontario cases concerning force majeure clauses in commercial leases in the context of the COVID-19 pandemic. The Australian bushfires, floods and coronavirus COVID-19 have brought force majeure clauses to the fore, as businesses look up and down their supply chains to spot vulnerabilities – and whether their suppliers, or they themselves, can comply with their contractual obligations. 31 Mar 2020 COVID-19 and Force Majeure Twitter ... 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