Notwithstanding that such triggering may have occurred, it is also important to consider other limiting language in a clause. The COVID-19 pandemic has no precedent; and boilerplate force majeure clauses typically do not expressly include a pandemic. 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. 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. Is COVID-19 a force majeure event? 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. 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. 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. In those circumstances, you will need to include alternative wording to allocate the risk for COVID-19. In reality, they differ from contract to 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. Typically, such a clause lists all the events that excuse or delay performance. For new contracts, FM provisions should be carefully considered as to how they may apply to performance. 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. This is wider that the language of "Act of God" because it can extend to human interventions. It is not a free-standing common law concept and will not be implied into a contract otherwise. 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. 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. They are the excuses for non-performance. COVID-19 and Force Majeure . 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. 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. A contract is frustrated where the obligations or nature of the contract have become impossible to perform. There are three main factors to consider when determining the applicability of a force majeure clause to COVID-19. First, you must determine how the contract defines a force majeure event. 1. I recently came across the above statement (on clarkslegal.com) and wondered at its accuracy or lack thereof. 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. 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. Many force majeure clauses set out specific triggering events, which tend to vary by contract. This is likely the first of many Ontario cases concerning force majeure clauses in commercial leases in the context of the COVID-19 pandemic. Definition . As with all contract terms, the starting point for interpreting force majeure clauses is the language used on the face of the contract. Whether or not COVID-19-related events fall within a force majeure clause depends on the precise wording of the contract. 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. “The impact of Covid-19 itself is now foreseeable and so will not be covered by any force majeure clause in a new contract”. 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. 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. What options do you have if your force majeure clause does not cover COVID-19? 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. 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 … Finally, it will explore suggestions for how such clauses … 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. Some clauses may be very specific, for example expressly … The following triggering events, if listed in a force majeure clause, may be implicated by COVID-19 and current events: 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). Force Majeure clauses release a party from liability when an extraordinary event outside of their control makes the fulfilment of a contractual obligation impossible. 31 Mar 2020 COVID-19 and Force Majeure Twitter ... To use an extreme example, if the clause in an English law contract simply says, “This contract may be terminated in the event of Force Majeure” without expressly defining what “Force Majeure” means, the clause is unlikely to have any meaningful effect. An example of an exhaustive definition of . 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. 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. When it comes to Coronavirus and force majeure clauses, there are at least 3 moving parts in play: ... Let’s break the example force majeure clause down into its parts: Triggers or qualifying events: these are the type of events that bring the force majeure clause in operation. Loans typically do not contain force majeure clauses. Every force majeure clause is different . March 4, 2020. Drafting force majeure clauses . Does COVID-19 Classify as a Force Majeure? 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. COVID-19 as a force majeure. force majeure. Coronavirus (COVID-19) and Force Majeure Contract Clauses. Ultimately, when determining whether COVID-19 classifies as force majeure, wording is the key. Banking contracts . Sector examples of force majeure clauses. We provide some sector examples below. Note that some contracts only allow one party to rely on FM. 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. 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