The coronavirus pandemic continues to wreak havoc on businesses across the country. As we pointed out last week, it’s important to review the contractual arrangements you have with third parties to establish whether you and the other contracting parties are still obliged to discharge your obligations under the contract. Unsurprisingly, at Nath Solicitors in London, we are receiving a high volume of enquiries from concerned businesses. And it’s clear to us that the question of whether a contract contains enforceable force majeure provisions has become critical.
Here we look at the type of clause you need in your contract to enable you to reduce or terminate your obligations at a time of global. We’ll also mention some of the high profile organisations that appear to have been able to rely on force majeure provisions to mitigate the fall out from the virus on their business.
Relying On A ‘Catch-All’ Force Majeure Provision
To activate a force majeure clause in your contract you must be able to:
- Point to an event that’s beyond your control
- Show that your ability to perform contractual obligations has been prevented by that event
- Demonstrate that you have taken steps to reduce the impact of the event
Many commentators and businesses – reasonably in our opinion – have taken the view that the coronavirus pandemic is an event beyond the control of individual businesses. Most force majeure clauses will contain general, catch-all language, including the term ‘Act of God’ when defining a force majeure event and at present many businesses are relying on this type of general clause.
However, businesses with contracts that refer to ‘pandemic’ specifically within a force majeure clause will probably be in a stronger position when it comes to invoking the force majeure provisions. This week it’s been reported for example that the All England Lawn Tennis Association that runs the Wimbledon Championship and the Royal & Ancient, organisers of The Open Golf Championship had the benefit of specific pandemic provisions in their insurance contacts. This, according to reports means the cancellation of Wimbledon and the Open will have little financial impact on the two organising bodies.
Force Majeure Not An Excuse To Evade Payment
Remember even when you establish force majeure you are still required to demonstrate causation – that the event has directly stopped you from performing the contract as originally envisaged and that you have taken steps to mitigate the effects of the force majeure event.
We’ve seen already individuals and businesses – from estate agents and events management companies to clients of private schools and childcare facilities –attempting to use coronavirus and the concept of force majeure as a way to avoid paying what is contractually due.
Of course, it’s essential to act sensitively and proportionately at this unprecedented time. But at Nath Solicitors, we are able to step in quickly to remind your clients, customers and suppliers of their continuing contractual obligations, and to take appropriate action where necessary.
How We Can Help
At Nath Solicitors, we have been able to respond quickly on behalf of clients encountering spurious claims of force majeure, including instigating proceedings for recovery of monies due.
For further advice please contact Nath Solicitors on 44 (0) 203 670 5540 or use the covid19 emergency contact form to get in touch.
