If the impact of Covid19 teaches us anything, it’s to expect the unexpected. As contract lawyers we’ve always worked hard to negotiate the strongest possible protections for our clients. The pandemic has brought the need for us to negotiate hard for clients into much sharper focus. We need to understand the nature of the deal in question and the intentions of the parties. We must also do our utmost to:
- Anticipate situations in which it may become impossible to perform contractual obligations; and
- Set out what the repercussions for each side should be if there is a breach of contract.
It’s when these considerations aren’t taken into account that disputes become more likely. Here we look at two 2022 High Court cases where unexpected events made performing the contract much more difficult than had been predicted at the negotiation stage.
Both cases turned on similar facts involving media rights to sporting events affected by Covid19. But because of the way the contracts had been drafted, and how each party pursued their case they had very different outcomes.
At Nath Solicitors in London we advise on all aspects of commercial contracts, including contractual disputes. To get in touch call 44 (0) 203 983 8278 or get in touch with the firm online.
Case Study 1: The FA v PPLive Sports (2022)
When an unforeseen event jeopardises contractual performance, parties will very often seek to rely on a force majeure clause. Whilst the disputed contract n the FA v PPLive case (2022) did contain a force majeure clause, the defendant instead based its – ultimately unsuccessful – case on the contract’s ‘material adverse change’ clause.
The disputed contract – referred to in court as the Live Package Agreement (the LPA) covered the Chinese broadcasting rights for Premier League football matches. The 2019/2020 football season was thrown into chaos because of Covid19. Matches were delayed or suspended and fans were excluded from grounds. Ultimately however the seasons’ matches were all played, albeit under a very different format from that laid out in the LPA.
Faced with such a different version of the tournament s PPLive failed to pay $200 million due under the contract (although despite the non-payment the Premier League continued to provide the live matches until the end of the season). When the season was over the FA/Premier League brought proceedings to recover the money.
So what sort of tournament had the FA promised? And did the way the League fixtures were played amount to a fundamental shift in what had been promised?
As always the court’s priority is to examine the terms of the specific contract and apply these terms to the case in hand. Here, under the LPA the FA promised that:
“..the format of the Competition will not undergo any fundamental change…,and for the purposes of this sub-clause, a fundamental change shall include any change which results in:
(i) the total number of Clubs being reduced to less than eighteen (18); or
(ii) the Competition ceasing to be the premier league competition played between professional football clubs in England and Wales.”
PPLive argued that the Covid disruption meant the fundamental change clause had kicked in. The court however disagreed. While the judges accepted there had been severe upheaval this did not amount to the sort of fundamental change anticipated in the LPA.
Yes, the way the tournament played out was different to that envisaged before Covid19. But that did not mean PPLive could avoid its obligations entirely. To take such an approach to contractual performance obligations would result only in chaos.
Case Study 2: European Rugby v RDA Television (2022)
In this case there was a very different result. Despite remarkably similar facts to those in the Premier League case discussed above, the High Court found that a broadcaster, RDA Television could get out of a media rights contract with European Professional Rugby when the final stages of the relevant tournament were postponed because of Covid restrictions.
Unlike the Premier League case the broadcaster here relied on a force majeure clause in the contract. It was to the broadcasters advantage that the clause was clearly drafted and widely drawn. For example the actual force majeure definition in the clause referred specifically to ‘epidemic’ as an event that could trigger the clause. It’s worth quoting the clause in full to show how comprehensive these provisions need to be. Force majeure equated to”
‘any circumstances beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement including inclement weather conditions, serious fire, storm, flood, lightning, earthquake, explosion, acts of a public enemy, terrorism, war, military operations, insurrection, sabotage, civil disorder, epidemic, embargoes and labour disputes of a person other than such party’.
Comment
From the way things turned out in these cases it’s easy to see which parties were in the strongest contractual position. But we don’t know what the prevailing circumstances were at the time the contract was negotiated. Which party was able to insist that force majeure terms were drawn as widely as possible for example?
It’s also important to note how the High Court approaches the interpretation of contracts. In particular the way the terms of the disputed contract, as applied to the facts of the case is paramount. A crucial factor in the court’s decision in the Premier League case that disruption didn’t amount to a fundamental change was the way the contract set out clear, limited examples of what would amount to a fundamental change i.e. a reduction in the number of clubs or the competition ceasing to be the premier league competition in England and Wales.
Contact Us
If you are entering a new business contract or you are facing issues around contractual performance contact Shubha Nath at Nath Solicitors on 44 (0) 203 983 8278 or get in touch with the firm online. We’d be more than happy to have an initial chat about your case and how we may be able to help.
