COVID-19 vs. Force Majeure Clauses

COVID-19 vs. Force Majeure Clauses

-Fawzan Rafeek MRICS MCIArb

#constructioncontracts #RICSAPC #fidic #meqsa

Force majeure is a reference to an external event, outside of the parties' control, which parties cite as a reason to withhold performance of their contractual obligations.

There are a number of questions that every business should be raising right now no matter the stage of contractual performance:

is performance of the contract impeded?

is the contract now impossible to perform, or is it merely more difficult?

does the contract include an explicit force majeure provision (which need not be labelled 'force majeure') and, if so, is the impediment caught by that provision?

does the contract require notice of a force majeure event to be given and has notice been given accordingly?

how is the impediment measured, how long will it last and when can it reasonably be said to have ended?

is there any indication in the terms of the contract that one party has assumed the risk of not being able to perform in the current circumstances?

is the impediment due to an event under one party's control? Could one party reasonably have mitigated or avoided the consequences of non-performance altogether?

can the impediment be dealt with by cooperative means, including expressly varying the contract to accommodate the change?

whether or not the contract contains a force majeure clause, what is the governing law of the contract and what does that law say about force majeure or similar doctrines?

where a business is entering into a new contract, how does it intend to allocate the risk of non-performance caused by the pandemic?

Parties should be familiar with the wording of their contracts and comply with any notice requirements strictly.

Force majeure clauses are interpreted restrictively, and it is a very high hurdle to prove that a contract has been frustrated. Parties should therefore seek to cooperate in this difficult climate, working together on devising reasonable steps to mitigate the adverse effects caused by the pandemic while still delivering performance, even if in a different way.

Parties also remain free to vary their contract by agreement in order to adapt to the current situation.

Reference;

https://www.pinsentmasons.com/out-law/guides/force-majeure-uae