Contractual Obligations & COVID-19

Force Majeure – Frustration – Termination

For our valued clients, colleagues and friends,

I have put together a brief summary of your exposure in this COVID-19 landscape.

It is expected that in the near future you, your customers and or your suppliers will likely face challenges in meeting contractual obligations.

Existing contracts will likely offer some assistance:-

1. Force Majeure clauses:

• Will not likely state a ‘pandemic’ as an express trigger event;
• Consider the impact of COVID-19 on one’s ability to perform their obligations;
• A force majeure event suspends contractual obligations rather than drawing them to a close;
• In all new contracts being entered into, carefully consider and redraft the force majeure clauses to include foreseeable events as a trigger.

2. Frustration: 

• A contract is frustrated if COVID-19 has made performance impossible or has transformed the way performance was contemplated;
• Frustration brings a contract to an end;
• While usually quite narrow in its application, the longer the COVID-19 landscape endures, the more applicable this doctrine becomes;
• If a force majeure trigger can be applied, frustration will not apply.

3. Termination and Dispute Resolution clauses:

• Beware if you terminate a contract prematurely, you may expose yourself to repudiation;
• If you cannot agree a force majeure trigger, the dispute resolution clauses of your contract will be invoked.

4. New contracts from this point forward:

• Include carefully redrafted force majeure clauses, termination and dispute resolution clauses.

Please contact myself or Shavin Silva if further assistance is required to determine your rights and remedies in this changing landscape, so you may plan as best as possible for the months ahead.

Stay safe and positive.

Law, done better.

Serina Pace

Legal Director

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