As our leaders, health workers and we all continue to battle the spread of Covid-19 worldwide, we are aware that businesses are also battling the effects of Covid-19 on their operations. A lot of industries have been hit due to lockdowns, travel bans, closed ports, amongst other government measure put in place.
A major question arising amongst businesses struggling to meet contractual obligations, is whether or not they can rely on the Force majeure clauses in their contracts to gain relief from performance of their existing contractual obligations due to Covid-19 pandemic.
If you are affected in this manner, we have set out below some useful information on Force majeure to guide your next steps in this regard.
What is a Force Majeure clause?
A Force Majeure clause is a contractual term which enables a party to cancel or suspend or delay the performance of an obligation under a contract as a result of an event beyond their control. Force Majeure events include an act of God, war or military operations, outbreak of diseases, acts of government, change of government laws and policies, etc.
What must I do to claim Force Majeure as a result of Covid-19?
- Confirm existence of Force Majeure Clause– The first step is to confirm that there is a Force Majeure clause in your contract.
- Confirm the event qualifies as a Force Majeure event: It is necessary to review the Force Majeure clause to confirm that the particular reason for your delay or inability to perform is within the definition of the Force Majeure Event. For instance, where your failure to perform is directly caused by Covid-19 you may be in a position to claim “Pandemic” or “Epidemic” as the Force Majeure Event. If it is as a result of measures put in place by government to battle the spread of the virus, it may fit into “Act of Government”.
If you are uncertain as to if the reason for the delay falls within the definition of Force Majeure Events in your contract, it is advisable you seek legal assistance.
- Show that the Force Majeure Event is beyond your control: You must also show that the event was beyond your control (unless your contract does not require you to prove this).
- Show causation: You are also required to show that your inability to perform is directly attributable to the Force Majeure Event i.e. you were prevented, delayed or hindered by reason of the Force Majeure event from performing your duty under the contract.
- Show you took steps to mitigate effect: You must also show that you took steps to avoid the effect of the Force Majeure event but these steps were to no avail; or that there were no reasonable steps that you could have taken to avoid or mitigate the Force Majeure event and its consequences on your ability to perform.
I think I have a case for Force Majeure what steps should I adopt now?
If you are certain that you have a right to claim Force Majeure, you must follow the requirements of the Force Majeure clause in your contract (as guided by your lawyers) in order to successfully rely on it.
Your contract would typically require you to adopt the following steps: give notice
- Notification of the other party: Immediately notify the party of the occurrence of the Force Majeure event and describe, at a reasonable level of detail, the circumstances causing such delay or inability to continue the performance of the contract.
- Reasonable efforts: Use reasonable efforts to perform (or recommence performing) your obligations including through the use of alternative sources and workarounds, where possible.
- Notification of Cessation of Force majeure Event. Upon cessation of circumstances leading to the Force Majeure event, notify the other party of such cessation and resume performance as agreed with that party.
When can I terminate the Contract based on Force Majeure?
The terms of your contract would clearly state the period the Force Majeure event should have continued for before you are permitted to terminate. For instance, it may state that “where the Force Majeure event continues for a long period e.g. thirty (30) days or more depending on the contract, either of the parties may terminate the contract upon giving notice of such termination to the other party”.
It is important to understand that Force Majeure clauses do not automatically relieve businesses of their obligations under contracts including in the current Covid-19 situation. In order to confirm you can rely on the Force Majeure provisions in your contract, the clause must be carefully reviewed by you or your lawyer to confirm that your reason for your non-performance meets the requirements of the Force Majeure clause.