Upgrade to ChromeUpgrade to FirefoxUpgrade to Internet ExplorerUpgrade to Safari

Contracts and Coronavirus – force majeure and frustration

As the impact of Covid-19 continues to spread, we are seeing some clients express concern that they may not be able to perform their obligations under contracts with customers.

Here, we look at how businesses’ contractual responsibilities may be affected by the coronavirus.

First, do I have a contract?

A contract is a legal agreement that gives new rights and responsibilities to those who agree the terms of the contract. Contracts can be formed verbally or in writing. For example, a contract can be created by email, letters or during a verbal communication.

A valid contract consists of:

  • offer;
  • acceptance;
  • consideration;
  • intention to create legal relations; and
  • certainty of terms.

What about breach of contract?

Due to the current pandemic, your business might be unable to fulfil its contractual obligations or suffer loss because the other party has failed to comply with their duties. Generally, a claim for damages for breach of contract would be available.

How does a pandemic or crisis situation affect breach of contract?

However, if the contractual failure was caused by Covid-19, more commonly known as coronavirus, then the claim for breach of contract might fail for one of the following reasons:

  • There was a force majeure clause in the relevant contract; or
  • The doctrine of frustration applies.

Force majeure

A force majeure clause suspends one or both parties from their obligations to perform a contract due to the occurrence of certain events which are beyond the parties’ control.

Before claiming for breach of contract it is sensible to check the terms of the contract to determine whether a pandemic or crisis is covered by the definition of force majeure.

Frustration

A contract can be discharged on the ground of frustration when something unpredictable occurs after the formation of the contract rendering its performance impossible.

To successfully claim frustration of a contract the following criteria should be satisfied:

  • a frustrating event takes place after the contract has been formed;
  • the frustrating event is unpredictable and was not contemplated by the parties when they formed the contract;
  • the frustration was not due to the fault of either party; and
  • the frustration renders further performance impossible.

If you would like initial advice on these areas, our Commercial Contract Disputes solicitor Richard Darbinian provides a free half hour consultation.

Please contact Richard at Richard.Darbinian@wards.uk.com

 

Get in Touch

Request a call back

If you’d prefer us to call you back, just use the form below to give us your number and the best time to call. It would also be useful if you could give us some idea of what you’d like to discuss.

Close

CORONAVIRUS UPDATE

Wards Solicitors continues to be operational during this time, including for new business and new clients.  To comply with government guidance, our eleven branches are closed to the public but our fee earner teams are working remotely, to ensure that we continue to provide excellent client service.

For enquiries:

Please email or telephone your usual lawyer or team.  Alternatively, please telephone the branch most convenient to you during normal office hours or email info@wards.uk.com  at any time. Emails to this address are being regularly monitored and forwarded to the correct person and we will respond to you as soon as possible.   It may take a little longer than usual for our phones to be answered so please bear with us.

Thank you.

Wards Solicitors LLP