In the current climate, businesses are scrambling to rise to a range of challenges. Many do not know how their contractual obligations will be impacted by the current pandemic. A recent client matter highlighted the importance of checking the details of any force majeure clause that may apply.
We are advising in relation to a contract for the upgrade and operation of a hospital. The contractor expects COVID-19 to severely impact hospital operations.
Fortunately for the contractor, the contract has a “force majeure” clause explicitly stating that “epidemic” is a force majeure event, excusing it from further performance of obligations it is rendered unable to perform because of the event.
However, a further clause requires an affected party to give notice within five business days after the party knew of the force majeure event. The notice must detail the adverse impact on performance of contractual obligations, the actions being taken to overcome the event and its effects, and an estimate of time. The clause states that the affected party is not entitled to any relief unless it complies with the clause.
The contractor has served notice, but there could be serious issues about when it became aware of COVID-19 and the likely impact on operations.
Note also that the doctrine of contractual frustration will generally not apply if a force majeure clause deals with the risk.
Parties to contracts should pay immediate attention to the wording of force majeure clauses in their contracts to avoid missing deadlines.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article