COVID-19 – A force (majeure) to be reckoned with

The effects of the coronavirus have disrupted almost every aspect of our daily lives, but is COVID-19 a reason not to comply with your contractual obligations?

The answer may come down to whether your contract includes a force majeure clause.

Force majeure is a contractual term that refers to an unforeseeable event or effect outside of the party’s control (such as a natural disaster, act of war or even a pandemic) with the result that the affected party is excused from performing its affected contractual obligations.

This may sound like a slam-dunk definition of the coronavirus, but the contractual reality may not be so clear-cut.

In Australian contract law, whether or not a party to a contract can rely on COVID-19 to relieve it from its obligations will generally depend on:

  1. The definition of a force majeure event in the specific contract;
  2. The rights and obligations of the parties set out in the terms of the contract if a force majeure event occurs; and
  3. Whether the failure to perform an obligation can be attributed to the force majeure event, rather than some other event within the party’s control.

The situation may differ again if you’re dealing with a contract governed by another international jurisdiction.

Wondering whether a force majeure clause applies to you? Looking to “future proof” a new or existing contract?

The Kalus Kenny Intelex commercial and litigation teams are here to help – from a 1.5m distance.