Will Covid-19 Risk Non-Performance Under Contract?

Year Published: 2020

There is no doubt that these are challenging and difficult times for all sectors of the economy in the UK and around the globe. So has the outbreak of Covid-19 put you or your business at risk of non-performance under contract?

The government is introducing drastic measures in almost every area from public health and education, to employment and housing. We are seeing rapid changes that are impacting many aspects of our lives and there is currently no sign of the outbreak slowing down.

In a recent press conference, Prime Minister Boris Johnson stated: “We don’t know how long this thing will go on for. But what I can say is that this is going to be finite” and was hopeful that with scientific progress, better testing and the combination of measures that have been advised to the British public, we may “turn the tide” of the disease “within the next 12 weeks”.

The Prime Minister announced on March 23rd that all UK residents are now in lockdown and will only be allowed to leave their home for essential reasons. The lockdown is intended to slow the spread of Covid-19 and demonstrates how serious this has now become. As a result many have had to make the critical decision of cancelling or postponing events or are faced with doing so in the near future.

For many of our clients this will bring forth the important issue of force majeure. This is when unforeseeable circumstances prevent a party from fulfilling a contract it was due to perform.

Does the Covid-19 Outbreak Constitute Force Majeure in a Contract?

Strictly speaking, the answer to this question has to be dealt with on a case by case basis. Legal analysis of the terms and conditions of the contract as well as the specific set of circumstances surrounding the case must be conducted. We strongly recommend seeking legal advice right away if you are currently facing this issue or are likely to in the near future.

That said, some of the initial points for consideration are:-

  • Do you have a written contract or not? If so, does it include a force majeure clause?
  • If you have no written contract, or you do but have no force majeure clause, are there any other means of seeking relief where you cannot perform a contract due to current events?
  • What does your contract say about performance and liability where a force majeure event occurs?
  • Are you required to give notice under the contract? If so, when?
  • Will any government policies being introduced in the UK as a result of covid-19 impact your ability to perform the contract?
  • Have you attempted to mitigate the potential non-performance? Is it still possible to do this now?
  • Do you have the appropriate insurance cover?

There is a high standard of proof required to invoke such a clause but force majeure notices may well be inevitable if the outbreak worsens. We would urge those who consider they have not performed under their contract or consider they may not be able to in the near future to get in touch with one of our lawyers for the latest guidance and legal advice.

For further information on the non-performance of contracts, please contact Shameem Ali, Solicitor, on 01260 28 2335 or email [email protected]

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