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The start of twenty-twenty brought the spread of Coronavirus COVID-19. Whilst thought to originate in China, the virus is now spreading rapidly throughout the globe. Although, the primary concern is on public safety, there has been little consideration on how this is disrupting businesses across the UK. The start of this week saw British Airways reduce the number of transatlantic flights and the British Government considering cancelling events such as the London Marathon.
Whilst some businesses faced staff shortage, others have been unable to provide the services in accordance with the contractual terms of their contract. Larger commercial businesses will have found their daily operations were disrupted with the threat of many boarders closing and a reduction in transport.
Where a business has a contractual obligation, for example, to deliver a certain product by a particular date, the occurrence of some event beyond the control of that business, such as an epidemic or pandemic, will not necessarily excuse the business from meeting their contractual obligation. In these circumstances, business will consider whether a force majeure clause will limit their liability for breaching the contractual obligations.
Although the term force majeure (which is derived from French law) is well known in the commercial environment, it does not have a precise legal meaning in English law. Therefore, it is essential that the contract clearly spells out what is meant by force majeure. In its most basic form, a force majeure clause outlines events which are beyond the parties control where by the party not being held liable for any failure or delay in the performance of their obligations.
For coronavirus to constitute as a force majeure event, it would have to constitute as an epidemic or pandemic. Whilst certainly in China, the outbreak of the virus could be described as an epidemic, the World Health Organisation has not declared coronavirus as a pandemic at 2nd March 2020.
As the courts adopt a strict approach to a force majeure claim, it is unknown whether the outbreak of coronavirus will constitute as a force majeure event. Whilst the burden is on the business to prove that coronavirus falls within the definition of an epidemic or pandemic they must additionally show that there were no other means of performing their contractual obligations.
In practice, when negotiating contracts, parties often pay very little attention to the force majeure provisions in the contract. It is only when an unforeseen event occurs, that the parties will have to consider what protection, if any, the contract may afford them.
Contact our specialist Company Corporate department today for further information.