COVID-19: Force Majeure And Negotiating Contracts

As the COVID-19 outbreak continues to cause unprecedented disruption to the global economy, businesses need to think about how they will address the pandemic in contracts that they are currently negotiating.

Current projections of the scale of the pandemic make it difficult for a party negotiating a contract to argue that loss due to Coronavirus is "unforeseeable". This makes it even more important that the contract spells out the parties' intentions if the outbreak prevents performance.

Does the doctrine of frustration continue to apply?

When an event occurs after a contract has been agreed that prevents one party from fulfilling the contract, the court can relieve them from liability under the doctrine of frustration. While COVID-19 has been widely reported since December 2019, it has only recently triggered a number of events (e.g. travel restrictions and lockdown) that may prevent performance. Over the coming months, further action may have a similar impact.