COVID-19 and the Force Majeure Clause in the UK and Ireland

For many businesses contending with the ongoing COVID-19 pandemic, a key consideration will be  seeking to suspend or be excused from contractual obligations.

This article summarises the key legal principles surrounding the Force Majeure – a contractual clause on which reliance is likely to increase in the context of the current emergency.

What is a Force Majeure Clause?

Under common law there is no general principle of force majeure. Instead, parties must include a specific clause in their contracts if they wish to rely on the concept.

Where incorporated into a contract, a force majeure clause generally excuses one or both parties from performing its obligations following the occurrence of particular events.

Its premise is that on the occurrence of particular events outside of a party's control, that party is entitled to (depending on the wording of the particular clause) (i) suspend performance of its contractual obligations (all or in part), or (ii) may even be excused entirely from those obligations.

As a result, that party will not be liable for failure to perform its contractual obligations.

Is COVID–19 a Force Majeure Event?

Whether COVID-19 constitutes a force majeure event is contract specific and will vary depending on the wording of each individual force majeure clause.

In Coastal (Bermuda) Petroleum Ltd v VTT Vulcan Petroleum SA (No 2) (The Marine Star) [1996] 2 Lloyd's Rep 383, the Court of Appeal held that force majeure clauses should be interpreted by reference to the words used by the parties, rather than their general intention. 

It is not unusual for force majeure clauses to cover a lengthy list of events, including Acts of God, natural or regional emergencies and government order or law, for example.  Epidemics could also be expressly included.

Conversely, if, for example, a force majeure clause referred simply to unforeseen events, the Courts would likely look at the date of the contract and consider whether or not COVID-19 or something of a similar nature was foreseen or unforeseen at that time.

If COVID–19 is covered by a force majeure clause, the party seeking to rely on the clause must demonstrate that their non-performance was due to COVID–19. Further, if the force majeure clause states that the event in question must prevent performance, the party seeking to rely on the clause must show that performance was impossible – rather than not simply uneconomic or difficult, as per Tennants (Lancashire) Ltd v G.S. Wilson & Co. Ltd [1917] AC 495. UK case-law concerning the enforceability of force majeure clauses will be of persuasive value in the Irish courts in light of the paucity of Irish law in this area.

Relying on a Force Majeure Clause

All obligations of the force majeure clause should be adhered to in order to ensure successful reliance. For example, force majeure clauses may specify that notice of the relevant event be served within a particular time period, in order for the clause to be triggered.

The party seeking reliance should be able to demonstrate that it took reasonable steps to prevent or mitigate the effects of the force majeure event.

Absence of a Force Majeure Clause

If contracts do not include a force majeure clause, or if the clause arguably doesn’t cover COVID–19, parties seeking protection may be able to rely on the doctrine of frustration at common law.

Suggested next steps for businesses in light of COVID–19

Key contracts should be examined in order to determine whether a force majeure clause is in place and, if so,  whether it might cover COVID–19.

Parties who wish to rely on a force majeure clause should consider whether there are any obligations needing to be adhered to, such as notice provisions.  

Prevention and mitigation measures should be analysed carefully, with consideration given to the inclusion of appropriate force majeure wording in new or renewed arrangements.

If you have any queries in relation to this topic, please contact Barbara Creed, Litigation Partner, Claire Morrissey, Commercial & Technology Partner, or Davinia Brennan, Knowledge Lawyer.

Date published: 20 March 2020