COVID-19, The Principle Of Majeure And Effects On Commercial Agreement.

By OLASUMBO KOLAWOLE.

In the last few weeks, we have witnessed a gradual global economic slowdown caused by the COVID-19 virus. Governments of most countries have enforced a lockdown of their major cities and restricted human movement as the pandemic continues to spread. The virus which has been confirmed to be airborne and highly contagious has also extended to the most populous country in Africa, Nigeria, leading to unplanned lockdown which has disrupted businesses and inadvertently frustrated the performance of some contractual obligations.

As a result of the pandemic, contractors and suppliers have been constrained in meeting their obligations as most businesses were thwarted abruptly, thereby leading to a shortage of resources. In a bid to reduce the effect on their businesses, some contractors/ suppliers have taken further steps to review the terms of their contracts by proposing price increment as the pandemic has taken its toll on most economies thereby leading to increased prices of materials.

The object of this article is as regards the many legal actions that may be initiated right after the containment of COVID-19 as a result of failure to fulfill contractual obligations. The aggrieved party may fail to accept or understand the implications of the present situation on the performance of the duty of the other party whilst this is understandable from a sentimental view, there may have been loss accrued to the aggrieved party amidst so many other things which may have caused some pains or discomfort to the distressed party.

However, for the party in default otherwise known as the non-performing party, there is a relief or protection for them in this situation even though the onus is on he who asserts to actually prove that the pandemic was the actual cause of his non-performance. Thus, this may be the best time for parties to an agreement to take a look at their contract and evaluate what is known as the “Force Majeure clause”. For the purpose of this article, I will simplify the term “Force Majeure” to its simplest form as this article is intended to protect a layman who is about to get sued for failing to perform a contract due to an act or occurrence that was beyond his help.

Force Majeure is a French phrase for “superior force”. It means unforeseeable circumstances that prevent someone from fulfilling a contract. The inclusion of this proviso simply means that both parties understand that there may be a situation that can frustrate the execution of a contract.  We tend to refer to a Force Majeure, in simple terms as,” Acts of God”, “Natural disasters”, “Unrest”, “Epidemics or pandemics”, etc. The idea of the clause is to protect parties from being punished in such a situation.

When an aggrieved party sues for breach or non-performance of a contract, Force Majeure may be a defense to such a rule or claim. Nonetheless, Force Majeure cannot be implied into a contract, it must be expressly stated.

Like I stated earlier, the party seeking to rely on the protection of a Force Majeure is under the onerous duty to prove that the situation was obviously beyond his control and must show that he actually took steps to carry out his obligations as defined in the contract. In addition, he cannot claim the defense of Force Majeure when the causative link to the non-performance is broken, in effect, this means that the breach must be solely caused by the principles of Force Majeure before the claim can avail him.

Now let us look at the situation where the contract is silent on the provision of Force Majeure clause, what other protections are available for the non-performer? A non-performer may hide under the protection of the Doctrine of Frustration or Impossibility. This is also closely and largely related to Force Majeure. This doctrine seeks to understand that it will be absolutely inequitable to make an injured party honor the obligations of a contract after it has been frustrating.

For the parties (companies, suppliers or contractors) that will most likely be facing legal actions after COVID-19 has been resolved, here are what they should start preparing ahead:

• To seek a legal opinion to review their contracts and know-how exhaustive their protective clause “Force Majeure” is on defining what will amount to “An act that is obviously beyond their control” and to know if the clause covers “COVID-19 as a Force Majeure.

• Keep in touch with the party likely to be injured,  informing and engaging them on every step taken and are or being taken to see how they can ensure the performance of the contractual obligations or mitigation of loss obligation. This is because they must prove that they took all necessary measures to ensure the performance of their obligations and they were all frustrated due to the pandemic.