Applicability of Force Majeure under Covid-19

April 05, 2020

The recent outbreak of coronavirus (COVID-19) has impacted the ability of businesses globally to conduct its operations and fulfill their contractual obligations.

As a result of this, many countries have placed restrictions on holding events, shutting public places, schools, offices which is preventing businesses to perform its obligation as per scheduled timelines. The World Health Organization has declared COVID-19 as a pandemic, and we should focus on protecting our family and community and simultaneously businesses need to be prepared to overcome with the issues arising due to non-performance of contractual obligations. Further, there is high rise in insurance claims to cover the losses suffered from business interruption.

The force majeure clause in an agreement excuses a party’s non-performance when an unforeseen and uncontrollable event prevent the party from fulfilling its contractual obligations. However, for applying the rule of Force Majeure the various aspects have to be looked into such as whether or not the event qualifies the condition of Force Majeure, the risk of non-performance could be mitigated or not and the non-performance of contract is due to Force Majeure.

The companies are looking to their contracts to have excuse of non-performance, such as force majeure, only to find their contracts are conspicuously silent on the issue. On the other hand, if the force Majeure clause is clearly mentioned in the agreement then the same can save it from the huge liabilities that organizations could incur due to non-performance of contracts.

MBC recommends all businesses to have their contracts reviewed to determine what, rights and remedies are available as a result of the delayed performance of contracts due to force majeure and to fulfil all the conditions such as provide timely notice of a force majeure event; prepare for potential litigation if any required for the application of force majeure clauses, including by taking (and documenting) reasonable steps to mitigate the impact of the coronavirus and update force majeure clauses to take into account, to the extent possible, risks to contractual performance.

We shall able to review the contracts, study and advise you on the extent to which the Force Majeure shall mitigate liabilities and claims to your company and guide to leverage and then negotiate your way to win in such situations.

Sakina Dickenwala

Designation: Associate Director - Legal Services

About Author:

Company Secretary, Lawyer, and Commerce Graduate having 10 years of experience globally.

Areas of Specialization:

  • Business advisory
  • Regulatory Compliances and Governance
  • International Commercial Contracts
  • Commercial Law and Business Establishment
  • Liquidation/Winding-up
  • Employment Laws
  • Land Department Laws

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