Coronavirus Vaccine for Your Business? Force Majeure Clauses Can Save You

Over 340,000 people have been infected with COVID-19 globally as of today and more and more cases in Australia. COVID-19 not only has health effects but also economic ones. The ASX200 suffered the biggest single day decline by a whopping 9.7% on 16 March 2020.

Are you losing business or getting affected due to the Coronavirus?

Lockdowns are happening across the globe, business are being disrupted, events like the Royal Easter Show and Vivid Sydney are getting cancelled and travel lockdowns are becoming more drastic. What will happen if your business can’t open due to the Coronavirus or if your supplier cancels on you?

How legal clauses can help protect your business against the Coronavirus

Business owners must start thinking about their agreements and contracts so that they are less exposed to the effects of coronavirus. Fortunately, there are some simple clauses that we can negotiate to insert into your agreements to protect your business against the coronavirus. We can help review or amend your agreements and contracts to make sure you are covered.

We will start introducing the “Force Majeure” clauses.

Stay tuned to our series of other clauses and protection mechanisms that we will introduce throughout the series.

Force Majeure Clauses: Unforseen events beyond your control

Force Majeure clauses can ensure that you are not liable in your agreement where there are delays or failure to perform obligations, due to forces beyond your control, like pandemics such as the Coronavirus.

For example, if you have entered into an agreement last year but now, do not wish to carry out your business because of the risk of Coronavirus, Force Majeure clauses, depending on your circumstances, may be able to ensure that you are not liable to continue carrying out your business.

Can your contract obligations change due to Coronavirus?

Generally, on a big picture, to prove a Force Majeure event, the event must:

1. Occur by natural or human events;
2. Cannot have been reasonably foreseen by you and the other parties; and
3. Is completely beyond all of your control and could not have prevented the consequences.

A force majeure event must be irresistible, be external to you and have made your performance impossible and not merely onerous or difficult. You cannot also rely on your own acts or omissions. 

Coronavirus can be likely to be considered a Force Majeure event.

However, there are a lot of other legal nitty-gritties to consider and careful legal drafting to ensure that your business is covered. For example, careful legal drafting can ensure that the Force Majeure event includes economic restraint and not just a legal or physical restraint, which can broaden the scope of how your business can be protected from the Coronavirus pandemic.

You will also need to provide evidence of the impact of the Coronavirus including you taking reasonable steps to prevent or mitigate such impact.

We can help

Call us or book a time to come to our office or join us in a virtual online meeting if you are concerned. Clauses like this one can be negotiated to be inserted into your agreements and contracts so that in the future, you can be more protected not only from this Coronavirus but other potential pandemics and external threats.

Want to learn more? The concept of “frustration” in contract law can also apply when circumstances are completely different to that anticipated by the parties. Frustration requires a higher standard to prove and Force Majeure applies to wider circumstances. Stay tuned to our new article on “frustration” in this series.

In the meantime, please stay safe.