In Series 001 of contracts in the time of a pandemic, MMW ADVOCATES LLP endeavoured to decipher the muddy legal, contractual term “Force Majeure”, how it’s likely to play out given the government restrictions on travel, curfews, and widespread economic instability inflicted by COVID-19.
In this article, Series 002, we delve into how to trigger the clause and the consequences of therefrom.
WHAT ARE THE EFFECTS OF TRIGGERING THE FORCE MAJEURE CLAUSE?
The language of the force majeure clause will determine the remedies available to the parties. However, most contracts provide for the following remedies as a consequence of a force majeure event;
- Parties may be excused from performance of the contract, in whole or in part; or
- Parties may be entitled to suspend performance or to claim an extension of time for performance; or
- A party may be entitled to terminate the contract; or
- Others may require the contract to remain in effect until the force majeure event is resolved.
HOW DO YOU TRIGGER THE FORCE MAJEURE CLAUSE?
- A party to a contract must issue a notice to trigger the force majeure protection regardless of whether the contract provides for the issuance of notice or not.
- The notice must be comprehensive and explain the relief the party is seeking for.
- The party receiving the notice must then decide whether he is amenable to the proposals in the notice and how the contract can be modified to mitigate any losses.
EXCEPTIONS TO THE FORCE MAJEURE CLAUSE
Even if a party can show that this pandemic has been provided for in the contract, there is still a duty to demonstrate that the event and its effects were unforeseeable and can not be mitigated. Further, a party cannot claim protection under the Force Majeure Clause where performance merely becomes
- more difficult; or
- more expensive; and/or
- less profitable
IS THERE A DUTY TO MITIGATE THE LOSS OCCASIONED BY THE FORCE MAHEURE EVENT?
Both parties to a contract have a duty to mitigate damages in the event of force majeure. Thus, it is important for parties to work together to assess their obligations so as to determine whether there are alternatives that can be pursued towards reducing potential loss.
IN THE NEXT ARTICLE, SERIES 003, WE SHALL DEAL WITH WHAT OTHER OPTIONS ARE AVAILABLE IN LAW WHERE THE CONTRACT DOES NOT CONTAIN A FORCE MAJEURE CLAUSE, BUT PERFORMANCE HAS BEEN GRAVELY AFFECTED BY THIS PANDEMIC.
N/B:-THIS ARTICLE DOES NOT FORM PART OF A LEGAL OPINION AND IS PURELY INFORMATIVE. PLEASE FEEL FREE TO REACH OUT TO MMW ADVOCATES LLP FOR A MORE DETAILED OPINION ON THE IMPACT OF THE CORONA VIRUS ON COMMERCIAL CONTRACTS.