Question: I hear that one can rely on ‘Force Majeure’ as a way out of a contract. What is ‘Force Majeure’ and how does it work?
Answer: A force majeure event can be described as an unforeseeable event that prevents someone from fulfilling a contract. If force majeure is established, you may be excused for delaying the performance of your obligations under the contract, or for not performing them at all.
Can you claim that the Covid-19 pandemic amounts to an event of force majeure, and accordingly you are excused from performing the contract? The answer depends, first, on the law of the contract because the concept of force majeure varies from country to country. The first thing to do if you are bound by a contract and you wonder what your rights are, is to look to see if there is an applicable law clause in the contract (i.e. a clause that expressly states the law of the contract – that clause is typically found at the end of the contract). If there is such a clause, then you know what law applies and you can take a advice in the jurisdiction in order to establish if you can rely on force majeure. If there is no applicable law clause, the law applicable to the contract requires a fact-based analysis. This may be straightforward if the parties are in the same jurisdiction and the contract was concluded in that jurisdiction. If the parties are based in different countries and the contract was concluded in a third country, the analysis can be complex.
Let’s assume that English law applies to your contract. In English law, force majeure is a creature of contract and not of the general common law. In other words, the answer as to whether you can rely on force majeure is found within the four corners of the contract. The answer is different in other legal systems where force majeure is a general legal concept and the courts (or the government) may declare that a particular event, such as the Covid-19 pandemic, is a force majeure event.
In England, force majeure clauses are contractual clauses which alter parties’ obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those obligations. You can potentially rely on force majeure if there is a clause in the contract allowing it. If there is not, force majeure will not help you.
The clause does not have to be labelled “force majeure”. You are looking for a clause which anticipates that there may be some supervening event beyond the control of the parties, be it factual (such as a pandemic causing staff to be ill and unable to work) or legal (such as restrictions imposed in reaction to a pandemic which might prohibit staff from travelling to work and cause them to be unable to work), which may affect the performance of a contract. Such clauses may be specific in the events listed, but may also be general (e.g. making reference generally to acts of government, or to performance having to be lawful, or to anything preventing performance that is beyond the party’s control).
Each force majeure clause has its own unique scope and effect. Most force majeure clauses cover matters like Act of God, war, strikes, fire, weather and government action, such as prohibition of export. Often a number these or additional events are specified in a clause and then followed by the wording “or any other causes beyond our control”. This is because a draftsman will be concerned about the rule of contract interpretation under which the expression of one thing excludes other things. In light of this, a draftsman will often include sweep-up language to ensure that any list of events is not treated as an exhaustive list. Such general wording in a commercial contract will help the party seeking to rely on force majeure to rely on an event that is not specifically listed in the clause.
If a force majeure clause does refer expressly to a pandemic but includes the phrase ‘Act of God’, the question is whether the Covid-19 pandemic amounts to an Act of God. The phrase is said to mean “such a direct and violent and sudden and irresistible act of Nature as the defendant could not, by any amount of ability, foresee would happen, or, if he could foresee that it would happen, he could not by any amount of care and skill resist, so as to prevent its effect“. Historically, Acts of God have been linked to natural disasters such as floods and earthquakes. It could be argued that the phrase should be limited to ‘one off’ events which “involved no human agency”. Equally, the argument can be made that pandemics are natural disasters occurring on a microscopic rather than meteorological or geological level, and the phrase ‘Act of God’ is capable of covering a pandemic such as Covid-19.
A force majeure clause will normally also set out the threshold of hardship that the affected party must experience as a result of a qualifying event. Where a party seeks to invoke the protection of a clause which states that he is to be relieved of liability if he is “prevented” from carrying out his obligations or is “unable” to do so, he must show that performance has become physically or legally impossible, and not merely more difficult or unprofitable. In contrast, words “hindered” or “delayed” set a lower standard for affected party.
Whether a force majeure clause is triggered by an event will depend on the proper interpretation of the clause. If the clause specifically refers to a pandemic, quarantine or lock down, you should be able to rely on force majeure. If the clause does not make any such reference, but it includes events beyond a party’s reasonable control, this may be sufficient but will not be guaranteed to succeed and will depend on the drafting, circumstances, intention of the parties and the extent to which this can be proved. If the clause specifically refers to ‘other events beyond a party’s control’, or words to that effect, this may also be sufficient.
The effect of a force majeure clause will depend on how it is drafted. Generally, its effect includes some or all of the following:
• obligation to mitigate;
• right to terminate.
In the art world, there is often no written contract. In that case, the contract will be oral. Force majeure is rarely addressed if the contract is oral. Even if the contract is recorded in writing, it is unlikely to contain a force majeure clause because few art-related contracts do.
Unfortunately, if you cannot point to a force majeure clause in the contract, force majeure will not come to your rescue. You must look elsewhere.
If the contract is governed by the law of a country that applies force majeure even if the contract does not include a force majeure clause, force majeure can come to your rescue. That is the case in France, Belgium and other countries applying the Napoleonic codes. One must consider the situation on a country by country basis.