Author: Sarah Nadon – Law Student Edited By: Ryan Carson
On March 11, 2020, the World Health Organization deemed the outbreak of Covid-19, or more commonly known as the coronavirus, a global pandemic. Many provinces entered into a state of emergency, office buildings closed, and many people were forced to work from home. Covid-19 began disrupting everything from travel to business operations.
Force majeure is a standard clause in contracts that allows both parties to be freed from liability or obligation when circumstances arise that are beyond the control of either party. These events can include war, pandemics, or an event described by the legal term act of God.
“An Act of God clause or a force majeure clause … generally operates to discharge a contracting party when supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected something beyond reasonable human foresight and skill”.1
The short answer is no. In order for one’s obligations and duties to be excused by force majeure, the contract of the individual must have an applicable force majeure clause. Even if a force majeure clause is present, most are drafted broadly so that parties have to argue what events fall under the clause. Contrary, some clauses provide a long list of events that fall under force majeure. Many clauses indicate “acts of God” however, there is very little case law that supports what an act of God is.
The first question that needs to be asked is whether the force majeure event directly impacted the individual’s ability to perform their obligation and duties. A well-drafted force majeure clause should include a requirement that the party invoking the clause provide written notice of the force majeure to the other parties included in the contract. If the force majeure clause is relied upon, the party claiming force majeure will be required by the contract to give notice that the clause is being invoked as soon as they become aware that they plan to rely upon that clause. If for any reason, there is no specific notice period, they must provide notice that is reasonable.
• How broad should be the definition of triggering events;
• What impact must those events have on the party who invokes the clause; and
• What effect should invocation have on the contractual obligation? 2
Again, when drafting the clause, many lawyers opt to use broad lists while others rely on all-inclusive and descriptive events. The force majeure clause is more than a boilerplate as it helps protect parties to a contract and avoids putting parties at risk of having a court interpret a contract. Even if a contract does not have a force majeure clause, there are still circumstances where the principle of frustration may apply.
Articles written by Sarah Nadon:
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References
1 Atlantic Paper Stock Ltd v St Anne-Nackawic Pulp and Paper Co, [1976] 1 SCR 580, [1976] 1 RCS 580
2 Atcor Ltd v Continental Energy Marketing Ltd, [1996] AJ No 131, [1996] 6 WWR 274, 38 Alta LR (3d) 229, 178 AR 372, 25 BLR (2d) 1, 61 ACWS (3d) 75