COVID-19 Force Majeure… Or Simple Frustration? By Ikechukwu Onuoma Esq

The COVID-19 pandemic and the unprecedented social lock downs in both Nigeria and internationally have seen a rapid increase in queries relating to force majeure. This article gives you the main legal principles and practical considerations in a nutshell.

The Law

Force majeure clauses are fairly common in commercial contracts but there is no standalone concept of ‘force majeure’ under the laws of Nigeria. Accordingly, such clauses are creatures of the contracts in which they appear, and their scope and effect will depend on the wording in question.

That said, typically a force majeure clause excuses or delays the performance of contractual obligations upon the occurrence of an event outside the reasonable control of the party alleging the force majeure event.

Is there actually a force majeure event?

The event in question must fall within the contractual definition of circumstances or occurrences capable of triggering the force majeure clause. The list of events in the contract is exhaustive and the court will look at the natural meaning of the words used and whether the present circumstances were intended to fall within them. The courts will assume that the parties only intended to grant relief where the event was outside of their control, as anything else may lead to an unjust result.

Typical force majeure events are war, revolution, drastic government interventions etc. ‘Acts of God’ typically connote natural events which cannot be prevented against, such as war, earthquakes, tsunamis, floods, etc. Whether a virus pandemic amounts to an ‘act of God’ will depend on a number of factors which will be treated hereunder. It is advised that from now on ‘force majeure’ clauses should include specific references to pandemics or epidemics, influenza that would support a noscitur a sociis approach to construction, and the governing law of the contract.

Principles guiding the “act of God” jurisprudence suggest that when these cases wind their way through the courts, we will see a patchwork of judicial decisions Whether a particular casualty is an act of God is a mixed question of law and fact. The defining and limitation of the term, its several characteristics, its possibilities as establishing and controlling exemption from liability, are questions of law for the court; but the existence or non-existence of those facts must be established by evidence.

Has the party’s ability to perform its contractual obligations been prevented, impeded or hindered by the event?

The exact requirements will depend on the contractual wording but all clauses require the party alleging force majeure to show a causal link between the event and its inability to perform the contract. In more lenient contracts the event may only need to have hindered a party rather than prevented it altogether.

Either way, the event must be the only cause of the failure/under-performance in question.

Has the party alleging force majeure taken all reasonable steps to try to avoid or mitigate the event or its consequences?

Even if there is a force majeure event, the alleging party cannot rely on it if in fact performance under the contract would have been possible via another reasonable course of action. It is no good to invoke force majeure and then ‘sit on your hands’.

Effect of a Force Majeure Event

Typically a valid force majeure event will have one of two outcomes depending on the drafting of the contract:

• Mutually suspend all obligations under the contract – obligations resume when the specified event ends; or
• Be an event of termination – typically a notice must be served on the other party and all thereafter liability for non-performance (other than for prior breaches) will ordinarily be extinguished because there is no longer a valid contract.

Practical considerations – getting it right

Check your contract carefully! Those wishing to invoke a force majeure clause must assess carefully whether the requirements are met. Where one party wrongfully seeks to terminate on the basis of a force majeure event, the other party may in turn rely upon such a wrongful termination as a repudiatory breach entitling it to terminate. Both parties may be better served by opening a dialogue in order to find consensus on whether there has indeed been a force majeure event.

Ikechukwu Onuoma Esq, Managing Partner, Obra Legal