Litigation, Insights

Covid-19 Pandemic: A Force Majeure to Reckon with in Business Today

As at April 5, 2020 the World Health Organisation (“WHO”) has reported over two hundred countries/territories/areas with confirmed cases of the COVID-19 pandemic with the Falkland Islands (Malvinas) joining the list of territories with confirmed cases in the past 24 hours. Nigeria has reported 230 cases and 6 deaths. The world has over 1,200,000 confirmed cases and counting and nearly 70, 000 deaths. It is widely believed that these statistics are not a true picture of the situation and the correct figures are likely to be much higher as many countries face various limitations in the number of per capita test rates.

WHO has canvassed various public health and social measures to be taken by individuals, institutions, communities, local and national governments and international bodies to slow or stop the spread of COVID-19. These measures amongst others include contact tracing and quarantine, social and physical distancing including banning of mass gatherings, closure of non-essential facilities and services, local or national movement restrictions and stay-at home orders as well as international travel restrictions.

There is therefore no doubt that the world is faced with a serious health challenge, the kind and magnitude of which has not been experienced in recent history. The effect cuts across the fabric of our economic, religious and social lives. The capital market is in a state of pandemonium, manufacturing and commercial activities are almost paralyzed and performance of contractual obligations are being delayed or put on hold leading to the possibility of claims of breach of contract or default. However, this might not be the case where the agreement between parties provides for a Force Majeure clause.

WHAT IS FORCE MAJEURE?

The term Force Majeure is actually a French phrase which means “irresistible compulsion or greater force” having its origin in the Latin term vis major meaning “an act of God or a superior force or an irresistible natural occurrence resulting in damage or disruption that cannot be prevented by humans”. It is provided under the French Civil Code as a defence against liability for contractual non-performance due to the occurrence of certain events. However, under English law from which Nigeria derives its legal system, the term Force Majeure is not expressly recognized but is quite similar to the English common law principle of Frustration which will be discussed further below. The following elements are usually present in a general definition of Force Majeure contained in a contract: The circumstance must be such:

(a) which is beyond a party’s control;

(b) which such party could not reasonably have provided against before entering into the Contract;

(c) which, having arisen, such party could not reasonably have avoided or overcome; and

(d) which is not substantially attributable to the other party.

However, each contract is unique and would usually involve a variation of the above based on the industry and negotiation between contracting parties. The definition is usually accompanied by a list of Force Majeure events which upon their occurrence entitles a party to be excused for non-performance, partial or delayed performance as the case may be. To the inattentive lawyer or contractual parties, Force Majeure is one of those frequently overlooked boilerplate clauses that is either completely ignored or poorly drafted to address possible eventualities. However, with the present Covid-19 outbreak, it has become one legal terminology that is on the lips of business owners and stakeholders in various industries – from aviation to banking, oil and gas, power, information technology, manufacturing, maritime, hospitality, sports, and others.

TREATMENT OF FORCE MAJEURE UNDER NIGERIAN LAW 

In our jurisdiction as in other common law jurisdictions, Force Majeure provision cannot be implied into a contract and must be specifically provided for in a contract for it to avail a party…

 

 

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