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Covid-19: Contract Law and Force Majeure

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The Covid-19 coronavirus crisis has gripped the UK for the past couple of months, impacting greatly on all areas of life from frontline healthcare through to closed businesses and furloughed staff. The effect on economic activity has been, and will continue to be, seismic; but as living in the Covid-19 world starts to become ‘the new normal’, what are the an individual’s or a businesses’ legal rights when it comes to goods and services that have not been received or that have been cancelled due to the pandemic?

Firstly, if you are a provider of goods or services and are now unable to fulfil your existing contractual obligations, it is important that you review the terms and conditions of your current contracts to see if there is a ‘force majeure’ clause which may cover you from any legal liabilities resulting from non-performance. Different contracts have different definitions surrounding force majeure, and whether or not Covid-19 is included will depend on each definition; the terms ‘pandemic’ or ‘epidemic’ may be included, but it would need to be judged that CV19 does indeed fall into these categories.

Force Majeure

In the absence of a relevant force majeure clause, parties covered by the contract could argue that the contract was frustrated or terminated because the supplier could no longer perform their obligations under the contract. If this is the case, there may be a certain actions available for the party seeking to frustrate the contract to recover some or all of the sums paid before the contract was frustrated. A contract will only have been frustrated if the contract had become impossible or illegal to perform because of Covid-19, and the extent to which monies can be recovered under the contract will depend on the extent to which the supplier has already incurred expenses in performing the contract.

One example would be whether or not a force majeure clause is applicable in the contract between a private school and pupils parents. In this example, the school may be obliged to look at alternative ways to provide the pupils education - through online and e-learning, for example. Provided a school is able to offer a reasonable alternative, parents may not be entitled to any refund of fees during the period of closure. If a school closed because of Covid-19 and there was no force majeure clause in the contract, there may be an argument that non-performance of the contract means that the contract has been frustrated. However, in those circumstances, the parent or student may not be able to recover any fees paid, because the school would have already incurred most of the costs in employing the staff.

Customers should also take time to review the other standard terms and conditions in various contracts in order to establish any other contractual rights they may have against the supplier. One other avenue to explore is whether there is any regulatory body which provides additional protection for consumers or whether any insurance cover applies to the losses you have suffered.

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If you are thinking about taking legal action against another individual or company but are worried about the costs involved, Advantage Litigation Services have the skills and expertise to help you find a way of funding commercial litigation without risking your personal finances or those of your business. Click here to contact us today or call 0800 160 1298 to see how we can help.

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