The outbreak of the pandemic has brought about many unforeseen changes. It has changed the way we operate. Contractual agreements have also been affected. A breach of contract is considered an offense and the one who breaches can be taken to court and tried. Despite the current situation, contracts are still in force. Businesses and the Economies at large have been hit negatively by COVID-19. With a halt in operations, money has become a problem. However, employers cannot just terminate or reduce pay as contracts are still in play. Reviewing is advised and only then can a change be effected. COVID-19 has brought confusion and has brought about government regulations that hinder parties from fulfilling their end of the bargains. Traveling, for instance, has been affected and those that heavily relied on offering services through travel have had a problem with their contracts.
‘Force Majeure’ is where a party to a contract can be relieved of their duty and contract confinements due to uncontrollable circumstances that may hinder the party from effectively completing the tasks as provided by the contract agreement. COVID-19, being unforeseen, had not been included in most of the ‘force majeure’ businesses and employers must determine whether they can invoke ‘force majeure’ in the existing contracts. There are two scenarios in looking at enforcing ‘force majeure’. If COVID 19 was unavoidable then the force majeure can be used but if an individual had been strongly warned about exposure and avoided COVID 19 hit countries and still did not adhere then it may be difficult to involve ‘Force Majeure’.
Some of the contracts that are likely to be broken in the wake of COVID-19 include;
• Tenants may be unable to pay their rent or mortgage due to a probable loss of job or source of income in general.
• The supply of commodities to Retail chains and buyers due to the government regulations regarding operations during the COVID-19 period.
• Most parties may be unable to fulfill their obligations due to strict guidelines enforced by governments hindering them from fulfilling objectives as per the contract.
• People who purchase goods on a long-term basis may be unable to make payments for the goods due to income cuts owing to government regulations.
Businesses should liaise with their legal teams to avoid a breach of contract due to COVID 19. It may be tricky. Businesses and employers must know whether or not to invoke the defense. Businesses can justify that normal operations based on the contract have been disrupted by using the law angle of Impossibility that allows for a breach in contract by either party. According to health experts, COVID-19 may be with us for quite a while. To ease conflicts, it is good that both parties, mostly employers and employees, get together with teams of experienced and brilliant attorneys to review contract terms. By agreeing to favorable terms that work for both parties, then the activities can go on in a friendly and conducive environment leaving everyone satisfied.
However, the breach of contracts may need to be settled in court to determine whether contracts have been breached or not. Negotiation should be the first choice because the pandemic has not been in any way easy to most people. A backlog of cases in court only adds salt to injury. However, the attorney option and review is the best probable cause of action and if all that fails then the matter has to be fairly dealt with in court. A careful review of force majeure clauses is inevitable due to the effects of the pandemic. Every party should know their roles in the Clauses by careful alterations of the contract. Willingly of course.
Careful analysis is key in evaluating the terms of breach of contract during the COVID-19 period. Should pandemics such as this one be added into ‘Force Majeure’? It is good to be prepared for uncertain times by closing any loopholes in contracts.