Are contracts frustrated due to the coronavirus ?

COVID-19 And Contractual Obligations:

The COVID-19 pandemic has had an impact on many areas of businesses. One such aspect is the performance of contractual obligations, as many businesses have been forced to stop working or move to remote working arrangements, which could have an impact on the ability to perform what is set out in the contract.

The three main problems which are likely to arise are the inability to perform contractual obligations: a) at all; b) on time; or c) in the manner stated in the contract.

A failure to perform a contractual obligation on time does not usually give the innocent party the right to terminate the contract and claim for damages unless:

• There is an express term which makes time ‘of the essence’, such as using that exact phrase or a similar phrase, making the consequences of the delay clear in a certain clause;
• An intention to make ‘time of the essence’ can be implied into the contract;
• The innocent party serves notice on the other party, making time of the essence or where there is a delay for a period of time which indicates that one party intends to cease performance of the contract.

Where the problem is that a party cannot perform a contractual obligation at all as a result of the COVID-19 pandemic, businesses can consider the following options:

• Whether there is a force majeure clause in the contract or;
• Whether the doctrine of frustration, wherein an event makes performance of the contract impossible, may apply.

It is necessary to consider both the obligations in the contract and to assess whether there is a specific provision, such as force majeure clause, which would apply to this situation.

West London Law can provide advice and guidance on your business’ contractual obligations at this time. If you would like to enquire about a specialised assessment of the contract in question, please fill in the form below and attach a copy of the contract: