Coronavirus, Quarantines and effects on Commercial Contracts

13th March 2020

The recent outbreak of coronavirus (COVID-19) has caused disruption across the globe. Most people will be aware of the tragic statistics relating to hospitalisation and death. However, the long term economic impacts on businesses are yet to be assessed.

So how is coronavirus likely to affect UK businesses?
Well, it is possible that staff suffering from, or having close contact with anyone affected by, coronavirus will have to be quarantined and may be prevented from performing their usual duties. This could result in businesses finding it difficult or impossible to perform the contractual obligations they owe to third parties.

In this event, it is likely that businesses will want to suspend the performance of, or possibly terminate, their contractual obligations in order to prevent any breach of contract claims. However, the right to suspend or terminate will depend on the written provisions set out in the contract.

It is typical for most contracts to include force majeure clauses which excuse a party from performance of contract obligations on the occurrence of events which are outside a party’s control.

What is force majeure?
The term force majeure generally refers to events happening outside the control of a business such as natural disasters, widespread outbreak of disease or the outbreak of hostilities. It is usual for a contract to be drawn up so that such events will not make the defaulting party liable if they prevent it from performing its obligations.

However, it is important to note that a force majeure event is not a defined term under English Law. The parties will need to review the written definition of a “force majeure event” in order to determine what is covered. It is common for force majeure events to include wars, floods, fire, strikes and industrial action but epidemics and pandemics (such as a coronavirus) are often missed.

What can I do to protect my business?
If you are a UK business and are finding it difficult to perform your contractual obligations as a result of coronavirus, now is the time to review your written contracts and force majeure clauses. If you are about to form new commercial agreements with third parties, ensure that force majeure provisions are included and are suitably drafted. If epidemic and pandemic are included in the drafting, then you will be able to rely on these provisions to suspend, or possibly terminate, the contract.

Get in touch
If you would like to discuss any of the issues raised in this article, or would like assistance with commercial contract, Rebecca Anforth (Senior Associate), would be delighted to hear from you. You can reach Rebecca on 01872 226999 or you can email her rebecca.anforth@murrellassociates.co.uk.