Force Majeure Clauses: Contractual Performance and the COVID-19 Pandemic

Nicolas Guevara-Mann | Queen’s Business Law Clinic | July 2021

Editor: Mikela Page

The COVID-19 pandemic has had wide-reaching implications which were felt in all spheres including contractual relationships. As the entire country came to a halt and Canadians stayed home, many contractual obligations went unperformed. Typically, when a party fails to perform their contractual obligations, a breach of contract occurs and they expose themselves to liability.

There is a type of clause, often included in contracts, which excuses a party from non-performance of contractual obligations when an unforeseeable event that is out of the control of the parties prevents performance. This clause was typically referred to as a “boilerplate” clause and often not given much consideration during the drafting process. This clause is called the force majeure clause.

A force majeure clause is used to relieve a party’s non-performance due an unforeseeable and uncontrollable event. It “discharges a contracting party when a supervening, sometimes supernatural event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill.”^[1]

Force Majeure clauses vary in length and complexity, but may read like this:

No party shall be liable or responsible to the other party, nor deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement, when and to the extent such failure or delay is caused by or results from the following force majeure events…

These types of events tend to include:

• Natural disasters
• Terrorism
• Labour strikes and lock-outs
• Epidemics, pandemics, and quarantines
• Acts of God

To provide the most protection for parties to a contract, it is important that this list be as exhaustive as possible. If the uncontrollable event is not listed, then the party will not be excused from performance and must perform their duties to avoid breaching the contract. To cover events not listed, parties often include broad phrases like “Acts of God” or “Acts beyond their reasonable control.”

This pandemic has been the perfect example of an unforeseen event beyond contracting parties’ control. The wide-reaching impact of COVID-19 on all spheres of life as we knew it has been even more unpredictable. It has prevented people from leaving their homes, stopped deliveries, and halted projects. Typically, force majeure clauses provide that the event only delays performance for the duration of the event. This means that, as the economy begins to re-open and restrictions are lifted, it is expected that contractual obligations will be performed when it becomes possible to do so.

Force majeure clauses may only be a few sentences to a paragraph in length, but a properly drafted clause can save a lot of time, effort, and money in the long run.

 

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