Updated: Jun 26
On the 22nd April 2020 the UK government issued a Notice to Traders 12/20 regarding the use of Force Majeure provisions.
The Coronavirus outbreak has caused a great deal of strain on supply chains, with imports and exports being significantly impacted. In many cases, businesses aren’t able to comply with the terms of service due to lockdown disruptions as a direct result of COVID-19.
Although Force Majeure (act of God) provisions are common in commercial agreements under English law, they are to be express terms within the agreement and usually take the form of exclusion and Force Majeure clauses. The courts will only consider the specific drafting of the agreement and whether there is a causal link between the non-performance and the Force Majeure event.
The Notice is to remind business owners that Force Majeure provisions are available to them in the event that they’re unable to adhere to their agreed contractual obligations. The notice states:
“If you are unable, or believe you will be unable, to fully utilize your license or meet the regulatory deadlines to allow release of security, you can submit a request for force majeure as provided for the Article 16 of Commission Regulation (EU) No 2016/1239.”
You can find the Commission Regulation (EU) No 2016/1239 here.
Frequently Asked Questions about Force Majeure Provisions
What is a Force Majeure clause?
Put simply, a Force Majeure clause is a contractual clause which considers unexpected events (or acts of God) as reason not to meet obligations as detailed within the contract. The clause may protect the involved party by:
Excusing the party from fulfilling their required obligations as laid out in the contract;
Justifying a delay or extension for deadlines agreed in the contract;
Allowing a party to terminate the contract if no other option is suitable.
Is a Force Majeure clause necessary?
In some jurisdictions, a Force Majeure clause is a general legal term, which a court can use to declare a particular event as a Force Majeure event – like COVID-19 for example. However, under English law, the Force Majeure clause must be expressly drafted in the contract for a party to be excluded of their contractual obligations. The party who is seeking to rely on the Force Majeure clause must prove that the Force Majeure event falls within the clause and that non-performance was due to the event.
What if there’s no Force Majeure clause?
If there’s no Force Majeure clause in a contract and English law is the governing law of the agreement, then any form of certification issued by the government to exclude the defaulting party is limited and likely to not make any difference. Under English law, Force Majeure cannot be implied into the contractual terms, it must be expressly drafted.
At Serenity Law LLP, we offer a full documentation audit for commercial clients. As a part of the audit, we aim to determine whether existing Force Majeure clauses are in place, recommending any revisions or additions where necessary. To learn more about how we can support your business throughout the COVID-19 outbreak, contact our team today.