COVID-19 is a business and legal challenge the likes of which we haven’t seen in over fifty years. As governments grapple with how to respond to the crisis and enact bans on gatherings of 50 or more people and enforce business closures in high risk areas, business owners need to make decisions on how to proceed with contracts that were entered into long before the outbreak.
Luckily, most contracts include force majeure provisions that are intended to protect your company and typically allows for a termination or modification of the contract. However, these clauses are limited in scope and it’s important to fully understand what your clause covers and how to communicate these issues with the other parties to the contract.
For most of these clauses, the simple existence of a pandemic or epidemic will not be enough to engage the clause. However, in provinces like Ontario or British Columbia where premiers have declared a state of emergency, the government’s actions and orders will be sufficient to engage the clause on a short-term basis. As these circumstances are unforeseeable in a commercial context and beyond the control of you and your business, non-performance of the contract will be covered by most force majeure clauses.
While you are likely protected if you have one of these clauses in your agreement, this crisis is the perfect time to review your existing agreements and determine if a force majeure clause should be added or amended. Including specific language about global pandemics and health emergencies will erase doubt and provide greater clarity for future contracts.
If you would like to have your contracts reviewed or have a discussion with a lawyer about how this pandemic may impact your business, please do not hesitate to contact me or one of the other members of our business law group.
Associate – Business Law Group
Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving.