Covid-19 is going to be used as a reason to terminate all sorts of contracts and agreements.
Principally this will be by activating Force Majeure clauses and or the doctrine of Frustration.
For more information on force majeure clauses please refer to the article written by Simon Morris in our Corporate team titled, ‘Force Majeure in the UK and the Coronavirus’.
If there is a force majeure clause that covers a coronavirus then frustration will not apply.
However, in the absence of a force majeure clause or in circumstances where the force majeure clause is not drafted so as to cover events such as coronavirus, parties to the contract may be able to bring the contract to an end by relying on Frustration to avoid liability for breach of contract.
In broad terms, a contract will be frustrated if:
- The frustrating event occurred after the contract had been formed;
- The frustrating event was not the fault of either party to the contract;
- The frustrating event was beyond the contemplation of the parties at the time the contract was entered into; and
- The frustrating event made the performance of future obligations under the contract impossible, illegal or radically different.