Introduction
The recent world outbreak of the Coronavirus (Covid – 19) has led to a lockdown in almost all major cities the world. This lockdown is necessitated by the need to contain the spread of the coronavirus and ensure that scares medical resources can be efficiently channeled towards the treatment of persons that have been infected by the virus.
This lockdown has led to the crippling of major economic activities as people all over the world have been prevented from fully carrying out their daily commercial activities with some resorting to working from home Sadly, not all contracts can be performed from home. A vivid example of this is a construction project with a timeline of 6 months. The implication of the lockdown is that the builders will not be able to complete the construction within the agreed 6 months as they will not be able to access the construction site.
Some contracts however have force majeure clauses which seeks to exculpate a party for his inability to meet up with his agreed obligation in a contract due to natural occurrences beyond the party’s control. This write up shall discuss the implication of a force majeure clause and thereafter analysis the implication of executed contracts without a force majeure clause.
What is Force Majeure?
Force majeure, according to Black’s Law Dictionary 8th Ed, is an event or effect that can neither be anticipated nor controlled. It includes both natural and humans act. Examples of human acts are strikes, war, riots etc.; while example of natural acts are earthquakes, floods, hurricane, virus outbreak etc.
An example of a force majeure clause is: “Neither party is responsible for any failure to perform its obligations under this contract, if it is prevented or delayed in performing those obligations by an event of force majeure.”
The import of a Force Majeure clause is that parties to an agreement will not be held liable for their inability to perform their respective obligation under the contract in the circumstance that their inability to perform their obligations is as a result of natural occurrences beyond their control.
What if my contract does not contain a Force Majeure clause?
The law on interpretation of contract is that contracts will be interpreted to give effect to the express wishes of the parties as contained in the contract. The Supreme Court emphasized this point in the case of Adetoun Oladeji (Nig.) Ltd. V. N.B. Plc (2007) 5 NWLR (Pt. 1027) 415 where the court held as follows: “Where there is a contract regulating any arrangement between the parties, the main duty of the court is to interpret that contract to give effect to the wishes of the parties as expressed in the “contract” document.”
Furthermore, in another case of Zenith Bank PLC v. Chief Arthur John & Ors (20100) LPELR – 5122 (CA), the court stressed that: “It is a cardinal principle of the law that the duty of a court is to interpret a contract contained in an instrument just as made by the parties on their own volition without any need to import any unrelated documents or issues.”
The implication of this is that contracts are to be interpreted in accordance with the express agreements of the parties. Consequently, the court will not introduce a clause in a contract when the parties to the contract never made such clause part of the terms of their contract.
What is being said in essence is that if a contract does not contain a force majeure clause, the court will not add a force majeure clause for the parties. The court will only interpret the contract in line with the express agreement of the parties.
Can I be held liable for my inability to perform my obligations under a contract if my contract does not have a Force Majeure clause?
The law of contract allows a party to be exonerated from his inability to perform his obligation under the contract when such contract is frustrated. This is what is referred to as the Doctrine of Frustration. The court in the case of Revenue Mobilization, Allocation & Fiscal Commission v. Units Environment Sciences Ltd (2010) LPELR – 9205 (CA) defined a frustrated contract as follows: “A contract is frustrated where after the contract, events occur which make performance of the contract impossible illegal or radically different from what was in the contemplation of the parties. The events that have been held by the courts to constitute frustrating events include, subsequent legal changes, destruction of the subject matter of the contract, outbreak of war, governments requisition of the subject matter of the contract.”
The import of the above is that a contract can be said to be frustrated if the performance of the contract becomes impossible due to reasons beyond the parties’ control. For example, using the scenario of a builder not being able to complete the construction of a building within the agreed timeline, the builder can contend that the government ordered lockdown and restriction of movement led to a frustration of contract.
It should however be noted that before a doctrine of frustration will avail a party, such party must show that he is willing and capable of performing his own obligation under the contract but was prevented from doing so by circumstances beyond his contemplation and control.
It should also be noted that defense of frustration will be evaluated on a case by case basis and same will not avail the person making attempt to use the doctrine of frustration as a shield if it can be shown that:
- The intervening circumstance is one which the law would not regard as so fundamental as to destroy the basis of the agreement;
- The terms of the agreement show that the parties contemplated the possibility of such an intervening circumstance arising. For example, the obligation of Insurers under insurance policies;
- One of the parties had deliberately brought about the supervening event by his own choice etc.
Will a defense of Frustration exonerate me from my duty to perform my obligations under a contract?
The ultimate implication of pleading Frustration will differ based on the contract in issue. While a defense of Frustration can be used to avoid liability for nonperformance as a result of the occurrence of an event which makes the performance under the contract impossible, the defense of Frustration might not relive the party from the duty to eventually perform his obligations under the contract; in other words, such party might still be required to perform all prior agreed contractual obligations the moment performance becomes possible.
However, in situations whereby the entire contract has been frustrated by the nonperformance of a party’s obligation during the frustrated period, such party might be relieved of his duty to perform his prior agreed obligations due to a frustration of the entire contract.