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FORCE MAJEURE AND THE PERFORMANCE OF CONTRACTUAL OBLIGATIONS IN A GLOBAL PANDEMIC

May 20, 2020
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– NSEOBONG OKON, ESQ

INTRODUCTION

When parties enter into a contractual relationship, the intention is usually that such shall give rise to binding legal rights and obligations enforceable at the instance of the either of the parties. However, as parties cannot always anticipate the future, events may occur that significantly reduces the capacity of a party to perform his contractual obligation. That seems to be the situation at hand given the outbreak of Covid-19 declared by the World Health Organization as a global pandemic, leaving in its wake adverse economic consequences the world over. An unforeseen contingency such as Covid-19 which renders the fulfillment of a contractual obligation difficult or impossible is what is commonly referred to as force majeure. This article examines the concept of force majeure, its implication on the performance of contractual obligations especially in a period of a ravaging pandemic as well as the application of the concept under Nigerian Law.

MEANING AND ORIGIN OF FORCE MAJUERE

The concept of force majeure traces its origin to the French Civil Law System1 but it is also an acceptable standard in Common Law jurisdictions including the United Kingdom after which the Nigerian Legal System is patterned.  It literally means “a superior force”. According to the Black’s Law Dictionary 8th Edition, Force Majeure is an event or effect that can be neither anticipated nor controlled2. The term includes both acts of nature (e.g., floods and hurricanes) and acts of people (e.g., riots, strikes and wars). A force majeure clause is usually included in a contractual agreement in order to allocate risk if performance becomes impossible or impracticable.

IMPLICATION OF FORCE MAJEURE ON PERFORMANCE OF CONTRACTUAL OBLIGATIONS

Where a situation of force majeure arises, its effect on the performance of a contractual obligation may range from an outright termination of the contract. In this scenario, the party relying on it will be excused or discharged from further performing his obligations under the contract. Alternatively, a force majeure event can lead to a delay or suspension, for a specific period of time, of the performance of the contractual obligations of the affected party. In this instance, the affected party can seek for an extension of time within which to perform his obligations under the contract.

CONDITIONS FOR A SUCCESSFUL INVOCATION OF FORCE MAJUERE TO DISCHARGE, DELAY OR SUSPEND THE PERFORMANCE OF CONTRACTUAL OBLIGATIONS.

A party seeking to rely on force majeure to outrightly discharge himself from the liability to perform a contractual obligation or to delay its performance must ensure that the following conditions are satisfied.

  1. The contract itself must have expressly provided for a force majeure clause. Force majeure clauses are not usually implied into a contract. It must be explicitly and clearly provided for before a party can successfully invoke same.
  2. There must have occurred an unforeseen event which is external to both parties and unavoidable thereby rendering the performance of the contract impracticable. This standard of impracticability has been adopted by the International Chamber of commerce3, implying that it would either be impossible or unreasonably burdensome and expensive to carry out the terms of the contract in the light of the prevailing circumstance sought to be relied upon.
  3. The unforeseen event sought be relied upon must be shown to fit the description of the one stipulated under the force majeure clause. In this regard, a force majeure clause can either provide for an exhaustive list of events that would fall under the definition of “force majeure” or may provide for a specific list of events, but also include a term that the list is not exhaustive, thus enabling the parties to cover events not mentioned in the list.4

 IS COVID 19 A FORCE MAJUERE?

Amidst the outbreak of the ravaging Covid-19 virus, there have been questions as to whether the prevalence of the current global health crisis and its adverse consequence on world economies does constitute a force majeure. With drastic measures being adopted by governments and nations to curb the spread of the virus including lockdowns, travel restrictions and quarantine; many businesses and private individuals have found it increasingly difficult, burdensome or even impracticable to meet up with their contractual obligations. Against this background, it is imperative to note that whether or not a party will be able to discharge himself of liability from performing his obligation under a contract on the basis of the Corona Virus outbreak will depend on the wordings of the contract itself. Where the contract had provided for contingencies such as “disease”, “illness”, “pandemic”, “epidemic” or “acts of government” as evident in the lockdown orders and travel restrictions proclaimed by the Federal Government of Nigeria and other sovereign states, it will appear that a party may successfully invoke force majeure to excuse himself from further performance of his contractual obligation.

APPLICATION OF FORCE MAJEURE UNDER NIGERIAN LAW

Being a common law jurisdiction, the concept of force majeure applies in full force under Nigerian Law. Some notable cases wherein this concept was pronounced upon include C.G.G. (Nig) Ltd V. Augustine & Others5 and Globe Spinning Mills (Nig) Plc v. Reliance Textile Industries Ltd6. In the later case, the court of Appeal per Ndukwe-Anyanwu J.C.A. stated that “force Majeure is something that is unexpected and unforeseen happening, making nonsense of the real situation envisaged by the parties”. The court held that there was nothing like force majeure to terminate the contract of Sale and Purchase Agreement entered into by the parties. According to the court, the events sought to be relied upon by the respondent to terminate the contract are “usual vicissitudes of trade in Nigeria” In essence, for a party to successfully rely on force majeure, he must prove that the events which he seeks to rely upon are extraordinary and beyond the control of both parties.

It is important to note that there is an analogous concept of frustration of contracts under Nigerian law which a party may also rely upon to set aside a contractual obligation in the event of an occurrence of an intervening circumstance which is completely outside the contemplation of the parties at the time of entering into the contract.  In Adedeji v. Obaji7, the Supreme Court held thus: “It is trite law, that a valid contract may be discharged by one of the four ways. See Tsokwa Oil Marketing Company v. B.O.N. Ltd (2002) 11 NWLR (pt. 777) page 163 at 200 where this court held as follows; “A valid contract between parties may be discharged in four ways known to law, namely: a) by performance b) by express agreement c) by the doctrine of frustration; d) by breach.”

CONCLUSION:

Unforeseen events otherwise referred to as force majeure can constitute impediments to the performance of contractual obligations. The current global health crises precipitated by the outbreak of Covid-19 seems to be one of such unforeseen and unavoidable occurrences with far reaching implications on contractual obligations. With travel restrictions, quarantines and lockdown orders many business and private businesses have become unable to keep up with their contractual obligations thereby exposing the affected business and individual to legal liabilities in the form of claims for specific performance or damages for breach of contract. It is important when entering into a contract to ensure that force majeure clause is carefully and explicitly worded to mitigate against any form of liabilities in future resulting from unforeseen events including pandemics or other health threatening situations. Where a contract has already been entered into, it is important, at a time like this, to review the relevant clauses in order to ascertain whether there is any provision under which a party may rely to mitigate his liabilities in the face of a ravaging pandemic or any other unforeseen event at all.

REFERENCES

  1. Marshall Hargrave, Force Majeure, https://www.investopedia.com/terms/f/forcemajeure.asp, accessed on 19th May, 2020
  2. Garner, Bryan A., and Henry Campbell Black. Black’s Law Dictionary.8th ed. St. Paul, MN: Thomson/West, 2004.
  3. Ibid at note 1
  4. Kinanis LLC – Andrianna Solomonides,  COVID-19 and the performance of contractual obligations, https://www.lexology.com/library/detail.aspx?g=7441b831-204e-41e6-9ec9-e1bbbb61620c, Last Accessed, 19th May 2020
  5. (2010) LPELR-8592(CA)
  6. (2017) LPELR-41433(CA)
  7. (2018) LPELR-44360(SC)
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