October 2020

Digital Wills in Times of COVID-19

As the nation gears up for Lockdown 2.0 justice remains a distant dream as the Indian judiciary remains dysfunctional, at large. Further, digitization in India has evolved from the computerization of government offices to fragmented initiatives aimed at speeding up technological implementation across courts, albeit at a sluggish pace.

Thus, people seeking legal advice on succession planning face a twin problem – closed law offices and
dysfunctional courthouses.

Fortunately or not, India has witnessed a recent development in the concept of “electronic wills” also known as e-will, or digital wills. As the term suggests, a will is a declaration of intent by a person competent to transfer his wealth to others, but in an electronic form. Simply put, electronic wills are those wills that have been written, signed, and/or attested by way of an electronic medium.

In India, several platforms like Willstar, and MakeMyWill.in, Lawfarm, EzeeWill, etc. offer will-drafting and advisory services at reasonable rates.

Prevailing legislation and its issues

The law governing the Execution of Wills has been in effect since 1925 and is very specific. The law requires that be a written document signed by the person making the will i.e. the testator in presence of witnesses and be attested by two or more witnesses by signing the Will in the presence of the testator.

These requirements may be relaxed only in cases of wills signed by soldiers in warfare, or mariners at sea. Clearly, these rules appear archaic but they provide a certain level of protection to the Testator and beneficiaries alike.

On a regular day, these conditions can be met with relative ease; unfortunately, the law is not pandemic proof and prevailing legislations fail to recognize unconventional electronic wills. In fact, the Indian Information Technology Act, 2000, which allows electronic contracts, has specifically excluded wills and other testamentary dispositions from the applicability of its provisions.

Specifically, the preparation of Wills through electronic modes like emails or documents with digital signatures is not permitted. Further, the Indian Succession Act, 1925, governing Hindus, Sikhs, Jains, and Buddhists, requires witnesses to be present personally to see the signing of the Will by the testator. Therefore, attestation through video conferencing is inadequate under the law.

However, video recording of wills may be used as additional evidence, subject to compliance with Section 65B of the Evidence Act, 1872, to show that the Testator was of sound mind, and did not act out of coercion, undue influence, or fraud. Thus, the Indian judiciary’s partial acceptance of technology in the process of evidence and adjudication has further aggravated the wounds of people seeking expeditious legal help.

Recommendation of the Law Commission

Realizing this, the Law Commission of India in its 110th Report recommended a relaxation of rules for execution of a Will by persons affected by calamities has a reasonable apprehension of immediate death. As per the report, such a calamity would encompass instances of ‘epidemic’ or ‘pestilence’. However, this recommendation has not been given effect, and currently, the law does not provide for the easing of legal formalities amid an outbreak such as COVID-19!

The Scottish Law Society, for instance, issued guidelines wherein witnessing can be done via video technology in the presence of a lawyer overseeing the will signing process. Furthermore, the Ontario government introduced a regulation under the Emergency Management and Civil Protection Act, which allows witnessing of wills and powers of attorney remotely during the COVID-19 emergency.

Adding another stratum of protection, the regulation mandates 2 conditions namely: 1) technology that allows parties to see, hear and speak in real-time must be used, and 2) at least one of the witnesses must be a lawyer or a paralegal.

Conclusion

Unsurprisingly, many people are anticipating their own death during the COVID-19 pandemic and in a jiffy to make a legally enforceable will. However, the prevailing legislation is unsuitable for making wills in a time of quarantine and social distancing, with the non-recognition of digital wills coupled with a requirement to be physically present at the time of execution of the will.

However, with the current Indian government promoting the use of technology, social media, and e-governance, to encourage the pace of growth in various industries, and other countries positively recognizing testaments made in electronic form, there is an expectation for recognition of such concepts in India.

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Innovation During a Crisis

With the country being in the midst of an extended lockdown, businesses and individuals are feeling the anxiety and stress brought on by uncertainty regarding the future. Though India Inc. plans a partial exit strategy but to jumpstart a stalled economy is an onerous task.

It is, therefore, a valid assumption that economic disruptions caused due to a nationwide lockdown might give a two-fold rise to disputes. The closure of courts and tribunals to curb the spread of the virus has understandably delayed justice to companies and individuals alike.

Although the Supreme Court is hearing important cases via videoconferencing, lower courts lack the infrastructure to keep up with these advancements. Therefore, in such times, the traditional reliance on litigation is far from the optimal way of dealing with conflict.

Desperate times call for desperate measures. Fortunately, Alternate Dispute Resolution (ADS) is at last beginning to emerge as a response to conflict in its myriad forms and to the challenge of building a more peaceful world. ADS mechanisms prescribed by the Civil Procedure Code (CPI) under Section 89(1)-(2) include arbitration, mediation, conciliation, judicial settlement, judicial settlement through Look Adalats (people’s courts). ADS, being an informal process, provides quick, interim solutions to parties of a dispute, thereby mitigating conflicts by large.

The arbitral institutes can broker an agreement between the parties in two or three successive meetings. In comparison to this, the other dispute resolution methods would take several months, if not years. At the outset, if time is on the claimant’s side, a well thought out, well-crafted demand with factual statements and even detailed legal analysis may help the client avoid the prolonged stress of litigation dispute escalation and yield an early influx of settlement funds.

Some of the most compelling reasons for choosing ADS are high litigation expenses, time-consuming adjudication and most importantly, an appropriate method of carrying out dispute resolution whilst following social distancing amid the pandemic.

Though it started with trying to resolve disputes via e-mail, it went on to incubate an online dispute resolution (ODR) platform, known as the Centre of ADS Excellence. This method of dispute resolution was made a reality by marrying ADS mechanisms with technology. Typically, an ADS meeting or conference can be called at a short notice and if both parties are in agreement with the arbitration rules, an arbiter is appointed and time-stamped intimations are sent via e-mails, WhatsApp messages and SMSs (Short Messaging Services).

This platform facilitates communication via video calls and eliminates the need for face-to-face communication. The question of its legality can be put to test by going through Section 19 of the Arbitration and Conciliation Act, 1996 which states that the tribunal is not bound by provisions of the Criminal Procedure Code (CrPC) and the Indian Evidence Act (IEA) and may decide upon the procedure to be followed in conduct of such proceedings, thereby making online or live conduct well within the legal domain.

No one can challenge such proceedings merely on the ground of being an online resolution proceeding. International Commercial Arbitration rules, which serve as a guideline to arbitration institutions around the globe and have been adopted by the India Council of Arbitration, also mandate that arbitration tribunals have the power to conduct proceedings via videoconference, telephone or any such other means of communication as may be deemed fit.

This transposed the concept of ADS towards a highly advanced and a far more cost-effective method of ODR. The ODR also helps overcome jurisdictional issues, eliminate geographical barriers, automate administrative tasks, improve productivity of professionals, promote eco-friendly processes and finally, deliver a quick, economical and effective solution to disputes.

The need for use of modern technology in courts was emphasised by the Reserve Bank of India (RBI) and the Supreme Court in the matter of Meters and Instruments Pvt. Ltd. and Anr. v. Kanchan Mehta while hearing a petition on expeditious settlement of cases, especially those relating to business like the Negotiable Instrument Act.

The question of time-bound proceedings had already been answered by the Supreme Court vide its order dated  March 23, by freezing the limitation period from March 15 until further orders. For instance, Section 29A of the Arbitration and Conciliation Act, 1996 stipulates passing of award within 12 months of commencement of proceeding, which may be extended by six months upon agreement of parties to the dispute.

It is necessary that technologies be effectively implemented in the regular course of business and move away from the Supreme Court’s “urgent only” requirement for using videoconferencing and delve into full swing application of online proceedings for all cases and promote ODR, wherever applicable. The COVID-19 crisis has catapulted an archaic industry such as the law to adopt technology at a never-seen-before pace and is believed by many to be the way forward.

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Section 144: A Need of The Hour Amid COVID-19 Crisis

The World Health Organization (WHO) recently declared the novel corona virus (COVID-19) — a worldwide pandemic.

With over 2,00,000 confirmed cases and 8,000 deaths panic levels are on a rise around the globe. Flight cancellations, shutdown of public places and remote functioning of offices have caused unprecedented disruption across industries worldwide. In many instances, people seem to be prepping as if it’s the end of the world.

But what does it really mean?

Countries severely hit by COVID-19 such as Italy, Germany, China, United States are preparing to the greatest extent possible. While they may not resort to building 10 new hospitals in 2 weeks like China, but surge capacity is being evaluated, coordinated within their healthcare system coupled with several isolation policies and orders.

Similarly in India, the preliminary concerns for the government and its officials would revolve around the health and safety of all citizens disguised as an employee, customer, or neighbour. On these lines, Dy. Commissioner of Police Pranay Ashok imposed Section 144 over the Greater Mumbai region. 

Section 144 of Criminal Procedure Code (CrPC) imposes power to executive magistrate to restrict particular or a group of person residing in a particular area while visiting a certain place or area. This move was implemented to prevent a danger to human life health and safety and to ultimately slow down the spread of COVID-19. 

The outbreak of Novel Corona Virus aka COVID-19 was the reason for such threat to human life perceived by the Magistrate. This order created confusion among the general public who assumed this to be an imposition of Section 144 of Indian Penal Code (IPC) pertaining to Unlawful Assembly.

The same was later clarified by the Mumbai Police that the order was specific in nature, applicable to ‘Tour Operators’ and not the public in general. This was done so that travel groups comprising of domestic or foreign nationals in the area may be curtailed. The question that now lingers around is whether imposition of Section 144 the need of the hour amid this crisis?

We must know that Section 144 is there to dispose urgent cases of nuisance or apprehended danger by a competent magistrate so empowered to take such action. Although in India the cases of reported cases is still very low as compared to other nations across the globe. This is not to forget the harm already caused by the virus due to its quick growth rate and the potential to further aggravate the situation.

The present order or any such order within the legal dictum would be a necessary tool to impose certain restriction on public gathering and movement and such order could not be challenged on the ground of infringing the Fundamental Right enshrined in Article 19(1)(b) or (d) of the Constitution as same was found to be well within the limit of reasonable restriction of 19 (2) and (5).

However, there are certain restriction on the Magistrate exercising these power as he have to follow certain guiding principles laid down in the provision itself or that of Section 134. One peculiar instance in this regard is that this order under 144 cannot exceed more than 2 months but there is a proviso in the same clause granting the power with State Government to exceed such time period to 6 months on satisfying itself for the need of such act.

Given the situation of present case where no cure has been found these sections would need to be interpreted leniently it being a procedural law.

However, the role of CrPC would be much less when it comes to a situation which we are foreseeing as spread of COVID-19 to such a large extent. In India, we have Indian Epidemic Disease Act, 1897 which not only grants the State and Central governments to take any temporary measure for controlling and prevent the outbreak of a disease but also punish the individual not complying with such orders through Section 188 of IPC (Disobedience to order duly promulgated by Public Servant).

A recent case has been lodged in this regard invoking this section of Epidemic Act and even Visas are being called cancelled under the ambit of this Act.

In a recent poll, pharmaceutical companies and scientists acknowledged that it may take at least a year for a COVID-19 vaccine to be approved and made available to patients. So for the time being, Section 144 CrPC seems adequate to control the specific movement of targeted groups that are either more prone to the outbreak or are a major threat to spreading the virus.

This Section can also be invoked to prevent any situation of panic among the general public when it comes to shopping for essential commodities as we observe in different nations across the globe. Thus, we can rightly conclude that imposition of Section 144 is very well within its legal competency and can be effectively imposed to tackle this pandemic as the world impatiently awaits a magic COVID-19 vaccine.

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Does Your Business Contract Recognize Coronavirus?

The novel coronavirus (COVID-19) is now a global pandemic. Numerous deaths are reported worldwide and catastrophic consequences for businesses and the economy are on the rise as well. Cancellation of flights, shutdown of public places, and remote offices has caused unprecedented disruption to businesses across the globe. Our preliminary concerns would revolve around the health and safety of our loved ones, employees, customers, and neighbours.

But when the dust settles, business leaders from the C-suite to owners of convenience stores would be left wondering how the pandemic will affect their business contracts. The answer to which is particularly important for small and medium businesses, who may not have a robust cash flow or necessary resources to deal with such a crisis.

As a result of this outbreak, several companies are examining their contracts to understand the extent of their rights, remedies, and obligations with respect to their business associates. Suppliers of goods and services unable to deliver on contractual obligations are looking to see what provisions, if any, may protect them from default. One such provision of particular concern is the ‘Force Majeure’ clause.

What is the ‘Force Majeure’ clause?

Fundamentally, a force majeure is an unforeseen or unavoidable event beyond the reasonable control of the parties to an agreement that serves as an excuse or delay in the affected party’s performance of its obligations under the agreement. Common force majeure events include floods, fires, earthquakes, wars, terrorist attacks, and government orders.

But this is not an exhaustive list of events and there lies the problem. The Force Majeure clause excuses non-performance of contractual obligations for events specified under the clause. But if an event not specified under the force majeure provision occurs, then the impacted party may not be excused from performance. Simply put, if the impacted party is unable to perform, it is likely in breach of the contract.

If the contract does not specify events such as “epidemics and quarantines” or “pandemics” in its Force Majeure clause, a party may have a difficult time claiming they are excused from contractual obligations because COVID-19 has rendered a party unable to perform the contractual duties. But, is their failure to perform excused under the Force Majeure clause? Ultimately, it comes down to what the contract says and how a court of law interprets the clause.

Challenges in the Force Majeure defense

Part of the challenge lies with the fact that there is no universal standard definition for force majeure, and they often vary across agreement types and industries. The performance of one party might be completely excused by one force majeure provision, while under another, the contract might defer performance of the obligation until the force majeure event ceases, and yet another may require strict performance of the obligations or face penalty.

Ultimately, and most importantly, the issue depends on an assessment of: the nature and context of your particular contract; the words in the relevant Force Majeure clause; and the general terms of the contract, including the substantive law / governing law clause.

To assess a business’s rights, obligations, and remedies, whether the business is the party unable to perform or such counterparty, the following should be considered:

What contract provisions are relevant? Firstly, companies should determine whether their contracts include a force majeure clause, and whether there any other relevant provisions to further examine. Provisions concerning any violation, termination, cancellation, and/or repudiation may be applicable under the given situation.

How does the contract define a force majeure event? The language in contracts may be as broad or restricted as agreeable to parties to the contract. A contract may either explicitly list all qualifying events, or generally define a force majeure event as “an event beyond the parties’ control”, leaving room for interpretation.

Considering the extraordinary circumstances of its emergence, most of our contracts may not have it listed directly as a force majeure event. In the latter scenario, companies must look for examples of relevant language such as “disease,” “epidemic,” “pandemic,” “quarantine,” or “acts of government,” which may be interpreted to include the COVID-19 outbreak.

Is the coronavirus outbreak the cause of the party’s nonperformance? The mere existence of COVID-19 in the city does not exempt a company from the performance of its contractual obligations. Also, if other factors lead to the party’s non-performance, then a force majeure clause may not be applicable. For example, to the extent, a company takes proactive steps to curb the spread of the virus, by, say, advising workers to stay home, does the resulting failure to perform constitute a force majeure event?

Practical tips

Here are some brief tips in dealing with COVID-19 relative to contracts: Carefully review your contracts to determine your rights and obligations under these agreements, as well as any risks associated with the consequences and potential for recovery of additional costs or a price adjustment as a result of a work delay or stoppage.

Contractors should also carefully review their subcontracts to determine their rights, obligations and potential for recovery. If a long list of force majeure events is included, it is likely to be helpful (where you are seeking to rely on the clause) if pertinent wording is included such as “pandemic”, “epidemic”, “outbreak”, “crisis” or “governmental action”.

Watch out for wording in new contracts that require that the event of force majeure is “unforeseeable”. Communicate and properly document the incurrence of such additional costs to include any potential mitigation of such costs. The point here is to document, document, document, and communicate, communicate, communicate.

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COVID-19’s Impact on The Execution of Contracts & Mitigation

COVID-19 has posed a threat to human life across the globe so much so that it has now been termed a ‘pandemic’ by the World Health Organization (WHO). Apart from the rising deaths, stock markets across the globe have plummeted with Sensex crashing over 3,000 points in a span of two hours. The concern is not only limited to stocks and reduced production across the globe causing massive losses to the world GDP but also toward the performance of commercial contracts.

A contract is an enforceable agreement. This term ‘enforceable’ simply means a contract having the force of law (ie, it fulfils all other criteria essentials for it to be deemed a contract) must be performed by all the parties to it, and in event of failure to do so the party aggrieved may bring a civil suit in a court of law or refer it for adjudication or arbitration as the case may be.

But with the recent development of such a disease, which is forcing individuals to remain in a designated place for the time being or even bringing cities to standstill, what will be the legal status of contract to be executed by that person or in that area?

In the event of impossibility of a contract we may immediately refer to Section 56 of Indian Contract Act, 1852, which says that any act that was to be performed after the contract is made becomes unlawful or impossible to perform, and which the promisor could not prevent, then such an act which becomes impossible or unlawful will become void. Section 56 is based on a common law principle known as ‘Doctrine of Frustration’ propounded by English judges through a series of case.

As per this Doctrine there can be two grounds upon which even a legal contract can be termed ‘frustrated’ or, in other words, absolving all the parties from the liability of performance on account of certain intervening factors: (1) performance of contract is physically impossible, and (2) the object of contract has failed.

These principles have been upheld by the Supreme Court to be well within the ambit of Section 56 and thus we conclude that frustration as a result of COVID-19 will be safeguarded by the present contractual law. When in situations where it would be physically impossible to perform a contract owing to restrictions imposed on individual or an area, say, delivery of goods in a locality where all movement of people are restricted will fall within the present law, and both promisor and promise would be relieved from any contractual duty and liability in case of non-performance.

Similarly, where although it is physically possible to perform contract but such performance has lost the power to fulfil the very object of the contract itself would again call for application of Section 56 and Doctrine of Frustration. For example, decoration of an auditorium for a music concert although may be possible physically but without fulfilment of object to secure the required audience or even in some cases unlawful as per the orders of government.

In this regard we must also take note of Section 65 of the Act, which talk about the obligation of any person to revert back any benefit he may have received on account of any void contract. Thus, even though a contract ‘becomes’ frustrated at a later stage where at the time of its inception it was indeed possible to execute, if at all any benefit or advantage is derived by any party through this contract which became void due to frustration must be reverted back to the other party to bring everything back in its place.

Therefore, no one needs to worry about any liability arising out of contractual relationship when such relationship is tainted by an intervening impossibility like COVID-19 and also about any right he had over any amount, which is now with the other party to a contract where contract is now frustrated. A significant light in this regard must be thrown on the concept of ‘Force Majeure’, which is a French term for “superior force”.

If there is a force majeure clause present in a contract agreement then doctrine of frustration would not be applicable as far as such clause is applicable in a given situation.

The concept is simple, wherein parties to a contract agree beforehand about how to deal with or execute a contract under certain specified circumstances that might prevent execution of a contract. These circumstances could be anything such as natural calamity or unforeseeable circumstances that may be mentioned exclusively in the contract.

The clauses dealing with these circumstances and duties imposed on parties when such situation occurs and their liability, or what is to be done by the parties in such event, is termed as Force Majeure clause.

Force Majeure provision or clause is left for the parties to define within the contract itself and no such application are a matter of law and in common law no inference of such clause are decided by the courts. Any such clause in common law countries like ours are read strictly.

Onus to prove that the COVID-19 outbreak is within the force majeure clause mentioned in the contract and any such delay or failure to perform the contract on the account of such force majeure will lie on the party seeking such relief. In absence of these clauses, the doctrine of frustration would be applicable to make the contract void.

In conclusion, it can be said that COVID-19 has indeed impacted and will affect the execution of commercial contracts significantly in the near future, but such impacts can be mitigated by the provision within contract agreement itself and also by the law being in force.

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Section 144

The World Health Organization (WHO) recently declared the novel coronavirus (COVID-19) a worldwide pandemic. With over 2,00,000 confirmed cases and 8,000 deaths panic levels are on a rise around the globe. Flight cancellations, shutdown of public places, and remote functioning of offices have caused unprecedented disruption across industries worldwide. In many instances, people seem to be prepping as if it’s the end of the world.

But what does it really mean? Countries severely hit by COVID-19 such as Italy, Germany, China, and the US are preparing to the greatest extent possible. While they may not resort to building 10 new hospitals in two weeks like China, surge capacity is being evaluated, coordinated within their healthcare system coupled with several isolation policies and orders.

Similarly, in India, the preliminary concerns for the government and its officials would revolve around the health and safety of all citizens disguised as an employee, customer, or neighbour. On these lines, Deputy Commissioner of Police Pranay Ashok imposed Section 144 over the Greater Mumbai region. Section 144 of Criminal Procedure Code (CrPC) imposes power to executive magistrate to restrict particular or a group of persons residing in a particular area while visiting a certain place or area.

This move was implemented to prevent a danger to human life health and safety and to ultimately slow down the spread of COVID-19. The outbreak of novel coronavirus aka COVID-19 was the reason for such threat to human life perceived by the Magistrate. This order created confusion among the general public who assumed this to be an imposition of Section 144 of Indian Penal Code (IPC) pertaining to Unlawful Assembly.

The same was later clarified by the Mumbai Police that the order was specific in nature, applicable to ‘Tour Operators’ and not the public in general. This was done so that travel groups comprising domestic or foreign nationals in the area may be curtailed.

The question that now lingers around is whether the imposition of Section 144 is the need of the hour amid this crisis. We must know that Section 144 is there to dispose of urgent cases of nuisance or apprehended danger by a competent magistrate so empowered to take such action.

Although in India the number of reported cases is still low compared to other nations across the globe, one cannot ignore the harm already caused by the coronavirus due to its quick growth rate and the potential to further aggravate the situation.

The present order or any such order within the legal dictum would be a necessary tool to impose certain restrictions on public gatherings and movement and such order could not be challenged on the ground of infringing the Fundamental Right enshrined in Article 19(1)(b) or (d) of the Constitution as same was found to be well within the limit of reasonable restriction of 19(2) and (5).

However, there are certain restrictions on the Magistrate exercising this power as he has to follow certain guiding principles laid down in the provision itself or that of Section 134. One peculiar instance in this regard is that this order under 144 cannot exceed more than two months but there is a proviso in the same clause granting the power with the State government to exceed such a time period to six months on satisfying itself for the need of such act.

Given the situation where no cure has been found, these sections would need to be interpreted leniently it being a procedural law. However, the role of the Code of Criminal Procedure would be much less when it comes to a situation that we are foreseeing as the spread of COVID-19 to such a large extent.

In India, we have the Indian Epidemic Disease Act, 1897 which not only grants the State and Central governments to take any temporary measure for controlling and prevent the outbreak of a disease but also punish the individual not complying with such orders through Section 188 of IPC (disobedience to order duly promulgated by Public Servant). A recent case has been lodged in this regard invoking this section of the Epidemic Act and even visas are being canceled under the ambit of this Act.

In a recent poll, pharmaceutical companies and scientists acknowledged that it may take at least a year for a COVID-19 vaccine to be approved and made available to patients. So, for the time being, Section 144 Criminal Procedure Code seems adequate to control the specific movement of targeted groups that are either more prone to the outbreak or are a major threat to spreading the virus.

This Section can also be invoked to prevent any situation of panic among the general public when it comes to shopping for essential commodities as we observe in different nations across the globe. Thus, we can rightly conclude that imposition of Section 144 is very well within its legal competency and can be effectively imposed to tackle this pandemic as the world impatiently awaits a COVID-19 vaccine.

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Coronavirus – An ‘Act of God’ or not?

Oh my God! was a movie based on a middle-class atheist whose shop was destroyed in an earthquake. The movie revolves around the atheist’s struggle to claim his insurance money and learns that the disaster claim does not cover any damage caused by natural calamities classified under “Act of God”. Running out of options, he decides to sue God but fails to find a lawyer for such a lawsuit.

Similarly, the world today is struggling owing to the outbreak of COVID-19. The human cost of the novel coronavirus outbreak has been widely reported and the tragic consequences continue. But beyond the human toll of the current global health crisis, the coronavirus outbreak is having serious economic repercussions to the global economy and the supply chains on which it depends. 

As a result of this outbreak, several companies are examining their contracts to understand the extent of their rights, remedies and obligations with respect to their business associates. Suppliers of goods and services unable to deliver on contractual obligations are looking to see what provisions, if any, may protect them from a default.

What is the Force Majeure clause?

Force majeure clauses are contract provisions that excuse a party’s nonperformance when “Acts of God” or other extraordinary events prevent a party from fulfilling its contractual obligations.

Would the outbreak of corona virus amount to an Act of God?

Many force majeure definitions include reference to Acts of God or similar wording. Avoiding philosophical arguments that everything is potentially an Act of God, from a purely legal perspective, there is no one-size-fits-all answer as to whether a particular event falls within this sort of language. 

Generally, Act of God appears to denote events due to natural causes without any human intervention. It has also been labelled as “an irresistible act of nature” and some are advising that the phrase (or other catch-all provision) may suffice to cover an outbreak such as coronavirus. 

Ultimately, and most importantly, the issue depends on an assessment of all of:

• the nature and context of your particular contract; 
• the words in the relevant force majeure clause; and
• the general terms of the contract, including the substantive law / governing law clause.

To assess a business’ rights, obligations, and remedies, whether the business is the party unable to perform or such counterparty, the following should be considered:

• What contract provisions are relevant? Determine whether the contract includes a force majeure provision, and whether there any other relevant provisions to assess. Contractual provisions to review include any breach, termination, cancellation, or repudiation terms that may be applicable under the circumstances.
• How does the contract define a force majeure event? Is the provision broadly written? Assess whether the outbreak of the coronavirus, or the efforts to contain it, constitute a force majeure event under the contract. Examples of relevant language that may be included are “disease,” “epidemic,” “pandemic,” “quarantine,” or “acts of government.” Depending on the parties’ prior negotiation and drafting, a contract may either explicitly list all qualifying events, or generally define a force majeure event as an event beyond the parties’ control, leaving more room for interpretation. Broad, catch-all language may be interpreted differently depending on the applicable law.
• Is the coronavirus outbreak the cause of the party’s nonperformance? Consider whether the party could have timely performed if the outbreak did not occur. If other factors contributed to the party’s nonperformance, a force majeure clause may not be applicable. For example, to the extent a company takes proactive steps to avoid further spread of the coronavirus, e.g., by advising workers to stay home, does the resulting inability to perform constitute a force majeure event?

Practical tips

• Review the wording of force majeure clauses, paying particular attention to the list of non-exhaustive events which is often included, and the consequences of triggering a force majeure.
• If a long list of force majeure events is included, it is likely to be helpful (where you are seeking to rely on the clause) if pertinent wording is included such as “pandemic”, “epidemic”, “outbreak”, “crisis” or “governmental action”.
• Watch out for wording in new contracts that require that the event of force majeure is “unforeseeable”.
• Contact counterparties of contracts which may be affected and discuss a possible renegotiation, or postponement of obligations, as appropriate.

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