Skip to content
City PM
  • Germany
  • France
  • Europe
  • Markets
  • Business
  • Opinion
  • DE
  • Germany
  • France
  • Europe
  • Markets
  • Business
  • Opinion
  • DE
Thursday 26 March 2020 2:28 pm  |  Updated:  Thursday 26 March 2020 2:29 pm

How to resolve contract disputes during the Covid-19 pandemic

By: Sean Upson

Add as a preferred source on Google

The impact of Covid-19 on businesses is unprecedented and profound. Government restrictions and guidelines, the impact on supply chains and the unavailability of staff are all affecting businesses’ ability to comply with contractual obligations.

Stewarts has received many requests for advice from companies whose manufacturing plants are being shut down, or whose supply chains are being affected. It is evident that contracts in a range of sectors, including transportation and shipping, retail, sports and entertainment, are under increasing scrutiny. From contracts relating to the supply and sale of goods, to the provision of services, financial agreements, broadcasting rights, tickets sales, advertising and sponsorship agreements and business leases, the consequences are far-reaching.  Every situation is different, and the legal landscape is continually – and quickly – evolving. 

If a business is unable to perform, then then they risk being in breach of contract and liable for damages, or the counterparty may be entitled to terminate the contract. So, the manufacturing plant contracted to produce goods, for example, may be liable to its customer for not delivering.  

Such claims could exacerbate the economic hardship keenly felt by businesses and individuals worldwide – and I believe the coming weeks and months will see significant breach of contract and damages claims.

Many contracts contain so-called “force majeure” clauses, which excuse a business’s non-performance if circumstances beyond their control prevent (or sometimes hinder) performance.  

These clauses often list out the circumstances which excuse non-performance and they may include flood, fire, terrorism, “Act of God” and – sometimes – epidemic.

The question of whether Covid-19 qualifies as force majeure event is complex and depends on several issues. That’s why force majeure is not a “get out of jail free” card.  

Read more

Global trade remains ‘alive and well’ despite tariffs and war, says DHL boss

General news image showing a diverse group of people in a corporate meeting discussing business strategies in a modern off...

First, the business typically has to show its performance has been made impossible. This argument may not be straightforward as until the UK lockdown on 23 March, the government had merely advised that certain measures be adopted (for example, avoiding travel) but it had not legislated to make it impossible for workers to leave home. 

While it’s unclear how long this lockdown will remain in force, even under lockdown it may be technically possible – if expensive and difficult – for contracts to be performed.  So, a business may face a situation where performance is practically or economically difficult – but where it is not impossible.  

A business must also ask whether it can perform the contract in another way, such as remote working or by sourcing replacement goods or services for its customer from a country which is not affected.  Each situation needs to be judged on its own circumstances to establish if the Covid-19 restrictions have sufficiently prevented performance to qualify. 

Secondly, I think the courts will be alive to anyone cynically trying to excuse non-performance of contracts which they could not perform anyway, or which are not commercially viable. Typically, a business cannot use force majeure to excuse a failure to perform which was going to happen anyway.  Also, the fact that a contract has become more expensive and possibly uneconomic to perform is generally not an excuse.

Businesses need to evaluate their contracts and whether force majeure applies very carefully.  They may be protected from the difficult conditions we are all now facing – but they must review their contracts and circumstances urgently to check their precise position.

Main image credit: Getty

Read more

Carbon credits are moving up the boardroom agenda

Sabah landscape showcasing climate resilience measures by Climate Impact Partners

Share this article

  • Facebook
  • X
  • LinkedIn
  • WhatsApp
  • Email

Similarly tagged content:

Sections

  • Opinion

Categories

  • Legal
  • Opinion

Related Topics

  • Coronavirus

Trending Articles

  • Burnham told to launch £100bn tax reform package

  • Billionaire Easyjet founder in line for £800m payday from takeover

  • Construction sector cuts jobs again as house building slumps

  • Harry Styles at Wembley Stadium review: running through the grief

  • Tickets for England World Cup quarter vs Norway on sale for $8m

More from City PM

  • Global trade remains ‘alive and well’ despite tariffs and war, says DHL boss

    Tech
    General news image showing a diverse group of people in a corporate meeting discussing business strategies in a modern off...
  • Carbon credits are moving up the boardroom agenda

    Partner
    Sabah landscape showcasing climate resilience measures by Climate Impact Partners
  • Carbon markets must industrialise or the net zero transition stalls

    Partner
    Close-up of a sapling at Aranya Reforestation site in India, showcasing efforts in sustainable forestry and ecological res...
  • The companies leading on climate aren’t waiting for 2050

    Partner
    Large-scale reforestation project in India by Climate Impact Partners, showcasing vast tree plantation efforts.
  • Paladin Deepens Allied Supply Chain Footprint with South Korea Strategic Initiative and Netherlands Expansion, Advances Ex-China Rare Earth Recovery

    Business Wire
  • Businesses confidence slumps as Burnham prepares for power

    Economics
    Andy Burnham delivering a speech on government reforms and business confidence at a conference podium
  • UK in line for fresh US tariff hit as Trump proposes ‘forced labour’ levy

    Economics
    Breaking news conference podium with microphone, focused on speakers notes and event backdrop, set for journalist updates
  • Starmer weighs cut to EU student fees in bid for Brexit reset

    Politics
    Prime Minister Keir Starmer speaks at a press conference addressing future leadership rumours, wearing a navy suit and tie.

City PM — European politics, business and analysis.

Europe

  • Germany
  • France
  • Europe
  • UK & Ireland

Topics

  • Business
  • Markets
  • AI
  • Technology
  • Opinion
  • Energy

More

  • Politics
  • Economics
  • Fintech
  • Legal
  • Sport
  • Life

Company

  • About City PM
  • Editorial Policy
  • Corrections
  • Contact
  • Terms of Use
  • Privacy Policy
  • Cookie Policy
© 2026 City PM · Published by CityPM Media, Bahnhofstrasse 65, 8001 Zürich, Switzerland
About · Editorial Policy · Corrections · Contact · Privacy