LEGAL
Force
Majeure
And contractual obligations
during a pandemic
By Aaron W. K. Challis, Fillmore Riley LLP
The impact the COVID-19 pandemic has had on the
economy and business is, and will likely continue to
be, significant. There may be issues that arise as a result
of this disruption that will impact the ability of businesses
to perform contractual obligations. In such cases, there
may be terms in those contracts that could excuse performance in
certain circumstances.
One such term is known as a force majeure clause or “Act of God”
clause. A force majeure clause aims to assist parties when situations
outside of the control of the parties render them unable to meet
contractual obligations. The Supreme Court of Canada has said
that a force majeure clause operates to discharge a contracting party
when a supervening event beyond the control of either party makes
performance impossible. The event must also be unexpected and
something beyond reasonable human foresight.
Specific to the construction industry, many construction
agreements will have terms to deal with events that delay or disrupt
construction, including delay and force majeure provisions. The
standard form CCDC 2 contract does not explicitly contain a
true force majeure clause. However, consider the following clause
relating to delay:
6.5.3: If the contractor is delayed in the performance of the
work by:
1. labour disputes, strikes, lockouts (including lockouts
decreed or recommended for its members by a recognized
contractors’ association of which the contractor is a member
or to which the contractor is otherwise bound),
2. fire, unusual delay by common carriers
or unavoidable casualties,
3. abnormally adverse weather conditions, or
4. any cause beyond the contractor’s control other than
one resulting from a default or breach of contract by the
contractor, then the contract time shall be extended for
such reasonable time as the consultant may recommend
in consultation with the contractor. The extension of time
shall not be less than the time lost as the result of the event
causing the delay, unless the contractor agrees to a shorter
extension. The contractor shall not be entitled to payment
for costs incurred by such delays unless such delays result
from actions by the owner, consultant or anyone employed
or engaged by them directly or indirectly.
The question becomes: Can the COVID-19 pandemic result in
a force majeure that can excuse or delay performance of a contract?
Unfortunately, there is not a stock answer that can be applied to
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