Many commercial contracts these days will contain a force majeure clause. A force majeure clause operates to suspend an affected party’s obligations under a contract if certain unforeseen and uncontrollable events occur (such as an act of god, war, civil commotion etc) that make it difficult or impossible for a party to perform its obligations under a contract.
The benefit of force majeure clauses is that they prevent the affected party’s inability to perform from being treated as a breach of contract which would otherwise entitle the other party to terminate or seek damages.
As we all know, COVID-19 virus is novel and unprecedented. Accordingly, some force majeure clauses may not apply where a party’s ability to perform its obligations under a contract are affected directly by the COVID-19 or by a government measure enacted because of COVID-19.
If you are about to enter into a contract, you should ensure that you are adequately protected if the COVID-19 or a government measure enacted because of the COVID-19 prevents you from performing under that contract. It may also be prudent to insert provisions dealing with a material change in circumstances caused by the economic consequences caused by COVID-19.
If you are currently bound by a contract that either does not contain a force majeure clause or has a force majeure clause that will not apply to circumstances caused by the COVID-19, there may be other legal alternatives available to you.