Will The Effects Of The Coronavirus Allow You To Avoid Contractual Obligations?

  • A number of potential issues arise, including whether the virus excuses a party from their obligations under a force majeure clause or the doctrine of frustration.
  • If the party seeks to rely on such a clause and it later turns out that the clause did not apply, that party may have wrongfully repudiated the contract, and may be liable for damages resulting from that repudiation.
  • For example: Material adverse change: Facility agreements, sale and purchase agreements and supply agreements might contain material adverse change or material adverse effect provisions that allow a lender or other party to cancel the contract if triggered.
  • Change in law: Contracts might include a change in law clause that requires a party to give notice if one or more of their obligations has been made unlawful because of a change in law.
  • Parties should also be mindful of the termination provisions of their contracts, and whether any termination rights might arise as a consequence of the coronavirus.

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