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Whilst we are all forced to adapt to the enormous commercial and social consequences of the global battle against Covid-19, do not assume that contractual agreements entered into before the pandemic was declared will automatically terminate because of the prohibitions and restrictions currently in place. This note reminds parties bound by a contractual relationship not to forget the terms they have agreed to and the consequences of ignoring the termination provisions.

Is there a Force Majeure clause in the Contract?

There is no implied Force Majeure clause in English law. The effect of this is that if the contract does not contain such a clause then the parties will be unable to rely on Force Majeure as an incident, despite the indisputable impact of Covid-19.

Assuming there is a Force Majeure clause, does it include; a pandemic, an epidemic, a global health emergency or circumstances where there is a government restriction or prohibition? One of the above is key and likely to bite for Covid-19.

Just because it is less profitable (or indeed unprofitable) or more difficult to perform the contract, this will not necessarily release the parties from their obligations.

If there is no Force Majeure clause, Frustration may apply but the test is a strict one. The party seeking to rely on it would have to show that the consequences of Covid-19 indisputably prevents the performance of the contract.

Termination/The Notice

Check the termination provisions carefully. As above, simply because performance seems at the very least, not commercially viable and at worst, impossible; this will not result in automatic termination.

Do not get the notice wrong. When any Notice of Termination is served, the reason for termination must be clear and correct. Furthermore, the mechanism by which the Notice is served must comply with the contract. If you get either the reason for termination or the service of the Notice wrong, you risk the Notice being invalid. The effect of this is that the party seeking to terminate could face an expensive claim for damages for an anticipatory or repudiatory breach of the contract. Such a claim could and should be avoided with careful analysis of the terms agreed and how to extricate the parties in the most commercial way possible.

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