Written by Christopher Rosana.
Force majeure clauses are common within various contracts. They allow the parties to be excused from performing their obligations due to the occurrence of natural disasters and pandemics like Covid-19 [State Trading Corpn of India Ltd v ED & F Man (Sugar) Ltd].[i] It could allow parties not to pay rent, not to pay your insurance cover, or not to supply food.
The common mistake in drafting these clauses into contracts comes from the general feeling that the natural disaster will not occur. The drafters, mostly lawyers, bet against nature and decide to copy and paste the same clause from another contract, or to adopt a vague clause. Arguably, pandemics have occurred frequently since 2002 when SARS appeared. We must accept the new normal and draft better force majeure clauses because your job, your food supply, and health insurance cover, just to mention a few, depend on the terms of your contract.
We enter into contracts to manage the risks that will result in case things do not go as well as we would like. Your contract must have a properly worded force majeure clause [British Electrical and Associated Industries (Cardiff) Ltd v Patley Pressings Ltd].[ii] Do not assume nothing will go wrong. A properly worded force majeure clause must define the situations under which the parties will be released from their obligations. It should define the natural disaster anticipated concisely without being too specific. If it is too specific when a natural disaster occurs the clause will not protect you because it was too narrow. It is a balancing act pitting precision against generality. You cannot know what will come but you can look at previous natural disasters and adapt your clause to those events while leaving room for any other novel disasters.
After the containment of Covid-19 in the coming days, there will be lawsuits because of vague force majeure clauses. Parties will present differing interpretations of the force majeure clauses in their contracts. They will argue that the other party did not fulfil their obligations while the other party will argue that the force majeure clause excuses their behaviour during the pandemic. Parties will risk paying millions of shillings due to a vague clause adopted from another contract.
The court will interpret the contract strictly by looking at the terms you agreed to [Wycombe Borough Electric Light and Power Co Ltd v Chipping Wycombe Corpn].[iii] It will not assume you never intended to use the clause or that you should not be blamed for a bad clause copied from elsewhere. For example, do not simply write “The parties will be released from their obligations when there is an Act of God or natural disaster.” The clause must be precise by defining “Act of God” – extraordinary occurrences that could not be foreseen or circumstances that no human skill can prevent. You must limit the scope of obligations covered by the force majeure clause.
If the terms are not concise, they do not excuse you from performing your obligations under the contract even if it has become much harder to fulfil them.
The occurrence of a pandemic or a natural disaster does not automatically excuse you from performing your obligations under the contract. Even if the clause is properly worded, you must also show the other party or convince the court that the natural disaster has prevented you from performing your obligations. For example, if you are under a lease, you cannot stop paying rent by saying Covid-19 has occurred. Covid-19 must, in some way, actually prevent you from paying rent or honouring your obligations under the lease. But it is possible that you may be allowed not to pay the rent due to Covid-19 if you have such a term in the lease. Here is an example:
15. Force Majeure
15.1. In the event that the Tenant’s source of income shall be adversely affected by strikes, lockouts, riots, pandemics, governmental regulations and any other event beyond the control of the Tenant as to render him unable to pay 50% of their due and payable rent, the Tenant shall be excused from paying rent for the duration of the event even if it extends beyond the month in which it first occurs.
15.2. On the occurrence of the event, the Tenant shall notify the Landlord in writing within three days of the occurrence of the event specifying their grounds for invoking this clause.
15.3. The occurrence of the event shall not release the Parties from performing other obligations under this Contract or those implied by law if those other obligations are not directly affected by the event.
15.4. The event need not render the obligations impossible. The event should merely render performance impractical.
15.5. The lack of funds shall not be deemed to be a cause beyond the control of either Party.
Another mistake is assuming that you can always amend when the need arises. The natural disaster may prevent you from fixing this mistake when it occurs. With Covid-19, we have had to work from home, while others have had to be placed in quarantine. Other natural disasters may destroy existing infrastructure, for instance, volcanic eruptions may cripple power supply leaving us in the dark dying softly under hot lava. We are not as fortunate as to say we will not experience disaster. It will happen and the number of years between one pandemic and the next should not fool you into accepting badly worded, copy-pasted force majeure clause that will only worsen your already bad situation in the pandemic.
*Christopher Rosana is a Commercial Transactions adviser with a focus on Taxation and Finance.
NOTE that the article is for purposes of general advice and SHOULD NOT be relied upon without seeking specific legal advice. For queries and legal advice, contact the author via firstname.lastname@example.org.
[i]  Com LR 235, CA.
[ii]  All ER 94,  1 WLR 280.
[iii]  33 TLR 489.