The effect of this Pandemic Corona virus has a big potential yet again significant distortion to the entire business world.It is highly likely yet evident that the Covid19 cantagion might cause unprecedented impact on the normalcy of business .
The Project Act Africa has picked a peculiar interest in understanding whether or not business shall rely on force Majeure clause or even other contractual rights for relief from performing such obligations as a result of this deadly virus outbreak .
“Without keeping a glimpse on our faces, the global markets,trade and commerce are mostly likely to face stampede” Edwin Muyunga, a banking specialist at Equity Bank says.
As I put this on paper,I reckon on Muyunga’s commentary with an entire agreement though not contract convening that quarantine measures have been put in place,manufactury, transport and all other supply chains disrupted and this leaves painful wound on many businesses.
Remember :A lot of businesses particularly in Uganda have been dealing closely with China for almost all transactions and without being speculative,these are mostly like to suffer.
How can they get relief?
As a student of Law and particularly Law of Contract of Uganda, a clause called “The force Majeure” might help businesses in this period especially in case of credit crunch, that I envisage is likely to happen.
This force Majeure clause implies “Superior force and may encompass acts of God” which in my opinion Coronavirus doesn’t suffer from lack of particularity as many analysts have pointed out.
In any common law of understanding ,the event prescribed in any contract under force Majeure clause will guide on what binding parties are likely to do, for example a Party claiming force Majeure may have to notify it’s counterparty and take reasonable steps to mitigate the problem .
I have also learnt that ” In common law, jurisdictions,force Majeure is not implied as a matter of Law🤣 and clauses are interpreted strictly.No doctrine of force Majeure will apply outside of contractual mechanisms.
Is Coronavirus Pandemic captured under your contract?
Remember:A court or tribunal may have sympathy for situations that arise and cause disruptions to the contractual relationship,the task required in common law is actually the analysis that were agreed.But since this virus is relatively new phenomenon ,it is unlikely that any force Majeure clauses would explicitly refer to the event of Coronavirus outbreak.
The force Majeure clause quite obviously may not necessarily capture events such as Corona virus outbreak.The party relying on the clause will still need to prove that the force Majeure event was not reasonably contemplated by the parties while entering the contract that the event is beyond the reasonable control of the party seeking relief.
Advice :Visit your contracts and understand what is enshrined under the force Majeure clause .This will give you a starting point in case of breach of contract.
In the next piece of this text, we shall dive into the following
1. How to seek relief for force Majeure
2. What if there’s no force Majeure.
3. Steps to take in mitigating the risk.
Article By Naboth Tukahirwa
Manager_Internal Audit Function@Gloveg Agric
Student of Dip in Law at LDC specialising In Law of Contract.
Volunteer @ PROJECT ACT AFRICA