Can the COVID-19 crisis be considered a case of superior force

Julie Robert [1]
ROBIC, LLP
Lawyers, Patent and Trademark Agents

If it is not already the case, the COVID-19 crisis will inevitably have an impact on your company’s day-to-day operations in the coming weeks. Especially, if they are slowed down or suspended.

Can the COVID-19 crisis be considered a case of superior force, and therefore, come to release you from your contractual obligations in a context where you cannot comply with them?

What are your rights, obligations and protections in such context?

In this article, we will go over the definition and application of the concept of “superior force”, also referred to as fortuitous event and mostly at Common Law, as “force majeure” or sometimes “act of god”. We will conclude the article with recommendations and measures to consider in order to take advantage of these provisions.

Verify what your contracts provide for

Generally, the definition and the effects of a case of superior force, will be determined in the contractual provisions specific to each contract. Indeed, the notion of “superior force”, not being a matter of public order, allows the parties to define its application to their separate contractual agreement. In this way, the parties could, in case of superior force, have specifically agreed, for example:

For example, a typical contractual definition may also be provided as :

“any cause beyond the control of the parties hereto which they could not reasonably have foreseen and against which they could not have protected themselves, including, without limitation, any act of God, epidemic, strike, partial or complete work interruption, lockout, election, fire, riot, intervention by civil or military authorities, compliance with regulations or orders of any governmental authorities and acts of war, whether declared or not”.

Some definitions may have specifically provided for “epidemic or pandemic”, but this is not necessary for the COVID-19 crisis to be considered a case of superior force.

It should also be noted that events of nature (floods, rain, frost, wind and storms, waves, ice, snow, etc.) and acts of man (strikes, fires, robberies, wars, insurrections, embargoes, etc.) are not, in themselves, superior force, but may become such depending on their own circumstances and their compliance with the jurisprudential criteria detailed below. It is for this reason that such cases are often added contractually by the parties, to ensure their inclusion.

What if your contracts do not provide for force majeure?

When the contract is silent on cases of superior force, parties will have to rely on the statutory provisions and case law relating thereto.

In Quebec, the concept of superior force is defined in section 1470 of the Civil Code of Quebec, RLRQ v. CCQ-1991 (C.C.Q.):

A person may free himself from his liability for injury caused to another by proving that the injury results from superior force, unless he has undertaken to make reparation for it.

Superior force is an unforeseeable and irresistible event, including external causes with the same characteristics.

Case law has developed the necessary criteria for identifying a situation of superior force.

First, the event must be unforeseeable, i.e. the event was not foreseeable by the parties at the time of acceptance of the contract and was not foreseeable by a diligent, prudent and informed person. Consequently, we will see many cases where COVID-19 will be considered a case of superior force in the application of a contract entered into in September 2019, but, reasonable, not in the case of a contract entered into in March 2020.

Second, the event must be irresistible. In this case, any intervention to try to prevent the event is futile or useless. Moreover, the event prevents the performance of the obligation in an absolute manner. Performance that is simply more difficult, more perilous or more expensive for the debtor is not considered “irresistible”.

Thirdly, superior force cannot be personal to the debtor. There must be a general character of the event which makes performance impossible for all. Similarly, the event cannot be caused by or attributable to the debtor.

Furthermore, article 1693 C.C.Q. provides for the release of your obligations when they cannot be performed by reason of superior force.

At Common Law, the basis of law applicable to all Canadian provinces other than Quebec, the concept of “Force Majeure” is contractual only. However, the Doctrine of Frustration will potentially apply. That being said, this doctrine has been framed by legislation in most Canadian provinces (other than Quebec). For example, in Ontario, the Frustrated Contracts Act R.S.O. 1990, c. F.34 is applicable and provides for the compensation of the parties in cases where the contract has become impossible of performance.

COVID-19: each case must be analyzed

A case-by-case analysis will have to be carried out to determine whether COVID-19 can be considered a case of superior force. In particular, it will be necessary to demonstrate:

It is also important to recall the general obligation to mitigate its damages. The COVID-19 crisis will not exonerate you from liability for damages caused if you have not tried to minimize the extent of your damage.

Recommendations

In the meantime, our recommendations are to conduct an overview of your contracts that could be affected by the COVID-19 crisis, to identify your obligations, potential damages and penalties at stake and to ensure that the essential formalities are completed to invoke these superior force/force majeure clauses. Sending notices to creditors or business partners could be an important step in validating the relief and other effects provided for in a superior force/force majeure clause.

Particular attention should be paid to contractual obligations to maintain day-to-day operations, often put forth by creditors (such as landlords) and financial institutions.

In addition, an audit of your insurance coverage is always relevant in this context.

We also advise you to find out about the support and relief measures put in place to support companies affected by the COVID-19 crisis with your financial institutions as well as with the government and government entities.

Finally, in the future, it will be important to re-examine and pay attention to the contractual clauses invoking the concept of superior force and protections put in place in this type of situation, more particularly for contracts under negotiation.

Don’t hesitate to contact Julie Robert (robert@robic.com) or any other professional at Robic, if you wish to discuss these issues further.

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