Contracts, superior force (force majeure) and COVID-19 (the new coronavirus)

In this time of the rampant new coronavirus, questions abound with respect to the legal ramifications of the COVID-19 pandemic. In this article, the focus will be on contractual law in Quebec. Indeed, many businesses face problems in either continuing to operate and also face problems in acquiring the materials, products or resources necessary to operate. Accordingly, businesses may well wonder what their contractual obligations continue to be in the face of COVID-19's effects on commerce.

The Civil Code of Quebec ("CCQ") provides for a principle which addresses a unique event that is unforeseeable, irresistible and external to the party invoking it and is an impediment to fulfilling one's contractual obligations, be it a natural event (such as a pandemic or some other natural disaster) or a man-made one (such as strikes or war).This principle is referred to as "superior force" or force majeure. That being said, it is always important to keep in mind that a contract may define both what qualifies as superior force, as well the effects superior force may have on the obligations of a contract.

Superior Force (Force Majeure) in the CCQ

For an event to be qualified as superior force at law, there are three criteria that must be met.

First, the event must be reasonably unforeseeable.

Second, the event must be irresistible. What is meant by this criterion is that the event makes the obligation in dispute impossible to perform (whether temporarily or permanently). If the event renders performance only more difficult, more perilous or more onerous, the event is not irresistible. Indeed, the performance must be absolutely impossible. A good example is the 1998 Quebec ice storm where it was impossible for landlords to ensure continuous enjoyment of leased premises; another example is where a zoning change has rendered a given obligation illegal (therefore impossible).  However, it is noteworthy that this criterion can also be met by proving that the party who was the beneficiary of the obligation could absolutely not have benefitted from the fulfilment of the obligation due to the event.

Third, the event must be external to the parties. For this final criterion, the event must be one outside of the control of the party invoking the defence of superior force.

Effects of a Defence of Superior Force under the CCQ

Should one party to a contract successfully invoke superior force as a defence for non-performance, the questions which remain are what the effect of that defence is on the execution of the contract is and what are the recourses and obligations the other party(ies) may have.

The answer to these questions varies depending upon the importance of the obligation which cannot be performed and on the duration of the impossibility as well as the context surrounding the contract.

Indeed, depending on the evaluation of the above criteria as a whole, a party may be permitted to suspend its contractual obligations or annul obligations altogether.

Should the superior force only suspend performance of a given obligation, the party owing the suspended obligation must immediately continue to perform the obligation as soon as the superior force permits. The party owing the obligation, however, will not be responsible for delays resulting from the suspended obligation.

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Should the superior force be such as to justify extinction of obligations, the party owing a cancelled obligation is released from performance. The creditor of the obligation, meanwhile, is also released from the performance of its correlative obligation and, if the performance has already been rendered, restitution is owed.

 Contractual Provisions

It is important to note that contracts may further define what qualify as situations of superior force and the contractual effects resulting from such situations of superior force. These must be evaluated on a case-by-case basis in the context of the analysis of the contract as a whole.

For the purpose of identifying the relevant provisions in your agreements, the following terms are often found in contracts and are often analogous, either in part or integrally, to the superior force definition provided for in the CCQ: act of God, force majeure, natural disaster and unavoidableunforeseeable eventcasualtydelay.

The Current Situation: The COVID-19 Pandemic

It is anticipated that the current COVID-19 pandemic may be used in many cases as a foundation for a defence of superior force for parties seeking to delay their obligations or otherwise terminate certain agreements. That being said, every situation must be evaluated in the context of the particular facts surrounding a contract, particularly as to whether the event is irresistible.

Should this pandemic reoccur in waves (while this first wave may have been unforeseeable, certain reports suggest that future recurring waves of contagion may be possible), the question of whether any such future waves may then be qualified as unforeseeable and therefore constitute a superior force will need to be addressed going forward.

Considering the uniqueness of each situation with respect to the potential application of a defence of superior force or force majeure to a given contract, PFD Lawyers can assist you in assessing the situation and what it means to you.

Mtre. Stéphane Jetté