Case Study – Force Majeure in the Context of Covid-19

Commercial

Force majeure clauses are construed strictly, in accordance with the terms of the contract. A contractual term might explicitly provide that Covid-19 is a force majeure event for example by listing a ‘pandemic’ or ‘epidemic’ as a potential force majeure event, or as the tribunal has found in cases below the pandemic might be found to be a force majeure by way of similarity with provided examples. Please see below few of most recent cases which discussed force majeure in the context of Covid-19.

Ford v TripADeal Pty Ltd [2021] NSWCATCD 57

  • Applicants paid respondents $7,599.99 for a 2 for 1 tour of Europe
  • In March 2020 travel advice was updated to advise against travelling through Europe if avoidable
  • The applicants departed Sydney on 10 March 2020 and asserted that parts of the tour had been cancelled due to Covid-19 before the flight, but that this had been concealed from her by TripADeal
  • TripADeal consequently cancelled a large portion of the tour that had been intended to occur in Italy and asserted that this cancellation was a force majeure event
  • A force majeure clause provided:
    • TripADeal reserves the right to vary, withdraw or cancel any products and services by written notice in the event they cannot be supplied or the itinerary is changed due to force majeure or other events which are beyond our control including but not limited to severe weather, fire, floods, acts of God, acts of government or other authorities, failure of equipment or machinery, war civil disturbance, strikes and malevolent acts.
Found
  • The court found that what had occurred was a force majeure event
  • Although the Covid-19 pandemic is not an event specified in the clause it is a ‘force majeure’ event in that it is something unforeseen and beyond the control of either party, similar to fire, floods, acts of god etc
  • There were two reasons for the alterations and cancellations
    • The pandemic itself
    • Consequent government acts

 

Bluesfest Services Pty Ltd v The Cajun Kitchen Pty Ltd [2021] NSWCATAP 325

  • Bluesfest was cancelled due to the Covid-19 pandemic under the Public Health (Covid-19 Public event) Order 2010 was made by the health minister
  • The respondents here were stallholders who had contracted for the right to operate stalls at the festival
  • Initially the tribunal found that the stallholders were entitled to a refund of all fees paid to the appellant because the contracts had been frustrated
  • Force majeure events were defined as follows
    • Force majeure” means any circumstance beyond the reasonable control of a party, including an act of God, terrorism, act of public enemy, civil commotion, war, blockade, riot, fire, flood, earthquake, explosion, or any form of government intervention that prevents fulfilment of obligations under these Terms and Conditions.
  • The actual case was an appeal that the force majeure clause was unfair as it allowed the appellant to retain all security deposits made by stalls
  • Tribunal found that the act of government was a force majeure event falling under ‘form of government intervention’

 

Kenny v Trip A Deal Pty Ltd [2021] NSWCATCD 59

  • Tours were cancelled by the respondent due to the Covid-19 pandemic
  • The applicants sought a full refund of the contract amount, having already received a partial cash reimbursement
  • The respondent relied on the terms of the contract to assert that its liability was limited
  • The court found that the Covid-19 pandemic was a force majeure event even though it was not specifically listed as one of the events
    • Note that an act of government was listed as a force majeure event but was not relied upon in this case
  • The term about “force majeure” is specific to the frustration of the contract by an event that comes within the meaning of that term, some of which are specifically set out, and of which a pandemic such as Covid-19 is one, even though not specifically mentioned

 

Gem Ezy Flights Pty Ltd v Gribble [2021] NSWCATAP 76

  • Respondent paid appellant money between November 2019 and January 2020 to undertake a school trip to France and Italy in April 2020
  • Liability was excluded for a force majeure under condition 5:
    • “5.1 Exchange Me [which all parties agreed was the trading name under which the Appellant provided its services in connection with the tour] and its employees, agents and suppliers do not accept liability for nay injury, death, damage, loss, delay, additional expense, or inconvenience caused directly, or indirectly by force majeure or other events beyond our control, or which are not preventable by reasonable diligence on its part including, but not limited to, war, civil disturbance, fire, flood, unusually severe weather, acts of God, acts of Government or other authorities, accident to or failure of machinery or equipment, or industrial action
  • The school cancelled the trip due to the Covid-19 pandemic and restrictions on international travel
  • The respondent sought a full refund from the appellant, who had only issued a partial refund
  • The tribunal held that the contract was frustrated by the Covid-19 restrictions and the respondent should thus be entitled to a full refund under the Frustrated Contracts Act
  • Although clause 5 purports a different allocation of risk, it did not expressly exclude the Frustrated Contracts Act from operation which it must do clearly and unambiguously under the contra proferentem rule

Some further questions currently circulating, given most cases thus far have dealt with the initial impact of the Covid-19 pandemic, include whether a ‘second wave’ can be considered an unforeseen event in regard to being a force majeure event. This also extends to restrictions constantly changing, whether businesses were right to rely on government deadlines for easing of restrictions and lockdown dates when those dates are constantly changing.

Keystone Lawyers would be closely following this development for any further updates.

If you would have any questions please contact our team for a confidential discussion.

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