Dealing with Pandemics: The Role of Express Contractual Terms

Abstract Unexpected events, such as the Covid-19 pandemic, can have a dramatic impact on the ability of contracting parties to perform their contractual obligations and can create real hardship for contracting parties by substantially increasing the cost of contractual performance. In such circumstances contracting parties may look to the applicable law for relief. An alternative approach, and the one explored in this paper, is for contracting parties to make their own provision in the contract for the occurrence of such events. It is, however, no easy task to draft such clauses. These clauses take different forms, such as a force majeure clause, a hardship clause or a material adverse change clause, and they have different potential remedial consequences. One of the central questions for contracting parties is whether they should attempt to make provision in one of these forms for the impact of events which, by definition, have not occurred at the time of entry into the contract or whether they should leave it to national courts, particularly in those jurisdictions where a legal doctrine of hardship is being developed, to resolve the difficulties that have arisen and when the courts can use the benefit of hindsight to develop a solution which is appropriate for the events which have in fact occurred. This question does not admit of a single answer which will be suitable for all contracts but parties seem more likely to wish to make their own provision for the occurrence of such events where the contract is of high-value, entered into over a long term and drafted with some sophistication with the benefit of professional legal advice.

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