In response to the novel COVID-19 outbreak, which has caused extreme turmoil to livelihood and society, governments worldwide have adopted unprecedented measures such as city lockdowns and travel restrictions, to try to stem the tide of this highly infectious virus.
COVID-19 has taken (and may continue to take) its toll on businesses and their ability to perform their contractual obligations. As a result, businesses of all sizes may consider the following contractual provisions and principles which could help to mitigate the disruption caused by the virus outbreak:
· Force Majeure: A force majeure event refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract. It has the effect of excusing one or more parties from performance in whole or in part.
· Material Adverse Effect Clause: The clause can be used in various contexts but, in general, its purpose is to shift certain risks between the parties, providing buyers with a mechanism to avoid closing on a transaction if there is a significant enough change in the business of the target or underlying assets.
· Price Adjustment Clause: The clause will provide for either upward or downward price adjustments in the event of certain changes in economic conditions.
· Doctrine of Frustration: Where an unforeseen event either renders a contract impossible to perform or where the substantial object of the contract is no longer attainable, a contract may be discharged by the doctrine of frustration in certain limited circumstances.
The application or otherwise of the clauses and principles highlighted above, which are by no means exhaustive, must be analyzed on a case-by-case basis, preferably by your trusted legal adviser.
The contents of this news alert are meant for the general information of our clients and friends and do not amount to legal advice. All enquiries on the subject may be made to: firstname.lastname@example.org
Adepetun Caxton-Martins Agbor & Segun
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