Impact of COVID-19 / Coronovirus Events on International and Domestic Commercial Contracts
The reports from China show that COVID-19 / Coronavirus not only has a tragic impact on the lives of very many, but has already caused the consequential events of closure of manufacturing, halting exports and affecting transportation operations. This can be caused by forced movement of labour, government-ordered closure and / or state sanction and embargo, or the business decision to cease production.
Interruption of Supply, Outsourcing and Transportation of Goods
This often has serious consequences for Canadian companies dependent upon foreign supply, outsourcing of manufacturing and the international carriage of goods.
The central question is often whether or not the performance of a supply, outsourcing or transportation contract is legally suspended or excused because of the events surrounding the spread of COVID-19 / Coronavirus.
Frustration | Impossibility
International trade and transportation contracts may not expressly refer to the consequences of an unpredictable event such as COVID-19 / Coronavirus and its consequential events. However, depending upon the body of law governing the contract, parties to a contract may wish to consider if performance has become impossible or so severely affected, to be said to frustrate the performance of the contract.
Termination, Cancellation and Force Majeure
International trade and transportation contracts commonly include a termination clause, a cancellation clause, and / or a force majeure clause, which, depending on the proper legal application of that clause, may or may not excuse, or suspend, performance of the contract in circumstances such as these. It should not be presumed that these clauses will have application without first taking legal advice from lawyers competent to advise on such matters.
Early Advice and Lawful Exercise
In events such as these, early legal advice can be invaluable, and most certainly required, before the delivering notice of a force majeure event, or the operation of a termination or cancelling clause. Impossibility and the frustration of contracts is a well developed body of law and each case requires competent legal advice on its availability.
Legal advice should include how and when such notice should be provided.
Why Gilbertson Davis LLP?
We have lawyers who are experienced in international trade and transportation litigation.
This writer has practiced cross-border litigation and international arbitration in Ontario, Canada, London, England, Dubai, United Arab Emirates and Bermuda. He is also admitted in New York state (but currently practices only the laws of Ontario and Canada). He has considerable experience in cases involving the impact of world events on commercial contracts, particularly the legal consequences of war.
If your company is considering whether the performance of a contract is affected by the events surrounding the spread of COVID-19 / Coronavirus, or has, or may, receive a notice of force majeure, termination or cancellation events from a contracting party, then please contact Gilbertson Davis LLP as soon as possible to arrange an initial consultation.
Following the initial consultation, we may be able to offer a retainer and would then promptly review your contract, the surrounding facts and circumstances, and consider if we can advise on whether performance of the contract is likely required or, alternatively, likely excused by law.
Related Practice Areas
Please see our related webpages on Contract Termination, Contract Disputes, International Sale of Goods Disputes, International Distribution Disputes, International Joint Venture Disputes, Cross-Border Litigation, International Arbitration, Import-Export, Textiles and Apparel, Fashion Industry, Manufacturing, Start Up Business, Transportation and Logistics, Marine Transportation, and Travel and Tourism.
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