COVID-19, Force Majeure and Doctrine of Frustration ?

Force majeure is a French term that literally translates to “superior force”. It is a civil law concept
that has no meaning under common law such as Australia. Force majeure clauses are inserted
into contracts to relieve a party of liability for its inability to discharge its contractual obligations due
to circumstances beyond that party’s control.

Traditionally, such clauses were intended to deal with unforeseen acts of God or governments but
recently they have been drafted to include a wider range of circumstances such as industrial strikes,
floods, wars, and epidemics.

When can it be invoked?
For a force majeure clause to be invoked, the force majeure event must have the following three
1. The event can occur with or without human intervention,
2. The event cannot have been reasonably foreseen by the parties, and
3. The event must be completely beyond the parties’ control.

Recent Examples

In the collective bargaining agreement between the Rugby Leagues Players Association (RLPA) and
the NRL there is a force majeure clause that requires the parties to renegotiate terms (including
players’ salaries) if revenues decrease by $10 million in any year of the deal. This clause can be
triggered if games are called off due to a force majeure event such as the COVID-19 pandemic which
would see the RPLA and NRL negotiate a new deal.

Doctrine of Frustration

The common law doctrine of frustration acts to relieve parties of liability where, due to an event,
there is a radical change in the circumstances that the contract is to be performed. This event is
referred to as a frustrating event. There is no need for a contract to have a frustration clause as the
doctrine exists in the common law.

The event comes under the doctrine, if:

1. the event makes the further performance of the contract different to which the contract is for,
2. the event creates a fundamentally different situation than which the contracted is for, and
3. the event deprives a party from the benefits as expressed in the contract or deprive the
party from the performance of obligations under the contract.

Examples of frustrating events include:

– Destruction of the subject matter of a contract,
– Death of a party to the contract,
– Terrorist acts, wars and

– Natural disasters.

In Taylor v Caldwell (1863) 3 B & S 826 the contract was discharged due to frustration. In that case
the Caldwell owned a theatre that he agreed to rent to Taylor to use for concerts. The theatre burnt
down prior to the concerts and Taylor sued Caldwell for breach of contract. The court held that the
contract was discharged due to frustration as the performance of the contract was rendered

If you are a party to a contract and have been impacted due to the COVID-19 pandemic, there might
be a relief for you, please call Pannu Lawyers on (02) 9920 1787 to speak to our legal team to discuss
how we may assist you during this time of uncertainty.

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