As a result of Coronavirus, a business may be prevented from or delayed in performing their obligations under a contract with a consumer. In order to rely on an express Force Majeure provision in a contract with a consumer a business will need to satisfy a two-part test:
Are the terms properly incorporated into each contract with each individual?
Firstly, a business must demonstrate that the Force Majeure provision has been effectively incorporated into each contract with each individual at the time the contract is made. To satisfy this a business must either demonstrate:
- that the individual knew of or agreed to the terms. The easiest way to demonstrate this is the individual's signature to the terms, but getting them to tick a box to confirm that they agree to them will be more appropriate when the contract is formed online; or
- that the business has done what is reasonably sufficient to give each individual notice of the terms before the contract has been formed.
Is the Force Majeure clause fair?
Assuming that the above has been satisfied and that the terms have been incorporated into a contract with a consumer, the next step would be to demonstrate that the Force Majeure clause is fair. A Force Majeure clause will be considered unfair if it inappropriately excludes or limits the legal rights of the consumer in the event of total or partial non-performance by the business of its contractual obligations. This is because the term would cause a significant imbalance in the rights and obligations of each party under the contract to the detriment of a consumer. If the Force Majeure clause is considered by a Court to be unfair, then the clause will not be enforceable against a consumer.
Clauses excluding liability are more likely to be regarded as fair and therefore enforceable if they:
- are written in plain language and the term "Force Majeure" is either not used or clearly explained;
- are restricted in scope. For instance, the Force Majeure clause should not allow a business to refuse a refund or credit note where the business is at fault, for example in not taking reasonable steps to prevent or minimise the risk of loss;
- do not include examples of factors which would be deemed to be within the reasonable control of the business. If examples are included, then the examples should only be matters which are genuinely outside of the control of the business, not situations such as labour problems which could be the fault of the business; and
- includes a right for the consumer to cancel without penalty where there is a risk of a substantial delay. The business must not be able to delay the supply of goods or services at will.
If you would like one of our consumer contracts specialists to advise on the issues raised in this article, please contact any of the following individuals on the details below:
This article has been authored by Sam Truckle.