Force Majeure clauses and the coronavirus pandemic – recent cases

The full article can be found here.

Nearly three years after the Coronavirus pandemic began, we now take a look back at how the courts have approached this issue.

The cases below touch upon:

• 1. Discretion within force majeure clauses
• 2. A closed group of defined force majeure events
• 3. Express reference to pandemic/epidemic

1. Dwyer (UK Franchising) Ltd v. Fredbar Ltd [2021] EWHC 1218

Dwyer was a franchisor who contracted with Fredbar as a franchisee. The force majeure clause within the franchise contract provided that: “This Agreement will be suspended during any period that either of the parties is prevented or hindered from complying with their respective obligations… by any cause which the Franchisor designates as force majeure”.  The Franchisor therefore had discretion as to what constitutes a force majeure event.

In March 2020 the owner of Fredbar (Mr Bartlett) had made Dwyer aware that, due to his son being vulnerable, he was unable to work as they needed to self-isolate for a period of 12 weeks for his son’s safety. Dwyer decided that a force majeure event had not arisen but failed to consider this particular factor.

In July 2020 Fredbar terminated the franchise agreement on a number of bases, one of which was Dwyer’s failure to comply with the force majeure clause. Dwyer then issued a claim which, amongst other matters, claimed that no force majeure event occurred therefore agreement should not have been terminated.

The High Court implied a term into the force majeure clause that the designation/discretion must be exercised honestly, in good faith and genuinely, considering all relevant matters. The court could set aside Dwyer’s decision if no reasonable decision-maker would have reached the same conclusion. The High Court found that Mr Bartlett’s family circumstances and risk in light of the Covid pandemic was a critical factor which had been ignored for the purposes of the decision. Dwyer had therefore not exercised their discretion in accordance with the implied term and their decision was overturned.

The High Court went on to find that the force majeure clause was a fundamental term of the agreement, and within the circumstances of the case the fact that Dwyer ignored such an important consideration (particularly given the effect of this upon Mr Bartlett and his family).

This highlights how important it is to exercise discretion within force majeure clauses properly, in line with the implied term above, as failure to do so could be deemed serious enough to justify the other party terminating the contract.

2. Football Association Premier League Limited v PPLive Sports International Limited [2022] EWHC 38 (Comm)

In this case the High Court awarded the Claimant (the Premier League) a summary judgment for the full amount plus interest as the Defendant failed to pay instalments totalling more than US$200m in relation to broadcasting rights for live matches and highlights of Premier League football matches in China.

The Defendant argued that in response to the pandemic the Claimant fundamentally changed the format of the competition as the majority of matches were rescheduled to weekdays, with no spectators and altered kick-off times which impacted their viewing numbers. However, the Defendant was unable to rely on the force majeure clause within the contract to support this argument as it only included defined events such as “any strike, lockout, labour disturbance, government action, riot, armed conflict, act of God, period of mourning as a result of the death of a reigning monarch, accident or adverse weather conditions”.

As the force majeure clause didn’t specifically reference an epidemic or pandemic, and there was no discretion (as there was in the franchising agreement in the above case) the Defendant was unable to plead that the Coronavirus pandemic amounted to a force majeure event.

3. European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm)

On similar facts to the case above, the Defendant here entered into a contract with the Claimant for the rights to license media rights for two European rugby competitions worth US$15m in fees, with a percentage of revenues received from sub-licences payable to the Defendant.

The contract defined a force majeure event as “any circumstances beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement including… Epidemic…”.

When the pandemic hit the Claimant suspended and re-scheduled the remaining matches. The Defendant in response served notice of termination, relying on the epidemic as a force majeure event. The Claimant issued proceedings for wrongful termination, but the High Court held that the pandemic constituted a force majeure event, and that the Defendants were able to terminate as a result.

Summary

These cases highlight the importance of having a carefully drafted force majeure clause in order to mitigate risk. Express reference to pandemics and epidemics is now more common place in applicable contracts drafted post-Covid – the effect of which is demonstrated by the comparison between the Football Association and European Professional Club Rugby cases above.