Force majeure clauses stipulate that an exceptional event or circumstance can excuse a party from fulfilling their contractual obligations to another party. They are usually hidden away in the boilerplate provisions.
The effect of a force majeure clause depends on:
The particular drafting of the words used
The context of the contract as a whole
The circumstances of the case
Does COVID-19 classify as a force majeure event?
The pandemic is unprecedented and can be described as an exceptional event that has the potential to affect a party’s contractual obligations beyond their reasonable control.
However, the courts will pay particular attention to the other components of the clause to determine whether or not COVID-19 can be relied upon in that particular contract and case.
Football Club Metallurg v. UEFA
FC Metallurg breached UEFA’s Club Licensing & Financial Fair Play Regulations, owing payments towards other football clubs. FC Metalurg were, therefore, fined and excluded from participating in UEFA competitions for three seasons.
On appeal to CAS, FC Metallurg contended that they could not make payments towards the other clubs by the deadline because of financial problems and Ukraine's problematic social and political climate.
CAS determined that financial problems or the lack of financial means do not meet the requirements for relying on a force majeure clause.
The arbitration panel also found no evidence to prove that the environment in Ukraine did not prevent the club from paying its creditors.