Cover feature
“In the short term, and
purely for survival,
what can organisations
do to stay afloat? At
the moment they
can throw respective
contract clauses,
legal arguments and
insurance definitions at
each other, in the hope
of securing a payment.”
provide compensation when workers
contract Covid-19.
The FCA case in the UK is being
expedited in order to reach a conclusion
as quickly as possible. A timeline for the
case, is that it is expected to go to court on
or close to 20 July. A best-case scenario
for pay outs if the case won, would be late
August or September, although exact times
are difficult to predict. Matt Brewis, director
of General Insurance at the FCA said “The
FCA’s motive is one of speed.”
Regardless of whether insurance
companies are pressured by regulators,
authorities or politicians to pay Covid-19
losses, the question remains as to whether
insurance clauses are too onerous. If they
are, because, that’s how they always have
been, maybe now is the time to revisit
them.
Force majeure
For the time being, let’s park the insurance
discussion and move onto another
favourite. The force majeure clause.
Force majeure clauses are contractual
clauses that alter parties’ obligations and/
or liabilities under a contract when an
extraordinary event or circumstance beyond
their control prevents one or all of them
from fulfilling those obligations.
In English and Scottish law, force majeure
is a creature of contract. It differs from some
other legal systems where it is a general
legal concept, where courts may declare
that a particular event, such as a pandemic
like Covid-19, is a force majeure event. And
that is the basic problem.
Force majeure is used and interpreted
differently across the globe. But, even if the
clause was agreed universally, how relevant
is it in a global pandemic?
With little guidance from many
governments across the globe as to what
organisations should do to keep their
businesses going, the only thing they could
do to survive was to make every effort to
keep the cash coming in and cut expenses.
The way in which they did this, highlights
to what extent legal clauses were used or
abused. Let us take a look at three instances.
One venue in Croatia decided not to
charge their client any cancellation fee,
despite losing a substantial amount of
money. The venue felt that building a longterm
relationship was the best way to go and
put their trust in the fact that, hopefully, the
client would come back to them next year.
Then we have a venue in Paris that
decided to take a hard stance, despite
their own country being under lockdown.
Management argued that they didn’t need
to refund any deposit monies to the planner
as the event could still go ahead. However,
this couldn’t happen and 24 hours before
the event was due to take place the venue
agreed it needed to be cancelled. The
venue offered the client the option of the
same rates for 2021 or they would refund
the monies. According to a clause in their
contract, the venue has up to 18 months to
refund the payment.
At the other end of the scale, there was a
venue (we are reliably informed) that had
agreed a contract with a client. The client
went to a site visit to discuss additional
items and in the meeting confirmed what
they wanted. The meeting took place
just as the coronavirus was beginning to
have an impact. Seeing a problem, the
venue promptly charged the client for all
the extras the next day even though the
revised contract had not been signed off.
A tangled web we weave
Covid-19 has highlighted the extent to
which the business supply chains are
truly interwoven.
In the short term, and purely for
survival, what can organisations do to
stay afloat? At the moment they can
throw respective contract clauses, legal
arguments and insurance definitions
at each other, in the hope of securing a
payment.
Clearly there needs to be a better
solution for the future. Other waves of
the coronavirus could be coming and,
surely, will be another pandemic at some
point in the future.
International borders get in the way
of contracts especially in a global events
sector. Different countries have different
legal systems, insurance differs across the
world and force majeure clauses end up
adding to the confusion.
This prompts us to ask just how
relevant are some of these clauses
today and whether they still
work for a society that is
so connected and so interdependent?
Could contracts between
parties be just that? No territorial
jurisdiction, but reference to
independent arbitration if disputes
need sorting out?
Is this the beginning of the end of
unreasonable legal clauses? If it isn’t
then maybe it should be. What else
could be a better catalyst for action,
other than a global pandemic that
has stopped business and society
around the world in its tracks?
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