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Release date: April 16, 2020
Contracts & Force Majeure
With the global pandemic of COVID-19 coronavirus causing major disruptions to nearly all aspects of life in Ontario, the parties to a contract – whether a condominium corporation or a service provider – will need to think carefully about whether their respective obligations under the contract can still be fulfilled.
Some contracts may have a "force majeure" clause which likely sets out a list of possible events (e.g. war, terrorism, pandemic, natural disaster, other acts of God) that excuses a party from contractual performance. Such a clause may stipulate that the party is no longer required to perform the contract, can delay performance of the contract to a future time, or is still obligated to perform the contract regardless of the force majeure event. Because of the wide variety of force majeure clauses out there, parties to a contract should consult with their respective legal counsel to assess the potential impact that COVID-19 might have on their obligations.
If the contract does not have a "force majeure" clause, then the common law doctrine of "frustration" may apply. Broadly speaking, frustration is a supervening event that the parties could not have reasonably anticipated when they entered into the contract. In such cases, the court is asked to intervene to relieve the parties of their contractual bargain because a radical change in events makes the contract impossible to perform. Under the doctrine of frustration, the key question is whether the contract can still be performed despite an unforeseen event like COVID-19; is the contract truly impossible to perform now, or is it merely more difficult to perform? Another consideration worth looking into is that in Ontario, the common law doctrine of "frustration" is also supplemented by legislative statute, namely the Frustrated Contracts Act, R.S.O. 1990, c. F.34. Parties should speak to their legal counsel regarding whether the doctrine of frustration or the Frustrated Contracts Act applies to them in light of COVID-19.
With the relatively sudden onset of the COVID-19 coronavirus on the world stage, the full extent and impact of this pandemic to parties in Ontario remains unknown. The courts of this province have not yet had the opportunity to go through the myriad of cases concerning force majeure clauses and frustrated contracts that are bound to pop up in the months to come due to COVID-19. Nevertheless, parties should be proactive and discuss any concerns regarding contract performance with their service providers. If a mutual agreement cannot be reached related to the contract, then condo corporations should consult their legal professionals to determine if, and how, the outbreak of COVID-19 coronavirus influences their contractual obligations.
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