Letters on Force Majeure – Lessons Learnt from the aftermath of the COVID-19 Pandemic

by Victoria Anaba, Contract Administration Lead, Alcon Nigeria Limited

Nigeria

Fifteen months and counting after the categorization of the Covid-19 virus as a ‘Pandemic’ by the World Health Organization, the effect is still being felt in the construction industry.

There have been many articles written by legal practitioners on the effect of the virus on contractual arrangements. Legal practitioners in various articles unanimously agree on one point that the Covid-19 pandemic qualifies as a “force majeure event” and, therefore, could ordinarily excuse both parties from performing their obligations under a contract.

All are valid points and valid arguments, however, in this article, I share some lessons learnt in my capacity as a contract administrator in Nigeria on force majeure viz-a-viz the Covid-19 pandemic, some of which include:

1. The pandemic is not the only event that qualifies as a “Force Majeure Event”.

Other instances of force majeure events associated with the Covid-19 virus include the lockdown directives by the Nigerian Federal and State governments, the restriction of interstate movements, government sanctions encouraging social distancing to preserve the health and safety of the public, inability to obtain relevant licenses and permits from the relevant authorities because of the work from home order by Government.

Therefore, though a contract may have been silent on the use of the word “pandemic” a contractor could still potentially declare force majeure based on other grounds as mentioned above.

2. The right of the Contractor to declare Force Majeure may not be automatic.

The mere fact that the contract grants either party the right to declare the occurrence of specific supervening events as a “force majeure event”, does not automatically mean that parties must exercise that right upon the occurrence of such an event.

In certain circumstances, the contractor either has to wait for the Employer to declare force majeure or get the Employer’s buy in before declaring force majeure.

For instance, it would be unwise for a contractor who is already exposed to liquidated damages to hurriedly declare force majeure without first getting the requisite go ahead from the Employer or engage the Employer for further clarification.

A reasonable contractor in such an instance should as much as possible endeavor to take necessary steps to mitigate the impact of the event on the project.

Therefore, contractors must assess the situation of each specific contract and the existing relationship with the Employer before exercising such rights under the contract.

3. One Size Does Not Fit All:

Force Majeure Letters to be issued on each project must be tailored to the contractual provisions of that contract.

While reference to specific clauses of a contract would be relevant for project A, reference to the general clause on force majeure would be best suited for project B and so on. Contractors must understand the terms of their contract.

4. Letters to the Employer on Force Majeure must be clear on which project activities are likely to be affected by Force Majeure events.

While for some contractors, only site activities could be affected, for others the event would affect both site and office support activities.

It is important to point out that not all Nigerian states had shut their borders at the peak of the lockdown. For contractor’s resident in states whose borders remained open, office-based activities were still ongoing.

For contractors whose scope includes procurement, force majeure may likely not affect certain aspects of the procurement process. For example, specification enquiries on certain items/materials. A certain aspect of engineering scope may as well still be achievable this period.

5. Shut down or work from home: The importance of using appropriate words in letters on Force Majeure.

Is the company shutting down or having its staff work from home? Shut down would be an appropriate “phrase” to be used by construction contractors currently executing site-based activities impacted by the pandemic.

An engineering contractor could order its staff to work from home while for some other contractors, it could be a combination of both. The question then, which is most appropriate?

From experience, for an event to qualify as a force majeure event, the contractor must not only rely on the supervening nature of the event but must show that the event had indeed impacted the performance of its obligations under the contract.

Therefore, though the Covid-19 pandemic could have been a force majeure event, it needs to be assessed whether or not the event impacted the contract.