With COVID-19 (coronavirus) continuing to spread across the globe, the effect on the global and Canadian economy has already become evident. In terms of economic impact, the United Nations Conference on Trade and Development estimated that there was a $50 billion reduction in exports globally in February alone. With our reliance on global supply chains, the Canadian economy is at risk of disruption in the coming months.
While health considerations are always the highest priority, Canadians should also plan for the effects of COVID-19 on their businesses. Business owners should monitor their supply chains, and if possible, find alternate suppliers in case supply chain issues arise. Business owners should also review their commercial contracts for provisions that may be triggered by the COVID-19 scare, primarily force majeure clauses.
A force majeure clause is a common contractual provision that provides protection to a contracting party who is adversely impacted by an event outside their control, such as natural disasters, war, or epidemics. Depending on the wording of the particular force majeure clause, and the progression of the COVID-19 crisis, parties could be temporarily relieved of their contractual obligations.
In order to invoke a force majeure clause, the affected party would have to prove that they were adversely impacted by COVID-19 in a way that made it unreasonable for them to fulfill their contractual obligations. Throughout this analysis, it is important to remember that a party must take any reasonable steps to mitigate the negative effects on their business operations as much as possible.
In the event that COVID-19 is impacting your business or the business of a counterparty to one of your contracts, you should review any relevant contracts for a force majeure clause. These clauses generally provide a procedure to follow in such an event and often require the party invoking the force majeure clause to provide notice to the other party before relying on the provision.
Being aware of the legal implications related to COVID-19 will help you to adequately prepare and minimize the impact that the virus will have on your business. Boughton Law is actively providing advice to clients related to the effects of COVID-19 on businesses throughout British Columbia. Please do not hesitate to contact us if you have any concerns about the impact of COVID-19 on your business.
Written by Brendan Morgan and Cameron Smith