The COVID-19 pandemic has forced governments across the globe to take drastic measures to combat the spread devastating effect of a virus that has affected numerous sectors as predicted by the Director-General of the WHO in his 11th March 2020 speech.
The business sector has been terribly hit and this has seen numerous business and contractual obligations forestalled. As a result, force majeure and the doctrine of frustration have become part and parcel of day-to-day business conversations. While force majeure is a contractual concept which suspends or postpones inter alia parties obligation to perform and absolves such a party from otherwise resultant liability, the doctrine of frustration results in the termination of a contract by operation of law.
In addition, while it is important to note that only parties whose contracts contain a force majeure clause can have recourse to that mechanism in situations of this kind, a successful claim must satisfy certain elements such as the invoking party giving adequate notice of the force majeure event, proof of the occurrence of the event, and the effect of the event on the performance of contractual obligations by parties. Accordingly, it is not enough that the event has rendered performance more difficult than envisaged or that additional cost will be incurred to perform obligations under these circumstances.
Generally, the effect of a successful force majeure claim is dependent on the terms of the contract. Common contractually-stipulated effects include: extension of time to perform, part-performance and the right to terminate the contract. Again, a force majeure claim is only sustainable where the contract between the parties has a clause to that effect. Where this is not the case, the doctrine of frustration will operate to terminate the contract by operation of law. This will, however, only be the case where the elements of frustration are satisfied – (a) the frustrating event is not the fault of either partyand (b) the frustrating event was not forseaable; and (c) the event occurred after the execution of the contract and rendered performance, in effect, impossible.
Justice must not be denied, even where there is a lock down.
On 6th April 2020, the Honourable Chief Justice of the Supreme Court of Nigeria directed all Court to suspend sittings except in matters that are “urgent, essential or time bound according to our extant laws”. The absence of guidelines on access to courts and movement restriction imposed by the lock-down orders ensure Courts are entirely inaccessible.
While Courts across the globe including in the United Kingdom, the Republic of Kenya and Uganda have commenced remote dispute proceedings utilizing basic technology, no such steps have been taken in Nigeria thus ensuring existing and fresh disputes will remain unresolved until the pandemic is defeated. The extension of the lockdown order by the President and the growing number of infected persons in Nigeria means Courts remain closed indefinitely and without any certainty as to when normalcy will be restored.
Dispute resolution is critical to the sustenance of businesses and in light of this uncertainty, we recommend the adoption of Alternative Dispute Resolution mechanisms by parties with bona fide grievances desirous of resolving same efficiently and expeditiously, particularly non-binding forms such as Negotiation and Mediation and binding forms such as arbitration. These mechanisms inherently possess the procedural flexibility to overcome the limitations in place as a result of the COVID-19 pandemic particularly as it relates to the restriction of movement. In arbitrations especially, documents only hearings and remote hearings are not novel. Also, negotiation and mediation sessions can be conducted remotely with parties reaching settlements expeditiously and cost-effectively.