COVID-19, FORCE MAJEURE AND FRUSTRATED CONTRACTS | FAIR TRADING DURING LOCKDOWN
Fair Trading During the South East Queensland Lockdowns
Given the recently actioned South East Queensland Lockdown, there’s no denying that businesses, contractors, employees and consumers have yet again been affected.
Queensland businesses have noticed first-hand the significant impacts of COVID-19 (coronavirus) restrictions on their businesses’ longevity and prosperity.
All Queensland lockdowns and limitations are vital to slowing the spread of the virus. So as not to diminish the need for these restrictions, we aim only to inform those who are facing a bit of a COVID-induced ‘blurred line’.
Navigating Force Majeure and Frustrated Contracts during Government Restrictions
The information below is generalised. It is strongly advised that you acquire independent, professional and in-depth legal advice from our team at Creevey Russell Lawyers if you are experiencing any of the following issues discussed.
When there is a goods-and-services-based contract between two parties (i.e., trader and consumer), and one can no longer fulfill their commitments due to circumstances out their control, there can be a bit of uncertainty about how to proceed and still abide by Australian Consumer Laws.
Say a consumer has ordered (and paid for) goods from an online vendor. The vendor has set a promised date to deliver the goods. Due to an unforeseen COVID-19 lockdown, the vendor cannot fulfill the order on the day initially promised.
For the consumer in question, it’s recommended for them to directly contact the vendor to discuss what possible remedies are available, such as:
• full or partial refunds; • credit notes; • in-store or online vouchers.
Because the vendor or trader was unable to fulfill their contractual commitments due to circumstances out of their control, they are not held liable to have ‘breached the Australian Consumer Law (ACL)’.
“In the COVID-19 situation, where a consumer has paid for goods or services and the trader can’t provide them because of a government ruling, the trader won’t have breached the ACL.” (www.qld.gov.au/fairtrading)
However, not being in breach of the ACL doesn’t mean that the trader hasn’t breached their contract with the consumer. Sometimes the contract will be written down (e.g. as part of the ‘T&Cs’ the consumer had to accept when placing the order); sometimes nothing will be written down and the law will imply what the contract days; and sometimes it is a combination of those two options.
In some written contracts, there is a ‘force majeure’ clause. Typically, a force majeure clause protects the trader and excuses them from being held liable for breaching the contract when they can’t perform their side of the contract due to circumstances beyond their control.
What does ‘force majeure’ mean or refer to?
The term holds no settled meaning in the common Australian law, so its meaning in any particular contract has to be defined by the contract. Sometimes the concept may be given a different name, but the same principles apply.
Essentially, a force majeure clause allows the parties involved in a contract to ‘agree’ upon a possible element of risk when circumstances out of their control arise unexpectedly, deeming some of the contractual obligations no longer able to be performed.
The parties involved in the contract have the freedom to negotiate the force majeure clause before they enter an agreement or before money is paid. (www.qld.gov.au/fairtrading) Therefore, it’s up to the involved parties to determine what circumstances are to be treated as a force majeure event.
For example, these circumstances could be ‘acts of God’ such as natural disasters war, strikes, embargoes and government-determined restrictions.
In turn, a force majeure clause outlined in a contractual agreement may relieve a party from completing their outlined obligations due to these kinds of circumstances.
Is COVID-19 a Force Majeure Event?
The scope of a force majeure clause, where it is present, will vary from contract to contract.
Some contracts directly list examples of force majeure events, where some may not. The lists (if present) could be exhaustive or non-exhaustive.
Because of this, it’s up to the terms and conditions outlined in your contract to determine if force majeure applies to COVID-19 and related events. The contract does not need to explicitly mention coronavirus, instead, reference to a ‘pandemic’ or ‘infectious disease’ would suffice. Sometimes COVID-19 itself might not be a force majeure event, but resultant government restrictions could be.
When there is no relevant or disclosed force majeure event in the contract, but you are still unable to abide by the contractual obligations due to circumstances out of your control such as the COVID-19 Queensland lockdown, the term ‘frustrated contract’ comes into play.
What do you need to know about frustrated contracts?
A contract is said to have become ‘frustrated’ if unforeseeable circumstances out of the parties’ control make the performance of the contract impossible. There are some thresholds and conditions before the courts will consider a contract to have become frustrated. One of these is that a circumstance that is only temporary or transient – in the context of the time over which the contract is to be performed – usually will not give rise to the frustration of a contract.
The effect of a contract being frustrated is that it is discharged (cancelled).
The interplay between the various legal principles in the context of issues caused by COVID-19 is complex, which is why obtaining professional legal advice is the best way forward.
Have you been affected by COVID-19? Contact Creevey Russell Lawyers
Based in Brisbane, Toowoomba and Roma, Creevey Russell Lawyers are a full-service law firm who puts you first. If you’re looking for legal representation advice our highly skilled team members are here to assist you. With a drive to deliver the highest quality professional services, you can rest assured the results you need will be fought for.
Call 07 3009 6555 or email firstname.lastname@example.org
(1) The materials appearing on this website are provided for informational use only, and are in no way intended to constitute legal advice.
(2) This article is general information only and not legal advice