As a small business owner, you likely have questions about the impacts that COVID-19 has, or may have, on your existing business contracts. Goodlawyer has put together the most asked COVID-19 legal questions they’ve received in the past few weeks, spanning from insurance and leases to contracts.
Is COVID-19 a Force Majeure Event?
This would depend on the specific language in the force majeure provision in your contract. Unless the provision explicitly captures an event like COVID-19 by using language like “pandemic”, “epidemic”, or “public health emergency” courts may be reluctant to recognize COVID-19 as a force majeure event. Force majeure clauses excuse non-performance of a contractual obligation when a specified, unforeseeable event or circumstance that is beyond the parties’ control occurs. Contract interpretation of force majeure events will be dependant on the foreseeability of the COVID-19 pandemic, steps that were taken (if any) by the party intending to rely on the provision, and whether COVID-19 has an actual and direct impact on the relying party’s ability to perform their contractual obligation. For more information on force majeure provisions during the COVID-19 crisis check out Adrea Sanche’s article here.
What if my contract does not have a force majeure provision?
Whether you have options would depend on the specific circumstances surrounding your contract and your obligations under that contract. There is a doctrine of frustration, however, a contract is only “frustrated” when unforeseen circumstances arise which make the performance of the contract radically different from what the parties agreed to. This is a very narrow exception, but when it applies, it relieves both parties of their obligations. For more information on your contract options check out Kalie McCrystal’s blog here.
Can I terminate my contract?
This will vary from contract to contract. It will depend on whether or not your contract has a termination provision and what that termination provision allows you to do. Some contracts contain termination provisions that simply require notice, however, other contracts have specific events that must arise in order for the contract to be terminated. For more information on contract termination see Kalie McCrystal’s blog.
Can I renegotiate my lease given the COVID-19 circumstances?
Leases can vary widely in their terms and it is important for both a landlord and a tenant to review their commercial lease under these circumstances to determine what relief is available. Under most commercial leases a tenant will have an obligation to continue to pay rent. However, many leases have a process for amending the lease. This typically requires both parties to agree to the change in writing. If this is the case, both parties could negotiate either a reduction in rent or a deferral of rent during the COVID-19 pandemic. Check out more Response Options for Commercial Leases from Clark Wilson LLP.
Do I have other options outside of renegotiating my lease?
It would depend on the specific language of your Lease. Commercial leases may have force majeure provisions that typically protect both parties for non-performance of obligations when an extraordinary event or circumstance beyond the control of the parties occurs. Contract interpretation of force majeure events will be dependant on the foreseeability of the COVID-19 pandemic, steps that were taken (if any) by the party intending to rely on the provision, and whether COVID-19 has an actual and direct impact on the relying party’s ability to perform their contractual obligation.
If your lease does not have a force majeure provision a party may have recourse under the doctrine of frustration. A contract is only “frustrated” when unforeseen circumstances arise which make the performance of the contract radically different from what the parties agreed to. If it does arise, it relieves both parties of their contractual obligations. You can read the Kalfa Laws Detailed Summary on Frustration and Force Majeure, and lawyer Kalie McCrystal explains more options here.
Do I have any rights under legislation that will allow me to access rent relief or other protections?
On March 25th, the Emergency Response Act was passed. This act contains the Government’s COVID-19 Economic Response Plan which provides direct support to Canadian workers and businesses. Landlords should be familiar with these programs because they can encourage those tenants who request rent concessions or claim they are unable to pay their rent to access the benefits available under the Canadian government’s COVID-19 Economic Response Plan. Click here to see Gowling WLG’s COVID-19 Advisory.
Can I make a claim under my business interruption insurance?
Whether you will be able to make a claim under your business interruption insurance will depend on the specific language of your business interruption insurance policy. Most business interruption policies only provide coverage when there is physical loss or damage to the insured’s premises or property.
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