Force majeure clauses are commonly found in many different contracts and at its most basic level, creates an instance where neither party to the contract is held liable to honor the contract terms in the event of circumstance out of their control. With the current effects of the COVID-19 crisis, it is becoming apparent many signatories have not fully understood the terms of the force majeure clauses in their contracts.

The most common force majeure clause generally describes a situation where the outcome is out of the hands of the person responsible for delivering the good or service, therefore absolving them of any liability for failure to deliver.

In Ireland, for instance, many developers have continued building their projects, despite restrictions put in place due to COVID-19, begging the question, are these projects continuing because the providers want to do so or because they have a contractual obligation?

There are a variety of properties being built in Ireland that are working under extremely strict contract terms. For example, if the project is not completed in time, the buyers will lose their mortgage approval. This puts the construction company in a catch-22 situation. Either they finish the project on time, protect the mortgage applications of the buyers, follow through on the terms of their contract and breach the new COVID-19 restrictions put in place; or stop working on the project, breach the terms of their contracts, lose the property buyers and put the company at risk of insolvency or bankruptcy.

The Irish government is aware of this situation for many property developers which is also due to the fact that many of their contracts are lacking a force majeure clause that could ease the burden of the build timeline. Therefore, some concessions have been made for housing projects that are considered essential. However, not all housing projects or developments without force majeure clauses have been deemed essential.

Even though some projects have been cleared to continue during this time, the temporary legislation states that any construction projects taking place during the COVID-19 pandemic have the direct responsibility to ensure safety of their employees at the site, and that all measures be taken to meet this objective.

Overall, if a company is relying on a force majeure clause to change the fundamental terms of a contract, the party seeking to change the original terms of the contract must be able to prove, without question, that COVID-19 was the sole reason for not being able to meet the obligations stipulated within the agreement. In the event that a force majeure clause is accepted, then the project developer and buyers must work together to determine a fair and reasonable extension for such a project to see that the contract is fulfilled in a mutually agreed upon way in the future.