What Are Your Contractual Rights And Obligations Amidst The Covid-19 Pandemic?

With the onset of the COVID-19 Pandemic, and the consequential government directive mandating the closure of all non-essential businesses in Quebec, many private law contractual rights and obligations will be impacted. While it is currently impossible to state with absolute certainty that the COVID-19 pandemic will fall withing the category of an event of force majeure (or “Superior Force”), the legislation in Quebec regarding force majeure lends strong credence to the probability of the COVID-19 pandemic being considered as such by the courts. Furthermore, certain past turbulent events can provide some guidance as to how the Québec courts will characterize the COVID-19 pandemic. For example, the 1990 Oka crisis and the 1998 Quebec Ice Storm were determined by the courts to be events of force majeure. However, the analysis of the impact on each specific contractual obligation arising from an event of force majeure must be made on a case-by-case basis.

Generally, a private law contract will include a provision relating to an event of force majeure, whereby a party to the contract can be absolved from its inability to perform a contractual obligation directly as a result of an event of force majeure, thus relieving that party from liability towards its co-contracting party. The provision dealing with force majeure will typically provide a precise definition of all events constituting a force majeure. It may include the following: acts of war, riots, fire, flood, earthquake, lightning, explosion, strikes, lockouts, slowdowns, prolonged shortage of energy supplies, and acts of state or governmental action prohibiting or impeding any party from performing their respective obligations under the contract. In Quebec the notion of force majeure is not of public order, therefore the parties can contractually waive the application of an event of force majeure as a basis for the non-performance of a contractual obligation. As a result, the debtor of the obligation will remain obliged and liable for the performance of their obligation despite the occurrence of the event of force majeure. Moreover, if the obligation that the debtor is bound to perform is one of warranty (by law or contractually), the debtor will not be able to invoke an event of force majeure as a pretext for the non-performance of a contractual obligation.

In the event that a private law contract does not include a provision addressing an event of force majeure and its potential impact on the parties’ contractual obligations, the Civil Code of Quebec will then apply. Article 1470 of the Civil Code of Quebec deals precisely with force majeure (or “Superior Force”). It states the following:

"A person may free himself from his liability for injury caused to another by proving that the injury results from superior force, unless he has undertaken to make reparation for it. Superior force is an unforeseeable and irresistible event, including external causes with the same characteristics."

This article of the Civil Code of Quebec delineates the essential criteria necessary for the classification of an event as a force majeure. Firstly, the force majeure must be unforeseeable, in that the debtor of the obligation could not have objectively foreseen it or could not have reasonably be expected to foresee it. Secondly, it must be irresistible, meaning that it is impossible for a reasonable debtor to take reasonable measures to avoid the occurrence of the force majeure, and that the force majeure renders the performance of the debtor’s obligations absolutely impossible. Finally, the force majeure must also be external, meaning that the event is outside the bounds of the debtor’s doings or control. An example of an external cause can be the act of a third-party over whom the debtor has no control (for example, a government shutdown).

An event of force majeure can temporarily suspend the debtor’s contractual obligations in the context of a contract where the obligations are to be performed successively (ex. a gym membership with monthly payment instalments). It can also result in the termination of a contract in its entirety where there is a substantial failure of performance by the debtor.

Finally, it is important to note that a party invoking force majeure must ensure that it notifies its co- contracting party in writing as soon as it become aware of the event of force majeure, or as soon as it may reasonably do so. In contracts that include a provision relating to force majeure, there is typically a specific delay and manner by which a party must advise its co-contracting party of its inability to perform its obligations because of an event of force majeure. The said invoking party must also ensure to take all reasonable steps in the circumstances to mitigate any further damage that may be caused to its co-contracting party as a result of the force majeure.

In conclusion, while it is likely that the courts in Quebec will classify the COVID-19 pandemic as an event of force majeure, it is important to remember that it cannot be used as an all-encompassing basis for the non-performance of all contractual obligations and subsequent release from liability. Each contractual obligation must be analyzed on an individual basis, and the debtor of the contractual obligation must do his part to sufficiently notify its co-contracting party and mitigate all damages where possible.

Please contact us for any questions you may have relating hereto.

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