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Force majeure: Can Covid 19 release you from your contract obligations?

Real Estate, Business Law, Employment Law, Litigation, Blog

Under general principals of contract law, a party has a defense against performing under a contract where that performance becomes impossible due to unforeseeable events outside of the parties’ control.  If disaster strikes, a non-performing party can resort to a claim of “force majeure”, sometimes called “acts of God”, to forgive them from living up to their responsibilities.

A pandemic can be one of those events. Some commonly listed force majeure events include natural disasters such as floods, earthquakes, or hurricanes; war; terrorist acts; government action such as expropriations or changes in laws; union activities such as strikes and slow-downs; shortages of necessary materials… and, if the contract provides for them, also epidemics and quarantines.  

General economic conditions are not force majeure events.  Governmental restrictions may qualify, if directly related to the force majeure event, and if they directly relate to the alleged breach of contract, but reduced demand and business are usually found to be more a fact of life than an act of God:

While relatively few cases have interpreted the impact of pandemic on force majeure clauses, previous cases do offer some guidance. Courts have found that generalized economic hardship or increase in expenses, without more, does not constitute a force majeure event. As a result, it will be difficult to avoid an obligation to purchase goods or services merely because customer demand has decreased. Also, even if an unforeseeable and extreme disaster occurs, a contract’s force majeure provision will still control with regard to the parties obligations and may override other common law defenses used to avoid performance. For this reason, it is imperative that companies read contracts closely, or consider engaging counsel, to determine what rights they have before acting (or not acting) on a contract. Finally, courts are split as to whether intervening governmental acts (such as changes of regulations, emergency declarations, etc.) will excuse performance under contract, but the contract itself will still likely control as to which party bears the risk of the nonperformance.

National Law Review: COVID-19: Force Majere Event? March 19, 2020

If a contract’s force majeure clause includes terms such as “epidemic” or “quarantine” or “pandemic”, then the clause can be invoked during the current Covid-19 crisis to avoid living up to contractual responsibilities that have been rendered impossible.  Even if a contract has a force majeure clause that does not include such terms, it may still be possible to defend against an action for breach relying on the force majeure clause, if the language of the clause is broad enough to encapsulate disasters such as pandemics.  

However, in any case where such a clause is invoked, in order for the defense to work, the party invoking it must also show that they took steps to mitigate the damage and that full performance was truly impossible – together with any other contractual obligations that might be necessary to adhere to when invoking the clause.

If there is no force majeure clause at all, or if there is no reasonable way to bring the COVID-19 pandemic within the terms of the force majeure claus, then there still will be defenses to breach or non-performance on the commonlaw bases of impossibility or frustration of purpose.

All of these defenses are pretty strict.  The general principle of contract law is that the parties to an agreement assume the risk of their own non-performance unless the contract itself says otherwise.  In order to claim impossibility or frustration, the defending party has to show that the event offends, in a way that was unforeseen to the contracting parties, a foundational assumption of the agreement.  For instance: if the subject matter of the contract turns out to be non-existent, then the contract will be impossible to perform.  However, it is not a basic assumption of the parties that market conditions or financial situations will remain favourable to the parties.  

In this case the event is a global pandemic.  The problem with pandemics (well, one of the many problems with pandemics) is that they only indirectly affect businesses.  A pandemic is not that kind of natural event that destroys infrastructure or physically prevents businesses from operating.  Instead, it is the social and governmental response to the pandemic that has the effect of interfering with business viability.  Laws that are changed to address it are laws of general application that only affect your ability to live up to your contracts.

At the end of the day: contracts are enforceable.  Rent is payable. If rent is not paid, that is a breach of contract.  Force majeure is a defense available to a claim for that breach.  As identified above, general economic effects do not constitute a force majeure event.  

Unless the contract specifically defines pandemic as a force-majeure escape hatch, it seems unlikely that it would be considered one.  

However, the global nature of the coronavirus crisis lends itself to other practical considerations.  Unless there are particular circumstances that are quite significantly different than those being faced by most businesses today, it may not be in anyone’s business interests to force strict compliance with contracts right now.  After all, if all contracts are strictly enforced, that may have uncomfortable effects on the very parties who insist on strict enforcement:

As the COVID-19 pandemic continues to develop, businesses should take proactive steps to ensure continuity of operations sufficient to meet existing contractual obligations and evaluate whether their counterparties are doing the same. If companies expect that COVID-19 may result in their own or their counterparties’ inability to satisfy contractual obligations, they should assess the viability of either force majeure or common law principles of nonperformance excusal. This assessment may also be rendered more complicated by the fact that many companies will be on both sides of this issue, as the performing party in some cases or the receiving party in others… Businesses may wish to avail themselves of a force majeure clause or the common law principles in connection with certain contracts, but resist such a claim by their counterparties to other contracts. Companies will therefore need to be mindful of the broader implications of asserting these provisions and principles.

P.Weiss: Force Majeure under the coronavirus Pandemic: March 16, 2020

COVID-19 related contract breaches will cut in all directions.  If you insist on strict compliance with others, they may insist on strict compliance with you.
Andrew Powell practices a wide range of civil litigation with a focus on business or commercial disputes, including breach of contract, lease and land use issues, corporate disputes including liquidations and shareholder issues, and realization and enforcement. Andrew also practices estate litigation, including wills variation claims.

March 28, 2020
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Employment Issues During COVID-19

Business Law, Employment Law, Litigation, Blog

The COVID-19 pandemic has created unprecedented circumstances for Employers and Employees.  Many people  have questions with respect to their rights as Employers and Employees, and, particularly for Employers, potential liabilities.

The British Columbia Employment Standards Act sets out minimum standards that employers must adhere to.  COVID-19 does not change or suspend statutory rights or obligations.  Failure to adhere to these standards may result in claims against Employers and even personal liability for directors and owners of companies.  Being pro-active and getting good advice now can help avoid problems and encourage creative and pro-active solutions to preserve goodwill and morale in the workplace, and to make the best of a bad situation for all.

Don’t be fooled by one size fits all solutions.  Each situation is different and requires careful review and planning.

Don’t get caught out.  Call for assistance.

March 27, 2020
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COVID-19, Child Support and Layoffs

Family Law, Employment Law, Litigation, Blog

When parents separate, their children are entitled to child support.  The Child Support Guidelines set out how child support is determined.
 
The amount of child support depends on the income of the parent who pays the support, or both parents’ incomes if they share time with the children.  If income goes up, or down, normally this will result in an adjustment to child support payments.

What Happens to Child Support if the Parent Paying Child Support Loses His / Her Employment?

The COVID-19 pandemic has had a significant impact on all of our lives.  Most sectors of the economy have been affected and many businesses and employees will face a significant decrease in earnings.

So, what happens if a parent is laid off or terminated from their job during the COVID-19 pandemic but has been paying child support?

All parents in British Columbia should be aware that as of March 20, 2020 the various courts in this province have suspended regular operations.  Accordingly, child support disputes likely will not be heard by the courts until they resume regular operations following the COVID-19 pandemic.  Thus, parents are encouraged to find a workable solution to any child support disputes during this time.

If you are paying child support and find yourself laid off or terminated from your employment, the best course of action is to immediately inform the other parent.  Be open and transparent and let them know if you will be receiving any of the benefits offered by the provincial or federal government, such as employment insurance.  Try to find a mutually agreeable solution so that you can still pay some support rather than stopping support altogether. 

If you are paying support payments to the Family Maintenance Enforcement Program (FMEP), also inform them if your employment status changes.  On March 19, 2020, FMEP posted the following update on its website in regards to the COVID-19 pandemic:

“If you are a payor, we acknowledge you may have difficulty [during the COVID-19 pandemic] paying your full amount of maintenance that is due. You are, however, still required to pay the maintenance owing under your order or agreement. If you are unable to make full payments it is very important that you contact us by signing into your web account and sending a web message …” https://www.fmep.gov.bc.ca/whats-new/

If you are concerned about paying or receiving child support payments, our experienced team of family law lawyers are available to help you assess your specific situation and provide trusted advice on how to move forward in this uncertain time.

Darren maintains a broad practice in family law including divorce, common law separation, division of assets, parenting, custody, mobility/relocation, and child and spousal support. His diverse litigation background serves him well when acting for clients in more complex family law disputes. Darren always strives to provide tailored, down-to-earth advice for his clients.  

March 24, 2020
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Impacts of COVID-19 on Parenting and Custody Matters

Family Law, Litigation, Blog

The COVID-19 pandemic has caused unprecedented levels of uncertainty in all aspects of our lives, including in the operation of our courts.  As of March 20th, the various courts in British Columbia have suspended most of their operations. 

Currently, the courts in BC are only hearing essential and urgent matters.  These matters include issues relating to the safety of a child or parent due to a risk of violence; wrongful removal of a child from a jurisdiction; or matters relating to the well being of a child.  All other matters are suspended and will not be heard by the courts until at least May, 2020. 

My ex and I share time with our child – what can we do in an age of “social distancing”?

For most of us, the phrase “social distancing” didn’t exist until a few weeks ago.  It’s now become our reality.

If you and your ex spouse have kids and share them between your two homes, what do you do?  Do you exchange the kids between two houses?  Do you send the kids to your ex’s house?  Should you protest if your ex won’t send the kids to spend time with you?

The only clear answer is that there isn’t a clear answer.  Each case will be dependent on your specific circumstances. 

The best approach parents can take is to consider only the best interests of the kids.  In fact, this is the only thing a court will consider when deciding an appropriate parenting arrangement.  Section 37 of the British Columbia Family Law Act sets out a number of factors a court must consider when deciding what is in the best interests of a child.  The most important factors in light of the COVID-19 outbreak are:

•    the child’s health and emotional well-being;
•    the ability of each person … who has parenting time or contact with the child, to exercise his or her responsibilities;

Although the COVID-19 pandemic is new, courts in BC have considered the issue of when a parent has a contagious virus and seeks parenting time with a child.  In D.M.M. v. D.F., 2015 BCPC 0310, the father previously had the Hepatitis C virus and the evidence at trial showed he did not take sufficient care of his hygiene such that his daughter may have been exposed.  The father said he had recovered from the virus but the court said “while his freedom from the virus is obviously very good news, I remain concerned about [his] attitude towards [the daughter’s] safety, since he was contagious at the time he was with her.” (para 72).  This finding, among other findings at trial, resulted in an order that the mother have primary care of the daughter. 

Thus, it is imperative that parents take all precautions and follow the advice from governments and health authorities during the COVID-19 pandemic.  Our experienced team of family law lawyers are available to help you assess your specific situation and provide trusted advice on how to move forward in this uncertain time.  
Darren maintains a broad practice in family law including divorce, common law separation, division of assets, parenting, custody, mobility/relocation, and child and spousal support. His diverse litigation background serves him well when acting for clients in more complex family law disputes. Darren always strives to provide tailored, down-to-earth advice for his clients.  

March 20, 2020
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Aarts-Chinyanta v. Binkey/Hayer/Stewart et al

Personal Injury, Decisions and Settlements

Three Motor Vehicle Accidents Contribute to Chronic Pain: Susan A-C was referred to Nixon Wenger by a friend.  James represented her initially for an accident that occurred in 2012.  While representing her, Susan was unfortunately involved in two other accidents, none of which were her fault.  Susan suffered chronic soft tissue injuries which affected her ability to move and function without pain and to suffer from intense migraines.  ICBC defended the claim of Susan for all three accidents.  They defended a claim in part on the basis that Susan’s claim of pain, migraines and disability far exceeded the injuries she could have suffered in any of these accidents, as none of the accidents were of such a nature as to cause such injury.  In other words, ICBC was saying that the accidents were of such a minimal nature that no one could be so disabled from any of the accidents.  Susan was unable to return to her job as a Walmart employee.  She had difficulty maintaining her home as she did prior to the accidents, and had a difficult time cooking and looking after her children.  James Cotter and Ryan Irving took this matter to a two-week trial in October of 2019.  They retained the foremost chronic pain specialist in British Columbia to assess Susan and to provide expert opinion evidence.  In addition, an occupational therapist was retained, an economist, and a doctor of physical and medicine rehabilitation.  ICBC retained its own experts.  This was a hotly contested trial with many arguments relating to evidentiary issues and expert evidence issues.  However, at the end of the day the trial judge agreed with our position that the culmination of these accidents resulted in significant disability for Susan.  She was awarded over $700,000.00 in damages.  This was a far greater sum than ICBC had ever offered her in the seven years since her first accident in 2012.  Susan was very pleased with the outcome and felt that it justly reflected her loss.

March 17, 2020
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T-bone collision results in a judgment of $420,000.00

Personal Injury, Decisions and Settlements

Mike Yawney, QC, along with Associate, Allison Jaquish, were retained by a 30-year old single mother after she suffered significant injuries in a T-bone collision in the North Okanagan. The woman suffered a broken clavicle and soft-tissue injuries to her neck, back, and bruising to both knees. Her injuries made it extremely difficult for her to return to work, but she continued to do so in order to support her young family. Medical experts concluded the young woman would continue to suffer from chronic pain going forward and would require ongoing rehabilitation. The court ruled in her favour and awarded damages of $420,000.00.

 

March 2, 2020
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