By Sara Joy - Law Student @ Downing College, Cambridge
[Before reading this article, it would be beneficial to read the previous Oxbridge Launchpad article “Covid-19 and Contracts”]
Force majeure clauses typically excuse one or both parties from performance of obligations under a contract due to the occurrence of events outside its control. The outbreak of covid-19 had caused the implementation of measures such as social distancing, national lockdowns and travel bans which have impacted the operations of businesses. Given the narrow application of the similar common law doctrine of frustration, many businesses have responded by actively including Covid-19 specific force majeure clauses within contracts. They have sought to rely on these where an unpredictable state of affairs prevents them from fulfilling their obligations.
A common example of the use of a force majeure clause in this context would be the case of Western buyers who have used these clauses to cancel purchase orders they can no longer pay for. Where these orders had already been completed or in the process of being completed, there can be a huge impact on vulnerable workers in the supply chain. Workers in the Ready-Made Garment industry have been particularly impacted by the use of these clauses. The ‘race to the bottom’ phenomenon has resulted in buyer companies competing to reduce costs by paying lower wages or reducing the quality of the work environment. As a result of these initiatives aimed to keep costs down, suppliers are provided with little margin to pay severance to workers. This is particularly detrimental to these workers who likely have no savings or access to strong government social safety nets.