24th Mar 2020

Am I covered from Covid-19 disruption under “Frustration”?

If you don’t have a contract, or your contract doesn’t have a “force majeure” clause in it, then the doctrine of frustration could apply (although the bar is very high).

Frustration is one of those old legal concepts that exists under common law but also has various bits of statute that prop it up. Effectively, frustration applies where performance of a contract is rendered:

  1. physically or commercially impossible by some change in circumstances.
  2. “radically different” from that which was originally envisaged by the parties.

So if, for example you were supposed to deliver goods to an area which is in full government ordered lock-down, you can probably rely on frustration to be relieved of your contractual duties. If you think this may cover you, it’s worth seeing a lawyer to check it out.

Covid-19 is not something we were prepared for, and it will likely be devastating on many levels for a lot of people and for businesses. There will likely be changes to the insurance and contractual landscape as and when this passes over and it will become increasingly more difficult for anyone to argue that they couldn’t have seen an epidemic coming, because it’s now happened on a massive scale and we really should be more prepared should similar events happen again. 

Sam Crich is an Associate in Berwins' commercial team and specialises in advice to businesses form all sectors, with a focus on digital and technology based organisations.

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