With COVID-19 being top of mind for everyone, it is important to understand how this affects contractual rights and obligations under an agreement.
This may affect your business in situations in which you are a party, where you or the other party claims that it cannot perform its obligations under the agreement as the result of an event such as the current pandemic.
Normally, Ontario courts will not imply or otherwise permit a party to claim that it should not be responsible for damages where their non-performance is a result of an event not contemplated by the agreement. For this reason we often include force majeure clauses in agreements, so a party would not be unduly punished or responsible for the other party’s damages for events beyond their control. In general terms, a force majeure clause states that non-performance as a result of an event outside the party’s control (i.e. a labour strike, terrorist attack, or a significant pandemic) will not result in the non-performing party being held responsible for the damages to the other party.