Is a mandated citywide shutdown enough to trigger force majeure?

March 26, 2020

Partner David Outerbridge has told Daily Commercial News that an event as significant as a citywide mandated shutdown would likely be enough to trigger a force majeure clause in a contract.

David’s comments come in the context of construction industry’s response to the COVID-19 pandemic. The article says that in Toronto “building permit intakes, requests for information, filing of complaints and reports, and building inspections have been suspended until April 5.”

He told the publication that government actions like that would likely qualify force majeure.

“It’s fairly typical, although not universal, that government actions and orders in decree by a public authority would qualify,” David said.

“Force majeure is a creation of the contract.

“It would be determined project-by-project if a shutdown by a municipality constituted a force majeure. If generic wording was used, in the case of a municipality shutdown it would probably fall into that category.

“Other contracts will list specifically what is or is not a force majeure, an exhaustive list that may not include government shutdowns. One of the benefits of being generic is that you would have that argument available to you. One of the downsides of being specific is that you can get into debates as to what qualifies.”

David also said that once COVID-19 passes, contracted parties looking to recover financial losses may have a hard time.

“In Canada, it’s difficult to sue a municipality for negligence in policy decisions,” he said.

“The municipality does not have a contract with the builders or the owners.”

You can read more of David’s comments on the Daily Commercial News website. The publication has quoted Torys literature on force majeure in the context of COVID-19 in other articles. You can read Torys' comments in "Factors to consider before declaring force majeure", "Continued construction during COVID-19 requires diligence" and "Contract frustration a challenging force majeure alternative". 

David and a team of Torys lawyers have written a piece on force majeure clauses in light of COVID-19. You can learn more about considerations for your organization by reading “COVID-19 and force majeure clauses: key considerations, implications, and practice tips”.

At Torys, we understand the how the pandemic is presenting challenging and unique circumstances for businesses. We are keeping close watch on developments as they unfold, and have established a resource centre on our website, COVID-19 guidance for organizations, where you can find our latest updates for businesses navigating COVID-19-related issues.

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