Recently, we have had many clients contact us to ask what effect COVD-19 may have on their purchase or sale.
The starting point is your Contract of Sale. Not all contracts are the same and some can be quite detailed, so it is always best to get legal advice to ensure you are aware of your contractual rights and obligations.
Usually, there are three main considerations:
- Does the contract contain any force majeur clauses?
A force majeur clause in a contract permits parties to be relieved of their contractual obligations in the event of something that is outside of their control. Most contracts do not contain such clauses, although we expect that we may see more of these clauses in future as a result of COVID-19.
- Does the doctrine of frustration apply?
Where it becomes impossible for one party to a contract of sale to fulfil his or her obligations under that contract through no fault of either party, the doctrine of frustration may allow the party in default to avoid any penalties for failure to complete the contract (subject to any conditions in the contract which forbid this).
However, it can be difficult to prove that a party’s inability to complete a contract is due to something beyond his or her control. Another problem is that, if a contract is brought to an end by the doctrine of frustration, each party often simply has to bear any losses he or she has incurred and cannot claim those losses from the other party.
- Can the parties negotiate a resolution?
It can be difficult to establish that a contract has become impossible to complete due to a force majeur event or the doctrine of frustration. The best option to consider is normally for the parties to attempt to negotiate a resolution to their problem as usually both parties simply want to finalize the contract.
If you feel the advice given above may be relevant to your situation, please contact us today to discuss what option may be available to you.
Please note, the above contains very general information on the subject matter and should not be regarded as legal advice. Legal advice should always be sought as to your specific circumstances.