Is a force majeure clause enforceable in a business-to-consumer contract because of coronavirus (COVID-19)?

Is a force majeure clause enforceable in a business-to-consumer contract because of coronavirus (COVID-19)?

Traders seeking to rely on force majeure provisions in their contracts with consumers for delays in performance caused by the coronavirus (COVID-19), or to relieve them of their contractual obligations, will need to consider whether:

• the term has been effectively incorporated into the contract, determined in accordance with common law principles, and

• the term is fair, determined in accordance with the Consumer Rights Act 2015 (CRA 2015)

If the force majeure clause has not been effectively incorporated into the contract or is unfair, it will not be enforceable against the consumer.

Incorporation

In order to be enforceable, a term must be properly incorporated into the B2C contract at the time the contract is made. The party seeking to rely on them must show that either the other party has specifically agreed to, or knew of, the terms (eg by showing a signature to them) or that it has done what is reasonably sufficient to give the other party notice of them (before formation of the contract). This will be a question of fact in each case. The more onerous or unusual the terms, the more that needs to be done to bring them to the notice of the other party.

For more information on incorporating express terms, see Practice Note: Contract interpretation—express terms in contracts.

It is important to distinguish the question of whether a term has been effectively incorporated (determined in accordance with common law principles) from the question of whether that term is fair (determined in accordance with CRA 2015).

Fairness test

Terms in B2C contracts and notices, including force majeure clauses, are subject to the unfair terms provisions set out in CRA 2015, Pt 2. A term or notice is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. Terms which do not satisfy the fairness test are unenforceable against consumers.

The CRA 2015, Sch 2 Pt 1 contains an indicative and non-exhaustive list of B2C terms that may be regarded as unfair for the purposes of CRA 2015, Pt 2 (the ‘grey list’). See in particular CRA 2015, Sch 2 Pt 1, para 2.

For more information on the fairness test and how this is applied by the courts, see Practice Note: Consumer Rights Act 2015—unfair terms—Fairness test.

Blacklisted terms

In addition, certain B2C terms and notices are automatically unenforceable under CRA 2015 in a number of specific situations (often referred to as ‘blacklisted’ terms). For example, terms which exclude or limit the consumer’s statutory rights and remedies under CRA 2015.

For more information, see Practice Note: Consumer Rights Act 2015—unfair terms—Blacklisted terms/notices.

CMA guidance

The Competition and Markets Authority (CMA) published guidance on unfair contract terms entitled ‘Unfair contract terms: CMA37’ (CMA Guidance). This includes guidance on the grey list and other potentially unfair terms and notices. Annex A of the CMA Guidance provides illustrative examples of wording which may regarded as unfair by the CMA.

In respect of force majeure clauses which exclude or limit the trader’s liability for delays, see the CMA Guidance at paras 5.9.1–5.9.7.

In respect of clauses which exclude or limit the trader’s liability to perform its contractual obligations, see the CMA Guidance at paras 5.10.1–5.10.5.

For illustrative examples of the CMA’s approach to the wording of such terms, see the following in Annex A of the CMA Guidance:

• Group 2(f): Exclusion of liability for delay

• Group 2(g): Exclusion of liability for failure to perform contractual obligations

• Group 19(b): Specific revisions—‘Force majeure’

For more information on:

• the unfair terms provisions, see Practice Note: Consumer Rights Act 2015—unfair terms

• force majeure clauses in B2C contracts, see Practice Note: Boilerplate clauses in business-to-consumer contracts—specific clauses—Force majeure

• the exclusion and limitation of liability in B2C contracts, see Practice Note: Boilerplate clauses in business-to-consumer contracts—specific clauses—Limitation and exclusion of liability

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