Two former Supreme Court judges have recently suggested that, given the exceptional nature of the current crisis, a "more creative" approach may be needed in assessing contractual disputes. With that in mind, we've put together a checklist of potential issues to consider if you are looking to dig yourself out of a contractual hole created by COVID-19.
Why might a more creative approach be justified now?
Let's say you can't meet your obligations under a contract because of COVID-19 and there's very little in the express wording of the agreement that seems to help you. For example, we've seen a number of situations recently where, on closer inspection, it transpires that the force majeure clause is rather less helpful than might have been expected. Historically, the English courts have tended to take a strict approach to such situations. In particular, they have not normally been sympathetic to more "creative" arguments aimed at avoiding a harsh outcome for one party. So why should such arguments stand any better chance of success now?
In a recent paper, former Supreme Court judges Lord Phillips and Lord Neuberger, together with a number of academics, suggest that the exceptional nature of the situation created by the COVID-19 pandemic may justify a degree of divergence from the historically strict common law approach. They note that the "present crisis…. does not have an easy analogy in past case law" and that in some situations "an outcome which leaves one party a winner, and the other a loser, will not take full account of the market/social contextualisation of the crisis." They go on to ask whether "there is a case for adopting a more creative, graded, but nevertheless rigorous approach without prejudicing the underlying need for legal certainty." Behind these points lies a concern that an overly strict application of established contract law principles may produce particularly harsh outcomes which do more harm than good, undermining the prospects for economic recovery – which would be in no one's best interest.