Events have a habit of overtaking us. The Covid19 pandemic for example raised all sorts of issues when commercial contracts proved more difficult to perform than originally envisaged. And in 2022 the war in Ukraine cast doubt on a raft of legal agreements covering everything from energy supply to foodstuffs. In legal terms the principle of force majeure offers a remedy to a party that’s unable to perform his or her side of a bargain because of some unexpected, intervening event. Similarly remedies derive from clauses that enable a party to extricate itself from a contact in the event of ‘fundamental changes’. But to take advantage of a force majeure or fundamental change clauses you must be able to rely on a clear contractual provision that covers the event you say has made performance of the contract impossible.
The courts will always be reluctant to undermine the terms of a contract that’ s been freely entered into by two commercial entities. Two cases from the English High Court – both from 2022 – show just how narrowly contracts will be constructed when one side attempts to avoid responsibility. The two cases (discussed below) turn on remarkably similar facts. But they have entirely different outcomes. These decisions of the High Court in London have highly persuasive authority in the Bahamas. They demonstrate just how nuanced and finely balanced judgments relating to force majeure and fundamental change clause clauses can be. If anything this highlights the importance of getting expert contractual advice before you enter any kind of commercial contract. At ParrisWhittaker our award-winning lawyers are available on 1-242-352-6110 and 1-242-352-6112 or you can always contact us online.
The FA v PPLive Sports (2022)
The contract at the centre of this case related to the rights to broadcast English Premier League soccer matches across China. PPLive Sports agreed to pay $700 million to stream all Premier League matches in China for three years between 2019 and 2022. In 2020 PPLIve failed to pay an instalment of $200 million under the contract, arguing that the suspension of the Premier League because of Covid was a breach of warranty. PPLive in essence argued that the Premier League had, on signing the rights contract, warranted that the tournament would not be changed in any fundamental way. The fundamental change clause relied on stated that the Premier Leagie warranted that:
during the term of the contract the format of the competition will not undergo any fundamental change which would have a material adverse effect on the exercise of the Rights by the Licensee
The clause then indicated that a fundamental change would include a change that results in:
(i) the total number of Clubs being reduced to less than eighteen (18); or
(ii) the Competition ceasing to be the premier league competition played between professional football clubs in England and Wales.
In court the judges refused to accept that the tournament had been altered fundamentally. There was no doubt the season had suffered severe upheaval because of the Covid19 pandemic. Games were postponed and matches were played in empty stadiums. But ultimately all of the seasons’ fixtures were completed, there was a winning team and – as usual – three teams were relegated.
In short there was no fundamental change under the contract and the Premier League was entitled to recover the full $200 million.
European Rugby v RDA Television (2022)
Here the broadcaster RDA sought to avoid obligations under a contract with European Rugby, arguing that the postponement of parts of a major rugby tournament because of Covid amounted to a force majeure event. Unlike the broadcaster in the FA case described above, RDA was successful in its argument. This was largely down to the way the contract had been drafted. It incorporated a clear description of what force majeure in the context of the rugby tournament might look like. And it specifically referred to ‘epidemics’ as something that would initiate the force majeure clause. A lesson, if it were need, that clauses in your contract –whether force majeure or other clauses – should always be tailored to your circumstances and be fit for purpose.
Courts will always interpret contracts on the basis of the facts and the circumstances of the particular contract and commercial context.
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