Authors: Nnamdi Oragwu, Ugochukwu Nwaokike and Sharon Juwah
Keywords: Aviation, Force Majeure, Pandemic, Relief
INTRODUCTION
From supporting the tourism and hospitality sector to promoting global trade and international or diplomatic relations, the aviation sector contributes a heavy quota to the Nigerian economy. The COVID-19 pandemic has impacted every sector of human endeavour and has greatly affected the activities of the aviation sector. The effort by many countries of the world to curtail the importation and community spread of the virus led to the closure of borders and the introduction of social distancing guidelines respectively. The closure of borders and restriction of movements led to major disruptions in the aviation industry as the majority of airlines were grounded. The crippling effect of the lockdown resulted in a huge loss in revenue suffered by the airlines and effort to cut cost led to many downsizing efforts across board. This article seeks to analyze the effects of the pandemic on the industry and how it has impacted on the performance of contractual obligations in the aviation sector.
FORCE MAJEURE AND FRUSTRATION OF EXISTING CONTRACTUAL OBLIGATIONS
The outbreak of the pandemic has induced widespread breach of contractual obligations in the aviation industry. A defaulting party can either plead force majeure or rely on the doctrine of frustration as a defence to either limit his liability or excuse himself of his contractual obligations which have clearly become impossible to perform in view of the prevailing circumstances. A force majeure clause is a term inputted into the contract by the parties which states in clear terms such events which if occurs will relieve a party of its obligation under the contract. Unlike the principle of force majeure which is founded in the contract between the parties wherein, the specific events must have been clearly spelt out, the common law doctrine of frustration appears to be wider in scope as it encapsulates such events beyond the control of parties which have rendered the performance of contractual obligations impossible. This is commonly referred to as an act of god.
In the case of  Revenue Mobilization, Allocation & Fiscal Commission Vs Units Environmental Sciences Ltd,[1] it was held that a contract is not deemed frustrated merely because its execution becomes more difficult or more expensive than either party originally anticipated or that it has to be carried out in a manner not envisaged at the time of negotiation of the contract. Common examples of what might constitute force majeure include labour disputes, acts of God, casualty, war, riots, strikes, terrorism, natural disasters, delays in obtaining or an inability to obtain labour, utilities or materials, and essentially any event beyond the control of the relevant party.[2] An illustration can be gleaned from the ratio in the case of Attorney General, Cross River State Vs Attorney General of the Federation,[3] where the Respondent pleaded that it was unable to perform the contract due to intermittent strike actions embarked upon by its factory workers and on appeal, the court held that the strike action did not amount to frustration
Force majeure is a clause that must be included in a contract for it to take effect. In the absence of this clause in a charter,[4] the common law principle of frustration entitles parties to suspend obligations or performance pending the resolution of the event hindering the actions of either party and by extension, to determine the contract at first instance. Assuming that the aircraft lease agreement contains a force majeure clause, whether or not such clause could be invoked as a result of the Covid-19 pandemic will depend on whether an “epidemic” is listed as the triggering event in the lease agreement. In the aviation sector, there is however a clause that may vitiate the concept of force majeure. It is known as the Hell or High Water clause which stipulates that regardless of any prevailing or eventual circumstances, the lessee’s obligation to pay rent on an unconditional basis throughout the lease subsists.[5]
Business/Ticket Refunds
A downside effect of the pandemic concerning the financial affairs of airlines is the failure of airlines to refund flight tickets to all passengers whose travelling has been cancelled. In place of refunding fully, flight tickets to passengers, airlines have issued vouchers that expire in a year or the chance to rebook.[6] Some passengers have taken to legal actions to ensure their refunds are effected.[7] The United States Congress introduced a new bill that requires airlines to provide a full refund of all flights that have been cancelled regardless of whether the passengers on the tickets before the general government order to do so. The Cash Refunds for Coronavirus Cancellations Act[8] would let airlines pay for the refunds using the signed emergency money provided by the Congress, so as far the funds intended for employee benefits remain intact.
Interestingly, there are arguments in this line of action. The first being whether the clients who purchased non-refundable tickets are also entitled to refunds. Secondly, many airlines question if they should actually be mandated to refund tickets and wonder if they are not covered by force majeure as the cancellations are not occasioned by their negligence or through any fault of theirs. Customarily, in both aviation and maritime sectors, tickets purchased by passengers for travel are to be refunded in an instance that the flights are cancelled. However, to prevent insolvency and potential closure of some airlines, regulators may have to step in and stipulate a timeline or guideline for these refunds to be spanned out and eventually effected. Some European Union countries have altogether passed a law[9] to suspend the refunds by these airlines for a couple of months. The Civil Aviation Authority in Nigeria should also come up with a guideline to deal with how[1] issues relating to tickets refund would be addressed to preclude unnecessary litigation which will further stretch the already distressed sector. Generally, the COVID regulations issued by the Federal Government ought to have been more comprehensive, going beyond matters of health and safety and delving into the impact of the pandemic and necessary alteration or modified implication on contractual obligations.
CONCLUSION
As Nigeria has lifted the ban on interstate travel and operation of local commercial flight, there is a need for government stimulus intervention in the aviation sector to save the industry from going bankrupt. Despite lack of incentives by the government to sustain this sector of the economy, the aviation industry has stood the test of time but is however gasping for breath and is unhealthy. While some contractual obligations have become impossible to perform, an airline would not be liable for the inability to fly a customer who bought a ticket because of the lockdown, issues like the right to refund tickets would be somewhat impossible to repudiate at the instance of the pandemic. Policies should be implemented and enforced to ensure companies in these sectors abide by global best practices and adopt necessary technology to protect the interest of all stakeholders in the sector.
[1] (2010) LPELR-CA/A/213/09. See also Okereke Vs Aba North LGA supra.
[2]Steven herman and manda reasoned, update thoughts on force majeure and impossibility of performance, https://www.natlawreview.com/article/covid-19-update-thoughts-force-majeure-and-impossibility-performance accessed on 16th May, 2020.
[3] (2012) LPELR-SC.250/2009
[4] Adetayo Adetuyi and Nnanke Williams, COVID-19: UNDERSTANDING CONTRACTUAL ISSUES IN AFRICA’S MARITIME INDUSTRY’’ < https://iclg.com/briefing/11497-covid-19-understanding-contractural-issues-in-africa-s-maritime-industry > accessed on 22nd May 2020.
[5] https://www.kinstellar.com/insights/detail/1059/regional-covid-19-as-force-majeure-in-aviation-contracts-comparative-analysis-across-10-jurisdictions accessed on 21st May, 2020
[6] C. Elliot, Refund-related lawsuits against airlines are taking off, but will they succeed?’’ https://amp.usatoday.com/amp/5185753002 accessed on 21st May, 2020
[7]A passenger in Chicago sued United Airlines for refusing to issue refunds for a canceled flight despite being able legible for a total refund. Another passenger sued Delta Air Lines for behaving in an unfair manner but turning deaf ears to the outbreak of claims for refunds by passengers.
[8]D. Jones, Congress introduced new bill requiring cash refunds from airlines- regardless of who cancels the trip.’’ https://www.google.com/amp/s/www.washingtonpost.com/travel/2020/05/14/congress-introduces-new-bill-requiring-cash-refunds-airlines-regardless-who-cancels-trip/%3foutputType=amp accessed on 21st May, 2020
[9] https://www.forbes.com/sites/davekeating/2020/04/29/12-countries-ask-eu-to-suspend-law-requiring-airline-refunds/#7f0ee3a9112f accessed on 22nd May, 2020
Also, the COVID 19 Regulations issued by the Federal Government ought to have gone beyond the issues of health and safety to make provision for the impact of the pandemic on contractual obligations either in terms of freezing them or determining the redress mechanism for losses.
