Introduction
The chain reaction and disruption by the COVID-19 pandemic is not restricted to mankind but to Governments, regulation, contracts and businesses (including law firms and service-based business). The update below will consider these and possible palliatives
COVID 19 and Commercial Contracts
Whilst the law is designed to uphold the sanctity of consensual executory contracts[1] for the sake of accountability and certainty in commercial activities, it still contemplates the incidence of force majeure (an event or effect neither anticipated or controlled or attributable to either party[2]) such as the COVID-19 pandemic as a basis for frustration of contracts[3].
For instance, in the area of property or property development transactions, stakeholders like investors, purchasers or contractors have used Governmental public movement restrictions as force majeure basis for suspension, liability avoidance, variation, delayed performance and or even frustration of pending contracts[4], particularly those of which time is of the essence or of which payments are required to be by instalments or in terms of milestones.
Remarkably, the burden remains on the invoking party to show the negating impact of the force majeure on the ordinary fulfilment of the contractual obligation: for instance, except he shows cogent and compelling reasons such as lack of income directly resulting from the pandemic and the involuntary restrictions, a tenant may not successfully plead avoidance of obligation to pay rent due.
Going forward, however, insurance provides an effective palliative against force majeure impact on many contracts, particularly in employment contracts, construction or development projects, and long leases.
COVID 19 and Regulatory Compliance
The tsunami effect of the COVID-19 global pandemic is also being felt very deeply for startup or new businesses, or existing businesses that involve regulatory compliance, filings, registrations, licenses or business permits which are issued by Governmental authorities or administered by official authorities and regulators.
The situation is exacerbated when these compliance issues are time sensitive and these bodies have no electronic platform for remote interaction and approvals.
In the light of the recent lockdown and public gathering restriction, an interesting example -which is hoped to be soon remedied by the amendment of the 30 years old Companies and Allied Matters Act- is the requirement for annual general meeting or filing of Annual Returns, particularly for public companies(PLC) who are not permitted by law to have a written resolution or hold their AGM outside Nigeria, and by extension there is no clarity whether remote meetings and video conferences for same is allowed. This means that as far as PLC companies are concerned, no AGM or EGM may effectively be held. There has not been any notices by the Corporate Affairs Commission, the regulator, making any pronouncement to clarify this or waiving any penalties for non- compliance.
The invocation of force majeure is a defence available to companies against their regulator where they are provided an opportunity to be heard regarding these unintentional breaches, and they should be provided an opportunity for sanctions to be waived as part of the Government’s support to businesses in a pandemic era with grave economic consequences.
Conclusion
The Tsunami generated by COVID-19 impacts on all aspect of human relationships, commercial activities and human governance, and require both persons and institutions to adjust and adapt for survival sake.
Governments are expected to provide maximum support for businesses. It is suspected that pragmatism would also be the order of the day for commercial courts in Nigeria in view of force majeure doctrine.
The content of this article is intended to provide a general guide to the subject matter. where relevant, Specialist advice should be sought about your specific circumstances.
For more information, please contact us at info@punuka.com, or the following:
Emuobonuvie Majemite (e.majemite@punuka.com) or PUNUKA PROPERTY TEAM <propertylaw@punuka.com> for property law related matters
Gloria Ogwu (g.ogwu@punuka.com)or NEW BUSINESS & REGULATORY
<regulatory@punuka.com>for New Business and regulatory matters
[1] Arjay Ltd.& Ors V A.M.S. Ltd. (2003) LPELR-555 (SC) (P.67, paras. A-E)
[2] Black’s Law Dictionary 8th Edition
[3] C.G.G. (NIG) LIMITED v. Anthony Augustine & Ors LPELR-8592(CA) (2010)
[4] A related but different concept which a party may consider is hardship. If a hardship clause exists in a property related contract, then a party may rely on it to seek to vary the terms of the contract on the basis that the unforeseen event which is not attributable to either party has fundamentally changed the equilibrium of the contract and has placed significant, material and excessive burden on him.
