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Cancellation of contracts: What are my rights?

In these uncertain times we have seen a great number of contracts being cancelled or severely restricted as a result of the ongoing Coronavirus (COVID-19) pandemic. What are your rights if your contract or agreement has been cancelled or postponed?

It is pleasing to see that retailers and suppliers have taken cognisance of the difficulties brought about by the pandemic, and many are offering no-fuss refunds, or free-of-charge changes to existing bookings. It is inevitable however that disagreements will arise, and parties to an agreement may be unsure of their rights and obligations. Your position will likely be decided with reference to the terms of your agreement.

Many contracts contain a force majeure clause, which is designed to regulate a situation where performance of a contract becomes impossible due to some or other event outside the control of either party. English law does not assign a single meaning to the phrase, and each clause must be interpreted with reference to that contract. The clause should set out the position, and the effect on performance of the contract, and importantly what rights accrue as a result.

The Common Law doctrine of frustration will apply to contracts where no force majeure clause is present, and in circumstances where after having agreed the terms of the contract, some or other event renders it practically impossible to fulfil those obligations, or those obligations are significantly different to the terms contemplated on formation.

Courts are generally reluctant to conclude that frustration has occurred, and the simple fact that performance has become more difficult or expensive to perform is not grounds for frustration. The party in breach may be liable to the other party for damages.  Therefore, it is important to examine the exact facts of your matter to determine whether you are entitled to rely upon frustration, or alternatively if you have any recourse against the party in breach.

An example of a frustrated contract may be a situation where a country has closed its borders to foreign nationals. This flight may be cancelled as its purpose has been voided by the action of the borders closing. Compensation would likely be payable because the unforeseen event has frustrated performance. Contrary to this is a position where the airline was permitted to fly and deliver nationals home to their country, and you (as a foreign national) have boarded the flight knowing of the border closures and travel restrictions in place, it is likely that you will not receive compensation for this error on your part. In practice however, airline booking terms and conditions envisage force majeure, and the contract will be governed by those terms.

The example provided has been oversimplified, and it is likely that your rights will be somewhere on the spectrum between these two points.

We recommend that you contact our experienced litigation and dispute resolution lawyer, Michael Ridgwell, to provide you with more thorough and personal advice.

Michael Ridgwell

Michael Ridgwell

Corporate Litigator

Michael has joined us from his native South Africa, where he is a qualified Attorney of the High Court. Michael is an integral part of the Disputes Resolution Department, and specialises in Corporate and Commercial Litigation. He holds a postgraduate qualification in Corporate Law, and comes with broad experience in commercial and contractual disputes.

Read more about Michael

Contact NRG Law

Bush House
77-81 Alma Road
Bristol BS8 2DP

+44 (0) 117 317 9719
+44 (0) 117 317 9720

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