On Monday, March 23, 2020, the Quebec government announced that as of midnight Tuesday, March 24, all non-relevant/non-essential businesses and commercial activity in the province will be on “pause” – essentially, shut down – until April 13. If you operate or own a business, this measure, together with Covid-19, will inevitably disrupt your supply chain and production process, will isolate your workforce, and, perhaps, negatively impact your financial forecasts.

This article examines if and how, under the laws in Quebec, a party to a contract could claim COVID-19 and/or the government shutdown of your business, as a force majeure allowing one to put an end to, or temporarily suspend, its contractual obligations.

The law in Quebec provides that, where an event is determined to be a force majeure, the debtor is released from performing its contractual obligations and from liability, in whole or in part and either temporarily or permanently. This legal provision may be modified by the terms of a contract by providing specifically for a force majeure clause allowing a party to be excused from the performance of its obligations, in whole or in part, or to suspend said performance because of the occurrence of some specified event or condition. Whether contained in a contractual clause or not, each situation must be assessed on a case-by-case basis to determine the effect of a given situation. Even if contained in a contract, clauses vary from one to another and must be carefully analysed. Clauses that are silent regarding pandemics, epidemics and other disease outbreaks are likely to be insufficient for a force majeure defense due to COVID-19. If, on the other hand, the force majeure clause clearly covers a pandemic such as COVID-19, parties seeking to invoke the provision will have a lower burden of establishing that the event was unforeseeable. In addition, the coronavirus may qualify as a force majeure event when broader wording such as “Act of God,” or “circumstances beyond a party’s reasonable control” is included in the contract.

Force Majeure Under the Civil Code of Quebec

Article 1470 of the Civil Code of Quebec (the “Code”) provides that a person may free himself from his liability by proving that the injury resulted from a “superior force”. The Code defines “superior force” as an unforeseeable and irresistible event, including external causes with the same characteristics. In other words, a superior force is an event that the relying party could not have foreseen, nor could have resisted and which makes the performance of the contractual obligation impossible. The COVID-19 epidemic and or the government shutdown may each satisfy the criteria of un-foreseeability, irresistibility and externality. The bigger challenge is that in order to suspend or cancel the execution of contractual obligations, the party invoking force majeure has the burden of proving that it satisfied the following criteria:

  1. Unforeseeability: an event is “unforeseeable” if a prudent and diligent person placed in the same circumstances could not reasonably have foreseen its occurrence. Note that an exceptional situation is not in itself necessarily unforeseeable. Query as to whether contracts entered into after the spread of the epidemic in Wuhan or even Italy would meet these criteria.
  2. Irresistibility: the event in question must lead to the absolute impossibility for the claiming party to fulfill its obligation or to take reasonable measures to avoid the occurrence of the event. As mentioned above, the mere fact that the performance becomes more difficult or onerous does not make the performance impossible. It would be difficult to imagine a scenario where a governmental order to shut down your business would not fulfill this condition.
  3. External causes: exteriority or “extériorité” (as used by Quebec courts) means that the party invoking the force majeure event did not create or contribute to the occurrence of said event. In other words, the force majeure must have occurred independent of the party’s will.

Force Majeure Provided in the Contract

Article 1470 of the Code can be modified by the terms of a contract. In fact, many contracts include a force majeure clause that allows a party to be excused from non-performance of an obligation when extraordinary events (usually specified in the clause, such as wars, rebellions, earthquakes, epidemics, and even pandemics),  prevent said party from fulfilling its contractual obligations. As such, one must look at the contract and: (1) identify the force majeure clause (if any); (2) examine its scope and (3) establish the formalities required to invoke it.

Bear in mind that force majeure clauses are generally interpreted narrowly by the courts. Therefore, for an event to qualify as a force majeure, the specific event must be outlined in the clause at issue. Moreover, said event (in our case, COVID-19 and/or the government shutdown resulting therefrom) must have an actual, direct and concrete impact on your ability to perform the contract. An indirect impact of the coronavirus, such as price fluctuations or a decrease in cash flow, is likely not a sufficient argument to prevent one from performing its contractual obligations.

Finally, even when the clause encompasses a specific extraordinary event, parties generally must mitigate their risk and, as such, cannot invoke force majeure if the risk was foreseeable and could have been prevented.

Force Majeure in Past Decisions

 Below are some examples of past disputes that can provide some guidance as to whether Quebec courts will characterize COVID-19 as an event of force majeure:

  • H1N1 Virus: The Quebec court recognized the H1N1 Virus as a force majeure in favour of a travel agency and only partially allowed the consumer to be reimbursed for the trip to Mexico that was cut short by H1N1.[1]
  • September 11 attacks: Plaintiff filed a lawsuit claiming payment of the balance of $100,000 owed to it under service contract cancelled following the attacks. The Quebec Superior Court recognized the event as a force majeure but concluded that the force majeure clause only entitled the plaintiff to fees, costs and disbursements corresponding to the actual value of the services rendered from the date of termination of the agreement.[2]
  • 1998 ice storm (crise du verglas): The Superior Court of Quebec held that the ice storm was a force majeure and, as such, lessor’s evacuation of the premises was justified and did not breach its obligation to ensure peaceful enjoyment of the premises. The lessee was ordered to pay rent.[3]

How to invoke force majeure?

Generally, the contract will require you to give notice to the other party in order to trigger the force majeure clause. Even if the contract does not provide for a formal notification process, you will be well served if you document (1) the impacts of the virus and the government shutdown on your ability to honour your contractual obligations, and (2) your efforts to avoid and mitigate such impacts. Documenting these facts might help you in the event of a dispute or, even better, help you avoid the dispute altogether.

However, do not forget to consider your contractual relationship in its entirety. You might be tempted to invoke the force majeure clause right now, but this could have possible long-term impacts on the overall relationship you have with the other contracting party, as well result in a reputational risk and possibly launch a legal dispute. In addition, bear in mind that if you invoke a force majeure event in one contract whose language is to your advantage, it could be very difficult to argue the opposite in a contract where one of you contracting parties is invoking the force majeure clause against you.

Finally, note that a force majeure clause can excuse the inexecution of an obligation of means (i.e. an obligation requiring reasonable or best efforts to achieve the goal sought by both participants to the contract) or an obligation of result (i.e. an obligation which guarantees the attainment of specific result). However, a force majeure cannot excuse an obligation of warranty (i.e. an obligation whereby the debtor is giving a warranty about the achievement of the result).

In the context of Covid-19, while the stress, panic and uncertainty are at their highest levels, you and your business may be better served in negotiating a mutually agreeable outcome, particularly where the force majeure clause is not clearly in your favour.

[1] Béland c Voyage Charterama Trois-Rivières ltée, 2010 QCCQ 2842.

[2] Gestion Initiative Développement GID Ltée c Québec New York 2001, 2003 CanLII 27447.

[3] Pierrevillage inc. c Construction 649 inc., 1999 CanLII 11136.