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.