On 23 March 2020, the Prime Minister the Most Honorable Dr. Hubert Minnis of the Commonwealth of The Bahamas, declared that by Emergency Powers (COVID 19) (No. 2) Order 2020, amongst other directives to stem the spread of Covid 19, non-essential businesses may either have their employees work remotely or cease to operate until 31 March 2020.
As a result, many businesses closed their doors and sent their employees home. While the World Health Organization announced that Covid-19 had become a pandemic on 12 March 2020, some businesses were not sufficiently prepared for the Prime Minister’s announcement. As such, businesses were thrust into scenarios where, through no fault of their own, they could not comply with their contractual obligations. Parties looked to their contracts to determine whether they could be released from their obligations either by relying upon the contract’s express term of “force majeure” or relying upon the common-law doctrine of frustration. Below, we explore both reliefs in the context of the employment contract.
Force Majeure Clause
A “force majeure clause” is normally used to describe a contractual term by which one (or both) of the parties is excused from performance of the contract in whole or in part, or is entitled to suspend performance or to claim an extension of time for performance, upon the happening of a specified event or events beyond his control.”
Reliance upon a force majeure clause in a contract releases the parties from strict compliance with its terms where one of the contemplated events arises through no fault of either party. Typically, contemplated events include, (1) acts of God; (2) insurrections/war; (3) strikes; and (4) acts of government which directly/indirectly affect performance of the contract.
In the current state of emergency in The Bahamas, some may attempt to argue that circumstances have arisen to invoke the force majeure provision. In some cases it will be clear but others, not quite so, as despite the existence of a triggering event, compliance with the contract may still be achievable. Parties should carefully review their contracts and seek legal advice on whether they ought to invoke the force majeure clause and the consequences of such actions.
When a contract does not contain a force majeure clause, a party may rely upon the doctrine of frustration. Frustration of a contract occurs when unforeseen circumstances arise, through no fault of either party to the contract, which makes completion of the contract impossible or radically changes the purpose of the contract.
The Court will assess the terms of the contract in light of the unexpected event which has purportedly changed the contracts fundamental terms. The Court will consider whether the triggering event has caused a simple hardship or inconvenience or a material change in the contract resulting in incapability of performance (in other words, frustration). In determining whether a contract is frustrated, the Court will consider the following:
- “Whether there is a valid contract between the parties and none of the parties are in default of the contract;
- Through no fault of either party to the contract, whether directly or indirectly, an event occurs which causes the contract to be incapable of performance; and
- The performance of the contract after the event, if continued, would result in the parties’ obligations under the contract being radically different than what was initially agreed.”
Employers and employees should seek legal advice to accurately determine whether the employment contract has been truly frustrated. A party who has failed to successfully argue that the contract has been frustrated may be held liable for breach of the contract and significant damages.
The above should not be considered legal advice. Please consult an attorney should you require legal advice concerning your rights, duties and obligations as an employer or employee.
Dated: 30 March 2020
 Chitty & Jacobs on Contracts 28th Ed 1999 Vol 1. 14-126
 Davies Contractors Ltd v. Fareham Urban District Council  A.C. 696