Attention: Cresa Ottawa COVID-19 Initiative

These are unprecedented times, and we want to help. Cresa Ottawa is offering to support clients and major employers with rent abatement discussion with their landlord. We're not seeking any compensation for this effort, nor are we suggesting that the landlord will simply gift any relief provided. We have several strategies we are employing to achieve this, and depending on your situation and that of your landlord, we expect to be able to arrange a period of lower rent, or no rent whatsoever. The rent relief may represent anywhere from between 1 and 3 months. We hope that our ability to work with your landlord to support you in this effort will contribute to your ability to get through this crisis smoothly. Let us assist with this effort so you can focus on other pressing matters.

 

Our team is fully engaged working out of their home offices and ready to assist. Please call us at 613 688 7200 before May 8th or fill in the form below if you are interested, so we can discuss your situation. 

 We know things will get better in time. 

Force Majeure Clauses – What Are They and What Do They Mean

Cresa Ottawa

Cresa is the world’s most trusted occupier-centric commercial real estate firm. We exclusively represent commercial tenants and solely focus on finding the best office space that drives superior results for your business.

Ask us how we can help you re-negotiate your commercial lease during COVID-19. Talk to one of our advisors today -

613 688 7200

March 30, 2020

Does COVID-19 excuse parties from performing under a contract? What happens if such parties cannot perform?

The widespread impact of the COVID-19 virus on our daily lives is evident. Restaurants and bars are closed or closing, travel is restricted, and many of us are working remotely. For businesses, the outbreak may mean an inability to fulfill orders, provide services, make payments, or meet other contractual obligations.

Does COVID-19 excuse parties from performing under a contract? What happens if such parties cannot perform? In many contracts, including real estate leases, a “force majeure” clause can provide the answers.

The Force Majeure Clause – What is it?

A force majeure clause is a contractual provision that seeks to (a) allocate among the parties the risk of certain events that are beyond their control and (b) mitigate the negative effects of such events. These clauses are usually found at the end of a contract (commonly known as the “boilerplate”) and typically consist of four components:

  • A statement that performance under the contract is excused for one or both parties upon the occurrence of certain events

  • A list of force majeure events (specific or general)

  • The impacted party’s obligations if an event occurs (notify the other party, attempt to mitigate, etc.)

  • Other remedies (e.g., termination without liability, suspension of certain obligations, refund of deposits)

Typical force majeure events include: (a) acts of God; (b) flood, fire, earthquake, epidemics, or explosions; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order or law; (e) actions, embargoes or blockades; (f) action by any governmental authority; (g) national or regional emergency; (h) strikes, labor stoppages or slowdowns or other industrial disturbances; (i) shortage of adequate power or transportation facilities; and (j) other events beyond the reasonable control of the impacted party.

My Contract Contains a Force Majeure Clause – Am I or the Other Party Excused?

Read the language of the clause carefully. Not all clauses allocate risk to both parties equally. For example, many force majeure provisions favor the party with non-payment obligations (such as the party providing services or delivering goods) and may carve out payment obligations from the clause altogether (meaning a force majeure event might not excuse a party’s obligation to make payments, such as an obligation to pay rent). 

"Merely because a party’s performance is being impacted by an external event does not necessarily mean the force majeure clause is triggered."

If you (or another contract party) are being affected by a force majeure type of event, there are several threshold questions to consider. Is the type of event specifically listed in the contract as a force majeure event, or is the contract language broad enough to encompass it? If the event is covered, does your business need to comply with certain obligations before taking advantage of the clause? For example, must you attempt to mitigate the effects of the event or must the event be ongoing for a certain duration before you can terminate the contract? 

If you find yourself on the other side of a force majeure clause and the other party to your contract is attempting to terminate it or excuse their performance, consider the same questions. Merely because a party’s performance is being impacted by an external event does not necessarily mean the force majeure clause is triggered.

Conclusion

As the impact of COVID-19 continues to spread and forces businesses to cancel events and otherwise struggle to meet contractual obligations (like rent payments), the importance of force majeure provisions will become evident. For those seeking to terminate a contract or otherwise excuse performance because of COVID-19, such clauses may provide relief, but should be examined carefully. 

Wondering how COVID-19 can impact your businesses' real estate? At this time you need an expert on your side who will guide you step by step through your options. Get in touch with one of our brokers today.

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E: ottawa@cresa.com

D: 613.688.7200

130 Slater Street, Suite 1000

Ottawa, ON K1P 6E2

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