BY now, all Jamaicans are acutely aware — and in no danger of forgetting — what the term ‘Category 5’ truly means. The devastation which hurricane Melissa wrought has made ineluctably clear the urgent need to embed hurricane resilience into every aspect of Caribbean life, including the way we do business.

Companies generally rely on legally binding agreements to secure their operations, and in addition to supporting the national economy these contracts obligate them to suppliers, customers, creditors and employees. Consequently, the paramount importance of a reliable contract necessitated the development of ‘the Doctrine of Frustration’ in contract law, and the evolution of ‘Force Majeure’ clauses in contract drafting.

Frustration

Put simply, the doctrine provides that where a contract becomes impossible to perform as a result of some event outside the control of its parties (of which a hurricane can be an example), the parties whose contractual obligations were prevented by the unforeseen event are excused from liability under the contract, to the extent of the frustration. Three common situations which have been recognised in law as likely to frustrate a contract are:

1. Destruction of the Subject Matter

Where the performance of the contract is predicated on the continued existence of a particular thing, then the destruction of that thing prior to the performance of the contract (and being due to no fault of either party) is likely to render the contract frustrated. Examples of this include contracts for the supply of agricultural produce or of construction equipment, or the leasing of a building which was destroyed or damaged by the rain and wind of very strong hurricane.

2. Personal Service, Supervening Incapacity

Where the contract required the performance of a service by a specific person(s) for whom no viable alternate(s) can be found and the specified individual has suffered injury, or perhaps [is] physically prevented from travelling to the agreed location to perform the obligation, then the contract may be frustrated. An example of this may be those who are stranded in the communities currently marooned by fallen trees or collapsed roads.

3. Non-Occurrence of an Event

If a business makes an agreement which is dependent on a particular event taking place, then the cancellation of that event may cause the agreement to be frustrated. The examples of this in recent weeks are myriad.

Melissa precipitated several instances of all three of the above situations. In the aftermath, an immediate priority must be renegotiation of the affected agreements with a view to establishing new contract timelines, if possible, and taking into consideration that the effects of the hurricane are still with us.

Force Majeure

Looking ahead, businesses should be sure to include force majeure clauses in their essential contracts. These clauses are a separate legal concept from the doctrine of frustration but they seek to anticipate potential, contract-frustrating events by outlining what the parties agree should happen if one or more of those events (specified in the clause) occur. Without a force majeure clause the doctrine of frustration (if applicable) will likely mean that the adversely affected party must simply bear their losses when the unforeseen event occurs. Even worse, when the doctrine is not applicable and there is no force majeure clause, but a party was still prevented from fulfilling the contract, then liability for breach of contract may be in the offing. On the other hand, a well-drafted force majeure clause can make arrangements for:

1. Refunds

2. Suspensions of duty/service

3. Moratoriums on debt repayment

4. Continuity of business

5. Scaled-down but sustained operations

6. Loss/burden sharing;

and many other business-appropriate remedies.

Even companies which already have force majeure clauses in their essential contracts should not assume they are sufficient. In an age of escalating climate risks, Caribbean businesses must prioritise hurricane resilience in all facets of operations — and in any event should consider making their force majeure clauses more comprehensive and more attuned to the contract subject matter. Lastly, though not a legal doctrine, extending grace to those individuals and businesses who have sustained heavy losses because of the hurricane may be the most important consideration in times like these.

Jamaiq Charles is an associate at Myers, Fletcher & Gordon and is a member of the firm’s Litigation Department. Jamaiq may be contacted via Jamaiq.charles@mfg.com.jm or through the firm’s website at www.myersfletcher.com.

This article is for general information purposes only and does not constitute legal advice.