Temporary Update: Common Questions regarding Contracts and COVID-19
Some contracts include a force majeure clause. They are more common in commercial contracts. A force majeure clause will govern who bears the loss when a contract cannot be performed because of a pandemic or other event outside of the control of the parties.
Be careful if relying on a force majeure contract in a consumer or small business contract. The Australian Consumer Law protects consumers and small business from unfair contract terms. A court can declare that a contract term is void if it is unfair. An unfair contract term example might be a force majeure clause that says a consumer cannot get a refund if the supplier cannot supply the service.
For more information about unfair contract terms, see Unfair Contract Terms.
In the absence of a force majeure clause, the parties may rely on the doctrine of frustration.
Frustration applies when something out of the control of the parties stops the performance of the contract. The common law doctrine of frustration says that the losses lie where they fall. This means that neither party is liable to compensate the other for any loss suffered.
The Frustrated Contracts Act 1988 (SA) changes the common law doctrine and can assist parties to reach a fair result. Get legal advice if you are unsure how this legislation applies to your situation.
Contract law is very complex. Although the information given here may be helpful in deciding if a right or remedy exists, expert advice will still be needed.
A person should not sign a contract unless they have read it, understood it, agree with it, and want to be legally bound by it. If they are not sure, they should get legal advice before signing the contact. Once a contract is signed it is usually a legally binding agreement.
What is a contract?