In the recent decision of European Professional Club Rugby v RDA Television LLP, the High Court allowed for the lawful termination of a contract due to COVID-19 on the grounds of force majeure.
The contract in question was between the governing body and organiser of two European premier club rugby union competitions (Organiser) and sports media broadcaster (Broadcaster).
In May 2018, following a tender process, the Organiser entered into a media rights agreement (Agreement) with the Broadcaster. Under the Agreement, the Organiser agreed to license various broadcasting and media rights in upcoming championship games, including the right to broadcast live footage of the 2019/2020 season from 1 July 2019 – 20 June 2020. The Broadcaster had paid a considerable up front sum to the Organiser for such broadcasting rights.
On 11 March 2020, COVID-19 was declared as a global pandemic. The following week, the Organiser announced that the quarter finals, semi-finals and finals of the season would be postponed beyond the scheduled end of the season on 20 June 2020.
On 5 June 2020, the Broadcaster wrote to the Organiser stating it was exercising its right to terminate the Agreement in accordance with the force majeure provisions. The Broadcaster also claimed a partial refund for the upfront sum it had paid for the media rights in the postponed matches.
Force Majeure Provisions in the Agreement
Clause 26 of the Agreement provided that neither party would be liable for a failure or delay in performing its obligations to the extent that the delay or failure was caused by a force majeure event. A force majeure event was defined as any circumstance beyond the reasonable control of a party which affected the performance of its obligations under the MRA, including (amongst other things) “epidemics”.
Clause 26.4 stated: "if the force majeure event prevents, hinders or delays a party's performance of its obligations for a continuous period of more than 60 days, the party not affected by the force majeure event may terminate this agreement by giving 14 days' written notice to the affected party".
The Broadcaster argued that COVID-19 had significantly delayed the conclusion of the rugby season and live matches were not made available as promised in accordance with the rights granted to it under the Agreement.
The Broadcaster therefore believed it was entitled to serve notice terminating the Agreement under clause 26.4 of the Agreement when it wrote to the Organiser in June 2020.
Contrastingly, the Organiser argued that the Broadcaster was not entitled to terminate the Agreement. The Organiser’s reasoning for this was that for a party to terminate the Agreement under clause 26.4, it had to be “not affected by the force majeure event” and both the Organiser and the Broadcaster had, in different ways, been affected by COVID-19.
The Organiser claimed damages against the Broadcaster, asserting that it had suffered as a result of the Broadcaster wrongfully terminating the Agreement.
The court found in favour of the Broadcaster and rejected the Organiser’s argument that where both parties are affected (in different ways) by the same force majeure event, the effect is to deprive the parties of recourse to terminate/bring a claim in connection with that force majeure event.
This resulted in a payment of approximately €200,000 being payable by the Organiser to the Broadcaster in respect of media rights which it had received payment for but not provide to the Broadcaster in accordance with the terms of the Agreement.
What does this decision mean for businesses?
In addition to illustrating the importance of having a properly constructed force majeure clause and contract, this case demonstrates that, where a contractual right exists, a party can terminate an agreement due to a force majeure event caused by COVID-19, notwithstanding that it was also affected by the same force majeure event.
However, it is important to remember that force majeure is not a concept that exists under English common law. If force majeure provisions are not included within a contract, then the parties to that contract would not have the rights available to it that the Broadcaster had in this particular case. Similarly, it is important to include a right to terminate the contract as a result of an ongoing force majeure event as part of such force majeure provisions.
It may also be the case that, as a result of decisions like this, businesses will seek to carve out COVID-19 from force majeure provisions by including specific COVID-19 clauses in their contracts, specifying how the parties will deal with any impact COVID-19 may have on the performance of the contract.