COVID-19 – some legal implications for contractual obligations and employment law.


The COVID 19 pandemic is having an unsettling impact on the normal operations of businesses worldwide and as such has disrupted individuals and businesses thereby hindering their ability to perform contractual obligations. This includes many businesses in Jamaica.

With this interruption caused by COVID 19, many contracts will be delayed, interrupted, or even terminated either because the party has found itself in a situation where it is no longer able to comply with its contractual obligations or it sees this event as an opportunity to be released from its obligations. When such unusual circumstances occur, businesses should examine their contractual rights and obligations as well as business continuity plans.

In these circumstances businesses may find the following general points on contractual and employment issues helpful.

 To what extent can a force majeure clause protect a non-performing party from liability due to impact of COVID-19?

 The standard effect of a force majeure clause is that the person who is affected by the event gives notice to the other party that they cannot perform to be excused from performance for a period. Performance is typically suspended for a short period or the duration of the force majeure event. If the force majeure event becomes prolonged or permanent, then the clause may allow either party to terminate the contract. The party seeking to rely on a force majeure clause will need to be able to demonstrate that the event (COVID-19) is captured by the clause, and that it is the cause of the party’s inability to perform the contract.

Force majeure clauses which reference epidemic, disease and/or quarantine outrightly support an assertion that COVID-19 is an event falling within the scope of the clause. Force majeure clauses that reference acts of God or restraints of a governmental body can similarly be relied upon in connection with the impact of COVID-19.

What if the contract does not include a force majeure provision? 

If the contract does not contain a force majeure clause, the doctrine of frustration may be available in some circumstances to excuse contractual performance and discharge the parties’ respective obligations under the contract. Frustration is available when a supervening event has occurred without the fault of either party, and for which the parties did not allocate risk in the contract, but which causes performance of the contract to become “a thing radically different” from what the parties had in mind when entering into the contract.

While the remedy flowing from the doctrine of frustration is less flexible than a well-drafted force majeure clause, frustration may nevertheless apply to insulate a party from liability for non-performance of its contractual obligations as a direct result of the impact of COVID-19. It is anticipated that parties who have a mutual desire to see a contract continue, but recognize the unanticipated consequences of COVID-19, will seek to renegotiate a contract in good faith.

How are Employment contracts impacted by COVID 19? 

Managing this pandemic in the workplace involves considerations under employment law. The impact of COVID 19 on businesses is gravely significant.  The government has been promoting social distancing as one of the ways to contain the spread of the virus locally, instructing work-from-home directives to non-essential workers. Employees face the possibility of redundancy / being laid off as businesses might be forced to shut down or dramatically reduce their activity due to the coronavirus.

A lay-off is a temporary suspension of employment for a specified period without pay. Employees may be laid-off for a period without pay in circumstances where there has been a complete close-down or cessation of the business. If lay-off is affected, and at the end of 120 days the situation does not change, employees can elect to have their positions made redundant.

Redundancy is an alternative which would have the effect of terminating the contracts of employment right away. If an employer elects to proceed with a redundancy, the costs associated with this would be:

  1. Pay in lieu of notice of termination;
  2. Compensation for unused vacation leave; and
  • For employees who have worked for over 104 weeks: two (2) weeks’ pay for each year that they have worked; three (3) weeks’ pay for each year for every year of employment ten (10) years and over.

These and various other legal options to address business disruptions that arise are largely dependent on the existing contractual arrangements, as well as the exact type and circumstances of each business.

 This article is intended to provide general information only and is not to be relied on in place of legal advice.

Emile G. R. Leiba is an Attorney-at-Law at the law firm DunnCox. You may contact him at and Kelly A. Akin is an Attorney-at-Law at the law firm DunnCox. You may contact her at


Share this article