Coronavirus, sport & the law of frustration and force majeure

Coronavirus is affecting every part of our lives, and while the health effects are of most immediate concern, the long term social and economic implications are also likely to be very  significant. Legal issues arising in commercial, employment and human rights law will be played out for many years to come. They are often brought into especially sharp focus in sport –because sporting events are a common cause of people coming together in large groups, but also given the commercial and cultural value of many of those events. The news about the development of the virus throughout the world is punctuated with references to the cancellation of major sporting events, or for arrangements being made for contests to be played ‘behind closed doors’.

What happens when a sports event gets cancelled as a result of steps being implemented by a government or regulator to prevent the spread of Covid-19? Or where a team or player refuses to participate because of their fears of infection? Or where a match must be played behind closed doors, but spectators have already bought their tickets? The litigation implications are almost endless: claims by broadcasters and sponsors against those not performing their obligations; by players for negligence exposing them to infection; by spectators who have bought tickets or hospitality packages; and by clubs who have lost substantial revenue.

A key focus in many of these potential disputes will be whether the outbreak of Covid-19, or mandatory measures imposed on organisers of sports events to cancel, delay or play them behind closed doors, will release a party from its contractual obligations. 

Civil law systems generally recognise that parties are released from a contractual obligation which has become impossible to perform. Art. 119(1) of the Swiss Code of Obligations, for example, provides that an “obligation is deemed extinguished where its performance is made impossible by circumstances not attributable to the obligor”. 

The English common law has developed its own responses to this problem, often in the context of large spectator events. The first is the common law doctrine of ‘frustration’ which will have effect where an event arises, which the parties have not provided for in their contract, which makes performance of the contract impossible and which does not arise as a result of breach by one of the parties. The second is the inclusion in contracts of “force majeure” clauses, where the parties expressly provide that they are released from performing their obligations by the happening of a specified event outside their control.

The principle of frustration developed in the context of the cancellation of large public events. In 1861, Taylor, an entertainment events organiser, hired a music hall to put on extravagant concerts and fairs over four days and nights featuring the English operatic singer, Sims Reeves, and a band of minstrels, with fireworks, rifle galleries, air gun shooting, “a wizard and Grecian statues”, tightrope performances and “Chinese and Parisian games”. Unfortunately, a few days before the performances were to take place the music hall burned down. Drawing on principles of civil and common law the High Court decided that both parties were discharged from their obligations under the contract because the music hall had ceased to exist through no fault of either of them. (1) The judge gave a most visual example of the principle: where a painter employed to paint a picture is suddenly struck blind, performance of the contract may be excused.

In 1902, there followed a series of “coronation cases”: various contracts had been made to hire accommodation for viewing processions during the coronation of King Edward VII. But the coronation was postponed, and the processions called off, because the King had appendicitis. Mr Henry refused to pay Mr Krell the balance for renting his rooms on Pall Mall to watch the procession that didn’t take place, and the Court of Appeal, relying on the doctrine of frustration, found he was discharged from his obligation to do so. (2)

As the doctrine of frustration releases a party from the promises it has made in a contract, the courts will not invoke it lightly. It is necessary to establish that an event was unforeseen by the parties, that it makes them incapable of performing the promises they made, and that that event is not their fault. 

Force majeure, like the words (meaning superior force), derives from civil law and refers to an unforeseeable and irresistible event which prevents a party from performing a contract. English law does not recognise force majeure as a particular doctrine (such as frustration). Rather, contracting parties can include force majeure terms in their contracts which provide that they are excused from performing their obligations by the intervention of a specifically defined event. The existence of force majeure clauses further narrows the scope of the doctrine of frustration. If the parties have carefully contemplated the circumstances in which they may be released from performing their obligations in a contract, it will be harder for them to rely on the doctrine of frustration.

In Matsoukis v Priestman & Co. (3) the 1912 miners’ strike caused the defendant to be late in building a steamship for the plaintiff, who happened to be Romanian. The contract contained a force majeure clause and the English Court noted, with a little parochialism, “The words ‘force majeure’ are not words which we generally find in an English contract. They are taken from the Code  Napoléon, and they were inserted by this Romanian gentleman or by his advisers, who were no doubt familiar with their use on the Continent.” Grappling with this foreign concept, the Court found that the complete dislocation of business in the north of England caused by the strike came within the reasonable meaning of the words, force majeure. Unsurprisingly, the defendant’s claim that the steamer was also delayed because the workmen went to football matches was not force majeure: it was a usual incident interrupting work that the defendants, in making their contract, no doubt took into account.

In CAS 2015/A/392, (4) the Court of Arbitration for Sport (CAS) found that the Royal Moroccan Federation of Football (FRMF) was not entitled to postpone the African Cup of Nations tournament in 2015 due to concerns about the Ebola virus. The CAS found that Ebola was not a force majeure event because it did not make the organising  of the tournament impossible; rather, it only made it difficult. Caution ought to be applied with respect to this case given its highly fact specific nature: it was partially dependent on expert evidence suggesting that, at the time, Ebola was transmitted by direct contact with organic liquids and there was no proof it could be transmitted through the air or from touch.  In addition, the CAS was sympathetic to the FRMF’s legitimate fears about Ebola, and although it did not agree to it being a force majeure event, it allowed the FRMF’s appeal against the heavy financial and other sanctions imposed upon it by the Confederation of African Football.

A contract, or set of rules for a sporting body, may specify precisely what events constitute force majeure or it may delegate to a body the determination of whether or not something constitutes force majeure. For example Article 83 of the Regulations of the UEFA Champions League 2019/20, ‘Unforeseen circumstances’ provides that: 

Any matters not provided for in these regulations, such as cases of force majeure, will be decided by the UEFA Emergency Panel or, if not possible due to time constraints, by the UEFA President or, in his absence, by the UEFA General Secretary. Such decisions are final. 

Many sports clubs in England have force majeure clauses in their ticketing or hospitality terms and conditions, but the drafting of these clauses varies considerably. Many simply refer to ‘force majeure events’ without anywhere defining what those events are – which might work in a civil law jurisdiction but is risky in common law as the term has no general meaning other than what the parties explicitly agree. Some clauses refer to “epidemics” which would apply to Covid-19, but others don’t. Clause 5 of Leicester Tigers Seasonal Hospitality terms and conditions, for example, excludes liability for failure to perform due to a force majeure event defined as “strikes, lockouts, industrial disputes, riots, wars, civil disturbance, fire, explosions, storms, power failure, governmental or local authority or rugby authority regulations and requirements, loss of liquor licence and difficulties relating to venues”; while epidemics are not mentioned, governmental or regulatory requirements are. If the government or Premiership Rugby ordered that a match must be cancelled or played behind closed doors that would appear to fall squarely within the definition. If the Club voluntarily agreed that it should cancel a match, it might not.

Delay in the performance of an obligation is not necessarily a frustrating event, a party claiming frustration must show that the delay would make the ultimate performance of the relevant contractual obligation radically different that which was undertaken by the contract. (5)

The postponement of a football match caused by an outbreak of Covid-19 is likely to be an event outside the control of the parties, for which they have no fault and did not contemplate. But postponement, as opposed to cancellation or a requirement to play a match behind closed doors, is less likely to render performance of a contractual obligation impossible. If I buy a ticket to watch a football match, and that match is postponed, I should be able to use my ticket when the match is rescheduled some weeks later. 

The decision of the Premier League and EFL to postpone matches, instead of waiting for the government to ban large gatherings or play matches behind closed doors, would appear to be the most sensible one – allowing those matches to be played at a later stage, rather than abandoned altogether or played in circumstances where a season ticket holder will lose the value of their season ticket and, if the season is cancelled, a club the value of its performance to date. 

Yet there will undoubtedly be a number of further consequential tricky legal issues – what if I am a shirt sponsor who has paid 3 of 4 instalments to have my brand on the front of a club’s shirt until 30 May 2020, but the season does not end until the end of June? A sensible response of the parties might be to vary their agreement, agreeing the real purpose was for a season long sponsorship – but either party might have other reasons they do not want or cannot afford for the contract to continue. If the football season went beyond the end of the middle of summer, when many players’ contracts end, there may be a plethora of problems for clubs. What about clubs who are unable to earn match day revenue during any period of postponement, while still being required to pay players wages, suppliers invoices and tax bills? Will the various financial fair play rules have to be relaxed or even temporarily suspended? 

The only certainty in these most uncertain times is that Covid-19 is likely to generate a plethora of future legal disputes which will shape our legal landscape, especially in the world of sport.

Footnotes

(1) Taylor v Caldwell [1863] EWHC QB J1

(2) Krell v. Henry [1903] 2 K.B. 740

(3) [1915] 1 K.B. 681

(4) Fédération Royale Marocaine de Football v. Confédération Africaine de Football, Award of 17 November 2015 and see Bône N. (2017) CAS 2015/A/3920 Fédération Royale Marocaine de Football v. Confédération Africaine de Football, Award of 17 November 2015. In: Duval A., Rigozzi A. (eds) Yearbook of International Sports Arbitration 2016. Yearbook of International Sports Arbitration. T.M.C. Asser Press, The Hague

(5) Pioneer Shipping Ltd. and Others Respondents v B.T.P. Tioxide Ltd. Appellants [1982] A.C. 724