by Howard Nulty

I’ve just been asked by an estate agent if in light of  the Covid-19 virus if he and the client still have an agreement to sell their property. These are difficult times and all agreements are different. Every contract should be looked at individually, but there are one or two pointers from the law around contracts to assist in finding the answer.

A lot of contracts have in them now a “force majeure” (superior force) clause. The clause will likely set out a list of incidents that might be classed as “force majeure”. It is unlikely that Covid-19 would be in the list, but expressions such a “pandemic” might well be.

The agent has agreed to sell the property owned by the client. To perform the contract the agent has to find a willing buyer and the seller has to pay him. Usually these agreements are time-limited, often for three or six months.

The agent may say that he cannot sell the property as the owner will not allow viewings owing to social distancing. In my view the agent would be able to rely on a force majeure clause if there was one. Can the owner back out? Probably yes as the owner cannot see the would-be purchasers for the same reason. If social distancing was not obligatory but simply the owners choice he would not be able to rely on such a clause.

What if there is no force majeure clause? Well, you would fall back on common law doctrine of frustration. Where something happens that means that the purpose of the contract cannot be fulfilled, then the law may treat the contract as automatically ended or frustrated.

The paying party cannot be the cause of the frustration.

The parties have to go to reasonable lengths to make it work. If despite reasonable efforts it cannot proceed, then it is frustrated and ended.

For example, if the house being sold was destroyed by fire the agreement would be frustrated. If the owner deliberately set fire to it then it would not be frustrated. If there was a flood at the house the agent would expect the owner to dry out the property to sell it and could not claim frustration.

Could the agent extend the term and agree to sell at a later date? Only if the paying party agrees. Frustration does not allow for extensions. Either the agreement exists or it doesn’t. It cant be modified by frustration.

Would the agent be able to recoup anything? Yes, he would be able to recoup any reasonable out of pocket expenses paid by him before the frustration.

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