The COVID-19 pandemic has reshaped the world as we know it. It is undisputed that people, industries and entire sectors have been impacted greatly. Granted, the extent of such impact may vary from sector to sector, but no area is truly immune from the pandemic’s clasp.

The Inferior Court of Appeal, in a judgment delivered on January 19, in the names of ‘Steve Baldacchino et vs Lands Authority’ (10/2021LM), has dealt particularly with the effect that the pandemic has had on the performance of contractual or pre-contractual obligations. In a nutshell, the court inquired: does the COVID-19 pandemic constitute force majeure?

In simple terms, force majeure in the realm of contract law is invoked successfully when the person bound to perform an obligation is unable to perform it due to a force which is external, unforeseeable and out of his or her control. This is what the plaintiffs argued at first instance and at appeal stage.

The facts of the case were as follows. Plaintiffs Baldacchino had applied with the Lands Authority for the temporary emphyteutical concession (ċens temporanju) of a property in Cospicua. This was after a notice by the Lands Authority was published in August 2019. Following this, the plaintiffs duly submitted their bid bond as required and awaited news from the authority regarding their bid. A condition of the tender was that if an applicant fails to sign the relative contract on the date and time stipulated, such applicant would not be refunded the bid bond.

The plaintiffs were informed that their offer had been accepted in September 2019. However, in no way were they informed when, where and at what time the contract was going to be concluded. A saga of futile attempts at corresponding with the authority ensued. At this stage, the plaintiffs wanted to be informed precisely when and at what time the contract was going to be concluded. The plaintiffs were finally called upon by the authority to sign the contract in May 2020.

As one may agree, between September 2019 and May 2020, there was a fundamental change. The COVID-19 pandemic had hit. A contract that was initially negotiated in pre-COVID-19 times needed to be concluded in a context that was reshaped by the pandemic. The plaintiffs, whose livelihood depended on the hospitality industry, were especially affected.

As one of the plaintiffs explained in her testimony, the plaintiff’s financial standing pre-COVID-19 and during the COVID-19 pandemic were very different. This is especially so when one notes that the plaintiff’s reason for applying for the tender in the first place was so that works on the premises take place, with the intention of hosting tourists.

The Administrative Review Tribunal, at first instance, dealt with this issue of force majeure. It referred to several jurists who opined as to what falls within the ambit of force majeure and what doesn’t.

The tribunal likened the pandemic with the global situation following the two world wars

The common thread between these jurists was that for this to ensue, the person needs to be completely and categorically prevented and unable to perform the contractual obligation in question. It is not enough that the obligation is more difficult to perform – it needs to be impossible to perform it. The tribunal likened the pandemic with the global situation following the two world wars. Even in such cases, foreign courts distinguished between impossibility of performance of obligations on the one hand and mere increased difficulty on the other.

So, in which category do the facts in question fall into? The Administrative Review Tribunal explained the circumstances which need to be present for force majeure to ensue. Firstly, the event needs to be irresistible, resulting in the performance of the obligation being completely impossible. Secondly, the event needs to be unforeseeable. Thirdly, the event needs to be external of the will of the person involved. And finally, the person who is to perform the obligation must not be at fault for the happening of said event.

Despite the detailed analysis undertaken by the tribunal, this still was not enough for it to decide completely in the plaintiffs’ favour. What the plaintiffs wanted was essentially to be refunded the bid bond. Instead, the tribunal ordered the authority to set a new date for the conclusion of the contract. Indeed, the tribunal held that while the pandemic may have been ‘somewhat of an obstacle’ to the plaintiffs, it still was not enough to constitute force majeure.

The Inferior Court of Appeal begged to differ. The plaintiffs argued that the existence of the pandemic was and is ‘notorious, public, and uncontested, in such a way that the impossibility of performance invoked by the plaintiffs should not have been doubted’. The court first held that since the plaintiffs were not given a precise date and time for the conclusion of the contract, they should not have to forfeit the bid bond.

The court then delved into the whats, whens and hows of force majeure. It made special reference to the adverse and grave effects that the pandemic had on the hospitality industry. It emphasised that the plaintiffs made a living from this industry and that their finances were severely destabilised by the pandemic. The court remarked that the plaintiffs ‘operate in a sector riddled with uncertainties and cancellations which made it very difficult for investors such as themselves to plan far ahead into the future’.

For these reasons, the Court of Appeal overturned the tribunal’s judgment and acceded to the plaintiff’s claims in their entirety.