Legal implications of COVID-19 for businesses and companies in Nigeria

Recently, the world has be awashed with the rapid spread of the Corvid-19 virus (CORONA VIRUS). Nigeria citizens are at an elevated risk of contracting this virus and many scientists all over the world have been thrown into the turmoil of finding the cure to this widespread epidemic.

Here is this brief article dabbles into the legal implications of the virus in Nigeria from human rights, contractual, taxation, employer and employee laws.

i). Effect of coronavirus on contracts and contracting parties

Businesses worldwide have been forced to a halt due to the challenges of the spread of COVID-19 (coronavirus), including interruptions to supply chains and challenges in meeting contractual obligations.

With no end to the outbreak in sight, this makes it important for businesses to understand and consider their options to mitigate possible risk exposure.

As it stands, many businessmen will be caught between the Devil and the Red Sea in a bid to fulfill their contractual obligations within the stipulated time per the contract agreement and the current order of the government on shut down of basic Federal and State infrastructures, and other attendant necessities.

The problem will further be escalated for contractors when the contract does not include a clause which allows for emergency situations as this or where the contract is iron- clad, thereby placing the burden of delivery without excuse on the contractor.

How about situations where the contractor is to be paid but due to various shut downs, he cannot be paid and money and resources are been wasted due to the inability to pay the contractor and the contract did not envisage this?

Is coronavirus a legal excuse not to pay or perform a contract?

This virus shows the importance of three legal doctrines and their relevance in cases of emergency such as this:

(1) Doctrine of frustration

(2) Force majeure and

(3) Impossibility or impracticability of performance

1. Doctrine of Frustration

Performance under a contract can be excused for Frustration. Frustration as a defence in law is asserted where a change in circumstances or situation, outside of the parties making, makes one party’s performance virtually worthless or unachievable to the other party in relation to the agreement.

To prove frustration, you must show that: (1) the contract must be in the midst of being performed; (2) the frustrated party’s purpose in making the contract must have been known to both parties when the contract was made; (3) the purpose must have been fundamentally frustrated by an event not reasonably foreseeable at the time the contract was made, not due to the fault of the frustrated party.

2. Force majeure

A party can also be relieved of a contract based on a force majeure clause. A force-majeure clause relieves a party from penalties for breach of contract when circumstances beyond the party’s control render performance untenable or impossible.

The purpose and intent of force majeure provision is to protect the parties from events that are agreed to be outside normal business risk. Force majeure clauses excuse the performance of contractual obligations if specified events outside the parties’ control have prevented such performance.

If successfully invoked, the clause would excuse a party’s performance of its obligations under the contract, thereby avoiding a breach.

Force majeure clauses are typically narrowly construed. Such a clause will generally only excuse a party’s nonperformance if the event that caused the party’s nonperformance is specifically identified.

Force majeure events may include: acts of God; acts of a government or the public enemy; natural disasters; fire; flood; epidemics; quarantine restrictions; strikes; freight embargoes; war or acts of terrorism.

A force majeure clause applies to objective events that directly affect a party’s ability to perform the contract in question, not the ability to make a profit.

3. Performance Impossibility or Impracticality

The doctrine of impossibility or impracticability may also allow a party to avoid performance of its obligation. There are two types of impossibility:

a.) Original impossibility and

b.) Supervening impossibility.

The former is impossibility of performance existing when the contract was entered into, so that the contract was to do something which from the outset was impossible; in contrast, supervening impossibility develops sometime after the contract is formed.

Under either type, contract performance may be excused when at the making of the contract, or thereafter, performance became impracticable due to some extreme or unreasonable difficulty, expense, injury, or loss involved, rather than that it is scientifically or actually impossible.

The important question for the doctrine to apply is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both parties when they entered into the contract. Although absolute impossibility is not required, there must be a showing of impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved.

Note: Where your business is caught in this situation it is legal wisdom to contact your lawyer to:

1. Send out a letter informing the other party of the present situation.

2. To devise a means to reduce or mitigate risk or loss

ii). Employer/employer legal responsibility:

An employer is required to protect the health and safety of workers at the workplace in accordance with the provisions of Factories Act and Labour Laws. It is obligatory for the employer, under employment contract to provide safe system and place of work and to take measures to ensure the safety of the worker during work related matters.

The rights of employees in Nigeria are heavily guarded by various laws such labour Act, Employee Compensation Act, Factory Act, etc.

•Can my employer terminate my employment during this COVID-19 lockdown?

By law, subject to agreement between parties, the employer can terminate the employees’ employment at any time so far he follows the LA by giving you the required notice or payment in lie I of the notice.

•Can I get a paid sick leave?

Every worker is entitled to sick leave by Law according to section 16 & 18 of Labour Act. Apart from the provision of the Mano Act, an employee is entitled to protect the employees.

•Can my boss force me to take medical test?

Medical test may be a company policy but you cannot be forced to take a medical test. It is against your Constitutional right to Privacy according to Section 37 of the 1999 Constitution.

iii) Taxation during COVID-19 crisis

Many tax return will become due during this period of pandemic widespread. Government has issued a lockdown of facilities and service. How then will companies effect and file their returns?

For instance the return date for Value Added Tax (VAT) and WithHolding Tax will be due this March. There are many companies whose income tax, tertiary education tax, national information technology development fund levy and capital gains tax are due in March 2020.

It is only sensible that the tax authorities make social plans on this and grant a tax extension period. So your inability to file tax returns where the government has issued a lockdown order cannot effect or contribute to your liability.

iv). Human right in period of pandemics

Fundamental human rights, as we know, is provided by the Constitution. But as important as they are, they are not totally supreme. They can be breached in times of National Security or cases of National Emergency. In the light of coronavirus, certain restrictions can be made on individual freedoms under the Law such as right to movement, movement of people can be restricted etc.

Conclusion

Companies must understand the legal implications attached to the recent widespread of the pandemic as it relates to their various legal obligations to their staff, costumers, clients and to themselves. This will help in their decision making ability.

Opatola Victor Esq, an Abuja based legal practitioner, writes through [email protected]

source: https://thenationonlineng.net/legal-implications-of-covid-19-for-businesses-and-companies-in-nigeria/

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