With only 3 months to go, a postponement of the Olympic Games has finally been confirmed. Why did it take so long to make a decision which seemed inevitable to most of us?
The likely answer is that neither the IOC nor Japan wanted to be the party to make the decision to postpone.
Each would want to avoid being the party instigating a cancellation or postponement so as to avoid the potential financial consequences. It seems the postponement has been agreed by consent, but had that not been the case, the cancelling party would be in breach of contract and could, with an event of this scale, face a claim worth billions of pounds.
It’s possible they could have relied on a force majeure clause which is an essential but often overlooked clause. This clause usually says that a party is not liable if it cannot perform its duties under the contract because of a force majeure event, an event completely outside of their control such as war or earthquakes. This protects parties from unforeseen risk, and is especially important as most insurance policies will not cover non-performance because of ‘Acts of God’.
Without this clause, failure to perform the contract may put you in breach of contract. The other party might terminate the contract and/or ask you to pay damages as a result. Ultimately, a force majeure clause allows parties to agree on a more practical and commercial solution, such as suspending or delaying performance rather than ending the contract.
These problems are not specific to the Olympic Games, in such uncertain times, these problems will apply to many sporting fixtures across the globe which are being cancelled or postponed, and with many contracts incapable of being performed. The extent of the legal and economic ramifications are not yet truly known.
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