ENTREPRENEURS’ HANGOUT- March 31, 2020

John:

I personally would like to reassure everyone that we are in a safe place. So if you have any questions, feel free to share them. I know a lot of people got answers to their questions last time. And let's make progress. Let's see that after this season we all come out stronger, which is the main, goal of setting this up. So without much further ado, I’ll welcome Pirzing to please take the stage while I mute my call. Welcome Pirzing. Welcome, everyone.

Pirzing:

Good evening, everyone. Great to be here and John, thank you for the invite. Thank you for the opportunity to lead the conversation today, as I said its leading so I would really count on your feedback, comments, questions, to help me also broaden my knowledge. When we started conversing last time, I was fascinated with the dimension, the thoughts about thriving in these times. Thriving in these times, opened my mind to a lot of things giving me perspectives that I had not had before now, and it's helped me to see things in a clearer perspective. Now, I will go straight to the paper or our discussion today, which is COVID-19 as a Force Majeure.

Now, these are not normal times. I mean, I'm sure we get to hear this every time but it's also an opportunity- it's a tipping point for us to harness the right strategies. Now, while we are at it examining what is happening, what is going on, the rules of economics competition remain in play. And by that I mean obligations are still ongoing. Competition is also looking at your weakness. People have had time to rest people are examining and reviewing. So they're having fresh perspectives. Now to guide us, we would look at it essentially from 4 perspectives now, events that have occurred since the onset of COVID-19. The second would be how the events are supervening events generally with a focus on Force Majeure, practical next steps of dealing with stakeholders and counterparties and then we would take time to review some scenarios as part of our conclusion.

So as part of efforts to stop the spread of COVID-19, we're all complying with the combination of recommendations and guidelines from WHO and our governments which include lockdown, stay at home, social distance, virtual meetings, closure of borders, airspace, restrictions on movement. Now these restrictions have altered the normal order of work and provision of services. However, contractual obligations highlighted are still in play, and there's no one size fits all recommendation for how you will deal with potential litigation post COVID-19. I am deliberate about potential litigation because it's how we deal with instances now that would either avert litigation or create litigation. I'm sure in one way or the other, we receive messages from banks, service providers, notifying us of alterations, changes that have been made or in how they are going to render services. Now, these are notices, and the whole essence is to prevent disputes and to guide in events of any person incurring any loss. It is important to stress also, that the possible dispute areas could be in delay of provision of services, failure to provide the services, overrun of liabilities from counterparties. In the course of our discussion, I'll spend some more time to dwell on it. To have an assumption that counterparties, stakeholders are aware of COVID-19 and should understand is a mistake we should not make. We should be deliberate. And the reason is because in crisis or market failures, minds change quickly and there can be serious consequences. So what do I mean by this? You’re rendering service, things have changed so competition is taking advantage, your counterparty is trying to change his mind. What do you do in that circumstance? Or you fail to render service, The Counterparty has incurred a loss from another service he's supposed to render because of your failure to render your own service. So what then happens? COVID-19 was not contemplated. But it has now created a supervening event. Now supervening events is one you didn't expect or envisage and is one you have to contend with.

For purposes of our conversation, we’ll group supervening events into three :force Majeure, frustration and supervening illegality. Now, What is force majeure? I'm sure in one way or the other in our contracts, we would have seen this, maybe we've not had time to dwell on it, but we would X-ray it a little more today. Now, force majeure simply put is any circumstance not within a party's reasonable control, including without limitation. Now, the long clause and for purposes of drafting as lawyers we usually either explore the short clause or the long clause now. The long clause for force majeure lists the following: acts of God, flood, drought, earthquake or natural disasters- the first The second is epidemic or pandemic, third terrorist attack. Civil War civil commotion or riots, threats or preparation of war, armed conflict, imposition of sanctions embargo or breaking off diplomatic relations, nuclear, chemical or biological contamination or sonic boom any law any action taken by government or public authority including without limitation imposing an export or import restriction, quota or prohibition of failing to grant the necessary licenses or concept collapse of buildings fire explosion or accidents, any labor or trade disputes strikes, industrial action or lockouts valid and in each case by the parties seeking to rely on this clause or companies in the same group as that party. non performance by suppliers or subcontractors other than by companies in the same group as the participants rely on this clause, interruption or failure of utility. The general thinking is that force majeure under common law is not implied. parties must expressly provide for it in their contract. courts construe a limited number of force majeure items strictly, which have been well litigated. Now, I talked about the long version, which is the one I listed, the shorter version says neither party shall be in breach of disagreements or liable for delay in performance or failure to perform any of his obligations under this Agreement. If such delay or failure results from events, circumstances or courses beyond reasonable control. In such circumstances, the time for performance shall be extended by a period equivalent to the period during which performance of the obligation has been delayed or failed to be performed or the affected party shall be entitled to a reasonable extension of the time for performance of Such obligation. If the period of delay or non performance continues for a number of weeks, months, the party not affected may terminate agreement by giving a number of days written notice to the affected party.

Now, another shorter version just highlights the fact that an event or force majeure, including but not limited to civil commotion strikes no crowds, Boss mode insurrection or other acts of God.

At this point, I'd say we should, if possible, access some of our agreements and look at existing force majeure clauses, it would help a conversation if you're able to look through, see what areas your force majeure clause in the contract you've executed, has covered and the reason is, you cannot imply them into the contract at this point. Yes, they are supervening events, but which one captures your circumstance. So it is important to look closely and then to guide us in how to deal with it. Now, the other thing I mentioned that talked about force majeure. Now, frustration. Frustration occurs when Whenever the law recognizes that without default of either party contractor obligation has become incapable of being performed because the circumstances in which the performance is called for would mandate thing radically different from that which has been undertaken by the contract. In summary, it was not this that I promised to do. Now, frustration only emerged as a contractual doctrine in the late 19th century, just as advances in public health medicine were reducing the frequency and expense of pandemics. Perhaps, for that reason we may not yet meet Well, this is for me, I had, during the course of my review, seen a case that was on all fours on pandemic as frustration but it doesn't mean it doesn't exist. And I would welcome inputs or thoughts around this. So when you're faced with this scenario, like COVID-19, it could have either created a frustration or supervening event in the in the sense of an illegality. In that context it's about a natural or a national or supernatural government saying specific events are hereby prohunited and you can’t carry forward with them. social gathering and the likes. Imagine you one of one of us is a an entertainer and has a sold out concerts. You can't carry on with a concert what then happens? What are the liabilities that will run on from this? Now, what are the practical next steps? The agreement Yes, like I had mentioned must be express but it doesn't have to be called or labeled as a force majeure, what should be identified in substance or clauses which anticipate that there may be some sort of supervening event beyond the control of the parties be it factual, such as a pandemic causing staff to be ill and unable to work, or legals such as restrictions imposed in reaction to a pandemic which may prohibit staff from traveling to work and cause them to be unable to work, which may inadvertently affect the performance of a contract. Such clauses may be very specific in the events listed. they may also be general for example, makingf reference generally to acts of government or to performance having to be lawful or anything preventing performance that is beyond the party's control. force majeure clauses are construed restrictively and are often subject to implied limitations. The reality is that COVID-19 itself may not constitute force majeure for a lot of people, it would most likely be the government guidelines, the shutdown orders. This is because most contracts use the abridged clause, which is the one I said the short one and then the long one, which expressly lists adverse government action and this would be the short trigger to declare force majeure. force majeure clauses contain detailed protocols which must be complied with a bill. Now the affected party is required to close the force majeure clause in the agreement. And then as soon as reasonably practical after the start of the force majeure event, notify the other party in writing of the force majeure event the date it started, likely or potential duration and the effect of the force majeure event on the ability to perform any of its obligation

All reasonable endeavors to mitigate the effect of the force majeure event on the performance of its obligations.

However, If the force majeure event prevents hinders or delays affected parties performance of his obligation for a continuous period. The party not affected by the force majeure event may terminate this agreement by giving a written notice to the affected party. The formalities specified in the contract are important notice invoking force majeure may need to be given in a particular way or in a particular time period or the events or consequences may need to be clear or certified by an independent state or other body. Two key points. The first is that formalities only matter if framed as a condition precedent that will be a question of construction in each case. The second is that even if framed as a condition precedent formalities can be waived. waiver is an omnibus term, which catches a range of different doctrines including forbearance election and estoville. the consequence of force majeure clause will also depend on the express terms of the clause. normally, parties agreed to suspend performance or excuse liability for non performance rather than provide for an automatic discharge of the contract. Sometimes a long stop date is included. Other times, there's no long stop dates. In the latter scenario parties facing indefinite suspension may want to consider their ability terminate at a common law, which is the law we practice in Nigeria by Express provision or by implied provision. At this point, I would welcome any comments or if I lost anybody at any point, I would welcome questions so that we can take the practical scenarios together and hopefully conclude In summary, all we've just tried to highlight is that force enjoys any event nobody expected nobody planned the COVID-19 would happen in 2020. now there are obligations, there are contracts that have been entered into. The reality is those obligations are subsisting their life. Would we be ignorant of competition taking advantage? Or would we be ignorant of overrun or delays or inabilities to deliver? The whole summary of it is we need to engage counterparties in active conversation, to say, well, this has come up we didn't envisage this. This are the measures we're putting in place to mitigate this. That has happened. the conversation is essentially a renegotiation of terms. This has happened. And I would actively recommend against boxing yourself to timeframes because nobody knows when the lockdown would be suspended or how soon they will be cleared the the pandemic is over. And we can resume normal life. So in your negotiations, you should reference the fact that this is beyond your control, however, these are the efforts, you're going to make and steps you would take however, in terms of definite timelines, for those that are beyond your control. You should also engage the counterparties, who you're relying on to deliver their own part. that's it so we can take the practical scenarios. I mean, it would help us I have some practical scenarios I would love to share out wants to make sure we're all on the same page so we can actually have the conversation so you

John:

I'm interested in hearing you talk about it again, from a slightly different perspective. So assuming we are the ones who have people that are supposed to perform certain obligations to us. Right? beyond what the law says, I would like your perspective on some, for lack of a better word fair terms that we can also give to people that are probably obliged to performing certain duties to us at a time like this.

Pirzing:

Okay, so john, this is what we tried to highlight are the ones that are potential damages to us Beautiful side is the one where we are the ones at the other side, and we're in a position to control and dictate the terms. Now what then happens is for us to first of all, review our contracts and see what is provided in it, because yes, we're on this side but don't take it for granted that the other party may not want to be mischievious. The other party may also want to exploit situations like I said, These are tough times people would want to play funny, and like they say on the streets, everybody would want to exploit the other and take care of the interest of number one, which is their own selfish interest. People will look for ways to circumvent the contract. So it is important from this side. The fair side to go is to engage the other party. Now, to engage them to say, Oh, these are the timelines we agreed on, which is what I did on a particular contract.

A client had paid for a property and had paid in full. the property was supposed to be delivered in February. Now as at the time of physical inspection, when I was in Lagos, I had asked them expertly Are you able to deliver in February and they gave assurances that no, they can deliver theyre fine, fine. They would deliver as of February. Now the issue there are rules also in this scenario where they had made commitments that we're going to provide a swimming pool, and a general common generator for everybody in the property.

But as the contract progressed, they varied it. They took out the swimming pool and created areas for each person to put his own generator- 4 town houses. so I engage the contractor and said, My client is unhappy that this has happened. What is it and you know, they explained- this is what happened, they had the day Though there were there were disputes from other projects they had as regards payment for January or so they want to avoid on this project now, but the contract they had with my client didn't specify the swimming pool. But he was also express about the generator. So I tried to mediate about point to see Well, how about compensation, which they did, and they offered to take care of situations. However, the potential dispute is my client in this scenario, to keep their commitments and didn't renew their rent, with the expectation that you would fold you and the property will be delivered. Unfortunately, they didn't deliver. My clients have had to take or get another apartment. And COVID-19 came up, then the shutdown came on. Now when we come out of COVID-19, I would love to see how they would react because my plan is to engage them to say what's going on. This is a potential dispute. You need to begin to rectify this and move fast. So in fair terms, I would engage them to say do this because they are people I know, they're also friends. So it's to prevent any further dispute between parties. But in claiming force majeure, in this circumstance, you recall, we had had previous conversations, so you wouldn't avail them much. It's a function of how we're able to manage the situation. So it's a different situation, you’ve had those conversations, which I would recommend that on this side, for counterparties, you would have those conversations to say, Well, this is what is going on. And for those ones, where you also have obligations to other people, you would call the other party to this risk. And I'm not saying all round conversations. At this point, you would begin to line up your documents because you need to document so you need to take the pains to write formal letters they May be one paragraph. one page letters you need the other party to Be on notice that these are your expectations in the event that it becomes a dispute. You have correspondence.

John:

So I'm going to open the floor. Remember if you’re not speaking leave your mic mute. But if anybody has any questions is a good time to throw them up.

Tayo:

Thank you so much for the analysis. Very, very detailed. Definitely opens one's eyes to a broad spectrum. you actually touched on a few things That, I've kind of seen, you know, just thinking about this force majeure thing. We had a call, I think was even last week. in house legal was just raising these issues. Now we're talking about people potentially defaulting on on some rents and we're saying can be can they call on force majeure and all of that and then after that I just did some research of my own and it was interesting to note that there's not a lot of case law to to back up pandemics like this, you know, being stated as force Majeure I think even things like SAS and Ebola did not throw up cases to classify a pandemic as Force Majeure. what I said that you touched on was what we what I finally found that The act of government is more likely to be the issue that that throws up force majeure. And obviously, with Buhari’s proclamation, the 14 day work stop definitely brings that to bear, it was very surprising to find out that even banks will not be will not be open and the central clearing system will not be working for those 14 days. That's very fearful. You know, that's very surprising. I don't think that's the case even in in the UK or in the US or any other country that we are taking notes from. So I don't know why they're doing that. But anyways, I think what's important to note is that with this act of government, I think where my mind is is that We've entered the realms of Force Majeure. And like john is trying to point out, it's not just us being able to say, See, I can't deliver this to you for the next 14 days because of force Majeure, it is to begin to think about the people that are on similar calls as we are right now thinking hey, I can also tell Northcote I can't do this. I can't I can't pay this. I can't, you know, so we need to start thinking about that, because any Retainership that we currently are in, can technically pay for the next 14 days. They're not going to pay us despite the fact that the service I might be delivering to them is on auto run and they’re enjoying it anyway. You know, so those are the kind of things that it begins to throw up in my mind. I was on a call with a client today. And you know, because I just saw the way the conversation was going, I just offered to reduce our  fee because of the COVID-19 and he was very grateful that That's very kind of me and that’s brilliant that we should send a revised invoice. And those hearing you speak now, I am just hoping that we not have been able to save myself noting that the client could even say they're not paying me at all since they could have claimed force Majeure.

Pirzing:

Yeah. Thank you for your comments. I have an occupant in Lagos who raised the same issue. So to to comment about our clearing system, you know, banks would open people would take checks to banks, people would come back for value. The people at the clearing desk would come to work. And, you know, anything can happen, fraud could or any other events could come up. I'm just trying to think of the garmoutof what government is considering by restricting the financial system because anything happens, a funnychecks thrugh, the other party has to honor it or people default in, I mean, a lot of scenarios. So it's just to prevent all of this madness so that the whole, the whole coast is clear. And then parties go back. But then to your point about services that are ok autorun. So I have a tenant in Lagos, who I will they have it's a it's an in country with the principal company out of the country. So it's the subsidiary that operates in Nigeria, their parent company is works out of India. So for purposes of that we needed to put on the generators, and that meant my maintenance manager had to go to the office And go back home. And then I tried to reach them before the crisis, the lockdown to say, Oh, well, what do you think? And they were quick to tell me no, they needed the generators to be on at every point in time because they needed to keep rendering service and corresponding with India. Thursday, Friday, I reached out to them to say, Oh, this is becoming a problem. For me. That was last week to say this is becoming a problem for me. And it is important we take a position because my maintenance man can’t keep going to the office and they will Oh, well, that's fine with them. But then they also want me to suspend the service charge. And I said, Well, some of it is beyond my control. Your security has my security men, which is another party it is outsourced to, is has deployed officers and they would be there. NEPA is beyond my control, this services are going to be on no other charges that I do to Lagos State Government. The invoices would come to me. Do I? How do I deal with that? So I I mean, I've quickly cleared it to him, the country manager to tell him Well, this is a force majeure beyond my Control beyond your control, but these other things are in play and there's nothing you and I can do. So you can't begin to say you want to suspend it. Fortunately for me, they pay in advance for service charge. So in an email they sent, I was able to respond to say, well further to our conversation, these are in play, and it's beyond our control. So I hope that clears it for you that for services that are beyond your control, which you are also rendering to 3rd parties, these services are still being enjoyed. You cant now say it, you're not enjoying it and it should be suspended. And then for services where you're still liaising with them remotely, workers and staff are still working. You can't I mean, the realities are just but it’s to have those conversations to clear the air and it was a brilliant thing you did, to engage them. Have it clearly settled to say? Have we clearly said to say, Oh, I'm going to reduce So that there is no dispute I mean, our default in payment.

Tayo:

let me ask you this, you know, in your standard tenancy agreement, Force Majeure is cured by the landlord taking up insurance

And if you look at your agreement the landlord is even meant to onward refund the tenant.

So he's meant to reinstate because force majeure a lot of times is thinking more of the physical assets. Standard agreement say the property will be reinstated and the tenants portion of his fixture, fittings and everything will also be onward sent to him. I'm just thinking where your landlord has not gone ahead to buy this insurance, it just might be a problem.

Pirzing:

Okay, so for this kind of situations and that takes us back to the short clause of this force Majeure it envisages fire and perils? Those are the insurance that you’re think of or, in this situation for fires at quakes or floods that may come up or maybe damaged by trade union activities or lockouts, or government or protests. But this in this scenario is an epidemic where you can't go to work. So I'm trying to see the policy that the tenants in this scenario would want to claim against you.

Maybe you could give me some more insights to the perspective, I’m looking for places in our policy that refers to perils and fires, that's the standard one, we take a look for property.

Tayo:

if we can claim damages towards maybe in the event that he suffered some kind of mental loss or this or that, is there a potential that you can claim damages.

Pirzing:

So like, you know, john was saying on the on the platform recently, he said the enterpreneur should rest because the intrapreneur is an asset to himself. Now, that is between him and his medical insurance that is between him and his employer, or in this case between him and his company. This goes beyond you as a landlord. Your responsibility is as regards defeating the features or is it the The structure itself to say nothing as far as this epidemic would affect this physical structure to distort his quiet enjoyment of the property. That is what you're dealing with. But in the event where he's even infected by COVID-19, it is not your responsibility. Now, this goes beyond you and it goes beyond the tenancy agreement, the tenancy agreement is about the space. So if for any reason, one of the service providers brings the virus into the premises, that's a separate conversation. And this is not you. It's about what safeguards have you put in place at the property? Did you put sanitizers did you put wash areas? Did you put gloves did you put the necessary guidelines in place? That's the perspective I'm playing devil's advocate in this scenario, that would be my argument if I'm representing the owner. Yeah, no, which is fair. I mean, that's the whole essence of the conversation, we have to think as well. Like I said, we're dealing with the rational Relations at this point, when there's a market failure, everybody is trying to exploit the other. I mean, prices are going high. People are trying to make profits, you know, so what then stop somebody wanting to make a quick bucks to say, Well, that's true. He has an insurance policy. How do I get money out of this? So it's to limit your liabilities, because I can imagine a conversation with your insurance, either on the right, or policy provider for insurance, yes, insurance company in this regard. It would essentially be either a life policy for them, and that would be more for your stuff your workers, not for tenants. I mean, if you do, I can imagine the liabilities you'll be dealing with. But another perspective, in this insurance thing is what of those who have booked far Cover. I mean, a lot of Nigerians have those covers in event of any disease or sickness or ambulance are supposed to lift them and take them to the UK for treatment. Now, expenses are close. It's a pandemic, would it be enough reason for them to allow an ambulance to come and lift you and take you to another country for treatment? I'm just going in that direction to say in terms of policies. These are other issues. insurance brokers are going to deal with more for our own sake, dealing with tenant, tenant counterparties and we would restrict them to policies that affect our obligations directly to them.

Tayo:

Yeah, yeah. Well, you don't want to be an insurance underwriter at this point anyways,

Pirzing:

not at all. Not at all. This is the real time where this is where our capacity will be tested.

I’ll give you an example of a client who is delivering cargo of crude in Ghana. Now, they were supposed to have offloaded, they are at the ports. But there's a queue. So I can imagine policies that have to do with the chatter party or services for the vessel that was charted. I mean, those are the ones that you would be dealing with, or I'm just thinking of any damage that now happens to any properties or life covers people who may, I mean, in the unlikely event for those who may die from the infection, that would be a large claim because they have to honor those life policies. And these are significant figures. So I don't know what they would now hinge on or what would be their own fallback because this would be a run. Imagine you're in one of the big insurance companies and the 1000 deaths on your hands. I mean, it's not funny.

Speaker:

I was reading on a London Business and it says businesses around the world are facing you know a lot of loss because of this Coronavirus. And because this is a pandemic globally, a lot of companies and not operationally set up to handle such insurance covers for pandemics, there are no frameworks for it so many companies as bigger than you would imagine. So if you stream that down to daily operations like just like you were talking about How you want your your tenants to have the same structure regardless of what is going on. If you want to consider that in terms of some cases you can now tailor that to a force Majeur where there is dispute to be resolved so I think it is still relative regardless becauss it is something that is new to everybody and is affecting every operation.

Tayo:

Yeah, very, very true. Like I said, I look forward to a lot of more papers, more discussions on this whole issue because the far reaching consequence of what we're dealing with. Tayo was speaking earlier, he said, this is bigger than I mean, banks are closed businesses are not opening I mean, clearing systems are not going through. I can imagine the far reaching effect when banks do open. I Hope, you know all these panic movements and online platforms would have taken care of some dispute. But yesterday I had to go to the central bank to report somebody because I felt or my client felt, they had given an instruction and they hadn't complied with instruction. Now, these are all post COVID-19, that we'll be dealing with them. I mean, it will be far reaching is just for us, as in this conversation, to look at those potential risks for us, look at how we can mitigate them, and then see safeguards. They're far reaching. Yes, I agree. But how do we secure ourselves because that's the first law in this instance to safeguard our interest and make sure that we're also not exposed to other people in this instance.