The Legal Implications for Businesses and Companies in Nigeria in the Pandemic Period

By Opatola Victor Esq.

Recently, the world has been hit with the rapid spread of the Covid-19 virus (Corona Virus) and Nigerian citizens are currently at an elevated risk of contracting this virus. With many scientists all over the world being tasked with finding a cure to this widespread epidemic, this brief article dabbles into the legal implication(s) of the virus in Nigeria from the Human Rights, Contract, Taxation and Labour/Employment perspective.

The Effect of Corona Virus on Contracts and Contracting Parties

Businesses worldwide have been forced to a halt due to the challenges of the spread of the virus and this includes interruptions to supply chains and challenges in meeting contractual obligations. With no end to the outbreak in sight, businesses must know, understand and consider their options in order to mitigate their risk exposure.

As it stands many businessmen would currently be caught within 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 shutdown of basic federal and state infrastructures as well as attendant necessities.  The problem will further be escalated for the contractor when the contract does not include a clause which allows for emergency situations such as this or where the contract is written in an iron clad manner that places the burden of delivery without excuse on the contractor. 

Is the Pandemic a Legal Excuse Not to Pay or Perform a Contract?

This period also highlights the importance of three legal doctrines and their relevance in cases of emergency; The Doctrine of frustration, Force Majeure, and Impossibility or Impracticability of Performance

Performance under a contract can be excused for “frustration.” Frustration in Law is defined as being a change in circumstances or situation, outside of the parties making and renders one party’s performance impossible 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.

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. It excuses 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 and 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, acts of terrorism or equipment breakage. 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.

The doctrine of impossibility or impracticability may also allow a party to avoid performance of its obligation. There are two types of impossibility; original impossibility and supervening impossibility. The former is impossibility of performance and this exists when the contract was entered into, for the purpose of doing 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.

It is important to note that when a business is caught in this situation it is legal wisdom to contact a lawyer to send out a letter informing the other party of the present situation and device a means to reduce or mitigate the risk.

Employer/Employee 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 Law. 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 as Labour Act, Employee Compensation Act, Factory Act and so on.

Can an Employer Terminate Employment During the Lockdown?

By law and subject to agreement between parties, the employer can terminate an employee’s employment at any time as long as the required notice is given or payment in lieu of the notice.

Is an Employee Entitled to a paid sick leave during this period?

Every worker is entitled to paid sick leave by virtue of section 16 & 18 of Labour Act and an employer is entitled to protect the employees.

Can an Employer Compel an Employee to take a Medical Test?  

Medical test may form part of a company’s policy but an employee cannot be forced to take a medical test because it is against his/her constitutional right to privacy as guaranteed by Section 37 of the 1999 constitution.

The Effect of Taxation During the Pandemic

Many tax returns will become due during this period. The question is how companies will effect their returns as a result of the Government’s issued lockdown of facilities and services. For instance, the return date for Value Added Tax and With Holding Tax is March and it is imperative that the tax authorities make plans and grant a tax extension where possible.

Human Rights in period of pandemics

Fundamental Human Rights, as we know, are protected and guaranteed by the Constitution. However, as important and sacrosanct as they are, they can be breached in times of national security or cases of national emergency. In the light of pandemic and lockdown, certain restrictions can be made on individual freedoms under the Law such as right to movement, freedom of association and discrimination.

In conclusion, companies must understand the legal implications attached to the recent widespread of the corona virus as it relates to their various legal obligations to their staff, customers and clients and this will help in their decision-making ability.