Pandemic wreaking havoc on and off the pitch – how to cater for unforeseen events
Whilst contracts are generally drafted to take into consideration the possibility of certain events occurring, it is often difficult to cater for unforeseen events. A number of businesses found themselves in a contractual position of uncertainty when faced with the Covid-19 pandemic, as their contracts did not specify what would happen in the event that a pandemic (and any government lockdowns) prevented them from performing their obligations under the contract.
The issue of accommodating unforeseen events in commercial contracts also affects the sporting industry. This was highlighted recently in two factually similar cases: The Football Association Premier League Ltd v PPLive Sports International Ltd [2022] EWHC 38 (Comm) (‘Football Broadcasting Rights case’) and European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm) (‘Rugby Broadcasting Rights case’).
Brief Background
The Football Broadcasting Rights Case involved contracts for the rights to broadcast Premier League football matches in mainland China and Macau for three football seasons, the first of which was to run from August 2019 to June 2020. The contracts combined were worth more than £500 million.
In the Rugby Broadcasting Rights case, the claimant, European Professional Club Rugby (‘EPCR’), licenced its media rights in the Competitions for the 2018-19, 2019-20, 2020-21 and 2021-22 seasons to the defendant, RDA Television LLP (‘RDA’), under a Media Rights Agreement.
Given that both cases concerned contracts for the rights to broadcast sports competitions which were significantly disrupted by the impact of the Covid-19 pandemic throughout the 2019/20 season, one might have expected that the judgments handed down by the Court would have been similar. In fact, this was not the case and we have looked into the reasons behind this below.
Rugby Broadcasting Rights case
The High Court held that the broadcaster, RDA, was entitled to terminate a Media Rights Agreement relating to premier club rugby union competitions in Europe, governed by EPCR as a result of the postponement of the final stages of the 2019-20 season.
The relevant clause provided that, if a force majeure event prevented, hindered or delayed performance for a continuous period of more than 60 days, “the party not affected by” the event could terminate on 14 days’ written notice. The Court found that the clause was triggered, rejecting an argument that it could not be relied on where (as here) both parties had been affected by the pandemic. It was also irrelevant that the party in breach had not served a notice expressly notifying force majeure.
In this case, it was clear that the pandemic qualified as a force majeure event, as the relevant definition referred expressly to ‘epidemic’, and in any event was drafted non-exhaustively to cover circumstances beyond a party’s reasonable control.
Football Broadcasting Rights case
In contrast, the High Court held that a broadcaster, PPLive Sports International limited (‘PPL’), had no real prospect of successfully defending a summary judgment application brought by The Football Association Premier League Ltd (‘Premier League’) as a result of the non-payment of two contractual instalments due to the pandemic. The Court therefore granted the Premier League summary judgment on its claims.
PPL complained that the 2019/2020 season was interrupted, and that the conditions under which it resumed were very different to what all imagined when the contracts were agreed. These conditions included matches being played in empty sports stadiums, without fans present, the compression of the remaining fixture list into a five-week period rather than nine weeks. Many matches were also re-scheduled from weekends to weekdays, and kick-off times were changed such that broadcast times moved to the early hours in China, which affected viewing numbers.
Notably, the force majeure clause was not pleaded by either party in this case. The force majeure clause was however reproduced in the judgment and based on the information available it is likely that force majeure was not in issue because the clause had been drafted restrictively (thereby limiting the parties’ ability to rely on it when the pandemic affected their contractual relations).
Therefore, the outcome of the case hinged on the Court’s interpretation of whether or not a material adverse change clause would be triggered by the impact of Covid-19, by interpreting what the words the parties actually used in the written agreement mean, taking in the factual matrix and the context in which the agreement was reached (Wood v Capita).
Despite the obvious disruption, the clause in question was only triggered if there was a “fundamental change” to the “format” of the Premier League competition – which, as construed by the Court, did not include the timing of matches or whether there were fans present. The Court therefore did not have to consider whether the changes that had occurred had had a “material adverse effect” on the exercise of the rights.
Conclusion
These decisions illustrate how similar factual circumstances can give rise to very different results depending on the contractual protections the parties have agreed in their contracts.
The ability to protect their position, and manage risks, is increasingly in the hands of the contracting parties and there is real merit in anticipating at the outset of a new relationship (or when revisiting an old one) what will happen if things go wrong. The most appropriate way to do this, would be to include a detailed force majeure clause within a contract that sets out a description of what may be deemed an unforeseen event and, the process for performing the contract in the event that one did occur.
If you require any support with drafting or interpreting a commercial contract (or advice on force majeure provisions), please contact our Commercial Team who will be happy to assist.