Covid-19: Do ‘lockdown’ days count as “Business Days” under a contract?

The calculation of ‘Business Days’ under a contract will be determined by how that term is defined in the contract and how it is interpreted. A defined term is normally given its agreed effect, reducing the risk of an unintended interpretation. However, contract interpretation depends on the context, so the rest of the contract and the circumstances surrounding its formation may also affect the interpretation of a defined term.

The main principles of contract interpretation are:

  • Loyalty to the text. Consider the text of the provision and give it appropriate weight.
  • Whole contract approach. Consider the remainder of the contract or instrument in which the provision appears.
  • Context. Consider the factual, legal and regulatory background to the contract or instrument.
  • Business common sense. Give appropriate weight to business common sense, or the commercial purpose of the contract or provision.
  • Reasonableness. Avoid giving literal effect to the words of the contract where that would lead to very unreasonable results.

Context, in the current climate of Covid, is key. These are unprecedented times in recent history, and this must be borne in mind when considering contractual provisions.

Market practice, particularly in transactional agreements, has, for some time, considered ‘business days’ by reference to banks being open for business, but commentators have questioned the usefulness of this, given the round the clock availability of online banking services. So, whilst the reference is still often used as a starting point, it is important to consider:

  • What exactly are the parties obligated to do, and where they are obligated to do it on the ‘business day’ in question; and
  • What exactly ’banks being open for business’ means. For example, does it mean being open and able to offer all usual services, or would banks operating with restricted hours or operating online only render them closed for business?

A party could try to argue that the terms of the contract are such that a term should be implied that business days should exclude days where there is a “lockdown” (or some other event that has a similar effect). A court could imply a term into a contract on the basis of:

  • Usage or custom parties. That is, terms that are customary to a particular trade of the place in which it is made.
  • A previous course of dealing between the parties.
  • Filling the gap in the contract’s drafting to reflect the parties’ intention when the contract was entered into.
  • Common law, where the implied term is a necessary part of a particular type of contract (for example, an employment contract).

Whether or not a term should be implied into a contract will therefore depend on the facts and circumstances of each case. Where obligations cannot properly be performed because of the ‘lockdown’, the obligated party has a strong argument such days should not count as business days and thus the deadlines within which to comply should be extended.

By Simon Goldberg and Rob Hepburn

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