Loan contracts are generally written, but there is no legal reason why a loan contract should not be a purely oral contract (although oral agreements are more difficult to enforce). Before entering into a commercial loan agreement, the borrower first decides on his affairs concerning his character, his creditworthiness, his cash flow and all the guarantees he must put in collateral for a loan. These presentations are taken into account and the lender then determines the conditions under which they are willing to advance the money. There is a symbiotic relationship between Cayman Islands holding companies and their subsidiaries. In most cases, holding companies are not parties or are involved in day-to-day activity, but rely on the success of their subsidiaries to generate and receive their revenues. These revenues are then used for ease of service agreements and for the provision of working capital to their subsidiaries. Based on what we know of COVID-19 and its likely effects on the global economy, it is likely that some lenders will view these effects as substantial negative effects on activity and financial position and performance if COVID-19 has more severe effects than expected for the borrower, beyond what the parties would reasonably have foreseen. This, in turn, can trigger an EOD as mentioned above. On the other hand, consideration of importance may include the ongoing importance and short-term disruptions or difficulties caused by COVID-19, and its effects may not be sufficient to trigger an EOD, which remains uncertainty at this stage. A force majeure clause is a provision that allows parties to suspend or terminate a contract when certain circumstances beyond their control make the performance of the contract impossible or inoperable. The events constituting a case of force majeure depend on the parties who agree upon the conclusion of the agreement, usually force majeure clauses that include events such as earthquakes or terrorist attacks. Numerous articles have recently been distributed to discuss force majeure clauses and whether or not such a pandemic meets the examinations and requirements of force majeure in the jurisdiction concerned.
However, this is especially the case for operating or service-providing contracts, as many facility agreements (regardless of jurisdiction) do not contemplate force majeure events such as COVID-19, as they did not exist at the time of the contract.