Finance documents typically use the concept of “Business Days” to count how much time a party has to fulfil certain obligations, including payment and notification obligations. In light of recent approaches by various governments in response to the coronavirus (COVID-19) outbreak, this briefing looks at whether the varying degrees of “lock-downs” imposed have an impact on the timing of a party’s contractual obligations.
The usual formulation for the definition of a “Business Day” refers to a day (other than a Saturday or Sunday) on which banks are open for general business in the relevant jurisdictions. This is consistent with the Loan Market Association (LMA) standard facility documentation.
Some variations on this definition may include an express exclusion for public holidays, or a reference to different jurisdictions depending on whether the term is referred to in the context of a utilisation, a payment, a quotation day or for any other purpose.
Where the government of the relevant jurisdiction has declared an ad hoc public holiday, such as the extension of the Lunar New Year public holidays in China or the declaration by Sri Lanka of ad hoc public holidays in March 2020 to combat COVID-19, this should constitute an exclusion from the “Business Day” definition as all businesses (including banks) are closed – particularly if there is an express reference to public holidays within the definition itself.
While there has not been any case law directly on this point in the English courts, the High Court of Australia considered the impact of a declaration of a public holiday after the formation of the contract in IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417. The High Court of Australia held that, because of the wording of the definition of “Business Day” (in that case being a date that banks were open for business), the concept of a business day would change with the advent of new public holidays.
If there are such public holidays to take into account in the definition of “Business Day”, then parties should also look at the business day conventions set out in the finance documents to determine whether a date for payment or other obligation would, in light of the additional public holidays, fall on the preceding or succeeding Business Day, in order to correctly calculate time for performance.
However, where a government directive is issued for the shutdown of certain businesses and industries, such as the measures implemented in New York, London and Australia, where a distinction has been drawn between “essential” and “non-essential” services, whether a day is one on which banks are generally open for business will depend on: (i) whether the specific legislation defines the non-essential services that are subject to closure and (ii) whether banks are generally open for business on such day.
The Coronavirus (Business Closure) (England) Regulations 2020, made on 21 March 2020 and which came into force at 2pm (London time) on 21 March 2020, contains a schedule listing the businesses required to cease operations. It refers specifically to restaurants, cafes, bars, public houses, cinemas, theatres, nightclubs, bingo halls, concert halls, museums and galleries, casinos, betting shops, spas, massage parlours, indoor skating rinks, and indoor fitness studios, gyms, swimming pools or other indoor leisure centres. It is apparent from the regulations that financial services and banks are not impacted by the shutdown.
This is also the case with New York State’s Executive Order 202.6, which contains a definition of “Essential Business”. The list of essential businesses to remain open specifically refers to financial institutions, including banks. As such, unless the legislation or directive requires banks to close, such temporary measures implemented by governments are unlikely to impact the definition of “Business Day” and the timing for contractual obligations to be performed.
While legislative instruments such as those implemented in the United Kingdom, New York and Australia have not required banks to cease operations (and in the case of New York, expressly required banks to continue operations), in certain jurisdictions banks may have directed staff not to come to the office and closed bank branches. Whether or not physical locations remain open, as long as banking transactions can be completed (remotely, online or otherwise), then the banks are likely to be “open for general business”. Even if the bank in question was in fact unable to perform banking transactions on that day, it is unlikely this would have any impact on the definition of “Business Day” if other banks in the relevant jurisdiction are able to do so.
Further, in British and Mexican Shipping Co. v Lockett Brothers & Co.  1 KB 264, Hamilton J considered the meaning of a “working day” and held that this should be defined as:
“something contradistinguished from days which are not working days, a day of work as distinguished from days for play or rest; and I think it is immaterial whether the days for play or rest are so for secular or religious reasons, and whether they are so by the ancient authority of the Church or by the present authority of the State. The words point to days which can be prescribed beforehand as being working days, and not to days whose character as working days or the reverse can only be decided after the event, either upon some investigation of facts…” (emphasis added)
 See eg, https://www.forbes.com/sites/isabeltogoh/2020/01/27/china-extends-holiday-as-coronavirus-death-toll-rises-to-81/#620a749327c3, accessed 23 March 2020.
 See eg, https://www.thestar.com.my/news/regional/2020/03/15/sri-lanka-declares-public-holiday-due-to-concerns-over-virus, date accessed: 23 March 2020.
 http://www.legislation.gov.uk/uksi/2020/327/pdfs/uksi_20200327_en.pdf, accessed 23 March 2020.
 See eg, https://www.governor.ny.gov/news/governor-cuomo-issues-guidance-essential-services-under-new-york-state-pause-executive-order, accessed 23 March 2020.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021