Coronavirus (COVID-19): Objective Impossibility to Perform Agreements

The outbreak of the new coronavirus COVID-19 determines the adoption of necessary measures to limit the disease, such as quarantine, suspension of cultural events, temporary closing of public school units, performance of work at home and restriction of travels to and from the seriously affected areas. At the same time, the measures for the prevention of the spread of the virus and/or the ones of limitation/elimination of the outbreak caused by this virus have a significant impact on the performance of the ongoing agreements and on the undertakings’ activity.

In the context of implementation of these measures by the decision of the governmental and/or local authorities or even of private organizations (in order to protect the personnel), some agreements may become impossible to be performed or their performance may become excessively onerous.

Please find herein below a few aspects that we consider useful to be had in view:

Preliminary aspects necessary to be checked by the companies:

• Check of the definitions given to the notions of force majeure, unforeseeable event and hardship in the services and/or goods provision agreements etc.;
• Check of the existence of clauses for the undertaking of the risks of occurrence of an unforeseeable event or for undertaking the occurrence of an excessively onerous performance incumbent on a party;
• Identification of the agreements whose performance could be influenced by the COVID-19 outbreak;
• Identification of the contractual obligations whose fulfilment could be influenced by the spread of COVID-19 and their object, considering that, according to the legal provisions, if the obligation concerns generic goods, like products manufactured as serial products, raising of the performance impossibility is limited;
• Check of the necessary documents for obtaining the force majeure certificate, if the case.

Is the phenomenon of expansion of the infection with COVID-19 an unforeseeable event?

The notion of unforeseeable event reunites both force majeure, and unforeseeable circumstances.

Force majeure is an external event, which cannot be predicted or avoided, absolutely invincible. Usually, high intensity earthquakes, in areas with low seismic activity, natural disasters or wars are considered force majeure events. We mention that there are numerous publications worldwide that consider that the COVID-19 outbreak could be associated to a force majeure event.

Given the rapidity with which the new virus is spreading and the difficulty to control this situation, the impact that the disease has on companies and, implicitly, on the activity carried out by these and also the imbalance caused to the business environment, we are of the opinion that also in Romania one can open up the discussion regarding the association of the COVID-19 outbreak with force majeure by relating to the way in which this is regulated by the Civil Code.

Unforeseeable Performance Impossibility

Regardless of whether the COVID-19 outbreak is qualified as force majeure, and, unforeseeable event, respectively, the effects of ascertaining of this unforeseeable event are the following:

• debtors cannot perform their agreements, as concluded;
• consequently, debtors of the obligations impossible to be fulfilled are discharged;
• no debtor’s liability may be engaged for the non-fulfillment of its obligations.

We have to mention that, in order for these effects to operate, it is necessary that:

• the debtor of the obligation impossible to be executed has to prove the performance impossibility;
• non-fulfillment of the obligation by the debtor must be a direct consequence of the occurrence of the unforeseeable event.

The impossibility to fulfil the contractual obligations may be temporary or final. Under the law, when the performance impossibility is temporary, the fulfillment of the obligation shall be stayed for a reasonable term, depending on the duration and on the consequences of the event that has caused the performance impossibility. When the impossibility is total and final and refers to a significant contractual obligation, even the cancellation of the agreement may be triggered. Consequently, depending on the percentage of the spread of COVID-19, the parties may either stay the fulfilment of the contractual obligations, until the situation is remedied, or terminate the performance of the agreement, when the outbreak affects its performance fully and finally.

Hardship

There may be situations when the COVID-19 outbreak may generate a more onerous performance for the parties to an agreement, and not impossible to be performed, either as a consequence of the increase of the costs of fulfillment of the obligations, or as a result of the decrease of the value of the counter-performance.

Two hypotheses may be distinguished:

• the fulfillment of the obligations becomes more onerous, in which case the debtor of the obligation will continue to fulfil its contractual obligations, as they have been provided initially;
• the fulfillment of the obligations becomes excessively onerous, due to an exceptional change that could make it obviously unfair to require the debtor to fulfil the obligation, in which case the court may order either the adjustment of the agreement, or the termination of the agreement, in the conditions established by this.

It is important to mention that the adjustment, and, respectively, termination of the agreement may be ordered only if such agreement whose performance is susceptible of being affected by the spread of COVID-19 has been concluded prior to the occurrence of the outbreak, the outbreak could not have been foreseen at the moment of conclusion of the agreement, the debtor of the obligation that has become excessively onerous did not assume the risk, to this end, and the debtor of the obligation that has become excessively onerous has tried to negotiate the adjustment of the agreement.

Aspects necessary to be considered in relation to the agreements to be concluded after the acknowledgment of the outbreak of COVID-19

• insertion of clauses meant to protect the company from the effects of the outbreak in the agreements to be concluded;
• preparation of plans for negotiations and of mechanisms to avoid the possible disputes regarding the impossibility to perform the agreements.