FORCE MAJOR IN CORONAVIRUS CONDITIONS
Who else could have guessed a month earlier that a fish market in China’s province would cause a global recession and lead to a collapse of the financial markets?
The effects of coronavirus are directly or indirectly affecting all sectors of the economy. This is especially evident where there is a long-term contract between the contractors, which was concluded before the parties could imagine the effects of the virus.
In such situations, the parties want to know what the contract provides for in the event of such circumstances.
Today’s events and the effects of coronavirus in the first place, are reflected in business. In the current circumstances (force majeure), the Verkhovna Rada of Ukraine introduced a set of legal norms aimed at protecting the rights of business and citizens during quarantine.
Today, every business has a quarantined time:
- Avoid penalties and damages for failure to fulfill obligations under contracts (including FEA contracts).
- To terminate the contract ahead of time if the force majeure deadline is exceeded.
- To defer / defer fulfillment of tax obligations or tax debt and other obligations stipulated by the law, which cannot be enforced due to force majeure.
- Use other options agreed by the parties in the force majeure contractual clauses, in case of its occurrence.
The final decision on the force majeure epidemic for each particular contract is the exclusive jurisdiction of the court. All of the acts listed above will only be advisory in nature, but not binding.
In resolving such disputes, the court will evaluate a number of circumstances, taking into account the specifics of the specific contract, including:
- date of conclusion of the contract. So, if the contract for delivery to the quarantine area was concluded after the announcement of the epidemic, the virus will not be recognized as an extraordinary circumstance – when deciding on the delivery, the parties knew or should have known about its existence;
- the impact of the epidemic on a particular market segment. The party must prove that it has not been able to overcome the obstacles to the performance of the contract by making every reasonable effort;
- the terms of the force majeure agreement. Most commercial contracts contain clauses about force majeure.
But they can:
- determine what circumstances a party recognizes as a force majeure (eg, epidemics involving quarantine measures);
- determine necessary evidence of force majeure (for example, Chamber of Commerce certificate);
- specify the consequences of force majeure (suspension of contract, termination, etc.).
Author: Ivan Ishchuk