The state of epidemic threat as a case of force majeure
The SARS-Cov-2 epidemic results in numerous limitations in everyday economic life, such as travel restrictions, limited operation of institutions and establishments, or a limited possibility of trading in and using certain objects. Undoubtedly, this state can be considered as one associated with the occurrence of force majeure which is understood as an external phenomenon that could not have been predicted and avoided.
On 8 March 2020, the special law on the prevention of COVID-19 was introduced, and on 13 March 2020, the Minister of Health announced the state of epidemic threat in the entire country. These regulations define e.g. the tasks of public administration bodies, as well as the obligations and prohibitions applicable to entities participating in trade; at the same time, they fail to provide an answer to one of the most crucial questions concerning liability that results from the lack of possibility to properly perform the existing contracts.
Below, we discuss some actions which, in our opinion, should be taken in order to secure the interests of economic operators in connection with their contracts.
Contractual liability
The provisions of the Civil Code establish general liability in connection with improper performance or non-performance of a contractual obligation, unless such improper performance or non-performance is a consequence of circumstances for which the debtor is not liable (Article 471 of the Civil Code). In principle, this is fault-based liability. If it is not possible to perform an obligation due to the existing circumstances resulting from the state of epidemic threat, such liability may be excluded for reasons of force majeure, as described above.
In business trading, in extreme cases such as the epidemiological threat, in accordance with the principle of freedom of contracts (Article 353[1] of the Civil Code), the so called force majeure clause is laid down. The application of this clause may result in the exclusion of contractual liability.
Therefore, we recommend:
- verification of concluded contracts to check the existence of the force majeure clause, and in the event of absence of such a clause, commencement of discussions in order to modify the contracts to adjust them to the present situation,
- immediate notification of all parties to the contract about difficulties related to the performance of the contract, with an invocation of the force majeure clause.
In order for the clause to be used correctly, we recommend that the notification should contain a justification describing the existing difficulties, e.g. a limited number of employees, the need to comply with additional requirements to safeguard the goods transported, and the consequences of the present circumstances affecting the possibility to perform an obligation in a proper and timely manner.
Liability in tort
In addition to the contractual liability discussed above, the provisions of the Civil Code specify liability for an unlawful act. In the case of economic operators, the basis for this type of compensation may be found in Article 417 in conjunction with Article 435 of the Civil Code, pursuant to which a person who runs an enterprise or an establishment is liable for any personal or property damage caused by the operation of the enterprise or the establishment. In respect of liability in tort, the provisions of the Civil Code also allow for the invocation of force majeure in order to exclude liability for damage. Events that may be the basis for liability for damage are understood as all events not related to the performance of concluded contracts; however, in the light of the dynamics of the situation, these should also be borne in mind.
Therefore, in such cases it is recommended to precisely determine and describe, in a report on the event giving rise to the damage, all circumstances which may be associated with the current state of epidemic threat.
According to the case-law of common courts, in order to effectively invoke force majeure as a circumstance excluding liability for damage (contractual or in tort), it is necessary to:
- take actions to limit as much as possible the impact of a force majeure event,
- take actions to eliminate the consequences of force majeure,
- provide a warning about the threat of their occurrence.
Pursuing claims:
We also wish to point out that as a result of the limited operation of public authorities, economic operators may face difficulties in pursuing claims at court, e.g. when applying for the payment of outstanding remuneration in judicial proceedings.
The regulations of the Civil Code provide for the possibility to completely stop the commencement or to suspend the period of limitation for claims, if due to force majeure the entitled person cannot bring them before a court or another authority set up to hear cases of a give type (Article 121 (4) of the Civil Code).
Despite the existing limitations, it should be remembered that as long as registry offices of courts and other authorities and post offices remain open, there is a real opportunity to pursue claims. Thus, failures in this respect cannot serve as the basis to rely on the non-application of the statute of limitations to a right.
KONTAKT
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