30 Apr Corona crisis | Force majeure and unforeseen circumstances
Due to the corona crisis, as an entrepreneur you may no longer be able to (fully) execute existing contracts. You are confronted with various questions: is it possible for one of the parties to suspend the agreed performance of the contract? May the contract be (temporarily) amended or terminated? Do my current standard contracts and general terms and conditions offer sufficient safeguards in the event of similar situations in the future?
In this post we’ll take a brief look at this.
Legal provisions: force majeure and unforeseen circumstances
The main legal provisions that may apply when a commercial contract cannot be executed (under the same conditions) are ‘force majeure’ and ‘unforeseen circumstances’.
Force majeure occurs when a party is unable to fulfil contractual obligations due to a cause that cannot be attributed to that party. In principle, a party will be able to invoke force majeure if the contractual performance is prohibited by government measures. Think, for example, of the ban on events imposed by the government. The consequence of a successful invocation of force majeure is that the other party cannot claim performance. However, it is still possible for the other party to dissolve the agreement.
Unforeseen circumstances exist when, after entering into a contract, circumstances occur that are not taken into account in the contract. Such circumstances must affect the contract in such a way that an unaltered performance cannot be required. The (forced) closure of the hospitality industry could, for example, be reason to invoke temporary adjustment of the lease contracts for the premises in the hospitality industry. The consequence of a successful claim on unforeseen circumstances is that the contract can be fully or partly amended or terminated (with retrospective effect).
An appeal to force majeure and unforeseen circumstances can be made outside of the court. However, if the appeal is not accepted by the other party, one of the parties will have to go to the court. Usually parties do not want to litigate, and this may lead to a renegotiation of the existing contracts.
Have your general terms and conditions checked
Most people do not read the familiar small print, but this is exactly what can be of help. The corona crisis is a good time to re-read your general terms and conditions carefully and have them checked and updated if necessary. Pay attention to the force majeure provisions and the provisions concerning unforeseen circumstances. It is also wise to take a look at the provision on the exclusion or limitation of the obligation to compensate damages, the exoneration clause.
Whether the outbreak of the coronavirus gives cause to invoke a possible exoneration clause depends on the wording of that particular provision.
We are happy to help you review and update your general terms and conditions. We can assess what the provisions of your general terms and conditions can offer you during this corona crisis and whether your general terms and conditions need to be amended in view of the corona crisis. We will charge a moderate rate for our regular clients.