Contributed by Knezovic & Associates, member of Adriala
How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?
The Covid-19 pandemic has a major impact on the generality of business in North Macedonia.
The measures and the recommendations issued by the Government of the Republic of North Macedonia on a daily basis are aimed to prevent further transmission of the deadly virus. These measures include inter alia:
- Complete closure of the airports in North Macedonia with some exceptions applicable to specific transports;
- Complete closure of borders for vehicles and passengers with the exception of trucks for transport of goods with exceptions based on specific permits;
- Prohibition of the entry into the territory of the Republic of North Macedonia to foreign nationals from high and medium-risk countries in accordance with the list published by the World Health Organization;
- Complete closure of shops in malls with exception of grocery stores and pharmacies;
- Complete closure of educational institutions at all levels revenues
- One parent of a child under the age of 10 is released from work
These and other applied measures, as well as the fact that the general population should avoid any unnecessary travel and commute, affect the free flow of people, have an impact on the workforce and the capability to conduct regular business. In general, this situation will affect the expected revenues and cash flow.
The most affected industries are transportation and tourism, as industries that are directly dependent on the free flow of population. On a longer-term basis, this would apply as well to the liquidity of the general economy and therefore the set of economic measures would have to be introduced by the state on a parallel track.
At the moment, the Government is contemplating the introduction of economic measures but none are introduced by far.
In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?
The capability of the parties to perform contractual obligations in the Vis Major circumstances (such as the Covid-19 pandemic) should be observed from the perspective of actual impact on the performance of the parties involved.
In principle, there is a possibility to cancel the contract in case of impossibility for a party to perform its contractual obligations, for reasons beyond the control of the parties.
According to article 126 of the Law on contractual obligations, when the performance of obligations in a contract would become impossible due to an extraordinary event, which occurred after the conclusion of the contract, and before the obligation has become due, and which at the time of conclusion of the contract could not be foreseen or prevented by either party, avoided or removed and for which neither party is responsible (force majeure), the obligation of the other party is considered as canceled.
In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?
In case of partial impossibility to perform its contractual obligations caused by an external event beyond the control of the parties, the affected party may terminate the contract in case of partial performance would not suit the counterparty requirements. Other than that, the contract would remain valid and the counterparty would be entitled to appropriate partial relief from compliance with its obligations.
If yes, what considerations should be borne in mind by such parties, in particular in relation to:
Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)
Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)
Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)
Any such event should be duly notified to the counterparty in an appropriate time period which is depending on the actual situation and should be communicated without delay.
The impact of the force major event should be real and would have to result in an incapability to perform obligations under the contract. Taking into consideration the present status of the things in North Macedonia each case of force major and its causality should be evidenced. From the formulation of the respective article of the Law on Obligations is evident that each of the parties is required to demonstrate that specific steps are taken to avoid the impact of such an event.