The coronavirus outbreak is unfortunately having an impact on every aspect of our lives, and sets to affect a considerable number of businesses. For this reason we’ve summarised the five most important legal considerations that no business can afford to ignore at this time.
1. What commitments can you (and can’t you) fulfil?
Firstly, you need to think about what sort of consequences the present situation will have in terms of fulfilling your commitments: what exactly are the obligations that you’ve undertaken in your contracts that you can’t fulfil at all, or that you can only fulfil with a delay?
This will not only provide clarity in legal and business terms, but is an essential tool that help to comply with our contractual commitments.
2. Take a look at your force majeure clauses!
Many contracts contain what are known as force majeure clauses. These typically determine what the parties regard as unavoidable external circumstances, and what is to be done if they arise. If you do not follow the procedure set out in the contract, you may well lose the right to apply the force majeure cause.
Therefore, we recommend that you look at your key contracts from this perspective as soon as possible.
The general obligations regarding co-operation require that you immediately notify the other party if a circumstance that will (or is likely to) prevent you from fulfilling the contract arises. If you’re late in providing such notification, this can in itself result in liability for damages, even if you’re not actually responsible for causing the problem that prevented performance.
Therefore, even if there’s just a risk that you won’t be able to perform the contract, you must inform all parties concerned about the problem, in writing, and if possible, explain to them what the likely consequences will be.
4. Doing nothing is not an option!
The virus, and the circumstances caused by the preventive measures against it, may – certainly if we look at court decisions taken in comparable cases in the past – at the end, prove to mitigate your responsibility for a breach of contract. Nonetheless, even in this situation the law still requires the parties to take the necessary measures to minimise any damage that can be minimised.
In other words, you can’t just sit there doing nothing until all this blows over: whatever may be reasonably expected of you in the interests of fulfilling the contract and mitigating the consequences of the situation, you still need to do.
Information that’s available on the virus, including measures that the government is taking to combat its spread, are changing from day to day. Let’s not forget that with time, the situation will improve, and as it does, contractual obligations will gradually start to apply again, meaning that what was not fulfillable – or could not be expected to be fulfilled – one day may well again become fulfillable on another.
Ensuring compliance with your obligations under the law requires that you keep up-to-date, and that you constantly adapt to the latest situation by taking appropriate action.
By Levente Bihari, Senior Attorney, Jalsovszky