COVID-19 & Law

Coronavirus - consequences for business and non-fulfillment of obligations

The negative impact of the pandemic on international business relations is undeniable, and it’s necessary to think about the consequences and preventive measures now.

According to experts, even with the most positive forecast, the impact of the consequences of the coronavirus pandemic will last for several months. That is why it is so important to deal not only with the current outstanding contracts but also to think about how to protect your company from future losses.

Entrepreneurs around the world are wondering what to do with the obligations under Contracts that have been suspended due to the global epidemic, how to survive and develop their business in a global crisis?

Your Partner in Russia, what to do?

According to the current Russian legislation, if a coronavirus is classified as a force majeure, one of the parties to the contract can expect to be released from liability under the Contract. However, it is necessary to take into account the specifics and conditions of the executed transaction, as well as to prove that the terms of the Agreement are unenforceable due to the current situation.

A particularly important factor is the lack of judicial practice and established precedents, which increases the chances of protecting the interests of a foreign entrepreneur.

A foreign company that has a Contract with unfulfilled obligations must act and not give up, try to settle disputes peacefully, if it is not possible to agree, then go to court and defend its position and rights legally with the help of qualified lawyers.

Can coronavirus be considered force majeure?

To answer this question, you need to understand the circumstances of a particular case and evaluate the terms of the contract, taking into account the applicable law and practice for resolving disputes in a particular territory.

As a rule, contracts drawn up by the Russian side include a provision on force majeure with an explanation of the factors that are recognized as such. However, the party must prove that the coronavirus and the consequences of actions to combat it affect the ability to perform the Contract.

If the delivery was possible, but the obstacle was, for example, an increase in the cost of logistics due to the pandemic, this circumstance is considered as “difficulties”, and not “force majeure”, respectively, the responsibility is not removed from the Performer.

If Your Partner tries to remove liability under the contract by referring to the pandemic, it is important to take a note to some significant issues:

1

Terms and conditions termination of the agreement

The Agreement cannot be terminated unilaterally due to force majeure unless it is stipulated by the terms of the agreement.
2

Compliance with the notification rules

The Contractor must notify the Customer in writing of the inability to perform obligations under the agreement due to force majeure events within 10 days. Only after that action does force majeure enter into legal force.
3

Liability under the agreement

If the performance of obligations remains possible after the termination of force majeure, the liability under the contract does not terminate.
4

Non-objective reasons for termination of the agreement by the Сontractor

The absence of working capital and necessary goods on the market on the part of contractors specified as reasons for non-performance of obligations cannot be qualified as force majeure.
5

Violation of obligations by third parties

Violation of obligations by third parties cannot be recognized as force majeure and does not remove responsibility for violation of the agreement.
6

Right to terminate the contract by the Customer

If as a result of a long delay in the execution of the contract, the customer no longer needs to implement it, the Customer has the right to cancel the contract.
7

Documents confirming the recognition of force majeure

If your Partner refers to "force majeure", require a documentary certificate from the chamber of commerce and industry of the Russian Federation, confirming that a specific event or fact is a force majeure.

The concept of "force majeure" is a legal aspect that requires specification and clarification, which makes it possible to change it in the contract at your own discretion.

This is why a thorough audit of the contract is required in order to take into account all aspects of the
interaction between the parties, which is possible only with the help of a qualified,
experienced lawyer.