Checklist: fulfillment of contractual obligations at the time of corona crisis

For now, the measures instituted by the central government to prevent the spread of the coronavirus do not seem to have a negative effect on the sales of DIY stores. The opposite seems to be the case. Consumers are visiting DIY stores en masse to get started at home.

It is unclear how long this situation can be sustained without increasing the further spread of the coronavirus. There is a risk that - just like other retailers - do-it-yourself stores will also be confronted with stricter measures of the central government, forcing them to close their doors. If do-it-yourself stores are forced to keep customers out, in many cases this causes immediate problems with regard to the fulfillment of contractual obligations. Examples include certain purchase obligations, not being able to meet agreed delivery times and not being able to meet payment obligations.

In the checklist below, we provide do-it-yourselfers with some practical tools to help them quickly and insightfully determine their contractual position.

1. Check the agreement

An important principle in Dutch contract law is that agreements must be fulfilled. In the first instance, therefore, it is important to ascertain what has been agreed upon between the parties. Think about certain purchase obligations and delivery and payment terms. What exactly does it say and on whom does what obligation rest?

2. Check the agreement for a force majeure clause

Some contracts contain a so-called force majeure clause. This usually stipulates the situations in which no performance of the agreement or damages can be claimed. A force majeure clause can be formulated in general terms, for example, "all external causes beyond X's control." Sometimes the force majeure clause lists specific examples, such as strikes, war, government measures and business interruptions. The question then arises whether a pandemic, such as the corona crisis, is covered by the force majeure clause. This depends primarily on how the clause is worded. In addition, also check whether the contract regulates anything about time limits. In fact, many agreements include a deadline by which a force majeure situation must be reported.

3. Check the terms and conditions

In many cases, in addition to the contract, general terms and conditions have been declared applicable to agreements between the parties. If this is the case, it is advisable to also check the general terms and conditions for the presence of a force majeure clause. Such a clause may mean, among other things, that in the event of force majeure (such as a pandemic), performance may be carried out at a later date, or the agreement (or part of it) may be dissolved. If a force majeure clause is included in the general terms and conditions, it is important to consider carefully which circumstances justify invoking a force majeure clause and who, in such a case, is entitled to invoke such a clause.

4. The law as a safety net

If the contract and general terms and conditions do not include a force majeure clause, the main rule is that if the agreements made are not fulfilled, the debtor is in principle liable to pay damages to the creditor. However, the law also offers the possibility of invoking force majeure. Whether the corona crisis justifies invoking the legal concept of force majeure depends on all the circumstances of the case. The question is whether performance of the contract has become impossible due to the corona crisis or is so onerous that performance cannot reasonably be required. If the debtor fulfills all the legal conditions that justify a claim of force majeure, then in principle he is not obliged to perform or pay any form of damages. It is important to note that the party invoking force majeure will have to state and prove that the legal requirements have been met. If this fails, the debtor will, in principle, remain liable to the creditor.

5. Determine your position and enter the conversation

The moment you are confronted with a contracting party who can no longer fulfill his or her obligations or when you yourself are in this position (or risk being in this position), it is advisable that you check in advance what the applicable agreements are. Where possible, try to come up with creative solutions by looking for alternative forms to fulfill the obligation(s). Also check whether any damages are covered by your insurer.

Knowing where you stand and starting the conversation with your contracting party from there can help arrive at a solution that is workable for both parties, especially in the extraordinary situation we all currently find ourselves in.

6. Attention when entering into new agreements

Should you be about to enter into a new agreement, be sure to include a provision regarding coronavirus. In any case, make sure the agreement contains a provision for force majeure situations. If you have general terms and conditions, check them carefully for force majeure clauses; is everything in there and is it worded correctly? If general terms and conditions of the other contracting party apply, make sure you determine in advance whether you can agree to such terms.

Do you prefer personal advice? Feel free to contact attorneys corporate law:

Valerie Lipman or Joost van Dongen.

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