Compliance with agreements at the time of the corona crisis?

The outbreak of the coronavirus is putting pressure on the operations of many companies. In some cases, this has far-reaching consequences that make business owners unable to fulfill their obligations. To what extent can you or your contracting party invoke force majeure in such a case? And are you as business owner always obliged to comply? In this article I provide some practical tips to determine your position.

Check the agreement

An important principle in Dutch contract law is pacta sunt servanda. Agreements between parties must be respected. It is therefore important to look first at what has been agreed between the parties. The agreement may 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 may 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 particularly on how the clause is worded.

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.

A claim of force majeure under the law

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.

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 are at risk of being in this position), it is advisable that you check in advance what the current agreements are. Knowing where you stand and starting the conversation with your contracting party on that basis can help you reach a solution that is workable for both parties, especially in the exceptional situation we are all currently in.

Do you prefer personal advice? Feel free to call us or send us an e-mail. We are here for you!
Valerie Lipman and Joost van Dongen

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