Unpaid invoices during COVID-19

Slowly but surely, COVID-19-related rulings are trickling in. With that, it is becoming increasingly clear how judges are distributing the risks of the COVID-19 outbreak. In other words, who is actually footing the bill. One telling ruling was handed down earlier this month between a cleaning company and a hotel.

COVID-19 and unpaid invoices

The parties had entered into an agreement under which the cleaning company would provide cleaning services for the hotel for a certain period of time. Following the COVID-19 outbreak and in connection with the intelligent lockdown, the hotel was forced to temporarily close its doors in the spring of 2020. It informed the cleaning company that cleaning services were no longer needed during the closure. The cleaning company subsequently claimed over EUR 212,000.00 in outstanding invoices for cleaning services performed during the closure.

Who pays the bill?

The parties dispute whether they agreed that the hotel would pay a fixed amount per month for cleaning services, regardless of the amount of cleaning services performed. The cleaning company believes that they did, while the hotel believes that the parties agreed that they would pay only for the cleaning work actually performed. Based in part on the wording of the agreement, the court ruled that the hotel was not obligated to pay the outstanding invoices. So far, the case appears to be, at its core, a conducted discussion about interpretation of a contract provision. Such discussions are commonplace. More interestingly, the court added a consideration "for the sake of brevity.

Unforeseen circumstances

The court ruled that even if the parties had agreed on a fixed amount per month, the hotel would probably be able to successfully invoke Section 6:258 of the Civil Code. In other words, even if the parties had agreed on a hard payment obligation, the hotel does not stand empty-handed. It can, according to the judge in this case, probably successfully ask the court to modify the effects of an agreement or to dissolve it in whole or in part.

Revenue decline

The judge in this case arrived at this judgment based in part on the drop in revenue that the hotel faced (a whopping 86% expected drop in revenue versus 9% from the cleaning company). This case demonstrates that judges are lending a helping hand to parties who have been squeezed as a result of the COVID-19 outbreak.

Want to learn more about the impact of the COVID-19 outbreak on contracts? Then check out our Infographic or contact Emile Sahhar or Valerie Lipman.