CEE Legal Matters

Category: Comparative Guides

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Croatia

    Contributed by Cipcic-Bragadin Mesic & Associates

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    In Croatian jurisdiction there are numerous ways how businesses can be affected by the Covid-19 pandemic. Some of the problems which arise in the economy are lower production or even termination of production, postponement or cancellation of the projects which are planned and paid in advance, and cancellation of flights, transport, events, accommodation, and travel arrangements, as well as delays in the delivery of ordered goods and the inability to deliver goods.

    Many companies are finding it impossible to perform their contractual obligations or impossible to perform them completely and adequately.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    Croatian law on obligations prescribes the obligation of a party to pay damages caused by its failure to perform its contractual obligations or its failure to perform it within the specified time. That is the general rule. The damage which should be compensated is both actual damages and lost profit.

    However, a party can be exempt from the obligation to pay damages if it proves it was unable to perform its obligation because of risks outside its reasonable control (i.e., force majeure). Examples of such risks include flood, earthquake, fire, explosion, etc. It appears the Convid-19 pandemic would be a “force majeure“ too.

    Furthermore the Croatian law on obligations prescribes that the parties are released from their contractual obligations and liability for damages if the inability to perform contractual obligation arises from force majeure. This rule also applies when only one party is unable to perform its contractual obligations because of risks outside its reasonable control, in which case the other party is entitled to take back everything already given in connection to its contractual obligation.

    Subsequently, in Croatian jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic) that party can cancel its contract without being obliged to pay damages to the other party. It is however important that the external event (Covid-19 pandemic) happened after the formation of the contract but before the prescribed timeline for its realization (for the party who cancels the contract), could not have been predicted when the contract was formed, could not have been avoided, and there is no responsibility of the parties for that event.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    When a party’s performance of its contractual obligations is adversely affected by an external event beyond its control but that performance does not become completely impossible, the other party can insist that the obligation be partially performed (to the extent that it is possible to perform it) or it can cancel the contract. The decision depends on whether a partially performed obligation satisfies the other party. If the partially performed contractual obligation is not acceptable to the other party then the contract is cancelled.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    The affected party should notify other parties about all the facts which have impact on their mutual obligations, so the consequences and circumstances of an FM Event would certainly qualify. Otherwise the party becomes liable for the damages caused by the lack of notification. It is required to notify other party immediately to avoid any damages.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    It is not required for a party to demonstrate that it would have performed its contractual obligations if the FM Event had not happened.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    It is necessary to take all steps possible to avoid or minimize the impact of the FM Event.

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Lithuania

    Contributed by Cobalt

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    In response to the COVID-19, the Lithuanian Government has imposed a nationwide quarantine and adopted various preventive measures. Based on the decision of the Lithuanian Government, the following main restrictions affecting business have been implemented:

    • visits to and provision of physical contact services in culture, leisure, entertainment, and sports establishments are prohibited
    • all mass gatherings in both open and closed spaces are prohibited
    • activities in health service centers, sanatoria, and recreation centers, except individualized rehabilitation services related to treatment, are prohibited
    • activities of public catering establishments, restaurants, cafes, bars, night clubs, and other entertainment places, except when food is taken away or delivered to customers in other ways, is prohibited
    • activities of (a) shops, except supermarkets and other shops selling food, (b) trading and entertainment centers, except spaces where food, veterinary, pharmaceutical, and optical products are sold, (c) market places, except food stalls, are prohibited. Exceptions are available for Internet trade and cases when goods are delivered to customers
    • activities of gambling and slot machine saloons (casinos) are prohibited
    • provision of beauty services is prohibited
    • The Lithuanian Government also approved work from home in state and municipal institutions of the public sector, in state-owned and municipal enterprises, except cases where certain functions must be fulfilled in working places. It is recommended that businesses in the private sector organize work in the same manner.

    Taking into account the wide scale of Governmental preventive measures, Lithuanian businesses will be definitely negatively affected. The imposed restriction creates a great risk of significant losses due to the distracted supply chain and decreased demand.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    According to Lithuanian law, external events that are beyond the control of a party can serve as a ground to amend, suspend performance, or even terminate an agreement in the following cases:

    Force majeure circumstances

    • Material change of circumstances (clausula rebus sic stantibus principle)
    • Both of these options are described in more detail below.

    Force majeure circumstances

    Force majeure events are unavoidable, uncontrolled, and irremovable circumstances that were not or could not have been foreseen. According to Lithuanian and prevailing case law, in order to invoke force majeure, the circumstances must meet the following requirements:

    • the circumstances did not exist at the time of conclusion of the agreement and they could not have been reasonably foreseen
    • due to the circumstances, it is not possible to perform the agreement objectively
    • the party could not control or prevent the occurrence of those circumstances
    • the circumstances were beyond the control of the party
    • the party did not assume the risk of such circumstances or their consequences

    It should be also noted that force majeure does include such circumstances as absence in the market of goods needed for the performance of the obligation. Lack of the necessary financial resources or failure to perform obligations by other counter-parties (e.g., suppliers) will also not serve as a ground to invoke force majeure.

    In practice agreements usually contain a force majeure clause. It might be drafted in different ways, including by providing exhaustive or non-exhaustive list of force majeure events (strike, fire, flood, etc.). However, Lithuanian law allows for the invocation of force majeure even if no such clause is established in the agreement.

    The party may invoke force majeure only when it informs the other party about the occurrence of force majeure circumstance and its consequences for the performance of obligations under the agreement. Such notification should be provided within reasonable time after the non-performing party became or should have become aware of force majeure circumstances.

    If the situation is considered to be force majeure, the party relying on force majeure is exempted from liability for failure to perform the agreement. This does not deprive the other party of the right to terminate the agreement, suspend its performance, or request payment of interest.

    Governmental preventive measures adopted in the light of COVID-19 do not qualify as force majeure per se. It is the obligation of the party to prove that due to those currently-adopted preventive measures it is unable to perform its obligations to its counter-party. The assessment of whether or not force majeure can be invoked due to the impact of the COVID-19 must be made on a case by case basis.

    Material change of circumstances (clausula rebus sic stantibus principle)

    According to Lithuanian law, the aggrieved party has a right to initiate an amendment of the agreement when performance of the agreement becomes obstructed. In particular, this right may be invoked when the balance of contractual obligations is materially (fundamentally) altered, i.e., either the cost of performance has essentially increased or the value thereof has essentially diminished. However, this amendment may be initiated only if:

    • the circumstances occur or become known to the aggrieved party after the conclusion of the agreement
    • the circumstances could not reasonably have been foreseen by the aggrieved party at the time of the conclusion of the agreement
    • the circumstances are beyond the control of the aggrieved party
    • the risk that the circumstances would occur was not assumed by the aggrieved party

    If these conditions are met and the parties fail to reach an agreement on the amendment of the contractual obligations within a reasonable time, any party may bring an action in court. The court may either (a) terminate the agreement and establish the date and terms of its termination, or (ii) amend the conditions of the agreement with a view to restoring the balance of the contractual obligations of the parties.

    In Lithuanian case law it is emphasized that in order to rely on a change of circumstances, such change should be “fundamental.”

    Also, it is important to keep in mind that:

    • despite the fact that it becomes difficult for the party to continue performance of its contractual obligations, the party must continue performing the agreement until it is amended or terminated
    • request to amend the agreement has to be submitted to the counter-party immediately after a change of the circumstances
      the agreement may be amended or terminated only by mutual agreement of the parties or by the court. It is not possible to refuse to perform contractual obligations unilaterally
    • Similarly as in cases of force majeure, assessment whether the preventive measures adopted in the light of COVID-19 form a basis to initiate amendment of the agreement on the basis of change of circumstances must be assessed on a case by case basis.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    Please see our answers to Question (II) under Section “Material change of circumstances (clausula rebus sic stantibus principle)”.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    Yes, as mentioned in our answers to Question (ii), the affected party is required to notify the counter-party about the force majeure circumstances or material change of circumstances. There are no specific terms. The law, however, requires the provision of relevant notice within a reasonable period after occurrence of force majeure circumstances and immediately upon a material change of circumstances.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    No such particular requirement exists. However, the party relying on force majeure circumstances or material change of circumstances must prove that the relevant requirements set under the law and court practice are met. Please see our answers to Question (II) under Section “Material change of circumstances (clausula rebus sic stantibus principle)” for further information.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    Yes, the affected party should demonstrate that force majeure circumstances or a material change of circumstances or the consequences thereof could not be prevented.

     

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Latvia

    Contributed by Cobalt

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    There are two main types of issues that businesses are facing: (i) loss of income, which results in the necessity to reduce the operations and take certain measures with respect to employees; (ii) the need to restructure operations due to quarantine restrictions and employees who may refuse to work in fear of getting infected.

    Latvian law is not very flexible in relation to situations where employers have to deal with similar short-term situations. Employer can either agree with the employees on certain solutions like work from home, part time work, use of annual vacation, or unpaid vacation for a certain time. Alternatively, it is possible to terminate certain employees on the basis of redundancy. However, this is not a very viable solution since the termination notice period is 1 month, plus the employer needs to pay severance, which could range from 1-4 monthly salaries depending on the employee’s seniority with the company. If the situation improves after 1-2 months, this would be wasted money. Accordingly, some kind of agreement with the employees is usually the best option.

    Employers are not allowed to prohibit the employees from traveling abroad. If an employee has travelled abroad against the employer’s recommendation and the employee is quarantined for 14 days upon return, then the employer is entitled to suspend the employee without pay. There could also be a situation where an employee simply refuses to work in fear of getting infected. It is unlikely that the employer could take serious disciplinary measures against such employees, however, this could be treated as unpaid idle time.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    The party invoking force majeure is under an obligation to immediately inform the other party thereof. Such obligation derives not only from international contract law, but also from the principle of good faith that applies also to domestic matters. In the event of failure to notify, the party which has failed to fulfill its obligations due to force majeure shall be liable for the loss resulting from the failure to inform the other party.

    The occurrence of force majeure typically allows the affected party to postpone the fulfillment of its contractual obligations for the period during which the specific circumstances exist, but does not release the party from the fulfilling its obligations entirely. However, in practice, there may be situations where the delay in the performance of obligations is so significant that the performance of the contract becomes useless.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    Latvian national law strictly follows the principle pacta sunt servanda and therefore neither the exceptional difficulty of the transaction nor difficulties in performance arising after the conclusion of contract shall give one party the right to withdraw from the contract. The Supreme Court of Latvia has also confirmed the importance of separating force majeure circumstances from cases where, despite difficulties, performance of contract is still possible. Consequently, circumstances where performance, although adversely affected by an external event beyond control, would be still possible, would not qualify as force majeure under Latvian law.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    Although it is not specifically regulated under Latvian law, the general principle of good faith would require the party invoking force majeure to immediately inform the other counter-parties regarding the respective circumstances.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    The affected party, as a party seeking relief from liability, would be required to demonstrate that force majeure has been a cause of failure to perform its contractual obligations.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    The general principle of good faith would require mitigation of loss in any case where liability of the affected party would be discussed. Moreover, parties seeking to justify non-performance based upon force majeure circumstances would be required to demonstrate that those circumstances were unavoidable in order to qualify them as force majeure. 

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Moldova

    Contributed by Schoenherr

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    Aside from public health, the outbreak of the Covid-19 pandemic is negatively impacting the Moldovan economy by disrupting a range of industries and business activities conducted in Moldova, affecting supply chain, services, and labor arrangements, among other areas.

    On March 17, 2020, the Moldovan Parliament declared a state of emergency for a period of 60 calendar days, this state of emergency allows the Moldovan Government to impose certain restrictions on the state, the first set imposed being: quarantine; special rules regarding work regimes; banned flights; restricted movement and access to and within the territory of the Republic of Moldova; and special rules regarding local and central public authority activities. In addition, the activities of certain economic agents have been restricted or completely disallowed. 

    It is difficult to assess the extent of damage this will cause to the economy of the Republic of Moldova and, in particular, to Moldovan companies, in the long term. However, it is obvious that substantial losses have already been caused, while contractual relations may be affected by improper or non-performance due to the current state of affairs.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    If a party (“Debtor”) proves that it is temporarily impossibile to perform its contractual obligations due to a justified impediment beyond its control, it may request either suspension of execution of its obligations under the respective contract or, in case of a definitive impossibility, the termination of the contract. Also, the Debtor may propose to the opposite party (“Creditor”) an adjustment of the obligation (redistribution of risks).

    Otherwise, several remedies are available to the Creditor in case of the Debtor’s inability to execute its obligations, such as:

    • reduction or suspension of execution of the Creditor’s correlative obligation;
    • request for termination of the contract;
    • any other legal remedy provided by the applicable law or by the respective contract.

    The Creditor may use any and all remedies indicated above.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    A case of failure to execute an obligation is considered justified if caused by an impediment (either external or internal) which is insurmountable, unpredictable, and inevitable, and which objectively causes the failure (impossibility) to execute the obligation. The Debtor has the burden of proof with regard to the concrete circumstances of the impediment. In this context, we tend to consider that if the impediment does not make the execution of the obligation impossible, the Debtor’s failure to execute the obligation is not to be considered justified.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    The Debtor has the obligation to ensure that the Creditor receives a notification of the impediment and its effects on the Debtor’s ability to perform its obligations, within a reasonable time after the Debtor knows or should have known these circumstances. The Creditor is entitled to compensation for any damage resulting from the failure to notify.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    Under applicable civil law, the Debtor has the burden of proof with regard to the circumstances of the impediment and the effects of the impediment on its ability to execute the obligation.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    If, taking into consideration that a diligent professional should be able to foresee and mitigate risks under various circumstances, the Debtor must prove that the impediment was inevitable taking into account all precautions and reasonable measures taken to avoid or to overcome it.

     

  • CEELM Covid-19 Comparative Legal Guide: Contracts in North Macedonia

    Contributed by Knezovic & Associates, member of Adriala

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    The Covid-19 pandemic has a major impact on the generality of business in North Macedonia. 

    The measures and the recommendations issued by the Government of the Republic of North Macedonia on a daily basis are aimed to prevent further transmission of the deadly virus. These measures include inter alia: 

    • Complete closure of the airports in North Macedonia with some exceptions applicable to specific transports;
    • Complete closure of borders for vehicles and passengers with the exception of trucks for transport of goods with exceptions based on specific permits;
    • Prohibition of the entry into the territory of the Republic of North Macedonia to foreign nationals from high and medium-risk countries in accordance with the list published by the World Health Organization;
    • Complete closure of shops in malls with exception of grocery stores and pharmacies;
    • Complete closure of educational institutions at all levels revenues
    • One parent of a child under the age of 10 is released from work

    These and other applied measures, as well as the fact that the general population should avoid any unnecessary travel and commute, affect the free flow of people, have an impact on the workforce and the capability to conduct regular business. In general, this situation will affect the expected revenues and cash flow.

    The most affected industries are transportation and tourism, as industries that are directly dependent on the free flow of population. On a longer-term basis, this would apply as well to the liquidity of the general economy and therefore the set of economic measures would have to be introduced by the state on a parallel track.

    At the moment, the Government is contemplating the introduction of economic measures but none are introduced by far.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    The capability of the parties to perform contractual obligations in the Vis Major circumstances (such as the Covid-19 pandemic) should be observed from the perspective of actual impact on the performance of the parties involved. 

    In principle, there is a possibility to cancel the contract in case of impossibility for a party to perform its contractual obligations, for reasons beyond the control of the parties.

    According to article 126 of the Law on contractual obligations, when the performance of obligations in a contract would become impossible due to an extraordinary event, which occurred after the conclusion of the contract, and before the obligation has become due, and which at the time of conclusion of the contract could not be foreseen or prevented by either party, avoided or removed and for which neither party is responsible (force majeure), the obligation of the other party is considered as canceled.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    In case of partial impossibility to perform its contractual obligations caused by an external event beyond the control of the parties, the affected party may terminate the contract in case of partial performance would not suit the counterparty requirements. Other than that, the contract would remain valid and the counterparty would be entitled to appropriate partial relief from compliance with its obligations.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    Any such event should be duly notified to the counterparty in an appropriate time period which is depending on the actual situation and should be communicated without delay.

    The impact of the force major event should be real and would have to result in an incapability to perform obligations under the contract. Taking into consideration the present status of the things in North Macedonia each case of force major and its causality should be evidenced. From the formulation of the respective article of the Law on Obligations is evident that each of the parties is required to demonstrate that specific steps are taken to avoid the impact of such an event.

     

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Poland

    Contributed by Penteris

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    (1) SOLVENCY ISSUES – businesses which have been directly affected by government preventive actions are in the most serious position now, including airlines, the travel industry (also digital intermediaries) and other firms engaged in passenger transport, enterprises providing publicly-available services (e.g. restaurants, theatres, cinemas, hotels, shops), and training firms. There will be a domino effect and the effects in the above sectors will spread to others causing reduced profitability.

    Another factor affecting revenue is weaker demand from cautious consumers. This may warrant widespread restructuring actions (to reduce costs) and in some circumstances even declaration of bankruptcy. The Polish government has announced support mechanisms for businesses affected by the pandemic but the specifics of this assistance are still unknown.

    (2) DISRUPTION OF SUPPLY CHAIN and other problems in performing contractual obligations – many businesses rely on supplies (or assistance) from other countries (regions, cities) in order to perform their contractual obligations and the lockdown of transportation (and other services) and manufacturing activities can make it extremely difficult or even impossible to fulfil contractual obligations. This may be remedied by renegotiating terms of contracts and if that proves to be undoable, businesses will be forced to assert their rights in courts of law.

    (3) ABSENCE OF EMPLOYEES AND HR ISSUES – businesses are facing employee absences due to mandatory quarantines and their inability to return home due to cancelled flights and restrictions on borders. There is no specific legislation in this regard and our experience suggests that most employers do not have a clear roadmap on how they should handle these situations from a legal standpoint i.e. if they should pay employees for their time off, and whether they are obliged to let employees work remotely and the suchlike. Another issue concerns the risk of spreading disease and the steps employers may/must take if they think that an employee might be affected by Covid-19.

    (4) TECHNOLOGICAL INADEQUACIES – some companies are not ready to quickly make the switch from traditional working models to a remote working model. One barrier is technology, another, a lack of procedures that would ensure effective and lawful supervision of employees (“checking in” vs. “checking up”), as well as the necessity to secure the safe flow of information.

    (5) POSITIVE SIDE EFFECTS – often crisis situations lead to positive outcomes. Companies and employees are already innovating and finding work-around solutions in order to keep one step ahead in this VUCA environment (volatile, unpredictable, complex, ambiguous). Remote working can actually be incredibly efficient thanks to modern collaboration tools. Our hope is that these positive outcomes will mitigate some of the negative effects of Covid-19.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    The general rule is that if the performance of an obligation becomes impossible as a result of circumstances for which the debtor is not responsible, such an obligation expires. Even though there is no obligation that binds the parties, if the object of the performance has been transferred, forfeited, or damaged, the debtor will be obliged to release everything that he obtained in exchange for it or as redress for the damage (Article 475 of the Polish Civil Code).

    The above general rule is supplemented with some other provisions with regard to obligations stemming from mutual contracts. In such contracts, if the performance of one of the mutual obligations becomes impossible as a result of circumstances for which neither party is responsible, the party who was to make the performance cannot demand mutual performance, and if already received , the party shall be obliged to return it in accordance with the provisions on unjustified enrichment. If the performance by one of the parties becomes impossible only in part, that party loses the right to the appropriate part of the mutual performance. However, the other party may rescind the contract if partial performance would have no significance for it in view of the nature of the obligation or in view of the intended purpose of the contract, known to the party the performance of which become partially impossible (Article 495 of the Polish Civil Code).

    There are some key issues to note here:

    • impossibility of performance must be objective (i.e. it can no longer be performed by anyone) or subjective (i.e. pertaining to the debtor), but in the latter case only if the debtor is obliged to make the performance personally;
    • impossibility must be permanent and definitive (not transient or temporary) but this does not always mean that it must be infinite – each case must be assessed also from the point of view of the creditor’s interest or obligation’s nature;
    • impossibility may be of a factual or legal character. it also covers restrictions introduced by the authorities;
    • impossibility does not pertain to pecuniary obligations; if the debtor becomes insolvent, he should file for bankruptcy;
    • the obligation expires once it becomes impossible and this expiration is only for the future (effective ex nunc);
    • it is not an imperative provision of law which means that the parties may contractually regulate such a situation differently. It is, however, worth remembering that impossibility clauses forged by parties are subject to all restrictions and rules stemming from the applicable law so parties are not entirely free in their discretion in this regard (especially in contracts with consumers);
      • there are limited exceptions to the above-mentioned rule e.g. if the object of the performance is something indicated as to its identity, the debtor who is delayed shall be liable for the loss of, or damage to, the object of the performance unless the loss or damage would have taken place and also if the performance were undertaken in the appropriate time (Article 478 of the Polish Civil Code).

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    Yes, there are courses of action designed for such events. Below is the most important one:

    According to Article 357* of the Polish Civil Code, if due to an extraordinary change in circumstances, the performance of contractual obligations entails excessive difficulties or exposes one of the parties to a substantial loss which the parties did not foresee when concluding the contract, the court may, having considered the parties’ interests, in accordance with the principles of community life, designate the manner of performing the obligation, the value of the performance or even terminate the contract. When terminating the contract, the court may, as needed, decide how accounts will be settled between the parties, being guided by the principles set forth in the preceding sentence.

    Below are some key features of the above course of action:

    • it is designed to mitigate the extraordinary effects of certain events and states that interfere with contractual obligations and not to simply free the party from typical contractual risks that it took upon itself;
    • the change in circumstances should be in the sphere of social relationships (including economic relationships) and should be universal, widespread (not limited to this particular contract) and have a degree of permanency (changes that are only transient are not relevant);
    • it is not an imperative provision of law, which means that the parties may contractually regulate such a situation differently. It is, however, worth remembering that force majeure clauses forged by parties are subject to all restrictions and rules stemming from the applicable law so parties are not entirely free in their discretion in this regard (especially in contracts with consumers);
    • it is an exceptional measure which undermines the key rule of contract law i.e. pacta sunt servanda (“agreements must be kept”), so it should not be interpreted broadly;
    • this measure is only available to an obliged party if it was not in default when the extraordinary circumstances occurred;
    • the unforeseeability of effects that the change in circumstances have on the contractual obligations must also be objective i.e. a party acting with diligence could not foresee this;
    • a party interested in a modification of contractual obligation(s) must sue its contractual partner and demand a specific modification (or termination of the contract) to be ordered by the court; however, the court is not bound by the party’s demand and may rule in any way it sees fit guided by the criteria outlined above (interests of parties, principles of community life, etc.);
    • the court should endeavor to improve the situation of the claimant in a way that would be least adverse for the defendant;
    • termination of the contract is a last resort.

    * Apart from the above course of action (and impossibility of performance described above), it must be noted that under Polish Contract Law the party is, as a rule, not liable for damage caused by the non-performance or improper performance of contractual obligations if this is a result of the circumstances for which the obliged party is not responsible. The parties may stipulate in their contract for which circumstances they are responsible. If they will not regulate this matter, it will be on the obliged party to prove that it acted with due diligence in order to perform the obligations properly.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    No, there is no specific obligation but it may be helpful to prove in court the party’s case and the fact that it acted in good faith or in accordance with the principles of community life. What is more, the party may use this course of action at any time (it is not subject to limitations of claims time periods) until the obligation (contract) is still in force. This means that if the party fulfills its obligation before lodging the lawsuit it may not demand anything from the other party. Also, if the other party effectively rescinds the contract and e.g. charges the party with contractual penalties the party affected by extraordinary circumstances is not able to take advantage of this course of action anymore.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    Yes, the fact that performance of contractual obligations entails excessive difficulties or exposes one of the parties to a substantial loss must be due to an “extraordinary change in circumstances”. The onus of proving this (as well as other elements of this course of action) in court is on the party who wants to take advantage of this course of action in court.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    Yes, such obligation stems from the general rule of contract law which requires the parties to take actions in order to mitigate the loss (acting diligently). What is more, in case of the discussed course of action the court takes into account the principles of community life which includes contractual loyalty, also after the “extraordinary circumstances” occurred. Therefore in general, the better the affected party acts in the wake of unexpected events, the better outcomes it can expect.

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Romania

    Contributed by Ijdelea Mihailescu

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    Certain businesses have taken a severe hit and the entire business community is worried about the final toll this will take both at the individual company level and on the overall economy. Like everywhere else, the industry most affected is tourism, as the COVID-19 pandemic has led to huge losses for all companies active in this field (especially travel agencies and hotels), many foreseeing bankruptcies on the medium and long terms. Certain travel agencies have already closed their businesses and suspended employment agreements. Restaurants and shops of any kind (except for supermarkets and other shops selling groceries or/and other necessary products) are not far behind and, as of March 16, 2020, Romania is in a state of emergency, with many having already temporarily closed or reduced their programs. The other most-affected industry is transportation (especially international transportation) which is frozen, most definitely leading to huge losses for the two Romanian airlines as well as other transport companies.

    Probably, the flip side is that some companies will be profiting in the short term from the large sale of certain products but, however, in the long run, everybody will suffer losses.

    Through the Presidential Decree by means of which the state of emergency was declared on March 16 for a 30-day term, various general measures have been enacted in order to provide some temporary support to both employers and employees. However, the substantial measures meant to offer some kind of support scheme for businesses are expected to be further enacted by the Government.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    As per the Romanian Civil Code, the following rules apply:

    • In cases of force majeure or fortuitous event, a party is exonerated from liability.
    • For certain agreements (such as a transportation agreement) the law provides that only force majeure events exonerate a party.
    • If the force majeure or fortuitous event is permanent, the contract shall be terminated by law.
    • If the force majeure or fortuitous event is not permanent (such as the COVID-19 pandemic), the contract may only be suspended, providing that the obligation can still be performed subsequent to the cessation of the force majeure or fortuitous event, as the case may be.
    • If the execution of a certain obligation can be effectively performed only on a certain date or period (within the COVID-19 pandemic), the rightful party may request the termination of the contract.
    • Neither force majeure nor a fortuitous event can protect contractors from liability in relation to obligations regarding the supply of generic goods (such as money). However, the proper qualification of goods as being generic should be assessed considering the overall effects of the COVID-19 pandemic as it might be that goods normally considered generic will be generic no more.

    Force majeure is defined as “any external, unpredictable, absolutely insurmountable and unavoidable event” while a fortuitous event is defined as “an event that cannot be foreseen nor prevented by the person who would have been called to respond if the event had not occurred.” As per the applicable case law and legal literature, both events need to unpredictable, the main difference being that force majeure needs to be also external and absolutely insurmountable and unavoidable while a fortuitous events need to be solely insurmountable and unavoidable for the said party.

    Contracts can include specific clauses which extend or limit the legal provisions related to force majeure and fortuitous event. Usually, contracts provide for exoneration of liability only for force majeure (excluding fortuitous event) and include a detailed process to be followed (notifications, timeframe in which the contract can be suspended and conditions in which it can be terminated). Although not common, contracts can provide that a party shall be liable even in case of force majeure.

    Thus, having in mind the actual particularities of the contract (object and moment of execution) as well as its provisions (if any):

    • COVID-19 pandemic might be considered force majeure, a fortuitous case, or none of the above;
    • A party’s liability may or may not be triggered liable and such party may or may not be entitled to cancel the contract.

    Please see below two examples:

    • If a supply contract was executed in 2019, it is likely that certain cases of failure to comply with the supply obligation will be considered force majeure or a fortuitous event;
    • If a supply contract was executed in March 2020 (when the potential effects of the COVID-19 pandemic could have been envisaged), it is very unlikely that any failure to comply with the supply obligation will be considered force majeure or a fortuitous event.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    As explained above:

    • If the contractual obligation does not become completely impossible in the sense that it can be performed at a future date in time, and in the absence of any contradictory contractual provisions, the contract shall be suspended and none of the parties shall be liable for the respective delay.
    • If the event beyond the party’s control was not absolutely insurmountable and unavoidable, it may constitute a fortuitous event (as opposed to force majeure) making it probable that the party will not be able to seek relief (depending on the contract’s object and related provisions).
    • If the event does not constitute an fortuitous event or if it does but the affected party remains liable, the affected party may try to amend or terminate the contract. The grounds for such claim would be the hardship clause, i.e. the right to terminate or amend the contract as the obligations have become substantially more onerous due to unpredictable change of events leading to an inequitable distribution of risks and contractual balance. This will not be possible if the contract expressly excludes the hardship clause.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    The other party must be notified as soon as possible in relation to the FM Event. What is the meaning of “as soon as possible” depends on case by case basis but usually it means within maximum one day since the party was aware of the FM Event assuming that such does not prohibit him also to notify (this is not the case for Covid-19 pandemic)

    Failure to notify in due time may trigger contractual liability for any damages occurred due to the notification delay.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    The failure to comply with the contractual obligation must directly derive from the FM Event. This causation requirement must be proved by the affected party.

    It is possible for the party to request a certificate attesting the existence of force majeure, issued by the Chamber of Commerce and Industry of Romania. This would represent an extra-judicial proof of causation requirement, but it can be challenged in front of the courts of law.

    However, force majeure cannot be used as a reason for the delay/refuse to comply with a contractual obligation if this would have been the case also in lack of the FM Event. Thus, the affected party must invoke the FM event in good faith.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    The affected party should take specific steps in order to avoid the impact of the FM Event. Moreover, usually, this specific obligation is included in contracts.

    Thus, if no appropriate steps have been taken, the debtor shall be liable for the damages causes by its lack of action.

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Serbia

    Contributed by JPM Jankovic Popovic Mitic

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    The rapid outbreak of Covid-19 (the coronavirus) hit not only our businesses, but also our daily lives. The disruption of the financial markets was reflected in our daily lives, which in turn affects businesses, particularly the travel industry, airliners, and supply chains. The first confirmed case of Covid-19 in Serbia was registered on March 6, 2020, while Serbian authorities declared a state of emergency on March 15, 2020 and imposed various measures to fight the outbreak.

    Even though the country has not been in a lockdown, the recommendations of the Government to stay home and switch to remote work have affected the liquidity. On the one hand, there is high demand for basic needs and consumer goods, while there is significant drop of sales in tourism industry – the Ministry of Trade, Tourism and Telecommunications announced on March 10, 2020 that 80% of travel arrangements in February and March 2020 were cancelled due to the spread of the coronavirus.

    It should be noted that authorities adopt measures in real time. One of the latest (adopted on March 17, 2020) measures was adopted by the National Bank of Serbia, which announced at least a 90-day moratorium on all debts and finance leases. However, debtors may opt to continue to repay loans and finance leases.

    The NBS previously lowered the reference rate for 50 base points, to 1.75%, March 11, 2020. According to the NBS, this decision was made as a reaction to uncertainty in the international environment and it is line with activities other central banking authorities worldwide undertook.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    As a general rule, if a party does not perform its contractual obligations, it would be liable for non-performance. So the question would be whether a party could be exempted from liability if the non-performance is caused by an external event beyond its control.

    Pursuant to the Serbian Law on Obligations (133-136), a party affected by an external event (e.g., the Covid-19 pandemic) could seek an order from a court canceling the contract due to changed circumstances occurred after the execution of the contract (rebus sic stantibus institute). However, this option of a debtor may be enforced only subject to conditions set out by the law and not automatically. One of the main conditions is that the occurred event must have been unforeseeable at the time the contract was concluded.

    Additionally, where a debtor requests that the court cancel the agreement due to changed circumstances, the court would cancel the contract if a creditor does not accept to amend or offer to amend the contract fairly.

    Moreover, pursuant to the Law on Obligations, an obligation shall terminate if its performance is made impossible due to circumstances for which a debtor is not responsible. However, it is up to the debtor to prove the circumstances which exclude its liability.

    In other words, there is no automatic option for a debtor under the Serbian Law on Obligations to terminate a contract due to an event which could be deemed force majeure.

    Additionally, with regards to pre-contractual obligations, the Law on Obligations (45) expressly provides that a pre-contract does not bind parties if circumstances after its conclusion are changed to such an extent that it would not have been concluded if they had existed at the time of conclusion.

    For these reasons, it is common for commercial agreements to contain provisions on force majeure outlining the reasons for termination or suspension of the agreement, as well as potential remedies. A contractual definition of force majeure could include “epidemic, pandemic,” as well as a time requirement (e.g., duration over 90 days).

    In any case, we strongly recommend that all commercial agreements, including finance agreements, if relevant, be reviewed by legal experts, particularly as some specific rules could be applicable to different contracts (lease contracts, transportation contracts, etc.) and circumstances (e.g. hell and high water clause).

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    The Serbian Law on Obligations provides for that a debtor could ask the court to cancel a contract in case of changed circumstances, subject to the mandatory requirements (Articles 133-136) mentioned above. However, the agreement would not be cancelled where a creditor accepts or offers fair amendments to the agreement.

    Certainly, parties may agree/could have agreed such right to seek relief from compliance with their respective obligations to a certain extent in case of FM event in their agreements.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    A debtor must notify a creditor about the force majeure event. Pursuant to Article 268 of the Law on Obligations, a contracting party is obliged to inform the other contracting party on any event which might affect their mutual relations – otherwise, it could be liable for damages caused by delayed delivery of the notice.

    In case a debtor wishes to enforce its rights to cancel the agreement due to changed circumstances, it must notify the creditor of such event the moment it became aware of the force majeure event – otherwise it is liable for damages caused by delayed delivery of the notice.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    A debtor must demonstrate circumstances which lead to its inability to perform its obligations. It is not up to a creditor to demonstrate that a debtor is liable, but to debtor to demonstrate that it is not liable.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    A debtor must perform everything to mitigate damages, particularly if the debtor wishes to be released from damages caused by non-performance of its contractual obligations due to an event that occurred after the conclusion of contract which could not be prevented, eliminated, or avoided.

  • CEELM Covid-19 Comparative Legal Guide: Contracts in Slovenia

    Contributed by Law firm KBP, member of Adriala

    How might businesses in your jurisdiction be impacted by the Covid-19 pandemic?

    The competent authorities in the Republic of Slovenia have already taken certain measures to curb and control the COVID-19 epidemic in Slovenia, which also affect businesses. New measures are being adopted daily.

    Temporary prohibition of sale of goods and services to consumers in the Republic of Slovenia

    As of March 16, 2020 at 00:00 hours, the Ordinance on the temporary prohibition of sale of goods and services to consumers in the Republic of Slovenia is in force. The Ordinance shall be in force until further notice.

    The Order temporarily prohibits the sale and offering of goods and services directly to consumers in the territory of the republic of Slovenia. Such goods and services include accommodation, catering, sports and recreation, cinema, culture, hairdressers, pedicure, gambling and other similar services. The following goods/services/activities are not covered by the ordinance and as such are permitted:

    • Remote sale of goods and services to consumers (distance sales)
    • Sale of food products (including sale of farm products on farms)
    • Pharmacies
    • Sale of medical supplies
    • Sale of goods related to garden and farming in stores
    • Farmhouse sales
    • Gas stations
    • Banks
    • Post
    • Delivery services
    • Tobacco sales and sales of newspapers
    • Other services urgently needed to ensure public health and safety
    • Other sales of goods and services to consumers which are indicated as exceptions to the Ordinance by the Government of the Republic of Slovenia in other ordinances.

    Prohibition and restriction of public transport

    On March 16, 2020, at 00:00 hours, the Order on the temporary prohibition and restriction of public transport of passengers in the Republic of Slovenia entered into force, temporarily prohibiting public transportation of passengers in the Republic of Slovenia. Taxis are still permitted to operate if the driver of the vehicle, before allowing a new passenger to enter, arranges for the proper disinfection of parts of the vehicle that are in regular physical contact with the passenger.

    Temporary ban of air transport in the Republic of Slovenia

    In order to curb the spread of the SARS-CoV-2 virus and its related impact on the protection of public health and assets protection, the Government of the Republic of Slovenia has issued an Order banning air transport in the Republic of Slovenia. 

    The Order applies from March 17, 2020 (00:00 hours) until March 30, 2020 (until 24:00 hours) for international air transport operating within the European Union in accordance with European Union regulations, and from March 17, 2020 (00:00 hours) until further notice for international air transport from or to non-EU countries. 

    Operation of schools and kindergartens

    From March 16-29, 2020, the Order on the Prohibition of gatherings in Institutions in the Field of Education and gatherings in Universities and Independent Higher Education Institutions is in force. Pursuant to this order, gatherings in kindergartens and in all stages of the educational process in Slovenia are prohibited. Educational institutions (kindergartens, primary schools, secondary schools, faculties, etc.) will thus be closed from March 16, 2020 to March 29, 2020.

    Prohibition of gatherings at public events

    As of March 7, 2020, the Order on the prohibition of public gatherings at public events in enclosed public places has been in force. The Order bans gatherings of more than 100 people at public events in enclosed (indoor) public places in the Republic of Slovenia. The ban will apply as long as the risk of spread of the contagious SARS-CoV-2 disease (COVID 19) exists.

    Operation of the courts

    As of March 16, 2020, all courts shall hold hearings and issue rulings only in urgent cases.

    All oral hearings scheduled in cases which do not fall within the urgent matters specified in the order are cancelled. Except for urgent matters referred to in the order, procedural time limits will not run while these special measures apply, nor will court documents be served. If a court document has been served, the procedural time limits will begin to run on the first day after the special measures cease to apply.

    Border control checks between Slovenia and Italy

    The Order on the conditions of entry into the Republic of Slovenia from the Italian Republic to prevent the spread of SARS-CoV-2 (COVID-19) came into force on March 11, 2020.

    The Order does not apply to citizens of the Republic of Slovenia, persons with permanent or temporary residence in the Republic of Slovenia, or to freight transport, but applies to all other entities and other transport/traffic.

    Entry into the Republic of Slovenia is granted to an individual to whom the Order applies if he/she submits proof in Slovenian, English, or Italian which is no more than three days old showing negative results for SARS-CoV-2 (COVID-19) (or even without such proof if his/her body temperature is below 37,5°C and he/she shows no clear signs of upper respiratory tract infection (cough, sneezing, shortness of breath)).

    Passenger train traffic between Italy and Slovenia has been suspended.

    In your jurisdiction, if it becomes impossible for a party to perform its contractual obligations because of an external event beyond its control (such as the Covid-19 pandemic), can that party cancel its contract?

    In certain circumstances, yes. Please see below the relevant provisions and legal institutes, which allow for such cancellation/termination of, or withdrawal from, a contract.

    Total Impossibility of Performance

    Pursuant to Article 116 of the Obligations Code (in connection with Article 329 of the Obligations Code), if the performance of obligations becomes impossible (in full) for one party to a bilateral contract, due to a development for which neither party is responsible, the obligation of the first party shall cease, whereby the obligation of the other party shall also cease; if the latter has already performed part of their obligations, it can demand the return thereof in accordance with the rules on the return of that which was acquired unjustly.

    Partial Impossibility of Performance 

    In the event of partial impossibility of performance, and if the partial impossibility of performance is the consequence of a development for which neither party was responsible, the other party may withdraw from the contract if the partial performance does not satisfy such party’s needs; otherwise the contract shall remain in force and the other party shall have the right to demand the proportionate reduction of such party’s obligations.

    Rescission or Amendment of a Contract owing to a Change of Circumstances

    Pursuant to Articles 112 and 113 of the Obligations Code, in the event that:

    • after the conclusion of a contract, circumstances arise that render the performance of obligations by one party (hereinafter referred to also as: the First Party) more difficult, or
    • owing to these circumstances, the purpose of the contract cannot be achieved,

    and in both cases to such an extent that the contract clearly no longer complies with the expectations of the contracting parties and it would in the general opinion be unjust to retain the contract in force as it is, then the party whose obligations have been rendered more difficult to perform or the party that owing to the changed circumstances cannot realize the purpose of the contract, may request the court to rescind the contract.

    Rescission of a contract cannot be requested if the party invoking a change of circumstances should have taken such circumstances into consideration at the time the contract was concluded or could have avoided them or could have averted the consequences thereof.

    The party requesting the rescission of the contract (i.e., the First Party) may not invoke the change of circumstances if that change occurred after the deadline stipulated for the performance of the First Party’s obligation.

    A party who is entitled to request the rescission of a contract, owing to the changed circumstances (i.e., the First Party), must notify the other party of its intention to request a rescission as soon as it learns that such circumstances have occurred. A party that fails to do so shall be held liable for the damage incurred to the other party as a consequence of the notification not being provided on time.

    A contract shall not be rescinded if the other party offers to have the relevant contract conditions fairly amended.

    Release of Debtor’s Liability

    Pursuant to Article 240 of the Obligations Code the debtor (i.e., the party required to perform a certain contractual obligation) shall be released from liability for damages (which occurred as a consequence of non-performance), if it is shown that the debtor was unable to perform the obligation or was late in performing the obligation owing to:

    • circumstances arising after the conclusion of the contract, that
    • could not be prevented, eliminated or avoided.

    In your jurisdiction, if a party’s performance of its contractual obligations is adversely affected by an external event beyond its control (an “FM Event”) but does not become completely impossible, can that party typically seek relief from compliance with its obligations?

    In certain circumstances, yes. Please see above answers under b), especially the Release of Debtor’s Liability section and Rescission or Amendment of a Contract owing to a Change of Circumstances section.

    If yes, what considerations should be borne in mind by such parties, in particular in relation to:

    Any notification obligations (Is the affected party typically required to notify any counterparties of the FM Event within a specific time period?)

    With respect to the Rescission or Amendment of a Contract owing to a Change of Circumstances: A party who is entitled to request the rescission of a contract, owing to the changed circumstances, must notify the other party of its intention to request a rescission as soon as it learns that such circumstances have occurred. A party that fails to do so shall be held liable for the damage incurred to the other party as a consequence of the notification not being provided on time. 

    With respect to the Release of Debtor’s Liability: The Obligations Code does not stipulate such an obligation specifically in connection with Article 240, however, according to the general rule of Article 10 and Article 5 of the Obligations Code, each party shall be obliged to refrain from action by which damage could be inflicted on another an to observe the principle of fairness and conscientiousness. Thus, if refraining from notification would cause damages to the other person, the affected party may have an obligation to notify.

    Any causation requirements (Is the affected party typically required to demonstrate that it would have performed its contractual obligations but for the FM Event?)

    With respect to the Rescission or Amendment of a Contract owing to a Change of Circumstances: As stated above, the affected party must demonstrate that the specific FM Event occurred after the conclusion of a contract and that the specific FM Event renders the performance of its obligations more difficult, or that owing to the FM Event, the purpose of the contract cannot be achieved, and in both aforementioned cases to such an extent that the contract clearly no longer complies with the expectations of the contracting parties and it would in the general opinion be unjust to retain the contract in force as it is.

    With respect to the Release of Debtor’s Liability: The affected party has to demonstrate and prove the fact that the FM Event could not have been prevented, eliminated, or avoided. Thus, the affected party has to demonstrate and prove that these the particular FM Event (and not other circumstances) adversely affect the performance of its contractual obligations.

    Any mitigation obligations (Is he affected party typically required to demonstrate that it took specific steps to avoid the impact of the FM Event as far as possible?)

    With respect to the Rescission or Amendment of a Contract owing to a Change of Circumstances: Article 112 of the Obligations Code mandates that the affected party shall notify the other party of their intention to request a rescission as soon as it learns that such circumstances have occurred (which is intended to mitigate the damages of the other party). In all other respects, general principles of the Obligations Code apply (duty to observe the principle of conscientiousness and fairness; prohibition of infliction of damages, etc.).

    With respect to the Release of Debtor’s Liability: The affected party must demonstrate that these circumstances could not have been prevented, eliminated, or avoided and, thus, that no relevant measures could have been taken to avoid or mitigate the damages. General principles of the Obligations Code apply (duty to observe the principle of conscientiousness and fairness; prohibition of infliction of damages, etc.).

  • Foreword

    The outbreak of the COVID-19 virus, which may yet be some way off its peak, has already caused significant loss of life and suffering in many countries around the globe. Its impact, like the impact of the measures taken to try to contain it or mitigate its effects, continues to grow at both a macroeconomic and an individual business level.

    As governments and central banks intervene across the globe to address the impact of the virus on communities, commerce, and the financial markets, many businesses are facing new and difficult challenges in relation to many aspects of their operations. Whilst some sectors, such as travel and tourism, leisure and hospitality, shipping, logistics, and retailers are particularly badly affected, almost every significant business in Europe and beyond will have important issues to grapple within the coming days, weeks, and months.

    This CEELM Covid-19 Comparative Legal Guide: Contracts sets out to summarise, at a high level, certain key issues that will face any business with operations in the CEE region and is intended to serve as an overview of issues to consider and possible challenges and mitigants in each jurisdiction covered. There is a particular focus on contractual issues, including circumstances where performance of a contract may be excused (or may not be excused) by force majeure provisions or legal doctrines such as frustration or impossibility. Even for lawyers who deal with commercial contracts for a living (whether inhouse or as external advisers), such areas of the law may be unfamiliar or largely forgotten, yet may now be of relevance in many contexts and may be of particular interest to executives and other decision-makers within companies. We hope this guide is a useful starting point to identifying some of the key issues and considerations as business seeks to find a path through the present uncertain and rapidly changing situation.