Coronavirus: Is It a Force Majeure Event?

Coronavirus: Is It a Force Majeure Event?

The spread of the COVID-19 virus, better known as the coronavirus, has become a global healthcare event that has caused concern for all member states of the world community. The spread of the virus has affected not only the health and safety of citizens but also the security of business relations in general.

In this connection, the issue of protection and prevention of doing business becomes especially urgent, because the spread of the virus can cause not only failures and interruptions in the operation of companies, but also non-fulfillment of contractual requirements by the parties, and evasion of those from the fulfillment of their obligations.

So, among the main points to which attention should be paid to participants in business relations that will help minimize the impact of the virus on their business, we can highlight:

1. Domestic policy of companies

It is important to ensure awareness among workers about the mechanism of action of the virus and its prevention. Mostly, it is ignorance that causes the malfunctioning of companies. In order to ensure business continuity, it is recommended to conduct fact-finding lectures, provide information leaflets that will help employees better understand the symptoms of the disease, the principles for identifying such in the early stages. Particular attention should be paid to personal hygiene, the use of antiseptic and other precautions.

Also, in order to ensure the possibility of remote work, the preparation and improvement of software at the company is appropriate. It is important that such an opportunity necessarily implies compliance with confidentiality information, as well as maintaining data integrity in the process of authorization of an employee.

2. Ensuring the implementation of contractual obligations

Given the potential delays in meeting obligations, we emphasize the need to review the terms of contracts, which due to circumstances cannot be completed on time. After all, such a delay can become the basis for large financial losses on the part of counterparties, as well as for the calculation of penalties.

Given the fact that the establishment of circumstances of force majeure can mean the release of a person from liability, the issue of determining the COVID-19 coronavirus as such is especially relevant.

So, there are potentially two possible options for fixing coronavirus as a force majeure event. First, include a clause on COVID-19 in the contract. Secondly, to prove that the failure to fulfill the terms of the contract occurred precisely because of the influence of the coronavirus.

The use of the second reason may be difficult, given the rather high requirements for a person interested in confirming the circumstances of force majeure. So, the submitted documents must together indicate the extraordinary, inevitability and unpredictability of the relevant circumstances, as well as the direct causal relationship between the circumstance and the inability to fulfill their contractual obligations.

We recommend collecting and storing all documentary evidence of the effect of coronavirus on the ability to fulfill contractual obligations. Such evidence is correspondence, regulatory and administrative acts of individual action, and the like. The party should carefully record all events and circumstances associated with the epidemic that affect the ability to fulfill contractual obligations because it is necessary to prove and reliably establish both the moment of the occurrence of force majeure circumstances and the moment of completion of their negative impact.

One can really agree with the assertion that the spread of the COVID-19 virus can lead to problems related to doing business both at the internal level of the companies themselves and when the parties conduct external relations.

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