Execution of contracts during the COVID pandemic

The widespread spread of the new coronavirus and the increasing number of cases in Romania led to the need for restrictive measures by the authorities, which inevitably led to changes in people’s lifestyles. The only thing that is certain in a pandemic situation, such as the current one, is that no one and nothing can guarantee what will happen tomorrow. Every day can bring major changes that affect people in unpredictable ways. But we can say that each person can adapt their own situation to how things evolve in society.

Declaring a state of emergency could mean taking increasingly drastic measures, as has already happened with the closure of restaurants, bars, cafés, and public places. Although the circulation is still free at the moment, the unpredictable nature of a pandemic of this scale means that many contracts are likely to be affected by these measures. As more and more European countries take drastic measures to stop the spread of the virus, from closing borders to banning flights, several questions arise: what happens to ongoing contracts? Who bears the contractual risk? Can the coronavirus outbreak be a force majeure?

A large number of people, both natural and legal, could be contractually affected by the outbreak of a state of emergency. The issue of disclaimers will be raised much more often in the coming period, given their wide applicability to many types of contracts. In the context of travel contracts, for example, the agent is obliged to compensate travelers; transport contracts would suffer from the prohibition to enter or leave certain areas, as well as supply contracts or contractor contracts. Employment contracts will also pose serious problems due to the closure of restaurants and public premises; these are just a few examples.

First of all, it is important to know that the civil contract has the force of law between the parties. In other words, people who have signed a contract are bound to perform it. However, two exonerating circumstances are of greater interest in this period: fortuitous events and force majeure. As long as the debtor, the person who has entered into a contract, proves that he was unable to perform his obligation for unforeseeable reasons beyond his control, he may invoke force majeure or fortuitous event, thereby removing his liability. It should be noted, however, that the parties may agree by contract that even in case of force majeure or fortuitous event, the debtor is still bound to perform his obligation. In such a situation, the debtor is no longer exonerated from the performance of the obligation in the event of an unforeseeable situation since the provisions of the contract take precedence.

But what are force majeure and fortuitous events?

According to Article 1351 para. (2) of the Civil Code, “Force majeure is any external, unforeseeable, absolutely invincible and unavoidable event.” These situations usually include wars, revolutions, coups d’état or natural disasters, events of a nature beyond man’s control and with devastating effects, having an extraordinary character. Whether this outbreak is a case of force majeure remains to be seen, as the situation assessment is on a case-by-case basis.

Force majeure implies an unpredictability of an objective, even absolute, nature. The impossibility of foreseeing an event is judged by taking the prudence and care of an expert as the yardstick. Thus, if an ordinary person could not have foreseen an event, force majeure cannot be invoked. Understandably, the reporting of unpredictability is done austerely to an expert person so that absolutely no one could have foreseen the situation. This absolute unpredictability is also the reason why few situations meet the conditions of force majeure.

It follows that the existence of a state of the pandemic is not sufficient for force majeure to be invoked in a contract since it is necessary to show that the non-performance of the obligation is external, invincible, inevitable and that it arises from an event that nobody could have foreseen.  Thus, in the case of contracts concluded before the existence of the epidemic and still in force at present, force majeure may be invoked only after the establishment of concrete circumstances based on an invincible and inevitable character and only for as long as the causal link between the event and the non-performance can be established. Concerning contracts concluded once the risks of pandemics are known, the solution is simple: to introduce a force majeure clause that expressly and concisely stipulates how it operates and to which circumstances it may apply.

Thus, as an answer to the main question, the current context of the COVID-19 pandemic may lead to the dismissal of contractual liability on the grounds of force majeure. Still, each case must be analyzed by the parties or by a Court on a case-by-case basis to determine whether the conditions of force majeure are met and whether there is a causal link. The mere state of the pandemic does not in itself constitute force majeure, but the situation’s effect on the contract’s performance must be demonstrated in each specific case.

By contrast, a fortuitous event is an event that cannot be foreseen or prevented by the person who would have been liable if the event had not occurred. Unlike force majeure, fortuitous events require fewer conditions, namely the unforeseeable and the impossibility of preventing the event. Although these conditions are the same as in the case of force majeure, the reference to them is more relaxed, as there is no longer the absolute nature, the unpredictability that no one could have foreseen, but in this case, the reference is to the average person, with average diligence.

Thus, although in some cases the conditions of force majeure would not be met, it might be possible, by concrete assessment in a specific case, to invoke the case of fortuitous events as a ground for non-performance. Still, as in the case of force majeure, a fixed model cannot be applied to all contracts. In times of crisis full of uncertainties and unpredictable situations that change drastically from one day to the next, both individuals and companies need to assess the state of the contract from the perspective of force majeure and to what extent it would be applicable to mitigate possible losses. On the positive side, both state institutions and traders understand that this is a time of crisis and multiple measures are being taken to avoid substantial losses, so there is an openness on the part of the state and large companies to adopt solutions to cover contractual non-performance by allowing performance under special conditions.