FORCE MAJEURE DURING QUARANTINE: ADVICE FOR CORPORATE BUSINESS

Business partners try to answer the question: whether the quarantine at the national level can be considered as a force majeure. The Chamber of Commerce and Industry of Ukraine reports a record number of requests on this issue – more than 300 requests a day.

Do you want to know how does the quarantine can affect on your commitment? We have the answer.

CONTRACT VS LAW

Very often business partners include provisions  about force majeure in the contract.

On March 17, 2020, the Verkhovna Rada adopted Law of Ukraine № 3219 “On amendments to certain legislative acts of Ukraine aimed at preventing the occurrence and spread of coronavirus disease (Covid-19)”. Therefore, quarantine established by the Cabinet of Ministers is considered as a force majeure.

Article 617 of the Civil Code states that the person that violated the obligation shall be released from responsibility for its violation if he proves that this violation was due to a contingency or force majeur. Article 218 of the Commercial Code has the similar provision.

Individual contracts have their own specifics.

Pursuant to Article 906 of the Civil Code, the executor that violated the agreement on service provision for fee in the course of entrepreneurial activity shall be responsible for such violation provided he proves that the proper execution is impossible due to force majeure, unless otherwise is established by the agreement or the law.

In accordance with Article 1043, the manager shall be liable for the inflicted losses, unless he proves their occurrence as a result of a force majeure, guilty acts of the management settler or the beneficiary.

Article 1209 of the Civil Code specifies that a seller, a goods producer, a performer of works (services) shall be exempt from indemnification for the damage, if they prove that the defect appeared as a result of force majeure or violation by the victim of the rules for the goods (results of the work, services) usage and storage.

It is important to remember that even if the contract establishes an exhaustive list of circumstances of force majeure and it does not specify quarantine, this fact is still provided for by the Law № 3219, so the party in any case has the right to refer to the quarantine measures as a basis for her release from responsibility.

HOW TO CONFIRM THE FORCE MAJEURE?

According to the Chamber of Commerce and Industry of Ukraine, force majeure (in our case – quarantine) must be in a causal connection with negative consequences for business,

Please note that it is necessary to prove that the quarantine make  impossible for you to fulfill your obligations under the contract.

This fact must be attested by the certificate of the Chamber of Commerce and Industry of Ukraine (hereinafter – CCI). A party can be released from liability if it provides a relevant certificate to its partner.

In order to receive the certificate, it is necessary to submit an application with attachments (copy of the agreement and information about the stage at which the commitment is made) to the regional office of CCI.

Thus, the quarantine measures provides for a resolution of the Cabinet of Ministers of Ukraine of March 21, 2020 № 211. In Lviv was made an additional local – Protocol of March 16, 2020 № 7 of the City Commission on Technogenic and Environmental Safety and Emergencies of the Lviv City Council. You can refer directly to these acts in a statement to confirm the fact of quarantine.

ADVICE FOR THE FUTURE

First of all, You should inform Your partner about the situation with force majeure.

If your business partner is agree to work together in new conditions, it would be a good idea to conclude an additional agreement. For example, you could include delaying contractual obligations or reducing the price of a contract during the quarantine period. As a result, there is no breach of contractual obligations.

In case the other party does not agree with you, it seems appropriate to initiate an application to the CCI to obtain a Certificate. Moreover, before applying to the CCI,  you should create the document about prove the impossibility of continuing your work.

As a reminder, in accordance with the Rules of the Chamber of Commerce, in any case DO NOT MAKE the circumstances of force majeure:

  • economic crisis;
  • default;
  • currency appreciation;
  • failure of the debtor’s counterparty to perform its duties;
  • lack of necessary goods on the market;
  • lack of cash from the debtor, etc.

If You need to obtain a certificate and apply force majeure to delay contractual compliance or avoid penalties, please contact us. Our team will provide legal assistance in obtaining all the documents, as well as competently and logically justify the cause between the force majeure and the inability to execute the contract.

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