Since establishing a state of emergency in Romania, the authorities can now legally restrict some of the fundamental rights and freedoms of citizens, which profoundly affects the business environment.
Most of the businesses have closed, the most common example being restaurants and coffee shops, and the rest of the businesses are running at a much slower pace. But can this be considered a case of force majeure according to the law?
What is force majeure?
Force majeure is defined in Art. 1351 of the Romanian Civil Code as any external event, unpredictable, absolutely invincible and inevitable. This event is totally exceptional, is impossible to avoid and has no direct connection with the person who caused a breach of contract.
The pandemic, for example, is external to any contractual agreement, was not caused by either party (neither by guilt nor by intention), it could not be foreseen or avoided in any way.
Even if the emergency situation caused by the pandemic and the measures taken by the public authorities are indeed exceptional, all these do not automatically determine a case of force majeure in any contract. All these despite the fact that by Emergency Ordinance no. 29/2020, the Government of Romania recognizes the pandemic as a general case of force majeure.
According to article X paragraph (3) of the Ordinance, it is presumed to constitute a case of force majeure the unpredictable, absolutely invincible and inevitable circumstances referred to in art. 1.351 paragraphs (2) of the Civil Code, which results from an action of the authorities in the application of the measures imposed by the prevention and control of the pandemic caused by the infection with the coronavirus COVID-19, which affected the activity of small and medium-sized enterprise, an impact attested by the emergency situation certificate.
The presumption may be overturned by the interested party through any means of evidence. The unpredictable character is assessed at the moment when the contract was signed. The measures taken by the authorities in accordance with the normative act establishing the state of emergency will not be unpredictable.
Although an event can be considered a case of force majeure, in general, it does not mean that it will be considered force majeure in any type of contract, as we will detail below.
Is COVID-19 a force majeure event?
The most common and correct answer is: “it depends“. To find out if the current situation can be considered major force, all its characteristics must be analyzed, in relation to the obligations assumed by the parties and the possibility of protecting the contract, because it is a binding agreement between the parties.
First, we need to check if we have a force majeure clause in the contract. If there is no such clause in the contract, we will apply the provisions of the civil code, thus giving the parties the possibility to invoke force majeure.
If we have this clause, things get a little more complicated, because the extension of the clause must be confirmed. If it strictly enumerates the situations that represent force majeure (e.g. earthquake, war, cataclysm) and we do not find a pandemic in this enumeration, COVID-19 cannot be invoked by the affected party. But if we only have examples or a general definition of force majeure, it means we can also include the pandemic in this case.
Secondly, we will have to investigate what rights and obligations have been assumed by the parties in the contract. If we talk about IT services, then it is unlikely that the pandemic will in any way affect the IT activity, which can continue from home without issues and have the final product delivered as discussed. But if the subject of the contract is the organization of an event with a large number of people, such as a wedding, the contract cannot be executed according to the understanding of the parties, because its object is now outside the law.
Finally, while assessing on a case-by-case basis, the pandemic may give rise to other contractual remedies besides force majeure. The COVID-19 crisis can also be considered a case of unpredictability, according to Art. 1271 Civil Code, if the contractual obligation becomes very burdensome, but not impossible to perform by one of the parties. And if one party ceases to perform its obligations, the other party can successfully invoke the exception non-execution, according to Art. 1556 Civil Code.
What can the parties do in this case?
Even if one of the parties invokes force majeure, this legal remedy does not automatically apply by simple written notice. If the opposing party does not agree, it will certainly result in a court case with an additional waste of time and financial resources.
For this reason, as in any legally difficult situation, it is preferable for the parties to negotiate the contractual in good faith and save as much as possible from their initial understanding. Finally, we must recognize that the COVID19 pandemic affects us all and the only way we can overcome it is to adapt our business relationships to fit the present situation, however new and difficult it may be.
If you would like to address more questions or if you need a legal consultation, you can contact us at office@rrpb.ro or by accessing our site www.rrpb.ro for more information.
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