1. Produce detailed documentation
…as soon as you face difficulties in performing your contractual obligations. What should you pay special attention to? Proving the causal link between a contractual default and Covid-19 is vital. You must be able to prove that the obstacles you face come from the current pandemic; in other words, if not for Covid-19, you would perform your contractual obligations smoothly, on budget and on time. What kind of facts should you register with particular thoroughness? Example: if you are committed to a component-supply agreement and due to Covid-19 you are unable to execute it on time, try to record:
The rapid decrease in the number of employees present at work
Any kind of notifications coming from your sub-contractors informing you that the timely execution of their obligations is not possible due to Covid-19
Correspondence with your suppliers regarding possible delays or lack of certain products
The current status of the work performed (you can do it two ways: by signing an acceptance protocol with your contractor or by asking a notary to do it)
If the problem you experience is serious and you will not be in position to negotiate with your business partner, it is very likely you will soon become party to a court case. It is therefore reasonable to prepare for meeting the subsequent evidence requirements.
Looking at it from the perspective of a creditor (the party waiting for the obligation to be performed), my advice would be:
Document all irregularities and delays;
Keep a close watch on your contractor: ask them specific questions, remember you have a right to demand reliable evidence;
Be vigilant and careful when accepting notifications coming from your partner;
Tell your partner that you are checking if their earlier omissions do not negatively affect the current situation and scope of the damage that they claim results from force majeure.
2. Analyse your contract
… and check what kind of clauses it covers. Set out what practical use could you make out of them. Focus on the following:
Does it provide contractual penalties for delays?
Does it cover a force majeure clause?
Do you have to follow any kind of procedure to effectively refer to it?
How does force majeure affect your own and your partner’s obligations?
What are the rules of risk distribution?
Remember formalities, because Polish law is very strict on the issue. Check what kind of procedure you need to implement to refer your non-performance to the force majeure. Very often, such a clause represents a commitment to act in accordance with some strictly defined rules, the violation of which (such as failure to comply with an obligation to notify the partner on time) results in the loss of the right to invoke an act of force majeure.
3. Contact your contractor
… immediately, as it is far better to lay your cards on the table than to wait for their call. Notify your contractor as soon as you realise the problems, set a new deadline if possible; propose a meeting, but at the same time keep on documenting the current status. This is significant also because one may later accuse you of not duly cooperating in the performance of the contract. And this in turn may seriously impact the proportions of the claimed damages. Keep in mind that each key arrangement you make with your business partner should be confirmed at least by e-mail. Make sure there is some tangible evidence in support of your case.
4. Think how to protect your interests best
… whichever side of the contract you're on.
If you are a party in a delay:
Consider negotiating a new deadline or new rules to meet your commitment – your business partner is interested in the smooth execution of your contract and will desist from taking the matter to court as long as possible
Propose some additional performance bond to your contractor
If you feel the other party is taking a rigid position, be particularly cautious – you might want to monitor the relevant courts to get quick information about the steps your partner might be taking to get temporary protection
If you are a creditor:
Verify what is the current financial situation of your contractor – it could have worsened as a result of Covid-19, or you may not be the only creditor
Check how Covid-19 may affect your business partner’s assets in the future – it may be worth considering asking for an additional performance bond already
Act aggressively if you consider that the performance of your contract or your future payments (of contractual penalties or damages) are at risk
Polish law gives a number of ways to secure your interests. It is possible to freeze a debtor’s bank account or to seize some other assets of theirs. The court procedure is relatively low-cost, quick and simplified as compared to a formal suit for payment. To obtain such a temporary measure, it’s usually enough to substantiate a claim and to demonstrate your contractor’s poor financial standing.
5. Prepare yourself
… as you may be soon facing the risk or necessity of starting court litigation against your contractor.
Your check-list should include the following:
- Which court will be competent to recognise my case?
- How much would this cost?
- How long would it take before I get the final court decision?
- What are my claims, and do any counter-claims from my contractor come into play?
- What are my chances?
- Did I prepare myself well at the evidence gathering stage?
- Do I need a technical expert to support my argumentation?
Having analysed all this, you might come to the conclusion that it is far better to get back to the negotiating table than get involved in a court dispute. Or the opposite – you strongly feel that the delay was not your fault and you do not want to pay for this. Whatever your business decision will be, if you followed the above guidelines properly, you should be in a far better position than your opponent.