Covid-19, business and the law

Magdalena Mączka, Ewa Jastrzębska and Michał Pochodyła from law firm Stolarek & Partners answer questions frequently asked by business in Poland right now…





 

Does Covid-19 qualify as force majeure, is there any procedure to follow?

Yes, the Covid-19 crisis can be certainly be treated as force majeure or frustration event.

You have to act diligently. These are the steps to follow (both under Polish and international commodity or sale-of-services laws):

Business measures:

  • Inform your counterparty as soon as possible about any potential inability to perform

  • Stay in close contact with the other party regarding the contract (consider doing this on a ‘without prejudice’ basis)

  • Mitigate the potential loss and explore alternatives

  • Keep a good record of all relevant documentation – proof of delay or cancellation of transportation - all on paper

  • Review all your insurance policies - talk to your insurers!

  • In all new contracts, consider including force majeure circumstances such as ‘epidemic’, ‘pandemic’, ‘international public health concerns’; avoid calling it Covid-19, because in November 2020 or earlier we may have Covid-20, or -21

Legal measures:

  • Review each contract carefully, with regard to the governing legal and force-majeure provisions, including any time bars or other procedural requirements;

  • In all new contracts, consider including force majeure circumstances such as ‘epidemic’, ‘pandemic’, ‘international public health concerns’; avoid calling it Covid-19, because in November 2020 or earlier we may have Covid-20, or -21 (duplication intentional!)

  • Take a preliminary view on whether the outbreak and/or resulting government crisis measures are covered, or whether they are excluded. There is case law that may include Covid-19 as either global or regional-government health crises

  • If you cannot positively conclude that the event affecting you is force majeure, consider any potential consequences of invoking force majeure, for example being held to be in repudiatory breach of the contract – especially in contracts governed by English law. Keep in mind the consequences of a repudiatory breach, just in case.

  • If you are going to go ahead and invoke force majeure, consider your obligation to mitigate the effect on non-performance and what steps you can take. Collect the proof of mitigation;you’re your actions must be well recorded.

  • If you are at the receiving end of a force majeure claim that you do not think is valid, there is the issue of enforcement of the contract, particularly if it does not provide for international arbitration.

  • Consider the impact of a force majeure claim (made or received) on your insurance arrangements