COVID-19 and its potential effect on contracts
The global health emergency resulting from the spread of the COVID-19 virus and its declaration as a pandemic by the World Health Organization may affect the possibility to materially comply with many contractual obligations in different sectors of the economy.
In Argentina, this situation led to a number of emergency regulations issued by the public authorities at various levels and areas of the State, having restrictive effects on social and economic activity, as well as on the free movement of people and goods within the country and across its borders.
The COVID-19 pandemic and the regulations issued may consequently lead to the material or legal impossibility of complying with all or part of the obligations undertaken in certain agreements, either permanently or temporarily.
Is there a legal solution to this problem?
Under certain commercial contracts, the material or legal impossibility of complying with contractual obligations could be considered a force majeure event. A force majeure event takes place when there is a current and absolute impossibility to perform certain obligations, arising from unforeseeable and unavoidable events beyond the debtor's control.
The requirements for an event to be considered as a force majeure event are the following:
Proving the existence of a force majeure event lies on the party who invokes it. Although the COVID-19 pandemic is a publicly known notorious fact, whoever claims it as a force majeure event must provide evidence as to how and why it affects its ability to meet its contractual obligations.
The effect of a force majeure event shall be the waiver of liability of the debtor who is unable to comply with its contractual obligations.
In order to analyze the specific effect on contracts, it is necessary to consider whether the impossibility is definitive or temporary:
The impossibility to comply due to a force majeure event does not per se imply in every situation the waiver of liability, as there are several exceptions, including:
Unaffected party by a force majeure event
The unaffected party in a force majeure event may, as a preventive measure and to avoid the aggravation of the damage, suspend its own performance until the other party complies or provides a guarantee.
For further information and an analysis of your case in particular, please contact Santiago Sturla (firstname.lastname@example.org or by phone at +54.11.4318.9932), Diego Botana (email@example.com or by phone at +54.11.4318.9928), David Gurfinkel (firstname.lastname@example.org or by phone at +54.11.4318.9901), or Laureano Genin (email@example.com or by phone at +54.11.4318.9963)
This report shall not be considered as legal advice or any other form of advice rendered by Allende & Brea. The effective possibility of invoking a force majeure event is subject to a more in-depth analysis of the particular circumstances in the specific case and the absence of any cause obstructing the configuration or invocation of the force majeure event.