It should be stressed that, in general, the coronavirus SARS-CoV-2 situation on its own does not constitute grounds for an interruption of contracts, meaning that contractual parties, unless otherwise agreed, are obliged to continue discharging their duties as required by the contracts. It can be discussed, to what extent coronavirus can potentially be classified as force majeure, i.e. a circumstance that prevents the performance of a contract which was not known at the time the contract was entered into.
In contractual relationships, coronavirus and related measures can have especially the following consequences:
Re-opening contract negotiations
If, as a result of the epidemic, there is a change in circumstances that creates a gross disproportion between the value of the performance by both parties, it is possible to demand the re-opening of contract negotiations. This is particularly applicable in those cases where performance by one party becomes disproportionately more difficult or costly.
This seems to us to the most practical solution, especially in cases of lease contracts (please also note further comments on postponement of the rent payments).
If, on the other hand, the other party is unwilling to accept an acceptable compromise, it is possible to bring an action before a court that will change the contractual terms through its own decision. However, such an action is only admissible if the contract does not exclude such a right.
A disclaimer of liability for damage
If a contracting party is prevented from performing its obligations due to an “extraordinary unforeseeable and insurmountable obstacle arising independently of its will”, it is not liable for any damage suffered by the other contracting party as a result of its non-performance.
However, the first party will have to prove that the obstacle was actually insurmountable. This is not the case if the performance under a contract merely requires higher costs or is otherwise more difficult, but still possible. For example, if a contracting party cannot use its own employees because they have forced to enter quarantine, it may still be able to outsource some of its work or use agency workers.
Subsequent inability to perform
These are situations when contract performance becomes impossible due to extraordinary circumstances. This is an objective impossibility, i.e. the condition is not met if the obligation can be fulfilled at a later date or at a higher cost. These are rather rare cases as the impossibility would have to last for a very long time – for example, if as a result of the COVID-19 epidemic, the farming of certain animals were prohibited or some establishments permanently closed due to future measures being adopted.
However, it always depends on how the contract was formulated. Many contracts that are typically entered into preclude the possibility of invoking exceptional circumstances.
To a large extent, it also depends on the overall context of the contractual performance. For example, a delay that had occurred prior to the COVID-19 outbreak would generally not allow a contracting party to invoke this circumstance. Communication with the contractual partner is also important, and it is always advisable to notify the other party of the circumstances as soon as possible so that the other party can be prepared for the lack of the agreed-to performance and take appropriate measures.
Enforcement Proceedings
In order to support persons facing a financial crisis, a law has been adopted, which orders "unsuccessful" enforcement proceedings to be terminated. An "unsuccessful" enforcement is deemed if the debtor has not received wages in the last 2 years or if the debtor has not received wages in the last 3 years at least in such an amount that deductions can be made. The creditor can prevent a termination of the enforcement procedure by lodging a deposit on enforcement costs.
The Act entered into force on 24 April 2020, and its sixth amended version applies from 31 July 2021.