COVID-19 & commercial law

The coronavirus epidemic is disrupting the performance of supply and service contracts. The result is that performance is either no longer possible at all, or not in the manner or timeframe that was agreed.

A distinction is made here between factual grounds, such as e.g.

• employee-related problems
• supply chain disruptions
• liquidity problems

and specific legal grounds based on legislation or official directives.

Each contractual party is generally obliged to do everything in their power to ensure contractual performance. A supplier or service provider remains subject to this obligation even during times of crisis. The coronavirus pandemic cannot therefore be held up in these times as “force majeure” in every instance. We at the commercial law firm MTR Rechtsanwälte note that extra toil and struggle is, of course, to be expected and may also need to be demonstrated, even if force majeure is applicable.

If the contract is to be performed according to objective standards, the contracting parties have an absolute right to enforce these and, in the event of nonperformance, to pursue legal remedies such as delay, withdrawal, and damages. In cases where this leads to financial hardship for one of the parties to the contract, it is necessary to determine whether assistance can be claimed. Proving entitlement is then a simple matter.

This may come in the form of

• government support
• loans from the German state-owned development bank, the KfW
• other regional measures and proposals (e.g. IHK chambers of commerce and industry)
• instruments of labor and employment law

A temporary or permanent, full or partial release of the contracting parties from their obligations to render performance and counterperformance is only possible if it can be demonstrated that the coronavirus is the reason for the inability to fulfill the contract. This right of recourse is enshrined in sections 275, 323, and 326 of the German Civil Code (BGB). Frustration of contract pursuant to section 313 BGB also largely excludes further legal consequences.

Whether the coronavirus can be held up as force majeure is a question that in complex cases can only be addressed after having experts review the specifics of the relevant contract – including its general terms and conditions – as well as any other agreements. Of course, such a review must also consider the influence of official measures and factual grounds for exclusion.

Lawyers with experience in the fields of commercial law can offer advice

More information about the crisis surrounding the coronavirus is available here!