Agreements and contracts constitute an inalienable part of our lives and can be faced upon every simple act. The parties’ performance of their obligations has a real value for another one. However, sometimes there are situations under which it becomes either impossible or non-beneficial to perform such obligations and, as a result, counter party seeks to terminate or delay its execution, in particular, by the referring to force majeure clause. Nowadays, due to worldwide pandemic, there are many issues - whether it is possible to link COVID-19 and force majeure. The answer is not unambiguous and it is necessary to go deeper into the matter of COVID – 19 as force majeure ground in Baltics.
In general, force majeure should be considered as situations and/or circumstances that objectively disable other party from a possibility to perform its obligation, while taking into account that such circumstances are of inevitable nature and could not have reasonably foreseen at the moment of contract’s conclusion. Since the list of circumstances is not exhaustive and is assessed separately in each case, in order to justify the failure of a party to fulfil its obligation, it is necessary to assess the regulatory framework and practice of each Baltic State with regard to force majeure.
Thus, Lithuanian legislation requires the following conditions regarding force majeure to be met:
- Circumstances did not exist and could not be reasonably foreseen at the time of conclusion of the contract;
- Due to occurrence of such circumstances, it is objectively impossible to perform an obligation;
- The occurred event is beyond the party’s control and it has been reasonably impossible to prevent such occurrence;
- The party did not assume and undertake such risks and their consequences;
- The counterparty has to be notified about occurrence of force majeure event.
Besides that, Lithuanian Chamber of Commerce, Industry and Crafts initiated the issuance of certificates evidencing the force majeure event. Although, such certificates do not automatically preclude liability, they may be used as an additional evidence, when an action against the party, which was unable to fulfil its obligations, is brought to the court.
In Latvia The Supreme Court explains that force majeure consists of four elements:
- An event – which is impossible to avoid and whose consequences cannot be overcome;
- A reasonable person at the time of conclusion of the contract could not predict the event;
- The event has not been occurred due to the conduct of the party or the person under its control;
- The event makes the obligations not only difficult but also impossible to fulfil it.
It is important to distinguish the case of force majeure from the difficulties of performance of the contract, when an event significantly changes the balance of the contract, but does not make its performance impossible as conditions regarding the force majeure.
In Estonia the definition of force majeure falls within the scope of the one mentioned above. However it must be noted that the occurrence of the event should affect the performance of obligations under the contract.
Legal recommendations for the mitigation of risks, related to your contract would be the following:
- Perform an assessment of the business conjecture to find out whether you are going to be affected by, for instance, restrictions imposed;
- Assess the economic reasonability of the contract’s continuation;
- Discover whether the agreement contains precise and universal force majeure clause, in particular, covering state-imposed restrictions, emergency states, epidemic/pandemic cases;
- Inform your counter-party about the force majeure event since the fail of such notification would lead to your liability for the expenses resulting from occurrence.
In order to indemnify your business activity and avoid additional losses, do not hesitate to contact our experienced lawyers with regarding any legal issues emerged due to COVID-19 pandemic at email@example.com
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