Contracts in the Times of Coronavirus

In the article about force majeure we presented the basic principles governing this institution, and allowing for thepossibility of evading the negative effects of non-performance of the contract due to the COVID-19 pandemic. As a reminder, force majeure is such an emergency and external event which the parties could not foresee at the time the contract was concluded.

Currently, however, when any agreements are concluded, the parties are undoubtedly already aware of the global spread of the virus and the possible legal risks associated with it - at least in theory. Therefore, in the event of any problems with its implementation, the party concerned cannot, in principle, invoke the existence of the so-called force majeure, at least in general terms. It is therefore extremely important that the contract include a provision that will regulate the rights and obligations of the parties regarding the foreseeable effects of the epidemic. At present (as of April 3, 2020) we already know that the scale of possible restrictions is wide and that until the cessation of the epidemic (which may occur in an indefinite future) special precautions must be taken when concluding contracts.

First, do not commit to things that you have no influence over, or place an appropriate contractual provision. And so, if the performance of a contractual obligation requires you to obtain certain official documents, make sure you can obtain them in a timely manner! Remember that as an entrepreneur you must act with due diligence, so acting as if nothing has changed in the current situation is at least unreasonable. For example, in the judgment of the Court of Appeal in Warsaw (file reference number I Aca 378/12) it was stated that since the entrepreneur, when concluding a contract during a flu pandemic in 2009, did not verify the administrative procedures applicable in this exceptional period (the case concerned the transport of medical equipment) and has assumed impossible fulfillment deadlines, he cannot rely on force majeure.

As a professional, you should be able to predict the possible effects of introduced restrictions and, above all, become familiar with applicable regulations and formalities. Try to negotiate contractual provisions that will protect you in the event of a sudden change of regulations.

If you conclude a contract under which your contractor undertakes to pay for your services / goods etc, try to get some collateral, especially if the sum of the service is significant. In the current situation, unfortunately, the loss of financial liquidity is real. It is worth thinking about additional solutions, like. e.g. deposit, promissory note, notary security for payment of the price pursuant to the provisions of art. 777 of the Polish Code of Civil Procedure. If in doubt, consult draft agreements with a lawyer. You can ask the contractor to provide the revenue and expense ledger (income statement) for previous months to verify his financial position.

At present the situation is dynamic and it is impossible to predict all possible effects. However, as an entrepreneur, you must act with due professional diligence, i.e. take care of your own interests as much as possible. Do not hesitate to ask your contractors for an accurate presentation of your financial situation and if in doubt seek legal advice.