Impact of COVID-19 on contractual relations, default due to force majeure (vis maior) and elimination of adverse consequences

The COVID-19 pandemic has not yet reached its peak from a medical point of view, but the economic consequences are already taking effect. First of all, most affected are suppliers from the PRC and the Chinese domestic market, but also the inability to fulfill obligations due to the suspension of traffic and the reduced of movement of people and goods at the international and domestic levels has taken consequences, the Zivkovic-Samardzic law office says on its website.

The Government of the People’s Republic of China has already taken appropriate measures to counteract the economic consequences and has secured the issuance of a “force majeure certificate” by the Chinese Council for the Advancement of International Trade (CCPIT) to provide written proof of the force majeure of companies based in the People’s Republic of China, which are predominantly suppliers to the foreign market.

Force majeure by nature, by it’s definition, is some external event that could not be predicted or eliminated. As the consequences of force majeure in a business relationship are generally borne by one party, resorting to force majeure clauses defining the extraordinary rights to terminate the contract for the benefit of one or both parties. In the absence of such provisions, the fate of the contract depends on the rights that apply to it, so it is necessary to determine which law is relevant to that business relationship and to clarify in the light of the relevant legislation the consequences for the business relationship.

Whether you are in business with suppliers from the PRC, other COVID-19 affected countries, or within the Republic of Serbia, causing your business relationship to be disrupted and goods not delivered or services not delivered, or some other obligation that cannot be fulfilled from your contract causing one or both parties to suffer damage, it is imperative that you know the path by which you can exercise your rights. Also, if you have a manufacturing facility in the PRC, you should carefully apply for a force majeure certificate, and not without first analyzing the consequences.

Although standard vis maior clauses are used in contracts, it is very important that each contract is individually reviewed so that the consequences can be interpreted properly.

Advokatsko ortačko društvo Živković Samardžić Beograd

covid 19

coronavirus

pandemic

force majeure certificate

force majeure consequences on business relations

vis maior