Delays in fulfilment or inability to fulfil contractual obligations due to exceptional circumstances

18 March 2020

Coronavirus has already begun to affect contractual relationships. It causes delays in deliveries as a result of disruptions in production and in transit. Delays and contractual defaults occur in all segments of the economy.

Contracting parties are obliged to fulfil their obligations in a timely manner. Due to the current global situation, it is clear that the number of delays in fulfilment and non-fulfilments of obligations will only increase.

In the coming months, it will be necessary to closely monitor the contractual relationship and to review the contractual provisions. If the parties have already agreed to a definition of force majeure in the agreement, they will be obliged to comply with such provision. Otherwise, the force majeure will need to be interpreted in accordance with the law that the parties chose to govern the contract.

In Slovenian law, the concept of force majeure is interpreted in accordance with the Obligations Code. Force majeure is not defined directly, but it is mentioned several times by its meaning. Obligations Code, among other things, defines that if it is shown that the damage originated from any cause outside the object whose effect could not be foreseen, avoided or averted, exemption from liability applies (see Article 153 of the Obligations Code). Debtor can be relieved of the liability for damage if he can prove that he was unable to perform the obligation or was late in performing the obligation because of circumstances that arose after the conclusion of the contract and such circumstances cannot be prevented, eliminated or avoided (see Article 240 of the Obligations Code).

Given the current situation it will also be possible to demand cancellation of the agreement, due to change of circumstances, beside claiming force majeure. Of course, each case will need to be examined individually. There will also be cases where one party of the agreement will not be able to fulfil its obligations or the ability of one of the parties to fulfil its obligations will become questionable. Obligations code regulates such situations as well.

The KIRM PERPAR team is preparing a publication to answer all current dilemmas and questions. The above mentioned institutes are also covered. Follow us.

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