What impact could COVID-19-related events have on my contractual relationships?

In order to assess the impact of any COVID-19-related events on your contractual relationships you should first check whether the contract already provides for solutions regarding this type of event (e.g., force majeure clauses that cover epidemics, change in circumstances clauses, clauses for the suspension or extension of deadlines in light of non-attributable events, etc.).

As part of any standard interpretation of a contract, even if the contracts include clauses foreseeing specific solutions for those events, it is advisable to check whether those solutions are valid under the law applicable to the contract, in an exceptional and emergency scenario such as the current one. The applicable law shall determine the legal regime to be considered both in the interpretation of the contract and in the search for legal solutions not covered by the contract, such as the legal framework for changes in circumstances or impossible performance.

 

What are my rights if, on account of COVID-19 events, I am prevented from performing my contractual obligations?

If my contractual obligation cannot be definitively performed, the civil code of Sao Tome foresees the expiry of such obligation due to impossibility, provided that the causal link between the COVID-19 event and the impossibility to perform the agreed obligation is duly demonstrated.

In case my contractual performance is only temporarily impossible, and the performance deadline is just delayed, the civil code of Sao Tome also foresees that the debtor will not answer for the consequences of such delay.

In case of partial impossibility to perform the obligation, the civil code provides for the encumbrance of the obligation that can be performed, in which case the obligation of the other party shall be proportionately reduced.

These effects are not effective automatically but are predicated on the specific situation at hand. Besides, they always require solid evidence, and therefore it is advisable, as a cautious manner, to keep adequate supporting documentation should the need to claim an objective impossibility to perform arise.

 

In those instances, is there a duty to compensate the other party?

If my contractual obligation becomes impossible, I am under no obligation to compensate the other party. However, if the other party has already performed their obligation (e.g., payment of the service) I need to return such payment or if return is not possible, compensate the counterparty, under the terms prescribed for unjust enrichment.

 

Could I allege that my obligation has become excessively burdensome in order to be excused from its performance?

Theoretically it is possible (e.g.: the price set for my service has become ruinous in light of the changes caused by the COVID-19 to the distribution chain), alleging that the circumstances in which the parties decided to enter into the contract have changed. However, the validity of such allegation is predicated on the assessment of the relevance of the event for the performance of the contract, the risks inherent to the contract, the specific provisions of the contract and the equity of the solution.

Any solution will always be grounded on the ability to prove the facts that modified the original circumstances underlying the contractual terms and ultimately, the equity and balance of the solution.

 

Can I claim COVID-19-related facts that affect my supplier to justify breaching any contracts in place with third parties?

If my contractual obligation becomes impossible or excessively burdensome following a chain default (e.g.: I cannot perform because my key raw materials’ supplier fails to supply them due to the shut down by an administrative order of its factory) the civil code of Sao Tome states that, provided that some requirements are met, the obligation may expire in the same terms as described above. In any case, the existence of this causal link will always have to be shown.

 

 

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This information is being updated on a regular basis.

The information provided and the opinions expressed herein have been prepared with the help of VdA Legal Partners and are of a general nature. They are not in lieu of appropriate legal advice in connection with specific cases.