The coronavirus and the termination of contracts. Force majeure?

The coronavirus and the termination of contracts. Force majeure?

Although the World Health Organisation (WHO), on the basis of the information available up to date on coronavirus, has expressed its opposition to the application of travel or international trade restrictions, the Spanish health authorities have nevertheless recommended, on the basis of the precautionary principle and in order to avoid a rapid spread of the virus, that travel to the affected areas should be avoided unless strictly necessary.

Many questions now arise: Can companies now cancel events already planned as a result of this situation? Are passengers entitled to demand a refund of sums already paid? Are travel agencies, hotels, etc., obliged to refund the price paid, or can they instead demand contractual penalties?

The answer to these questions is still neither clear nor in any way definitive, because everything is still in flux. Probably the best answer that can be given to this is: it depends. But what does it depend on? In contrast to a Spanish song with the same name, it does not depend on how you look at it, but on the circumstances of each individual case:

If one of the parties intends to terminate a contract for unforeseen reasons, the term “force majeure” is usually referred to. If the existence of force majeure is actually affirmed, the parties to the contract may exceptionally relieve themselves of their respective responsibility.

However, “force majeure” is a general term that refers to an event or situation that neither of the parties to the contract wishes to happen – and which is also unforeseeable or unavoidable – and therefore prevents the fulfilment of the contractual obligation assumed.

We have to ask the following questions, for example: Does the coronavirus prevent the traveler from taking his flight, enjoying his stay or entering a particular place? Can the companies provide the committed services?

In the case of hospital patients, it is clear that the coronavirus prevents the contracted services from being carried out. And the same is true, for example, in case of health workers who are quarantined to prevent the spread of the disease or those who are extremely mobilized to care for the sick.

By contrast, and only in so far as there are no official restrictions on travel preventing travel to or from Spain – as is currently the case with flights from Italy to Spain – travelers generally have no real obstacle to travel, but make the decision voluntarily, an argument which is also used by insurance companies, intermediaries, etc., to refuse to refund sums already paid.

However, this situation and the conclusions presented here may change rapidly, depending on how the disease develops and, in particular, if the government imposes further restrictions on travel.

It is also important to carefully analyze the general terms and conditions of the contract in question in order to determine the specific conditions that provide for the possibility of cancellation, as well as their deadlines, any contractual penalties, etc.

Lastly, it is also important to point out that the conclusions in this news report have been drawn on the basis of Spanish law, so that it is possible – depending on the place where the contract was concluded – that the law of another country may be applicable and therefore the answer to the questions posed at the beginning may differ.

Marinel-lo @ Partners