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Suspension of contracts due to COVID-19: not everything is valid

| COVID-19 / News | Litigation

Contractual obligations should be examined on a case-by-case basis to determine whether compliance could be suspended because of COVID-19. The special situation of tour operators

In recent days and hours, and even more so after the publication of Royal Decree 423/2020 on 14th March, which declared the state of alert throughout Spain, it is impossible to talk about anything other than the so-called "COVID-19"; about known cases, the measures adopted, the recommendations of the health authorities, the impact on the economy and it is in this context that many legal questions arise regarding what consequences this virus will have on the contracts signed and the obligations we have acquired by virtue of them.

Now that COVID-19 has been declared a "pandemic" by the World Health Organization and that the Spanish Central Government have adopted a series of exceptional and unprecedented measures, it seems impossible not to qualify this virus and the circumstances surrounding it as "force majeure".

In Spain, the concept of "force majeure" has not been specifically defined by legal texts, which has not prevented the doctrine from including it among the "events that could not have been foreseen, or that, if foreseen, would be unavoidable" as established in article 1105 of our Civil Code. The impossibility of foreseeing will, however, always have to be considered on the basis of the normal activity of the average man in relation to the circumstances, as stipulated in the Supreme Court's ruling of 7th March 1988, among many others. On the other hand, in order to assess whether an event or occurrence is inevitable, the obligation must be related to the means available to the obligor, the means that would be required of him and the activity that he would have to carry out in order to fulfil the obligation. As the Supreme Court stated in its decision of 18th December 2006, "force majeure must be understood to be an event that arises a posteriori from a convention that renders useless any diligent effort, and that this event - which is a determining factor - must involve the participation of an outside party, in the sense that it must be completely independent of the party alleging it, and the outside party must not be confused with the circumstances that must be assumed and foreseen by the contracting party on whom performance depends".

It is not the first time that our Courts have recognized a case of "force majeure" that meets the requirements of "unpredictability", "inevitability" and "alienation" to which we referred in a global public health problem. More than ten years ago, a similar case (no doubt on a smaller scale) occurred with the so-called "Flu A". In relation to this event, the 8th June 201214th Section of the Barcelona Court of Appeal, did not hesitate to acknowledge that this epidemic constituted a "sudden and unexpected incidence" as did the Ruling of the 20th Section of the Madrid Court of Appeal in its 10th December 2013.

There is therefore nothing to prevent the assimilation of the COVID-19 virus to the so-called Flu A and to consider it a situation of "force majeure".

The immediate consequence of this is that, as stated in the aforementioned article 1105 of our Civil Code, the party bound by any contract of a civil or commercial nature will not be liable for any failure to comply with its obligations that are a direct consequence of the situation generated by the COVID-19.  

Special mention should be made of the organizers and retailers of package tours since, in accordance with 16th November Article 162.2.c) of Royal Legislative Decree 1/2007, which approved the revised text of the Law for the Defence of Consumers and Users, that the responsibility of said organizers and retailers will cease when the non-execution or deficient execution of the contracts signed by them is due to reasons of force majeure, such as the one in question is established, clearly applicable to this case.

However, the exceptional situation in which COVID-19 has plunged us will not be sufficient to exonerate us from fulfilling the obligations assumed when a direct link cannot be established between the breach and the situation generated by the irruption of the virus or when, already being aware of the situation generated by the virus, the necessary diligence measures had not been adopted to avoid the breach. Thus, for example, the existence of this pandemic cannot be invoked to prevent compliance with contracts that are now being signed, once the existence and severity of the virus (or at least its significance) is known.

COVID-19, as a situation of force majeure, may exempt us from the obligation to respond or compensate for damages that may occur as a result of a breach. However, this does not mean that if compliance with the obligation can be postponed the obligor is released from its obligation.

It will therefore be necessary to analyse on a case-by-case basis to determine the applicable legal situation.

You can see the article in Expansión.

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