How can you avoid non - payment obligation this pandemic
Answers
Answer:
The current pandemic has a significant impact on commercial activity, the parties of agreements for a variety of reasons encounter difficulties fulfilling their obligations, keeping deadlines, providing workers. Given the situation we recommend familiarizing oneself with three institutions which in the near future may affect your relationships with clients and contractors: the force majeure clause, the fault principle and the rebus sic stantibus rule, that is the extraordinary change of circumstances.
Force Majeure
In business transactions, it is common to include force majeure (vis maior, Act of God) clauses in contracts, according to which if a certain type of phenomenon occurs and prevents one of the parties from fulfilling their obligations, this party shall not bear the consequences of non-performance or improper performance of the contract. Contractual clauses may simply mention "force majeure", they may also contain a definition of this concept, or even indicate specific events (e.g. flood, earthquake) that should be considered as force majeure. Polish law does not define force majeure, but it is commonly accepted that it is an event which: (i) is independent of the parties, (ii) at the time of the conclusion of the contract could not have been foreseen and (iii) the effects of which could not have been prevented by maintaining normal means caution. When asking whether the COVID-19 pandemic is a force majeure event, the answer is not unequivocal, because the current situation has influenced individual enterprises in different ways, some of them have the possibility to apply remedies, some also as professional entities in their fields should have been prepared for it, hence also establishing whether the current pandemic is a force majeure event must be performed on a case-by-case basis, unless the contract clearly indicates that a pandemic is an example of force majeure.
We recommend reviewing active agreements. If there is a risk that you may have difficulties in fulfilling your contractual obligations due to the COVID-19 pandemic, this may help reduce the impact of the prevailing conditions on your enterprise. If, however, your contractors may not fulfill their obligations towards you, reviewing contractual provisions will allow you to predict whether other parties to the contract may be released from liability. Keep in mind that the entity that wants to justify non-performance of its obligations by citing force majeure will have to prove that: (i) the event (here: COVID-19 pandemic) is a force majeure ocurrence, (ii) performance of the obligation has become impossible and (iii) a causal relationship has occurred, i.e. force majeure has resulted in the inability to fulfill the obligation.
In the case of construction works contracts, due to their nature, the force majeure clause usually provides for justified exceeding of deadlines beyond the deadlines resulting from the schedule, primarily protecting the Contractor against liability for damages towards the Investor. In practice, this means that if the Contractor exceeds the deadlines resulting from the schedule and proves that the reason was the consequences of an event associated with force majeure (e.g. illness of employees as a result of the pandemic), they could avoid liability for damages incurred by the Investor and avoid any obligation to pay contractual penalties. Should the Investor oppose this argument and there was a court dispute, the court on the basis of said provision could conclude that the Contractor is not be liable for the damage suffered by the Investor (of course, provided that other conditions are met, including documentation of the situation). It should be noted that this does not imply a direct possibility of temporarily suspending the performance of the contract at the Investor's request due to force majeure.
No Provisions on Force Majeure
If the contract does not contain provisions allowing the reduction of liability citing force majeure, the Polish Civil Code may be of assistance to the affected party. Article 471 of the Civil Code states: "The debtor shall be obliged to redress the damage arising from non-performance or from improper performance of an obligation, unless the non-performance or the improper performance are an outcome of circumstances which the debtor shall not be liable for." The following article 472 further indicates that the debtor is liable for failure to exercise due diligence. Other regulations may, of course, modify these provisions, however, articles 471 and 472 of the Civil Code constitute the general rule in force in the Polish legal system.