LexGo

Contracts and commercial litigation: Covid-19 as an unforeseeable event and/or a material adverse change
27/03/2020

For contracts governed by Luxembourg law, the parties may wish to consider if the COVID-19 outbreak has rendered the obligation impossible to fulfil and could thus qualify as an event of force majeure within the meaning of the Luxembourg Civil Code. Pursuant to the Luxembourg Civil Code, force majeure is deemed to arise when a contracting party's performance is prevented by an event beyond its control, the effects of which could not have been foreseen at the time the contract was entered into and avoided by appropriate measures.

In this respect, the event hindering performance of the contract should be:

(i)         external (i.e. outside the contracting party’s control),
(ii)        unforeseeable at the time of conclusion of the contract, and
(iii)       unpreventable or unavoidable (through the exercise of reasonable diligence by the contracting party).

While it is debatable whether the current coronavirus outbreak should be considered an unforeseeable event given other outbreaks in the recent past (such as SARS in 2003), it cannot be denied that the scale of the present crisis is unprecedented. The courts will have to assess if the outbreak constitutes a foreseeable contingency for which reasonable measures could have been taken by the affected party. In this regard, they could rely on guidance provided by WHO declarations and national health services.

The COVID-19 outbreak will clearly not be considered an unforeseeable event when it comes to new contracts.  

Furthermore, it should be noted that in order to be considered an event of force majeure, the outbreak must constitute a real obstacle to performance of the agreement.

The above rules apply by default to agreements governed by Luxembourg law and can be supplemented and/or derogated from by specific force majeure and/or material adverse change clauses. Such clauses are even required if the agreement is governed by foreign law, which does not always contain default rules on events of force majeure.

The fact that performance of the contract would simply be more costly or difficult remains insufficient to exempt the breaching party from liability.

In light of the foregoing, the following points should be considered in order to mitigate the contractual risk related to COVID-19 in an international environment:

  • Include express disease/epidemic wording in new contracts (including wording on the impact of delivery failure by third-party suppliers due to a viral outbreak).
  • Review and amend existing contracts, to the extent possible.
  • Consider which contracts could be impacted by closures or delays.
  • Audit suppliers and gather information from customers to assess the impact of the outbreak and prepare for potential disruptions.
  • In case of doubt as to whether an event of force majeure applies to a specific contract, seek legal advice before acting or sending communications.

Related : Nautadutilh Avocats Luxembourg Sàrl ( Mr. Vincent Wellens ,  Mr. Antoine Laniez )

[+ http://www.nautadutilh.com]

Mr. Vincent Wellens Mr. Vincent Wellens
Partner
[email protected]
Mr. Antoine Laniez Mr. Antoine Laniez
Counsel
[email protected]

All articles Commercial practices

Lastest articles Commercial practices

Consumer law class action
27/10/2020

Bill of law 7650 (“Bill ”), which was recently presented by the Government, aims to introduce a class act...

Consumer law class action Read more

Restructuring and Corporate Recovery measures in Luxembourg – April 2020
21/04/2020

Luxembourg went into full Coronavirus lockdown on March 16. By the ministerial decree of 16 March 2020, the State narrowed...

Restructuring and Corporate Recovery measures in Luxembourg – April 2020 Read more

Covid-19 Impact on Luxembourg Contractual Obligations
07/04/2020

In this unprecedented health crisis, many economic actors are facing the impossibility of fulfilling their contractual obl...

Read more

Buying alliances in Europe are under threat
05/12/2019

On Monday 18 November 2019 the Dutch Authority for Consumers and Markets ("ACM") announced that the regulator ha...

Read more

Lastest articles by Mr. Vincent Wellens

Insufficient cybersecurity measures under GDPR: 100k EUR fine in Belgium & key fines elsewhere
29/04/2021

On 26 April 2021, the Litigation Chamber of the Belgian Data Protection Authority (BDPA) handed down its first fine specif...

Read more

Regulatory changes in the audiovisual media sector
16/04/2021

The Act of 26 February 2021 and certain grand ducal regulations have transposed into Luxembourg law the Audiovisual Media ...

Read more

New bill brings Luxembourg to the forefront of distributed ledger technology
17/03/2021

On 22 January 2021 Parliament approved Bill 7637, which modified:  the Law of 5 April 1993 on the financial sec...

Read more

The Sky Is Not the Limit: Space Activities in Luxembourg
15/02/2021

At the end of 2020, Luxembourg adopted the Act of 15 December 2020 on space activities (loi du 15 décembre 2020 por...

Read more

Lastest articles by Mr. Antoine Laniez

Bill Amending the Luxembourg Code of Civil Procedure Adopted
21/06/2021

On 8 June 2021, Bill No 7307 ("the bill") to improve the efficiency and speed of civil and commercial proceeding...

Read more

Covid-19 and Commercial Lease Payments: Time for a Discount?
02/02/2021

As the world continues to battle the Covid-19 pandemic, small businesses are struggling to survive, affected by successive...

Read more

Adoption of New Secondment Act
18/12/2020

On 9 December 2020, the Luxembourg Parliament adopted a new secondment act, the purpose of which is to transpose into nati...

Read more

European Court of Justice Confirms the Validity of the CETA Dispute Resolution Mechanism
07/05/2019

On 30 April 2019, the ECJ confirmed that the investment court system (ICS) created by the free trade agreement between the...

Read more

LexGO Network