The most important criterion to consider is whether a contract contains a Force Majeure clause.
If positive, it must first be examined whether the clause is applicable for events related to the Coronavirus outbreak.
- The situation is clear if the clause refers to an epidemic or pandemic.
- On the other hand, the clause cannot be deemed applicable if it exhaustively lists cases that are to be considered as cases of Force Majeure, but does not list an epidemic or pandemic.
- If the Force Majeure clause is rather general, a pandemic is to be understood as a case of Force Majeure under German law, because it is an unforeseeable and unavoidable event. In this respect, the term Force Majeure includes not only events such as war, riots and natural disasters but also epidemics and therefore even more so pandemics. This has already been pointed out by the German legislator in the statement of reasons for a law which used the concept of Force Majeure. Also in German jurisdiction, especially in the area of travel, it is already recognized that diseases can fall under the concept of Force Majeure. This is to be assumed in particular if the infection spreads rapidly and is associated with considerable health risks. Moreover, the Federal Foreign Office has also already issued a virus warning, which is to be regarded as a further significant indication of Force Majeure.
Usually the agreed Force Majeure clause will be worded very similarly to this understanding in German law. Therefore the Force Majeure clause normally contains the following content:
- First, the event is beyond the control of the parties.
- Second, the circumstance affecting the fulfillment of the contractual obligation (here: the Coronavirus) was an unforeseeable event at the time the Force Majeure clause was contractually agreed upon. In the case of the Corona pandemic, this will certainly apply to all contracts concluded before December 2019 (the first time a Coronavirus infection in China became known). For contracts concluded after this date, this is not certain.
- And last but not least, some clauses add as a third condition the inevitability and/or insurmountability of the situation
A pandemic such as the Coronavirus should, therefore, be covered by a standard Force Majeure clause, at least if the contracts are not from the recent past.
If there is no Force Majeure clause in the contract, the concept of Force Majeure is not applicable. On the other hand, if it is impossible to fulfill the respective contractual obligations, the debtor is released from his duty to perform pursuant to the general regulations in the BGB, and is not obliged to compensate for damages, provided he is not responsible for the impossibility of performance of the contract.
However, it has to be ascertained on a case by case basis whether the fulfilment of the contractual obligation is really impossible or, for example, can be postponed.
The Coronavirus outbreak may be considered also an event of Hardship (as explained above), which shall lead to a fair and reasonable settlement between the parties in the event of unforeseen circumstances.
This only does not apply if it can be inferred from the contract that one of the parties had assumed the contractual risks affected by the virus outbreak, or if the contractual consequences are of a minor nature.