The Effects of COVID-19 on International Contracts in Slovakia

Regulation in the Commercial Code: in general, in business relations, if a party breaches its contractual obligation, the breaching party is liable for damages caused to the other party due to the breach of the obligation. However, unless agreed otherwise, if a party in breach proves that the breach of obligations was due to “circumstances excluding liability” (Slovak legal term for the force majeure events), the (breaching) party shall be released from its liability for damages. Provisions on circumstances excluding liability, i.e. force majeure events, are regulated in the Commercial Code [1].

The circumstances excluding liability are defined in the Commercial Code as obstacles, which:

• occur regardless of the liable party’s will; and at the same time,
• prevent this party from fulfilling its obligation,

unless it can be reasonably anticipated that:

• the liable party could prevent or overcome the obstacle or its consequences, and
• the (breaching) party had anticipated the obstacle at the time when the obligation (contract) was agreed.

The obstacle, which occurs only during the time when the liable party was already in delay with the fulfilment of its obligation, shall not be considered as the force majeure event.

Contractual Freedom

Parties to a contract may exclude the general application of the statutory definition of the force majeure event. They may also agree their own Force Majeure clauses. If the parties agree their own Force Majeure clause, the contractual definition of a Force Majeure can be:

• very general and applicable broadly to almost any delay that is beyond control of the liable party, or
• it can be explicitly limited to very specific events that constitute a force majeure event (e.g. earthquakes, floods, strikes, or acts of terrorism).

Contractual Penalties

Even a valid force majeure event does not release the obliged (liable) party from its duty to pay a contractual penalty if the contractual penalty was agreed in the respective contract for the particular breach of the respective obligation. In other words, while the (breaching) party may be released from its liability for damages (caused due to the breach of its obligation), the party would still have to pay the contractual penalty, unless otherwise agreed in the contract in this regard.

If there is no written contract, or the contract in place does not mention anything about Force Majeure, the statutory provisions of the Commercial Code will apply to the contract.

[1] Act No. 513/1991 Coll., the Commercial Code, as amended.

Having regard to the various nature and extent of several consequences of the spread of the Coronavirus, it is not possible to make a conclusion – that would be generally applicable to all situations – whether the spread of the Coronavirus would be considered as a Force Majeure event under the Slovak law.

In each particular case (in addition to other relevant circumstances) it is necessary to analyse, whether the current extraordinary situation indeed “prevents the contractual party to fulfil its obligation” under the respective contract, and whether, at the same time, “it cannot be reasonably anticipated that the liable party could prevent or overcome this obstacle or its consequences”.

In our view, there may be cases where the unpredictable negative consequences of the spread of the Coronavirus, such as mandatory closing of a plant or operation by governmental decisions or obligatory quarantine of employees, could be considered as the circumstance excluding liability.

The assessment would have to be made on a case by case basis, taking into consideration also the nature of the obligation that was violated, and the nature of the very particular consequences of COVID-19, which particularly prevent the party to fulfil its contractual obligation. Finally, only courts are entitled to decide, in each particular case, whether the liability of a party in breach is excluded due to COVID-19.

The evidential burden of proof is borne by the party affected by the negative consequences of the Coronavirus, who must prove that the Coronavirus (or its particular negative consequences) meets the conditions of the Force Majeure event. In order to do so, it is recommended to use evidence adopted or issued by relevant authorities, e.g. documents issued by the public health authorities or government, certificate of Force Majeure issued by the Slovak Chamber of Commerce and Industry, etc.

To be excluded from liability, it is also necessary to prove the causal link between the Coronavirus and the breach of the contractual obligation. In other words, the party will have to demonstrate that the current situation indeed prevents the party to fulfil its contractual obligations and may, therefore, be considered as a circumstance excluding liability.

If the party has difficulties to fulfil its contractual obligations due to the Coronavirus outbreak and its negative consequences, it should take all reasonable steps in order to mitigate the possible damages. First of all, the other contractual party should be timely informed about the existence of these extraordinary circumstances preventing the party to fulfil its contractual obligations.

If it is not possible to fulfil the contractual obligations or find some other alternative solutions, it is recommended to try to agree with the other party on the amendment or termination of the contract. All of the evidence (proving existence of the circumstances excluding liability) that may be required later, e.g. in court proceedings, should be carefully gathered by the party in breach.

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