Is it possible to cancel, suspend or modify your Franchise Contracts conditions due to the COVID-19 crisis?
Franchise contracts may include a definition of extraordinary circumstances and the legal effects of those circumstances on a particular contract. If a pandemic is contractually defined as an exceptional circumstance, further contractual provisions on the consequences of the occurrence of such an extraordinary circumstance should be checked. Otherwise, the relevant legal provisions from Civil Obligations Act apply.
Civil Obligations Act recognizes the institute of changed circumstances as a possible reason for the modification or termination of a contract, and states: “If, due to exceptional circumstances arisen after the conclusion of the contract, which could not have been foreseen at the time of the conclusion of the contract, the fulfillment of the obligation by one contracting party would become excessively difficult or cause it excessively large loss, then the party may require the contract to be modified or even terminated.
Thus, if the COVID-19 coronavirus disease pandemic has affected the regular business activities so that because of it the fulfillment of the obligations arising from the specific business relationship becomes difficult, or causes excessive loss to the party, the party is not obliged to bear all the negative consequences of the situation and under certain circumstances is entitled to seek a modification to certain contractual provisions or even seek termination of the contract.
It is important to note that a contracting party who is affected by the changed circumstances, and who plans to consume subjective rights for the occurrence of those circumstances, is obliged to inform the other party of its intention as soon as it becomes aware that such circumstances have occurred. Failure to do so shall result in the counterparty being liable for damage suffered by the other party for failure to notify the claim in a timely manner.