It is possible to cancel, suspend or modify your Franchise Contracts conditions due to the COVID-19 crisis?
Cancellation, suspension or amendment of any contract has to be analyzed on a case by case basis, in order to identify the particular contractual and legal provisions applicable to that individual case. The party affected in the COVID-19 should analyze the applicability of the following remedies:
Claiming force majeure
Under the provisions of the Civil Code, the force majeure case exempts the parties from the contractual liability for the damage caused by the non-performance of the obligations provoked by its intervention, as long as the parties have not established the contrary. Events triggered by COVID-119 outbreak or the measures implemented by authorities can represent force majeure cases, however a causational link between such event and the non-performance has to be proven by the claiming party.
Hardship or change of circumstances may be invoked for the purpose of adapting / balancing the contract. The affected party may claim that the COVID-19 epidemic and the measures of the authorities generated an exceptional change in the contractual circumstances, which could not have been foreseen at the time of concluding the Contract and which generates a contractual imbalance in the sense that it becomes unfair to oblige the affected party to perform contractual obligations as established at the date of signing and which have become excessively onerous in the context of the international crisis caused by the COVID-19 pandemic. In case the parties do not reach an amiable understanding, hardship can be claimed in court.
Claiming exception of non-execution
As per the provisions of the Civil Code on the exception of non-execution, when the obligations arising from a mutually binding contract are enforceable and one of the parties does not execute them or does not offer the execution of the obligation, the other party may, to an appropriate extent (proportional measure), refuse to execute its own obligation, unless the law, the parties’ agreement or the customs provide that the other party is obliged to perform first. Thus, if due to COVID-19outbreak or related state measures one party cannot comply with its obligations, the other party may proportionally refuse to execute its counterpart obligations.