CORONAVIRUS – HEALTH ALERTS AND WORKING RELATIONS

The severe economic impact caused by the Covid-19 outbreak at the international level also extends to the everyday operation of companies in two different ways: working conditions and contractual relationships with customers and suppliers.

With regard to working conditions in the context of the Covid-19 outbreak, there are legal tools available for their appropriate management taking into account the particularities and production model of each company. In this regard, temporary agreements to do home office, agreements to recover time not worked or policies for voluntary trips to risk areas are just some of the options. Likewise, there are measures such as "Expedientes de Regulación Temporal de Empleo (ERTE)" [Temporary Employment Regulation Procedure ], which are applicable in certain scenarios.

Additional measures may be considered, depending on the development of the emergency and decisions by the Government.

In terms of contractual relations with customers and suppliers, potential claims for breach of contract should be addressed, and the possibility and risk of a breach by the company itself should be assessed.

In this regard, the key element is force majeure, an abstract legal concept that is assessed in each case on an individual basis, although it has certain specific theoretical characteristics: it is an event beyond subjects’ control, which was unforeseeable and forces them to do something or stops them from doing it, which results in a breach of contract. Force majeure can exonerate the subject from compliance with contracts so that if it occurs, there is no right to compensation for such non-compliance.

As of today, it is commonly accepted that the Covid-19 epidemic is not a fact that justifies force majeure in Spain because there have been no official measures to close borders, limit people´s mobility, or similar steps. The mere “fear” of traveling or carrying out a task because of the risk of the epidemic does not justify non-compliance with contracts.

On the other hand, force majeure would be debatable for those companies that have commercial relations with China, Iran, South Korea, Italy and other territories where supply chains have been interrupted, industrial plants or other services have been closed or halted because of official measures taken by their respective governments.

Faced with these circumstances, companies may be asking themselves if the insurance policies they have taken out are adequate or if the contracts they have signed foresee cases of force majeure and even what would be the determining fact able to justify a breach or paralysis of a commercial contract in the “force majeure” clause, or what happens in those cases where the contracts do not set down anything in this respect.

To find the answer to all these questions, a series of factors must be jointly analyzed, including the contract signed and the authorities’ assessment of the scope of Covid-19.

When raising a potential claim for compensation for breach of contract in these circumstances, the appropriate choice of the optimal legal procedure for the claim and the perfect exposition of the legal grounds in this respect will be very important factors. The preparation of a technical expert’s report and their testimony in court on the effect of the virus on the breach of contract will also be key elements to be properly managed.

Given the uncertainty arising from the fact that there is no case law on the impact of this particular epidemic, it will be essential to prepare these claims or responses to them in depth, as well the corresponding trials.


This text is for information purposes only and does not constitute legal advice.