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To what extent is the Covid-19 pandemic considered a “force majeure” excuse in contractual relations

1. Definition:

Force-major, coming from the French “force majeure”, means compelling force, which is unpredictable and/or unpreventable event with extraordinary nature, a circumstance (event), which is thoroughly dependable and caused by unpredictable circumstances or factors, notwithstanding by the will or the actions of one or more people and due to that it is unpreventable. According to art. 306 of the Bulgarian Commercial code, the debtor in a commercial deal, is not responsible for failing to perform his obligations, which is caused by the unpreventable force.

In order to refer to force-major, there must be an unpredictable or unpreventable circumstance with extraordinary nature.

The pandemic situation, caused by COVID-19, that led to the emergency state, announced by the Government of the Republic of Bulgaria on March 13 2020, is qualified as a force- major state, because of its extraordinary nature, that was not possible to be predicted, nor it was possible to be prevented, because it is spreading too fast and its affection is global.

2. Preconditions for referring to force-major:

The following preconditions must be available, so as to be able to rely on force-major circumstance – the corona virus- COVID-19 pandemic:

a) In respect of the moment- the coronavirus pandemic- COVID-19, must have occurred after the signing of the contract. That means that the contract, which the debtor is failing to execute, must be signed before the pandemic’s occurrence.

b) In respect of debtor’s attitude in connection to the contract – the debtor must not have been in delay or failing to execute the contract before the pandemic’s occurrence. Consequently, the debtor would not be able to refer to force-major state, if he has been in delay or has failed to execute his contract obligations, before the pandemic’s occurrence. The debtor would also not be able to rely on force-major situation, if he has the ability to execute his contract obligations, despite the emergency situation in the country and despite all of the prohibitions and restrictions that are applicable.

3. Regulations of referring to force-major:

a) In accordance to the agreed force-major clause – it has been broadly accepted in the legal theory that this provision is of an imperative kind and it might not be derogated upon parties’ mutual consent. If such derogation has been included in the contract, the provision shall be considered invalid.

b) In accordance to the applicable Bulgarian law.

If there is not available clause in the contract, which regulates the force-major state, but it is agreed that the Bulgarian law would be applicable to the contract, then parties may refer to the possibility, described in the Commercial code for applying the force-major effects.

4. Procedure:

In case of not succeeding to execute the contract obligation, due to the force-major event – the coronavirus pandemic- COVID 19, the debtor must give notice to the other contracting party in an appropriate term, and to also notify what exactly is the meaning of that force-major event, and to notify about the probable and possible consequences of the force-major’s effect on the contract’s execution.

4.1. Appropriate term - it is estimated that an appropriate term to notify your contracting party, is a period of approximately 10 days, according to the legal practice / case-law.

4.2. A manner of notification - it must be a written notification to the contracting party, and if the debtor fails to do it, he would owe a compensation for the damages caused, because he would not be able to refer to the force-major circumstance, or even more accurately said, he would have not executed the conditions to rely on force-major.

5. Applying for a force-major certificate:

The force-major certificate is a document, by which the contract parties could escape responsibility for non-executing or for delay execution of commercial deal, due to an unpreventable force. A force-major certificate is emitted by Bulgarian chamber of commerce and industry and by Bulgarian industrial association. The certificate is not an obligatory document to rely on force-major but it might ease the evidence proceedings in case of a claim.

6. Consequences of relying on force-major:

6.1. Suspension of the execution of the contract - while the extraordinary circumstances, caused by the coronavirus- COVID 19 pandemic, last, the execution of the obligations and their opposing obligations in the contract, is being suspended. The meaning of that is that the execution of the obligations by both contract parties, would be stopped. After the extraordinary circumstances reach their end, the contract obligations must be executed the way they were initially stipulated.

6.2. Termination of the contract - it must be taken into consideration, that if the continuance of those extraordinary circumstances lasts for a long period of time, one or the other contracting party, could be no longer interested in the execution of the contract. In that case, both parties would obtain the right to terminate the contract, knowing that the consequences of that termination are inevitable, with exception of those, coming from the culpable non-execution – penalties for braking the contract, interests, and compensation for damages, overcoming the amount of the penalty, provided for in the contract.

According to the new Act of the measurements and actions during the State of emergency, announced with a Resolution of the Bulgarian Parliament on the 13th of March 2020, it must be taken into consideration, that until the derogation of the emergency state, the consequences of delayed payments of the people with private legal status, including interests, and penalties for breaking the contract, so as the non-financial consequences, such as pre-term chargeability, breaking the contract and confiscation of goods, are not applicable.