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COVID-19, performance of contracts governed by foreign law, and the hardship clause
Many businesses and their lawyers are now analysing the impact of the coronavirus on their contractual obligations. In the case of some contracts the situation is further complicated by the fact that the contract is governed by foreign law.
COVID-19, performance of contracts governed by foreign law, and the hardship clause
Situation of contractors performing construction contracts in the private sector
The pandemic may delay the performance of construction works and increase their costs. It may even make it completely impossible for a contractor to fulfil its obligations. But how this affects the contractors’ legal situation depends on the factual circumstances of the given case and the wording of the specific construction contract.
Situation of contractors performing construction contracts in the private sector
Performance of contracts in epidemic conditions
Even such unusual circumstances as a pandemic do not overthrow the general principle that contracts should be performed (pacta sunt servanda). But this does not mean that the current situation has no impact on the substance or performance of contractual obligations.
Performance of contracts in epidemic conditions
Shopping-centre leases and the retail ban
In the tough times of battling the coronavirus, many tenants are seeking ways to reduce their rent, release themselves from the obligation to pay rent, or avoid other obligations under their existing leases. What opportunities does the law offer them?
Shopping-centre leases and the retail ban
Settlements related to non-culpable impossibility
An issue concerning businesses at present is the problem of settlements between them resulting from non-culpable inability to perform contracts. This is an area that may require the Parliament’s intervention if current regulations prove insufficient.
Settlements related to non-culpable impossibility
Businesses’ contractual obligation in a time of pandemic
Numerous sectors of the economy have been paralysed. The problem is not just closings or restricted access to a range of services, but also absence of staff due to illness, quarantine or childcare. Consequently, businesses cannot operate normally or perform their obligations on time. A lack of supplies by one company often carries over to an inability of its customers to fill their own orders. This bogs down the whole economy. We await systemic solutions allowing Polish businesses to survive. But before they arrive, it’s a good time to examine the regulations currently in force.
Businesses’ contractual obligation in a time of pandemic
Can an epidemic excuse late performance of a contract?
The simplest answer is “it depends”—primarily on the specific clauses included in the contract and the governing law. This issue is worth considering under Polish law, because economic globalisation means that factory closings in China could also disrupt supply chains in Poland.
Can an epidemic excuse late performance of a contract?
Compliance and new regulations on payment gridlock
New regulations on payment gridlock entered into force on 1 January 2020, via an amendment to the Act Combatting Excessive Delays in Commercial Transactions of 8 March 2013, the Civil Procedure Code, and the Unfair Competition Act. How will the new rules affect compliance in companies?
Compliance and new regulations on payment gridlock
How can an investor ensure control over the construction process?
The investor is the host of a construction project and, in practice, it is the investor who decides on the wording of the agreement with the general contractor, including the contractor’s activity in execution of the project. It is the investor who decides how the construction process is organised. But investors have different preferences: they do not always want to precisely track the course of works, and that may not be feasible. Therefore, the agreement with the contractor should be tailored to the adopted model of cooperation and take into account the possible level of control by the investor of the general contractor’s activities.
How can an investor ensure control over the construction process?
Guarantee of payment or guarantee of withdrawal from contract?
Art. 6491–6495 of the Civil Code is intended to ensure that the security in the form of a payment guarantee for construction works provided at the investor’s request secures timely payment of the contractor’s fee. However, one may suspect that in practice this instrument is used for a completely different purpose.
Guarantee of payment or guarantee of withdrawal from contract?
How to recover money paid directly to subcontractors?
The parliament has granted subcontractors a high level of protection. The provisions on joint and several liability are strict for the investor and often in practice mean a risk of double payment for the same thing: the first time to the general contractor and the second time to the subcontractor. Therefore, the investor should be able to recover from the general contractor the sums paid directly to subcontractors.
How to recover money paid directly to subcontractors?
Settlements with subcontractors in public procurement
The Public Procurement Law provides for rules autonomous from the Civil Code for settlements with subcontractors. The regulations apply independently of each other, but they are applied in parallel to contracts concluded under the public procurement regime.
Settlements with subcontractors in public procurement