Concluding business contracts during the coronavirus outbreak
During the virus outbreak it may easily happen that business partners are unable or unwilling to arrange a face to face meeting to sign contracts. What can you do to keep the business running?
In the period of the pandemic affecting more and more countries, sooner or later every business enterprises face the challenge that the cancellation of personal meetings and along with it the cancellation of signing contracts and other legal documents throw back their business operation. Performing the already existing contracts may be challenging, as well. Industries that may be particularly affected include events, tourism, manufacturing, logistics, retail and F&B.
Whilst the direct health impacts of the coronavirus outbreak are largely affecting mainland China, the commercial impacts will be felt globally. In this blogpost we will discuss some of the most common issues that businesses are encountering right now, according to the publication of the law firms operating beside KPMG Hong Kong and KPMG China.
Approving and signing contracts
During the period of a pandemic it may occur that business partners are unable or unwilling to arrange a face to face meeting to sign contracts. Under these extraordinary circumstances, electronic signing of contracts may be of even more significance than before.
Based on point 2 of Article 25 of 910/2014 EU Regulation, qualified electronic signature has the same legal value as handwritten signature.
Thanks to the mobile app developed by EvroTrust Technologies, providing one of the most important integrated elements of TrustChain Platform, the remote identification via video chat and application of qualified electronic signatures (QES) may help to maintain the continuity of business operation even during the virus outbreak.
Complying with contractual time limits
Many contracts use the concept of “Business Days” to count how much time you have to fulfil certain obligations. You should review the definition of “Business Days” and all the places in the contract where this term is used, and consider whether you can still meet those time limits.
It also needs to be considered that different countries may react to the extraordinary situation in a different way, as we could already see in the territories mostly affected by the virus: e.g. in China, extraordinary public holidays were introduced, while the Hong Kong government has not declared any new public holidays yet, but has temporarily closed or suspended a number of public facilities and services, including postal services.
The exact wording of the contract and the governing law specified in the contract may be of great significance. Where there may be uncertainty from a contractual perspective, it is recommended to engage in proactive discussions with contracting parties.
Suspending or terminating contracts
Virus outbreaks and other major events may disrupt supply chains, trigger cancellations and generally dampen the economic mood for investment and spending. Businesses under financial pressure may face challenges when trying to uphold their contracts. If they determine that continued performance is not possible, they may try to look for ways to suspend or terminate their obligations.
Commercial contracts will often have a ”force majeure” clause to cover what happens under extreme situations. However, the jurisdictions of the contracting parties may have different rules on force majeure, so again, the exact wording of the contract and the ”governing law” clause shall be considered.
And also, a force majeure event does not, in itself, allow the parties to simply walk away from the contract. The obligations and liabilities of the parties will generally still need to be resolved based on principles of fairness. This is where it is critical to identify and document the extent to which the failure to perform the contract (or parts of it) is directly due to the coronavirus outbreak and compliance with related government announcements.
Where non-performance is due to the failure of one of your suppliers (i.e. upstream effects) affected by the coronavirus outbreak, this should similarly be very clearly conveyed to your customer and documented.
All reasonable steps should be taken to mitigate loss, to perform parts of the contracts which can still be performed, and to perform the contract after the coronavirus related challenges are alleviated.
On TrustChain’s online platform entrepreneurs, companies and other business actors create, negotiate liaise and sign documents by using only their mobile phones, in a digital and yet legally secure way. Administrative processes, which usually make everyday operation slower and more complicated, like negotiate the content of agreements, and signing report, completion statement and legal documents can become faster, more simple and secure.