Coronavirus and contracts
emergency reforms
On March 25th, 2020 the German parliament approved a draft bill introducting temporary amendments to several pieces of legislation inteded to mitigate the impact of the COVID-19 on contracts. In particular, the following aspects will be affected:
the introductory act to the civil code (“Einführungsgesetz zum Bürgerlichen Gesetzbuch”, EGBGB) will be amended as to allow contracting parties unable to fulfil their obligations because of the epidemics’ impact to stop or suspend performance without incurring the typical negative conseguences (such as being obliged to compensate damages)
small entrepreneurs and consumers will be protected in case of failure to pay electricity, gas or phone bills (alonside other essential supplies). Providers of such essential services will not be allowed to cut supply upon default of payment
landlords will have only limited rights to terminate rental contracts over land or premises upon tenants’ default of payment
repayment of consumer loans will be postponed by law and loan givers will be prevented from terminating the respective contracts for cause
The above-mentioned amendments are yet to be implemented into the respective acts and shall in full force until June, 2020, but the Government expressly reserved the right to extend them for a longer period in case the emergency should not be over yet by then.
For now, you can have a look at the draft bill here, we’ll update you as soon as the changes are passed into binding law.
“force-majeure” as general excuse
A part from the described specific intervention of the German legislator, the current coronavirus crisis is being recognised more and more as a “force-majeure” event, that even under normal circumstances (i.e. regardless of the planned legislative amendments) would relax standard contract law and protect contracting parties unable to perform.
The current emergency is having a severe impact on virtually all business players in all sectors. Events are cancelled or postponed, restrictions make it hard or even impossible to move, let alone to travel. As a result, businesses and individuals find themselves bound by contracts that were closed before the coronavirus outbreak and that now become impossible or unenforceable.
Here you can find further information about how the current emergency can be regarded as “force-majeure” event, allowing for a release from the duty to perform a contract. Specific information about the extreme situation in Italy can be found here. This might be interesting, if you’re part to a contract with an Italian contracting party.
Here you can find some practical information about how to invoke the force-majeure excuse.