This question is among the most important queries that suppliers and customers try to answer after the pandemic declaration by the World Health Organization (WHO) on 11th of March 2020.

Undoubtedly, the coronavirus pandemic impact on the global economy and supply chain, heavily disrupted all the business operations and created massive negative effects.

Innumerable trade contracts have been affected by the lockdowns, travel restrictions and factory shutdowns worldwide.

In addition, firms with insufficient product line diversification and companies that followed limited shortage inventory system policies, were among the ones mostly affected, since from the beginning of the pandemic they started to experience significant difficulties and losses of revenue due to inventory shortage.

As we all know, product distribution is highly dependable on the supply chain’s efficiency and effectiveness, especially when cross – border transactions are in place.

It is undeniable that the supply chain industry heavily supports the global GDP.

Therefore, many governments in their attempt to protect their local suppliers have issued thousands of force majeure certificates and notices. The force majeure certificates and notices were used as a defense strategy for local suppliers to be exempted or suspended from their contractual obligations towards overseas buyers, due to the unforeseen and unpredicted conditions that the pandemic caused.

Force Majeure principles describe the out of anyone’s control unexpected events that prevent contractual parties to fulfil their contract obligations i.e. natural disasters, pandemics etc.

Having said that, not every agreement is eligible to be valid under the force majeure doctrine since the clauses included in the contract and governing laws of each jurisdiction, differs.

Consequently, it is advisable, as a sound practice, that all contracts, no matter the nature of the transaction or agreement or jurisdiction, are drafted by experienced lawyers, so as to include the rights and obligations of all parties involved and state the actions that should be followed in the case of a dispute or contract failure.

Thus, lawyers not only will specify the contractual parties’ relationships in the occurrence of a dispute, but they will also add clauses that will specify:

• in which events force majeure actions will come into force
• which party will be responsible for the possible financial losses in each specific event
• the contract governing law
• in which cases is the resolution of the contract acceptable, with no further legal consequences other than the ones specified in the contract etc.

The risks of COVID-19 outburst lie on the inability of businesses to meet their contractual obligations in the event which, the business’ operations are being disturbed by the coronavirus pandemic or governmental restrictions.

Who is accountable for those losses? The supplier, The customer or Both.

Unfortunately, who is held responsible is at fault and who will bear the financial losses when a supplier cannot meet customers’ orders is not a straightforward answer.

In the event of a pandemic outbreak, suppliers should carefully assess their legal contracts clauses and determine which sections apply to the exact event and specify if the conditions stated in the contract provide solutions for this event.

Furthermore, suppliers should examine if the specific event is directly correlated with the cause of not meeting the contract obligations and then examine if the specific cause was the one that affected their performance.

Moreover, suppliers should determine if the force majeure principle can apply on the specific event and examine if the legal framework of the contract’s governing law justifies the reasoning of the force majeure for not meeting contract obligations.

To sum up, everything depends on the contract terms and conditions, as well as the governing law of the contract, since there is no global one-size fits approach for countries.

What is more, suppliers may put into effect additional strategies that will assist them to minimize the consequences of the outbreak and cope with the risks caused by the pandemic.

Suppliers Crisis Management

First and foremost, suppliers should try to negotiate with customers directly and try to identify, as well as suggest possible ways of solving the problems in the supply chain.

Some “relief strategies” that suppliers may adopt are:

• prolonging the lead delivery time to customers
• prioritizing orders according to delivery time requirements per contract
• postponing new incoming orders or extending the proposed delivery time
• allowing cancellations for a short period of time etc.

Second, suppliers should form a crisis management plan that will include amongst others:

• Identification of the problem and analysis of all the reasons that are affecting the supply chain’s performance (i.e. lockdowns, travel restrictions, quarantine, staff illness, governmental restrictions etc.) It is extremely important for suppliers to document all the reasonings and determine which whys disturb the supply chain’s flow and how those causes affect the supply chain’s performance at all levels, so as to be able to proceed with the correct management decisions and avoid contracts terminations and minimize financial losses.
• Recognition and legal analysis of the risks involved, in accordance with the contract clauses and contacts governing law.
• The formation of outsourcing agreements with affiliate suppliers situated in operational areas, not heavily affected from the pandemic. With this “mitigating risk strategy”, suppliers may be able to support their production and overcome the supply chain problem for a short period of time.

Third, when suppliers have exclusivity contracts with customers, it is highly recommended to review those contracts with great caution with their legal associates and give emphasis to the clauses of delays, delivery failure, force majeure, reasons for contract termination etc.

Last but not least, suppliers in cooperation with their legal associates should review very carefully the dispute resolution section of their contract with customers and/or affiliates, so as to determine their legal rights and be in the position to negotiate.

Supply chains are amongst the most vital, complicated thus advanced industries of the world that allow minimum delays and disruptions, due to cost and inventory optimization policies by the companies.

Serious disturbances, i.e. coronavirus pandemic, may result to massive losses around the globe and serve as a tricker point of a global economic recession.

Therefore, suppliers by acknowledging the vulnerability of the supply chain industry should seek the consultation of legal and business consultants to assist them in forming a crisis management plan that will include reasonable solutions with immediate enforcement, so as to safeguard their companies’ operations and future.

The post Covid-19 and Supply Chain Breach of Contracts. Who is accountable? appeared first on Chambersfield Economides Kranos.

Ακολουθεί Ελληνική Μετάφραση

The outbreak and rapid escalation of the pandemic of COVID-19, has shaken the world, confronting it with an unheard-of and unprecedented, for modern society, situation. The evolving spread of COVID-19 has had numerous implications and has brought significant challenges, not only at global health level, but also in interpersonal and business relationships, in domestic and global, economic and business sectors.

Many people fail to comply with their contractual obligations, because of the unexpected outbreak of COVID-19 crisis, as well as a consequence of the measures that have been taken by the Government, aiming to minimise the effects and implications of COVID-19 crisis, including, but not limited to the temporary suspension of the operation of a huge number of businesses. Therefore, this reasonably raises the question as to whether the pandemic of COVID-19, could, indeed, be considered as a “force majeure” event, thereby justifying and relieving the party in default to comply with his contractual obligations and subsequently, from the obligation of paying damages to the innocent party.

What exactly constitutes a “force majeure” event has been, repeatedly, called upon to be interpreted by the Cypriot Courts, in numerous cases. No statutory interpretation exists of what precisely constitutes a “force majeure” event, but guiding principles have been emerged through the case law, of the District Courts and the Supreme Court, as well.

According to case law, the term “force majeure” refers to unforeseen and extraordinary events and/or circumstances, the occurrence of which, in any case, could not have been avoided despite the due diligence exercised by the party in default. In such a case, the party in default is relieved of responsibility. Therefore, the ultimate purpose of a “force majeure” clause is to safeguard the rights of the contracting parties, namely, to exempt them from complying with certain of their contractual obligations, under unforeseen circumstances which in no case fall within their sphere of control.

In many commercial agreements, a “force majeure” clause is observed, which includes, inter alia, possible definitions and examples of what could be deemed as a force majeure event. Nevertheless, a mere reference to “force majeure” does not, necessarily, provide certainty as to what is covered and/or has been construed to cover. For example, “force majeure” clauses usually refer to extraordinary circumstances, such as a war, strike, riot, crime, epidemic, and/or, any other events defined as acts of God (e.g. hurricanes, floods, earthquakes, volcanic eruptions, etc.). Nevertheless, in practice, most force majeure clauses do not justify a party’s non-performance of its contractual obligations, altogether.

It is understood that whether, or, not, an incident constitutes an act of force majeure, is based on the special circumstances of each case, on the respective agreement between the Contracting Parties and in particular, as well as on the precise drafting of the relevant contractual clauses. Therefore, the force majeure clauses shall be drafted as clearly and precisely as possible.

Furthermore, it is worth mentioning that in absence of a force majeure clause, the party in default may, always pursuant to the specific circumstances of each case, possibly, rely on the common-law doctrine of frustration. Under the doctrine of frustration, the party in default may be relieved of any liability, because of an extraordinary and supervening event, which in no case falls within the sphere of control of either of the parties.

Regarding tenancy agreements, noted shall be that, among other governmental measures that have been undertaken for tackling COVID-19 crisis, the Cabinet approved a bill, suspending and/or freezing all Court proceedings and/or the execution of any eviction Court orders and/or decisions, based on non-payment of rents, until 31^st of May 2020. In no case, however, this provision, exempts the tenants from their obligation to pay, the rents due, for the said period of time.

In light of the abovementioned, whether COVID-19 pandemic could be deemed a “force majeure” event, shall be examined on a case-by-case basis.

COVID-19. ΑΝΩΤΕΡΑ ΒΙΑ 

Η εκδήλωση και ραγδαία έξαρση της πανδημίας του COVID-19 έχει κλονίσει το παγκόσμιο, θέτοντάς το αντιμέτωπο με μία πρωτόγνωρη και πρωτοφανή, για τη σύγχρονη κοινωνία, κατάσταση. Η ραγδαία εξάπλωση του COVID19 έχει επιφέρει πληθώρα επιπτώσεων και σημαντικών προκλήσεων, όχι μόνο στο επίπεδο της παγκόσμιας υγείας, αλλά και στις διαπροσωπικές και επαγγελματικές σχέσεις, σε εγχώριο και παγκόσμιο, οικονομικό και επιχειρηματικό τομέα.

Πολλοί αδυνατούν να ανταποκριθούν στις συμβατικές τους υποχρεώσεις, συνεπεία του ξεσπάσματος της κρίσης του COVID19, ως επίσης και ως επακόλουθο των μέτρων που έχουν ληφθεί από την Κυβέρνηση, συμπεριλαμβανομένων μεταξύ άλλων, την προσωρινή αναστολή της λειτουργίας μεγάλου μέρους επιχειρήσεων, για σκοπούς περιορισμού και/ή ελαχιστοποίησης των δυσμενών επιπτώσεων που ενέχει το ξέσπασμα της κρίσης του COVID-19. Ως εκ τούτου, εύλογα εγείρεται το ερώτημα του καταπόσον η πανδημία του COVID-19 μπορεί, πράγματι, να ερμηνευθεί, ως συμβάν «ανωτέρας βίας», αιτιολογώντας και απαλλάσσοντας, κατ’ αυτόν τον τρόπο, το συμβαλλόμενο μέρος που παραβιάζει τη σύμβαση, από πιθανή καταβολή αποζημιώσεων στο ανυπαίτιο μέρος.

Το τί επακριβώς συνιστά γεγονός «ανωτέρας βίας» έχουν κληθεί να ερμηνεύσουν, κατ’ επανάληψη, στο παρελθόν, τα Κυπριακά Δικαστήρια, σε πληθώρα υποθέσεων. Εντούτοις, δεν υφίσταται θεσμοθετημένη ερμηνεία του τι εστίν «ανωτέρα βία», αλλά καθοδηγητικές αρχές δίδονται μέσα από την νομολογία τόσο των Πρωτόδικων Δικαστηρίων, όσο και του Ανωτάτου Δικαστηρίου.

Κατά πάγια νομολογία, ο όρος «ανωτέρα βία» αναφέρεται σε απρόβλεπτα και εξαιρετικά γεγονότα και/ή περιστάσεις, η επέλευση των οποίων, εν πάση περιπτώσει, δεν θα μπορούσε να μπορούσε να αποφευχθεί παρά τη δέουσα επιδειχθείσα επιμέλεια από μέρους των συμβαλλομένων μερών. Σε τέτοια περίπτωση το συμβαλλόμενο μέρος που παραβιάζει τη σύμβαση, απαλλάσσεται ευθύνης. Ως εκ τούτου, απώτερος σκοπός της συμπερίληψης ρήτρας περί «ανωτέρας βίας» συνιστά η διαφύλαξή των δικαιωμάτων των συμβαλλομένων μερών και δη, η απαλλαγή τους από την εκπλήρωση των συμβατικών τους ευθυνών και υποχρεώσεων, σε απρόβλεπτες συνθήκες και οι οποίες σε καμία περίπτωση εμπίπτουν εντός της σφαίρας του ελέγχου τους.

Σε πολλές συμβάσεις, εμπορικής φύσεως, παρατηρείται, συχνά, η σχετική ρήτρα περί «ανωτέρας βίας», η οποία περιλαμβάνει, μεταξύ άλλων, πιθανούς ορισμούς και παραδείγματα του τι αποτελεί γεγονός ανωτέρας βίας. Ωστόσο, η απλή αναφορά στον όρο «ανωτέρα βία» δεν παρέχει κατ’ ανάγκη βεβαιότητα ως προς το τι επακριβώς καλύπτει και/ή επιδιώκει να καλύψει. Για παράδειγμα, οι ρήτρες «ανωτέρας βίας» είθισται όπως αναφέρονται σε απρόσμενα συμβάντα, όπως πολέμους, απεργίες, πραξικόπημα, εγκλήματα, επιδημίες και/ή άλλα γεγονότα που ορίζονται ως πράξεις του Θεού (π.χ. τυφώνες, πλημμύρες, σεισμοί, κλπ.). Εντούτοις, στην πράξη, οι περισσότερες ρήτρες «ανωτέρας βίας» δεν δικαιολογούν την, εξ’ ολοκλήρου, μη εκπλήρωση των συμβατικών υποχρεώσεων ενός μέρους.

Νοείται ότι το καταπόσον ένα περιστατικό συνιστά ή όχι γεγονός «ανωτέρας βίας», έγκειται στα ιδιαίτερα περιστατικά της κάθε υπόθεσης, στην εκάστοτε συμφωνία μεταξύ των συμβαλλομένων μερών και ειδικότερα, στον τρόπο σύνταξης των σχετικών συμβατικών διατάξεων. Ως εκ τούτου, καθίσταται ανάγκη όπως οι ρήτρες «ανωτέρας βίας» συντάσσονται όσο το δυνατό με περισσότερη σαφήνεια και ακρίβεια.

Περαιτέρω, αξίζει όπως σημειωθεί ότι σε περίπτωση μη συμπερίληψης ρήτρας περί «ανωτέρας βίας», το μέρος που βρίσκεται σε παράβαση σύμβασης, στη βάση των ιδιαίτερων περιστατικών της κάθε υπόθεσης, δύναται, ενδεχομένως, να επικαλεστεί το νομολογιακό δόγμα της απογοήτευσης (doctrine of frustration) να απαλλαγεί από την ευθύνη μη εκτέλεσης των συμβατικών του υποχρεώσεων.

Όσον αφορά τις συμβάσεις μίσθωσης, σημειώνεται ότι, μεταξύ άλλων κυβερνητικών μέτρων που έχουν ληφθεί για την αντιμετώπιση της κρίσης COVID-19, το υπουργικό συμβούλιο ενέκρινε νομοσχέδιο, αναστέλλοντας όλες τις Δικαστικές διαδικασίες και/ή εκτέλεση διαταγμάτων και/ή αποφάσεων για έξωση, που βασίζονται στη μη καταβολή των ενοικίων, μέχρι τις 31 Μαΐου 2020. Σε καμία περίπτωση όμως, αυτή η πρόνοια απαλλάσσει τους ενοικιαστές από την υποχρέωσή τους να καταβάλλουν, τα τρέχοντα ενοίκια, για την εν λόγω χρονική περίοδο.

Υπό το φως των ανωτέρω, το ερώτημα του καταπόσον η πανδημία του COVID-19, συνιστά συμβάν- ανωτέρας βίας κρίνεται στη βάση των συμβατικών όρων και πραγματικών συνθηκών κάθε περίστασης.

The post COVID 19 | FORCE MAJEURE appeared first on Chambersfield Economides Kranos.

Article Publication: Forbes Magazine June 2019

There are many cases where investors, real estate agents and construction companies have questioned whether a real estate agreement requires the appointment and supervision of a professional lawyer.

Even more times we heard that the contract is only typical and meets the basic requirements of the law or that the contract is standard, follows a specific pattern and does not require any change.

A contract, even when the transaction appears simple and straightforward, does not cease to be the most important document of the transaction, as it defines the rights of the parties involved and the appropriate actions on how to resolve various disputes that may arise. Additionally, a proper and careful contract limits all possible risks and prevents uncertainties, which could lead to disagreements.

As an international law firm that frequently deals with multiple and complex real estate transactions, we have unfortunately encountered many cases in which investors and service companies did not pay the necessary attention to the sales contract to cover all the chances of any dispute before, during and after the transfer of the real estate property, resulting in unpleasant and serious consequences that could only be solved through court actions.

Owning a property is a long-term and significant investment because of the large amounts involved. Therefore, investors, sellers and buyers, have to follow the appropriate procedures as defined by the legislative framework, during the closure of an agreement, in order to safeguard their interests.
On the other hand, real estate agents, construction companies, as well as land development companies, should safeguard their rights in order to avoid adverse consequences that may arise during the closure of the agreement, i.e. cancellations, financial problems etc.

Therefore, appointing an experienced law firm is absolutely necessary because, as legal advisors and knowledgeable legal practitioners, they can secure the benefits of the involved parties and propose the insertion, deletion or modification of terms that, in case of a disagreement, will determine what has been agreed. Additionally, the law firm will ensure that the contract is fully compliant with the provisions of the law governing the terms and conditions of the transaction in question.

Additionally, law firms often act and provide escrow services for the implementation of real estate contracts. In these cases, the law firm provides the “escrow service” as a third party. This service works in between the transaction and the law firm oversees its smooth flow. Typically, this service is offered in cases where investors come from a different country than the provider. However, this service is also used in cases where all the parties involved are from the same country.

Moreover, legal advisors are able to advise the investors, sellers or buyers on the strategy needed to be followed in their dealings with real estate transactions and purchases. The real estate market, which will be incorporated into the investors’ portfolio of real estate, is very important and influenced by various factors that determine its future value. Let’s not forget that every investor wants to increase its income flow. The main factors to be considered for each investment transaction of this type are the location, future use, tax system, the reliability of the real estate provider and the resale strategy for the property.

Taking everything into consideration, I would like to highlight that, by appointing an experienced law firm, investors, buyers, sellers and involved providers, secure their rights when signing the contract and are fully informed about the legislative framework and the practical part governs the purchase and sale of real estate.

The post Real Estate Contracts appeared first on Chambersfield Economides Kranos.