Coronavirus has been impacting also the world of international contracts. Several authorities all across the world have adopted and enforced many decisions restraining commerce and trade of goods and services and many businesses have been and are being negatively affected by them. Accordingly, many companies, often despite themselves, are terminating agreements, suspending the provision of services and defaulting their contractual obligations. However, can they really do that? The answer to such question is not always straightforward and must be analyzed from many different points of views.

Let’s give you a mere example in connection with one tool that, in certain cases, could justify a party from defaulting its obligations, the force majeure.

The applicable law. Like always when dealing with international contracts the first question to address is what law (or laws) applies to the contract. Once the applicable regulations are clear, if provided for by the law governing the contract (for instance, in presence of the corresponding requirements, pursuant to Italian law), as anticipated the interpreter could focus for instance on the potential applicability of the force majeure, consisting in unforeseeable circumstances (often referred to as an irresistable force or overcoming power), going beyond the parties’ control, making it impossible for one or more parties to carry out their obligations and exempting them from  their fulfillment.

The contractual clauses. It is also important to examine carefully the text of the contract which may regulate the occurrence of unforeseen obstacles going beyond the control of the parties and its consequences, helping the parties dealing with a situation like the one of Coronavirus even if the applicable law didn’t expressly regulate the force majeure.

Place of business and execution of the obligations. It is also crucial in a scenario like the one at hand to carefully identify the place of incorporation/operation of the parties and of the execution of the contract since local orders and decision by the competent authorities might affect the execution of the contract regardless of the above factors.

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The above is just a rough non-exhaustive example, please feel free to contact us for any legal guidance that you might need in interpreting and executing your international contracts, we are always at your complete disposal online through our contact form.

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