GP&H Suite


GP&H Suite

28 Jan

Effects of COVID-19 on Contracts


Last year, a state of alarm was declared around the world about the health crisis caused by COVID-19. Therefore, a series of decrees, regulations and measures of a sanitary and legal nature have been issued in order to minimize or control the effects that this sanitary crisis has had, that is why countless questions have automatically arisen about the impact that COVID-19 has had on both companies and individuals in meeting their obligations.

One of the main effects that we have experienced in the current situation in the legal field is related to the contractual aspect. Although none of the regulations or decrees that have been issued so far alter as such the legal framework of contracts and obligations between individuals, however, some of the clauses contained therein cannot be carried out or complied with in accordance with the agreed.

Taking the foregoing into account, it is necessary to analyze those scenarios in which the law itself allows to release from compliance with the obligations generated through the contracts due to unforeseen circumstances or force majeure or, request that the parties’ obligations be reestablished, considering that the existence of this type of unforeseen situations may cause onerous charges for any of the parties.

In the same way, it must be considered what the parties that have entered into the contract, have stipulated in it on the cases and effects if any event of force majeure or any event that makes it impossible to comply with the obligations will be presented.

As a general rule, the parties are obliged to fully comply with what has been stipulated in the contract, however, for those cases in which they have not indicated any precautionary clause or a scenario in which they include cases of force majeure, the parties of Common agreement could establish what would be the next step and even enter into an amendment agreement on the original contract in order to formally agree on these changes.

Regarding the possibility of making a modifying agreement on the original contract, in order to modify or resolve any point on certain clauses of the contract, it may not be applicable to those obligations that have existed prior to force majeure events, however, it may be applicable on the obligations that are still pending to be fulfilled, as long as the parties are not in default or that at the time they have acted fraudulently.

In conclusion, the current health situation derived from the effects of COVID-19 has had and will have a relevant impact on the contractual obligations of individuals, as well as on future negotiations that are carried out on contracts. In the contracts that have already been signed and that have already generated obligations for the parties, the actions to be followed will have to be verified in order to validate which obligations can be fulfilled even under different conditions and which will be subject to a modification under a modifying agreement, the above in order to avoid damage and provide the greatest benefit to the parties.

Melissa Sanchez

Gloria Ponce de León & Hernández

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