Fulfillment of Contracts during the COVID-19 pandemic

Jun 2, 2020

In the context of the current coronavirus situation, given the various constraints, the question arises as to how the parties may exercise their rights and obligations in relation to the contracts, and whether they have the possibility to behave differently from the provisions of the contract.

During the current viral situation, the parties must first examine whether the contract has any provisions for the event of a circumstance which was unforeseeable at the time of the conclusion of the contract. If the contract contains such a clause, the parties must first act accordingly.

In the event that such a provision is not stipulated in the contract or the provision is too general and it cannot be judged on the basis of whether it can be applied in the situation that has arisen, it is necessary to act in accordance with the relevant provisions of the hungarian Civil Code.

Delay

If, due to a situation caused by the coronavirus, one of the contracting parties is unable to fulfill his/her obligations in time because, for example, the lorry transporting the contracted product arrives later due to the virus situation or due to quarantine and can prove that the delay is beyond his/her control, caused by an unforeseeable circumstance at the time of concluding the contract, the delay can be directly related to the viral situation and there is no way to remedy the circumstance, he/she may be released from the obligation to compensate for the delay due in principle.

Impossibility

In the event that the coronavirus situation not only causes a delay but also makes it impossible to fulfill the obligation under the contract, for example because if the service should have been provided at a certain time – but this is not possible due to the circumstances caused by the virus – the contract ceases to exist and the parties are required to settle accounts with each other, the cash advance should be refunded and the monetary consideration for the service provided before the impossibility of performance should be reimbursed.

A typical example of this case is when an accommodation is booked but the accommodation is quarantined and thus the contractor wishing to use the services of the accommodation is unable to use the service paid for by him/her.

Summary

It is extremely important to state that the appearance of the virus and thus the difficulty of fulfilling the obligations under the contract does not in itself give rise to the application of the exemption from liability or the consequences of impossibility, so it is necessary to examine individually the nature of the contract to determine the contracting parties current rights and obligations.

Please note that the above is for general information only, legal advice on individual cases can only be given in the context of an individual consultation, taking into account all the circumstances of the case.