Since March 16, 2020 state of emergency has been declared in Armenia (https://www.e-gov.am/gov-decrees/item/33564/). This decision led, in particular, to restrictions on the freedom of movement of persons and the right to free economic activity.
Restrictions imposed and measures applied during the state of emergency raised various legal issues, in particular, whether the impact on contractual relations should be assessed as force majeure, what criteria should be selected, and what are the possible legal consequences?
Under current legislation ? judicial practice, force majeure is described as a circumstance that:
- By its nature, is extraordinary in public relations,
- in those circumstances was unavoidable for the legal parties,
- led directly to non-fulfillment or improper fulfillment of obligations (cause-and-effect relationship, causality).
No circumstances are presumed to qualify as force majeure by the virtue of law, allowing the parties to freely determine those events that will be qualified as such within the meaning of the given contract concluded. The requirements of force majeure, which need to be met, are the unforeseeability at the time of the conclusion of the contract and the extraordinary character of the event. Nevertheless, the below listed event are not and may not be qualified as force majeure events:
- Violation of responsibilities by the debtor's counterparties,
- Lack of necessary products in the market or,
- Lack of necessary monetary funds upon the debtor.
According to the general rule, there is a liability for non-performance of the obligation provided that there is a fault of the party, except for persons engaged in business activities. In that case, if there is a nonfulfillment of an obligation of party to a business contract, the absence of fault is not a ground not to be held liable.
However, if the entrepreneur is able to prove that the fulfillment of its obligation was impossible due to a force majeure event (extraordinary and unpredictable under those certain circumstances), the person will be released from liability.
Special attention should be paid to the fact that force majeure, according to existing regulations, does not exempt from the performance of obligations, but releases from liability arising from non-performance of obligations. For example, a lessee cannot be exempt from paying rent under a lease agreement just because its employees did not visit the place of work, because (a) the lessor continued to perform the duties of possession and use of the territory, (b) actually owned the territory and used the lessee, because at least the lessee's belongings continued to occupy the territory, and (C) the lack of funds from the lessee does not release him from the obligation to pay rent.
It is important to note that according to the juridical practice developed in Armenia, the extraordinary and unforeseeable character of the event in each case should be considered and assessed in the framework of the nature of the specific obligations and conditions of its execution.
From above discussed, one can conclude that there cannot be a single prescription. Each contract and the individual obligation entered into under each contract, must be evaluated in accordance with each circumstance of the state of emergency, for example, in the light of restrictions, conditions and consequences of pandemic. As in the case of diseases, in this case also advised to contact with the appropriate specialist for consultation.
However, the following questions can serve as a guide to understand whether you may be released from liability or execution of the obligation:
- Which state legislation is applicable for your obligation?
This regulation may be directly provided for in the contract or in the absence of a settlement under the contract, be governed by law (conflict of law clauses). This will allow you to clarify whether the Armenian law should be applied or you should apply to a lawyer from another country.
- Consequences of which of your obligations are considered?
Provided there is a contract under which there are a number of obligations, it is possible that, the decision to declare a state of emergency makes it impossible for not all of your obligations to be fulfilled, so you will not be able to argue the state of emergency as force majeure.
- Are any circumstances qualified as force majeure In the given contract?
In this regard, it is necessary to consider the above-discussed regulations. It is also necessary to take into account how the" force majeure " if formulated in the contract, in particular, whether a final list is provided, or the wording makes it possible to consider other circumstance that corresponds to chosen definition. For instance, if according to the stipulation in the contract only "an earthquake and flood are considered to be force majeure", the courts, applying the legal rules of interpretation of the contract, will not consider any other circumstances as force majeure, unless parties, have deviated from the legal presumption and decided ''otherwise''.
- Besides the sole description of force majeure events, are there additional notification requirements?
It's not unusual to have a procedure in a contract for notification of non-performance, which is an additional requirement for exemption from liability for non-performance or improper performance of obligations, and compliance with which will also be the subject of discussion in courst in the event of a possible dispute. Is there a procedure for notification, special content of notification, deadlines for notifications, can you respond that notification addressed to you and to object with the facts defined as force majeure by your counterparty?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
