Coronavirus – COVID 19 and its effect on contractual obligations


As we all know, since COVID-19 began spreading, the pandemic has rapidly affected different aspects of society such as health, safety and human relations, and the legal sphere is no exception.

In this field, one of the most significant examples of the effects of this pandemic is linked to its potential impact on the enforceability of obligations undertaken under a contract.

Contracts, their inalterability and the pandemic as a “force majeure” cause

In accordance to law, contracts concluded are to be honored, with stability and in good faith. That is, the parties to a contract must strictly comply with the provisions thereof and, should they violate any of them, are subject to punitive or reparatory consequences, etc.

Nevertheless, when peculiar events happen, especially beyond the parties’ control (but with effects on contractual obligations), the enforceability of these obligations may be ceased or legally suspended, and the obligor may be free of any liability.

Specifically, if none of the provisions in the contract make any explicit references to said events or provide textual solutions for these circumstances, a solution must be found under the law, particularly in articles No. 1342 and 1343 of the Civil Code.

These provisions set forth the following:

“1342. The obligor is forced to pay damages, either for lack of compliance with the obligations undertaken or for any delay in said compliance even when the obligor does not act in bad faith, provided that the obligor does not justify said breach on account of an external cause that is not attributable to the obligor.

“1343. No damages are payable when the obligor has not been able to comply with the obligation undertaken or has performed any action prohibited to the obligor, on account of a force majeure cause or an act of God…”

When is an event considered to be a circumstance of “force majeure”?

Generally speaking, when it is an event caused by human action or by nature that is extraordinary enough that, due to its characteristics, in connection with contractual relationships, makes it impossible for the obligor to comply with the obligations undertaken and, therefore, exempts the obligor from responsibility.

However, the approach for determining this impossibility is esentially strict given that, according to the established doctrine abd case law, the impossibility must be primarily absolute and objective.

When is an event considered to be a circumstance of “force majeure”?

In our view, the mere invocation of the pandemic, even when its existence is undeniable, lacks efficacy for exempting the parties from complying with their contractual obligations, because by definition contracts concluded are to be honored, pursuant to the rule of “immutability and intangibility of contracts” (derivation from the general principles of safety, certainty, etc.). In other words, the pandemic itself is not an event of “force majeure” that lawfully exempts the parties from responsibility, except that, in a specific case, it has the inevitability and irresistibility features mentioned aboved and, accordingly, the pandemic makes it materially impossible to comply with the obligations undertaken.

Thus, if a party to a contract (strictly speaking, the obligor) intends to be exempted from responsibility -or seeks a reduction or moderation of responsibility under the agreement-, said party should not only invoke the pandemic, but also effectively prove that the pandemic has had a severe and meaningful effect on the reality of the obligor (primarily from an economic standpoint) to the extent that the compliance with the obligations undertaken has become absolutely and objectively impossible. Namely, it is not enough to invoke and prove a mere difficulty or complication regarding the compliance with the contract (relative impossibilty), but also evidence must be provided of a primarily absolute, objective and insurmountable impossibilty to honor the contract.

If these conditions are not strictly met, the prescriptive validity of the obligations undertaken shall prevail, in accordance with the aforementioned rule of “immutability and intangibility of the contract.”