Short Reads

Corona Checklist for (Supply) Contracts in the Energy & Industry Sector

Corona Checklist for (Supply) Contracts

Corona Checklist for (Supply) Contracts in the Energy & Industry Sector

18.03.2020 BE law

The outbreak of the corona virus is affecting economies worldwide. Many governments are taking measures to mitigate the spread of the corona virus. Increasingly, this is leading to supply bottlenecks, assembly line stoppages, etc. The table below provides a short checklist of the most common issues that may arise in your contract.

 

Keep Records Maintain copies of critical correspondence and other communications to justify actions, if a dispute with your counterparty would arise.
Notifications As a supplier, you may have to notify the potential impact of the corona outbreak to your contractual counterparty. As a customer, you may have to inform other parties, such as lenders in case of project finance.
Delay Damages A delay in supply may trigger liquidated damages. A supplier may however be able to rely on defences such as force majeure, or dependencies of its subcontractors.
Most Favoured Customers  As a supplier, you may have a contractual obligation to prefer some customers over others. If so, you may have to (re)allocate your goods/services in accordance with such obligation.
Force Majeure For an event to qualify as force majeure under Belgian law, it must have been unforeseeable for the party invoking it, and it must render performance of the obligations under the contract (partially) impossible. Although unforeseeability can likely be accepted, a supplier will have to demonstrate that the performance of its obligations has also become (partially) impossible. Most likely a duty to mitigate also exists for the supplier under the contract.
Alternative Supply / Mitigation  Is it possible to mitigate the impact of the corona outbreak? Can an alternative supply be set up or is there an exclusivity?
Breach of Contract If there is no force majeure under the contract, a suspension of performance will be qualified as a breach of contract.
Mutual Suspension of Performance Unless excluded in the contract, a suspension in the performance of supply obligations entitles the customer to a suspension of the related payment obligations.
Hardship / Material Adverse Effect The effects of the corona virus or any governmental measures imposed may constitute hardship and allow for a renegotiation of the contract (e.g. a price adjustment), if your contract contains a hardship clause. This is generally the case for all Belgian public procurement contracts.
Securities Depending on the terms of the contract, parties may be requested to provide additional securities (such as a parent company guarantee or a bank guarantee).

Early Termination

Repeated breach of contract or prolonged force majeure may be a cause for early termination of the contract.

 

If you seek specific legal advice with regard to one of your contracts, please contact one of our specialists.

Team

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