COVID-19 Legal Tips
04 April 2020
The “Covid-19” pandemic, and corresponding legal decrees issued as a consequence, give rise to a number of important legal issues for businesses and individuals alike. We set out below some legal insight on some COVID-19 related matters in hope that this will assist in overcoming the corresponding challenges.
You don’t need to meet in person to sign agreements You can sign them electronically. Specifically pursuant to Article 25 of the EU Regulation on Electronic Signatures 910/2014/EU, which is directly applicable in Cyprus, an electronic signature is not denied legal effect and can be admissible as evidence in legal proceedings. The position is supported by Law 55(I)/2018, which harmonizes local law with the said regulation and the definition of “documents” under the Cyprus Evidence Law, Cap 9, as amended.
Frustration of Contracts
If it is impossible or illegal to perform a contractual obligation on account of COVID-19 or relevant decrees, the contract is likely cancelled by law. Pursuant to section 56(2) of Cyprus Contract Law, Cap 149, as amended, where a contract becomes impossible or illegal to perform, for any unanticipated reason arising after the time to contract is made, such a contract is cancelled. This provision in essence transposed the common law doctrine of "frustration" into Cyprus law. For obligations, which are directly in breach of laws and decrees adopted on account of Covid-19, the application of this provision is relatively clear. In any other case, especially in terms of satisfying the very high threshold of "impossible", whether or not this provision will operate depends on the terms of the particular contract and related facts and circumstances. Invoking "force majeure" may be also relevant in terms of cancellation or suspension of contracts, again depending on the relevant terms of the contract and related facts and circumstances.
"Force majeure" refers to provisions customarily found in commercial contracts which may operate to suspend the performance of obligations or even to terminate the agreement on account of an "act of god" or other unforeseen circumstances outside the control of the contracting parties. Covid-19, and the laws and decrees issued because of it, may in fact constitute a force majeure event capable of suspending contractual obligations. Whether or not a force majeure provision may be invoked, and to what extent, depends on the exact wording of the subject matter contract and the particular facts and circumstances. Where performance is in fact now impossible or illegal the common law doctrine of frustration, as adopted in Cyprus law in section 56(2) of Contracts Law Cap, 149 may operate, to cancel the agreement.
Agreement do not necessarily need to be in writing, signed by the parties at a meeting. They can be made by email or other form of electronic communication. Specifically, pursuant to section 10 of Cyprus Contract Law, Cap 149, as amended, agreements made verbally or partially in writing are valid and enforceable. Validity of an agreement is not a matter of form, per se. For a contract to be legally constituted there must be an offer, an acceptance of that offer, consideration (namely an exchange of value) and the intention to create legal relations.
Default of Contractual Obligations
As an economic consequence of COVID-19, and related legal decrees issued, individuals and businesses may be genuine unable to pay or otherwise perform their obligations under existing contracts and thus may be led to a default, not otherwise cured by operation of legal "frustration" or "force majeure" provisions of the contract. In such cases of a genuine, and not an opportunistic or strategic default, contracting parties should negotiate to reach a mutually agreeable solution which ideally will achieve a fair balance on who will bear the economic burden caused on account of the pandemic, and not any one party. The considerations under such a negotiations will likely include the performance and relationship of the parties prior to the pandemic, the timeframe and cost of enforcement in seeking damages and, most importantly, the loss of future business if the contract is terminated and the professional relationship is ruined.
For more information legal issues relating to COVID-19 and its consequences feel free to contact us at firstname.lastname@example.org.