Parameters for Applying the Rules on Force Majeure to COVID-19 in Spain

Summary

The aim of the contribution is to analyse how the spread of COVID-19 affects contractual relationships under Spanish law. A case-by-case approach is adopted – the key difficulties and paradoxes associated with the application of the current legal framework are determined by analysing the most typical difficulties encountered by the contractors due to the pandemic. The legal context is comprehensively presented: the core practical issues related to the functioning of the institution of force majeure are examined. The common problematic scenarios caused by the COVID-19 crisis are addressed, i.e.: the practical impact of the all-risk clauses on the risk distribution, the disappearance of causa of the contract, the tension between labour law mechanisms and force majeure. Finally, the possibility of classifying COVID-19 contingency as a force majeure contingency is examined (both the undisputed and the debatable force majeure contingencies are discussed).

INTRODUCTION

Everyone is acutely aware of how COVID-19 has impacted our lives since February 2020. In this context, the temporal border marked by RD 463/2020,establishing a “state of alarm” in the country, has severely limited the freedom of movement and imposed the closure of a great number of commercial activities alongside other public regulatory packages in the areas of employment, transport, health, tourism, etc. A series of Royal Decrees followed, which have affected very solid sectors of the Spanish legal system, including private law. “COVID-19 as a force majeure event” was already being discussed when the virus seemed to be located exclusively in China, because the paralysis of that country was bringing about dysfunctions in the global supply of goods and services, and, therefore, in the possibility of fulfilling supply or manufacturing contracts even in Spain. However, after RD 463, the rise of the term “force majeure” has been extraordinary in Spain. One could argue it has gone “viral”. In the recent scenario of pandemia, the cognitive limits between Force Majeure and Rebus sic Stantibus rule have been almost blurred. “Experts” and “pagans” relentlessly muddle around this aspect of COVID-19, giving social notoriety to a classic academic device. And, naturally, it has begun to be strategically managed in the dynamics of contractual performance and renegotiation.