Since a few weeks, Corona or Covid-19 is no longer a Chinese far-off show, but the virus has also reached the Belgian territory. This not only has an impact on the general health of the Belgian population, but also on the economic ‘health’ of every Belgian company. More than ever, people are trying to find a solution to this threatening problem. A major concern in the IT/IP sector concerns the execution of ongoing contracts. What should happen if a contract can no longer be executed? Is this considered as force majeure? With this blog we try to answer this pressing question about how to deal with IT/IP contracts within your own company in times of the Coronavirus.
Force majeure vs. hardship
A contracting party could initially try to suspend the performance of its contractual obligations until the corona contamination rate has significantly decreased. It will justify this by invoking force majeure. However, force majeure does not always apply in the event of such epidemic outbreaks. After all, a distinction must be made between two concepts.
In Belgian contract law, ‘force majeure’ is usually characterized as a situation that occurs outside the human will, for example a terrorist attack or a natural disaster, but sudden illnesses can also be considered as force majeure… if a situation of force majeure occurs, the performance of the contract becomes impossible and the contracting party will therefore be released from any obligation. Force majeure does not have to be explicitly included in an agreement, although this is strongly recommended due to the vagueness of this term.
If, on the other hand, the execution of the agreement is not made impossible, but only makes the situation more difficult or aggravated, then there is no question of force majeure. This is the theory of hardship. It may, for example, involve an increase in the price of raw materials. If, as a contracting party, you wish to obtain an exemption from the obligations in such situations as well, then this must be explicitly stated in the agreement.
In concrete terms, consider that, for example, the government would impose a general travel ban to prevent the spread of the Coronavirus. As a result, a certain service can no longer be performed by your company: you could then suspend the performance of the agreement. The Coronavirus measures imposed by the government will always be regarded as a situation of force majeure. It will be different if, for example, some of your employees are themselves infected by the virus. In such cases, the performance of the agreement is not impossible. After all, the contract can still be performed by other employees. However, this does make it more difficult to execute the contract, because it takes more time, for example, to educate another employee on the subject matter of the project.
Corona and IT/IP-contracts
Whether the Coronavirus can be used as a ‘joker’ to end or suspend your IT/IP contact, will depend on the specific wording in the contract in question. This is due to the fact that IT contracts will usually have their own definition of force majeure.
Most of IT/IP contracts include a non-exhaustive list of situations which can be considered as force majeure. It is always possible to agree jointly to include cases which are not considered as force majeure in the first place. In this way, situations that merely complicate the execution of the agreement can also be used to suspend the obligations. For example, it may happen that the agreement explicitly stipulates that the IT supplier no longer has to deliver when one of its employees is absent due to illness such as the Coronavirus.
In addition, do not forget that situations that are considered as force majeure but are not explicitly included in the list, such as epidemics or the Corona pandemic, can still be invoked as force majeure. This follows from article 1148 of the Civil Code. After all, force majeure can always be invoked, even if this has not been explicitly agreed. Even if your contract does not refer to epidemics, this will not exclude the possibility that the Corona pandemic may be considered as a force majeure situation, as a result of which you may suspend the performance of your contractual obligations.
Contract cancelled or postponed?
The above is probably not so pleasant to hear when a client suspends or postpones your assignment. As already mentioned, the client has the right to suspend the assignment if he himself is prevented by force majeure. The contractor is entitled to check whether the Coronavirus actually has an impact on the execution of the agreement, in order to contest the invocation of force majeure if necessary. After all, it is not inconceivable that a client, purely for opportunistic reasons, tries to get out of the contract and makes use of the Coronavirus as a cause.
If we look at an agreement in which the client outsources the development of a website to a contractor, it seems unlikely that the client can simply postpone the agreement by invoking force majeure. After all, it must be possible to prove that the Coronavirus makes it impossible to execute, which will be difficult in the case of building a website.
We therefore recommend that you critically review your IT/IP contract before you can invoke its suspension. As an expert in IT/IP contracts, we are happy to help you with this analysis. You can always contact us at firstname.lastname@example.org.
Written by: Helena Depaepe, Legal Adviser deJuristen, and Kris Seyen, Partner deJuristen