Covid-19 – Force Majeure?

On 11 March 2020 the World Health Organisation announced that Covid-19 has reached the scope of pandemic, therefore in response to the communication on 12 March 2020 the Cabinet issued Decree No 1031 by which the emergency situation was announced in Latvia from 12 March 2020 to 14 April 2020 (Decree No 103). Furthermore, on 14 March 2020 the Cabinet determined additional restrictions and prohibitions by Decree No 1052 (Decree No 105).

The restrictions apply to everybody and significantly affect daily routines of businesses. Taking into account that business is closely related to performance of different contractual obligations the current changed situation may significantly encumber performance of obligations or performance thereof in due time and scope.

The force majeure institute is a legal remedy widely known yet rarely applied in business. The force majeure situation is caused by extraordinary circumstances, which are unforeseen, beyond the control of the parties, which the parties are unable to prevent and due to which any party is unable to perform its contractual obligations, as a result of which other parties incur or may incur loss. If force majeure situation is proved, such loss incurred by the other party is not subject to compensation. In such case performance of contractual obligations is either suspended for the period of existence of force majeure situation or the contract is terminated if the performance of the contractual obligations is no longer possible due to force majeure.

Eversheds Sutherland Bitāns Law Office has prepared Practical advice for further performance of contractual obligations.