In order to prevent the spread of COVID-19, the Government of the Slovak Republic has adopted several restrictive measures which may, in contractual relationships governed by the Civil Code, cause impossibility of t debtor’s performance.In this alert we focus in more detail on the issue of additional impossibility of performance and subsequent cessation of obligation due to the spread of COVID-19 and adoption of the related preventive measures.
Regulation in the Civil Code
Impossibility of performance is governed by provisions of Sections 575 – 577 of the Civil Code. If a performance becomes impossible, the debtor’s obligation to perform shall cease to exist.
Although the Civil Code does not define when the performance becomes impossible, it states when it is not impossible. In particular the performance shall not be impossible if it can be carried out:
- even under difficult conditions,
- with higher costs, or
- after the agreed time.
In the case of partial impossibility of performance, the obligation ceases to exist only in the part in which the performance is impossible, while in the remaining part the creditor is entitled to withdraw from the contract. The obligation may also cease to exist in its entirety (even if the impossibility concerns only a part of the performance) provided:
- the nature of contract or the purpose of performance known to the debtor at the time of conclusion of the contract has indicated that the performance of the rest of the obligation has no economic relevance for the creditor, and
- the creditor does not notify the debtor without undue delay after he became aware of the impossibility of the part of performance that he insists in the rest of the performance.
If the debtor learns of the fact that makes the performance impossible, he is obliged to inform the creditor about this fact without undue delay. If the debtor fails to do so, the creditor is entitled to claim damages from the debtor due to the fact that he was not timely informed about the impossibility.
Can COVID-19 make the performance impossible?
Coronavirus disease (COVID-19) and the governmental measures adopted in connection with its spread may, in certain circumstances, cause that the contractual obligations will cease to exist due to the impossibility of performance. However, in order for the obligation to cease to exist, a number of conditions would have to be met – in particular, its performance must not be possible even under difficult conditions, at higher costs or after the agreed time.
In other words, even if certain governmental measures adopted in relation to the current situation made the debtor’s possibilities to perform more complicated (e.g. the performance is possible only with the increased costs or after the adoption of some specific measures) or impossible in the agreed time, it does not automatically mean that his obligation ceases to exist. In each individual case it is necessary to assess whether all the conditions required for the cessation of obligation are met, for example whether it will not be possible to perform the obligation in the future. As the measures adopted in relation to the COVID-19 pandemic are not likely to be permanent, some obligations may be fulfilled later – after the government will abolish or soften the restrictions. However, it always depends on the nature and character of the specific obligation.
If due to the COVID-19 or due to the adoption of measures preventing its spread, there will indeed be an objective impossibility of debtor’s performance, he should inform the creditor about it without undue delay. Otherwise, the debtor exposes himself to the risk of possible liability for damage, which may be caused by his failure to notify the creditor. In the event of impossibility of performance, the debtor is also obliged to return to the creditor the remuneration for the fulfillment of the obligation, which he already received from the creditor.