{"id":273604,"date":"2020-05-20T17:36:27","date_gmt":"2020-05-20T20:36:27","guid":{"rendered":"https:\/\/anba.com.br\/?p=273604"},"modified":"2020-05-22T11:44:59","modified_gmt":"2020-05-22T14:44:59","slug":"contracts-must-now-include-a-pandemic-clause","status":"publish","type":"post","link":"https:\/\/anba.com.br\/en\/contracts-must-now-include-a-pandemic-clause\/","title":{"rendered":"Contracts must now include a pandemic clause"},"content":{"rendered":"

S\u00e3o Paulo \u2013 In a moment when many companies must reinvent themselves to deal with the crisis ushered in by the COVID-19 pandemic, renegotiating legal contracts is one concern. The need to provide for major events like this in contracts was one recommendation from Brazilian and Arab specialists that were brought together in the webinar hosted by the Arab Brazilian Chamber of Commerce<\/a><\/strong> on Wednesday (20). In the webinar \u201cInternational Business and Legal Safety: Adaptations to the New Scenario,\u201d they talked about the impacts on national and international contracts, suggestions to mitigate risks, and trends for global trade.<\/p>\n

The lecturers stressed that are major difference between contracts signed before the spread of the pandemic, in the first days into the pandemic, and after it had spread.<\/p>\n

\"\"<\/a>
F\u00e1bio Amaral Figueira believes that contracts must includes clauses on events such as the pandemic<\/figcaption><\/figure>\n

Veirano Advogados partner F\u00e1bio Amaral Figueira believes that events such as the pandemic may not be included anymore as \u201cacts of God\u201d or \u201cforce majeure.\u201d Acts of God or force majeure are events that can\u2019t be avoided, such as the COVID-19 pandemic. \u201cThinking ahead, [it may be] established more clearly that some events won\u2019t be considered as force majeure or that the debtor should take some responsibility in the case of an act of God or force majeure. The pandemic will make the business world review some ideas,\u201d he considered.<\/p>\n

He believes that a resolution clause \u2013 concerning the termination of a contract \u2013 could cover eventual effects of pandemics. \u201cSome situations can lead to an unavoidable impediment of the relationship\u2019s continuity,\u201d Figueira said.<\/p>\n

\"\"<\/a>
Dib: Now is not possible to have the theory of unpredictability anymore<\/figcaption><\/figure>\n

Arab Chamber legal director William Adib Dib Jr. pointed out the importance that companies now have clauses allowing for contract reviews in the case of events that change the scenario, such as the pandemic. As for companies with contracts signed after the pandemic has started, they face another reality. \u201cSigning a contract now is signing a contract amid the pandemic. It\u2019s important to include clauses because now we can\u2019t have the theory of unpredictability anymore. You must find the best way to eventually solve the contracted option without incurring in further problems,\u201d Dib pointed out.<\/p>\n

Figueira explains that the next months will see a legal trend for contract decisions. As for international deals, he stresses the need to analyze if the law governing the contract is the Brazilian or the Arab country\u2019s law. \u201cIt\u2019s also important to have in mind what the party really wishes at the moment \u2013 if it\u2019s to discontinue the service or terminate it entirely, and remember the business issues, not just the legal decision, if the party is to maintain a good contractual business relation in the Arab country and vice versa,\u201d he said.<\/p>\n

A second point raised by the lawyer were the legal costs involved in taking the cases to justice. Figueira points out that cheaper alternatives, such as mediation, can be the solution. \u201cAt first, it\u2019s interesting that the parties negotiate between them. If it doesn\u2019t yield any results, then maybe it\u2019s the case of thinking on mediation. The mediator is a facilitator.\u201d Another option, he says, is contractual risk allocation, when where the parties discuss to specify the risks that each of them should sustain.<\/p>\n

Arab countries\u2019 legislation<\/strong><\/p>\n

Baker & McKenzie Habib Al Mulla partners Tarek Saad and Pietro de Libero (pictured on top<\/em>) also participated in the webinar and addressed how force majeure and unpredictable events are treated by the Arabs. According to the UAE-based office\u2019s partners, the code followed in most of the Arab countries is based on the Egyptian code, which is derived from the French code, so the same rules apply in most of those countries.<\/p>\n

\u201cIn the case of force majeure, the contract is completely terminated if the obligation of one party is made completely impossible or partially terminated if it\u2019s made partially impossible. In the latter, this contract is still in force concerning the part of the obligation that can be met, and the consideration is reduced accordingly,\u201d contract law specialist Libero explained.<\/p>\n

\"\"<\/a>
Tarek Saad talked about cases where \u2018force majeure\u2019 and \u2018unpredictable events\u2019 apply<\/figcaption><\/figure>\n

According to him, even if the contract does not provide for force majeure, the rule can still apply because of the civil code. \u201cIt apply only if the event causes an impossibility that wasn\u2019t there when the contract was signed and had an impact before the obligation was met or when the event makes the obligation impossible,\u201d he pointed out.<\/p>\n

In the COVID-19 scenario, the specialist mentions discontinuation of transport, lockdown measures and obligatory closing of production plants as examples of impossibilities of one party to meet its obligation to deliver or produce something. \u201cIn these cases, the contract terminates, and any payment already made must be returned,\u201d he pointed out.<\/p>\n

There are also cases when meeting an obligation is possible but became extremely costly. Libero explains that the judge can find a solution that balances the obligations of both parties. \u201cFor example, delivering a heavy machinery that can\u2019t be delivery by sea. The only possibility would be delivering it by air. Although it\u2019s possible, the transport cost would be ten times higher. Therefore, the seller would lose the sales margin and suffer an economic damage. In that case, the judge can change the terms of the contract. Our experience shows us that these two provisions are now very relevant,\u201d the specialist pointed out.<\/p>\n

Tarek Saad explained that legal decisions are different for contracts signed in different periods. \u201cIn contracts signed before the spread of the virus and before it became a pandemic, there are cases when maybe one party can\u2019t meet its obligations because it would result in the closing of its plants or the impossibility of the transport. In that case, the party can adjudicate the process, asking for exemption from meeting the obligations and returning the contract money. That\u2019s a contract termination,\u201d he considered.<\/p>\n

On the other hand, in cases when the party can supply a smaller quantity of the contracted product, it can adjudicate a case to ask for a reduced obligation. \u201cWe call this the theory of unpredictability. Unlike force majeure, it won\u2019t lead to contract termination because the court would reduce the obligation. In that case, both parties would share the damage,\u201d Saad explained.<\/p>\n

As for contracts signed in the first days after the spread of the coronavirus, Saad believes that the theory of unpredictability still applies, but force majeure doesn\u2019t. Finally, in contracts signed after the spread of coronavirus, neither force majeure nor unpredictability apply \u2013 this includes facemask supply contracts, the specialists explains.<\/p>\n

In addition to labor laws, Pietro explains that many countries have adopted specific decrees. \u201cConsidering how employers can react and how they can reduce labor costs, many provisions were taken in the Arab countries. In the UAE, we saw the adoption of measures concerning layoffs and other procedures. The general provisions for force majeure usually overlay labor decisions,\u201d he said.<\/p>\n

The specialist pointed out that the recommendation is starting with lighter measures, such as remote work, unpaid leaves, and temporary pay cuts, and only if these are not enough, start layoffs.<\/p>\n

The partners said that the office has what they call \u201ccoronavirus center,\u201d which they feed with updates concerning the topic and share among their peers. Baker & McKenzie Habib Al Mulla has an office in Brazil and, Libero said, has advised on international contracts in the coronavirus context.<\/p>\n

Arab Chamber president Rubens Hannun, who moderated the webinar, talked about the important of the legal area for the relations between countries and companies to not be harmed. \u201cEach country has faced a different reality, so this legal relation also suffers with the pandemic,\u201d he said. The webinar also featured KPMG Brasil market leader Andr\u00e9 Coutinho, Marriott Hotels \u2013 Brasil sales and marketing director Nina Mazziotti, as well as Arab Chamber secretary-general Tamer Mansour and Travel Plus Turismo CEO Renato Aureliano.<\/p>\n

Read more about the webinar:<\/em><\/p>\n

Companies must create recovery plans<\/a>.<\/em><\/p>\n

Marriott Brasil adapted to the new phase<\/em><\/a><\/p>\n

Watch the full webinar on YouTube.<\/a>\u00a0<\/em><\/p>\n

Translated by Guilherme Miranda<\/strong><\/p>\n

Reprodu\u00e7\u00e3o<\/div>\n
Reprodu\u00e7\u00e3o<\/div>\n
Reprodu\u00e7\u00e3o<\/div>\n","protected":false},"excerpt":{"rendered":"

Brazilian and Arab specialists talked about legal safety and how to deal with domestic and international contracts in the period. Lectures occurred in webinar hosted by the Arab Chamber on Wednesday (20).<\/p>\n","protected":false},"author":2324,"featured_media":273579,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[114],"tags":[9859,15444,12363,9583,9534,4639,15445,15446,14155,14156,15433,15448,15447,15449,14535,15434,15450,14803],"class_list":{"0":"post-273604","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news","8":"tag-arab-chamber-en","9":"tag-act-of-god","10":"tag-arabes-en","11":"tag-arabs-en","12":"tag-brazil-en","13":"tag-camara-arabe-en","14":"tag-clauses","15":"tag-contracts","16":"tag-coronavirus-en","17":"tag-covid-19-en","18":"tag-forca-maior","19":"tag-force-majeure","20":"tag-international-contracts","21":"tag-legal-legislation","22":"tag-pandemic","23":"tag-teoria-de-eventos-imprevistos","24":"tag-theory-of-unpredicability","25":"tag-webinar"},"wps_subtitle":"Brazilian and Arab specialists talked about legal safety and how to deal with domestic and international contracts in the period. Lectures occurred in webinar hosted by the Arab Chamber on Wednesday (20).","_links":{"self":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts\/273604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/users\/2324"}],"replies":[{"embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/comments?post=273604"}],"version-history":[{"count":0,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/posts\/273604\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/media\/273579"}],"wp:attachment":[{"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/media?parent=273604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/categories?post=273604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/anba.com.br\/en\/wp-json\/wp\/v2\/tags?post=273604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}