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Covid-19 crisis: Force Majeure

Lithuania: Corona Crisis & Regulatory issues

16 March 2020

Legal impact of the coronavirus on the execution of assumed obligations

Coronavirus, as well as decisions taken by state authorities in each country to control the situation, including the announcement of quarantine, will undoubtedly affect the fulfilment of obligations to other parties. Part of the obligations will be or will no longer be enforceable due to prohibitions or restrictions imposed by governments, and part of the obligations will no longer be enforceable within pre-agreed terms and to the extent of disruptions in the supply of goods or raw materials. In this situation, we recommend that you carefully consider the causes and circumstances of your particular business disruption and, if necessary, use one of the following remedies:

-      Use of force majeure. Key actions which
need to be taken in order to take advantage of this remedy:

  • To immediately notify in writing the counterparty on disorders of contractual obligations and / or impossibility to fulfil
    the obligations by specifying the reasons;
  • To immediately apply to the Regional Chamber of Commerce, Industry, and Crafts regarding issuance of force majeure certificates (force majeure certificates for legal persons registered in Lithuania in respect of the force majeure circumstances which occurred and existed within the territory of Lithuania shall be issued by Vilnius, Kaunas, Klaipėda, Šiauliai and Panevezys Chambers of Commerce, Industry and Crafts). It should be noted that the certificate is not obligatory where not expressly provided for in the contract, but it would facilitate proof in the event of litigation. In any event, the specific situation in the event of a dispute would also be examined by a court. For more details on the issuance of force majeure certificates please see:
  1. Chambers information in Lithuanian language

  2.  Chamber of Commerce, Industry and Crafts information in Lithuanian language

-      It should be emphasized that, in each case, it will be
assessed whether all necessary measures have been taken to fulfil the
contractual obligations. It is important to note that the law stipulates that
cases where the market does not have the goods needed to fulfil the obligation,
the contractor does not have the necessary financial resources or the debtor's
counterparties are in breach of their obligations are not considered force
majeure.

-       Initiation of negotiations in respect of changes in the contract due to the change in circumstances. Force majeure may also serve as a basis for initiating negotiations to modify the terms of a contract in the event of a change in circumstances where the performance of the contract becomes more difficult. Such request must be made immediately after the appearance of the constraints on the performance of the contract. The parties are not obliged to automatically change their contractual obligations, but in this case, the parties must cooperate with each other and negotiate in good faith in accordance with the principle of proportionality. In the event of disagreement between the parties over the modification of their contractual obligations, the dispute shall be settled by the courts.

-       Exemption from liability for State action. It is
an independent basis established by Lithuanian law for relief from civil
liability. Should other remedies be unsuccessful and the liability is essentially
due to decisions taken by public authorities, entrepreneurs may seek redress
and claim relief from default interest or penalties on that basis. This plea
does not relieve the principal of the obligation to pay (for example, payment
of rent or supply of goods), but allows for non-payment of interest and damages
for the counterparty.

In any case, we recommend carefully analyse the signed agreements and to
consult with legal experts to assess what further action to take and the extent
to which you can apply for exemption from the obligations, the exemption from
liability or to initiate contract changes.

You can find more Deloitte Legal insights on this issue here.

 

 

The Professional Partnership of Advocates “Deloitte Legal”, its employees or representatives are not responsible for the information and consultations provided here: www.deloittelegal.lt, i.e. advice should not be considered as professional legal consultation or service. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional legal advisor individually.

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