The UNIDROIT Secretariat has just released a Note on the UNIDROIT Principles of International Commercial Contracts and the COVID-19 health crisis.
While the paper is being made public today, it is to be considered as work in progress and the Secretariat welcomes any comments or suggestions. This paper starts a series of Secretariat Notes where aspects of our instruments will be subject to public discussion. They do not purport to represent an official position of the Secretariat on the Institute’s instruments.
In the context of the outbreak of COVID-19, UNIDROIT has prepared this note as a form of guidance as to how the Principles could help address the main contractual disruptions caused by the pandemic directly as well as by the measures adopted as a consequence thereof. The note analyses whether parties may invoke COVID-19 as an excuse for non-performance, and if so, based on which concepts and under what conditions. The analysis also covers the scenario, likely to be common in practice, where performance is still possible, but has become substantially more difficult and/or onerous under the circumstances.
The document aims to guide the reader through the process, leading her to ask appropriate questions and to consider the relevant facts and circumstances of each case. Naturally, solutions will vary according to the particular context of the pandemic in each jurisdiction and there is no one-size-fits-all approach. In particular, the document, considering the different ways the Principles have so far been used in practice, aims to:
- (i) help parties use the Principles when implementing and interpreting their existing contracts or when drafting new ones in the times of the pandemic and its aftermath;
- (ii) assist courts and arbitral tribunals or other adjudicating bodies in deciding disputes arising out of such contracts; and
- (iii) provide legislators with a tool to modernise their contract law regulations, wherever necessary, or possibly even to adopt special rules for the present emergency situation.
The open nature of the Principles furnishes the parties and interpreters with a much-needed flexibility in such an extreme context, constituting an efficient tool to offer a nuanced solution that can help preserve valuable contracts for the parties. Especially in mid-to-long term contracts, and in view of the – apparently – temporary nature of the impediment, mechanisms that allow for an adequate renegotiation and proportionate allocation of losses could ultimately help preserve the contract and maximise value for the jurisdiction(s) involved.
Arguably, the world of contracts has never suffered such an unforeseeable, global, and intense interference. Extraordinary situations require extraordinary solutions, and there is a global need to ensure the economic value enshrined in commercial exchanges is not destroyed. The Principles offer state-of-the-art, best-practice tools to deal with the problem; a set of rules that result from years of study and analysis, with the participation and consensus of the most prominent academics and practitioners in the field, from civil law and common law traditions.
This paper is the first to be published within the context of the Institutes broader work on COVID-19 and our instruments, and the Secretariat is pleased to inform you that, in particular, work on a similar paper with partners FAO and IFAD to study the pandemic’s effect on Contract Farming is already underway.
-> Full paper