Since the outbreak of the novel coronavirus pneumonia in December 2019, level 1 responses to major public health emergencies have been launched across the country. The State Council and local governments have successively issued administrative orders to extend the Spring Festival holiday and delay the resumption of work. Enterprises that resume work must After filing with the relevant competent authorities and the epidemic prevention and control command department, most manufacturing companies will form a gathering of people in the factory, and their resumption time will be even later. In addition, various regions require returnees from key epidemic areas such as Hubei to suspend their return to work. Many manufacturing companies have insufficient manpower and do not have sufficient production capacity even if they resume work. The resulting suspension of work and production of enterprises is tantamount to “drawing salary from the bottom of the cauldron”. In addition to the direct financial manifestations of tight cash flow or even rupture, legal breaches such as inability to perform contracts or delayed performance and subsequent litigation risks are also huge. The “ticking time bomb” needs more attention from enterprises.
1. Contracts signed before the epidemic, but after the epidemic Delays in delivery and other breaches of contract had already occurred before the occurrence, and liability reductions and exemptions such as force majeure and changes in circumstances cannot be invoked on the grounds of the epidemic and prevention and control measures.
Whether it is force majeure or change of situation, the inability to perform the contract must be due to force majeure or change of situation. If the contract cannot be performed or is inappropriately performed before the outbreak of the epidemic, , you should still bear the liability for breach of contract according to the contract, and force majeure, changes in circumstances, etc. cannot be invoked and applied. In this regard, Paragraph 1 of Article 117 of the Contract Law also specifically stipulates: “If force majeure occurs after the party delays performance, it shall not be exempted from liability.”
2. New contracts signed after the outbreak of the epidemic and the government has taken corresponding prevention and control measures will be deemed that the enterprise has reasonable foreseeability of the force majeure event or the change of circumstances, and it can no longer invoke force majeure or the change of circumstances to reduce or reduce the performance of the contract. Impossible, unfair and other responsibilities.
The second paragraph of Article 117 of the “Contract Law” stipulates: “Force majeure as mentioned in this law refers to objective circumstances that cannot be foreseen, unavoidable and insurmountable.” Therefore, To invoke the exemption of force majeure, it must be an objective situation that cannot be foreseen, avoided, or overcome by the parties when entering into the contract. When a new contract is signed after the epidemic has occurred and the government has taken corresponding prevention and control measures, both parties to the contract must have fully foreseen the impact of the epidemic and prevention and control measures on the performance of the contract. Therefore, they can no longer refer to the epidemic and the government’s prevention and control measures. It’s called “unpredictable”. If there is a subsequent breach of contract such as failure to perform the contract or inappropriate performance, the enterprise will certainly no longer be able to invoke applicable force majeure to excuse itself.
Similarly, according to the provisions of Article 26 of the “Interpretations of the Supreme People’s Court on Several Issues Concerning the Application of the Contract Law of the People’s Republic of China (2)”, the application of changes in circumstances Four conditions must be met at the same time. The first one is that the fact of the change of circumstances was not reasonably foreseeable by both parties when entering into the contract. Not to mention the fact that the change of situation is “a major change that is unforeseeable and not caused by force majeure and is not a commercial risk.” Therefore, based on whether this standard was foreseen when the contract was entered into, the enterprise cannot invoke the applicable change of circumstances principle to change or terminate the contract in this case.
[Note]: Based on the above two risk warnings, this article also focuses more on: the contract was signed before the epidemic, but the performance period is during the epidemic or after the epidemic. Finally, there are legal risks of inability to perform the contract due to the impact of the epidemic and prevention and control measures.
3. Not all types of contracts signed by enterprises can be invoked when their performance is affected by the epidemic and prevention and control measures. Force majeure or changes in circumstances reduce liability and losses. It is necessary to determine the specific loss reduction plan based on a comprehensive judgment based on the type of contract, the nature of the rights and obligations of the contract, the performance and status quo, force majeure and exemption clauses, etc.
Generally speaking, the common contract types for manufacturing enterprises include the following:
1. Purchase and sale contract
For every manufacturing company, it plays both upstream and downstream roles in the entire supply chain, serving as both a buyer and a buyer. Due to the impact of the epidemic and prevention and control measures, the most common default risks in purchase and sale contracts are: delayed or inability to perform raw material purchase contracts, delayed delivery of products to third-party customers, or insufficient delivery of products, etc. The corresponding risk response measures can be roughly divided into the following categories according to the provisions of the Contract Law: contract termination, contract modification (including quantity, price, delivery period, liquidated damages, etc.) and continued performance, etc. Specific risk warnings and response plans will be discussed in detail later. Unless otherwise specified, each subsequent risk warning and response plan refers specifically to the purchase and sale contract.
2. Financing and lending contracts
Whether it is a large manufacturing enterprise Small and medium-sized enterprises will more or less have financing and borrowing, including credit loans obtained from banks, various payment voucher businesses, as well as financing and private loans obtained from other financing institutions. Compared with purchase and sale contracts, the main obligation of manufacturing enterprises in financing and loan contracts is to repay principal and interest, which is a pure monetary payment obligation. baseFor a contract, the parties may apply to the China Council for the Promotion of International Trade (hereinafter referred to as “China Council for the Promotion of International Trade”) for factual certificates related to force majeure. Moreover, it is also necessary to promptly issue notices and force majeure certification documents to the counterparty of the contract, and save the express delivery documents and receipt documents issued by the corresponding notices. If sent in electronic form, the corresponding emails or electronic sending records need to be kept.
3. If you claim to change the contract price, you should keep the evidence of the price change and corresponding losses. For example, retain evidence of material purchase prices (quotations, industry association research reports on market price fluctuations, quotes from other companies in the same industry, etc.), direct evidence of labor price increases, including contracts, wages and social security payment records, etc. In addition, it is also necessary to keep communication records with material supply companies about the reasons for price increases to prove that the price increases have a direct and only causal relationship with the epidemic and prevention and control measures.
4. If the contract has been partially performed, collect evidence of corresponding performance. When requesting the rescission of a contract or sharing of losses based on the principle of equity, it can be used as evidence to determine mutual repayment and distribution of losses. For example, the supplier has purchased part of the material contract and payment, and the machine equipment contract, mold contract and payment are evidence of the purchase of machinery and equipment specifically for the fulfillment of the contract. If the demander has paid part of the contract price, the corresponding transfer voucher, etc. should be provided.
Conclusion:
When an enterprise predicts that the contract will be affected by the epidemic and prevention and control measures When performance is blocked, it is better to notify the counterparty of the contract in a timely manner and actively reach other solutions through consensus rather than waiting for force majeure or changes in circumstances to be resolved in litigation. </p
