The corona virus - relationships with customers and suppliers

Many of our clients are suppliers and customers and have questions related to contractual fulfilment and money requirements or questions about their own financial problems. This is exactly why we have chosen "Force majeure" and monetary claims as the theme of the day.

Contractual fulfilment in corona times, when everyone shouts "Force Majeure"! Don't sit still!

Several of our clients are customers who these days feel that they are not receiving the deliveries of goods or services to which they are entitled, and that the supplier invokes a postponement due to "force majeure". Other of our clients themselves are suppliers who have problems delivering as a result of the corona crisis, and they ask us: What do we do when we fail to deliver what we have committed to?

In both situations we answer: Do not sit still! If you do not handle this situation correctly, you as a supplier risk losing the right to claim deadline extension. As a customer, you can lose the right to object to the deadline extension. Both parties to a contractual relationship must act and take the necessary measures to mitigate the negative consequences of the corona epidemic.

Many contracts contain so-called force majeure provisions, that is, provisions that suspend the obligation to fulfil a contractual obligation as a result of unforeseen extraordinary circumstances. However, if a contract does not contain such a provision, an obligation under Norwegian law may be suspended based on the doctrine of defective assumptions or unreasonableness.

Whether the consequences of the corona epidemic qualify for such a suspension of the contractual obligations depends on an interpretation of the contractual relationship. It is not entirely unreasonable to assume that the consequences of the corona epidemic may constitute such an obstacle that may temporarily give the right to suspend the contractual obligation without incurring liability, but it assumes that one does not remain passive but takes active action and correct grips.

For example, a supplier wishing to invoke a barrier to delivery as a result of the corona epidemic must notify its contracting parties of this without undue delay, including that it requires a postponement without compensation adjustment as a result of the situation. Otherwise, the supplier risks losing the right to such postponement.

A customer who receives such notice must confirm receipt of the notice and how he responds to it. Otherwise, he risks losing his right to object. The customer should also ask for an explanation of the consequences of the corona epidemic that specifically constitute an obstacle to the delivery, for example, whether it is illness, quarantine, travel restrictions or otherwise. Different contract conditions may impose different requirements on how to be notified.

Although the consequences of the corona epidemic are invoked as a barrier to delivery, this only applies to the extent that it is not possible to remedy or overcome the obstacle. The fact that the obstacle relied upon only makes it more complicated or somewhat more expensive for the supplier to deliver is not sufficient to suspend the delivery obligation.

The Supplier has an ongoing obligation to assess whether the performance can be provided in other ways; Are there other personnel who can do the job, can we get materials from elsewhere, can we remotely control personnel via telephone or video conferencing, etc.? The suspension of the delivery obligation applies only as long as there is actually a qualified obstacle to the delivery. What is an obstacle today may not qualify as an obstacle tomorrow.

Both parties to a contract have a duty to work together to limit the adverse effects of the situation as much as possible. This means that the corona epidemic is not a "carte blanche" to free itself from its contractual responsibility, even though the community around us seems to be living in a state of emergency.

On the contrary: the corona epidemic places even greater demands on ongoing cooperation and a loyal and active duty of action for both suppliers and customers, so that the contracting parties jointly do what can reasonably be expected for the parties and the further cooperation to suffer the least possible harm.

Monetary claims

Suppliers and customers who experience problems in delivering or having goods and services delivered may also have problems with payments for goods and services. Suppliers that supply goods and services on credit these days should be especially careful about having too long payment periods and should, if possible, investigate the financial situation and payment remarks to the customers to whom they supply credit.

Suppliers should establish good routines to get claims receivable and claim expenses quickly, so that there are no large outstanding claims. Similarly, customers should be careful about paying advances for goods and services and examine the financial circumstances of the companies from whom they order goods and services.

If a supplier or customer detects delayed payments and deliveries too late, it can be difficult to obtain cover for the requirements at the bankruptcy opening. When the delay is detected, it may already be too late to request an outlay or take a case to court. Even if a claim or judgment is given for the claim, the expenses and claims can be reversed, i.e. required to be returned to the bankruptcy estate after bankruptcy opening.

At the same time, the supplier or the customer should not exert pressure for payment or deliveries, as these transactions may also be repealed by the bankruptcy estate if they are not regarded as part of ordinary operations. Therefore, it pays to be early and have control over credit benefits to avoid major losses in the event of bankruptcy opening.

It is seldom applicable for suppliers and customers to file for bankruptcy, because they must pay collateral for the bankruptcy estate costs that are currently NOK 58 600. If the company submits a bankruptcy request or a petition for bankruptcy is filed by other creditors, suppliers and customers will be able to file a claim in the bankruptcy estate to try to cover some of the loss.

If it is suspected that a company has been run for the creditors' account for a long time without providing information to suppliers and customers, one may consider whether there is a basis for board responsibility.

Homble Olsby | Littler assists both customers and suppliers in handling such and other contract law issues.