Coronavirus and problems with the supply chain
Coronavirus COVID-2019 was first identified in December 2019 in Wuhan, which is in Hubei province, which is home to the industrial and financial centres of central China. From that moment, the number of infected people has grown continuously, leading to the threat of a world pandemic.
Coronavirus is not only a global threat to public health, it also may have negative effects for entrepreneurs and the entire economy. This because China is an important part of the global supply chain. Additionally, the coronavirus is spreading to a growing number of countries on various continents. It can undoubtedly threaten timely deliveries and cause problems with the delivery of orders.
Even now, some of entrepreneurs, including the manufacturers of electronic equipment, are dealing with the problems caused by disruptions in the global supply chain connected with the suspension or the limiting of work in some Chinese factories, and the restrictions on maritime transport. Entrepreneurs and their business partners have problems with the timely performance of agreements for deliveries of spare parts, components and new devices. These problems may well have a negative impact on their relations with their consumers. Entities from the automotive, technological and pharmaceutical industries are particularly exposed to these problems.
Some companies, in order to justify non-performance or delayed performance of their obligations under business agreements, state that the epidemics constitutes an occurrence of force majeure or search for other legal grounds to enable them to avoid the negative consequences of the epidemics, if there are no related contractual or legal regulations. It should be noted that any statement on the occurrence of force majeure in the form of coronavirus epidemics should be analysed in accordance with the provisions of a specific agreement which may, but does not have to, contain a force majeure clause. Additionally, such an occurrence should be verified from the point of view of the provisions of law applicable to the agreement.
Considering the above, entrepreneurs (in particular those connected with China because of the logistic chain) should be prepared for the possibility of problems. The actions which can be taken right now include first of all:
- verification of the agreements, regulations, drafts connecting them with business partners and customers from the point of view of clauses concerning force majeure and assessing whether they sufficiently protect the entrepreneur’s interest,
- assessment whether the coronavirus epidemics may cause disruptions at other levels of the logistic chain and developing or implementing emergency plans,
- verification of insurance agreements with respect to liability connected with the entrepreneurs being prevented from performance of its obligations under business agreements,
- in the case of identifying the possible risk of delays in performance of agreements caused by the coronavirus epidemics – notifying customers and business partners and implementation of mitigation measures,
- in the case of any delays in performance of the entrepreneur’s obligations, assessing whether they have been caused directly or indirectly by the coronavirus epidemics, asking for legal advice and proper communication with the customers.
Our experts at SSW will be happy to help you, and we will provide you with support in adjusting the provisions of your agreements to properly secure your interests in the future. Additionally, in the case of negotiation of agreements, they will help you in the proper adjustment of risk and consequences distribution if the economic situation gets worse because of the coronavirus epidemic.