Corona, also known as COVID-19, has left clear traces in our society. The enormous impact on the economy, business, but also on people is clearly reflected in various newspapers or on social media. The law has also had to consider the consequences of the coronavirus. This topic has often been central to our last blogs. Today again. The pre-contractual phase and the consequences of the coronavirus - the phase that precedes the conclusion of a contract - are highlighted in this blog.
As a result of corona, people have often had to refrain from concluding contracts or agreements. An obvious example can be seen in the number of mergers and acquisitions that have decreased significantly in recent months, especially in the Netherlands.
An agreement is concluded by offer and acceptance. Prior to acceptance, the parties are therefore still in a negotiation phase. Between the period of negotiations and acceptance, the parties are initially free to terminate the negotiations. However, liability of the terminating party may still follow. If this is the case, it largely follows when the trust, in legal terms: the good faith, of the 'remaining' party has been broken for justified reasons. This will often be the case when the negotiations have progressed so far that - figuratively speaking - all that is missing is a signature from the parties. Terminating the negotiations - given all other circumstances of the case - can then even be considered 'unacceptable'. The terminating party therefore runs the risk of not only having to compensate for damage, but also having to pay compensation for the lost profit of the 'remaining party'.
Due to corona, it is common for negotiations to be broken off in connection with the new normal and its consequences. Financial reasons in particular can be grounds for a party not to want to continue. The most obvious escape from liability for the party breaking off is an appeal to 'unforeseen circumstances', as follows from article 6:258 of the Civil Code (Curaçao and the Netherlands).
Unforeseen circumstances are – in short – circumstances that were not foreseeable or could not have been foreseen when concluding the agreement. The chance of a successful appeal to unforeseen circumstances in the case of the corona crisis will be greater in the period when the consequences of the pandemic were still very uncertain. Most of the effects of corona were not at all predictable at the earlier stage.
It is not inconceivable that the corona crisis and its consequences may in certain cases constitute justified reasons for breaking off negotiations. A contracting party that is currently in the pre-contractual phase of negotiations will be less likely to successfully invoke article 6:258 of the Civil Code than at an earlier stage of the pandemic. It is therefore wise to pay specific attention to the formulation of a preliminary agreement, including a clause regarding the consequences of the corona crisis.
Would you like to have a preliminary agreement drawn up or advice on this subject? Please feel free to contact us contact with us.
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