Coronavirus and legal questions

Coronavirus and law: The initial situation

The coronavirus is currently determining and changing our lives. After previously focusing on the effects on trade or travel with China and the impact on supply chains, the consequences for the national sector, visibly apparent to everyone, are now approaching us. They are becoming increasingly apparent:

Empty supermarket shelves, temporarily closed businesses, schools, or daycare centers impressively show: The coronavirus affects us all.

However, many legal questions related to the novel coronavirus are still unresolved, despite being of considerable importance:

As a private individual or entrepreneur: Can one cancel booked trips free of charge? What are the consequences of the travel ban for holiday trips?

As an event organizer: Who is liable for the cancellation of events? What happens with reserved hotel contingents, contracts with caterers, technical equipment providers, etc.? Are there differences between a cancellation by the authorities or a ‘voluntary’ cancellation by the organizer?

As an entrepreneur: Who is liable for delivery delays causing business shutdowns, etc.?

1. Cancellation of trips

If a booked trip cannot be taken due to canceled flights, airlines offer free rebooking or cancellation options. The companies regularly refer to such rebooking. However, the customer does not have to accept this. They can return the tickets, as the service is not being offered.

Air passenger/Train passenger

Whether the passenger is entitled to compensation, on the other hand, seems unlikely. This is because the transport company can no longer regularly offer transport services due to the situation – at the latest when the passenger is faced with a closed border upon entry into another country. In this case, the cancellation of the flight would likely fall under the concept of “force majeure”. This means: The airline or train/bus can cancel the trip, the customer is entitled to a refund of the transport fee. At least for countries for which there are official travel warnings or border closures, airlines will not have to pay additional compensation. Whether this also applies to the cancellation of a train journey, through which the passenger arrives at the destination more than 60 minutes later, is still unclear. Because strictly speaking, the train could run (at least as of today!) It’s just not worthwhile.

Tour operator

Tour operators will also be allowed to cancel or reschedule trips, at least now that there are official travel warnings, without any claims arising from customers.

Precautionary cancellations of bookings for trips that could and would still be carried out by the organizer or airline are at least legally problematic. Here, one is ultimately dependent on the goodwill of the organizer, unless one could rely on the disputed principles of a “frustration of contract”. The more concrete the possible risks, the more likely a cancellation of the entire trip or adjustment of the travel route, for example, will be conceivable.

One must now probably see a mutual right to cancel the trip – with the consequence that the customer receives the travel price back, but also has no claim for damages.

Travel for businesses

Most companies have now switched to home office and are canceling all business trips.

If a company cancels trips to protect employees and switches to video conferences, this is, however, as long as there is no official order to refrain from any business trips, its own business decision and is in doubt fully at the expense of the company. A refund of firmly booked services is only possible in exceptional cases and in case of doubt only as a gesture of goodwill.

2. Cancellation of events

a) Prohibition by official order

It is legally unproblematic regarding liability if an event is canceled by official order.

If a municipality, a federal state or the federal government decrees that events above a certain size may no longer be held (currently this applies across the board to all events over 1000 people, in some cases from 100 people, in some cases from 10 people), this is to be seen as a case of force majeure for the organizer. They can cancel the event and, in case of doubt, cancel corresponding contractual agreements relating to the booking of the venue free of charge. However, the contractual agreements for cases of this kind must always be examined. Important: This only applies if an explicit ban has been issued; with mere recommendations, the cost risk is fully with the organizer! Therefore, it is almost desirable for politicians to finally decide on corresponding explicit bans and not always speak of “recommendations”. From a liability perspective, a ban creates a clear legal starting point.

In addition, the organizer must clarify the contractual relationships with suppliers or other affected parties, such as hotels, etc. Depending on the specific case, the related contracts regarding reserved contingents, catering services, etc. are often not so compulsory and directly connected that the officially ordered cancellation of the event would also lead to the termination of these contracts. A detailed examination of the contracts and records of contract negotiations is necessary; early discussions are also strongly recommended.

From today’s perspective, an organizer is compelled to consider possible official prohibitions and prepare for eventualities, such as the officially ordered cancellation of the event. Therefore, all contracts concluded in connection with the event should be reviewed. This also includes examining pre-contractual statements. The more clearly the organizer has linked these additional services to the event, the more likely it is that these services can also be cancelled/terminated by the organizer free of charge.

b) Cancellation by the organizer

If the organizer preventively cancels an event to eliminate eventualities from the outset, this is the organizer’s own decision and can only be viewed indirectly as a case of force majeure. This is the case, for example, if a ban is initially issued in the affected location/state only until the end of March or until the end of the Easter holidays, but the event is supposed to take place after that. In this case, the cancellation has occurred without compelling reason – the risk that the event could have been carried out contrary to responsible expectations lies fully with the organizer. Therefore, the organizer must wait until the authorities officially prohibit events of this type and size for the affected period.

Even more so with a preventive cancellation, but also with a cancellation due to official prohibition, the above statements regarding the review of all contracts and possible renegotiations apply even more strongly. Cancellation deadlines must be observed, and if necessary, renegotiations with suppliers and other parties involved should be conducted.

The prerequisite for successful negotiations and good results is good contract management and intensive legal assessment.

c) Delivery delays

Delivery delays pose a particularly high risk for companies. Production line stoppage can be the consequence.

Especially in times of global sourcing, the dependence on companies in other countries is quite substantial. Many electronic components are practically exclusively manufactured in the Far East, where the fight against the coronavirus is currently causing temporary operational shutdowns. As a result of government orders to quarantine entire cities or areas, supply chains are disrupted – even if borders are supposed to remain open for goods. But if no more planes and trains are running, and no ships are en route, this effort is of no help.

Depending on the specific case, an interruption of supply chains may constitute a case of force majeure; alternatively or additionally, the principles of frustration of contract may apply (§ 313 German Civil Code), whereby contracts can be quasi-forcibly adjusted or terminated at the request of one of the two partners. Complex legal questions are the result.

It is often advisable to identify potential factual risks early on and seek solutions with contractual partners.

3. Prevention

The diverse legal issues require early, committed, and competent action – advice is often urgently needed.

Due to the constantly changing news situation, one should by no means wait until confronted with fait accompli.

We are happy to assist with the various contractually relevant questions and provide practical preventive advice.