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Commercial

Issues of Non-Performance Under Supply Contracts During the COVID-19 Pandemic

27 May 2020
BBNP specialists have successfully resolved disputes over compliance with contracts on behalf of both Clients and counterparties in a pre-trial procedure.

Case Description


BBNP clients, the production cycle and wholesale non-food organizations, faced serious difficulties connected with the coronavirus pandemic and the announced non-working days in connection with it¹. The company's lawyers received requests for assistance in resolving issues connected with the performance of obligations under supply contracts, both from suppliers and buyers (among the clients, there are organizations that are both suppliers and buyers).

BBNP specialists analyzed each certain case, established the actual circumstances and gave a legal assessment indicating the possibility of applying certain statutes of civil law to the benefit of both the supplier and the buyer. Based on the results, notices or responses were sent with a legal justification for the impossibility of fulfilling the obligations under the contract or the need for the other party to fulfill its obligations, with a warning about the application of punishment by virtue of the contract and the law.

Having analyzed each case, BBNP specialists identified the general legal structures of such conflicts, identified trends in their occurrence and developed ways to resolve such situations. Herewith, such legal aspects and phenomena as the occurrence of force majeure, the amendment and termination of the contract due to a significant change in circumstances, the termination of obligations by impossibility of fulfilment, the termination of obligations on the basis of an act of a government agency, were used.

Result


As a result of operative and competent actions of BBNP lawyers, typical disputable situations, having clear ways to be resolved, did not transfer into the category of conflict situations. None of the cases of non-fulfillment of obligations under supply contracts has resulted in court proceedings involving the company's clients.

For Reference


Many business entities during the non-working days announced by the President of the Russian Federation in total from 30 March to 8 May 2020, faced serious problems in carrying out their usual business activities. In addition to the formal non-working days, restrictions were imposed on the activities of legal entities by the regional authorities. These restrictions prevented the normal functioning of companies, some of which could not continue their activities at all for a variety of reasons related to the measures applied.

First of all, such problems began to appear in the production cycle organizations and wholesale companies of non-food products, because their chain of supply of both components for production and goods began to literally break due to the inability to fulfill their obligations by manufacturers and suppliers.

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¹ On 25 March 2020, the Decree No. 206 of the President of the Russian Federation was issued, according to which non-working days were announced from 30 March to 3 April 2020. Further on, Decree No. 239 of the President dated 2 April 2020, extended the non-working days until 30 April, and Decree No. 294 dated 28 April 2020 extended them 8 May.

In addition, at the regional level, a number of resolutions and decrees were adopted regarding the introduction of a high alert mode, and further on, regarding the self-isolation of citizens and the suspension of the activities of enterprises and organizations. So, in the territory of Moscow and the Moscow Region, the high alert mode was introduced by the Decree No. 12-УМ of the Mayor of Moscow dated 5 March 2020 and the Order No. 108-ПГ of the Governor of the Moscow Region dated 12 March 2020, respectively.
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