Covid-19 and companies. The impact of the pandemic on liquidity and solidity

The effect of the Covid-19 pandemic on businesses is potentially fatal. Here is a vademecum on the state of compliance.

The situation in Italy

The situation dictated by Covid-19 is producing the first concrete impact on companies, compromising their liquidity and putting the solidity of many companies at risk.

With the Prime Ministerial Decree of 22 March 2020 and subsequent amendments, the shutdown of the production activity of the sectors deemed non-essential was legislated.

Here is a handbook on the fulfillment of pending contractual obligations, such as payments and signed agreements.

Our legal system provides in art. 1218 cc that the subject who does not perform his own service and / or payment is required to compensate the damage, unless he proves that the non-fulfillment or the delay is due to a cause to he is not responsible .

The unexpected impossibility of the performance means any situation preventing the fulfillment that is not foreseeable at the time the mandatory relationship arises and cannot be overcome with the diligent effort to which the party is required.

For the purposes of extinguishing the obligation, it is also necessary to establish whether it is:

• a definitive impossibility, such as to automatically extinguish the obligation;
• a temporary impossibility, determined by an impediment of a transitory nature. In this case the obligation persists and the debtor will be exonerated from liability for the delay in default.

Within the Italian legal system, if it is possible to give a definition of the supervening impossibility of the performance, it is not possible to find a precise force majeure since there is no article of our civil code that governs the case.
Nevertheless, a concept of force majeure can be identified in art. 1467 cc which recognizes the right of the debtor to request the termination of the contract when the performance becomes excessively onerous due to extraordinary and unforeseeable events not attributable to him .

On the other hand, art. 1256.2 paragraph of the Civil Code governs not so much the performance as a whole, but rather its fulfillment. The rule provides, in fact, that there is a temporary impossibility of performance whenever there are objective impediments which, while still making it possible, justify the delay .
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The international situation

Contrary to the provisions of Italian law at the international level, the case of force majeure is widely delineated.
Think, for example, of art. 79 of the Vienna Convention (Convention on the international sale of movable property) which identifies the three main characteristics that must be present for force majeure to be concretely applied:

• extraneousness in the event;
• unpredictability of the event at the time of signing the contract;
• the insurmobility of the impeding fact.

There are also many European states that expressly describe in their own legal system what is meant by force majeure.
References to the concept of force majeure can also be found in contracts in which the aforementioned Vienna Convention does not apply.
The International Institute for the Unification of Private Law (UNIDROIT), for example, disciplines all ’art. 6.2.1 , in the section entitled hardship, the possibility of requesting the renegotiation of the contract and in art. 7.1.7 the case of force majeure .
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What to do in practice

Having made this brief but necessary premise, we advise you, if your business falls within those for which the production stop has been legislated, to check the clauses included in your commercial contracts, with particular attention to those relating to the phase of its execution. , the competent court and the applicable law.

In the event that you are the party obliged to provide the service, we suggest that you send a timely official communication to the counterpart appealing to the specific regulations mentioned above.