March 30, 2020 IMPACT OF THE HEALTH EMERGENCY BY COVID-19 ON COMMERCIAL ACTIVITIES

Dear clients and friends:

On March 30, 2020, the Ministry of Health declared a health emergency due to the force majeure of the SARS-CoV2 virus pandemic (COVID-19), and on March 31, 2020, it published several extraordinary actions to address the emergency and minimize infections. This poses a complex business situation in legal terms. Here are some answers to these questions:

1. Can you carry out an activity that is not expressly listed as essential but provides inputs or services for a company that does carry out an essential activity?

The logical interpretation of the March 31, 2020 Decree suggests that it can, to the extent that the activity not explicitly considered essential is necessary for the full functioning of any of the activities listed as essential. In any case, the particular case must always be analyzed because there are other factors that may influence this answer.

2. Can an activity that is not explicitly listed as essential be carried out, but respecting established hygiene and distance guidelines?

According to Article 1 of the Agreement of March 31, 2020, any activity not considered essential must be suspended in order to comply with the home protection during the time set by the authority. However, all non-essential activities that can be carried out from the home guard can still be carried out. This includes, of course, work from home.

3. What is a fortuitous case or force majeure?

It is an event of nature (fortuitous case) or of man (force majeure) that prevents the fulfillment of an obligation. For an event to qualify as a fortuitous case or force majeure it is required: (i) that the defaulting party did not contribute to it (that it is not attributable to it); (ii) that it is insurmountable and therefore impossible to perform, and (iii) that it could not have been foreseen or avoided. As a general rule, those who cannot comply with the contract due to unforeseen circumstances or force majeure are exempt from liability.

4. Does the declaration of force majeure due to a health emergency constitute an exclusion of liability (does it allow the breach of contractual obligations without liability)?

No. The pandemic is a fortuitous case (being an event of nature) and the declaration of a health emergency and limitation of activities is an event of force majeure (being a human event). As a general rule, they exclude liability for those who are totally unable to meet their obligations. However, how the parties regulated the fortuitous event and force majeure and whether any other exceptions to the rule apply must be reviewed in each particular case to determine the precise scope of liability for non-compliance.

5. Does the exclusion of liability for fortuitous case or force majeure also apply to contracts entered into after the outbreak of the pandemic and declaration of a health emergency?

This scenario is unclear, and it will depend on the analysis of each individual case to be able to establish whether or not the exemption from liability applies. To avoid confusion, it is advisable that in contracts concluded after the emergence of the pandemic and the declaration of a health emergency, the parties regulate its consequences expressly, as it is no longer an unforeseeable event.

6. What happens if a contract is breached due to unforeseen circumstances or force majeure?

Unless otherwise agreed, in general terms, if the obligation being breached is serious (i.e., substantially deprives a party of what it was entitled to expect under the contract), the parties may terminate the contract without liability for either party but return what they have given up to that point. And if the obligation being breached is not serious, then, in principle, they should resist until the fortuitous case or force majeure disappears.

Of course, it is important to analyze each case in particular, but it is highly advisable to generate and preserve evidence about the reasons that may or may not have placed one of the parties in default due to a fortuitous event or force majeure.

7. What should be done in the event of a default due to unforeseen circumstances or force majeure?

First, an analysis of the contract and the unfulfilled obligation must be made to determine the consequences of the breach and whether it falls within the parameters of the exclusion of liability.

Subsequently, the creditor must be informed of the obligation in a timely manner in accordance with the terms of the contract, or in a reliable manner.

8. Can the right to invoke a fortuitous event or force majeure be waived as an exclusion of liability?

As a general rule, yes, as long as the contract itself expressly and clearly states the waiver. However, there are exceptions to this rule, so it is important to analyze each case in particular.

9. Is a fortuitous event or force majeure applicable even when there is no express clause or written contract?

Yes, because the applicable law (in commercial matters the Commercial Code and in a supplementary manner the Federal Civil Code) so establishes.

10. Is it possible to modify or reduce the economic burdens of a contract taking into consideration that at the time of the conclusion of the contract the pandemic or health emergency was not known?

According to the rebus sic stantibus or theory of unforeseeability, in certain cases a contract may be terminated without liability or sued to restore the balance between the obligations of the contract, if during its term unforeseeable events (such as a pandemic or a health emergency) arise that make the obligations of one of the parties more onerous.

However, this generally does not apply in commercial matters, where contracts must be performed in the precise terms in which they were concluded, except for the updating of liability exclusions such as fortuitous event or force majeure.

Notwithstanding the above, the parties at the time of the conclusion of a commercial contract may include the rebus sic stantibus principle and other contractual mechanisms that may be useful to provide compliance facilities and convenient alternatives that allow the continuity of commercial relations despite the commercial uncertainty generated by the pandemic and the declaration of a health emergency. rebus sic stantibus y otros mecanismos contractuales que pueden ser útiles para otorgar facilidades de cumplimiento y alternativas cómodas que permitan continuidad de las relaciones comerciales pese a la incertidumbre comercial generada por la pandemia y la declaratoria de emergencia sanitaria.

We remain at your disposal in case you require further information.

* This document is not an advice or a legal opinion. It only provides general information to assist in understanding the legal issues raised by the pandemic and the declaration of a health emergency. In any case, an in-depth and detailed legal analysis is necessary to reach conclusions applicable to specific cases as diverse as the business scenarios that each company or person faces. What is established here may differ from the conclusions reached after a legal analysis of a specific legal situation.