With the outbreak of the coronavirus in Switzerland, various legal questions arise for companies, in particular with regard to the validity and amendment of contracts. If insolvency is imminent, measures to prevent bankruptcy are required. The following text provides an overview of the most important points in this context.

1. Background

To contain the outbreak of coronavirus (COVID-19), the authorities in Europe have taken various measures. In Switzerland, the Federal Council, on the basis of Ordinance 2 on Measures to Combat Coronavirus1 , has ordered, among other things, that public and private events be banned (sec. 6 para. 1), that publicly accessible facilities be closed (sec. 6 para. 2), that human gatherings of more than five people be prohibited (sec. 7c) and that certain persons/employees be required to stay at home (sec. 10b f.).

For a large number of companies in Switzerland, the measures taken by the Federal Council have resulted in considerable impairments and restrictions. In this context, contractual and restructuring law issues arise, among others.

2. Contract law

2.1 Defaults

n Germany, there is apparently a debate going on as to whether debtors should have a general right to refuse performance until 30 September 2020 due to the corona crisis. In Switzerland, however, the principle "pacta sunt servanda" still applies – that agreements are to be honoured.2 However, there are certain exceptions to this principle, which are explained below.

Swiss law does not explicitly regulate the case of force majeure. Nevertheless, this figure is recognized in Swiss jurisdiction.3 Whether the coronavirus and its effects can be qualified as force majeure cannot be judged generally. Rather, it depends on the contract in question whether it contains a clause on force majeure (or a similar clause) and whether this provision can be interpreted in such a way that the corona virus falls under this clause. In such a case, the consequences provided for in the clause shall apply.

Unless a contract under Swiss law contains specific provisions on force majeure, the general principles of contract law shall apply. Misfeasance of contracts (including defective performance and default) generally results in liability for damages (sec. 97 CO). However, the corona crisis can lead to a situation where the debtor is not at fault for the defective performance in a specific case if, for example, he cannot deliver the ordered protective masks due to export restrictions. In such cases, the law provides the debtor's exculpation from the liability for damages due to lack of fault (e.g. sec. 97 para. 1, 103 para. 2, 106 para. 1 and 109 para. 2 CO). Whether the conditions for this are given must be analysed for each case individually, since other reasons for performance disruptions are also possible in times of the coronavirus. However, default interest for monetary debts is owed regardless of fault (cf. sec. 104 CO) and an exculpation based on impossibility (see below) is not possible ("One must have money" 4 ).

In connection with the coronavirus, the case of subsequent objective impossibility (in other words, impossibility that is not attributable to either party, sec. 119 CO) is of substantial importance. This would be the case, for example, for an event which can no longer be held due to an official ban on events. The legal consequence of this is that the claim of the service recipient for performance expires (sec. 119 para. 1 CO) and the service provider is obliged to refund the consideration (e.g. down payment) already received (in whole or in part; sec. 119 para. 2 CO).

In each case, it needs to be determined whether the performance is objectively impossible or whether the general economic conditions (e.g. value relationship between performance and consideration) have changed due to changed external circumstances (coronavirus), which justify an adjustment of the contract. Such constellations are particularly conceivable in supply chains (see below).

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1 To be found at https://www.admin.ch/opc/de/classified-compilation/20200744/index.html (as of 21 March 2020)

2 cf. e.g. Urteil (Bundesgericht) 4A_263/2019 vom 02.12.2019 E. 6.3

3 e.g. BGE 80 II 216, 220

4 Huguenin Claire, Obligationenrecht - Allgemeiner und Besonderer Teil, 3. Aufl., Zürich - Basel - Genf 2019, S. 264.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.