It is an undisputed fact that the usual course of commercial operations have been significantly altered in the Dominican Republic after the Executive Branch declared a State of Emergency to curtail the massive spread of the coronavirus COVID-19 and put into effect restrictions on freedom of transit, assembly, and commerce, all in accordance to Presidential Decree 134-20 of March 19th, 2020.
The Executive Branch has taken a series of measures under the declared State of Emergency to prevent the spread of the virus, including the shutdown of most private businesses as well government institutions that do not offer basic services, strict curfews, closing of the Haitian border, the prohibition of international flights, among others.
These extraordinary measures taken by the Dominican government can be considered as unforeseen acts by parties who have entered in good faith into contractual obligations of any nature prior to the pandemic, which can hinder their ability to fulfill said obligations and force them to be in breach of contract. Due to this unfortunate situation, some of our clients have already asked us if the occurrence of force majeure or acts of the State can be used to excuse a party's breach of its contractual obligations under the current national State of Emergency.
Under Dominican law, the occurrence of force majeure is considered a valid cause under which a party to a contract may be exempted from fulfilling their contractual obligations and, therefore, from being liable for breach of contract. For the non-performing party to be excused because of force majeure, the event or act producing the force majeure must be both unforeseen, inevitable and irresistible.
Acts of the State or sovereign acts, if unforeseen, inevitable and irresistible, have the same effect as force majeure.
In both cases, the breach must be evaluated in an abstract manner, that is, the party in breach must prove that their inability to comply with its obligations would have been the same for anyone else in similar conditions or circumstances.
It is likely that any party that has not been able to perform or has had to delay their contractual performances under the current state of emergency may avoid being considered in breach of contract and be subject to liabilities derived from such breach based on either of the causes mentioned above.
In the event of these causes, the default status can be considered as temporary or permanent; that is, the party could seek to delay its performance under the contract or delay it until the cause has ceased to exist.
Guzman Ariza is available to assess any case of contractual breach, actual or potential, in these difficult times. Feel free to contact us to discuss any specific inquiries.
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.