It is of significant importance for companies to know in which cases they are not bound by a performance obligation – be it money, goods, or something else.
By corporate lawyer Stine Petersen and paralegal/law student Simone Strøm Kristensen
In a recent district court judgment, the Court in Randers had the opportunity to interpret this in relation to corona. The circumstances were as follows:
The parties in the case entered into an agreement in mid-January 2020 regarding the holding of a party on April 25, 2020, with one party as the party organizer.
On January 30, 2020, the WHO declared corona a global health crisis, and on March 6, 2020, the government held its first press conference on the situation. It was recommended that events with more than 1,000 participants be postponed or canceled.
Already on March 10, 2020, the government held its second press conference, where it was announced that foreign travel to a number of areas was discouraged, and air traffic to these areas was suspended, and it was also recommended to avoid public transport during rush hour.
Due to the fear of the spread of corona, the government announced on March 11, 2020, at a press conference, that Denmark would be “locked down” for a provisional two weeks, and that already on March 12, 2020, a draft emergency law would be presented to the Danish Parliament, which would make it possible to prohibit larger gatherings of more than 100 people indoors.
Based on the development of corona, the party buyer already made an inquiry to the party organizer on March 10, 2020, about moving the summer party to a later date. In a subsequent conversation between the contracting parties, the question of maintaining the party at the agreed time versus a postponement or cancellation of the party was discussed. This resulted in the party buyer on March 11, 2020, expressing a wish to postpone the planned party on April 25, 2020.
Party organizer demanded payment without delivering
The party organizer refused to change the time and place and demanded payment for the agreed party at the agreed time. That is, payment without delivering a party. The question in the case was thus whether the party organizer was entitled to payment for arranging the summer party. Force majeure is recognized in both Danish law and EU law, but the requirements for invoking it are strict. If the requirements were met, the party buyer could avoid paying without receiving a party. The court therefore had to decide whether there was force majeure when the party, which should have been held on April 25, 2020, was not carried out.
Inquiry about postponement was due diligence
Based on the development of the corona situation, the court concluded that the summer party could not legally be held on April 25, 2020. Furthermore, the court found that at the time of the party buyer’s final postponement/cancellation to the party organizer, it must have been clear that the party would not be able to be held on April 25, 2020, and that this obstacle had the character of force majeure. The fact that the party buyer had contacted the party organizer about cancellation and postponement prior to a formal ban on holding the party had to be considered an expression of due diligence and loyal behavior towards the party organizer as a contracting party and not as a circumstance that could prevent the party buyer from invoking force majeure.
The court concluded on this basis that the party buyer should be acquitted. In addition, the party organizer was ordered to repay an already prepaid amount.
The party buyer had thus been entitled to cancel the summer party with reference to the corona situation as a force majeure event, and the party organizer could not demand payment for having arranged the summer party.
SØNDERBY LEGAL represents the party buyer in the case, who invoked force majeure both nationally and under EU law. In our assessment, it is likely that Danish courts will strive for consistency with EU law both in cases that are directly covered by EU law and in purely national cases. The Court of Justice of the European Union has a far more extensive practice than in Danish law, where the number of cases is few.
The judgment is appealed to the High Court, which will then have the opportunity to determine whether corona had the character of force majeure.