COVID-19 and Force Majeure: Managing Contract Crisis in the Philippines

The Corona Virus Disease (COVID-19) outbreak brought a huge impact not only on the tourism of every country around the world but also on the economy in general and operations of different establishments as well as other business entities have been affected. There have been major layoffs due to the unavailability of providing the necessities of the manpower and on a global scale, various businesses specifically Asian markets have been struggling to adapt due to the said interruptions in the operations of major providers of goods and other services. Given these situations, the Philippines is no different. 

Due to the pandemic, Philippine President Rodrigo Duterte declared a state of public health emergency on the 9th of March 2020.  He also declared three days later that the entire Luzon will be set on an enhanced community quarantine and its guidelines include, strict home quarantine, limited operations of private commercial establishments, and suspension of mass public transport. These restrictions made it difficult for the business owners in the country and have an effect on their contractual obligations and on the conduct of the businesses in general in the country. Most companies operating in the Philippines faced some issues like inability to meet the customer demands because given the travel bans they will not be able to deliver raw materials or finished goods and businesses that are only allowed to operate are the ones who provide basic necessities. Their supply chains were also disrupted and their limited manpower also caused them to produce minimal products or services to their customers. 

In terms of their contractual obligations, businesses have been given a force majeure due to the occurrence of this pandemic which is considered an unforeseeable circumstance in the country. The contractual obligations of the parties are being affected and this matter has been also added to the crisis of the businesses in the country. With this force majeure, it will change the fixed agreements between the debtor and the creditor which can lead to different problems including legal issues. However, both parties can resolve these issues, if certain conditions are stated on the contract and they both agreed to change something and meet on both ends. In order to manage potential disputes, companies must take immediate action and the counterparties must also consider the legal actions in relation to the unexpected situation they are both involved in. Some actions that the companies may consider are to review existing contracts and try to anticipate which of these are at risk of being affected. They must also consider any steps that may be taken in order to avoid or mitigate any adverse impact of the pandemic. Identifying available remedies as well as keeping abreast of the latest developments can also help in making amends with situations. But the most important part of fixing these contractual obligation issues is to determine whether the terms stated are negotiable and is a feasible option to the situation. Both parties involved must come up with steps in order to find a solution to their legal matters and both agreed on the terms and conditions stated in the contract.