Pandemic from Covid-19 and pending legal reports
A) The general principles foreseen by the Civil Code
The emergency health situation caused by the spread of the epidemic from Covid -19 has led governments all over the world to introduce very quickly measures, immediately applicable, of social distancing, which include the mandatory blocking of all economic activities that do not relate to the provision of cc.dd services essential and the prohibition for individuals to move without a valid reason attributable to basic needs.
In our country, these measures, contained in national and regional regulatory provisions, have had a direct impact on the execution of contracts in progress, hindering their correct and timely execution and exposing the parties to the risk of contractual breach.
The question was therefore asked whether, and under what conditions, a contractual breach resulting from these regulatory measures or, in any case, from the Covid-19 pandemic, could release the defaulting party from liability.
(i) The debtor's liability for non-performance (Article 1218 of the Civil Code)
In order to answer the question, it must first be stated that the general principle in Italian law, dictated by art. 1218 of the Civil Code, mainly for the so-called bonds of result, according to which the debtor who does not exactly perform the performance due is always responsible for the failure unless he proves that the non-fulfillment or the delay in the fulfillment was determined by the impossibility of the performance deriving from a cause not attributable to him.
(ii) The causes of exclusion of the debtor's liability
The causes of exemption from liability are those that derive from objective, extraordinary, unforeseeable events and extraneous to the sphere of the debtor, such as to objectively and insurmountable the execution of the due service (traditionally, force majeure, the CD. factum principis - order or prohibition of the authority - the fortuitous event or the fact of the creditor).
International practice also contributes to the definition of "force majeure" (in particular, the Vienna Convention of 11 April 1980 and the "ICC Clause"Of the International Chamber of Commerce), for which epidemics, as well as catastrophes, wars and insurrections, are among the causes of force majeure capable of justifying non-fulfillment or delaying fulfillment.
B) The application of the general principles of the Civil Code to the case of the Covid-19 pandemic
It is therefore necessary to establish whether, and how, in the light of the principles set out in paragraph A above, the emergency caused by the pandemic and the issuing of government measures that ordered the temporary closure of production and commercial activities considered non-essential can qualify as causes for exemption from liability.
The answer to the question is positive, the following causes of exemption from liability being applicable to the specific case:
There seems no doubt that the restrictive measures can be traced back to the so-called factum principis when the default has been caused directly from the enactment of the restrictive measures against Covid-19. In these cases, therefore, the exemption from liability operates and consequently - in the absence of specific contractual provisions - the obligation is extinguished for unexpected impossibility of performance in application of the general discipline referred to in articles 1256 et seq. of the Civil Code ("Resolution due to the impossibility of occurrence");
In the emergency situation caused by the Covid-19 pandemic in addition to the cd. factum principis other elements of exclusion of the debtor's liability for non-fulfillment have also emerged, such as the cause of "force majeure" (understood as an objective, extraordinary and unforeseeable event) such as to make the performance impossible for reasons not attributable to the person owing it perform (think of the case in which the supply of a good or a service within a deadline agreed as essential for the subject who must receive it has been made impossible by the blocking of transport). International practice contributes to the definition of "force majeure" (in particular, the Vienna Convention of 11 April 1980 and the "ICC Clause"Of the International Chamber of Commerce), for which epidemics, as well as catastrophes, wars and insurrections, are among the causes of force majeure capable of justifying non-fulfillment or delaying fulfillment;
- Excessive burden occurred
It is also possible that the extraordinary and unpredictable events discussed are likely to cause, in contracts with continuous or deferred execution (think, for example, leasing) an imbalance in the contractual economic structure, exorbitant from the normal alea of the contract, which makes the performance excessively burdensome and unsustainable for one of the parties (think of the hypothesis of the tenant defaulting on the obligation to pay a fee that is no longer sustainable due to an unforeseeable contraction of the revenues planned at the time of the conclusion of the contract ).
Well also in this case the Italian law provides protection in favor of the defaulting party making it possible to remedy the termination of the contract in favor of the disadvantaged party in application of articles 1467 and ss. of the Civil Code ("Resolution for Excessive Burden"). However, termination can be avoided by the creditor by offering a fair modification of the contractual conditions, as will be clarified below.
Confirmation that the guidelines to be followed for the correct management of contractual relationships are those set out above can also be deduced from the emergency legislation itself and in particular - according to doctrine - from art. 91 of the DL n. 18 of 17.3.2020, converted with amendments into Law no. 27 of 24.4.2020 ("Cura Italia Decree"), In which it is specified that compliance with the containment measures established in the decree itself is always" assessed "for the purposes of excluding, pursuant to articles 1218 and 1223 of the Civil Code, the liability of the debtor, also in relation to the application of any forfeiture or penalties related to late or omitted payments.
C) The principles of good faith and fairness in the execution of the contractual relationship
However, the termination of the obligation by termination of the contract may not be considered desirable by one or both parties. In this case, it is necessary to consider that the Civil Code offers the parties the opportunity to do everything in their power to "save" the relationship and favor the preservation of the contract in execution of the principles of good faith and fairness in the execution of the contract sanctioned by articles 1175 and 1176 and then by art. 1375 of the Civil Code.
The legal institutions referred to in the following paragraphs are also expressions of these principles.
D) Corrective measures to remedy the extinction of the obligation: the general principle of "retention of the contract".
If there is an exempting cause of liability, the breach is innocent and the legislator, in consideration of this, prepares the remedy for the termination of the contract due to impossibility of occurrence. However, this is one extreme ratio since, where possible, the legislator takes into consideration the possibility that the parties aim to maintain, by correcting them, the effects of the contract. The provisions of the Civil Code governing them must be read in this direction late or partial fulfillment or the change according to fairness of the contractual conditions. In particular, art. 1256, 2nd paragraph, of the Civil Code states that, if the impossibility is only temporary, the debtor's exemption from liability is limited to the delay and implicitly states that the obligation to provide the service remains firm and that the fulfillment becomes due at the the adverse circumstances that generated the impossibility of performing the service within the established deadline will cease.
Furthermore, the parties' obligation to verify that partial fulfillment is not possible remains unaffected; in this case, the debtor could free himself from the obligation by performing the service for the part that remained possible (article 1258 of the Civil Code), and the other party would be entitled to the corresponding reduction in the service due by it or to the withdrawal from the contract in lack of an appreciable interest in the fulfillment (article 1464 of the Civil Code), or a fair modification of the conditions of the contract pursuant to art. 1467 of the third paragraph of the Civil Code.
II - Brief reflections on commercial leases and business leases.
A) Lease contracts
Commercial leases and company leases fall into the category of long-term contracts, in particular for continuous execution, which, as mentioned above, are directly involved in the impact of the health emergency.
It is common practice to provide in this type of contract a detailed regulation of cases of force majeure, upon the occurrence of which the tenant can be entitled to suspend or reduce the rent. In any case, the effects on the contract must also be assessed in the light of the general principles set out in the previous paragraph.
In particular, it is believed that in the event that the tenant has not been able to use the leased spaces, as a direct recipient of the closure measures imposed by the authority (factum principis), the supervening impossibility regulation is applicable temporary and partial (considering that the enjoyment of the property remains in part given that the tenant is unable to return the property because it is occupied by the assets intended for the operation of the company) of performance.
In the present case, the factum principis makes temporarily impossible the obligation of the lessor to "maintain" the intended use of the leased property sanctioned by art. 1575, lett. 2, of the Civil Code (and therefore releases it from the relative service).
In the face of this situation, it is believed that the tenant who has given appropriate notice in writing to the lessor is exempted - as long as the temporary impossibility persists - from the obligation to pay the fees during the period of closure of his business, without being able to be liable for the breach but cannot impose on the lessor a unilateral reduction of the rent, or the remission of the same, for the period in which the commercial activity carried out in the leased premises has ceased.
However, the provisions of art. 1464 of the Civil Code according to which when the performance of a party has become only partially impossible the other party has the right to a corresponding reduction in the performance due by it, and can also withdraw from the contract if it has no appreciable interest in the partial fulfillment.
Among other things, this provision, directly giving the right to a reduction of the rent (to the extent ascertainable in court in the event of non-sharing with the landlord), does not give the tenant the risk of unwanted termination.
On the other hand, a topic that would require independent study concerns the question of whether, among the remedies available to the tenant, they can indifferently invoke, at their option, the partial impossibility or excessive burden that arises.
Apparently they oppose both the art. 91 of the Cura Italia Decree is the measure of support to companies (in some ways censurable) introduced by art. 65 of the so-called Cura Italia decree, consisting of the governmental recognition of a tax credit for properties falling within the cadastral category C / 1 (shops and shops), equal to 60% of the amount of the rent for the month of March 2020, which belongs only to tenants who have already paid the rent.
But general and special rules can be well coordinated with each other avoiding a risk of conflict. Given that the support measures are necessarily standardized and temporary it is possible, in fact, that the same are unsuitable to make up for the "damage" resulting from the partial impossibility. The tenant will therefore have the burden of availing himself of the benefits of the law and requesting that the reduction of his performance be made net of the benefits received. Failing that, it will be in the interest of the lessor to plead the failure to make recourse to the benefits of the law by the tenant to achieve, in accordance with the principles expressed in art. 1227 of the Civil Code, a containment of the reduction in benefits.
Nor can it be excluded that the situation of general economic recession caused by the pandemic from Covid-19 determines, in a medium-long term context, a crisis situation such for the entrepreneur to make the obligation to pay in all or part of the fee. In these cases, the tenant could be allowed to use, where the conditions exist, the "typical" remedy of withdrawal for serious reasons provided for non-residential leases by art. 27, 8th paragraph of L 392/78, which includes commercial leases, or the general remedy of the Resolution for Excessive Burden pursuant to art. 1467 of the Civil Code.
With regard to the first instrument, it is known that in non-residential leases the tenant can withdraw from the contract at any time, if "serious reasons" occur, with at least six months' notice to be communicated by registered letter. According to constant jurisprudence, "serious reasons" mean all those facts unrelated to the will of the tenant, unforeseeable and occurring at the conclusion of the contract, such as to make the continuation of the relationship extremely burdensome and to significantly affect the conductor's activity.
In the presence of these factual circumstances, the tenant can therefore free himself from the contractual bond, it is intended after judicial assessment in the event of the lessor's contestation of the right of withdrawal exercised by the tenant and in any case with the obligation to comply with the six-month notice, with consequent duty to pay the rent for the entire notice period.
It should also be noted that such a remedy may not be operable by the tenants of the so-called large leases (i.e. non-residential leases that provide for annual rents higher than Euro 250.000 introduced by art.18 of Legislative Decree 133/2014, converted with amendments by L. 164/2014) where, at the time of the conclusion of the contract, this right had been contractually excluded, as allowed by the founding legislation.
In any case, the tools reviewed above remain available for all non-residential leases, without exception. On a practical level, the termination of the lease contract may, however, not be of interest to the parties who could legitimately negotiate a suitable contractual modification (as desired by the same art.1467 of the Civil Code with a view to maintaining the contractual relationship) aimed at rebalancing the contractual economic structure (for example by means of an adequate reduction of the rent or suspension for a specific period).
B) Company rental.
The lease of the company proposes problems similar to those that arise for the leases as regards the obligation to pay the agreed rent on the tenant.
Therefore, the same general principles already examined in relation to commercial lease agreements regarding the Termination of Impossibility (Partial), apply, without prejudice to the exclusion of the withdrawal for serious reasons, as a typical remedy for leases for non-residential use only.
As for the Resolution for Excessive Burden, instead, the special rule referred to in art. 1623 of the Civil Code dictated on the subject of a company lease contract, which governs the behavior of the parties in the event of subsequent modifications of the contractual relationship concerning the rental of productive property. The law provides that in the event of a significant modification of the relationship, due to legal provisions or provisions of the authority concerning production management, an increase or a reduction in the rent may be required, or, according to the circumstances, the dissolution of the contract. The rule is explanatory of the general principle contained in art. 1467 of the Civil Code but does not reproduce the rules, because it allows both parties to choose whether to act for the modification of the fee or the dissolution of the relationship without depending on the "counter-move" of the counterpart.
III - Conclusions.
The regulatory framework outlined by the principles of law examined in the preceding paragraphs leads us to believe (and in fact this is already happening) that pending commercial lease and company rental relationships affected by the Covid-19 pandemic will find greater application in practice. , those instruments of protection deriving from the retention obligations of contracts and of good faith and contractual correctness which incentivize the parties to renegotiate the contractual conditions, also with a view to responsibility, which allows to more effectively counter the serious economic and social emergency caused from the Covid-19 pandemic.
And probably the current situation will represent the "general rehearsal" of what will happen when the announced change to the Civil Code takes place (now in the state of the delegated bill) in the sense that the "right of the parties to contracts that have become excessively burdensome due to causes exceptional and unforeseeable, to demand their renegotiation in good faith, or in the event of no agreement, to ask in court for the adjustment of the contractual conditions so that the proportion between the services originally agreed by the parties is restored ". Not to mention that it would be reasonable to expect that, given the situation, this legislation could see the light - possibly in non-general terms - already in the abundant current emergency legislation.
Anna Maria Schirru