Publication date: 12/03/2020
What if you are a service provider to public authorities, but your employee who normally performs this contract must stay in quarantine? What if your supply chain has been disturbed and prices for a necessary product have skyrocketed? Public contracts contain specific rules on unforeseen circumstances, such as the coronavirus outbreak, which we will discuss below.
In principle, public contracts always contain review clauses for unforeseen circumstances that make the contract impossible/extremely difficult to perform. These clauses give the contractor the right to ask for an extension of the performance deadline, or, in the case of very serious detriment to the contractor, another kind of review of the contract (e.g. changing the price) or even terminating the contract. If the contractor has sub-contracted its obligations, and its subcontractor has difficulties in performing such obligations, then the contractor can also invoke the review clause vis-à-vis the public authorities.
The following conditions must be met, as set out in Article 38/9 of the Royal Decree of 14 January 2013:
- The contractual balance between the obligations of the public authority (i.e. paying the price) and the contractor are disturbed: this concerns both so-called force majeure and hardship situations: e.g. your staff are quarantined and so performance is impossible, your supply chain is disturbed and you cannot supply the necessary product on time, prices for the necessary product are extremely high, etc.;
- The unforeseen circumstances could not have been reasonably foreseen when the tender was submitted: the contractor should thus check the tender date and the date on which it was clear that performance of the contract was impossible/extremely difficult;
- The unforeseen circumstances could not have been reasonably avoided: contractors should make a reasonable effort to perform the contract under the agreed conditions: e.g. by trying to find a replacement for a sick staff member;
- The unwanted consequences cannot be reasonably ended by the contractor, in spite of taking all necessary measures to end it: a contractor should take reasonable efforts to end the contractual imbalance, e.g. by trying to find another supplier;
- The financial detriment to the contractor of performing the contract must meet certain thresholds, e.g. for supply contracts, the detriment must be greater than 15% of the initial contract value.
In practice, these situations will always need to be assessed in light of the specific circumstances of the case and contract. Do not forget to check the contract and/or the tender documents. Public authorities can choose to exclude or adapt the standard review clause from their contracts, on the condition that the tender documents contain an express justification.
Please note that contractors cannot decide by themselves to stop performing the contract or to change its performance deadline, but need to ask for this change. The wish to invoke the review clause must be submitted in writing within 30 days after the unforeseen circumstances have occurred.
Without notification, contracting authorities can in principle impose sanctions for non-performance, such as fines or termination of the contract. However, the Federal government has already announced it will not impose fines or penalties on companies or service providers that are unable to perform a contract (or unable to perform it on time) because of the Coronavirus.
The above information is merely intended as comment on relevant issues of Belgian law and is not intended as legal advice. Before taking action or relying on the comments and the information given, please seek specific advice on the matters that are of concern to you.