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Is Covid-19 a Valid Excuse for Not Abiding by One's Obligations?

While the easing of Covid-19 measures is a reason to rejoice for many, various tenants are still struggling to make ends meet, shop owners who have reopened their businesses are not seeing enough sales to break even, and bank moratoriums cannot continue to be extended indefinitely. And as of Friday this week, with the impending reopening of courts, disgruntled landlords and creditors will seek recourse for monies due to them.

An unexpected event like the coronavirus can leave contracting parties exposed. Is there a solution?

All contracts are based on the principle of good faith, and the contracting parties’ particular circumstances at the time of writing. Losing one’s job overnight or having one’s business closed abruptly is, at least on a human level, considered as a valid and reasonable excuse why one cannot honour obligations, at least temporarily. However, as in most cases between human interactions and relationships, these situations may give rise to abuse. Some may feel comfortable surviving on the financial aid presently granted by government, and, now that some kind of normality is returning, lenient landlords who made concessions on humanitarian grounds will not be as forgiving.

Maltese law includes the notion of force majeure, which could potentially be invoked as a defence against a claim of breach of contract. But this defence can only be successfully triggered upon the occurrence of very specific situations which courts will examine on a case by case basis. Primarily, there must come into play an irresistible force that puts the party in the impossibility of fulfilling the obligations. It is not enough that the obligation has become more difficult to honour. Additionally, the event triggering the impossibility must be both unpredictable and external, with the party having no role, responsibility or control in the claimed force majeure event. It therefore remains to be seen whether Covid-19 will, in the coming months or years, be considered by our courts as a force majeur event.

On the matter of rent in this extraordinary economic context, there are provisions in Maltese law which address this matter, such as the means test used by the Rent Regulation Board in establishing what tenants may afford to pay in accordance with their particular means.

Parties should ideally negotiate and seek mediation, where possible, and always do so in good faith. The Court has a tendency to frown upon parties who seek judicial intervention as a way to penalise an opposing party, without having sought to settle amicably before filing legal action. Moreover, courts are also empowered to penalise parties who abuse of legal procedures. In the case of Carmelo sive Charles Baldacchino vs Giuseppe Arcidiacono, decided by the Court of Appeal on the 17th of January 2007, the Court expressly stated that the law is an instrument of justice, and is neither a trap nor an escape mechanism to be used by those who wish to evade their obligations. The law wants what is righteous and not to deceive.

Dr Anthea Witney Turner

Civil Law - Employment Law - Expat Law

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