Alburo Law Offices

Registration Form

Loading form...

Contractual Obligations of Businesses During Covid-19

Legal Excellence Meets Business Insight

Whether you need expert legal counsel or want to sharpen your team’s knowledge of labor and business law, we have the right path for you.

Legal Services

Combined legal excellence with practical business insight — trusted counsel for your most important decisions.

Avail Our Services

Training Calendar

Expert-led sessions on labor law, business law, and more — gain the practical skills to navigate complex legal challenges.

Train With Us
Contractual Obligations of Businesses During Covid-19

Published — June 1, 2022

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Be aware of other legalities aside your contractual obligations: DOWNSIZING OF EMPLOYEES DUE TO COVID19

The COVID – 19 pandemic has done damage and is expected to do so until the world has finally discovered a cure for the disease.

Among the areas that the COVID -19 has impaired is the contractual obligations of businesses. Under article 1156 of the New Civil Code of the Philippines (NCC), an obligation is a juridical necessity to give, to do or not to do. Following this article of the New Civil Code are the questions, “Are there instances where the obligation may not be complied with?” If any obligation has not been complied with, is there any remedy under the law against the erring party? Is there an instance where the debtor may be excused from the performance of his obligation/s?

Let us deal with the above-stated queries. Yes, there are instances where the obligation may not be performed with. Among those instances provided under the law is the principle of fortuitous event or force majeure. The non-performance of the obligation, contractual obligations of business in this case, must be by reason of the fortuitous event or force majeure. Said fortuitous event or force majeure must be sole reason for the non-performance or impossibility of performance of the contractual obligation. Meaning, the non-performance or impossibility of performance of the contractual obligation must be due to force majeure such as government prohibitions  or restrictions as a lawful response to COVID – 19, a fortuitous event,  like those relating to the movement of its people, that only few are authorized to go out of their house. The nonperformance must not be by reason of the willful conduct of business. In other words, the business must not be in bad faith. Is the business liable for the non-performance of its contractual obligation? Under Article 1174 of the NCC, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable.  The case of Philippine Communications Satellite Corporation vs. Globe Telecom, Inc., G.R. No. 147324, May 25, 2004, provides that a fortuitous event under Article 1174 may either be an “act of God,” or natural occurrences such as floods or typhoons, or an “act of man,” such as riots, strikes or wars. COVID-19 being a natural occurrence is a fortuitous event. Thus, the business enterprise is not liable for the non-performance of its contractual obligation.

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

All rights reserved.