Lawyer for contract law during the Corona pandemic
The rapidly increasing spread of the coronavirus brings with it a variety of political and social reactions. Countries are issuing travel warnings or bans, suppliers are unable to deliver due to shortages and planned events are being cancelled. Our experienced contract law lawyers will be happy to assist you with questions regarding flight refunds for cancelled flights, acceptance of alternative offers and ticket price refunds. Below you will find the most important questions concerning contract law issues in connection with the corona virus.
Information as of 14th December 2020.
Contract law in case of cancellations
First, we need to know:
- Was the trip booked as part of a package?
- Were individual bookings made with the providers (hotels, airline, airbnb, local organisers, etc.)?
- Does Swiss law apply?
If you booked a package tour with a Swiss tour operator, and the tour operator cancels the trip, you are entitled to a full refund (without deductions) of services already paid (see Articles 10 and 11 of the Package Travel Act).
If you made independent bookings, the matter is different. If the airline has cancelled your flight due to a travel ban, an official order or warning, you are entitled to an airline ticket refund. Article 119 of the Swiss Code of Obligations (SCO) provides that a claim (e.g. to air travel) is deemed extinguished if it has become impossible to fulfil due to circumstances (e.g. official travel ban) for which the debtor (e.g. the airline) is not responsible.
European Passenger Rights Regulation
For the cancellation of flights, the European Passenger Rights Regulation (Regulation (EC) 261/2004) also applies. It applies to flights:
- within the European Union (EU); or
- from a non-EU country to the EU operated by an EU airline; or
- from the EU to a non-EU country operated by an airline from the EU or a non-EU country.
The European Passenger Rights Regulation was adopted by Switzerland with the Swiss/EC Air Transport Agreement (in force since 01.06.2002). The regulation provides that, in the case of cancelled flights, the passenger is offered a full reimbursement of the air ticket or rerouting, under comparable travel conditions, at a later date at the passenger's convenience.
The application of the European Passenger Rights Regulation to flights from Switzerland to a third country (with/without stopover in the EU) is disputed. One view is that despite adopting the regulation, Switzerland has reserved the right to regulate relations with third countries. At the cantonal level, there are court rulings that limit the scope of application of the regulation to relations between Switzerland and the EU, but the Federal Supreme Court has not yet expressed its opinion on this.
Reservations on site / at a travel agency
For bookings with local organisers (i.e. at a destination abroad), the contractual agreements or general terms and conditions of business apply to each individual case. If they do not contain corresponding provisions, the foreign law of the destination is applicable.
If you have booked your trip through a Swiss travel agency, you will also be entitled to a refund of payments already made if the trip has been cancelled by the travel agency due to a travel ban or similar response. However, the general terms and conditions (GTCs) of the travel agency may stipulate that you must accept a postponement of your trip to an ulterior date.
If you cancelled your trip yourself (e.g. for security or solidarity reasons), the terms of the contract and the GTCs of the airline or tour operator will apply. In such cases, a cancellation fee is usually payable, depending on the date of the cancellation.
If you have taken out travel insurance, it is important that you check the general terms and conditions of insurance to see if the insurance has made any arrangements in the event of a pandemic. Many insurers list epidemic / pandemic as a ground for exclusion from benefits. If no exclusion applies, you may have a claim for payment of any cancellation fees.
Article 119 SCO provides that a claim is deemed extinguished if it has become impossible to fulfil due to circumstances for which the debtor is not responsible. In such cases, the debtor is in particular not obliged to pay damages, but must return the consideration already paid. This applies only if Swiss law is applicable. Foreign legal systems may contain other rules that would have to be taken into account in individual cases.
In many cases, the general terms and conditions or contracts of a tour operator also contain similar provisions, "force majeure clauses". Such a clause gives the organiser the right to withdraw from or temporarily suspend its contractual obligations in a case of force majeure without liability for damages.
The question then is whether the coronavirus is a case of force majeure. What matters is whether the tour operator has explicitly classified an event such as the coronavirus as a case of force majeure in the contract or the GTCs, for example by mentioning epidemics/pandemics or official orders and travel warnings. If not, force majeure occurs under Swiss case law if the event:
- is exceptional, unforeseeable and external;
- is unavoidable;
- is completely unexpected;
- is independent of human behaviour (it was outside the parties' sphere of influence and was not preventable despite the greatest possible care).
On this basis, we believe that the coronavirus should be regarded as a case of force majeure. Particularly if the organiser cancelled the trip due to a travel ban or a public travel warning issued by the authorities. If this is the case, only (nonetheless) the direct booking costs such as air tickets, hotel fees etc. are to be reimbursed, but not your additional costs.
If a trip is not started because of illness, cancellation charges are normally charged by the organiser or airline. To answer the question of who bears the costs, it is also necessary to clarify whether or not you have travel insurance. If travel insurance has been taken out, the specific conditions of the insurer must be checked. Many travel insurance companies cover the cancellation costs of a trip that cannot be started due to a serious illness of the insured person up to a certain maximum amount. A medical certificate is often required.
If you do not have travel insurance, you normally have to pay the cancellation fees yourself. In the current situation, many companies are accommodating with regard to these fees. There is no legal right to a cost waiver.
Looking after or caring for a person in need in your immediate vicinity is not normally a reason to cancel a trip at no cost. You should check your contract. If the contract can be cancelled, cancellation fees are normally charged by the tour operator/airline. If you have got travel insurance, we advise you to read the general terms and conditions of insurance of the insurance company or to ask the insurance company whether the costs will be covered by the insurance company in your case.
In the current situation, many companies are taking an accommodating approach to the reimbursement of travel/cancellation charges. There is no legal right to a cost waiver.
On 11 March 2020, the World Health Organisation (WHO) declared the occurrence of the coronavirus to be a global pandemic.
The Federal Council recommends that you continue to refrain from non-urgent trips abroad if possible. If you nevertheless decide to travel abroad, it is advisable to find out about the restrictions of the destination in question before you travel.
The FOPH has decreed that persons entering Switzerland from countries and areas with an increased risk of infection must be quarantined for ten days. Please refer to the FOPH's list, which is regularly updated.
People who have been in a country or area with an increased risk of infection and then enter Switzerland must spend 10 days in quarantine. The affected states and areas are defined on a list. This list is regularly updated based on the epidemiological situation.
The list that is valid at the time of entry into Switzerland is decisive for the quarantine obligation.
Children who enter Switzerland from a country or region with an increased risk of infection must also be quarantined for 10 days.
Anyone who is required to go into quarantine under the Ordinance on Measures to Combat the Coronavirus (Covid-19) in the International Movement of Persons must report his or her entry to the competent cantonal authority within two days and follow the instructions of that authority.
First of all, it must be checked whether the employer has an obligation to continue to pay wages under the employment contract. The actual assessment of continued payment of wages is between you and your employer. In the event of a dispute, a court would probably have to decide.
There are two cases in which the employer is obliged to continue to pay wages:
- If you are sent by your employer to work in a country or area with an increased risk of infection and have to go into quarantine after returning to Switzerland.
- If you are able to work despite the quarantine, i.e. in home office.
If you cannot work due to the quarantine for persons entering Switzerland and do not receive a salary from your employer, the following applies:
- You are entitled to Corona earnings replacement if you have to start the quarantine through no fault of your own. Through no fault of your own means that your travel destination was not on the list of states and territories with an increased risk of infection at the time of your departure and that you also could not have known at the time of your departure, on the basis of an official announcement, that your travel destination would be placed on this list during your trip.
- Thus, there is no entitlement to compensation if your travel destination was already on the list of states and territories with an increased risk of infection when you left.
General contract law
In this case, Art. 119 para. 2 SCO provides that a claim is deemed extinguished if it is impossible to fulfil and the contract is to be “unwound." This means that the event organiser must reimburse tickets that have already been paid. However, the organiser is not liable for any further losses suffered by an event participant (such as, for example, a hotel room that was specially reserved for the event and is no longer needed).
Art. 119 SCO is not a compulsory provision. The parties may therefore deviate from the legal text by contractual agreement. Often the organiser’s contract or GTCs stipulate that the event participant must accept a postponement of the event or a voucher or even that no refund is possible. It is therefore advisable to first ascertain whether the organiser has made any arrangements in this regard.
In certain cantons, fitness centres are temporarily closed. This means that the fitness centre is currently unable or prohibited from providing its contractually agreed services due to an official order. Many fitness centres have regulated the further procedure for such a case in their general terms and conditions or in the contract. It is therefore first necessary to check whether the contract contains a corresponding clause. If this is not the case, the following applies.
The measures are temporary and will be lifted once the virus has subsided. For this reason, the fitness centre remains bound by the subscription contracts and its obligation to perform and is in so-called debtor's default (Art. 102 ff. OR). The owner of a fitness subscription can set the fitness centre a reasonable grace period for performance. It is highly probable that the fitness centre will not be able to perform within the grace period, unless the measures have been lifted in the meantime.
After expiry of the grace period, the holder of the fitness subscription may in principle withdraw from the contract and demand a proportional refund of the subscription costs. It is also conceivable to continue to insist on the fulfilment of the contract and to have the subscription extended for the duration of the closure of the centre.
According to the Ordinance on Measures in the Special Situation to Combat the Covid 19 Epidemic, organisers of events must develop and implement a protection concept. This protection concept must comply with the specifications according to the aforementioned ordinance. The protection concept includes compliance with the obligation to wear masks, the restriction of group size and the distance and hygiene regulations. The cantons may tighten the federal requirements. The following explanations apply in the event that a course is cancelled because the requirements cannot be met.
Reimbursement of course fees
Whether the fees are to be refunded if a course cannot be held depends primarily on whether the impossibility is permanent or temporary. If it is permanent, the course fees already paid must be reimbursed. If it is temporary, repayment may for example be requested on a pro rata basis for the period during which the course did not take place.
To assess whether the provision of the services is permanently or temporarily impossible, the precise contractual arrangements must be looked at. If, for example, all of the courses fall within the period of the ban on attending events, a permanent impossibility is deemed to have occurred. However, if the course is held over a longer period of time (which would normally be the case for music lessons or language courses), then the impossibility is only temporary.
If the tuition is temporarily impossible, the student can decide to maintain the contractual performance. The question then is when and how the course provider will provide its services. As long as the ban on organising events continues, it is not possible to perform the service in accordance with the contract (execution).
Whether an alternative offer (such as an online dance or language course, or music lessons via Skype) must be accepted depends on the precise contractual arrangements. Depending on the specific wording of the contractual services – in particular the nature of the promised service, the agreed terms of performance and the place of performance – an alternative offer may in our opinion be made within a reasonable spectrum. For example, music teaching via Skype is conceivable if there is no need for direct physical contact with the instrument or musicians. An online language course via Skype can in some circumstances also be regarded as proper performance of the contract.
It is advisable to discuss an alternative offer with the course provider and to discuss the exact terms and conditions. Depending on the structure of the alternative offer, a reduction in the course fees is in our view appropriate, particularly if the course is qualitatively different from the ordinary provision of services. If the alternative offer is not acceptable to the student, it is advisable to refuse the offer and to reclaim the already paid course fees (pro rata).
This is currently disputed, particularly as there is no legal precedent.
A legal view currently assumes that the operating ban ordered by the Federal Council constitutes a defect in the rented premises in commercial leases. The tenant would therefore be entitled to a reduction in the rent, as the landlord is unable to fulfil its contractual obligation (to provide the leased property for the contractual use). Whether or not the landlord is at fault for the defect is irrelevant.
The other legal view is that the closure of the premises by the Federal Council does not amount to a defect in the leased property. The landlord is not obliged to guarantee the operation of a given store. He must merely comply with the regulations applicable to landlords or building owners (such as fire regulations, building regulations, etc.). However, the business closure does not relate to the leased property but to the operators of the shop premises. Therefore, the provision falls within their area of responsibility.
However, until this matter is completely resolved, it is highly recommended to talk to the landlord and find an alternative that is satisfactory for both parties. For example, an instalment payment or deferment of the rent could be agreed, with a simultaneous extension of the tenancy.
At the political level, the enactment of a Covid 19 Business Rent Act has been discussed. This would have provided that tenants and leaseholders who were affected by a closure or severe restriction in the spring would have had to pay only 40 per cent of the rent for the period from 17 March to 21 June 2020. 60 per cent would have been borne by the landlords. After the bill was rejected by the National Council on 30 November 2020, the Council of States also decided on 2 December 2020 not to act on the Covid 19 Business Rent Bill.