Egypt’s Al Tamimi & Co advises on coronavirus outcome on contractual obligations for production and television contracts

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By Amwal Al Ghad English
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Images combined from a 3D medical animation, depicting the shape of coronavirus as well as the cross-sectional view. Image shows the major elements including the Spike S protein, HE protein, viral envelope, and helical RNA.

Due to the current confusion caused by the coronavirus pandemic and its impact on markets, the public is still oblivious of the legal consequences on their daily life, businesses and contractual obligations.

The virus continues to cause global widespread and indiscriminate disruption to all industries. Production houses and institutions are facing more challenges in effecting remote working or emergency shift working than their service industry peers, which is creating new challenges and forcing companies to redefine their business principles on a near-daily basis while managing often complex outsourcing arrangements. Addressing these challenges head-on in a calm, collected and collaborative manner will be crucial to maintain sustainable business relationships over the coming months.

Furthermore, legal consultants play a significant role in television and production contracts to pave the way for proper legal rights and obligations that are necessary in this current situation. Egyptian corporate law firm, Al Tamimi & Company therefore, presents the following guidelines that everyone should take into consideration to overcome the present circumstances with equitable practicality:

  1. With the holy month of Ramadan around the corner, everyone is eager to know whether television programs and series will be broadcasted during Ramadan as usual or not. Moreover, media personnel such as actors, artists, directors, producers and advertising agencies usually work extensively in the couple of months preceding Ramadan to finalize their work that is scheduled for broadcasting in Ramadan. Yet, Ramadan this year is utterly different due to the social distancing and precautions set as protective measures from the coronavirus. This pandemic is currently threatening the production and completion of television series and programs due to the extreme measures imposed by the government to flatten the curve. Egypt is currently imposing curfews, travel bans, and closure of several public and private sectors facilities, which automatically raises legal questions regarding the television and production industry and the contractual obligations arising thereof.

 

  1. When epidemics (or pandemics in the case in hand), natural disasters, and wars arise, the first theory that comes to mind is Force Majeure as stipulated in Article (159) of the Egyptian Civil Code that stipulates that “In binding bilateral contracts, if an obligation expires or terminates due to the impossibility of performance, the corresponding obligations are also terminated, and the contract is annulled automatically”. The theory of force majeure has conditions that must be met in order to qualify for application, and these conditions are established by the Court of Cassation, in which it clarifies that force majeure events are events that are “impossible to expect and prevent, which makes the performance of the contractual obligation impossible “. Force Majeure is only applicable if it could not have been foreseen before concluding the contract and before performance of the obligations. When Force Majeure meets its legal requirements, it can lead to the dissolution of the contract by the force of law.

 

  1. In the context of coronavirus, the theory of exceptional circumstances or emergency conditions is almost identical to the Force Majeure theory but differs in two aspects, firstly; that exceptional circumstances do not lead to failure of a party to fulfil its contractual obligations, but causes the fulfilment of such obligations to be exhausting. Secondly, the theory of exceptional circumstances does not necessarily result in the dissolution of the contract, nonetheless a judge interferes to reach a reasonable ultimatum for work obligations and restore the economic balance of the contract. Therefore, regarding “Impossibility of Performance” in article 373 of the Egyptian Civil Code, an obligation is extinguished if the debtor establishes that its performance has become impossible by reason of causes beyond his control.

 

  1. In our view, it is tough to say that one of the two theories is more applicable than the other. In practice, it is relatively necessary to consider each case separately. It is also important to identify whether the spread of the virus is the reason behind the inability to perform the contractual obligation or not. If the performance of the contract remains difficult for party, yet not impossible, , the judge in this case will amend or compromise the obligation in an adequate manner to become enforceable in the ongoing circumstances.

 

  1. Finally, in all cases, the legality of each incident is subject to the discretionary power of the judge. If the judge declares that it’s impossible to perform contractual obligation due to the current situation and the precautionary measures that are being taken by the government to reduce the spread of the virus, the legal effect may be the annulment of these contracts. However, if the judge finds that it is possible to perform these contracts, different measures will be taken to preserve the safety of workers in all fields. Lastly, the judge will turn difficult obligations to non-stressful one, such as reducing the number of certain workshops that tend to increase people in the same working environment.

 

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