Covid19 overturned the rules of international law and the broad subject matter of international commercial lease agreements relating to the commercial lease. But the established legal acquisitions in international contracts have also changed post covid. In March in Italy, on the basis of the CoronaVirus emergency and the consequences of total closure, the company owning a restaurant rented in a commercial property filed an appeal asking the Court of Rome to intervene and order the company owning the property to:
- block the guarantee of payment of the lease;
- reduce the agreed rent by 50% for 12 months.
The Court of Rome, by order of 27.08.2020, accepted the requests of the tenant company, establishing to:
- suspend the guarantee for non-payment of the rent up to the amount of 30,000 €;
- reduce the rent by 40% for the months of April, May, June and by 20% for the following months from July 2020, until March 2021.
The legal principles applied by the Court were those of the:
- renegotiation of the rent as a duty of solidarity between companies;
- reduction of the rent as a result of a defect occurring in the leased property and the objective impossibility of using it, already established by 4. Art. 1584 of the Italian Civil Code as the principle of risk sharing determined by the impossibility of using the property.
The attorney renegotiate of commercial real estate for lease and contractual obligations through the clauses of international contracts
Although the decision can be considered almost “obvious” it is good to point out that the legal factors highlighted by the Monocratic Judge are different and decisive. For example, the decision highlights the principle of “contractual good faith” which supplements the contract, even if not foreseen by the parties and for which there is an obligation to renegotiate the lease agreement due to unforeseeable events that go beyond their will and that alter the conditions. In the event that the owner of the commercial space wants to evade the obligation to renegotiate the rent, the lessee can contact the judicial authority to request a reduction in the rent due to excessive burdens, impossible to determine in advance and cope with the residual activity carried out in the commercial space. And furthermore, the revolutionary fact that produced the sentence in some ways is that the Judge intervenes not only to ascertain the existence of the abstract principle of good faith, but also to concretely determine what the economic measure of its application must be.
The measure prepared by the Monochrome Judge of Rome with his sentence took into consideration the fact that the owner of the restaurant is obliged by the State to observe the restrictive measures to contain the virus, which are regardless of his will. Therefore, the reduction in the rent of the room where it is hosted is justified by the imposed closure of the restaurant, by the expenses for the provision of containment devices and by the reduction in commercial activity. All aspects and new conditions inexistent and unthinkable at the time of signing the commercial lease.
Over the months, the order of the Court of Rome has opened a front that has gradually involved different sectors of commerce and the related contractual obligations, to the point of pushing the Court of Cassation to produce the thematic report no. 56/2020 on anti-Covid “emergency” law 19 in the contractual and insolvency context. The report justifies the renegotiation of commercial leases expressly referring to the cause of the Covid emergency, since the clauses provided for at the time of signing the contract have become too burdensome for entrepreneurs.
Legal guidance for the renegotiation of contracts and procedures followed by commercial contract lawyer.
The Court of Cassation with their Judges have collected the orientation according to which, due to Covid, the parties must conduct negotiations to modify the contract and that, in the event of unjustified refusal by the lessor to enter into negotiations or in the event of negative outcome of the same, the tenant entrepreneur can ask the judge for a ruling identifying the new conditions of the contract.
Finally, starting from the same assumptions and investing in the cases of international contracts, the business contract attorney who deal with protecting the interests of fashion houses and specialized in the field of fashion law are undertaking to review the clauses with retailers, retailers and suppliers after the pandemic, in an attempt to protect fashion companies from any unforeseen events by inserting ad hoc clauses in contracts. From March onwards there are several situations that have been faced by the commercial contract lawyers of the fashion houses through mediation, with the result of renegotiating international contracts relating to relationships and obligations:
- for supply and subcontracting, with the insertion of clauses adapted by lawyers to the exponential increase in online digital sales;
- that link fashion houses with logistics and transport companies, to ensure more favorable conditions given the increase in the amount of work caused by the increase in online sales;
- with influencers and testimonials who deal with brand communication, who were asked to insert the morality clauses, i.e. ethical clauses, to prevent the spread through social networks of behaviors contrary to the contagion containment measures ordered by the institutional bodies.
Therefore, also for fashion companies and for contractual commitments much more important than rent reduction, Covid-19 has put the issue of contractualisation and review of contracts with retailers, suppliers, influencers and logistics companies at the top of the priority list, also with a view to preventing future disputes.