Covid-19 and Long-Term Contracts

Abstract

This article takes stock of legal responses to temporary performance impediments in long-term contracts due to the Covid-19 crisis. Are there mechanisms in contract law that can adequately address the disruption caused by the pandemic and by government measures to contain it? And are contract law doctrines able to provide solutions with a long-term view? The article analyses tenants’ protection in commercial and residential lease contracts in England and the Netherlands. The analysis confirms that English contract law provides only a narrow scope for relief based on frustration. Dutch contract law offers broader possibilities for rent discounts on the basis of unforeseen circumstances, good faith and the defects regime in tenancy law. Overall, both systems struggle with two problems: the valuation of rent discounts in times of crisis, and the financial protection of vulnerable parties when payment obligations are revived after the crisis. Long-term changes to contract law should include adjustments of the default rules for long-term contracts to address these issues, linked to a principle of social force majeure.