Currently, given that it is temporarily impossible to predict when the COVID-19 pandemic will end, and as the impact of the pandemic on corporate production and operations gradually becomes apparent, how to fulfill contracts signed before the outbreak has become a thorny issue for many business operators. Recently, I have received inquiries about how to deal with the continued performance of contracts affected by the COVID-19 pandemic, many of which involve the issue of terminating or changing contract terms.

So, can the performance of contracts that have already been signed be terminated or changed due to the impact of the epidemic? And how should the contract be terminated or changed?

1. On February 9, the Guangdong Provincial High People's Court issued the "Announcement on Several Issues Concerning the Trial of Civil and Administrative Cases During the COVID-19 Epidemic Prevention and Control Period." Section 6 of the "Announcement," titled "Properly Handling Contract Disputes," states: "If a contract of sale, lease, tourism, accommodation, catering, transportation, etc., cannot be performed due to the epidemic and emergency measures to prevent and control it, or if performing the contract would significantly impact the rights and interests of one party, the contract may be terminated or modified by agreement. In the absence of an agreement, both parties are encouraged and supported to resolve the matter through negotiation, and economic losses should be reasonably shared according to the principle of fairness."

2. On February 10, the First Civil Division of the Zhejiang Provincial High People's Court issued the "Implementation Opinions on Regulating Civil Legal Disputes Related to the COVID-19 Epidemic (Trial Implementation)." Section 2 of the "Opinions," titled "Handling Contract Dispute Cases Appropriately and in Accordance with the Law," states: "If, due to the epidemic, continued performance of the contract is manifestly unfair to one party or the purpose of the contract cannot be achieved, and the party requests the people's court to modify or terminate the contract, the people's court shall determine the relevant circumstances in accordance with the principle of fairness and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (II)."

The above-mentioned provisions of the High Courts of the two provinces all believe that if the performance of the contract is affected by the epidemic, which has a significant impact on the rights and interests of one party, is obviously unfair, or the purpose of the contract cannot be achieved, the contract may be terminated or changed.

The epidemic is a sudden event, and it is rare to directly stipulate in the contract that the occurrence of the epidemic is a condition for termination. In the absence of an agreement to terminate the contract and no way to negotiate a unanimous termination, the contract may be terminated based on whether there are statutory circumstances for termination.

Article 94 of the Contract Law stipulates: "Under any of the following circumstances, a party may terminate the contract: (1) The purpose of the contract cannot be achieved due to force majeure; (2) Before the expiration of the performance period, one party expressly states or indicates by its own behavior that it will not perform the main debt; (3) One party delays the performance of the main debt and fails to perform it within a reasonable period after being urged; (4) One party delays the performance of the debt or has other breach of contract that makes it impossible to achieve the purpose of the contract; (5) Other circumstances stipulated by law." According to the answer given by Zang Tiewei, spokesperson of the Legislative Affairs Commission of the Standing Committee of the National People's Congress and director of the Research Office on February 10, the inability to perform the contract due to the government's adoption of corresponding epidemic prevention and control measures is an event of force majeure. If the contract cannot be performed due to the government's adoption of corresponding epidemic prevention and control measures, resulting in the failure to achieve the purpose of the contract, the affected party may terminate the contract.

According to Article 96 of the Contract Law, if one of the parties claims to terminate the contract in accordance with the provisions of Article 94 of this Law, it shall notify the other party. The contract shall be terminated when the notice reaches the other party. If the other party has any objection, it may request the people's court or arbitration institution to confirm the validity of the termination of the contract.

It should be reminded that, unless the contract stipulates a period for objection, if there is any objection to the termination of the contract, a request should be made to the people's court or arbitration institution to confirm the validity of the termination of the contract within three months from the date of receipt of the notice of termination of the contract, and the lawsuit will not be supported if it is filed after three months.

1. Article 77 of the Contract Law stipulates: "The parties may change the contract if they reach an agreement through consultation." The Guangdong High Court's "Announcement" proposes that if the performance of the contract has a significant impact on the rights and interests of one party due to the occurrence of the epidemic and emergency measures to prevent and control the epidemic, the contract may be changed according to the agreement; if there is no agreement, the parties shall resolve the matter through negotiation.

2. Article 26 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (II) stipulates: "If, after the contract is established, objective circumstances occur that the parties could not have foreseen at the time of entering into the contract, and significant changes that are not caused by force majeure and do not constitute commercial risks make it obviously unfair to one party or make it impossible to achieve the purpose of the contract to continue to perform the contract, the parties request the people's court to change or terminate the contract, the people's court shall determine whether to change or terminate the contract based on the principle of fairness and in light of the actual circumstances of the case." If the parties to the contract cannot negotiate to change the contract, and the continued performance of the contract affected by the epidemic is obviously unfair to one party, the parties request the people's court to change the contract." The Zhejiang High Court's Civil Division I "Opinions" made such a provision.

The termination and modification of contracts involve legal documents such as notices and supplementary agreements. The specific content of the original contract and the impact of the epidemic on the performance of the contract should be combined to prepare complete legal documents, and the reasons for terminating the contract or the reasons and clauses for changing the contract should be clearly stated to avoid disputes or ambiguities.