Jun 26, 2020

The COVID-19 pandemic has sparked several discussions about the impact of extraordinary and unforeseen circumstances on contract fulfilment. Strict contract fulfilment is understood to be supplying what was agreed, and it has been relatively or completely impossible for some suppliers to fulfil consumer contracts in some markets, due to the restrictions established.

There are no regulations that expressly address this issue and its effect on the legal relationships regulated by Law 19.496 on Consumer Rights Protection (LPC in Spanish). Therefore, the National Consumer Service (Sernac in Spanish) has issued interpretative circulars that recognise alternative ways for suppliers to fulfil their contracts compared to that originally agreed.

Firstly, Sernac issued a circular in response to the social unrest that began in October last year, Interpretative circular on service continuity during exceptional events. It recognises that suppliers can adopt contingency measures during events classified as force majeure or Acts of God.

Secondly, Sernac issued a circular in response to the pandemic, "Interpretative circular on virtual contracting during the COVID-19 pandemic", which allows suppliers to propose contract amendments. This proposal must state (i) the date when the amendments will begin, and (ii) if the consumer expressly rejects the proposals, then the amendments will be annulled.

Sernac also issued the "Interpretative circular on protecting the health of consumers and alternative measures for the fulfilment, suspension and termination of services, in response to the Coronavirus pandemic”. This circular reinforces the principal that suppliers must "fully comply with their contractual terms," and that "only when imperative can services be provided extemporaneously or using alternative forms of fulfilment, while always protecting the interests of consumers."

Sernac states in the same circular that only under justified and exceptional circumstances, when the contract becomes impossible to execute, suppliers may (i) suspend their services, or in extreme cases, (ii) terminate their services, but in this case, they must reimburse any payments received. Articles 12 and 25 of the LPC regulate and sanction the obligation to respect the agreed terms, although they may not be considered breached in both of these cases following the suspension or unjustified failure to provide a service.

Sernac's interpretation has consequences for the markets mentioned in this circular: (i) public transportation: providing a safe service obliges companies to adopt specific measures to reduce infections spreading in underground trains, buses or other means of transportation, (ii) on-site services, entertainment, public shows and other events: cancelling or rescheduling them is not considered a breach of the LPC per se, provided that users are informed of such measures and are given the option of continuing with the contract under new conditions, or terminating it with their money refunded, (iii) airlines and travel agencies: cancelling or rescheduling flights is not a breach of the LPC per se, provided that travellers are informed and other consumer rights are safeguarded, in particular if their flight has been suspended or cancelled and they are given the option of terminating the contract with their money refunded, or rescheduling their flight, (ivmarketplace: companies must implement measures that prevent any kind of publication that misleads consumers, and (v) utilities: companies must guarantee a continual supply of those services that are essential for community life.

The criteria used in these circulars have also been included in some Sernac press releases. A company may offer to reschedule public shows for consumers so that they can enjoy an equivalent service and even transfer their ticket to another person”. Travel agencies and airline companies should provide alternatives and should be flexible. Sernac values digital channels for contracting or amending services, which avoid face-to-face meetings, and requires companies to inform users of any amendment to the original contract in all cases.

The National Director of Sernac said that the most important consequences of any changes to how a contract is fulfilled are informing consumers of all the associated information so that they can choose an equivalent means of fulfilment and reach an agreement regarding the amendments.

Fulfilment by equivalence became a solution recognised by Sernac during the pandemic. It is important to look for fulfilment alternatives that can be executed, when payments cannot comply with the contract terms. The supplier must always respect consumer rights and analyse on a case-to-case basis whether these alternatives meet the criteria imposed by the authority.

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