The Law Firm’s lawyers are once again representing a Client in court proceedings against whom Polish Oil and Gas Company has imposed a contractual penalty for failure to collect the ordered quantity of gas fuel, which the Client had committed to purchase under an agreement concluded between the parties.
The Client of the Law Firm, a municipal company performing tasks on behalf of the municipality, in connection with the preparation and implementation of an investment project scheduled for 2017-2021. In 2020, it concluded a comprehensive agreement with PGNiG, together with annexes, for the supply of gas fuel for the start-up period of the investment and then for its own operations, i.e. until the end of 2021.
In the agreement, the parties agreed that if the company, for reasons attributable to it, fails to collect the ordered quantities of gas fuel, it will be obliged to pay a contractual penalty to PGNiG.
It is a well-known fact that at the beginning of 2020, the first media reports began to appear concerning cases of infection with the SARS-CoV-2 virus, causing COVID-19, in China, which soon spread to Europe, including Poland. Due to the increasing number of cases of this disease, a state of epidemic was declared in the country in March 2020, which was accompanied by numerous restrictions on the functioning of individuals, institutions and legal entities, both in the personal and economic spheres.
At the turn of September and October 2020, there was a sharp increase in the number of cases, which affected the implementation of the investment and the timeliness of the works.
Due to the Client’s failure to collect the ordered quantity of gas fuel, PGNiG charged a contractual penalty, issuing a debit note, and in order to pursue its claims in this respect, it called on the company to pay an amount of nearly half a million PLN. The company refused to pay the contractual penalty, as a result of which PGNiG filed a lawsuit with the court, which upheld the claim in its entirety with a payment order.
The Law Firm’s lawyers challenged the claim and raised a number of factual and legal arguments in their objection, pointing to the Client’s lack of fault in failing to comply with the contractual provisions. It was repeatedly emphasised that the failure to comply with the contract was due to force majeure, and the legislator itself helped to recognise the COVID-19 pandemic as force majeure, which in the justification to the Act of 2 March 2020 on special solutions related to the prevention, counteracting and combating of COVID-19, other infectious diseases and crisis situations caused by them (Journal of Laws 2020, item 374) that the measures applied are justified by the action of COVID-19 as a force majeure and the related epidemic, which was confirmed by the Regulation of the Minister of Health of 13 March 2020 (Journal of Laws 2020, item 433).
It was also argued that in this case, the selection of the contractor for the construction works by way of a tender, as well as the conclusion of the contract, took place before the announcement of COVID-19, while the investment implementation process was already underway during COVID-19, with the most significant factor in this process being the failure to deliver complete equipment for assembly and commissioning on time. These delays were the result of both the illness of employees working on the construction site and the disruption of numerous supply chains for materials and equipment (lack of fluidity in the production and delivery of components necessary for the production process). This concerned not only equipment purchased on the Polish market, but also on European markets.
In a similar case, the court agreed with the arguments raised by the lawyers of our Law Firm, ruling that the penalty was not due. We reported on this case in our previous post, which can be read here. Therefore, this time too, our lawyers hope for a satisfactory outcome of the ongoing court proceedings, about which we will keep you informed.