The provisions on force majeure affects contracts and obligations during the community quarantine, as discussed in a previous post. In a welcome move, the Department of Trade and Industry (DTI) issued the guidelines on refund of payments made for events affected by the State of public health emergency. The salient points of DTI Memorandum Circular No. 20-30 are as follows:
SCOPE OF GUIDELINES: EVENTS COVERED
The Circular covers events scheduled during the period covered by a community quarantine, wherein payment was made prior to the community quarantine. If payment was made after the effectivity of the government-issued restrictions, the party who made such payment shall not be entitled to the refund concession. This is because the party making the payment is deemed to have assumed the risk. [See COVID-19 Lockdown: Fortuitous Event or Force Majeure Exemption from Obligations]
The event must be scaled-down or cancelled in view of the ongoing public health emergency and the resultant social distancing directives for the imposed community quarantine, whether Enhanced Community Quarantine (ECQ), Modified Enhanced Community Quarantine (MECQ), or General Community Quarantine (GCQ). The non-inclusion of Modified General Community Quarantine (MGCQ) in the specific enumeration will most likely create confusion, although the provisions, taken as a whole, show that where social distancing is enforced in any community quarantine, the guidelines are applicable (the numerous errors in the text of Circular 20-30 suggest that the Circular has been rushed).
The event may be personal or business/work-related:
- Personal events refer to birthdays, christenings, weddings, anniversaries, thanksgiving, family reunions, leaseholds, and the like.
- Business/work-related events refer to conferences, seminars, workshops, team buildings, planning sessions, symposium, and the like, paid under the name of the company, firm, or association.
A scaled-down event is one which reduces the number of guests to ensure compliance with the social distancing directive in the venue.
FORTUITOUS EVENT OR FORCE MAJEURE
The Circular explicitly provides that the terms and conditions on force majeure (Force Majeure Clause) in a valid contract shall be recognized. In other words, the Circular respects the autonomy of contracts, when parties are free to agree on specific provisions, including the assumption of risk through the Force Majeure Clause.
In the absence of a Force Majeure Clause, the relevant provisions of the New Civil Code of the Philippines may serve as guide. The presence of any of the following fortuitous events voids the obligation:
- a. The restriction or directive on social distancing is the sole and proximate cause of the cancelled or scaled-down event or function;
- b. The restriction or directive on social distancing is independent of the will of the obligor;
- c. The restriction or directive on social distancing is either unforeseeable or unavoidable that renders it impossible for the obligor to fulfill his obligation in a normal manner;
- d. The obligor did not have a hand in the issuance of the directive on social distancing for the purpose of avoiding the obligation.
PROCEDURE FOR REFUND
Where an event or function referred to herein is cancelled or scaled down as a consequence of the implementation of restrictions, particularly social distancing during the community quarantine, the refund concession shall be carried out in accordance with the following:
The party who made the advance reservation or payment shall notify the other party of the decision to cancel or scale down the scheduled event.
Within 5 days from receipt of said notice, the venue owner/representative shall send a reply acknowledging receipt thereof, indicating the following options:
- i. Consume the amount paid at a later date, which shall be no longer than one (1) year from the lifting of the restrictions imposed by the government; or
- ii. Get the net of the amount paid after deducting relevant actual expenses incurred before the imposition of restrictions, with proof thereof.
Note that the Circular uses the phrase “venue owner/representative,” which is, in our opinion, a bit confusing, considering that the demand for reimbursement may be directed not only to the venue owner, but also to other obligees. For instance, in case of other suppliers in a wedding (e.g., caterer) who may have already incurred expenses, the demand for payment may be made by the prospective bride/groom to the caterer. The Circular expressly includes advance payment for “the food to be catered during the event and other related services such as rent of a vehicle or equipment to be used in such event.”
The Circular also provides a third option: “Get back the full amount paid regardless of expenses incurred after the imposition of restrictions.” This provision is, again, confusing. It appears to be out of place. We submit that this applies only as an act of liberality, based solely on the decision of the person who is under obligation to make the reimbursement. This specific option should be read in conjunction with Section 5 (c) and (d) of the Circular. The Circular is premised on fairness and avoidance of unjust enrichment, and it is hardly fair for suppliers (who already incurred expenses) to be required to reimburse the entire pre-payment or downpayment.
The person seeking reimbursement shall notify the owner/representative of the chosen option. Note that the person seeking reimbursement has the absolute discretion to choose the option provided under the DTI Circular.
Within 5 days from receipt of the option taken, the venue owner/representative shall send a letter confirming receipt thereof.
Refunds shall be implemented within the period and terms agreed upon by the parties, in the absence thereof, the period shall be within 30 days from receipt of notice confirming receipt of the option chosen by the party who made the payments.
If the foregoing efforts fail, the DTI-Fair Trade Enforcement Bureau (DTI-FTEB) or DTI Regional Offices (RO) or Provincial Offices (PO) shall, upon written request, issue a letter directing both parties to undergo DTI’s alternative dispute resolution proceeding. Pending receipt of notice from the DTI, the requesting party shall update the DTI-FTEB or any development on the subject concern. Failure to update the DTI-FTEB or DTI-RO/PO of any development regarding the subject issue shall create the presumption that the same has been resolved by and between the parties.