FORCE MAJEURE
AND HARDSHIP CLAUSES
FORCE MAJEURE CLAUSE (“Clause”)
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The concept of force majeure is known by most legal systems, but the principles developed in national laws may imply substantial differences. In order to overcome this problem parties tend to agree on autonomous solutions, by including in their contracts force majeure clauses containing solutions which do not depend on the particularities of national laws. In order to assist parties in drafting and negotiating such clauses, the ICC has created two balanced Force Majeure Clauses, the “Long Form” and the “Short Form”.
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The ICC Force Majeure Clause (Long Form) can be included in the contract or incorporated by reference by stating “The ICC Force Majeure Clause (Long Form) is incorporated in the present contract”. Parties may also use the Clause as the basis for drafting a “tailor-made” clause, which takes into account their specific needs.
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Should the parties prefer a shorter clause, they can include in their contract the “Short Form” of the ICC Force Majeure Clause. The Long Form nevertheless gives guidance on issues in which the Short Form is silent.
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As regards the question of what constitutes force majeure, the ICC Force Majeure Clause intends to achieve a compromise between the general requirements of force majeure, which need to be met in all cases and the indication of events presumed to be beyond the control of the parties and not foreseeable at the time of the conclusion of the contract. For that purpose, the ICC Force Majeure Clause provides a general definition (paragraph 1) and a list of force majeure events (paragraph 3) which are presumed to qualify for force majeure (Paragraph 3). Parties are invited to check the list and verify if some events should be deleted from or added to it, in accordance with their specific needs.
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The main consequence of successfully invoking force majeure is that the Affected Party is relieved from its duty to perform and from responsibility or damages from the date of occurrence of the event (provided that the other party has been notified timely) and, in case of a temporary impediment, until the impediment ceases to prevent the performance.
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Definition. “Force Majeure” means the occurrence of an event or circumstance (“Force Majeure Event”) that prevents or impedes a party from performing one or more of its contractual obligations under the contract, if and to the extent that the party affected by the impediment (“the Affected Party”) proves:
a) that such impediment is beyond its reasonable control; and
b) that it could not reasonably have been foreseen at the time of the conclusion of the contract; and
c) that the effects of the impediment could not reasonably have been avoided or overcome by the Affected Party.
The definition of Force Majeure provides a lower threshold for invoking the clause than impossibility of performance. This is expressed by the reference to reasonableness in conditions (a) to (c) of the clause
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Non-performance by third parties. Where a contracting party fails to perform one or more of its contractual obligations because of default by a third party whom it has engaged to perform the whole or part of the contract, the contracting party may invoke Force Majeure only to the extent that the requirements under paragraph 1 of this Clause are established both for the contracting party and for the third party.
This paragraph intends to exclude that non-performance by a third party or sub-contractor can be considered as such as Force Majeure. The Affected Party must prove that the Force Majeure conditions are as well met for the non-performance of the third party, to which also the presumption of paragraph 3 of this Clause will apply.
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Presumed Force Majeure Events. In the absence of proof to the contrary, the following events affecting a party shall be presumed to fulfil conditions (a) and (b) under paragraph 1 of this Clause, and the Affected Party only needs to prove that condition (c) of paragraph 1 is satisfied:
The Presumed Force Majeure Events commonly qualify as Force Majeure. It is therefore presumed that in the presence of one or more of these events the conditions of Force Majeure are fulfilled, and the Affected Party need not prove the conditions (a) and (b) of paragraph 1 of this Clause (i.e. that the event was out of its control and unforeseeable), leaving to the other party the burden of proving the contrary. The party invoking Force Majeure must in any case prove the existence of condition (c), i.e. that the effects of the impediment could not reasonably have been avoided or overcome.
a) war (whether declared or not), hostilities, invasion, act of foreign enemies, extensive military mobilisation;
b) civil war, riot, rebellion and revolution, military or usurped power, insurrection, act of terrorism, sabotage or piracy;
c) currency and trade restriction, embargo, sanction;
d) act of authority whether lawful or unlawful, compliance with any law or governmental order, expropriation, seizure of works, requisition, nationalisation;
e) plague, epidemic, natural disaster or extreme natural event;
f) explosion, fire, destruction of equipment, prolonged break-down of transport, telecommunication, information system or energy;
g) general labour disturbance such as boycott, strike and lock-out, go-slow, occupation of factories and premises.
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Notification. The Affected Party shall give notice of the event without delay to the other party.
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Consequences of Force Majeure. A party successfully invoking this Clause is relieved from its duty to perform its obligations under the Contract and from any liability in damages or from any other contractual remedy for breach of contract, from the time at which the impediment causes inability to perform, provided that the notice thereof is given without delay. If notice thereof is not given without delay, the relief is effective from the time at which notice thereof reaches the other party. The other party may suspend the performance of its obligations, if applicable, from the date of the notice.
The main purpose of this paragraph is to clarify that the Affected Party is relieved from the performance of the obligations subject to Force Majeure from the occurrence of the impediment, provided that a timely notice is given. In order to avoid the Affected Party invoking Force Majeure only at a later stage (e.g. when the other party claims non-performance) where a timely notice is not given, the effects of the Force Majeure are delayed until the receipt of the notice.
The other party may suspend the performance of its obligations upon the receipt of the notice to the extent these obligations result from the obligations impeded by Force Majeure and they are suspendable.
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Temporary impediment. Where the effect of the impediment or event invoked is temporary, the consequences set out under paragraph 5 above shall apply only as long as the impediment invoked prevents performance by the Affected Party of its contractual obligations. The Affected Party must notify the other party as soon as the impediment ceases to impede performance of its contractual obligations.
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Duty to mitigate. The Affected Party is under an obligation to take all reasonable measures to limit the effect of the event invoked upon performance of the contract.
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Contract termination. Where the duration of the impediment invoked has the effect of substantially depriving the contracting parties of what they were reasonably entitled to expect under the contract, either party has the right to terminate the contract by notification within a reasonable period to the other party. Unless otherwise agreed, the parties expressly agree that the contract may be terminated by either party if the duration of the impediment exceeds 120 days.
This paragraph 8 establishes a general rule for determining in each particular case when the duration of the impediment is unsustainable and entitles the parties to terminate the contract. In order to increase certainty and foreseeability, a maximum duration of 120 days has been provided, which can of course be changed by agreement of the parties at any time according to their needs.
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Unjust enrichment. Where paragraph 8 above applies and where either contracting party has,
by reason of anything done by another contracting party in the performance of the contract, derived a benefit before the termination of the contract, the party deriving such a benefit shall pay to the other party a sum of money equivalent to the value of such benefit.
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