Force Majeure and Hardship Clauses in International Commercial Contracts.
Mémoire publié en 2002 - 18 pages
As any relation now tends to become a legal relation, international contracts, that the French courts defined as a contract where there are an ebb and flow across a border , have increased as well. Moreover, with the setting aside of long relationships, long-term contracts, or which at least exist over a substantive period, have especially increased. International trade transactions generally imply a greater element of uncertainty due to the fact that they are subject to political and economic influences in foreign countries. Then, the main difficulty of this kind of contracts is that the circumstances under which they were concluded may well change, and so their performance may be more difficult, for one or more parties.
When such a problem arise, reference is often made to one of the main principles in international law, which is "pacta sunt servanda". It means that once the contract is signed, the parties have to respect it and so to perform it. If one or more party fail to do so, he would be held responsible for this non-execution. This principle has a great importance, as the contract can so be considered as a reliable promise. Indeed, for the effectiveness of economic activities, it shall be avoided that one of the parties signs the contract with a genuine bad faith, without any intention to fulfil his obligation. This principle aims natural justice, as the person is so bound by his promise.
Yet, this aim may be perverted, and even lead to unfairness, when the situation existing at the conclusion of the contract have changed so completely that the parties, acting as reasonable persons, would not have made the contract, or would have made it differently, had they known what was going to happen. This situation is of course less likely to arise if short-term contracts are concerned, or contracts with a rather easy structure, where non-performances are usually exchanged against money. In international trade, however, many contracts are of a more complicated structure.
Nevertheless, some solutions may be found in national laws.
For instance, French law provides that any non-performance of an obligation to do or not to do, do not give right to damages in the case of force majeure . Yet, the courts have applied those provisions in a very strict way, as the application of this provision requires four conditions to be fulfilled simultaneously:
- the event must be "irresistible"
- the event must be unforeseeable.
- the event is to be an outside one.
- the event should be unavoidable and absolutely beyond the control of the debtor.
The Common Law has a wider view and considers the theory of frustration: a contract is said to be frustrated by physical or legal impossibility or by the occurrence of a radical change of circumstances so that the foundation of the contract has gone . The contract is then discharged.
The German approach to the problem is much more flexible. The debtor does not have to fulfil his obligation when it became impossible to perform anymore, as soon as the reason of such an impossibility (Unmöglichkeit) is beyond his control, and so not due to his fault or negligence . This impossibility can be physical or legal (such as the compulsory purchase order of an estate). These provisions are quite similar to the Swiss ones.
The Italian theory of the Presupposizione is also close to the German one: the contract can be discharged when the situation of the contract becomes, beyond the control of the parties, different to the one that was expected to be.
Yet, some of these solutions happen to be too strict and then not adapted to international trade. Above all, they are not harmonised at all, so there would be too much differences from one situation to another, and so constitute a deterrent to contracting under the law of some countries.
So, from these rules have been created and developed two theories: force majeure and hardship. These concepts both deal with the change of circumstances arising after the conclusion of a contract, and seem to be an efficient way to react to the unforeseeability of some events. What is particularly interesting is that these concepts have first been developed by the observance and development of practical rules, before being consecrated by official and legal documents.
University College of Dublin