Unfortunately, these clauses are often copied from one contract to another, without verifying their quality, thus favouring the circulation of poorly drafted clauses which may have very negative consequences in case of subsequent disputes. It is therefore important for business to have access to high quality standard clauses to be used when drafting and negotiating international contracts. The purpose of force majeure clauses is to draw a reasonable compromise between two contradictory needs: the right of a party to be exonerated from its obligations when their fulfilment is prevented by unforeseeable events for which it is not responsible, and the right of the other party to obtain performance of the obligations agreed with its counterpart.
The traditional approach to drafting force majeure clauses tends to be different in civil law and common law jurisdictions. As it will be seen hereunder, the ICC force majeure clause intends to draw a compromise between these two approaches by providing a general definition together with a list of typical force majeure events. The International Chambers of Commerce ICC first introduced in a standard force majeure clause ICC Publication with the purpose of providing traders with a balanced and appropriate tool to be included in international commercial contracts or to be used as a basis for drafting tailor-made clauses.
The clause has been replaced in , by a new version, drafted by a working party of international experts. In order to answer this request, the Commission appointed a working party to revise and update the existing clause, which would remain a «long form», and to draft at the same time a «short form» which would maintain the essential elements of the revised long form through a more condensed formulation.
During the years the working party met several times and drafted two force majeure clauses: i an updated long form , which takes into account the market developments of the last years and which at the same time intends to be more accessible to business, through the use of a simpler language and short explanatory notes included in the clause, and, ii a short form which can more easily be incorporated in a contract.
While the long form was accompanied by a commentary which preceded the clauses, and which in fact was rarely consulted by the users of the clause, it was decided to include short explanatory notes within the text of the clause, in order to draw the attention of the reader to some critical issues.
This clause contains three conditions , all of which must occur in order to relieve a party of its duties. However, as regards the two first conditions, a and b , they are presumed to occur in case of listed events, while the third one must be proved in any case by the affected party. As already provided in the version of , the clause provides a lower threshold than impossibility in order to relieve a party from its duties, by introducing the criterion of reasonableness.
This means that situations where performance is theoretically possible, but in fact unpracticable, may be considered as force majeure. The working group had to decide a difficult issue concerning the relation between the general definition of force majeure and the typical examples of force majeure listed events and in particular whether the listed events would fall under force majeure as such, i. A third, more drastic solution, could have been not to include the list of typical events in the clause at all.
While the first solution was clearly unacceptable, since the existence as such of typical force majeure events, without verifying their actual impact on the performance of the contract by the affected party, could not be considered sufficient; on the contrary, the second solution, i.
In theory It would have been logical to cancel tout court the list of events, but it was to be considered that the inclusion of listed events is deeply rooted in commercial practice especially the Anglo-Saxon world and this issue could consequently not be abandoned. LOCALE 1 LocaleResolver implementation that uses a cookie sent back to the user in case of a custom setting, with a fallback to the specified default locale or the request's accept-header locale. This is particularly useful for Xing for stateless applications without user sessions.
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LocaleResolver implementation that uses a cookie sent back to the user in case of a custom setting, with a fallback to the specified default locale or the request's accept-header locale. This cookie is set by Youtube. Paragraph 3 provides that, in case of doubt, the obligor bears the risk for a refusal or withdrawal of an authorisation when such authorisation has to be granted by authorities in his own country.
This may be considered as a reasonable distribution of risk if the obligor is a foreign state or a state enterprise whose authorities have to grant the necessary authorisation. If the enterprise has no particular connections with the authorities who have to grant the authorisation, a request by the obligor for a term relieving him from the consequences of a refusal or withdrawal may be more acceptable to the other party. The parties should then amend the present clause accordingly.
A party in breach should try to minimise damages caused by a failure to perform, both in his own interests and in those of the other party. If he does not do so he may be liable to pay compen sation for loss or damage which otherwise could have been avoided, even though in principle the exemption clause operates. A party should therefore give notice as soon as practicable to the other party of his intention to rely on the exemption clause see Paragraph 4. Failure to give such notice in time would not only make the failing party liable in damages Paragraph 5 , but also deprive him of the right to rely on the exemption clause in respect of time before the notice.
The latter is a rather horsh and serious consequence. In some contractual relations it may be difficult for the obligor to realise at once whether he will need to rely on the exemption clause. Parties who feel that such a limitation of the exemption clause is unreasonable may strike out the first sentence of Paragraph 5 "The ground A ground of relief relieves the failing party not only from damages but also from penalties and other contractual sanctions Paragraph 6.
It should be observed that the clause covers non-performance of all kinds of obligations, including monetary ones. In the case of payment the duty to overcome the impediment is a very absolute and forgoing one, and the conditions for relief will be satisfied only in exceptional circumstances. It may be argued, however, that a refusal or a withdrawal or any other lack of a necessary license exempting from currency restrictions in a particular context would qualify as an impediment under the clause.
It may also be argued that the duty to pay interest until payment can be made is not a contractual sanction but just compensation for the use of capital. In any event, for the avoidance of doubt the clause specifies that it does not relieve a party from paying interest on a sum due.
It should be noted that the clause does not introduce any duty to pay interest — e. In addition, exchange rate risks are normally borne by the debtor from the date payment is due. A creditor who wants the debtor to be liable for any fluctuations in the rate of exchange of the money of account, irrespective of force majeure, should protect himself in this respect by a specific clause. Contrary to the Vienna Convention and a number of national legal systems, force majeure under the clause also protects the failing party from rescission or termination of the contract by the other party Paragraph 7.
Consequently the clause provides that the time for performance is prolonged for such period as may be reasonable. The test of reasonableness has to take into account not only the failing party's ability to resume performance, but also what interest the other party may have to go on with the contract in spite of late performance. Parties are advised to fix a maximum period at the expiry of which any party may elect toterminate the contract if still unperformed see Paragraph 8.
Since circumstances may vary very much from case to case, it is a delicate task to fix the length of such period in a standard clause. Therefore no attempt has been made to set a definite period in the clause.
Failing an express stipulation, a "reasonable period" test is applied. What is reasonable depends on the facts of the particular case. It would be equally difficult to define the parties' precise rights and duties in case of termination. The Vienna Convention gives only the performing party and not the failing one a right to terminate the contract, and most national legal systems adopt a similar solution. This gives the obligee the option of terminating the contract or waiting until performance is possible.
In case of termination the consequences under the Vienna Convention as in most national legal systems are that each party has to restitute what he has received.
The present clause, which allows also the failing party to terminate the contract, after the expiry of the waiting period has adopted a different system. No restitution is prescribed but each party is allowed to retain what he has received. But he has to account to the other party for any unjust enrichment resulting from the other party's performance Paragraph 9.
This is a very general formula which may not be suitable for certain contractual relations. One example of a different solution is provided by the general conditions of sale of the United Nations Economic Commission for Europe, No. Parties are therefore advised to consider very carefully whether the provisions of Paragraph 9 are suitable for their particular contract and, if not, to vary the clause accordingly.
On the other hand, it may not be advisable to strike it out entirely as long, as the failing party retains the right to terminate the contract. It cannot be incorporated in a contract by reference.
Should the occurrence of events not contemplated by the parties fundamentally alter the equilibrium of the present contract, thereby placing an excessive burden on one of the parties in the performance of its contractual obligations, that party may proceed as follows:. The party shall make a request for revision within a reasonable time from the moment it becomes aware of the event and of its effect on the economy of the contract.
The request shall indicate the grounds on which it is based. The parties shall then consult one another with a view to revising the contract on an equitable basis, in order to ensure that neither party suffers excessive prejudice.
The request for revision does not of itself suspend performance of the contract. The provision may then be continued with any one of the following four alternatives.
If the parties fail to agree on the revision of the contract within a time-limit of 90 days of the request, the contract remains in force in accordance with its original terms. Failing an agreement of the parties on the revision of the contract within a time-limit of 90 days of the request either party may refer the case to the ICC Standing Committee for the Regulation of Contractual Relations in order to obtain the appointment of a third person or a board of three members in accordance with the provisions of the rules for the regulation of contractual relations of the ICC.
The third person shall give his opinion to the parties as to whether the conditions for revision provided in Paragraph 1 are satisfied. If so, he shall recommend an equitable revision of the contract which ensures that neither party suffers excessive prejudice.
The parties will consider the third's person opinion and recommendation in good faith in accordance with Article 11 2 of the said rules for the regulation of contractual relations.
If the parties then fail to agree on the revision of the contract, the contract remains in force in accordance with its original terms.
If the parties fail to agree on the revision of the contract within a time-limit of 90 days of the request, either party may bring the issue of revision before the arbitral forum, if any, provided for in the contract, or otherwise the competent courts.
The third person shall decide on the parties' behalf whether the conditions for revision provided in paragraph 1 are satisfied. If so he shall revise the contract on an equitable basis in order to ensure that neither party suffers excessive prejudice.
The decision of the third person shall be binding on the parties and shall be deemed to be incorporated in the contract. Contrary to the Force Majeure clause which may be incorporated in a contract by reference, the provisions on hardship are not set out in the form of a standard clause.
They have to be completed by the parties as necessary and inserted as express terms in the contract. When doing so the parties will, inter alia, have to choose which of the four alternatives relating to the effects of hardship Paragraphs 5 and following they wish to adopt. Paragraph 1 provides that hardship may be invoked by one of the parties if the occurrence of events not contemplated by the parties fundamentally alters the equilibrium of the contract thereby placing an excessive burden on the party invoking the clause, in the performance of his contractual obligations.
The terms "events not contemplated by the parties", "alter the equilibrium" and "excessive burden" are not defined or described in detail in the paragraph. However, the parties may specify the contingencies entitling a party to invoke the clause in their contract.
They may particularly wish to do this if they want to avoid a very wide application of the clause. The requirements for invoking hardship are less strict than those placed upon a party wishing to invoke the Force Majeure clause. The event which gives rise to hardship must be one which was not contemplated when the parties made their contract, but it need not be one which the parties could not have taken into account.
For instance, a contract provides for continued deliveries of ice at a fixed price. Under normal circumstances, the supplier would have obtained the ice from a nearby frozen lake. The winter turned out to be unusually mild, and the lake did not freeze sufficiently. The only way the seller could supply the ice was to produce it artificially. This increased his production costs enormously.
The event was one not contemplated by the parties but which, strictly speaking, they could have taken into account. The hardship may also be one which the party invoking it could overcome such as an exorbitant price increase of raw materials. Whereas force majeure may be invoked only when performance of the contract has become impossible or quasi-impossible, hardship may be invoked when the contractual equilibrium has been seriously disturbed.
Hardship may come into play not only when the party providing a performance is excessively burdened, but also if the value of the performance to the person receiving it becomes so minimal that it is utterly disproportionate to the benefit which will be gained by the other party. However, hardship cannot be invoked by a party merely because the contract turns out to be unprofitable for him or because the profits flowing from it become considerably smaller than he expected them to be at the time the contract was concluded.
Moreover, the hardship has to be evaluated in the context of the contract as a whole, and not just the part that has been performed.
The event invoked must have occurred after the making of the contract. Generally speaking, if the event occurs when the party invoking it is already in breach, and in particular if the event was caused by acts or omissions for which he is liable, he cannot normally rely on it as a ground for hardship.
The party invoking hardship must continue to perform the contract see Paragraph 4. Paragraph 2 bars a party from invoking the clause if he does not request a revision of the contract within a reasonable time from the moment he became aware of the event and its effects on the economy of the contract. The request has to indicate the grounds on which it is based. What is a reasonable time depends upon the circumstances of the case. A question arises as to what a party can do if the other party remains passive or refuses to negotiate.
This may be of importance when a revision of the contract can be carried through only with the consent of both parties. The answer to this question must be found in the law applicable to the contract. Under some legal systems there is a duty of good faith and fair dealing which a party who does not negotiate in goods faith will violate.
In their contract the parties may opt for any one of four alternatives to be applied if they fail to agree on the revision of the contract within 90 days of the request of revision. The first and the second alternatives lead to a revision of the contract only if both parties agree. Paragraph 5, first alternative, lets the contract remain in force in accordance with its original terms if the parties fail to agree on a revision.
The party invoking the clause cannot require the other party to continue negotiations beyond the 90 days time limit. Paragraph 5, second alternative, gives either party an option to refer the case to an independent third person.
The third person gives his opinion to the parties as to whether the conditions for revision provided in Paragraph 1 are satisfied and, if so, he recommends an equitable revision of the contract which ensures that neither party suffers excessive prejudice. The opinion and the recommendation of the third party are not binding on the parties see Paragraph 6. Under Paragraph 7 the parties have to consider the third person's opinion and recommendation in good faith in accordance with Art. No liability to damages or other compensation for failure to agree arises.
Paragraph 5, third and fourth alternatives allow either party to apply for a binding decision as to whether the conditions for a revision are fulfilled and, if so, what revision is to be made.
Paragraph 5, third alternative, provides that after the 90 days time limit has expired either party may bring the issue of revision before the court or the arbitral tribunal provided for in the contract. If the parties have not agreed to submit the case to a paticular court of arbitration proce dure, either party may bring an action in any court which has territorial jurisdiction to hear the case.
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