Force majeure

What is a force majeure clause?

A term sometimes referred to as an “act of God”, covering unexpected events and preventing contract fulfilment.

What is the meaning of force majeure?

Force majeure, a French word translated as "superior force," refers to unexpected events beyond the control of the contracting parties that make it impossible or impracticable to perform contractual duties. Common examples include natural disasters, wars, and pandemics. Its purpose is to relieve parties of their duties in events where a normal functioning of the contract cannot be upheld.

This article explores how force majeure comes into effect in Dutch law compared to the European Union (EU) and its member states. As we will find out, there are slight nuances in the scope and tradition of its application, which can lead to a variation in outcomes.

What is force majeure in Dutch law?

In the Netherlands, force majeure - referred to as “overmacht” is governed by Article 6:75 of the Dutch Civil Code (Burgerlijk Wetboek). The application of force majeure does not require an explicit clause in the contract because it is embedded in the civil code (meaning it is always applicable). However, parties sometimes like to include specific force majeure provisions to clarify which events should be considered. The reason for this is that Dutch courts tend to interpret force majeure narrowly, focusing on whether the event was truly unforeseeable and unavoidable at the time the contract was concluded.

For example, if a supplier cannot deliver goods because a flood has destroyed their warehouse, this may be considered force majeure. On the other hand, however, if the supplier fails to deliver due to a price increase in raw materials, this is usually not accepted as force majeure. This, of course, is not to say that in no circumstance a contract can be ended for reasons of economic hardship - in fact, the opposite. However, it’s application would likely not fall under force majeure.

What is force majeure in the EU?

The interpretation and application of the force majeure clause varies among EU member states due to different legal traditions and statutory regulations. We will consider the nuance in a number of examples below.

In France, force majeure is defined under Article 1218 of the French Civil Code. An event qualifies as force majeure if it is beyond the debtor's control, could not have been reasonably foreseen at the time of the contract, and whose effects cannot be avoided by appropriate measures. French law requires the event to be unforeseeable, unavoidable, and external.

In Common Law countries like England (note that the UK has left the EU but is often included in discussions of European contract law), force majeure is not a concept automatically implied into contracts. Instead, it must be expressly included and defined within the contract. Without a force majeure clause, parties may rely on the doctrine of "frustration," but this is a narrow and difficult route, requiring that performance has become impossible, illegal, or radically different from what was contemplated.

In Germany, while the term "force majeure" isn't explicitly used in the German Civil Code (Bürgerliches Gesetzbuch), similar principles apply under sections dealing with impossibility and frustration of contract. German law allows for contract termination or adjustment when unforeseen events fundamentally alter the contractual equilibrium.

Real life examples of force majeure across the EU

Large unforeseen events provide an avenue to explore the application of this ruling in a real life setting. We’ve considered two of the most impactful macro events in the past 20 years below.

During the COVID-19 pandemic we saw EU governments declare states of emergency, enforcing lockdowns to curb the spread of the virus. The combination of this outbreak and measures required to prevent the spread disrupted economies and the businesses that comprise it. In the Netherlands, parties invoked "overmacht" (force majeure), with courts assessing whether the pandemic made performance truly impossible rather than just more difficult. France recognised COVID-19 as a force majeure event for public contracts and assessed private contracts based on criteria like unforeseeability and externality. Germany applied principles of impossibility and frustration of contract to acknowledge COVID-19 as a potential force majeure event

In Spain, the application of the legal doctrine of "rebus sic stantibus" allowed contracts to be modified or terminated when unforeseen events fundamentally altered the contractual balance. Spanish courts, both during the COVID-19 pandemic, as well as the 2008 financial crisis, were more receptive to considering severe economic hardship as grounds for adjusting obligations.

Conclusion

In conclusion, the force majeure clause is a valuable contractual tool for addressing unforeseen events that prevent the fulfilment of obligations, though its application varies significantly across jurisdictions. In the Netherlands, "overmacht" is embedded in the law, while in countries like France and Germany, specific criteria and principles govern its use. To ensure protection, businesses should clearly define force majeure events and seek legal guidance, especially when operating across multiple legal systems.