Force Majeure Hardship Contract Law COVID-19 Supply Chain Commercial Contracts

Introduction

The COVID-19 pandemic, supply chain disruptions, and geopolitical events have fundamentally changed how parties approach force majeure and hardship clauses. This article provides guidance on drafting these critical provisions in international contracts.

Force Majeure Under Different Legal Systems

Common Law (England, US)

Force majeure is not implied at common law; must be expressly included. Courts interpret strictly:

  • Event must be within specified categories
  • Causation requirement: performance prevented, not merely hindered
  • No fault of claiming party
  • Notice requirements strictly enforced

Civil Law (France, Germany, Switzerland)

Civil law systems provide statutory force majeure doctrines:

  • France: Article 1218 of Civil Code; impossibility due to irresistible, unforeseeable event
  • Germany: §275 BGB; impossibility; frustration of contract basis under §313
  • Switzerland: Articles 119-120 CO; impossibility and frustration doctrines

Key Drafting Considerations

Defined Events

Beyond traditional events, consider including:

  • Pandemics, epidemics, public health emergencies
  • Supply chain disruptions
  • Sanctions and export controls
  • Cybersecurity attacks
  • Labor strikes and shortages
  • Raw material shortages

Consequences

  • Suspension: Performance suspended during force majeure period
  • Termination Rights: After specified duration (30-180 days)
  • Mitigation Obligations: Reasonable efforts to continue performance
  • Allocation of Losses: Who bears increased costs?

Hardship/Price Adjustment Clauses

Address situations where performance remains possible but becomes economically burdensome:

  • Material adverse change (MAC) clauses
  • Price adjustment mechanisms
  • Renegotiation obligations
  • Termination rights for extended hardship

Case Law Developments

  • UK: Various COVID-19 cases confirm strict approach to force majeure
  • France: COVID-19 recognized as force majeure in some cases
  • US: Courts applying traditional force majeure analysis; frustration of purpose claims largely unsuccessful