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12/01/2022

WAR IN UKRAINE AS FORCE MAJEURE – IMPACT ON CONCLUDED CONTRACTS

The institution of force majeure is defined in the legal literature as an event that is unforeseeable at the conclusion of the contract and beyond the control of the parties. Furthermore, the event must be of such a nature that the parties have no possibility to counteract or prevent the effects of the event.

The existence of force majeure is relevant to the liability of the parties to the contract. According to the provisions of the Civil Code, the creditor cannot claim compensation for damage that is caused by circumstances for which the debtor is not responsible.

Circumstances exempting the debtor from liability for non-performance or improper performance of an obligation include force majeure. This means that the debtor will not be obliged, among other things, to pay contractual penalties for a delay in the performance of the contract.

A force majeure clause is often included in contracts to provide for the mutual obligations of the parties when performance of one of them becomes impossible.

As a rule, such provisions will include an obligation to enter into negotiations in order to redefine the mutual performance taking into account the situation and the continued performance of the contract, and will also introduce an obligation to inform the other party immediately of the force majeure. However, the absence of an agreement may result in the involvement of the court in the resolution of the dispute and the use of the so-called rebus sic stantibus clause. Pursuant to Article 3511 of the Civil Code, if, due to a change of relations, the fulfilment of a performance would be connected with excessive difficulties or would threaten one of the parties with a gross loss, which the parties did not foresee when concluding the contract, the court may, after considering the interests of the parties, in accordance with the principles of social co-existence, determine the manner of performance of the obligation, the amount of the performance or even rule on the termination of the contract.

The war in Ukraine may be treated in terms of force majeure – some companies have lost the possibility to use Ukrainian subcontractors and have been deprived of foreign supplies. The sanctions imposed may prevent the performance of contracts involving Russian companies. The war has also led to a significant increase in the price of raw materials, which affects concluded contracts.

However, it should be stressed that it is necessary to demonstrate the impact of the war on the implementation of the contract. This requires a case-by-case analysis. Non-performance must be a normal consequence of force majeure and be demonstrated by evidence. The non-performance or improper performance must have its origin in force majeure and not in a party’s lack of due diligence.