On March 16, 2020, the International Chamber of Commerce (ICC) updated their Force Majeure and Hardship clauses. In addition, the ICC published a guide for the application of Force Majeure clauses in commercial contracts.
On March 16, 2020, the International Chamber of Commerce (hereinafter ICC) updated their Force Majeure and Hardship clauses, with options to regulate a series of situations for which the intervening parties require to modify or rescind the contract. In addition, ICC published general considerations for the application of Force Majeure clauses called ‘ICC Guidance on Force Majeure in Commercial Contracts’.
Regarding the force majeure clause, the ICC proposes two versions (long form and short form). Both include the following elements:
- General definition of Force Majeure
- Requirements to be met for the application of the clause
- List of Force Majeure events
The main consequence of the application of the Force Majeure clause within a commercial relationship is that the party that invokes the clause successfully, is exempted from the fulfillment of the obligations contained in the contract and relieved of liability for damages caused for breach of contract.
On the other hand, the Hardship clause prepared by the ICC seeks to provide options for the parties to regulate cases in which one of the parties is affected by the fact that compliance would turn out to be more onerous than reasonably expected and anticipated at the moment where the contract was subscribed. The clause contains the following elements:
- Obligation of the parties to comply with the agreement.
- However, the parties will be obliged to renegotiate the agreed conditions, if one of them verifies that:
- Continuing to fulfill the obligation is excessively burdensome due to an event beyond their control and unpredictable at the time of the subscription, and,
- The event and its consequences could not have been reasonably avoided or overcome.
- If the previous section is applicable and if the parties do not reach an agreement regarding the alternative contractual conditions, the following will be followed:
- The party that invokes the clause will have the right to terminate the contract. This party may not request a judge or arbitrator to adapt the contract, without the agreement of the other party.
- Either party shall have the right to request the judge or arbitrator to adapt and balance the contract or to resolve it, as appropriate.
- Either party shall have the right to request the judge or arbitrator to declare the termination of the contract.
These elements can serve as basis in the preparation and drafting of clauses tailored to the needs of the parties, taking into account their specific requirements and other elements of the contractual relationship.
If you require assistance in drafting and including these clauses in your commercial contracts, please contact us.
You can access the full text of the ICC documents below:
Disclaimer: This document is informative and does not, and is not intended to, constitute legal advice.