It is essential to underline that many contracts contain Force Majeure and Hardship clauses. They usually contain definitions as well as the due course of action in such a case. In particular, the parties may extend or limit the catalogue of cases of Force Majeure and Hardship, may shape the liability of the debtor as less restrictive or more restrictive than it is provided by the Polish law.
Therefore, the below regime is applicable only in case if the contract does not contain a Force Majeure and Hardship clause, whether it be tailor made or a boilerplate one.
The below characteristics applies to the domestic contracts (where both parties are domiciled in Poland) and to those international contracts which are governed by the Polish law.
It also needs to be exposed that to many contracts of international of sale of goods where one of the parties is domiciled in Poland the Convention on the International Sale of Goods (1980 Vienna Convention) shall be applicable.
Polish civil Code does not provide for a definition of Force Majeure. It has been developed by the jurisprudence. Force majeure is defined as an event which:
- is external with regard to the parties to a contract – the event was not caused by any of the parties
- is unforeseeable – the parties could not have foreseen the event of Force Majeure at the moment of conclusion of the contract
- is unavoidable – beyond control of the parties
- causes impossibility of performance
Some examples of events of Force Majeure are:
- natural disasters (floods, fires, explosions)
- an epidemic,
- acts of authority (embargo, regulations or directions, seizure of works, requisition, nationalization, curfew restrictions, import and export prohibitions)
- military conflicts, civil riots, insurrections, rebellions, uprisings,
- strikes, lockouts
The Coronavirus epidemic may therefore constitute an event of Force Majeure.
An event of Force Majeure renders the fulfillment of a contractual obligation totally or partly impossible. In case delivery is still possible but commercially impracticable or causes extraordinary expenses for the party – such a situation cannot be identified as an event of Force Majeure but an event of Hardship.
A Hardship is a situation where:
- due to an extraordinary event,
- which the parties could not have foreseen at the moment of conclusion of the contract,
- the performance by a party encounters excessive difficulties or exposes this party to a glaring loss
In other words the contracting party theoretically still might deliver its performance because the delivery is not impossible (like in case of Force Majeure); however, expecting that such a party performs its obligation would be deemed unfair and unjust from the point of view of equity.
Examples of Force Majeure
A supplier cannot deliver the goods because the place of delivery is situated in a region closed by public authorities for quarantine and the trucks cannot enter.
A supplier cannot deliver the goods because the public administration of the country where the delivery is to take place has issued a temporary import prohibition.
A supplier cannot produce goods because of the lack of raw materials on the market or import restrictions.
Examples of Hardship
The supplier encounters economic difficulties due to the fact that certain raw materials or semi-finished products have become scarce or their prices have increased.
Such a supplier can still perform its obligation although the performance would trigger a substantial additional effort and expense.
It is important to remember that the protection of Force Majeure and Hardship mechanisms will only apply if the contract had been signed before the Coronavirus epidemic outbreak. The contractors who had signed the agreement before the epidemic of coronavirus may get protection against the other party claims. However if an entity concludes an agreement at present, when the general public is well aware of the virus and its impact on the economy – such an entity will not be protected unless the contract contains the Force Majeure and Hardship clauses which specifically regulate the consequences of the epidemic and its ramifications.