In articles 1351 and the following, the RCC foresees several cases in which a party to a contract is no longer held liable for the non-observance of its obligations, out of which of particular interest are Force Majeure and Fortuitous case (“exoneration cases”).
While “Force Majeure” is defined as any external event, unpredictable, absolutely invincible and inevitable, the “Fortuitous Case” is an event that cannot be predicted nor prevented by the one held liable if the event did not occur.
Although the two exoneration causes seem to overlap, there are some significant distinctions between the two, namely, while Force Majeure always implies the occurrence of an external event, the Fortuitous Case can also apply in situations related to the party or to the good that is sold through the contract. Also, the Fortuitous Case does not need to be “absolutely invincible and inevitable”, the requirement for the party invoking it is being to be able to demonstrate that it could not have prevented it or predicted it, the standard for this latter exoneration case being lower than in the case of the Force majeure.
In practice, the courts have held that:
- natural phenomena such as: floods, landslides, earthquakes, lightning and so on, due to the fact that such events cannot be imputed to anyone, they are exonerating causes of liability (High Court of Cassation and Justice (HCCJ) decision no. 358/1965);
- The Fortuitous Case is a simple internal causal obstacle arising from the conditions of exercising the prerogatives over of goods and which is only relatively possible to remove. For example, breaking the steering bar of a vehicle, tire explosion and so on, they are fortuitous cases, not cases of force majeure (HCCJ decision 766/1981);
What is important to underline is that the existence of a situation that could amount to an exoneration case does not excuse from its obligations a debtor who has not been directly affected by such case, so there must be a nexus between the exoneration case and activity of the latter and the burden of proof lies on the party invoking the exoneration event.
In the case of the Force Majeure, the assessment whether an event is unpredictable, absolutely invincible and inevitable, is done in abstract, according to the objective type of a sufficiently diligent man and not for the particular case, that is to say as a certain person who has a certain training in one area, preparation that would, in a given case, allow him to foresee, to avoid or defeat the effects of Force Majeure.
With respect to the modality the exoneration cases shall become applicable and if there are any preconditions, if the contract is silent, the provisions of RCC shall be applicable, which in art. 1634 foresee that the steps to be followed are:
- Notify the other party with respect to the occurrence of the event as soon as reasonably possible (otherwise the party shall be held liable to the damages caused to the other party);
- Consequently, the contract shall be suspended either up until the situation leading to the exoneration case has ended, either up to the date the contract is terminated through the parties’ will – should they decide so through an addendum to the contract;
- Conversely, if the event is one whose effects cannot disappear/be remedied in time (eg. the total destruction of an office building in which the party invoking the Force Majeure had its office) the parties shall immediately be released from their obligations;
Notably is the fact that for the obligations that were already outstanding when the exoneration case occurred (for example payments that were overdue) the party can’t invoke Force Majeure/Fortuitous Case to avoid being obliged to perform the payments or the applicability of penalties.
Also, in the case of occurrence of an event that does not amount to an exoneration cause but unbalances the contract, the RCC has regulated the situation of Hardship (Impreviziune): according to the definition from art. 1271 RCC, Hardship is the situation in which the execution of the contract became excessively onerous to one of the parties due to an exceptional change of circumstances, which would make it manifestly unfair for the party who is obliged to perform the obligation. Should Hardship occur the parties, or in the absence of their agreement the court of law may: adapt the contact distributing equitably between the parties the losses and benefits resulting from changing circumstances or terminate the contract.
As the definition provides, there are 3 conditions that need to be met in order for a party to be able to rely on Hardship in order to request the rearrangement of the contract, namely:
- the contract became excessively onerous in the sense that although the parties may still continue to execute their obligations, continuing to do so would place one party in a very difficult economical position
- exceptional change of circumstances: in order for an event to qualify as exceptional it must surpass the inherent risk that either party undertakes, under the contract. For example, a tenant of a shopping mall undertakes the risk for its activity to be stopped a couple of times per year (eg. In case of works to be performed or in case of shortages of utilities) but it will be exceptional for him to foresee that its entire activity will be shut down for months in a row. Also, it is implicit that the change should occur after the signing of the contract. In the case of COVID – 19 pandemy, from our perspective, the parties shall have difficulties invoking Hardship for the contracts signed after January 2020 when the World Health Organization declared a international health emergency. The assesment whether the character of the change is exceptional shall be done, by analizing the actual facts of the case and the ability of the party to foresee the event, depending on its knowledge, level of preparation etc.
- which would make it manifestly unfair to oblige the debtor to execute the obligation: this condition is very subjective and shall be analyzed by making a parallel between the intention of the parties at the date the contract was concluded and the situation when Hardship is invoked, and generally is considered as being met in circumstances in which the party invoking Hardship would be deprived of the benefits it wanted to obtain when concluding the contract, and its financial situation would be deteriorated while the other party would continue to obtain benefits from same contract.
Resorting to Hardship implies a threefold procedure, namely: Firstly the party invoking Hardship should notify the other party and request the renegotiation of the contract, if the other party replies positively to the notification, the second stage shall be initiated in which negotiations shall take place for the adaptation of the contract. Conversely, if the other party does not reply to the negotiation request or if the negotiations fail, the third stage shall commence through the filing of a judicial claim for the modification of the contract in order to distribute equitably the losses and benefits of the contract or the termination of the contract.
If the parties did not exclude the applicability of Force Majeure/ Fortuitous Case / Hardship from their contract, either party may rely of the provisions of RCC and request either exoneration from liability or the rebalancing of the obligations. However, if the contract does contain a provision regarding the exoneration cases and/or Hardship, the latter shall prevail.
If the contract in connection to which the party wants to invoke any of the exoneration causes or Hardship is one for sale of goods between parties headquartered in different countries, then the Vienna Convention on Contracts for the International Sale of Goods (“CISG”), to which Romania is a contracting state, shall apply (if the parties did not expressly derogate from its provisions).
The CISG does not specifically define Force Majeure or Hardship but merely sets forth in art. 79 of the Convention, the cases in which one of the parties may be exonerated from its obligations, namely if the following conditions are met:
- the occurrence of an impediment beyond his control
- the event could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract
- the event or its consequences could not have been avoided or overcame
The exoneration case from article 79 of the CISG is a combination between the elements of the Force Majeure and the Hardship from Romanian national legislation, but the wording is more permissible since it does not require the party to prove an absolute invincibility and inevitability of the event but just to prove that it was is out of its control.
Should an international contract, regulated by Romanian law not contain any exoneration clause, the provisions of CISG shall prevail because it constitutes Lex specialis by comparison with RCC that is Lex generalis.
The mechanism through which the exoneration clause is triggered is the same as in the case of the Force Majeure/Hardship, namely the party invoking it must send a notification within a reasonable time after the occurrence of the impediment.