Annex 4 - Force Majeure and Hardship Clauses Updated
The International Chamber of Commerce recently issued 2003 updates* for its suggested Force
Majeure Clause and Hardship clauses. These are the first revisions to these clauses since 1985 and
reflect significant changes. The ICC anticipates that either clause will apply to any contract where the
parties expressly incorporate it, or alternatively, where the contract incorporates by reference the "ICC
Force Majeure Clause" and/or the "ICC Hardship Clause." With the prospect of incorporation by
reference, familiarity with the consequences of these new formulations is especially important for
those reviewing any document where an incorporation by reference might appear.
Force Majeure 2003
Traditional formulations of force majeure usually are based on impossibility of performance. The
threshold of impossibility is high but, if reached, the contracting party suffering the force majeure
event is relieved of contract performance obligations as long as the force majeure event continues.
The ICC 2003 clause adopts a considerably lower threshold based upon "impediments" that are
beyond the "reasonable control" of the party. A party also may be excused from performance of its
contractual obligations as a result of a third party’s inability, as a result of similar "impediments," to
perform all or part of the contract that the third party has been engaged to perform.
There is a long list of impediments and many are familiar force majeure events: war, acts of God,
insurrection, etc., but others require careful consideration since they may absolve a party from
performance of contractual obligations as a result of circumstances quite different from the hostile
actions or natural disasters most often equated with force majeure circumstances. For example,
"compliance with any law or governmental order" or "prolonged breakdown of...telecommunication"
suggest circumstances that may have little to do with unanticipated external events, but might
nevertheless relieve a party from its contractual obligations.
A party invoking force majeure must "take all reasonable means to limit the effect of the impediment
or event invoked upon performance of its contractual duties" so the new formulation of force majeure
is not without limits in the relief a party can reasonably expect to achieve. However, the scope of the
ICC 2003 version introduces into force majeure analysis an expansion of subjective considerations
and the possibility of relief from the performance of contractual obligations in circumstances not
traditionally associated with force majeure events.
Hardship 2003
The ICC 2003 hardship clause recognizes that parties must perform their contractual obligations even
if "events have rendered performance more onerous than would reasonably have been anticipated at
the time of the conclusion of the contract." However, where continued performance has "become
excessively onerous due to an event beyond [a party’s] reasonable control which it could not
reasonably have been expected to have taken into account," the clause obligates the parties to
"negotiate alternative contractual terms which reasonably allow for the consequences of the event.
"
Failure to agree to alternative provisions entitles the party invoking the clause to terminate the
contract.
The difference in result suggested by an obligation, on the one hand, to perform a contract that is
"more onerous" than anticipated while, on the other hand, avoiding performance of the terms of a
contract that are "excessively onerous," might encourage the liberal use of the hardship clause by
those who perceive that they made a disadvantageous bargain. The use of the hardship clause or its
incorporation by reference into a contract could result in unanticipated requests for renegotiation with
the ultimate threat of contract termination if renegotiation proves futile. Careful consideration of the
possible consequences of the ICC 2003 hardship clause is warranted.
