Part 3 of ‘four points of attention when concluding (commercial) agreements’: force majeure

You are negotiating an agreement with your counterparty - for example, a supplier, manufacturer or service provider. What if you can no longer fulfill your obligations under the agreement? Can you then successfully invoke force majeure? And which situations are actually involved? In this blog, we briefly set out which possibilities you have.

What is "force majeure"?

As described in Part 2 of this blog series, a party who fails to perform the agreement is not liable for damages if this is not attributable to him or her. This situation is called force majeure and is described in article 6:75 of the Dutch Civil Code. In short, force majeure thus concerns the situation where performance is prevented by a reason that is not at the debtor's risk. It is up to the debtor to prove that this shortcoming is the result of force majeure. The statutory regulation of force majeure is of regulatory law. This means that parties can contractually modify or supplement article 6:75 Dutch Civil Code. Therefore, in commercial agreements, parties often agree on extensive force majeure provisions.

What is the consequence of force majeure?

The direct consequence of successfully invoking force majeure, is that the party claiming force majeure is not liable for damages for not being able to fulfill the agreement (anymore). It is therefore essential for both parties to be able to determine whether force majeure actually exists. Note that according to Dutch law, it is possible for the other party to dissolve the agreement in case of force majeure. Article 6:265 of the Dutch Civil Code - which governs dissolution - states that any failure to perform (attributable or not) gives the other party the power to dissolve the agreement in whole or in part. Also take a close look at the agreement to see any other consequences of force majeure.

What should I include in my contract about force majeure?

Because the statutory force majeure provision is of regulatory nature, it is advisable to include a force majeure provision in your agreements: the provision can then be written specifically for the agreement and do justice to the parties' interests. In such a contractual force majeure provision, parties often include what, according to them, falls within the definition of force majeure. Consider, for example, shortages of raw materials or price increases: if that occurs, is it possible for one of the parties to successfully invoke force majeure? And what about strikes by personnel or of suppliers of one of the parties? And can a pandemic or extreme weather conditions be categorized as a force majeure? It is also advisable to include what the parties must do in the event of force majeure: often the agreement states that the other party must be notified in writing and must be kept informed. The agreement will also generally include a duty to limit damages. Furthermore, it is often included that if a force majeure situation lasts longer than the contractually agreed period, the agreement can be dissolved. By precisely agreeing these conditions in the agreement, it is clear to all parties what the mutual obligations are.

This blog is part of a blog series on points of attention when entering into agreements. Don't want to miss a blog? Or would you like to know more now about liability or an agreement you are planning to conclude? Please reach out to s.poutsma@ploum.nl or b.schoenmaker@ploum.nl.

Also appeared in this blog series:

1. Term and termination
2. Liability
3. Choice of law and choice of forum