• Litigation
  • Agricultural law
  • Environmental law
  • Cooperatives law
  • Corporate and commercial law
  • Civil law
  • Criminal law
  • Collection of receivables
  • Construction law
  • Copyright and internet law
  • Intellectual property law

In the existing circumstances, many business entities have or will have problems with fulfilling their contractual obligations. However, this does not need to be always connected with negative legal consequences, like for example the payment of contractual penalties or the repair of a damage stemming from failure to fulfil such obligations.

The Polish legal system provides for at least two legal institutions under which contractual parties can defend themselves against negative consequences of their failure to fulfil their obligations in the case of the occurrence of certain circumstances being beyond the parties’ control. These are Force Majeure and the extraordinary-change-of-circumstances clause (rebus sic stantibus).

This institution is regulated by Art. 357(1) § 1 of the Civil Code, which reads as follows: “if, due to an extraordinary change of circumstances, a performance entails excessive difficulties or exposes one of the parties to a serious loss which the parties did not foresee when executing the agreement, the court may, having considered the parties’ interests, in accordance with the principles of community life, designate the manner of performing the obligation, the value of the performance or even decide that the agreement be dissolved. When dissolving the agreement, the court may, as needed, decide how accounts will be settled between the parties, being guided by the principles set forth in the preceding sentence.”

This institution may define liability of the parties in a completely different way than Force Majeure.

The rebus sic stantibus  clause differs from Force Majeure both in terms of premises (inability to foresee vs. the parties foreseeing the possibility of Force Majeure, excessive difficulties in fulfilling an obligation and a risk of gross loss if the obligation is performed) and consequences (the avoidance of a contractual penalty or compensation vs. a possible change in the manner of performance of the obligation, an amount of payment or even, in extreme circumstances, the termination of the agreement by the court).

In turn, both Force Majeure and the extraordinary change of circumstances, to have a consequence intended by the affected party, must have a significant and undoubted impact on the party’s inability to perform its contractual obligation, excessive difficulties in performance of such an obligation or a potential gross loss in case of its performance. In both cases, the burden of prove lies with the party that refers to Force Majeure or the extraordinary change of circumstances.

Please, note however that both institutions are separate and should be applied alternatively.

In the opinion of Prokurent Law Firm the existing epidemic and related restrictions may be considered both as a Force Majeure event and an extraordinary change of circumstances. However, a case-by-case assessment should be made both with regard to contractual obligations in terms of their impact on performance abilities, as well as the choice of a legal institution which is to protect interests of the party affected by a Force Majeure event or an extraordinary change of circumstances. As, the existence of an adequate casual link between new circumstances and the party’s ability to perform its obligations will be assessed, in most cases, by the court.

 

Author: Prokurent Law Firm Team

Are you interested in the article, share it.

e-mail: koronawirus@prokurent.com

 

#ProkurentLawOffice
The Prokurent Law Firm was with clients – when in 1989 there was a change in the legal system in Poland, when the Constitution of 1997 was adopted, when Poland joined Nato and the EU. We were present when there was an international financial crisis in 2008 (after Lehman Brothers’ collapse). A lot of good is behind us and ahead of us. You can always feel safe with Kancelaria Prokurent/ Prokurent Law Office.

Kategoria:
Autor: Paulina Radzikowska
Copyright © 2020 Kancelaria Radców Prawnych i Adwokatów Prokurent Sp.p.