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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).

In this article, we will discuss Force Majeure and soon we will write about the extraordinary change of circumstances.

In business the term of Force Majeure is commonly used, usually in the form of relevant contractual clauses which provide for the absence of sanctions (contractual penalties, compensations) for a failure to fulfil a contractual obligation by a party that was not able to fulfil such an obligation due to Force Majeure. There is no legal definition of Force Majeure in civil law. However, it may be assumed that this is an event: (i) which is independent of parties; (ii) whose occurrence could not be predicted as at the agreement date, but its potential existence must be taken into account; and (iii) whose consequences cannot be prevented by the use of normal precautions. Agreements containing such clauses usually give examples of Force Majeure events.

Parties to agreements which do not contain any regulations in this respect may also point to Force Majeure as the existence of Force Majeure is an objective factor. It is important, however, to note that the effective avoidance of contractual liability for non-performance of obligations is not only dependant on the occurrence of Force Majeure, but on the real impact of the Force Majeure event on the party’s ability to perform its contractual obligations.

There must exist an adequate casual link between Force Majeure and the inability to perform an obligation and the burden of prove that such a link exists is borne by the contractual party that has failed to fulfil its obligations and wants to avoid contractual liability thereunder.

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

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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.

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