Force majeure, fortuitous case and hardship: what happens with contractual obligations in moments of crisis

By Oana Stratula, Partner, Stratula & Asociatii (published in on March 19th, 2020)


Current situation our country is confronting with is one that produces, inevitably, a series of consequences impacting the legal relationships in general and the contractual relationships in particular, taking into account that there are numerous situations where one contractual party fails to undertake, totally or partially, its obligations towards the other.

Probably one of the most asked questions these days refers to the possibility to invoke the force majeure, or other legal mechanism, in order to suspend or stop performing the contractual obligations, that became either impossible to be performed or very burdensome, or for obtaining a decrease of the amounts to be paid.

Considering that there are important differences between the various legal mechanisms that become applicable in such situation of crisis, I will analyze herein below the distinctions between the force majeure, the fortuitous case and the hardship, their effects on the contractual obligations that are affected by the emergency state, as well as the personal situation of the contractual parties or their representatives.

I shall not treat those effects that are specifically regulated by the Presidential Decree instating the emergency status and which will apply per se, but will rather analyze the concrete situation currently existing, the negative impact of the legal and administrative measures already imposed, as well as the general economic situation with impact on the business environment.

It should be noted that applying certain legal institutions within the contractual mechanisms may be grounded on a general event, such as the force majeure, or on a particular event in which businesses may find themselves, such as the fortuitous case or the hardship – this being a first important difference between the three legal notions.


What is the force majeure

A first question is whether the current situation in Romania may meet the elements of a force majeure event, which could be invoked in order to exonerate the contracting party from responsibility and from its obligations, so that the debtor of a contractual obligation which is not performed due to force majeure, is not liable for such failure of performance.

To answer this question, it should be mentioned that force majeure is defined by the Romanian Civil Code as an external event which is unpredictable, absolutely invincible and inevitable.

Thus, to trigger exoneration from contractual responsibility, the external event that causes the cease of performance of contract’s obligations should not be predicted, defeated and avoided by any other person in a similar situation.

It is therefore necessary that the invoked event is external to the parties’ will and at the same time the person invoking it takes all measures to avoid it or limit its effects.

This possibility is evaluated by taking into consideration the capacity and diligence of a “medium person”, that is normally prudent and diligent, from case to case, depending on the actual particularities applicable to the contracting party and on the contract provisions as well (it should be stated that parties may include a clause according to which the responsibility is not eliminated for force majeure).

As an example, it might not be considered a force majeure event the situation of an international road carrier that cannot deliver the goods on time due to traffic agglomeration at the border but, in such scenario, an eventual fortuitous case or a hardship situation might apply. However, if the borders would be totally closed, such measure might equal to force majeure, if for example the goods are perishable and had to be delivered within the period during which the border closure measure subsists.

It is useful to know that, in the case of international contracts, the Romanian Chamber of Commerce and Industry endorses, upon request and based on documentation, the existence of force majeure events and their effects on the performance of international commercial obligations, while for domestic contracts the county chambers of commerce are the ones having this attribution.


What is the fortuitous case

Another legal institution that may become applicable is the fortuitous case, defined as an event that cannot be predicted nor prevented by the one responsible in case the event would not happen.

Such situation is not generally applicable but it influences just the contractual behavior of the party that finds itself in an impossibility to perform its obligations, due to the respective fortuitous case.

Such situation could be, from case to case, the quarantine or isolation at domicile of the representative of the contracting party, or any other situation which could not be prevented or predicted by the party undertaking the obligation. However, not always may the quarantine and isolation be fortuitous cases, if the performance of the obligations would not become impossible but just more onerous.

The analysis shall be done case by case, based on the type of obligation, and the impossibility to perform must be proven by the one invoking it. Thus, for example, if the person under quarantine or isolation is not prevented of having incomes during such time, he/she could not invoke an impossibility to perform certain payment obligations.

On the other hand, if a person concludes a promise to sell and buy and at the moment the sale should be done he/she is under quarantine, that person might not be held responsible for the lack of concluding the sale purchase agreement at the given date, due to quarantine or isolation reason.

It should be also underlined that the one who desires to invoke in his/her favor a fortuitous case for non-performance, must prove both the unpredictable feature of the event and his/her actual impossibility to perform. In case the person was not in impossibility to perform obligations, there is no longer a fortuitous case but a hardship may become applicable.


Hardship theory – rebus sic stantibus

In principle, contracts validly concluded have mandatory force between parties, in the sense that the parties are obliged to perform their obligations even if the performance becomes more onerous, due to the increase in the costs of performing the obligation or due to the decrease of the consideration received in exchange for that obligation.

Hardship represents an exception from the mandatory force of the contracts, occurring when performance of a contractual obligation becomes excessively burdensome due to an exceptional change of the contractual context, which would make the obligation visibly unjust. In such case the court may order either the adapting of the contract, in order to equitably distribute the losses and benefits between parties, or the contract termination, at a time and under conditions set forth by the court.

Therefore, if the entire situation generated by the COVID 19 pandemic would represent an exceptional change of the context in which the contract was concluded (a fact which is determined by the judge, based on evidence presented by the interested person) the party affected by that change may request to the court to adapt the contract in order to equitably distribute the losses and benefits that result from the context change, or even to terminate the contract.

In order to obtain such judiciary relief, it is necessary that the exceptional change of the context occurs after the conclusion of the contract and it is not envisaged by the affected party, at the moment it has concluded the contract.

At the same time, it is to be mentioned that such possibility does not exist if the debtor has expressly assumed in the contract the risk of context changing or if one might reasonably consider that it has assumed such risk.

Last but not least, in order to try to adapt or terminate the contract in court, the interested party must first try, within a reasonable time and in good faith, to negotiate on the modification or termination of the contract.

As a conclusion, depending on whether there is an actual and absolute impediment of a person to execute its obligations, or just a subjective impediment, or whether the obligations became not impossible but excessively onerous due to an exceptional change of the context, which makes debtor’s obligations ostensibly unjust, then any of the above legal institutions may become relevant.