Force majeure in contractual relationships

In early 2020 the Covid-19 pandemic caused drastic changes that significantly affected our daily lives and many contractual relationships. As a result, majority of shops, restaurants, accommodation facilities, sports, wellness and other services were practically closed overnight. The consequences of restrictive measures have raised a number of legal issues, including in the area of contract law. One of the most common question raised in practice was whether the announcement of pandemic and imposed restrictive measures enables the contractual parties to claim an exception from the pacta sunt servanda principle ("duty to fulfil contractual obligations") due to force majeure.

The Slovene Obligations Code (hereinafter: OC) requires the parties to fulfil the accepted obligations as agreed in the contract and provides only few exceptions to the pacta sunt servanda principle. The OC does not directly use the term force majeure, however, it stipulates the circumstances, which have to be met in order that a party to an agreement can be relieved from liability for the damages caused to the other party.

Damages shall originate from an external source beyond control, whose effect could not be expected, avoided or deterred. The respective provision has been established as the basis for invoking cases of force majeure in contractual relationships through case law practice.

Given the absence of detailed force majeure rules under Slovenian law, it is advisable that force majeure provision is agreed and regulated within the contract in greater detailed by the parties itself. It is recommendable that parties agree on provisions, which would determine the force majeure events (e.g., stipulating that certain unexpected measures such as sanctions or embargo imposed on certain country constitute a force majeure event, etc.) and which would also regulate the rights and obligations of the parties following the occurrence of such event.

In such way the parties may limit the area for various interpretation in case of a potential court dispute especially if the respective contract is governed under a law, which does not have a comprehensive regulation of the force majeure clause.

As for contracts which are currently valid and in force, we advise that the parties carefully analyse contract provisions and/or potential general terms and conditions. when analysing force majeure clauses it is also important to consider provisions and principles of the law governing the contract (international conventions, such as CISG, may also apply. In other words, invoking force majeure will depend either on the law chosen by the parties themselves or on the law determined by the conflict-of-law rules.

It is also important that each individual party acts diligently and, if the current situation makes it difficult or (temporarily or permanently) impossible to fulfil contractual obligations, to appropriately informs the other party in a timely manner and explains the circumstances that hinder or prevent fulfilling obligations in accordance with the terms of the contract. Nevertheless, it is necessary to take into account that the circumstances of each force majeure event shall be reviewed on a case-by-case basis.

For any further questions or assistance, we invite you to contact the Legal Department at PwC. 



Stay Connected: