On March 25, 2020, International Chamber of Commerce (ICC) published the new force majeure and hardship clauses (ICC Force Majeure and Hardship Clauses 2020). The ICC Force Majeure and Hardship Clauses 2020 update the 2003 versions, offering a simpler presentation and expanded options to suit various companies' needs. The clauses aim to provide businesses draft contract provisions adaptable to unforeseen events such as the COVID-19 outbreak.
In principle, the ICC Force Majeure Clause 2020 follows the structure of the 2003 Clause, but simplifies and renders it more user-friendly. New clause includes definitions of "Force Majeure" and "Affected Party" as well as paragraph headings. Conditions for the occurrence of a force majeure event are retained, only with some changes to the wording, as follows:
- the impediment is beyond the affected party's reasonable control;
- it could not reasonably have been foreseen at the time of the conclusion of the contract; and
- the effects of the impediment could not reasonably have been avoided or overcome by the affected party.
In order for an event to be considered as a force majeure under the ICC Force Majeure Clause 2020, all of these three conditions must be established, together.
Third paragraph of the ICC Force Majeure Clause 2020 includes a list of events which are presumed to qualify for force majeure. If any event listed is realized, the affected party is released from the obligation to prove conditions (a) and (b) above. In such a case, the affected party must prove only that the effects of this event could not have been reasonably avoided or overcome. While the whole world is struggling against COVID-19 outbreak nowadays, it is also noteworthy to emphasize that the list includes plague and epidemic.
The ICC Force Majeure and Hardship Clauses 2020 also present a short form of the ICC Force Majeure Clause 2020. Short form includes the main elements of the long form but does so only in three paragraphs. This form is particularly suited to use by SMEs.
With the 2020 update, the main revision is made in the ICC Hardship Clause 2020. Taking into consideration the general trend towards trying to maintain the contract where possible, ICC included three alternatives in the ICC Hardship Clause 2020: provided that the parties do not provide for alternative contractual terms, (a) the party invoking the hardship clause being entitled to terminate the contract; (b) either party being entitled to request the judge or arbitrator to adapt the contract or to terminate it; and (c) either party being entitled to request the judge or arbitrator to declare the termination of the contract.
You may access the New ICC Force Majeure and Hardship Clauses here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.