Corporate / M&A
Romania: Force Majeure in Complex Commercial Agreements
→ Dragoş Pleşuvescu
Force majeure allows a party to be exempted from liability if performance of its contractual obligations is hindered or prevented by events beyond the party’s control, such as earthquakes, floods and fire.
The legal concept of force majeure dates back to the beginning of the Roman Empire and is presently regulated by statutory laws in many European jurisdictions.
Although there is no equivalent legal concept under common law jurisdictions, parties also incorporate force majeure clauses into agreements governed by such jurisdictions. This is because relying on other common law doctrines (eg, frustration) may be in neither party’s interest for many reasons, the most important being termination of the agreement.1
Article 1351(2) of the Romanian Civil Code defines force majeure as “any external, unpredictable, absolutely invincible and inevitable event”. In a narrow definition, only natural disasters, with no human intervention (eg, earthquakes, floods, volcanic eruptions) are deemed force majeure events. Over time, legal scholars have extended such events also to “collective and anonymous human interventions undertaken on behalf of public authorities having extensive and extremely negative consequences” 2 (wars, national emergency, general strikes, lockouts, etc.).
Consequences of force majeure
By effect of law, a contractual party is automatically excused from performing its contractual obligations if a force majeure event occurs. The agreement remains in force, but performance is suspended for so long as the force majeure event hinders performance.
The re-activation and safeguard of the agreement is the normal result of overcoming the force majeure. Only in particular situations (eg, performance of the obligation becomes impossible and that obligation was of the essence for the entire agreement) may force majeure terminate the agreement.
Particularities under Romanian law
The parties to an agreement governed by Romanian law are, however, allowed to alter the statutory consequences of force majeure.
Unlike other jurisdictions, the Romanian Civil Code provides “caz fortuit” as a distinct legal concept from force majeure. Caz fortuit is a situation between force majeure and breach. Like force majeure, caz fortuit is an exemption from liability. The main differences from force majeure are: i) the cause of loss may be an internal one (eg, a hidden defect); ii) the event is reasonably unpredictable; and iii) the event is inevitable in the given circumstances (the judge assesses this in concreto).
Still, in Romania, modern commercial agreements frequently follow the Western European trend in legal drafting and incorporate caz fortuit (entirely or for certain events) within the purpose of force majeure clause.
Difficulties in practice; drafting tips
When drafting a force majeure clause for an agreement governed by Romanian law, consider the following:
- Avoiding boilerplate: Boilerplate clauses are often simply cut and pasted from one agreement to another. A force majeure clause may be excellent in a pharmaceutical distribution agreement, but lacking in an on-site industrial gases supply agreement. The lawyers involved in drafting and negotiating the agreement have a duty to understand the particularities for each business relationship and to draft tailor-made clauses.
- Listing force majeure events: When a force majeure clause is used in an agreement under the narrow definition of the Romanian Civil Code, listing events that do not fall under this statutory definition should be avoided. If events are listed for illustration purposes, this should be strengthened by using appropriate wording (eg, “including but not limited to”, “eg”, “etc.”).
- Consequences of force majeure event: The parties may agree to suspend or alter the obligations affected by force majeure. Alternatively, the parties may agree to be released from such obligations or, if the force majeure continues beyond a certain time period, to terminate the agreement.
- Procedure in case of force majeure: The party affected by a force majeure event must give notice to the other party within a certain time. Failing to do so should be expressly treated as a breach of agreement. The agreement should also provide that the affected party undertakes to mitigate the loss. The agreement may also provide that the notice of a force majeure event must be substantiated with evidence from relevant authorities (police, fire department, etc.). The parties should avoid appointing non-governmental organizations to assess/award on force majeure; court decisions are inconsistent in this regard and such practice may hinder access to the court.
The Romanian Civil Code provides an automatic “relief-valve” for an agreement in case of force majeure. But in complex commercial agreements, it is not enough to rely on the general provisions of the law or on boilerplate clauses. It is better to incorporate carefully negotiated and tailor-made force majeure clauses to reduce the risks associated with such events.
Modern commercial agreements frequently follow the Western European trend in legal drafting and incorporate caz fortuit (entirely or for certain events) within the purpose of force majeure clause.
- For more details see A‑Z Guide to Boilerplate and Commercial Clauses, 2nd edition, M. Anderson & V. Warner (Bloomsbury Professional, 2006), 270 – 271.
- L. Boilă in Noul Cod Civil: comentariu pe articole, Fl. A. Baias et al. (C.H Beck, Bucharest 2012), 1407.