The concept of force majeure under Polish law: how it may impact performance of contracts during the Covid-19 pandemic

By Michał Pochodyła, Stolarek & Partners law firm

The concept of force majeure, (siła wyższa in Polish) although used many times in case law and the doctrine, is not defined in Polish codes. However, it is commonly accepted that force majeure is an event which ticks each of these three boxes: It is external in origin (ie. has nothing to do with either party to the contract); it is impossible to predict; and its effects cannot be prevented.

The most frequently given examples of force majeure are events related to natural events – such as floods, large fires, volcanic eruptions, earthquakes or epidemics. The second group are cases related to unusual behaviour of the community – rioting or general strikes. The third category – actions of the state authorities – acts of war, import and export bans, blockades of borders and ports, but also, for example, expropriation.

However, the notion of force majeure should be interpreted very carefully, as it is a far-reaching exception to the rule that requires the execution of an obligation according to its content.

Failure to perform the contract due to force majeure excludes liability for damages resulting from it. If there is a connection between the damage and force majeure and as long as the agreement does not regulate this otherwise. This means in principle, no penalties, no compensation and the need to complete the contract after the termination of the force majeure. Regulations say nothing about the expiration of the obligation, the right to terminate the agreement or any other rights (this, however, may be in the agreement itself).

Extended definition in contracts

In principle, it does not matter whether the agreement contains a force majeure clause. If not, then the law applies, i.e. the principle of no liability for damages. In this situation, the understanding of force majeure will be narrow and limited (as the understanding of doctrine and case law described above). However, the agreement may extend beyond such a narrow definition. In many agreements, the definitions of force majeure often occupy half a page of text, indicating various examples of events. Many of them have nothing to do with the classical understanding of force majeure. Describing certain situations as force majeure is also a relatively common way of disclaiming liability, so it is even more important to pay special attention to these provisions.

Liability to verify

The parties may stipulate in the contract that the contractor’s liability is also extended to cases of force majeure (normally it is liable only for a fault). However, it should be noted that any deficiencies and ambiguities will lead to the return of the doctrinal and case law rules. Moreover, it is insufficient to indicate that “the contractor is liable for whatever reason” or “the contractor is fully liable”. According to the Polish Supreme Court, it is necessary to clearly indicate that the contractor is also liable for the occurrence of force majeure.

Contractual remedies

It is possible, among others, to introduce a contractual mechanism for automatic termination of a contract or the right of one of its parties to revoke the contract, in some instances. If nothing is written into the contract, the party affected by the force majeure, as a rule, will be obliged to complete its obligations once the force majeure event has ceased to apply.

Examples of force majeure events

-    Volcanic Ash Clouds;
-    Coronavirus;

Recommended steps in contracts:

  • Review your contracts in which force majeure or frustration may be a factor

  • Review the possibility to perform on time and quality and assess the consequences if unable to perform

  • Review the impact on your supply chain

  • Comply with notices formalities and ensure whether notification procedure is fully complied with

  • Inform your counterparty as soon as possible about potential inability to perform

  • Stay in close contact with the other party regarding the contract (on a ‘without prejudice’ basis)

  • Mitigate the potential loss and explore alternatives

  • Keep a good record of documentation – proof of delay or cancellation of transportation

  • Review all insurance policies

  • In new contracts, consider including circumstances such as ‘epidemic’, ‘pandemic’, ‘international public health concerns’.