Introduction
Global commerce is unpredictable. Pandemics, wars, sanctions, and climate-related disasters frequently disrupt supply chains, making performance of contracts difficult — or even impossible. To deal with these challenges, businesses rely on force majeure and hardship clauses in international contracts. These clauses allocate risk when extraordinary events prevent performance or fundamentally alter the balance of obligations.
Both the CISG (United Nations Convention on Contracts for the International Sale of Goods) and the UNIDROIT Principles of International Commercial Contracts address these scenarios. While Article 79 CISG focuses on exemption from liability due to impediments beyond control, UNIDROIT Principles provide a modern framework for hardship and renegotiation. Understanding these provisions is critical for drafting contracts that withstand unexpected crises.
Force Majeure in International Contracts
Definition and Purpose
A force majeure clause excuses a party from liability if unforeseen, uncontrollable events prevent contractual performance. Typical examples include natural disasters, armed conflict, strikes, embargoes, or pandemics.
Legal Treatment under CISG Article 79
CISG Article 79 provides that a party is not liable if failure to perform is due to an impediment:
- Beyond its control,
- Unforeseeable at contract conclusion, and
- Unavoidable despite reasonable efforts.
This creates a high threshold: the event must truly make performance impossible, not merely inconvenient or more expensive.
Practical Examples
- A supplier unable to deliver due to government export bans.
- A shipping company prevented from operating because of port closures.
Hardship in International Contracts
Definition and Distinction
Hardship occurs when unforeseen events do not render performance impossible but make it excessively onerous. Unlike force majeure, hardship focuses on economic imbalance, such as:
- Hyperinflation making costs skyrocket.
- Sudden currency collapse.
- Raw material shortages that multiply production costs.
UNIDROIT Principles on Hardship (Article 6.2.2 – 6.2.3)
- If an event fundamentally alters the equilibrium of the contract, the disadvantaged party may request renegotiation.
- If renegotiation fails, the tribunal may adapt the contract or terminate it on fair terms.
This is more flexible than CISG, which does not explicitly regulate hardship but can be interpreted through good faith principles.
Key Differences Between Force Majeure and Hardship
| Aspect | Force Majeure | Hardship |
|---|---|---|
| Performance | Impossible | Excessively onerous |
| Remedy | Exemption from liability | Renegotiation or adaptation |
| Legal Source | CISG Art. 79, national law | UNIDROIT Arts. 6.2.2–6.2.3 |
| Examples | Export ban, natural disaster | Hyperinflation, extreme cost rise |
Drafting Tips for Contracts
- Be precise: List qualifying events but leave room for unforeseen crises.
- Include notice requirements: Parties should inform each other promptly.
- Define consequences: Suspension, extension of time, termination, or renegotiation.
- Coordinate with governing law: Ensure compatibility with CISG or chosen national law.
- Add hardship clauses: Especially important in volatile markets (energy, commodities, construction).
Arbitration and Judicial Treatment
Arbitral tribunals often apply force majeure and hardship clauses flexibly. For example:
- ICC tribunals have accepted pandemic-related disruptions as valid force majeure.
- Under UNIDROIT, tribunals may adapt contracts instead of terminating them, balancing fairness and commercial viability.
National courts vary: some interpret force majeure narrowly, requiring true impossibility, while others are more sympathetic to hardship claims.
Lessons from COVID-19 and Geopolitical Crises
The pandemic highlighted the vital role of well-drafted clauses. Businesses without clear force majeure or hardship terms faced uncertainty, relying solely on CISG Article 79 or domestic law. Likewise, the Russia-Ukraine war and sanctions disrupted long-term supply contracts, showing the importance of adaptation mechanisms for hardship.
Conclusion
Force majeure and hardship clauses are indispensable tools in international contracting. While CISG Article 79 provides exemption for true impossibility, the UNIDROIT Principles add a modern framework for economic hardship and contract adaptation. Businesses that draft clear, balanced clauses can navigate crises more effectively, avoiding costly disputes and preserving relationships. In today’s volatile global economy, no international contract should be signed without addressing force majeure and hardship.
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