Force majeure: recent developments and key elements

In the webinar "Force majeure: recent developments and key elements," it was discussed how in commercial contracts, the concept of "force majeure" determines how and who assumes the risks of unforeseeable events for the parties. The pandemic marked a turning point in the configuration of these events, as previously, more general clauses were typically agreed upon, which did not foresee a pandemic, causing multiple contractual disputes when it occurred. After the pandemic, more specific clauses have begun to be drafted, requiring the listing of the multiple cases that can be considered "force majeure".

What elements should a force majeure contractual clause include in the common law system?

The panelists emphasized that the common law system now requires, following the pandemic, a specific stipulation: explicitly listing concrete events that can be considered "force majeure", such as cyberattacks, public emergencies, and government-ordered shutdowns, among others. This enumeration must be accompanied by specific notification periods to prevent the eventuality from becoming unenforceable for the parties due to the contract's silence.

Requirements to prove force majeure in the civil law system

The webinar contrasted the Anglo-Saxon model with civil law regulation. In this type of system, it is not necessary to include a specific force majeure clause, as the law already foresees this eventuality and, being a public order rule, it applies to any contract executed in the respective jurisdiction. However, to provide clarity to the agreement and avoid unnecessary discussions, it was recommended to include a clause on this matter, which, unlike common law, does not require listing the events or being detailed. In this system, for a force majeure event to occur, the law and jurisprudence require the situation to be: (1) unforeseeable, (2) irresistible, and (3) beyond the will, conduct, and diligence of the party claiming it.

The presentation detailed that this analysis is carried out objectively and not discretionally, under the objective elements determined by law and jurisprudence.

Causal link between the force majeure event and the breach of contract

The panelists discussed a real case advised by PGP Abogados from the perspective of both legal traditions and concluded that government-issued shutdown orders are not, in themselves, force majeure events, but rather the causal link between the shutdown declaration and the delay or breach of the obligation must be proven. In this regard, the panelists agreed that insurance policies are a containment mechanism against economic damages and contractual disputes arising from these eventualities.

Furthermore, they concluded that the delimitation of jurisdiction and the technical adaptation of force majeure contractual clauses to the reality of the system in which the contract is agreed upon and executed prevent litigation.

If you require advice or assistance in reviewing and drafting force majeure clauses, do not hesitate to contact us.