Mechanisms for suspension, termination, and settlement of disputes are essential in international contracts to protect the parties from unforeseen events and disagreements.
Over the past ten years, these clauses have evolved to better anticipate economic, health (e.g. COVID-19), political (e.g. geopolitical conflicts), and environmental crises (e.g. natural disasters).
To explore this point further in Civil Law or Common Law
In Civil Law countries, particularly in France, the 2016 contract law reform strengthened the legal framework around contract termination with the following provisions:
- Article 1218 of the Civil Code, which defines force majeure, limiting the ability to demand contract performance under exceptional circumstances.
- Article 1195 of the Civil Code, which introduces the doctrine of hardship, allowing renegotiation of a contract in the event of a fundamental change in economic conditions.
- Article 1224 of the Civil Code, which governs unilateral termination of a contract, preventing abuse. These provisions offer greater flexibility to the parties but require precise contractual clauses to avoid divergent interpretations.
In Common Law, the principles remain more rigid Force majeure is not a general legal principle and must be expressly included in the contract to be applicable.
- There is no direct equivalent to the doctrine of hardship (frustration of contract being narrower and more restrictive)
- Termination is governed by termination for convenience or termination for breach clauses, which must be clearly negotiated.
Since the COVID-19 crisis, many contracts have incorporated specific force majeure clauses, including pandemics and supply chain disruptions as valid grounds for suspension or termination.