Expert Guide on Force Majeure and Unforeseen Circumstances in the Context of Global Trade War in Romania

Force majeure is defined as any (i) external, (ii) unpredictable, (iii) absolutely invincible and (iv) absolutely unavoidable event, all four requirements being cumulative. This legal definition primarily refers to “external” events (which are outside the action of a party to the contract). So-called "acts of God" such as floods, earthquakes or natural disasters typically qualify as force majeure, but other events such as acts of war, labor strikes or epidemics are also generally considered as “force majeure”.

While the imposition of import tariffs or other trade barriers may be defined as an external event, they do not appear necessarily appear to meet the “foreseeability” criterion or the “absolute invincibility” criterion. Although the imposition of import tariffs may (and in fact does) alter the contractual balance and make the obligation of one party more burdensome than before, it is unlikely to consider that it is completely unforeseeable, or that the imposition of the tariff would make the performance of the obligation affected by the tariff absolutely impossible to perform.

Therefore, unless such tariffs were explicitly stated in a force majeure clause under the contract and would result from such a clause, import tariffs are unlikely to constitute a force majeure event.

We note that unlike force majeure, a fortuitous case  (in Romanian: caz fortuit), is a circumstance that can be neither foreseen nor prevented by the person who would have been held liable if the circumstance had not arisen. Therefore, a fortuitous event is (i) relatively unforeseeable (by a responsible person acting diligently whose conduct is evaluated according to the ordinary diligence and prudence)l and (ii) relatively invincible/inevitable (by a responsible person acting diligently to prevent risks related to the event from occurring). As a rule, the existence of a fortuitous case is circumstantial and analysed with respect to the natural or legal person who is bound to perform the contractual obligation. Where the conditions of the fortuitous case are met, the effect of exoneration of liability and release from contractual obligations would be similar to that of a force majeure case.

Consequently, while it is difficult to prove that the conditions of a case of force majeure are met with respect to US imposition of import tariffs, it may be possible to prove that the conditions of a fortuitous case are met. This, however, would be an assessment made on a case-by-case basis and the circumstances applicable to the party seeking to rely on the effects of a fortuitous case which must be individually assessed.

However, both in the case of force majeure and fortuitous case, the debtor of the contractual obligation must be objectively impeded to perform its obligation – if the obligation has simply become more onerous, neither force majeure nor fortuitous case could be invoked to exempt the relevant contracting party from its contractual liability. In the latter case, the matter would be settled based on the rules of contractual risk or legal foreseeability as explained below.  

The first option is based on the general principle of binding force of the contract (pacta sunt servanda). Another option is based on an exemption to this general principle called hardship.

1. In accordance with the principle of the binding effect of contracts between the parties (pacta sunt servanda), parties may either regulate the effects of an increase in the tax or other financial burden (such as the imposition of new import tariffs) on the contract.
   
   Such contractual provisions may regulate the parties’ approach to such situations where one party faces unexpected and extreme difficulties in fulfilling their contractual obligations due to circumstances beyond their control. As such, the imposition of import tariffs may be caught by such a clause. While Romanian law may not recognize the imposition of import tariffs as a force majeure event, parties can choose to recognize it in their contract and give it effect. However, in such a case, the suspension, excuse, or delay in fulfilment of obligations would not be by effect of the law, but as an effect of the contract and the consequences of such event occurring would be assessed in accordance with the terms and conditions of the contract.
    
2. Hardship is the legal institution designed to address the imbalances of contractual obligations caused by exceptional changes of circumstances.
   
   In the absence of a contractual clause addressing changes in tariffs, if the performance of the contract has become excessively onerous for a party due to an exceptional change in circumstances (e.g., the imposition of import tariffs) such that it would be manifestly unfair to require the debtor to fulfil their obligation within the initially agreed contractual terms, the debtor may request that a court:
   1. amend the contract to ensure an equitable distribution of losses and gains resulting from the changed circumstances; or
   2. terminate the contract at the time and under the conditions stipulated by the court.
      
      However, this possibility is granted to the debtor of the (now excessively onerous) obligation only if:
      1. circumstances occurred after the conclusion of the contract;
      2. the change of circumstances and its extent were not and could not reasonably have been foreseen by the debtor at the time of the conclusion of the contract;
      3. the debtor did not assume the risk of changed circumstances and could not reasonably be regarded as having assumed that risk;
      4. the debtor attempted, within a reasonably time and in good faith, to negotiate a reasonable and fair adaption of the contract.

Please note that for this legal option to be available, the performance of the contract must have become excessively onerous for one party. Courts will consider the severity of the onerousness on an individual basis.

Under the principle of freedom to contract, parties may insert a clause regulating the impact and the parties’ respective rights and obligations arising out of similar circumstances which may not necessarily qualify as force majeure under the law. In these cases, a judicial court would give effect to such clauses (irrespective whether the respective event would not formally meet legal conditions to qualify as force majeure or fortuitous case).

Such contractual mechanisms need to be carefully drafted in light of the relevant facts, background of the commercial relationship and the desired outcomes of a rightful appeal on such mechanism. In any case, clauses on force majeure, hardship, price adjustment mechanisms, etc., should be clear as to the scope of the respective clause (e.g. when and to which events does it apply and the consequences of a rightful appeal.