The Russian invasion of Ukraine has disrupted business operations in both Russia and Ukraine. As a result, business entities have begun issuing force majeure notices to clients in connection with a breach of contract matters.
The purpose of a force majeure clause is to relieve a party from its legal obligations under a contract if an unexpected event like floods, fires, terrorism, acts of war, or government orders make the service extremely difficult or dangerous as to be effectively impossible. In other words, if an unpredictable event occurs, then the law will excuse you from your contract.
CONTRACT FORCE MAJEURE
It’s not easy to issue a force majeure because the legally enforced promise is the core function of a contract. When courts rule on force majeure cases they apply strict measures. Force majeure carries a long history in Roman law, as part of a principle that notes no one is expected to perform the impossible. This concept is applied in all legal systems, as protection for contractual obligations when an unforeseen event beyond the control of the parties, makes it impossible to execute the obligation.
Recently, Metinvest, an iron ore and coal mining company operating in multiple locations in Ukraine, issued the force majeure clause with customers and partners. Russia’s assaults, business suspensions, and closures, as well as the Chamber of Industry and Commerce of Ukraine official confirmation of the events, were all factors that contributed to the trigger of the force majeure clause.
Some of the factors that invoke a successful application of force majeure are unpredictability and externality. For example, Ferrexpo, a Swiss commodity trading and mining business operating in Ukraine, issued a force majeure to customers last week. Ferrexpo issuing a force majeure is another example of a successful application of the force majeure clause. Ferrexpo’s obligation was impossible after Russia’s invasion led to port authorities suspending shipment exports from a southern Ukrainian port.
We can expect an increase of companies needing to activate force majeure clauses as the evidence is undeniable. Government orders have paralyzed transactions with Russian-owned entities, Russia continues its assault, and port closures are some of the reasons businesses may issue a force majeure.
The impacts of the Russian-Ukrainian conflict are changing rapidly, and the event is still unfolding. Contractual obligations are going to continue to be overridden by government-enforced orders and through the force majeure clause.
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