Austria

1. Is there legislation on force majeure in your law system?

Several Austrian civil law provisions tackle the issue of “accidental loss or impairment of goods” e.g.:

  • § 1049 ABGB stipulates that a contract shall remain in force if the value of the sold goods is accidentally reduced by half of the fair market value between conclusion of the contract and handover. Therefore, the seller has to bear the risk of deterioration until the handover. However, the purchaser’s contractual obligation (payment of the purchase price) must also be reduced accordingly. The regulations concerning default (§§ 918, 920 ABGB) shall only apply if the seller is responsible for the cause of the reduction.
  • § 1447 of the Austrian Civil Code (ABGB) stipulates that the accidental loss of an object between the conclusion of the contract and the handover means that all obligations of the contracting parties will cease. 
  • § 1096 ABGB, which is generally applicable to rental agreements, can also be applied by the courts to other continuing obligations. However, for cases involving extraordinary circumstances like the Coronavirus, §§ 1104 and 1105 ABGB will prevail over § 1096 ABGB. In relation to the issue of reduction in rent (“Mietzinsreduktion”), § 1096 ABGB and § 1105 ABGB have the same legal consequences. However, the effects of § 1105 are different for lease agreements (“Pachtverträge”) with a term of one year or less. According to § 1105 ABGB, in such cases the lessee is only released from his obligation to pay rent (“Pachtzins”) if his ordinary income is reduced by more than half.
  • In addition, § 1168a ABGB provides that, in relation to service contracts, an entrepreneur may not demand payment for work that is lost due to chance.
  • Finally, reference must be made to the UN Convention on Contracts for the International Sale of Goods. Article 79 leg cit does not apply to the supplier under an international sales contract in relation to liability for non-performance resulting from an event of force majeure. If performance is impossible even in the long term, the claim for performance will be forfeited. In Austria, the application of the UN Convention on Contracts for the International Sale of Goods can be contractually excluded, which is often the case in practice.

Any other deterioration of the item and charges occurring in the meantime by accident shall be at the expense of the owner.

However, if goods were traded in accordance with § 930 ABGB, the purchaser shall bear the risk of the accidental loss of individual items, provided that the respective item has not been limited by this to more than half of its value.

2. If so, what is the text of the force majeure clause in your civil code?

§ 1447 ABGB: ”The complete destruction of a specific asset by coincidence terminates all obligations, even those to reimburse its value. This principle also applies to such cases in which the satisfaction of the obligation or the payment of a dept is impossible due to any other coincidence. The debtor has, in any event, to return or reimburse everything which he received as performance of the obligation as an honest possessor, but in such a way that he does not gain a benefit from the other´s damage.

§ 1104 ABGB: “If, due to extraordinary circumstances, such as fire, war or pestilence, major floods, sudden changes in the weather or complete lack of growth, the property cannot be used at all, the owner is not obliged to restore it, but no rent is payable.

§ 1105 ABGB: “[...] The tenant is entitled to a rent reduction if, by extraordinary chance, the use of the property leased for one year or less has fallen by more than half of its ordinary income. The landlord owes a remission of the rent to the extent that the rent has been reduced by this decrease.

§ 1096 (1) ABGB: “Lessors and commercial lessors are obliged to transfer and maintain the leased asset at their own cost in a usable condition and not to disturb the lessees in the agreed use or enjoyment. If the leased asset is deficient at the time of transfer or if it becomes deficient during the lease period without the lessee´s fault in a way that is not suitable for agreed use, the lessee is relieved from the obligation to pay rent for the duration and in proportion to uselessness. This relief cannot be waived in advance in connection with the lease of the immovable goods.

§ 1168a ABGB: “If the work is destroyed prior to the transfer due to mere coincidence, the contractor is not entitled to demand remuneration. The loss of the material has to be borne by the party who provided it. If the work is unsuccessful due to apparent unsuitability of the material provided by the purchaser or the apparent incorrect instructions from the purchaser, the contractor is liable for the damage if he did not warn the purchaser.

3. Is this mandatory or are parties free to regulate force majeure clauses?

Yes. In general, contracting parties are free to agree on specific clauses regarding force majeure.

However, the provisions of § 1096 ABGB on continuing obligations cannot be waived.

4. If it is regulatory, to what extent are parties free to regulate such clauses (e.g. do parties have to take principles of reasonableness and fairness into account) and if so, in what way?

The parties must consider the limits of “immorality” (§ 879 (3) ABGB). Accordingly, a clause may not be grossly unfair to one of the parties. 

5. If a contract just says you can terminate for “force majeure” is there any guidance/case law as to what this means (in the absence of it being defined in the relevant contract)?

There is no specific definition of “force majeure” under Austrian law. However, according to Austrian case law and literature, force majeure constitutes an elementary, external event that could not have been prevented even if the parties had exercised the utmost reasonable care, and is so exceptional that it could not be regarded as a typical operational hazard. 1 Kletečka, Schadenersatz versus höhere Gewalt, ÖJZ 2015/138, H 23-24 / 2015, 1061.

6. Is there a difference in all of this in B2B transactions versus B2C transactions?

The above applies to consumers as well. In addition, pursuant to § 6 (3) of the Austrian Consumer Protection Act (KSchG), the force majeure clause must not ambiguous or incomprehensible to the consumer. If this is the case, the clause in question will be invalid.
In a nutshell, it is very likely that a court would declare a change in the statutory rules on the transfer of risk (“Gefahrentragungsregeln”) to the detriment of the consumer as invalid. 2 Holly in Kletečka/Schauer, ABGB-ON1.05

7. Is there a difference in judgement when the force majeure clause is laid down in a contract or in T&C’s?

No. However, if such a clause is embedded in consumer T&Cs, the provisions of the KSchG referred to above will apply.

8. Do you have examples of force majeure clauses which you think (would) work well in practice?

No. This must be determined on a case-by-case basis taking into account the type of contract at issue.

9. Do you (already) have an example of a force majeure clause which is “corona future proof” or “virus proof” and you willing to share that with us?

N/A

10. Are there any alternative remedies that a party could consider based on being unable to perform a contract due to the corona virus?

In addition to the default described above, an event of force majeure can also mean a “loss of contractual basis” (“Wegfall der Geschäftsgrundlage”). This is the case if one of the contracting parties can no longer reasonably be expected to be bound by the contract due to a change in the contract caused by this event. In this context, however, the only cases that are relevant are those that concern a change in circumstances which everyone associates with the conclusion of such a transaction and which could not have been foreseen at the time the contract was concluded. A typical example is the outbreak of war in a travel destination for a trip that has already been booked. The case of a massive outbreak of a highly contagious disease would also be covered. Therefore, Austrian case law has allowed the withdrawal of travel arrangements due to epidemics (SARS) based on a loss of the basis for the contract. 3 OGH 14.06.2005, 4 Ob 103/05h.

Authors

Picture of Johannes Juranek
Johannes Juranek
Attorney-at-law for data protection law