Law and regulation of force majeure in Bulgaria

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

Yes, force majeure is regulated under Article 306 of the Bulgarian Commerce Act. 

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

Force majeure

Article 306

  1. A debtor in a commercial transaction will not be liable for non-performance as a result of the application of force majeure. Debtors already in default are not allowed to invoke force majeure.
  2. Force majeure is an unforeseen or unavoidable event of an extraordinary nature that has occurred after the contract was concluded.
  3. A debtor unable to perform its obligations due to force majeure must notify the other party in writing within a reasonable time of the nature of the force majeure and its potential consequences for the performance of the contract. In the case of a failure to notify, compensation will be due for the damages resulting from such failure.
  4. The performance of the obligations and the related counter obligations will be suspended for the duration of the force majeure.
  5. If the duration of the force majeure renders the creditor no longer desirous of the performance, the creditor may terminate the contract. The debtor also has the same right.

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

The legal provisions which regulate force majeure are mandatory. Parties often stipulate force majeure clauses in contracts and list events that will constitute force majeure. However, the following should be considered:

  • The listing of potential force majeure events is for indicative purposes only and should not be considered exhaustive. If there are circumstances that fall outside the scope of the contract clause but which bear the characteristics of a force majeure event as stipulated in the legislation, the debtor will be released from liability.
  • Even if a specific circumstance occurs and it is listed in the contract clause as a potential force majeure event, this does not automatically mean that the debtor is released from liability. This would be the case only if the conditions of a force majeure event under the meaning of Article 306 of the Bulgarian Commerce Act are met.
  • It is not possible to envisage a clause under which the debtor would remain liable even if the performance of the contract were impeded due to force majeure. Such clause would be null and void, as it would contravene the mandatory rules and the principles of good faith and fairness.

It is standard practice for force majeure clauses to stipulate the steps of the notification procedure, specific deadlines for notification to the creditor, and how the force majeure event will be qualified.

However, it should be noted that courts will assess on a case-by-case basis whether a force majeure event occurred which impeded the performance of the obligation and whether the debtor notified the creditors within a reasonable time.

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?

Parties are able to stipulate certain events as force majeure. However, such events must still adhere to the conditions of Article 306 of the Bulgarian Commerce Act.

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)?

Force majeure is a legal term that is defined in the Commerce Act. To establish a force majeure event, the following test must be met:

  • the force majeure event must have occurred after the agreement was signed;
  • the event must have been unforeseeable, or, most importantly according to legal theory and court practice, it must be unsurmountable—the parties should not be objectively able to overcome it, e.g. earthquake, war, prohibition of export/import, flood, fire, acts by the state authorities;
  • either party’s performance under the contract must be impeded;
  • the force majeure event must be the direct cause of the impediment. 

According to the case law of the Bulgarian courts, there is no force majeure in the case of changes to economic conditions and increases in purchase price.

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

No, the force majeure provision stipulated in the Commerce Act applies to all civil law relationships, including B2C transactions.

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

No.

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

No, as explained above, the characteristics of force majeure are stipulated in the legislation and in the event of a dispute, the assessment of whether the legal criteria of a force majeure are met lies with the court.

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 general, another option under Bulgarian legislation which can be used is general business frustration, which is also defined in the Commerce Act. Business frustration is, in fact, a force majeure event that does not make performance impossible, but as a result of unforeseen changes in economic conditions, the preservation of the contract becomes contrary to fairness and good faith. In such case, the debtor is entitled to request that the court modify or terminate the contract.

However, whether the Coronavirus and anti-pandemic measures may impact contracts in a way that can be interpreted as business frustration has not yet been tested.

11. Is there anything else we should know or you would like to share on this topic?

It should be noted that under Bulgarian legislation, the duty of performance cannot be discharged on the grounds of force majeure if the obligation is monetary, because in this case the impossibility of performance would not be objective. 

Portrait ofAssen Georgiev
Assen Georgiev
Partner
Sofia
Portrait ofDesislava Anastasova
Desislava Anastasova
Senior Associate
Sofia