1. Is there legislation on force majeure in your law system?
No specific definition of the term “force majeure” exists under Croatian law. However, the Croatian Obligations Act (in Croatian: Zakon o obveznim odnosima, abbr. ZOO) has several provisions relating to force majeure, which imply that a force majeure event is an extraordinary external circumstance, which could not have been predicted nor prevented, avoided or overcome.
- Article 373 distinguishes with reference to bilateral contracts between (i) complete impossibility of performance due to such circumstances and (ii) partial impossibility of performance.As to (i) - The obligation of the other party (i.e. the party whose obligation under the contract can still be performed) will also cease. If the other party has performed its obligation partially, it has the right to restitution (i.e. the return of what has been performed). If this not be possible, the other party may request compensation.
As to (ii) – The other party may either unilaterally terminate the contract or request a reduction in its obligations.
- Article 369 stipulates that, if the circumstances under which the contract was entered into significantly change, the contract may be amended (if possible and both parties agree) or terminated (only by court order). The requirements concerning possibility/impossibility are similar to the requirements prescribed under Article 373. The main difference is that Article 369 applies if the circumstances significantly change, while Article 373 applies if the obligations under the contract cannot be performed (completely or partially).
2. If so, what is the text of the force majeure clause in your civil code?
Article 208 ZOO
- An obligation ceases when the performance becomes impossible due to circumstances for which the debtor is not responsible.
- The debtor bears the burden to prove the circumstances excluding his responsibility.
Article 343 ZOO
A debtor shall not be liable for damages if he can prove that he could not perform his obligations or that the delay in performance is caused due to external, extraordinary and unforeseeable circumstances, which appeared after entering into the contract and could not have been prevented, eliminated or avoided.
Article 369 ZOO
- Should, after entering into a contract, extraordinary circumstances appear, which were not possible to foresee at the time of entering into a contract, whereby the circumstances at hand make it excessively onerous for one party to perform its obligations under the contract or the party will suffer an excessive loss due to the subject circumstances, the party may request either change of the contracted terms or termination of the contract.
- Change of the contracted terms or termination of the contract may not be requested by a contracting party invoking the change of circumstances, if that party was obliged to take into consideration such circumstances at the time of entering into a contract or if it could have avoided or overcome them.
- If the party requests the change of contracted terms or termination of the contract, it may not invoke a change of circumstances that occurred after the expiry of the time for performance of its obligations.
- If the party requests termination of the contract, it shall not be terminated, if the other contracting party offers or agrees to an equitable change of the relevant provisions of the contract.
- If the court declares termination of the contract, the court shall, at the request of the other party, oblige the party requesting the termination, to compensate the other party with an equitable amount for the damage suffered due to termination.
Article 372 ZOO:
The Parties to the contract may in advance waive their right to invoke certain circumstances in the contract, unless it is contrary to the principles of good faith and fair dealing.
Article 373 ZOO
- If performance of an obligation of one party to a bilateral contract becomes impossible due to extraordinary external events that occurred after entering into a contract, before the performance under the contract is due and which could not have been foreseen or prevented, avoided or eliminated by a party to a contract and for which neither of the parties is liable, the obligation of the other party shall also cease, and if that party has performed its obligation partially, it has the right to restitution, in accordance with the applicable provisions on restitution in case of unjust enrichment.
- In case of partial impossibility of performance of one party due to an event for which neither of the parties is liable, the other party may terminate the contract if partial performance does not meet his needs; otherwise the contract shall remain valid and the other party shall be entitled to request proportional reduction of its obligation.
3. Is this mandatory or are parties free to regulate force majeure clauses?
Parties are free to mutually regulate their rights and obligations under the contract. The same applies for force majeure clauses.
In general, it is common for the parties to agree upon such clauses (especially in, e.g. construction or lease agreements), as they can regulate force majeure in more detail, e.g. concrete circumstances (such as war, disease) or duty of notification. These provisions may be taken into account when assessing the enforceability of a force majeure clause.
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 are free to regulate the force majeure clause to the extent permissible under the principle of good faith and fair dealing, as well as the principle of equality. The clause must also be in accordance with the Constitution of the Republic of Croatia, mandatory laws and moral principles.
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)?
Croatian case law regularly refers to the content of the “force majeure” provisions (please see the question No. 2 above), i.e. extraordinary external circumstances, which could not have been predicted nor prevented, avoided or overcome.
6. Is there a difference in all of this in B2B transactions versus B2C transactions?
B2C transactions are in general regulated more strictly than B2B transactions. The provisions are aligned with strict European directives.
Therefore, it is likely that the question of whether a circumstance constitutes an event of force majeure, as well as its impact on the obligations arising from the contract, will be interpreted more strictly when it comes to consumers.
7. Is there a difference in judgement when the force majeure clause is laid down in a contract or in T&C’s?
Articles 295-296 of the ZOO prescribe strict regulations regarding T&Cs, i.e. standard contracts, which the respective party uses and unilaterally imposes on other parties.
Provisions of T&Cs are null and void if, contrary to the principle of good faith and fair dealing, they cause a significant imbalance in the rights and obligations of the parties to the detriment of the other or jeopardize the purposes of the contract, even if the T&Cs have been approved by a competent authority.
When determining whether a provision of T&Cs is null and void, the courts have to examine the following:
- all circumstances existing before and at the time of entering into the contract;
- the legal nature of the contract;
- the type of contracted goods or services;
- other provisions of the T&C's, as well as provisions of the related contract.
Considering everything mentioned above, it is "safer" to regulate force majeure in the contract itself, as T&Cs are subject to stricter rules when it comes to validity of the provisions in general.
8. Do you have examples of force majeure clauses which you think (would) work well in practice?
The specific circumstances of each contract need to be taken into consideration when specifying a force majeure clause such as (i) the type of contract the parties are entering into and (ii) specific rights and obligations, which differ from case to case.
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?
10. Are there any alternative remedies that a party could consider based on being unable to perform a contract due to the corona virus?
Please see the answer to question No. 1 above regarding:
- termination by a party/termination by the courts;
- change of contract terms i.e. proportional reduction of obligations.