Law and regulation of force majeure in Switzerland

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

Under Swiss law, there is no statutory definition of "force majeure". In the absence of an explicit "force majeure" clause in a contract, the legal consequences will depend on whether the impossibility to fulfill a contract exists only for a limit period of time, or  permanently. With respect to the Coronavirus pandemic, for most contracts, the impossibility to fulfill will last only for a limited period of time.

Where impossibility of performance only lasts for a limited amount of time, the default provisions of Articles 107 to 109 of the Swiss Code of Obligations will apply.

 Articles 107 to 109 provide that, in cases where a party is in default, the other party may set an appropriate time limit for the performance to be fulfilled. If there is no performance by the defaulting party during this time period, the other party may withdraw from the contract.

No time limit needs be set:

  1. where it is evident from the conduct of the defaulting party that a time limit would serve no purpose;
  2. where performance has become pointless to one party as a result of the other party’s default; and
  3. where the contract makes it clear that the parties intended that performance will take place by or before a precise point in time.

Where a party withdraws from an agreement, any payment or other performance already made must be returned to the other party. However, no compensatory damages will be owed by the defaulting party where the defaulting party was not at fault. This will likely be the case where a party is unable to fulfill its obligations under a contract due to the Coronavirus situation.

Where performance of the contract becomes permanently impossible, for example if an event on a particular date can no longer take place due to a prohibition by the authorities, then Article 119 of the Swiss Code of Obligations will apply. The parties’ obligations under the contract  will be void and the parties will also be released from future obligations they have yet to fulfil. However both parties must return any benefits they have received from the contract to the other party.

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

N/A

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

None of the rules mentioned above are mandatory. If there are contractual provisions agreed by the parties that are different from the legal provisions, the contractual provisions shall prevail.

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?

Although the provisions mentioned above are not mandatory, and contractual provisions prevail, Article 8 of the Swiss Act Against Unfair Competition provides that general terms and conditions in contracts with consumers shall not unfairly provide a significant and unjustified imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. Terms in violation of this provision are invalid.

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 an extraordinary and unforeseeable event which interferes from an external source and which cannot be avoided despite of utmost care, without putting into jeopardy the entire company and its viability. Events which must be taken into account by a company due to its frequency do not amount to force majeure.

According to a decision of the Swiss Federal Supreme Court (BGE 102 Ib 257), "force majeure" is an extraordinary and unforeseeable event which is not related to the business of the company, but interferes from an external source with inevitable force.

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

Article 8 of the Swiss Act Against Unfair Competition provides that general terms and conditions in contracts with consumers shall not unfairly provide a significant and unjustified imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

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

Article 8 of the Swiss Act Against Unfair Competition provides that general terms and conditions in contracts with consumers shall not unfairly provide a significant and unjustified imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

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

When the fulfillment of a contract is not entirely impossible, but has become extremely onerous, a party might be able to raise the exception of "clausula rebus sic stantibus".

This must be a situation which is not only extremely onerous, but was also unforeseeable when the contract was concluded.

Such an extreme and unforeseeable situation allows a party to request that the contract be renegotiated. The parties may agree on revised conditions, or agree to terminate the contract. If one party insists that the contract remains unchanged, the requesting party might approach the court and seek a decision from the court ordering an amendment to the agreement, or the termination of the agreement.

Portrait of Philipp J. Dickenmann
Philipp J. Dickenmann, LL.M.
Partner
Zurich