Portugal: Force Majeure - Hardship in relation to Conflict and Sanctions

Law no. 31/2004, of 22 July, which adapts Portuguese criminal legislation to the Statute of the International Criminal Court, classifying conduct that constitutes crimes of violation of international humanitarian law. 

The Portuguese Civil Code (CC) has no specific clauses on war, related sanctions or on the consequences of war in contracts. There are, however, two general statutory concepts, which could be relevant under such circumstances.

2. If so, what is the text of the clauses in your civil code?

Article 437 of the CC: “If the circumstances on which the parties based their decision to conclude a contract have suffered an abnormal change, the affected party has the right to terminate the contract, or to have it amended according to fairness, provided that the obligations undertaken by it seriously affect the principles of good faith and are not covered by the risks inherent to the contract.

Article 790 of the CC: “The obligation ceases when performance becomes impossible for a cause not attributable to the debtor.”

3. Could war and/or sanctions constitute force majeure under statutory law?

In principle, it does. This application, however, can be challenged because the law does not specify possible force majeure cases.

4. Is there a need for a specific force majeure clause addressing these topics?

The inclusion of a force majeure clause addressing these topics in the contract is allowed under the principle of contractual freedom of the parties, and is also recommended in order to prevent discussion on whether a certain situation can be considered as force majeure. The clause should provide what a force majeure case is, indicate as many examples as possible and define the consequences of its occurrence. 

5. What is meant by ''unforeseen circumstances'' under the law of your jurisdiction?

For the application of the ''unforeseen circumstances'' regime, it is necessary that a relevant and objective change occurred in the circumstances on which the parties concluded their contract, that those circumstances have changed abnormally, and the obligations undertaken by affected party seriously affect the principles of good faith and are not covered by the risks inherent to the contract.

6. In the case of sanctions imposed by the European Union, what is the consequence if the law of another country (not being an EU member state) has been applied?

If so, the courts of that other country (not being an EU member state) will also in principle have jurisdiction and can choose to not impose sanctions or to follow them. If a Portuguese court has jurisdiction it will apply the EU regulations on a mandatory basis.

7. Can a party be sued by the sanctioned or warring counterparty because the other party fails to deliver?

This depends on which court has jurisdiction. If a Portuguese court has jurisdiction, it will apply EU regulations on a mandatory basis. In this case, a Portuguese party should not be sued by the sanctioned or warring counterparty for the Portuguese party's failure to deliver due to the imposition of sanctions.

8. Conclusion & recommendations

Portuguese law has no specific clauses on war, related sanctions or on the consequences of war in contracts. There are, however, general statutory concepts that could be relevant under such circumstances. If a Portuguese court has jurisdiction, a Portuguese party should not be sued by the sanctioned or warring counterparty for the Portuguese party's failure to deliver due to the imposition of sanctions.

The inclusion of a force majeure clause in the contract that addresses these topics is allowed and recommended. The clause should specify what a force majeure case is, indicate as many examples as possible and define the consequences of its occurrence.