9. What events of force majeure give rise to relief? Must they be unforeseeable and to whom? How far does the express or implied allocation of risk under the contract affect whether an event qualifies? Must the event have a permanent effect? Is impossibility in performing required or does a degree of difficulty suffice? Is relief available where only some obligations (eg, to make a single payment or carry out one aspect of the works) are affected or is a greater impact required? What relief is available and does it apply automatically? Can the rules be excluded by agreement?
By law, force majeure is defined as an emergency event that could not be prevented in the given circumstances. Therefore, to qualify as force majeure, an event must satisfy three requirements. It must (i) have an ‘emergency’ nature, meaning that such event is extraordinary and does not typically occur in a particular situation (or, in other words, is unforeseeable by the party in breach); (ii) be unavoidable, so that any person conducting the same activities as a debtor could not prevent its occurrence or its consequences; (iii) be irresistible, meaning that the event must be of such a nature that it would be unreasonable to claim that the debtor should take measures to overcome it.
Additionally, Russian courts generally accept as force majeure only those events that are objective in nature and do not depend on the contracting party. For example, according to recent guidance of the RF Supreme Court, the covid-19 pandemic can be classed as force majeure on a case-by-case basis. Although the law does not specify the particular events that may qualify as force majeure, there are several situations that, according to the RF Supreme Court, should not qualify as force majeure, such as (i) failure by a debtor's contractual counterparties to perform their obligations, (ii) lack of necessary funds on the part of a debtor (although, according to the RF Supreme Court, in certain circumstances a lack of funds may be held to constitute force majeure if caused by restrictive measures imposed by public authorities in connection with covid-19), or (iii) the unavailability of goods on the market that are required for performance of the obligations.
A force majeure event does not need to have a permanent effect.
By law, force majeure exempts a party from liability for improper performance or non-performance of some obligations only if it renders such performance impossible. At the same time, impossibility should not be construed literally. For example, should performance be possible but require disproportionate or commercially unreasonable efforts by the debtor, it may constitute a force majeure event.
In practice, relief could be available if it is impossible for the party to perform its contractual obligations in full or in part due to the force majeure event. However, where that event affects only some obligations, relief will be available only in respect of them, and no excuses will be entertained for non-performance of those parts of the contract that can be performed.
Force majeure does not automatically discharge the debtor from its obligations if they can still be performed after such events have ceased to exist. According to court practice, the debtor must notify the creditor of a force majeure. In this case, the creditor retains the right to terminate the contract if it is no longer interested in performance owing to delay caused by force majeure.
The parties to a construction contract are entitled to establish liability even if force majeure occurs.
Answer contributed by
Olga Semushina and
10. When is a contractor entitled to relief against a construction contract becoming unduly expensive or otherwise hard to perform and what relief is available? Can the rules be excluded by agreement?
The contractor must perform the works in accordance with the cost estimate (smeta) that determines their price. Unless the parties agree otherwise, the contractor is considered to be obliged to perform all the works described in the cost estimate (smeta) and technical documentation.
Should the contractor discover any works that are missing in the technical documentation that result in the necessity to perform additional works, thus increasing the price of the works set forth in the cost estimate (smeta), the contractor must notify the employer to this effect. If the employer fails to provide a response within a statutory or contractual time frame, the contractor must suspend such works. In this case, damages incurred by the contractor are attributable to the employer unless the employer proves that the additional works were not required.
Should the contractor fail to comply with the above requirements to notify the employer and suspend the works, the contractor will be estopped from demanding that the employer pay for the additional works and compensate damages incurred unless the contractor proves that its taking of immediate action was essential for the employer's benefit (in particular if suspension of the works could result in the loss of or damage to the facility under construction).
If the employer agrees to pay for the performance of additional works, the contractor can decline to perform them only if it lacks expertise in the field or encounters externalities that prevent it from performing them.
In addition, by law, in certain situations where there was a substantial increase in the price of materials and equipment provided by a contractor or in the price of services rendered to a contractor by third parties, which could not be foreseen when entering into the contract, the contractor might be entitled to request that the contract price be increased, and if the employer refuses to do so, the contractor is entitled to terminate the contract on the basis of a significant change in circumstances (the specific conditions for relying on such a change are set out in law).
Although the law does not expressly state that the above rules can be modified by agreement between the parties, one could argue that in practice such modifications are generally possible.
Answer contributed by
Olga Semushina and