StudioLegaleRosano

Force Majeure and Hardship Clauses in International Contracts: How to Protect Your Business Amid Emerging Global Crises

In recent years, global events such as the pandemic, the war in Ukraine, tensions in the Red Sea, and disruptions to supply chains have reaffirmed the strategic role of force majeure and hardship clauses in international contracts. Geopolitical uncertainty has made it clear how crucial it is for Italian companies operating internationally to rely on robust and well-structured agreements. Added to this is the recent partial suspension of certain tariff measures, which opens a limited but strategic window for strengthening contractual protections.

What do we mean by force majeure and hardship?

  • Force majeure refers to an unforeseeable, unavoidable event beyond the control of the parties (e.g., natural disasters, wars, pandemics). It renders the performance of the obligation impossible and, if proven, exempts the debtor from liability.

  • Hardship does not make performance impossible but renders it excessively burdensome due to extraordinary changes. It often triggers a duty to renegotiate or revise the contract, potentially under the supervision of a judge or arbitrator.

Both clauses aim to rebalance contractual obligations in the face of exceptional events. However, their effectiveness depends not only on their inclusion in the contract but also on how they are drafted.

Common Pitfalls

Many Italian businesses, especially SMEs, still sign international contracts without:

  • clearly defined force majeure clauses;

  • specific hardship provisions detailing when and how to renegotiate;

  • precise references to the applicable law (which affects the presumed or automatic enforceability of such clauses);

  • a clearly defined activation mechanism (notification procedures, deadlines, supporting documentation).

The Legal Perspective: Recent Developments

In recent years, international case law has provided greater clarity regarding the limits and enforceability of force majeure and hardship clauses in international contracts. Notably, arbitral practice (e.g., ICC, LCIA, UNCITRAL) has highlighted several key requirements for such clauses to have practical effect:

  • Strict burden of proof:
    The party invoking force majeure must demonstrate that the event was unforeseeable, unavoidable, and directly responsible for the impossibility (not merely the excessive burden) of performance. This standard also applies to global events like the pandemic, which are not automatically considered force majeure unless clearly defined in the contract.

  • No automatic legal effect:
    In the absence of an explicit clause, hardship is not always recognized by foreign jurisdictions unless the 1980 Vienna Convention (CISG) applies. However, the CISG does not explicitly address hardship, making tailored contractual provisions necessary.

  • Importance of renegotiation clauses:
    Recent practice encourages parties to include good faith renegotiation obligations in case of significant changes in economic conditions. The absence of such a clause can, in some cases, preclude access to remedies such as termination or judicial revision.

  • Approach of national courts:
    French and German courts have increasingly recognized hardship as a valid ground for contractual adjustment. In contrast, Common Law jurisdictions (notably England and the U.S.) remain much stricter, applying doctrines like impossibility or frustration, which are rarely applicable.

  • Role of international arbitration:
    Arbitral tribunals have become the preferred venue for resolving disputes arising from extraordinary events affecting commercial contracts. For instance, FIDIC (Fédération Internationale des Ingénieurs-Conseils) has updated its model contracts with more detailed force majeure definitions and tools for contractual risk management.

How to Protect Yourself with the Right Contractual Approach

To reduce risks from extraordinary events and ensure greater stability in international commercial relations, it is essential to adopt a conscious and updated contractual strategy. Recommended actions include:

  • Renegotiation of contract clauses: update or integrate force majeure and hardship clauses using clear language, concrete examples, and well-defined activation mechanisms.

  • Analysis of applicable law: choose the most favorable jurisdiction, carefully evaluating the differences between civil law and common law systems.

  • Precise classification of goods and services: to avoid disputes over contractual obligations in the event of discontinuities or regulatory changes.

  • Inclusion of alternative procedures: such as mandatory renegotiation or recourse to arbitration, to manage crises and unforeseen events with flexibility.

A well-drafted contract does not eliminate risk—but it limits its impact and provides practical tools to respond. In this context, prevention is already a form of defense.

 Rosano Law Firm – 21 maggio 2025