Adam entered into a contract for the manufacture and delivery of 200 luxury gold jewelry items for a customer based in France. The total value of the contract was 1 million PLN. Adam was to deliver the goods within a month to the Ordering Party’s headquarters. The parties knew that the Ordering Party is only an intermediary in the supply chain, and the goods are ultimately to be delivered to the final buyer in Russia. A moment before the goods were to be delivered, Adam informed the French company that he could not fulfill the obligations arising from the contract due to Russia’s aggression against Ukraine and the resulting economic sanctions. The contracting authority based in France tried to convince Adam that the contract concluded between them was performed only between Poland and France, and therefore neither party cooperated with Russia. The Ordering’s arguments did not convince Adam, who, citing the contractual provisions regarding force majeure, withdrew from the contract.
There was a dispute between the parties regarding the correctness of Adam’s actions and the possibility of withdrawing from the contract due to force majeure.
The content shows that the contract was actually concluded between entrepreneurs based in Poland and France. Russia was therefore not a party to the agreement. However, when analyzing this case, it is worth referring to the EU regulations introducing economic sanctions against Russia. An example of a legal act responding to Russia’s aggression against Ukraine is Council Regulation (EU) 2022/428 of 15 March 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine. According to the above-mentioned regulation art. 3h sec. 1: “It shall be prohibited to sell, supply, transfer or export, directly or indirectly, the luxury goods listed in Annex XVIII to any natural or legal person, entity or body in Russia or for use in Russia”. It clearly states that the prohibition covers not only the sale or delivery of luxury goods to Russia, but also the sale of luxury goods for use in Russia.
For the above reasons, Adam was right by concerning that his performance of the contract concluded with the French company would violate the provisions of EU regulations.
The concept of force majeure has not been defined in the provisions of the law that are in force in Poland, but some guidelines in this regard can be found in the judicature and among representatives of the doctrine. Only an event characterized by the following three features is considered force majeure: externality, impossibility of its foreseeability and impossibility of preventing its consequences. The manifestations of force majeure include: catastrophic phenomena caused by the forces of nature, e.g. floods, hurricanes, earthquakes, forest fires, but also wars or acts of public authority, as well as social or political phenomena on a catastrophic scale.
By using the above definition of force majeure, it should be considered that it is reasonable to assume that Adam could withdraw from the contract concluded with the French company, referring to the circumstances related to the war in Ukraine and the legal regulations that were introduced in connection with it.
Joanna Lubecka
attorney
However, when there is a dispute in the court, the basic practical difficulty leads to answering the question - where will such a dispute take place. In the contractor country or abroad? Can it be secured somehow?
One of the most important points that needs to be clarified in a B2B contract concluded with a foreign contractor are the terms of payment of the agreed remuneration. Payment after delivery of the subject of the contract or prepayment? And if so, what should be its amount? Which solution to choose? Read below.
Regardless of the form in which the agreement with a foreign partner is concluded, it is important that the parties agree on the most crucial elements of the contract. Incorporating these clauses will enable the parties to execute the contract in a transparent manner, without any ambiguity or uncertainties.
When force majeure events occur in international trade contracts, significant problems may arise in the process of its performance. However, including appropriate clauses in the contract that address such issues can help to manage the situation in a controlled and orderly manner.
As it is for the pandemic the world is slowly returning to normality, and there is much less talking about coronavirus cases, many entrepreneurs still feel the severe effects caused by the pandemic, including: disruptions in supply chains, lack of availability of materials or lack of components.
Case study. Check what Adam forgot when negotiating a contract with a foreign contractor
Although the indicated issues should be clearly regulated in each contract on the basis of which the guarantee is granted, in the case of foreign deliveries they are particularly important.
Below you will find some useful information on how to negotiate contracts concluded with a foreign business partner.
The purpose of the NDA is to secure the confidential nature of information that is provided to the other party in connection with the commencement of negotiations, determining the terms of possible cooperation between the parties, the concluded contract, cooperation or employment.
The standard practice is to start reading each document from the beginning. In the case of B2B contracts concluded with a foreign contractor, it is worth reversing this order.