The debate relating to the conservative and adjustment tools of the contract has acquired new and unexpected vitality as a consequence of the health crisis from Covid-19 first and then of the war in Ukraine.
The global reach of both phenomena has determined and is causing a slowdown in the economic growth of both European and non-European states, having a profound impact, albeit with different intensity, on the economic, financial and social stability of the latter.
The issue of contingencies, such as events that determine an alteration of the originally agreed services, in the context of contracts with continuous or periodic or deferred execution, provided that the supervening onerousness does not fall within the normal contingency of the contract, is regulated, with the due distinctions both internationally and nationally.
In the context of international contracts, the United Nations Convention on international contracts for the sale of goods (Vienna Convention), in art. 79 provides that “A party is not liable for the non-performance of any of its obligations if it proves that such non-performance was due to an impediment beyond its control and that it could not reasonably have been expected that it would have taken it into consideration at the time of concluding of the contract, which foresees or exceeds it, or which foresees or exceeds its consequences”, specifying however respectively in the following paragraphs 3 and 4 that … “3). The exemption provided for by this article is effective for the entire duration of the impediment. 4) The party that does not execute the contract must notify the other party of the impediment and its consequences on its ability to execute. If the notice does not reach its destination within a reasonable time from the time when the non-executing party knew or ought to have known of the impediment, the latter is bound to pay damages-interest on account of non-receipt”.
Other international sources have tackled the issue in question, substantially adopting the same principles; the International Chamber of Commerce has issued the ICC Force Major Clause 2003, updated in 2020 together with the hardship clause and the Unidroit Principles of International Contract.
The hardship clause, alongside the force majeure clause, codifies the supervening circumstances that can lead to an excessive imbalance in services, obliging the parties to remodulate the negotiating framework.
This assessment is far from easy, because, in the context of the principle of good faith inspired by the higher duty of social solidarity, the obligation to protect the interest of the other party persists if this does not involve an appreciable sacrifice; in practice, the party affected by the legally unfortunate event, will have to evaluate, before invoking an exemption from liability, whether there are actually alternative forms of fulfillment that still allow the performance of the service.
Hardship clauses generally have a three-phase structure:
- definition of the hardship event, by way of example, increases in the cost of raw materials, decreases in the value of the finished product, changes in taxes or customs duties. In any case, these must be completely unforeseeable situations and such as to substantially alter the original contractual balance;
- procedures for ascertaining the hardship event: the parties to the contract regulate the way in which the circumstance causing the contractual imbalance must be ascertained and communicated to the counterparty in order to be able to implement the contract “restructuring” procedure;
- regulation of the consequences of the declaration of hardship: the ways in which the parties must reach a new negotiation phase are illustrated, aimed at adapting the conditions of the contract to the new situation and therefore restoring the balance between the services.
The ICC model clauses are intended to apply to any contract incorporating them either expressly or by reference: parties are therefore encouraged to include the clauses in their contracts by their full name “ICC force majeure/hardship clause”. However, any reference in the contract to the ICC Clause, in the absence of evidence to the contrary, will also be considered as a reference to the Clause itself.
Unlike force majeure which is a broad and well-defined clause, the principle of excessive onerousness – present in our legal system (articles 1463 and 1467 of the civil code) – does not find generalized recognition in the various national legal systems, where the principle of non-modifiability of contractual agreements, except to the extent that express agreements allow it.
Moreover, coming to our national legislation, in the context of which the principle of good faith is the cornerstone of the legal system in contractual matters, the traditional approach, inspired by strict compliance with the pacta sunt servanda principle, identifies as a solution to the problem the removal from the juridical world of the contract with the inevitable (and often wanton) lapse of the economic operation as a whole.
In today’s economic context, however, the inadequacy of these remedies is clearly evident: the dissolution of the contractual relationship, in fact, does not necessarily respond to the interest of the contracting parties, who could instead obtain an undoubted advantage from the remodulation of the contractual conditions .
The party who, aware of the contingency not attributable to the other party, would take advantage of it by refusing the possible renegotiation of the contract by relying on a legal regime that denies the possibility of activating revision mechanisms would not act in good faith.
The duty to renegotiate the contract altered by contingencies, in fact, according to some jurisprudence and doctrine, is inherent in the obligation to execute the contract in good faith, an obligation incumbent on both parties and entails a reciprocal duty of activation for the protection of the interest of others.
As a result of the non-fulfilment of such an obligation, the party who promoted the renegotiation was identified with both the right to take action for compensation for damages against the intransigent counterparty and the right to appeal to the judge to obtain the specific execution of the unfulfilled obligation, or a sentence that takes the place of the unconcluded renegotiation agreement; in this sense, the Thematic Report no. 56 of 08.07.2020 Civil Cassation on “substantial new regulations of the anti-Covid 19 emergency law in the contractual and insolvency fields”.
At the invocation of the so-called excessive onerousness supervening pursuant to art. 1467 of the Civil Code follows the termination of the contract, which however the other party can avoid by offering to modify the conditions of the contract fairly.
It is intuitive that the renegotiation tool enhances the contractual will, preserving the originally agreed cost and revenue plan, is based on a concrete and demonstrable element – the cause of the contract, understood as the economic reason for the relationship – on the basis of which and the sacrifices between the parties must be realigned as well as preserving the effectiveness of the contract, allowing the achievement of the result.
Renegotiation not only proves to be a more ductile means of overcoming the impasse that has arisen, allowing for the reformulation of the implementation methods of the service, in a more incisive way compared to the price revision clause also generally envisaged in contracts with continuous and periodic execution, however unsuitable to completely eliminate the risk typical of a long-term contract, the evaluation of which is attributable to the circumstances weighed up at the time of conclusion of the contract, but also appears to be an instrument already envisaged by the legislator (the renegotiation in good faith on the basis of the correct rebalancing considered in the Report of the Supreme Court referred to above).
By resorting to clauses that govern critical issues such as the current ones, we will be able not to freeze/extinguish contracts, but allow their execution by intervening in the common interest of all parties, private and public.
In this regard, see the wording of art. 29, Urgent provisions on public contracts, of Legislative Decree 27 January 2022, no. 4, Urgent measures to support businesses and economic operators, work, health and local services, connected to the COVID-19 emergency, as well as to contain the effects of price increases in the electricity sector, converted with amendments into law 28 March 2022, n. 25 (so-called Sostegni-ter) which, with the introduction of a new regulation (until 31 December 2023) on the subject of price revision and updating of price lists in public contracts, aims to respond to the need to allow an adequate/ correct negotiating relationship where the functional synallagma (price – performance) maintains its balance.
Even in the presence of public regulations to support the economy, the response to the increase in costs is however not adequate; a more effective solution would require the extension to the public sector (see tenders) of the general provisions of the civil code relating to the principles of good faith and correctness (pursuant to articles 1175, Conduct according to correctness, 1337, Negotiations and pre-contractual responsibility, 1366, Interpretation of good faith, and 1375, Execution of good faith, civil code) which allow the negotiation balance to be restored (with justifiable and justified margins of increase in the percentage of difference and compensation), reaffirming a “legal duty” to act, source of liability contract, in full compliance with the principle of legality and coverage of expenses, in line with the constitutional principle of good performance and impartiality (pursuant to article 97 of the Constitution) in the collective interest in the realization of works, supplies and services in the era of “continues” structural emergency.