While the term "force majeure" is not defined in Swiss statutory law, the concept of force majeure (FM) is recognized in Swiss legal doctrine and case law.
If the parties have not agreed on a clause dealing with the impossibility or delay of performance due to FM, the statutory provisions of Swiss law apply. If the performance is permanently impossible due to circumstances beyond the non-performing party's control which were not foreseeable when the contract was concluded, the affected party is generally excused from its contractual obligation to perform and does not have to compensate damages since it is not at fault. For example, if a supplier is not able to supply its products to their partners for the foreseeable future because of sanctions, under Swiss law, the supplier would not be held liable for any damages resulting from the non-delivery as it is not at fault. However, depending on the contract, the affected party will normally also lose its right to claim contractual performance from the other party, or has to restitute what it has already received.
The question of which circumstances are considered to be foreseeable depends on the specific circumstances. For example, a sanctions regime or government measures against a pandemic that make it impossible for a party to perform its contractual obligations may lead to an unforeseeable and unavoidable impossibility to perform. On the other hand, in a country that is regularly hit by natural disasters or by civil riots, such events may be considered foreseeable in some cases. Similarly, the constraints that arose in connection with the COVID-19 crisis may be considered foreseeable if the parties have concluded a contract after the outbreak of COVID-19 and should have anticipated such constraints when agreeing on delivery dates. Therefore, it has to be assessed on a case-by-case basis whether or not an event was actually unforeseeable for the parties at the time the contract was concluded. Currency fluctuations or changes in law that do not prevent performance of the contract but merely render the performance more costly typically do not amount to impossibility.
International commercial contracts governed under Swiss law frequently include FM clauses. They foresee specific remedies and typically excuse or suspend performance, termination or adjustment of the contract if the contract becomes impossible, difficult or extremely onerous to perform due to unforeseeable and unavoidable events outside the affected party's control.
Whether an event is an FM event depends on the wording of the clause and the hypothetical will of the parties. Most FM clauses are "open" or inclusive, in the sense that the event does not need to be specifically listed as an FM event. Many contractual FM provisions will include a list of example FM events.
The available remedies under statutory Swiss law vary depending on whether the performance of the contract is either (i) permanently or (ii) temporarily impossible.
If the performance has become permanently impossible due to circumstances beyond the non-performing party's control generally no damages have to be paid. In this case, the claim of the counterparty is deemed extinguished but the non-performing party also loses its claim for compensation.
If the performance is only temporary impossible, the counterparty may in its discretion: (i) continue to insist on performance and claim for damages due to the delay; (ii) waive performance and claim damages for non-performance; or (iii) terminate the agreement.
However, as a general principle, the non-performing party has to pay damages only in the event that it cannot prove that it is not at fault.
The allocation of the risk due to impossibility of the performance may differ depending on the contract. Therefore, the contract has to be assessed in detail on a case-by-case basis.
Events requiring an adjustment of the contract (clausula rebus sic stantibus)
If the fulfillment of contractual obligations was not impossible but only commercially impractical, the discretionary Swiss law generally does not provide for an exception from the non-performing party's liability for damages. However, if the current situation would result in a serious discrepancy between the costs for the performance of the contract and the remuneration paid by the customers, Swiss law provides that the contract may have to be adapted to the new situation. However, such an adjustment of the contract is only possible if the changed circumstances were neither foreseeable nor avoidable and result in a lasting imbalance of the parties' contractual obligations.
If the parties cannot agree on an adjustment of the contract, the matter may be referred to a court or arbitral tribunal, who may adjust the contract to the changed circumstances or terminate it. In such a case, the judge or arbitrator must determine what the parties would have agreed in good faith if they had considered the changed circumstances when concluding the contract.
Whether an extraordinary increase in costs can justify an exceptional adjustment of a contract in the absence of a price review or price adjustment clause depends on the specific case. In principle, each party must bear the risks arising from the promised performance. Even in the case of long-term contracts with momentous obligations, the parties have no right to expect that performance will be a "good deal" for them and that the contract will be adjusted if circumstances change to their disadvantage and the contract no longer meets their expectations. Indeed, there have only been a few cases where the Federal Supreme Court concluded that a contract adjustment is justified. Most of these decisions date back to the time after the First World War and deal with the extraordinary economic turbulences caused by it. However, legal doctrine and case law have not developed specific percentages for how great the changes and the resulting imbalance must be to justify a judicial adjustment of the contract.
Termination of the contract for cause or material error
Under Swiss law, each party has the right to terminate the contract if continuing the contractual relationship is no longer acceptable for them due to changed circumstances. It has to be assessed on a case-by-case basis whether there is good cause for termination. Purely economic reasons, such as a weakened financial situation, are generally not sufficient for terminating the contract for good cause. In exceptional cases, a party may be able to claim a material error for the occurrence of a future event that it had expected, provided that the other party had realized that the expected future event was decisive for this party to enter the contract.