Force majeure and hardship both deal with something unforeseen happening after contract conclusion, but they answer different questions. Force majeure asks: Can I still perform at all? Hardship asks: Is performance still economically viable? Anyone confusing the two invokes the wrong clause when it matters, misses deadlines or demands a remedy that the contract does not provide. Here you can read how the two instruments differ, what applies without a clause, how to draft both cleanly and how a limitation of liability clause rounds out the package.
In short
- Force majeure applies when performance is temporarily or permanently impossible because an event beyond your control prevents it. Consequence: release from performance and from damages for as long as the impediment lasts.
- Hardship applies when performance is still possible but becomes economically unbalanced due to a fundamental, unforeseeable change of circumstances. Consequence: a right to renegotiate, and if necessary, adaptation or termination.
- Without a clause, the applicable law decides, and that is highly inconsistent internationally. The UN Convention on Contracts for the International Sale of Goods (CISG) has no dedicated hardship rule.
- Most claims fail not on the event but on the form: those who do not give notice on time and in the correct form put their protection at risk.
- A limitation of liability clause does not replace either of the two clauses; it caps the consequences of ordinary breaches of duty.
Two instruments, two logics
The basic principle of contract law is pacta sunt servanda: contracts must be kept. Force majeure and hardship are the two most important exceptions to this, and they attach at completely different points.
Force majeure: when performance is blocked
Force majeure exists when an event beyond a party's sphere of control prevents performance despite the party having taken reasonable precautions. The ICC describes force majeure as a situation in which performance becomes temporarily or permanently impossible, for example due to a serious natural disaster. The UNIDROIT Principles for International Commercial Contracts regulate this in Article 7.1.7: non-performance is excused if the party proves that it was caused by an impediment beyond its control and that it could not reasonably have taken the impediment into account at contract conclusion, nor have avoided or overcome it.
The system is notable: the UNIDROIT Principles place force majeure in the chapter on non-performance. The question, in other words, is who bears responsibility for the failure to perform.
Hardship: when performance becomes disproportionately expensive
Hardship requires that you could still perform, but that doing so has become economically unreasonable due to a fundamental change of circumstances. Under the UNIDROIT Principles, Article 6.2.2, hardship exists when events fundamentally alter the balance of the contract, either because the cost of a party's performance has increased or because the value of the counterperformance has decreased. In addition, the events must have arisen or become known after contract conclusion. They must not have been reasonably foreseeable, they lie beyond the control of the disadvantaged party, and that party has not assumed the risk.
At UNIDROIT, hardship appears in the chapter on performance. That is more than tidy filing: force majeure essentially aims to loosen the relationship temporarily or definitively, while hardship aims to save it.
Direct comparison
The table shows why both clauses belong in a long-term international contract. They cover different risks, and a force majeure clause does not protect you when your costs explode as long as you can still technically deliver.
What applies when the contract is silent?
Many contracts contain no clause at all or only a copied standard clause. The applicable law then kicks in, and that is where the uncertainty begins.
UN Sales Convention (CISG)
The CISG often applies to international sales of goods. Article 79 CISG releases a party from liability if it proves that its non-performance was due to an impediment beyond its control which it could not have taken into account at contract conclusion and whose consequences it could not have avoided or overcome. Two points are often overlooked:
- The release only concerns damages. Other rights of the counterparty, such as contract avoidance or price reduction, remain intact.
- The affected party must give notice of the impediment and its effects. If the notice does not reach the counterparty within a reasonable time, the party is liable for the damage resulting from this failure.
The CISG has no separate hardship provision. Whether economic unreasonableness is covered by Article 79 depends on how courts and arbitral tribunals interpret it. For planning purposes, that is not enough.
UNIDROIT Principles
The UNIDROIT Principles offer separate, developed rules for both cases. In hardship, the disadvantaged party may, under Article 6.2.3, promptly and with reasons demand renegotiation. The request alone does not entitle the party to withhold its own performance. If the talks fail within a reasonable time, either party may apply to the court, which may terminate or adapt the contract. The Principles apply only if the parties agree on them or an arbitral tribunal applies them. The UNIDROIT project group on reinsurance law stressed in its note on the COVID-19 crisis that precisely these two articles provide a modern, uniform approach.
National law
National legal systems take very different approaches. German law distinguishes between impossibility and interference with the basis of the contract (section 313 German Civil Code), which can allow adaptation. The Swiss Code of Obligations also recognizes impossibility, while adaptation due to changed circumstances is only granted exceptionally and with restraint. Other legal orders offer only termination, or no remedy at all, when circumstances change. The ICC warns that national variants differ considerably, which is why parties should agree on their own contractual solutions. Those who rely on the law often learn years later, in a dispute, which rule applies.
Three cases from practice
The distinction becomes concrete when played through typical situations. The following cases are simplified examples, not real mandates.
Case 1: Delivery ban through sanctions. A Swiss machine builder is to deliver spare parts to a customer in a third country. After contract conclusion, new sanctions prohibit the export. Delivery is legally impossible; this is a classic force majeure case. The timely notice and the question whether the clause expressly covers state measures are decisive. How to factor in such risks for contracts involving Eastern Europe is shown in our article on contracts involving Ukraine.
Case 2: Energy prices triple. A supplier has signed a five-year fixed-price contract. Its energy costs rise to three times the original level, every delivery brings a loss. It can still deliver, so there is no force majeure. This is a potential hardship case, but only if the increase was unforeseeable at contract conclusion and the supplier did not contractually assume the price risk. A fixed price without an escalation clause is often read as exactly such a risk assumption.
Case 3: The customer finds a cheaper supplier. A buyer wants to exit a framework contract because the competition offers lower prices. This is neither force majeure nor hardship but ordinary market risk. Here only termination rights, or in case of defective intent, challenge for mistake or deception may help.
Legal consequences: keep or end the contract
Under force majeure, the party is released for the duration of the impediment. If it lasts too long, the question of termination arises. The ICC's 2020 model clause provides that either party may terminate if the impediment lasts longer than 120 days, unless otherwise agreed.
In hardship, renegotiation comes first. What happens afterwards must be defined: the ICC Hardship Clause lets you choose whether the party may terminate itself, whether a judge or arbitrator may adapt the contract, or whether they are to end it. If termination is the route, the usual rules on deadlines and form apply additionally. What such rules look like in a specific contract type is shown, for example, in the guide on how to terminate a licensing contract on firm legal grounds. Those who want to avoid a dispute add a mediation clause before the hardship clause, so that renegotiation has a structured framework.
How to draft robust clauses
In the ICC's view, the real difficulty lies not in defining the event but in triggers, procedure and legal consequences. These steps have proven useful:
- General clause plus list of examples. Describe force majeure abstractly (impediment beyond control, unforeseeable, unavoidable) and add typical events: war, terrorism, natural disaster, epidemic, embargo, sanctions, official orders, cyberattacks. A list without a general clause leaves gaps; a general clause without a list leads to disputes over every event.
- Address subcontractors. Define whether failures by subcontractors count as force majeure. Without a rule, this is a frequent point of dispute.
- Draft the notice obligation precisely. Deadline, form, recipient and content of the notice. Under the ICC model clause, release from the time the impediment arose only applies if notice is given promptly; otherwise release only applies from receipt of the notice.
- Require mitigation. The affected party should do everything reasonable to limit the consequences and inform the counterparty regularly.
- Set a hardship threshold. Describe what counts as a fundamental disruption, for instance by reference to cost or price indices. The more precise the threshold, the smaller the risk that the claim is dismissed as mere regret over a bad bargain.
- Choose a mechanism after failed negotiation. Termination, adaptation by a third party or termination by the court. Without this choice, a lengthy dispute is likely.
- Align with choice of law and jurisdiction. The clause only works together with the applicable law. Agreeing on the UNIDROIT Principles or arbitration can fill gaps in national law.
Those who do not want to draft their own text can incorporate the ICC 2020 model clauses. Alongside the detailed version, they include a short force majeure clause for SMEs and extended options for hardship. The model clause works with presumptions: for listed events, part of the requirements is presumed, which eases the burden of proof.
Limitation of liability clause: the third tool
Force majeure and hardship govern exceptional situations. The limitation of liability clause governs the normal case: what do you pay when you yourself breach a duty? Typical content includes a liability cap, often tied to the contract value, exclusion of indirect damages such as lost profits, and shorter limitation periods.
The limits are tight. Under German law, liability for grossly negligent breaches can only be limited with difficulty in pre-formulated contracts; according to Haufe, a safe limitation can essentially only be achieved through an individually negotiated agreement. Swiss law also subjects exclusions in general terms and conditions to control, which we discuss in the article on general terms and conditions in Switzerland.
Three alignment questions arise in every contract:
- Avoid overlap. The force majeure clause releases without fault. The limitation of liability caps liability where there is fault. Draft so that it is clear which clause applies when.
- Classify contractual penalties. Does a liability cap also cover contractual penalties? Without a rule, this is a matter of interpretation. More on this in our article on contractual penalties in Switzerland.
- Do not use force majeure as a workaround. A force majeure clause drafted too broadly, covering every delivery delay for instance, is quickly read as a hidden exclusion of liability and can trigger the same content review.
Typical mistakes that become expensive
- Copied standard clause. Force majeure clauses are often adopted as boilerplate without negotiation. A clause from a supply contract rarely fits a software or services contract.
- Only force majeure, no hardship. Then the party bears the cost risk alone as long as it can still technically perform.
- Forgetting or informal notice. An email to the wrong contact can cost the release.
- Unilaterally stopping performance. Those who simply stop delivering in a hardship case may themselves commit a breach of contract and fall into default. What then applies is described in our article on payment default under the Code of Obligations from the counterparty's perspective.
- Language versions contradicting each other. In bilingual contracts, both versions must describe the same trigger and the same legal consequence, and it must be clear which version prevails.
Our view
In our cross-border mandates, we see that force majeure and hardship clauses are rarely negotiated at contract conclusion and then end up deciding the entire business in a crisis. Companies working with partners in Ukraine, Russia or other markets with sanctions risk particularly need both: a force majeure clause that expressly covers state measures and sanctions, and a hardship clause with a clear procedure for the case that currency, logistics or energy throw the business out of balance.
A second point is language. Many disputes arise because one party signed the English version but internally works with a Ukrainian, Russian or French translation in which "impediment" and "hardship" blur. We review and negotiate contracts directly in German, English, French, Ukrainian and Russian, with no interpreter in between. That way, the difference between impossibility and economic unreasonableness is preserved in every version. Our recommendation: do not treat these clauses as exit options but as rules of the game for working together in a crisis.
— Bitblade
Have your contracts reviewed
If you are drafting an international contract or want to review existing clauses on force majeure, hardship and liability, we support you with contract review and drafting in five languages. We offer an initial consultation with an assessment from CHF 150 per hour, and for SMEs with ongoing Eastern European business there is a retainer model from CHF 500 per month. All services are listed under Packages and fees.
Frequently asked questions
What happens if a contract contains no force majeure clause?
Then the applicable law applies, often Article 79 CISG for international sales of goods. It only releases from damages and requires timely notice. National rules differ widely, so the outcome is hard to predict.
Is a pandemic force majeure or hardship?
That depends on the specific effect. If official closures prevent performance, force majeure may apply. If performance only becomes significantly more expensive, hardship is the more likely category, provided the other requirements are met.
May I withhold performance in a hardship case until agreement is reached?
Under the UNIDROIT Principles, no: the request for renegotiation does not by itself entitle a party to withhold performance. Those who stop anyway risk their own breach of contract. Have the contract reviewed by a lawyer beforehand.
Can a limitation of liability clause replace force majeure?
No. It caps liability for your own breaches of duty but does not release you from performance due to an impediment beyond your control. In addition, it is subject to tight limits in general terms and conditions.
Is it enough to adopt the ICC model clauses?
They are a solid starting point, especially the short version for SMEs. However, you should adapt the list of events, the notice deadlines and the hardship mechanism to your business, the applicable law and the language versions.