Marina Lapidus explains the implementation of a force majeure clause due to spiking energy prices in Estonia

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Marina Lapidus explains the implementation of a force majeure clause due to spiking energy prices in Estonia

On 7 April,  Äripäev, the leading business daily in Estonia, published an extensive report on the impact of soaring electricity and gas prices on
Estonian companies and production capacity. Alongside politicians and entrepreneurs, the article features a comment by Marina Lapidus, RASK’s co-head of energy, explaining the grounds on which
companies can apply a force majeure clause in their contracts.

In the article, Marina explains that force majeure can only be invoked in a situation where performance of tthe contract is impossible and not merely difficult, inconvenient or undesirable. “Rising energy prices tend
to be a circumstance that can be overcome but which does not preclude the performance of the contract, although it places a greater obligation on the debtor.” Marina also points out that force majeure requires a circumstance that is outside the debtor’s control. A rise in energy prices is certainly beyond the control of the average consumer, and there is no way for the debtor to influence this process. Force majeure must also occur unexpectedly, so that it is impossible to foresee it when concluding the contract. “For contracts signed in a situation where energy prices are already starting to spike, debtors can no longer claim a price increase as an excuse for not fulfilling their obligations,” says Marina.

“Assessing the circumstances, debtors should also find out whether relying on force majeure aligns with their goals and is the right tool to remedy the situation. Force majeure is a circumstance that excuses the debtor’s breach of an obligation and precludes the exercise of certain legal remedies against the debtor. However, force majeure does not release the debtor from the contractual obligations or terminate the contract. In the event of force majeure, the contract is, in essence, frozen and the performance of the contract must resume as soon as the circumstances change. A party who is in breach of or unable to fulfil a contract is not entitled to terminate the contract (unless such a right arises from the contract).”

If a debtor wishes to change contractual terms that have become too burdensome – for example, to review the price of the contract – they should refer to the provisions of section 97 of the Law of
Obligations Act instead. “This also applies when meeting an obligation has become significantly more difficult or costly while not impossible,” says Marina. These provisions make it possible to demand an amendment of contractual terms in order to restore the original balance of obligations; they also allow the aggrieved party to withdraw from the contract if such an amendment is impossible.