As recently as 2019, Nexperia was acquired by the Chinese company Wingtech without any government oversight or media fuss. This shows how much the world has changed. The current uncertain times, characterised by wars, tensions between the US and China, and trade restrictions, are having an impact on the supply chain and contract management.
Until recently, the trend was towards increasing globalisation, free trade and minimal oversight of corporate ownership and policy. The end of history, predicted by Francis Fukuyama, seemed in sight. Now, however, history has returned, with wars, sanctions, protectionism and concerns about dependency and foreign influence on companies. This has led to the Dutch Act on security screening of investments, mergers and acquisitions (Wet Vifo) and the increased importance of sanctions and rules concerning dual-use and military goods.
The current uncertainty also has consequences for commercial contracts. The crisis surrounding Nexperia and the consequences for the supply of chips to European manufacturers make it clear that supply chain contracts must make provisions for the availability of raw materials and semi-finished products, delays in deliveries and government measures that restrict the export of technology or payment transactions. Force majeure, suspension rights, anticipatory breach and unforeseen circumstances are important doctrines in this regard.
Force majeure refers to extraordinary unforeseen events that prevent one or both parties from fulfilling their contractual obligations. Article 6:75 of the Dutch Civil Code stipulates: A default cannot be attributed to the debtor if it is not attributable to his fault, nor is it for his account under the law, a legal act or generally accepted practice. The CISG also regulates force majeure in Article 79.
Contracts often contain detailed provisions on force majeure. It is important to determine whether only “Acts of God”, events caused by natural forces beyond human control, qualify as force majeure, or whether events that fall within the sphere of risk of a party, such as strikes and supply or transport problems, also qualify. Parties have freedom of contract and, as long as the event in question is not attributable to them, they can determine what they understand to be force majeure. The Corona crisis, for example, has led parties to include provisions in force majeure clauses specifying whether or not the consequences of a pandemic are considered force majeure.
Invoking force majeure suspends the contractual obligations of both parties, but does not terminate the agreement. Force majeure only means that the affected party is not liable for failing to fulfil its contractual obligations (on time). Once the force majeure situation has ended, the contractual obligations of the parties are reinstated. However, the inability to perform constitutes a breach which, under Dutch law, may justify invoking termination of the contract. Contracts often include a right to terminate the contract if the force majeure situation continues for longer than a certain period of time.
If there is a fear that the other party will not perform, an appeal to “anticipatory breach” is possible. Pursuant to Article 6:80 of the Dutch Civil Code, an agreement may be terminated immediately if the other party, after having been summoned to do so, does not confirm within a reasonable period of time that it will perform its obligations. It is essential that the demand is based on valid reasons and that a reasonable period of time is set. A court will assess whether these conditions have been met and whether termination is justified. Not every refusal to confirm justifies termination. The nature of the obligation and the context of the refusal are relevant.
Because invoking force majeure is often unsuccessful, unforeseen circumstances under Article 6:258 of the Dutch Civil Code are regularly invoked. At the request of one of the parties, the court may modify the consequences of an agreement or dissolve it in whole or in part on the basis of circumstances that the parties did not foresee when concluding the agreement and which are of such a nature that the other party cannot reasonably and fairly expect the agreement to remain unchanged. However, the main rule is that agreements must be complied with and deviations from them are only permitted in exceptional circumstances.
