Supreme Court: Wartime Difficulties Do Not Automatically Justify Changing or Extending a Contract
⚖️ Ukraine | Commercial Disputes | Contract Law
Case Details
Case No.: 910/332/24
Court: Supreme Court, Commercial Cassation Court
Decision Date: 10 October 2024
Case Category: Commercial Law
Subject Matter: Amendment of Contract
Sub-Subject: Material Change of Circumstances / Force Majeure / Martial Law / Public Procurement
Contract Context: Contract concluded during martial law following a public procurement procedure
Relief Sought: Extension of contractual performance deadlines and the term of the contract
Legal Basis Invoked: Article 652 of the Civil Code of Ukraine and Article 41(5)(4) of the Law of Ukraine “On Public Procurement”
Key Issue: Whether intensified attacks and mobilisation occurring after conclusion of a contract during martial law constituted a material change of circumstances permitting the contract to be amended by court
Outcome: The Supreme Court rejected that approach and left the first-instance judgment dismissing the claim in force.
Background of the Dispute
A Ukrainian company brought proceedings seeking judicial amendment of a contract. In particular, it requested an extension of the deadlines for performing its contractual obligations and an extension of the overall term of the contract.
The company argued that the circumstances under which the parties had entered into the agreement had materially changed from 2023 onwards.
It relied on circumstances associated with the continuing war, including intensified enemy attacks and shelling and mobilisation measures. According to the claimant, these developments amounted to circumstances beyond its control and justified amendment of the contract under Article 652 of the Civil Code of Ukraine and the public procurement legislation.
The first-instance commercial court dismissed the claim.
The appellate commercial court reversed that decision and allowed the claim.
The dispute subsequently reached the Commercial Cassation Court of the Supreme Court.
Can a Contract Be Changed Because Circumstances Have Materially Changed?
Article 652 of the Civil Code of Ukraine provides a mechanism under which a contract may, in certain circumstances, be amended or terminated because of a material change in the circumstances upon which the parties relied when entering into it.
However, the existence of difficult or substantially changed circumstances does not, by itself, establish a right to judicial amendment of a contract.
The Supreme Court emphasised the circumstances existing at the time the contract was concluded.
In this case, that point was decisive.
The Contract Was Already Concluded During Martial Law
The parties entered into the contract after martial law had already been introduced in Ukraine.
The claimant therefore concluded the agreement in circumstances in which the war and mobilisation measures were already existing realities.
The Supreme Court considered that a contracting party exercising reasonable commercial prudence was required to take into account difficulties in contractual performance associated with martial law when entering into the agreement.
Accordingly, the subsequent continuation or development of wartime conditions could not automatically be treated as an unforeseeable material change sufficient to trigger Article 652 of the Civil Code.
Intensification of Wartime Conditions Was Not Enough
The claimant argued that the relevant circumstances had become materially more difficult from 2023 because of intensified attacks, shelling and mobilisation.
The Supreme Court did not accept that argument as sufficient to justify judicial modification of the contract.
It held that the appellate court had incorrectly relied on the existence of force-majeure circumstances when applying Article 652.
The Court drew an important distinction between force majeure and a material change of circumstances.
The existence of circumstances potentially characterised as force majeure does not mean that the legal requirements for amendment of a contract because of a material change of circumstances have automatically been satisfied.
These are different legal mechanisms and must be assessed separately.
Force Majeure and Material Change of Circumstances Are Not the Same
This distinction is particularly important for businesses operating in Ukraine during wartime.
Force majeure generally concerns circumstances affecting a party’s ability to perform particular contractual obligations and the legal consequences attached to that inability.
Article 652, by contrast, concerns whether the circumstances underlying the parties’ contractual arrangement have changed so materially that the statutory requirements for amendment or termination of the contract are satisfied.
A party therefore cannot establish a right to amend a contract under Article 652 merely by demonstrating the existence of wartime circumstances or relying generally on force majeure.
The requirements applicable to the particular remedy sought must be established.
Commercial Parties Must Consider Existing Wartime Risks
The Supreme Court’s reasoning places considerable importance on foreseeability at the time of contracting.
Where an agreement is entered into after the introduction of martial law, a commercial party cannot simply treat the general consequences of the war as circumstances that could not reasonably have been anticipated.
The Court considered that the claimant should, with appropriate prudence, have foreseen potential difficulties in contractual performance associated with martial law.
This does not mean that no subsequent wartime event can ever constitute a material change of circumstances.
Rather, the specific circumstances relied upon must satisfy the statutory test. The mere fact that wartime conditions subsequently became more difficult does not establish that test.
Public Procurement Rules Did Not Create an Automatic Right to Extension
The claimant also relied on Article 41(5)(4) of the Law of Ukraine “On Public Procurement”.
The Supreme Court noted that Ukrainian public procurement legislation did not provide for an automatic mandatory extension of a procurement contract at the unilateral request of one party.
In particular, the legislation did not establish a mechanism under which one party could compel an extension simply by bringing proceedings before a court.
The existence of circumstances affecting performance therefore had to be distinguished from the existence of a legal basis permitting the court to rewrite the parties’ contractual deadlines.
The Supreme Court’s Decision
The Commercial Cassation Court of the Supreme Court left the first-instance judgment in force and set aside the appellate court’s decision allowing the claim.
The Supreme Court concluded that the appellate court had incorrectly treated the existence of force-majeure circumstances as sufficient to justify application of Article 652 of the Civil Code.
The Court emphasised that:
the contract had been concluded during martial law;
mobilisation measures and wartime conditions already existed when the parties entered into the agreement;
a commercially prudent party should have considered the resulting performance risks;
force majeure does not automatically establish a material change of circumstances under Article 652; and
public procurement legislation did not provide an automatic right to compel extension of the contract at the request of one party.
Why This Decision Matters
The decision is particularly relevant to foreign companies contracting in Ukraine during the war.
The fact that a contract is affected by the war does not necessarily allow a party to change its terms, extend performance deadlines or obtain judicial modification of the agreement.
This is particularly significant where the contract was entered into after the beginning of the full-scale invasion or after martial law had already been imposed.
Foreign contractors should therefore distinguish between several different questions:
whether an event constitutes force majeure;
whether it excuses or affects liability for non-performance;
whether it constitutes a material change of circumstances;
whether the contract itself provides an extension mechanism;
whether the applicable legislation permits amendment of the contract; and
whether the particular event was reasonably foreseeable when the contract was concluded.
The distinction becomes especially important in Ukrainian public procurement contracts, where the parties’ freedom to amend contractual terms is additionally affected by procurement legislation.
Lions Lawyers’ Analysis
The practical significance of the judgment extends beyond public procurement.
For contracts entered into during martial law, reliance on the war in general terms is unlikely to be sufficient. A party seeking contractual relief should identify the particular event that affected performance, establish when it arose, explain why it was not reasonably foreseeable when the agreement was concluded, and connect that event to the specific contractual obligation that became affected.
This makes contractual drafting increasingly important.
Foreign companies entering into contracts connected with Ukraine should consider expressly allocating wartime risks rather than relying exclusively on general statutory mechanisms after a dispute has arisen. Depending on the transaction, relevant provisions may address force majeure, mobilisation, disruption of logistics, damage to infrastructure, electricity interruptions, import and export restrictions, changes in law, extensions of time, price adjustment and termination.
The decision also illustrates why force majeure and material change of circumstances should not be treated as interchangeable concepts. The appropriate legal mechanism depends on the facts, the contractual wording and the remedy being sought.
For international businesses, this should be considered at the contract-drafting stage as well as when assessing an existing Ukrainian-law contract affected by wartime events.
Lions Lawyers advises Ukrainian and international clients on commercial disputes and contracts in Ukraine, including contractual performance, force majeure, material change of circumstances, public procurement contracts, damages, debt recovery and cross-border disputes. We provide full-service legal representation as well as standalone Ukrainian-law opinions for foreign companies and international counsel.
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