Financial crisis – A force majeure circumstance?

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora

For several years the continuing financial crisis has caused many disputes between banks and borrowers and increased the number of cases in courts. According to Lithuanian law, a Credit Agreement is considered a Consumer Contract, so the rights of borrowers should be especially defended. The banks do not take into account this circumstance; if they do not cooperate with borrowers, this leads to disputes going to court.

The main argument pointed out on the applications of the borrowers is that the financial crisis is a force majeure circumstance, according to the Civil Code of Lithuania and is grounds for the borrowers not to carry out their duties. The borrowers ask to change the terms and conditions of the Credit Agreement because the financial crisis could not be provided for by the signing of the Agreement. The latest case law provided this as baseless due to these arguments:

a) the borrower shall foresee negative consequences before the signing of the Credit Agreement;

b) the impairment of the material situation could also arise due the loss of the professional skills of the borrower.

Even if the financial crisis could not be considered as a force majeure circumstance, according to the case law, the courts also established that in most cases the banks abuse their position. The banks do not comply with a request of the borrowers to change the terms of the Credit Agreement and violate in such a way the principle of cooperation based on Articles 6.38 and 6.200 of the Civil Code. This non-cooperation causes the dispute to go to court, though the banks could suffer more losses due to the interim measures applied in favor of the borrower.

The financial crisis is not a force majeure circumstance, but this question shall be resolved. The best way – by cooperation between banks and borrowers avoiding additional losses.