The doctrine of “unforeseen circumstances” is enshrined in Article 147 of the Egyptian Civil Code, which provides:
“… When, however, as a result of exceptional and unpredictable events of a general character, the performance of contractual obligations, without becoming impossible, becomes excessively onerous in such a way as to threaten the debtor with exorbitant loss, the judge may, according to the circumstances, and after taking into consideration the interests of both parties, reduce to reasonable limits, the obligation that has become excessive. Any agreement to the contrary is void.” (emphasis added)
Article 147 grants Egyptian courts a discretionary power to reduce, in light of the circumstances, onerous obligations under a contract. This discretion cannot be excluded by contract. The term “excessively onerous” is expressly stated to be of a standard lower than “impossibility”. However, the events must be of a “general character” and must be “exceptional”. Egyptian judicial decisions have held Article 147 to apply to emergency occurrences the impact and effect of which are of general application, and which are impossible for the ordinary person to predict or foresee (regardless of whether the particular contract counterparty has actually envisaged its occurrence2 or not) .
In the case of debts which accrue under a contract, Article 346 of the Civil Code provides that a judge may in exceptional circumstances, and in the absence of a provision in the law to the contrary, grant to the debtor one or more reasonable extensions for repayment of the relevant amounts, provided no serious prejudice is caused to the creditor. However, the grace period provisions appear to be more limited in the Egyptian Trade Law, which provides that a court “may not grant the commercial obligation debtor a time during which he shall fulfil or divide his debt, except in necessary cases and where no gross damage shall affect the creditor”.3
Article 373 of the Egyptian Civil Code addresses force majeure, and provides that “an obligation is extinguished if the debtor establishes that its performance has become impossible by reason of causes beyond his control”. The standard in this instance is the higher standard of impossibility (and not merely an obligation becoming excessively onerous). Where a contract is extinguished by reason of impossibility of performance, obligations are extinguished and the contract is rescinded.4 By contrast, the underlying contractual obligations in respect of which Article 147 relief is granted are not extinguished, but are adjusted to restore the economic equilibrium.