The world is in motion. US import tariffs are disrupting global supply chains, geopolitical tensions are threatening trade routes, and climate events are turning delivery deadlines into a lottery. What was once regarded as a theoretical risk has suddenly become very real for many companies: What happens if a contractual partner can no longer deliver—or no longer wishes to do so—and invokes force majeure? DACH companies with business relationships in Malaysia sometimes find themselves facing a situation that comes as a considerable surprise: Under Malaysian law, there is no statutory concept of force majeure. Anyone seeking this protection must include it in the contract. This article explains exactly what that means and what alternatives Malaysian law provides.

Whether in Germany, Austria, Switzerland or Malaysia, the starting point is always the same: Contracts must be performed. The Latin principle pacta sunt servanda—agreements must be kept—applies worldwide. A party that fails to deliver will generally be in default and liable for the resulting damage. The interesting question during periods of geopolitical tension is: When does a legal system make an exception to this rule? And what exceptions does Malaysia recognise compared with the DACH region?

When companies speak of “force majeure,” they often mean different things. It is therefore useful to distinguish clearly between three concepts.

Force majeure is not a law of nature, but a contractual clause. It specifies the extraordinary circumstances under which a contracting party is released from its obligation to perform—for example, in the event of natural disasters, war, pandemics or government prohibitions. In the DACH region, force majeure is not always expressly referred to by that name, but the underlying principle is legally protected. Under German law, Section 275 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) provides for release from the obligation to perform in cases of impossibility, while Section 313 BGB additionally allows for the adjustment of a contract where circumstances have changed. The Austrian General Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB), in Sections 1447 et seq., likewise provides that a debtor is released from the obligation to perform where performance becomes impossible through no fault of the debtor. Although the term “force majeure” is not used by statute, the protective principle is recognised under Austrian law. The Swiss Code of Obligations regulates force majeure in Article 119: If performance becomes impossible due to circumstances for which the debtor is not responsible, the claim is extinguished. In all three countries, therefore, the law provides protection if performance becomes impossible—even without an explicit contractual clause.

In Malaysia, by contrast, force majeure does not exist as a statutory right. Anyone wishing to rely on force majeure requires a corresponding clause in the contract—and it must be properly drafted. Without such a clause, there is simply no entitlement to this protection.

The concept of frustration originates from English common law and is codified in Malaysia in Section 57(2) of the Contracts Act 1950. It applies where, after the contract has been concluded, an event occurs that makes performance of the contract impossible—or alters it so fundamentally that the original contractual purpose is lost. A classic example is where a company leases a hall for an event and the hall burns down shortly before the scheduled date. The contract is “frustrated”—it becomes void by operation of law, without either party being at fault.

What may initially appear to be a safety net has one decisive drawback. The contract becomes automatically void without either contracting party having to take any action. There is no judicial adjustment and no renegotiation—it is all or nothing. The threshold is also very high: Mere economic hardship, increased costs or delivery delays are not sufficient. There must be genuine impossibility. Malaysian courts have repeatedly emphasised that a contract is not “frustrated” merely because it has become more difficult to perform.

Compared with the DACH region, the doctrine of frustration is significantly more rigid. Frustration operates on an all-or-nothing basis and does so automatically, without any action by the contracting parties. Force majeure, by contrast, may also apply temporarily and therefore does not automatically render a contract void.

Hardship is the third concept and perhaps the most relevant in practice—particularly in turbulent times. It describes a situation in which a contract can still be performed, but has become an extreme economic burden for one party. Consider, for example, a supply contract concluded at fixed prices shortly before US tariffs caused raw material costs to double. In the DACH region, hardship is recognised under various names. In Germany, Section 313 BGB applies under the doctrine of disruption of the basis of the transaction (Störung der Geschäftsgrundlage): If the circumstances forming the basis of the contract have changed so significantly that the parties would not have concluded it on the same terms, an adjustment may be requested—and, in extreme cases, withdrawal from the contract may be possible. In Austria and Switzerland, the principle of clausula rebus sic stantibus—“provided that circumstances remain as they are”—applies. The courts may adjust a contract where the equivalence of the parties’ obligations has been fundamentally disrupted by unforeseen events.

In Malaysia, hardship is not regulated by statute and cannot be read into contracts by the courts. Anyone wishing to impose an obligation to renegotiate or provide for price adjustments in the event of changed circumstances must expressly agree this in the contract—for example, through a hardship clause or a material adverse change (MAC) clause.

The current US trade tariffs provide an illustrative example. Malaysia, like many other countries, has been subjected to general import tariffs by the US government. These tariffs directly affect export-oriented Malaysian suppliers as well as DACH companies that use Malaysia as a production or procurement location.

Consider the following scenario: A German mechanical engineering company has entered into a supply contract with a Malaysian manufacturer that is required to deliver components at a fixed price. Malaysian law applies. As a result of US tariffs, raw material prices increase sharply. The Malaysian supplier wishes to renegotiate the price. What legal options are available? If the contract contains no force majeure clause, the supplier’s only remaining option is to rely on the doctrine of frustration—which is highly unlikely to apply because performance has not become impossible, but “only” more expensive. If the contract contains no hardship clause, the supplier remains bound and must deliver at the original price or fall into default. If, however, the contract contains a properly drafted force majeure or hardship clause covering tariffs and trade restrictions, negotiations may take place on a solid legal basis. The outcome therefore depends entirely on the wording of the contract—not on the law.

Force majeure exists in Malaysia exclusively on a contractual basis and has no statutory foundation. The relevant event must be expressly specified in the contract. The legal consequences are governed by the contract and may include suspension or termination. Adjustment of the contract may be possible depending on how the clause is drafted. The DACH equivalents can be found in Section 275 BGB, Sections 1447 et seq. ABGB and Article 119 of the Swiss Code of Obligations.

Frustration, by contrast, has a statutory basis in Section 57(2) of the Contracts Act 1950. It requires complete impossibility of performance and automatically renders the contract void. Adjustment of the contract is not possible—the all-or-nothing principle applies. Similar but more flexible provisions exist in the DACH region, particularly when compared with Section 313 BGB.

Finally, hardship, like force majeure, is not regulated by statute under Malaysian law and can only be agreed contractually. It requires economic unreasonableness while performance remains fundamentally possible. Its central purpose is to create an obligation to renegotiate and to allow the contract to be adjusted. The DACH equivalents are Section 313 BGB and the principle of clausula rebus sic stantibus in Switzerland and Austria.

Whether your company is based in Germany, Austria or Switzerland and is currently reviewing or renegotiating contracts with Malaysian partners, the following points are particularly important: First, it should be determined which law applies to the contract. If Malaysian law applies, the statutory protections available in the DACH region do not apply automatically. The next question is whether the contract contains a force majeure clause and, if so, what exactly is defined as force majeure and whether trade sanctions, tariffs or pandemic-related measures are covered. It should also be determined whether the contract contains a hardship or MAC clause. Such a clause is crucial where performance remains possible but has become economically unsustainable. Particularly in long-term supply or service contracts, it is advisable to include a clause that triggers an obligation to negotiate in the event of material changes in circumstances before a dispute arises. Finally, it should be determined whether notification obligations apply. Many force majeure clauses require written notification within a specified period. A party that fails to comply with this requirement may lose its entitlement to rely on the clause.

The basic structure of Malaysian contract law is pragmatic and strongly influenced by English common law. However, it allows significantly less scope for judicial adjustment of contracts than the law of the DACH region. What is addressed in our jurisdictions through legislation and case law—the adjustment of contracts to changed circumstances—must be included in the contract in advance in Malaysia. In a world that changes more quickly than contracts can be drafted, this presents a considerable challenge. The good news is that the challenge can be managed—with forward-looking contract drafting and a clear understanding of what the law of the host country, in this case Malaysian law, does and does not provide. Existing contracts with a Malaysian connection should be reviewed for force majeure and hardship clauses. In new contracts, such provisions should be standard rather than the exception.

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Your point of contact in Malaysia: Dr. Harald Sippel

Aqran Vijandran

5-2A, Medan Klang Lama 28, 419, Jalan Klang Lama
Wilayah Persekutuan
Kuala Lumpur, Malaysia

TEL:      +60 1 8211 4958

www.aqranvijandran.com
sippel@adwa-law.com

What Foreign Beverage Manufacturers Need to Know:

Since 1 April 2026, a mandatory deposit return scheme for pre-packaged beverages in plastic and metal containers (150 ml to 3 litres) has been in effect in Singapore under the “Beverage Container Return Scheme” (BCRS). A deposit of S$0.10 is charged per container.

The key obligations also apply, among others, to importers of foreign beverage products into Singapore.

In practice, this means:

Registration under the scheme
Product registration and implementation of a deposit mark and barcode
Payment of fees and deposit amounts per unit
Ongoing reporting and documentation obligations via the BCRS portal

A transition period applies until 30 September 2026. From 1 October 2026, only compliant products may be sold.

Conclusion: Foreign beverage manufacturers should ensure that their importers in Singapore are properly registered and prepared.

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Your point of contact in Singapore: Dr. Andreas Respondek

Respondek & Fan Pte Ltd

1 North Bridge Road
#16-03 High Street Centre
Singapore 179094

CELL:      +65 9751 0757
TEL:        +65 6324 0060
FAX:       +65 6324 0223

www.rflegal.com
respondek@rflegal.com

Amendments to the Recruitment and Employment of Foreign Professionals Act have significantly lowered the barriers for families of Gold Card holders by enabling more flexible career planning and providing greater security of residence. Pursuant to Article 15, spouses may now directly apply for a personal Open Work Permit. This grants them the independence to work for any employer or for several companies simultaneously. By eliminating the traditional administrative hurdles associated with employing foreign nationals, the employment of a Gold Card holder’s spouse is now considerably more straightforward than before.

Gold Card holders and their dependants continue to be exempt from the standard six-month waiting period for National Health Insurance (NHI) and are eligible for insurance coverage as soon as they receive their residence permit. Although this provision was not introduced by the recent amendments, it remains a crucial benefit for families relocating to Taiwan.

Pursuant to the revised Article 18, eligible “Global Elites” and their families may now obtain permanent residency after only one year of lawful residence—a significant acceleration compared with the existing three-year period that continues to apply to other Gold Card holders.

Pursuant to the newly added Article 12, foreign graduates of Taiwanese universities with at least an associate degree—including children of Gold Card holders—may engage in employment during their post-graduation extension of stay of up to two years without obtaining a separate work permit. Adult children with long-standing ties to Taiwan also retain direct access to personal work permits pursuant to Article 15.

Under a new provision in Article 20, parents and grandparents of Gold Card holders who obtain qualifying medical and comprehensive health insurance for their stay in Taiwan may now extend their visit beyond the previous maximum period of one year. This amendment allows Gold Card families to receive longer-term support from relatives and provides greater security regarding childcare arrangements.

Although these amendments provide unprecedented benefits, the processing of applications with the Ministry of Labor and the NIA remains complex. Eiger offers specialised assistance in this area and is available to answer any questions.

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IYour point of contact in Taiwan: Michael Werner

Eiger Law

Bldg. A, 2F, 25-2 Ren Ai Rd, Sec. 4
Taipei 10685
Taiwan

CELL:      +886 9 8726 1326
TEL:        +886 2 2771 0086
FAX:       +886 2 2771 0186

www.eiger.law
info@eiger. law