Businesses who are struggling to secure affordable bank credit are advised not to use the recession as a reason for getting out of an unprofitable contracts according to commercial contract experts at Browne Jacobson.

The warning follows the recent High Court case, Tandrin Aviation v Aero Toy Store (ATS), in which the defendants tried to pull out of a contract to buy an aircraft on the grounds that the global recession, which had affected their ability to obtain funding to complete the purchase, was a force majeure event. The High Court judge disagreed.

Force majeure is a common clause found in commercial contracts which can free one or more parties from their legal obligations when an extraordinary event or circumstance occurs which is beyond their control. Events include wars, natural disasters, public order disturbances and government actions.

According to a recent survey by the Federation of Small Businesses 43% of the 1200 businesses taking part said cash flow was a major obstacle to achieving business objectives, and 23% cited problems with obtaining affordable finance.

Richard Nicholas, a partner in the commercial team at Browne Jacobson, said: "We may be officially out of recession but many businesses are still struggling to obtain affordable funding to keep their operations afloat. So it's not surprising that some may be tempted to use clauses in their contracts to free themselves from their legal obligations.

"It seems only right that force majeure should not include economic downturns, particularly where it is possible for the parties to deal with a lack of funding another way such as incorporating a "hardship" clause or to make the deal dependent upon the purchaser first obtaining funding.

"This case makes it clear that the recession should not be treated as a force majeure event. It is rather a challenge that buyers and sellers must face together on their own terms."