Economic hardship in performance of contracts : a comparative study of English, American, French and German law and CISG, the UNIDROIT principles and PECL
This thesis is an assessment of the position of English, American, French and German law, UN Convention on the International Sale of Goods (CISG), the UNIDROIT Principles of International Commercial Contracts and Principle of European Contract Law (PECL) regarding the problem of economic hardship in performance of contracts. As such, it has four aims: first, to establish a comprehensive concept of economic hardship; second, on the basis of the concept of economic hardship established, to examine this concept in the four main legal systems to determine the extent to which they recognise this problem and what kind of legal consequences they consider for it; third, by a comparative approach, to consider and explore the points of convergence and divergence between the legal systems under study; and, fourth, by examining some international and regional laws and models to find out how non-domestic laws and models have treated the issue. In relation to the first aim, after establishing that a general theory of hardship is needed, it is argued that economic hardship occurs when, as a result of unforeseen and unforeseeable supervening events for which none of the parties is responsible and could not have been avoided the consequences, the performance of the contract has become excessively onerous and the original equilibrium of the contract has been fundamentally altered. In relation to the second aim, different conclusions are reached in the four legal systems being studied: in English law, although the doctrine of frustration by its dominant test of ‘fundamental change’ is theoretically applicable to cases of economic hardship, in practice, English courts have rejected the notion that hardship can be regarded as a ground for excuse for non-performance of the contract. In American law, the modern doctrine of commercial impracticability has recognised the problem of economic hardship. However, in practice American courts have been unsuccessful in properly applying this doctrine to cases of economic changes in contracts. French law has only accepted economic changes as a ground for revision in administrative contracts under the doctrine of imprévision. The German doctrine of frustration has played a broader function compared to that of other legal systems; German law has recognised the problem of economic hardship as a ground for excuse of non-performance of the contract in its case law and also in its recently revised Civil Code. In relation to the third aim, it is submitted that CISG, an international convention for international sale of goods, has not adopted the concept of economic hardship, and impossibility is the only ground for the exemption rule under Article 79 of CISG. However, the two modern models UNIDROIT Principles and PECL have properly recognised the problem of economic hardship and anticipated appropriate solutions for it. Although the presence of a concept of economic hardship is needed as a general guidance in changed economic circumstances, it is concluded that the most peaceful way to deal with the problem of economic hardship is to provide express causes at the time of conclusion of the contract.