All over the world, the binding force of contracts is a basic principle of contract law (“pacta sunt servanda”). In general, each party can rely on the performance of the contractual obligations undertaken by the other party. Yet, unexpected circumstances may occur after the conclusion of a contract which call this principle into question.
As a general market trend, we expect a rise in such hardship situations in various sectors (e.g. in the energy sector, which experiences significant changes due to substantial changes in environmental policies). Consequently, more and more companies have an interest in challenging long-term contracts.
Against this background, our comparative review considers how hardship situations are being dealt with in 18 jurisdictions around the globe. There are different ways to address hardship situations, but all the jurisdictions covered in this review have mechanisms in place to handle such situations. They have in common that they allow interference with the binding nature of a contract only under restrictive conditions.
We asked each of the 18 jurisdictions the following questions:
- Is the concept of hardship recognised by statutory or case law?
- If so, what are the requirements for a claim based on hardship?
- What kind of rights are granted for the aggrieved party in case of hardship and is there a ranking ratio between the different kind of rights?
- How can a hardship claim be asserted in court?
- Is there a time limitation in respect to the claim of hardship that needs to be considered?
As a result, our comparative review of the concept of hardship has highlighted a number of key themes and issues that the aggrieved party is facing when trying to invoke hardship in one of the covered jurisdictions.