Document-Id: 951500, Please cite as: "http://www.trans-lex.org/951500"

Principle

No. VIII.2 - Legal consequences

(a) In case of hardship, the aggrieved party may claim renegotiation of the contract with a view to reach agreement on alternative contractual terms which reasonably allow for the consequences of the event. 

(b) If the parties fail to reach agreement on these alternative terms within reasonable time, either party may apply to a court or arbitral tribunal in order to have the contract

i)

adapted to the changed circumstances (provided the applicable procedural law allows for such adaptation), or

ii)

terminated at a date and on terms to be determined by the court or arbitral tribunal.

CommentaryReferencesContract ClausesDiscussion

Commentary

1 See for the guidelines which must be observed by parties in a contractual renegotiation process Trans-Lex Commentary to Principle IV.6.7, Para 3.

2 If an arbitral tribunal is called upon to adapt the contract under Subsection (b) i), the question arises whether in these cases a “dispute” or “legal dispute” exists as a prerequisite for arbitral decision making. The reason for this is to be found in the special nature of the renegotiation process. Because the possible negotiation outcome is so open, a difference of opinion between the parties as to the way to adjust the contract is not suited to classical arbitral adjudication in the sense of a clear “yes or no” decision. Rather an agreement between the parties on changing individual contractual obligations or adapting them to the changed economic conditions should be replaced by a ruling by the arbitral tribunal. With regard to the openness of the possible decision, however, the arbitrators are no longer being called upon to make a legal decision but rather, to shape the contractual relationship for the parties.

3 A multitude of modern developments supports the assumption of a more extensive jurisdiction for arbitral tribunals, including the authorisation to adjust and adapt contracts. Factors in support of this view are the significantly greater arbitration-friendliness of national arbitration acts in recent years combined with increasingly equal treatment of adjudication by arbitral tribunals and by national courts, and the comprehensive recognition of party-autonomy as the leading maxim of arbitration. Even under English law, which has traditionally rejected every interference with the contract by the arbitral tribunal, arbitrators today are authorised to undertake such legal creativity to quite a broad extent. Apart from the extremely arbitration-friendly attitude of the English Arbitration Act 1996, this flows above all from the broad term “dispute”, which forms the basis of the English arbitration law. As well as genuine legal disputes („disputes“) it includes mere differences of opinion („differences“) and hence permits the express transfer of the completion and adjustment jurisdiction to an arbitral tribunal. Even without an express transfer of jurisdiction under English law, in the case of contracts where performance has already begun a so-called „implied term” can be assumed, according to which the contract should be amended by a subsequent agreement.

Please cite as: "Commentary to Trans-Lex Principle , http://www.trans-lex.org/951500"
 

References

 

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DoctrineModel LawsNational Legislation

Doctrine

Brunner, Christoph, Force Majeure and Hardship under General Contract Principles - Exemption for Non-Performance in International Arbitration, 2009 

Model Laws

Uniform Commercial Code (USA) 

National Legislation

Danish Contracts ActTurkmenistan Civil CodeUzbekistan Civil Code 

Contract Clauses

 

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1. Adaptation Provided by the Contract ItselfEmployment ContractSales & Purchase ContractJoint Venture
1. Adaptation Provided by the Contract ItselfEmployment ContractSuspension Period Following Harship Distribution
A participant who receives a distribution of elective deferrals after {Date/Year}, on account of hardship shall be prohibited from making elective deferrals and employee contributions under this and all other plans of the employer for {X} months after receipt of the distribution. A participant who receives a distribution of elective deferrals in calendar year {X} on account of hardship shall be prohibited from making elective deferrals and employee contributions under this and all other plans of the employer for the period specified (...)
2001
 Sales & Purchase ContractIncreased Costs
(...) the Seller shall promptly pay to the Administrator, for the account of such Affected Person from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for both increased costs and maintenance of bargained for yield in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments (...)
2004
 Joint VentureGross Asset Value
Upon the occurrence of any event specified in Regulations Section X, the Members, by unanimous approval, may cause the Capital Accounts of the Members to be adjusted to reflect the Gross Asset Value of the Company's assets at such time in accordance with such Regulation if the Members, by unanimous approval, determines that the Gross Asset Value of the Company's assets has materially appreciated or depreciated in such an amount so as to render such adjustment necessary to preserve the economic arrangement of the Members.
2007
 

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