The Legal Effects of a Change of Circumstances on the Binding Force of Contracts: Comparative Survey
No Thumbnail Available
Date
2019-01
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa
Abstract
The principle that contracts are made to be kept, articulated in the old maxim-pacta sunt
servanda- perhaps comprises the bedrock of all contract law systems. The principle, however,
has never been regarded absolute throughout its history: almost all legal systems traditionally
recognised limitations on its application, particularly where unforeseen supervening events
make performance of contracts absolutely and objectively impossible. However, such
uniform position is lacking among legal systems when it comes to how the law should
respond to the cases in which the supervening circumstances merely render performance of
contracts extremely burdensome or the counter-performance to be received virtuall y
worthless to one of the parties. These latter cases formed the main focus of this research: and
the generic expressions 'the problem of change of circumstances' and 'the doctrine of change
of circumstances', have been respectively employed to refer to the questions involved therein
and the specific legal devices applied to address them.
The doctrine of change of circumstances found its original expression in another old maxim
of contracts law- the ribus sic stantibus - which embraced the core idea that contracts stay the
same only so far as the states of affairs present upon their conclusions remain constant. In its
early application, the doctrine was viewed as an implied condition attached to all contractual
promises. Due to this reason, its application was never perceived to contradict with the other
paramount principle of contracts law- pacta sunt servanda. Thus it enjoyed wide-spread acceptance among legal systems, before the oppositions based on the 19 th century classical
theories of contracts later brought its demise. Application of the doctrine was deplored by the
classical views to cause erosions to the core principle of binding force of contracts, and
thereby threaten freedom of contracts and security of transactions. At least for some period,
this led to its disappearance from the legal scene altogether. But it once again started to re-
emerge in many jurisdictions, particularly due to the post-WWI and WWII huge economic
dislUptions caused in many parts of the world. This marked the final comeback of the
doctrine and its continued acceptance both in the theories and applicable IUles of the modern
contracts law.
This study was thus commenced with the basic objective of identifying the justifications
behind this modern comeback of the doctrine and how it may be related to ensuring
X