The Fundamental Change of Circumstances Doctrines

Contractual obligations provide commitment, independently of the circumstances that can affect the parties between the beginning of their contractual relation and the performance of the contract. It is sometimes said that if an event is foreseeable, a party that makes a promise to perform necessarily assumes an obligation to perform, even if the occurrence of the event makes performance impracticable. However, promises are contingent and not all contingencies can be spelled out ahead of time in a contract. Parties are incapable of reducing important terms of the arrangement to well-defined obligations. Such definitive obligations may be impractical because of the inability to identify uncertain future conditions or because of inability to characterize complex adaptations adequately even when the contingencies themselves can be identified in advance.

In the present times of financial and economic crisis, doctrines related to the effects of adverse and unexpected change of circumstances are especially relevant. Parties of long-term contracts are subject to negative variations in the costs of their contractual promises that can affect the performance of the contract.

It is worthwhile to consider to what extent the solutions provided by the ‘best’ jurisdictions and their case law can help parties in tuning the contract terms according to the new circumstances. Even to consider if there is some kind of right to breach the contract when it turns out to be harder than expected.