International Contracts Impact Considerations Assignment

Assignment Task

Problem Statement

Writing a problem statement is a complex step involving multiple decisions influenced by numerous factors. However, once established, a good problem statement lays the basis and paves the way to a complete thesis. In our time, which is undergoing major changes, the latest of which is the current Coronavirus crisis, adapting the contract is essential. It allows the sustainability" of long-term contracts, some of which have a fairly significant economic dimension." In addition, the "economic crises that are shaking the contemporary world cannot remain without impact on the contract(s)", Particularly international trade contracts.

In the case of Rebus sic stantibus, the change in circumstances may greatly benefit one party and, on the other hand, disadvantage the other. To prevent this problem, the Contracting Parties tend to allocate the risks specifically or provide for an automatic adjustment clause or introduce a clause called "hardship" into the contract. Lluelles defines it as follows. “The hardship clause, also called "safeguard clause", "equity clause", "renegotiation clause", "revision clause", or even "hardship clause", provides that in the event of unforeseen circumstances, the contract performance will be more onerous, the parties will have to enter into negotiations in good faith. Occasionally, the clause goes further and provides that failing to reach a satisfactory solution, the contractors must submit the difficulty to an arbitrator who may, in particular, adapt the contract to the new situation”

The Hardship clause is not incorporated into contracts with regularity. Indeed, according to an empirical study by Prado, the hardship clause is present in less than 40% of international contracts. In contrast, these same contracts are usually concluded by sophisticated parties

Schanze also stated that "from an empirical viewpoint, general Hardship clauses of this kind are much rarer than one would assume from the theoretical literature in contract practice; for example, in the 1980s, we studied 200 major mining contracts and did not find a single general Hardship clause"

Worldwide differences exist in the legal treatment of the Hardship clause. Some systems prefer to stick to a rigid application principle of the binding force of the contract – pacta sunt servanda. In the event of unforeseen events, each party bears the risks. Some systems adopt a legal policy that relies on a rigid application of the principle of the binding force of the contract. In return, they leave aside the problem of unforessability.

Other systems take a more flexible approach. Although they adopt the principle of binding force as a general rule, they admit an exception called Hardship. This theory establishes a principle that judges be recognized as having the power to intervene in the contractual sphere when a problem of unforeseeability arises. Depending on the case, the judge's intervention can force the renegotiation, revise the contract or terminate it.

Professor Abdel Razak el Sanhoury is the first jurist in Arab countries to defend the theory of Unforeseen Circumstances before adopting the new Egyptian Civil Code. According to him, this theory is correct, and the legislator can adopt it in the light of the theory of necessity in the Islamic sharia having several applications. Professor Ghannam said the theory of Hardship had confused legal scholars, judges, lawyers, and those involved in trade with the application theory of unforeseen circumstances in Arab countries due to the similarities between them, despite the differences in terms of provisions and validity of the application

This ambiguity persisted among international legal scholars who argued that the Arab countries, including Jordan, had stipulated the theory of Hardship in their laws for a long time, despite the absence of any text related to the theory of Hardship. But they prescribed the theory of Unforeseen Circumstances in their laws According to Salma Seifelnasr, "revising the contract for unforeseen circumstances constitutes an interesting remedy against economic precarity. In our time, which is undergoing major changes, the latest of which is the current Coronavirus crisis, adapting the contract is essential. It allows the sustainability of long-term contracts, some of which have a fairly significant economic dimension. France is one of the last countries in Europe to admit the legal concept of Hardship in private law. In contrast, this concept was known in administrative law and was a source of inspiration for administrative law in Arab countries. The theory of Hardship has been established in Arab countries law with some differences in treating change of circumstances"

This thesis will distinguish between some doctrines. For example, the doctrine of Hardship and the doctrine of impracticability contain elements of force majeure. However, it is important for the study to make an obvious distinction between an unforeseen circumstance clause and a hardship clause.

Research Questions

The research topic raises problems of great importance that need solutions. It can be put forward as follows:

1. what is the legal basis of doctrines of impossibility and change circumstances on the international trade contract? (CH2)
2. What are the similarities and differences between the doctrines of changes in circumstances in various legal systems?
3. To what extent do the comparative legal systems recognise the problem of change of circumstances, and what kind of legal effects do they consider?
4. How can the change of circumstances on international trade contracts affect the contracts' performance?

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