Change of Circumstances in European Contract Law – Convergencies, Distinctions and the Unsolved Mystery of Equitable Adjustment

Abstract

The principle of pacta sunt servanda is universally recognized. However, the binding nature of the contract is loosened to a certain extent in all legal systems if the circumstances of the contract change fundamentally. As a summary of a broad comparative analysis of European Contract law, the following article identifies a tendency of convergence with regard to the basic question of suspending or upholding the contract. The paper defines minimum requirements for setting aside the contract. From a doctrinal point of view, a preference is established for “exceptional” doctrines which openly address the conflict between the contract and the requirements of equity in the light of the unexpected event in question. In contrast, "coventional“ doctrines which are based on the parties’ (hypothetical) intentions or on flaws in the mechanism of contracting provide no precise and persuasive rationale for relief in cases of change of circumstances. It is suggested that cases of change of circumstances are strictly to be distinguished from cases of initial mistake. Finally, the problems of “adjusting the contract” are identified as the fundamental and fairly unresolved issue – and as the most important source of differences in the European legal systems.

Keywords: European Contract Law, contract law, comparative law, private law

JEL Classification: K12, K33