Doctrines of Change of Circumstances, Covid-19, and Special Measures

Abstract The chapter explores the doctrine of change of circumstances, which applies if an unforeseeable change has made it extraordinarily onerous for one party to perform or the promised performance much less valuable to the other, and considers how different jurisdictions used it when dealing with the difficulties that many parties encountered in performing their contracts when economic activity was restricted because of COVID-19. The doctrine of change of circumstances was developed by German scholars and courts between the two World Wars. It is now recognized in many civil law systems, either in legislation or case law. The parties are usually expected to negotiate a solution to keep the contract going, and an attempt at negotiation is sometimes a pre-condition to obtaining relief, but if the negotiations are not successful the court may terminate the contract or, in some systems, adjust its terms to restore the contractual equilibrium. In contrast, the doctrine is wholly unknown in the traditional common law systems, the nearest approach being frustration of the ‘contractual venture’. The chapter explores the doctrine, and then considers its role in responding to COVID-19 restrictions across different jurisdictions, some of which used it to give relief, while others preferred special legislative measures used exclusively or in combination with the doctrine. The picture is extraordinarily varied, and so were the results, illustrating the necessity to examine the social and economic assumptions made in different countries, particularly as to the risks that a party is normally expected to bear in various kinds of contract.