Retaining Economic Contractual Equilibrium Under the Hardship Theory in the UNIDROIT Principles of 2016 and the Contingency-Unforeseen Circumstances Theory in the Palestinian Civil Code Draft

Abstract

The UNIDROIT Principles of International Commercial Contracts (PICC) have a significant effect on the legal impact of changed circumstances. Many recent court and arbitral decisions have relied on the PICC when ruling on issues relating to hardship events, as a result of the occurrence of events fundamentally altering the equilibrium of the contract either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, which is widely known in international trade as hardship clauses. This was not the case only for court and arbitral decisions, as many directives and principles did, as well, such as Article 6:111 of the Principles of European Contract Law, Article 89 of the Common European Sales Law, and Article 1195 of the Amended French Civil Code of 2016. In this context, this article analyses the role of hardship provisions in light of the PICC in retaining economic equilibrium compared with the contingency-unforeseen circumstances theory in the Palestinian Draft Civil Code Draft (PDCC) in order to reach a place of harmony. On the one hand, the research concluded that the hardship theory as contained in the UNIDROIT Principles of 2016 suits the current Palestinian reality, however, the criterion for determining the fundamental alteration of the contractual equilibrium is tainted in ambiguity. On the other hand, the research shows failure of the contingency-unforeseen circumstances theory in the PDCC in addressing changed circumstances and onerous performance, which necessitates an urgent intervention of the Palestinian legislature to amend the text of Article 151. Accordingly, in light of the current wording of Article 151 of the PDCC, the study shows that Palestinian contracting parties cannot refer to the Unified Principles of International Trade Contracts 2016 to fill the legislative vacuum in cases of changed circumstances, because it is not possible to agree on anything contrary to the provisions of the contingency-unforeseen circumstances theory.