Gap Filling to Address Changed Circumstances in Contract Law – When It Comes to Losses and Gains, Sharing Is the Fair Solution

• Jurisdiction: South Africa
• Date: 16 August 2019
• Pages: 414-428
• Citation: (2010) 21 Stell LR 414
• Author: Andrew Hutchison
• Published date: 16 August 2019

414

GAP FILLING TO ADDRESS CHANGED

CIRCUMSTANCES IN CONTRACT LAW – WHEN

IT COMES TO LOSSES AND GAINS, SHARING

IS THE FAIR SOLUTION

Andrew Hutchison

BA LLB LLM (UCT)

Lecturer in the Department of Commercial Law, University of Cape Town*

1 The nature of the problem

The problem of changed circumsta nces arises when the fac tors on which

contracting pa rties had based thei r consensus are f undamentally cha nged.

This upsets the equ ilibrium of contract ual exchange, since performance now

becomes more onerous for one of the part ies. The result will usu ally be a

loss for one party and possibly even a wi ndfall gain for the other. This issue

of changed circumstanc es, or hardship, as it is often refer red to, is dealt with

by many leading Western legal system s. Countries such as Ger many and the

Netherlands deal with th is problem in ter ms of their civil codes.1 English law

has the doctri ne of frustration, as does the US, although d ischarge is far more

readily perm itted in the latte r jurisdiction.2 In t he realm of internationa l

trade there are r ules on hardship cont ained in the Unidroit Pr inciples of

International C ommercial Contract s (“PICC”), as well as in the Principles

of European Contract Law (“PECL”) and the Draft Com mon Frame of

Reference (“DCFR”).3 Comparat ive study thus reveals that this i s a widely

acknowledged problem and that leading legal sy stems address it with t heir

own idiosyn cratic rules.

The position is different in Sout h Africa, however. South Africa has a mixed

legal system, in that it is based on a m ixture of seventeenth cent ury Roman

Dutch law in the civilia n tradition as well as signicant tra cts of English law,

and also recognises t he doctrine of precede nt, so that these sources have

* I would like to thank P rof Tjakie Naudé and Prof Dale Hutchis on for their very helpful com ments on

earlier dr afts of this paper

1 German Civil Code § 313 (Störung der Geschäftsgrundlage which means “inte rference with the b asis of

the trans action”); Civil Code of the Nether lands art 6:258 Other European c ivil law countries such as

Italy, Spain, Gre ece, Portugal a nd Austria have si milar provision s in their civil co des Notable except ions

are France, Belg ium and Luxembourg See general ly Lando & Beale Principle s of European Contract

Law I & II (2000) 328

2 A succinct summa ry of the English approach c an be found in J Lauritze n AS v Wijsmuller BV [1990] 1

Lloyd’s Rep 1 8 (“The Super Ser vant Two”) For the US approach see § 2 -615 of the Uniform Comme rcial

Code and §§ 261-272 of the Second Restat ement of Contracts A good aut hority on both juri sdictions is

Treite l Frustrati on and Force Majeure (20 04)

3 Hardship is dealt wit h in the Unidroit Principles of I nternational Commer cial Contract s (“PICC”) art

6 2 1-6 2 ; the Principles of Europ ean Contract Law (“PECL”) at ar t 6:111; the Draft Com mon Frame of

Reference (“DCF R”) Book III art 1:110

(2010) 21 Stell LR 414

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