Hardship clause
Encyclopedia
Hardship clause is a clause in a contract
that is intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium
of a contract resulting in an excessive burden being placed on one of the parties involved.
Hardship clauses typically recognize that parties must perform their contractual obligations even if events have rendered performance more onerous than would reasonably have been anticipated at the time of the conclusion of the contract. However, where continued performance has become excessively burdensome due to an event beyond a party’s reasonable control which it could not reasonably have been expected to have taken into account, the clause can obligate the parties to negotiate alternative contractual term
s which reasonably allow for the consequences of the event.
, particularly due to the fact that they share similar features and they both cater to situations of changed circumstances. The difference between the two concepts is that hardship is where the performance of the disadvantaged party has become much more burdensome, but not impossible, while force majeure refers to a party's contractual requirements have become impossible, at least temporarily. Hardship constitutes a reason for a change in the contractual program of the parties. The aim of the parties remains to implement the contract. Force majeure, however, is situated in the context of non-performance, and deals with the suspension or termination of the contract.
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
that is intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium
Equilibrium
Equilibrium is the condition of a system in which competing influences are balanced. The word may refer to:-Biology:* Equilibrioception, the sense of a balance present in human beings and other animals...
of a contract resulting in an excessive burden being placed on one of the parties involved.
Hardship clauses typically recognize that parties must perform their contractual obligations even if events have rendered performance more onerous than would reasonably have been anticipated at the time of the conclusion of the contract. However, where continued performance has become excessively burdensome due to an event beyond a party’s reasonable control which it could not reasonably have been expected to have taken into account, the clause can obligate the parties to negotiate alternative contractual term
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
s which reasonably allow for the consequences of the event.
Relation to force majeure
The hardship clause is sometimes used in relation to force majeureForce majeure
Force majeure or vis major "superior force", also known as cas fortuit or casus fortuitus "chance occurrence, unavoidable accident", is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of...
, particularly due to the fact that they share similar features and they both cater to situations of changed circumstances. The difference between the two concepts is that hardship is where the performance of the disadvantaged party has become much more burdensome, but not impossible, while force majeure refers to a party's contractual requirements have become impossible, at least temporarily. Hardship constitutes a reason for a change in the contractual program of the parties. The aim of the parties remains to implement the contract. Force majeure, however, is situated in the context of non-performance, and deals with the suspension or termination of the contract.