INTRODUCTION

In times of economic stability, long-term contracts may, in theory, act as an efficient tool of financial planning. They provide a means for buyers of goods or services to achieve certainty of supply, and for sellers to achieve a guaranteed income stream. In times of instability, long-term contracts take on an altogether less attractive mien. Contracting parties and their lawyers are prompted to re-read contract terms in search of escape routes. Most – possibly all – legal systems refuse to release parties from contracts solely on the ground that they have become economically less attractive to perform. However, there are more deserving cases, where radical and unprecedented changes of conditions make it unfair to hold parties to their original bargains. As is often the case, the task lies in developing clear rules which can be used to distinguish deserving from non-deserving cases.

In the current climate of global economic instability, naturally, the question of unexpected circumstances comes to the fore once more. And, of course, other phenomena have a similar effect. Natural events such as Hurricane Katrina affect people's lives as well as their business transactions. In some respects times have changed. Parties to commercial contracts will probably use force majeure or hardship clauses, which seek to anticipate and regulate the consequences of such events. Such clauses do not, however, provide a water-tight solution. In low-value transactions where clients do not seek advice from solicitors or legal advisers, such clauses may not be used.