Project
Risk-allocation in case of systemic risks in contract law: towards a more flexible approach
A contract essentially is an act of risk-allocation where party autonomy prevails. However, contracts have been and are today more than ever confronted with reasonably unforeseen events that fundamentally disrupt the contractual equilibrium and, eventually, the economy as a whole. Pandemics, wars, financial crises or even natural catastrophes are systemic contingencies for which contracting parties cannot always allocate the risks in advance themselves. This begs the question: how should the gap in their contractual relationship be closed and the risk be allocated between debtor and creditor in a situation that is reasonably unforeseen and not directly attributable to one of the parties? Economists would say that the party which is best placed to insure the risk should also bear the risk, but that answer only reframes the problem of risk-allocation in one of insurance law. Others expect more from insolvency law, but that is nothing but an ultimum remedium. The role of contract law should not be overlooked. It has an equally important role to play, because parties (and judges) are in the first place dependent on contract law rules and principles of risk-allocation to close the gap in their contractual relationship. Yet especially these rules remain unclear and disputed. The Belgian rules of risk-allocation generally uphold an all-or-nothing approach and designate only one party as risk-bearer. The rules fully depend upon a dogmatic legal analysis and change with the legal basis upon which they are based (force majeure or hardship). This may sometimes feel unjust and necessitates further research on this topic.