Abstract
Danish law recognizes a number of modifications to the pacta sunt servanda rule. When such modifications apply, a promisor may be relieved, in whole or part, of its obligation to perform as originally agreed. Due to the emphasis usually placed on pragmatic considerations in Danish law (which goes hand in hand with a lack of legal formalism in our legal system), the various recognized exceptions to pacta sunt servanda – both statutory and otherwise – sometimes tend to overlap. So although it seems appropriate in a comparative context to provide a schematic (point by point) presentation of these exceptions – e.g. with specific focus on exceptions related to the possible effects of financial crises (“Hardship”) – account must also be taken of their interaction in Danish legal theory and practice, not least because Danish courts do not always specify the exact legal principle which they apply when holding that a contractual provision is not binding.
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Notes
- 1.
In Denmark, in the wake of the collapse of Lehman Brothers in September 2008, the interbank market literary froze, leaving numerous Danish financial institutions with severe funding problems and liquidity risks. To overcome these problems, the Danish government introduced a legislative package (“Bank Package I”) which included a two-year government guarantee for all deposits and all financial obligations of those Danish financial institutions who opted into the package. Obviously, there are limits to governmental interventions of this kind. When the government guarantee expired in 2011, Danish banks were on their own again. A few months after a Danish bank of substantial size (Amager Bank) went bankrupt leaving numerous creditors unable to recover the full amount of their original clams above the 100,000 Euro guarantee provided by the Danish Guarantee Fund for Investors and Depositors.
- 2.
In other words cyclical risks such as those outlined above can not affect the validity of the promises rendered by financial institutions as part of their financial products, in that the value to the financial system of the performance of and reliance on such promises is far stronger than the interest of one particular institution in being relieved of its promise under a given exception to the main rule that contracts are binding.
- 3.
See also note 1 above.
- 4.
See generally Andersen (2013), p. 53.
- 5.
See Andersen (2013), pp. 56ff.
- 6.
Regarding legal pragmatism in Nordic law, see generally Blandhold (2005).
- 7.
See Andersen (2013), p. 399.
- 8.
See Andersen (2013), p. 104 (comparing Lando’s characterizaton of the Danish doctrine).
- 9.
See (e.g.) Andersen (2013), pp. 80–85 (comparing the English precedent established in Taylor v Caldwell with the corresponding Danish doctrine).
- 10.
- 11.
Andersen (2013), p. 401.
- 12.
See UfR 2002.1031H, Ugeskrift for Retsvæsen (Danish Weekly Law Reports) 1031 (2002).
- 13.
Andersen (2013), p. 402.
- 14.
See Andersen (2013), p. 399.
- 15.
See Andersen (2013), p. 403.
- 16.
Regarding frustration under English law see generally e.g. Treitel (2007), Ch. 13.
- 17.
Regarding similarities and difference between these various doctrines see Lookofsky (1989), p. 80ff.
- 18.
The doctrine provides relief for cases where the original economic basis of the contract has changed. When circumstances have unforeseeably and substantially changed, the foundations of the transaction have been destroyed and the parties are no longer bound to their original contractual commitments. Requesting the original performance of the contract in such circumstances would constitute bad faith under Art. 242 BGB. See Liu (2005) Changed Contract Circumstances, available at http://www.cisg.law.pace.edu/cisg/biblio/liu5.html.
- 19.
Liu (2005).
- 20.
For an analysis involving this example see Lookofsky (1989), p. 85 f.
- 21.
- 22.
See Lookofsky and Ulfbeck (2015), pp. 222–223.
- 23.
- 24.
- 25.
See Gomard and Iversen (2011), p. 56 f.
- 26.
See Andersen (2015), pp. 418 ff.
- 27.
See Andersen (2013), p. 340 f.
- 28.
Ugeskrift for Retsvæsen 2000, p. 656 (Supreme Court).
- 29.
See Andersen (2013), pp. 341–342.
- 30.
Regarding the general Danish principle which obligates contracting parties to observe principles of good faith and fair dealing (loyalitetspligt) see Andersen and Lookofsky (2015), pp. 69 ff.
- 31.
See Lookofsky (1998), pp. 496–498.
- 32.
See Andersen and Lookofsky (2015), p. 198.
- 33.
See in this connection Lookofsky (2011), pp. 141–169.
- 34.
See generally Lookofsky (2011), pp. 156 ff.
- 35.
See generally Lookofsky (2005), p. 434.
- 36.
See UNIDROIT (2010) Article 6.2.2 which provides: “There is hardship where the occurrence of events fundamentally alters 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, and (a) the events occur or become known to the disadvantaged party after the conclusion of the contract; (b) the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract; (c) the events are beyond the control of the disadvantaged party; and (d) the risk of the events was not assumed by the disadvantaged party.”; see also Andersen and Lookofsky (2010), p. 193 f.
- 37.
See Lookofsky (1989), pp. 83–84.
- 38.
References
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List of Cases
UfR 2002.1031 H, Ugeskrift for Retsvæsen (Danish Weekly Law Reports) 1031 (2002).
Ugeskrift for Retsvæsen, 2000, p. 656 (Supreme Court).
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Andersen, M.B., Lookofsky, J. (2016). Financial Crises and Danish Contract Law: No Room for Hardship. In: Başoğlu, B. (eds) The Effects of Financial Crises on the Binding Force of Contracts - Renegotiation, Rescission or Revision. Ius Comparatum - Global Studies in Comparative Law, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-319-27256-6_7
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