The Impact of Supervening Illegality on International Contracts in a Comparative Context

Abstract

This article is a comparative study on the issue of frustration of contracts with a closer look at supervening illegality of international contracts as a frustrating event. The first part of this research mainly discusses how different legal regimes deal with this issue. When a frustrating event occurs, some legal systems apply pacta sunt servanda with very little flexibility in terminating (the only caveat being cases of force majeure, physical and legal impossibility), or at least adapting, the contract based on new circumstances. Some other legal regimes rule for obligor’s relief and subsequent termination of the contract. There are also moderate legal systems that do stand somewhere between these extremes, which frequently adapt the contract to what the parties had intended when concluding the contract. The latter seems to be more appropriate and suitable. The first part of the article will deal with frustration, while the latter part will focus on the prerequisites and consequences of supervening illegality. A subsequent change in the law, no self-induced non-performance and unforeseeability are the prerequisites in all legal systems. The major consequence is absolute and total discharge of the contract for permanent illegality, while for temporary illegality performance shall merely be suspended.