The theory of unforeseeability is a legal concept that relates to the occurrence of events unforeseen when a contract is concluded, which make its performance excessively onerous for one of the parties.
Unforeseen events therefore affect the economics of the contract without making its performance totally impossible.
This theory can lead to the renegotiation or revision of contractual obligations to restore the balance between the parties, when certain conditions are met. If adaptation proves impossible or inappropriate, the contract may be rescinded by a court of law.
This theory should be distinguished from force majeure. In both cases, an unforeseeable, irresistible event occurs which is beyond the control of the parties. Force majeure generally means that the debtor is temporarily or permanently prevented from fulfilling its contractual obligations due to exceptional and irresistible circumstances beyond its control. He will not be liable to pay damages to the other party. In the case of unforeseeability, performance of the contract is not impossible but has become more difficult due to the occurrence of an event that makes the performance of the services more onerous or causes an imbalance in the general economy of the contract.
While this theory had already been incorporated into the legal systems of other countries (Italy, Portugal), France and Belgium have only recently accepted it.
1. Recognition and application of the theory of unforeseeability
Historically, French and Belgian law refused to apply the theory of unforeseeability by virtue of the principle of the binding force of contracts, which provides that legally formed contracts take the place of law for those who have made them (inspired by the Roman adage “pacta sunt servanda”). This principle underlines the need for each party to respect the terms of the contract and for third parties (including the judge) not to interfere in the affairs of the parties.
In France, the theory of unforeseeability has long been a legal construct. The courts have occasionally taken on the right to revise agreements that have become unbalanced following the occurrence of an unforeseeable event, based on an obligation to renegotiate based on the principle of good faith.
In Belgium, the theory of unforeseeability was rejected by the Court of Cassation for lack of an autonomous legal basis. The Belgian Court of Cassation held that the performance of a contract in good faith did not allow a party to request its amendment in the event of new circumstances not foreseen by the parties.
This theory of unforeseeability has been recognised in France since the 2016 reform of the law of contracts and obligations, in Article 1195 of the Civil Code. In Belgium, it has been recognised since the reform of the Civil Code, in article 5.74 of the new Civil Code, which came into force on 1 January 2023.
In Italian law, the theory of unforeseeability has been recognised since 1942, well before it was adopted in France and Belgium. The Italian Civil Code specifically regulates this concept.
Article 1467 of the Italian Civil Code (Codice Civile) stipulates that if extraordinary and unforeseeable events render the performance of one of the services too onerous, the party who must perform that service may request a revision of the contract. If a revision is not possible, he may ask for the contract to be rescinded. The other party may avoid termination by offering to modify the terms of the contract in an equitable manner.
In Italy, unpredictability is justified by the need to “preserve the balance of interests in the contract”, in order to guarantee “fair cooperation” between the parties .
Portuguese law recognises the principle that unforeseen and extraordinary circumstances may affect the performance of a contract in its 1967 Civil Code (Código Civil). In Portuguese, this theory is referred to as “alteração das circunstâncias” (change of circumstances).
Article 437 of the Portuguese Civil Code deals with this situation. According to this article, if, as a result of circumstances unforeseen when the contract was concluded, performance of the contract becomes excessively onerous for one party, with a serious imbalance between the parties’ performances, that party may ask for the contract to be revised or even terminated. The solution will depend on what would reasonably be expected of the parties according to good morals and equity.
If these conditions are met, a Portuguese court can either adapt the contract to restore the balance between the parties, or terminate the contract if adaptation proves impossible or inappropriate.
As for Canada, it is important to note that it is a country of mixed law, with civil law in Quebec, based on the Napoleonic Code, and common law in the other provinces and territories.
The Supreme Court of Canada confirmed in Falls (Labrador) Corp. c. Hydro-Québec de 2018 that the theory of unforeseeability does not apply in Quebec civil law.
In common law, factual situations of contractual unforeseeability are governed by the “doctrine of frustration”. This doctrine, which is similar to force majeure, allows a contract to be terminated where unforeseen circumstances make performance impossible or give it a radically different nature from that originally envisaged by the parties when they entered into the contract. The “doctrine of frustration” applies only in circumstances where it has become impossible to perform the contract because of an unforeseen event and through no fault of either party. A mere increase in the cost or difficulty of performing the contract is generally not sufficient to invoke “frustration”. The very essence of the contract must be affected.
2. Similar conditions of application
The conditions required for the theory of unforeseeability to apply are similar in Belgian, French, Italian and Portuguese law:• The event must make performance of the contract excessively onerous. There must be a significant imbalance between the parties’ performances;
• The event must have been unforeseeable when the contract was concluded;
• The situation cannot be the result of fault on the part of the debtor;
• The debtor has not explicitly undertaken to assume the risk;
• The law or the contract does not explicitly exclude the application of the theory of unforeseeability.
3. Conclusion
The recognition and application of the theory of unforeseeability has evolved over time. There is, however, a trend towards harmonisation of the law of obligations in Europe.
The theory of unforeseeability is now applied and codified in a similar manner in countries with a European civil law tradition, but is not yet recognized in Quebec.
It should be noted, however, that although this theory is codified in France, Belgium, Italy and Portugal, it is generally applied with caution by the courts, as it can potentially interfere with legal certainty and freedom of contract.
