Preface........................................................................................................................................................................................... I
Contents.................................................................................................................................................................................... III
list of abbreviations....................................................................................................................................................... IX
I Introduction................................................................................................................................................................... 1
1 The scope of the work............................................................................................................................................................ 2
2 Method...................................................................................................................................................................................... 3
3 Terminology............................................................................................................................................................................ 9
4 Disposition............................................................................................................................................................................ 12
II Changing circumstances As a risk................................................................................................................ 13
1 Circumstances – changed or changing?......................................................................................................................... 13
2 Changing circumstances and contract paradigms........................................................................................................ 23
3 Risk as a (basic) concept in contract law......................................................................................................................... 47
4 Conclusions.......................................................................................................................................................................... 73
III THE Theory of contractual risk management...................................................................................... 77
1 The main trends of discussion on risk allocation.......................................................................................................... 82
2 The theories of efficient risk allocation.......................................................................................................................... 92
3 The theory of the governance of commercial transactions........................................................................................ 109
4 The theory of incomplete contracts................................................................................................................................ 136
5 An outline for the theory for contractual risk management..................................................................................... 138
IV Contractual risk management in practice.......................................................................................... 151
1 The identification and evaluation of the default norms of risk allocation............................................................... 153
2 The contractual tools of risk management................................................................................................................... 274
V Summary and conclusions................................................................................................................................ 277
1 Assumptions or management of risks?........................................................................................................................ 277
2 Contractual risk management........................................................................................................................................ 278
3 The implications of the risk management-approach for nordic contract law......................................................... 279
4 Conclusions........................................................................................................................................................................ 281
Bibliography........................................................................................................................................................................ 282
Index of statutes and equivalent instruments.......................................................................................... 304
Index of Cases...................................................................................................................................................................... 307
List of documents............................................................................................................................................................. 309
Index OF AUTHORS............................................................................................................................................................... 310
INDEX OF FIGURES.................................................................................................................................................................. 314
COMPLETE VERSION
Preface........................................................................................................................................................................................... I
Contents.................................................................................................................................................................................... III
list of abbreviations....................................................................................................................................................... IX
I Introduction................................................................................................................................................................... 1
1 The scope of the work............................................................................................................................................................ 2
2 Method...................................................................................................................................................................................... 3
3 Terminology............................................................................................................................................................................ 9
4 Disposition............................................................................................................................................................................ 12
II Changing circumstances As a risk................................................................................................................ 13
1 Circumstances – changed or changing?......................................................................................................................... 13
1.1 Changed circumstances?....................................................................................................................................... 16
1.1.1 Exceptional causes of the changes................................................................................................................ 18
1.1.1.1.... Unforeseen causes....................................................................................................................... 18
1.1.1.2.... Exogenous nature of the causes................................................................................................... 20
1.1.2 The exceptional extent of the changes.......................................................................................................... 20
1.1.2.1.... Unforeseeability of the extent of the changes................................................................................ 20
1.1.2.2.... Fundamentality of the extent of the changes................................................................................. 21
1.2 Changing circumstances?...................................................................................................................................... 22
2 Changing circumstances and contract paradigms........................................................................................................ 23
2.1 A Contract as a recorded momentum................................................................................................................... 28
2.1.1 The will paradigm........................................................................................................................................ 28
2.1.2 The reliance paradigm.................................................................................................................................. 30
2.2 A Contract as a process.......................................................................................................................................... 32
2.2.1 Social contract law....................................................................................................................................... 33
2.2.2 The paradigm of contract balance................................................................................................................ 34
2.2.3 The paradigm of legitimate market expectations.......................................................................................... 34
2.2.4 Relational contextual contracts.................................................................................................................... 35
2.2.5 Conclusions.................................................................................................................................................. 37
2.3 A Contract as a managed process........................................................................................................................ 38
2.4 Summary.................................................................................................................................................................... 46
3 Risk as a (basic) concept in contract law......................................................................................................................... 47
3.1 The definition of risk............................................................................................................................................... 47
3.1.1 Etymological and conceptual definition....................................................................................................... 48
3.1.2 Sociological definition.................................................................................................................................. 48
3.1.3 Definition in economics............................................................................................................................... 50
3.1.4 The definition in the literature for risk management.................................................................................... 51
3.1.5 The definition in jurisprudence.................................................................................................................... 51
3.1.5.1.... Definitions in contract law literature............................................................................................ 51
3.1.5.1.1.... Tore Sandvik, ‘Entreprenørrisikoen’ (1966)............................................................. 52
3.1.5.1.2.... Per Brunsvig, ‘Konstruksjonsansvar ved bygging av skip’
.................. (1973)........................................................................................................................ 53
3.1.5.1.3.... Ola Mestad, ‘Om force majeure og risikofordeling i kontrakt’ (1991)...................... 53
3.1.5.1.4.... Newer contract law literature.................................................................................... 54
3.1.5.2.... Definition in case law................................................................................................................... 54
3.2 Categories of risk..................................................................................................................................................... 55
3.3 Risk-terminology...................................................................................................................................................... 61
3.3.1 Berndt Godenhielm‘s “risk theory”............................................................................................................. 62
3.3.2 The concept of risk in the doctrine of failed assumptions........................................................................... 63
3.3.3 Diverse risk-terminology............................................................................................................................. 63
3.4 Conclusions.............................................................................................................................................................. 64
3.4.1 The definition of risk................................................................................................................................... 64
3.4.1.1.... Separation of the concepts of danger, risk, and liability.............................................................. 65
3.4.1.2.... Risk as part of the new system for liability in property law.......................................................... 69
3.4.1.3.... Summary...................................................................................................................................... 71
3.4.2 Suggested risk terminology.......................................................................................................................... 72
4 Conclusions.......................................................................................................................................................................... 73
III THE Theory of contractual risk management...................................................................................... 77
1 The main trends of discussion on risk allocation.......................................................................................................... 82
1.1 The theory of rational choice................................................................................................................................ 82
1.2 The choice of a strategy of egoism or cooperation (risk sharing)................................................................. 87
1.3 Conclusion................................................................................................................................................................ 91
2 The theories of efficient risk allocation.......................................................................................................................... 92
2.1 The theory of efficient breach................................................................................................................................ 93
2.2 The theories of superior risk bearing................................................................................................................... 96
2.2.1 Posner & Rosenfield, ‘Impossibility and Related Doctrines in Contract Law:
An Economic Analysis’ (1977)................................................................................................................... 97
2.2.2 Bruce, ‘An Economic Analysis of the Impossibility Doctrine’ (1982)..................................................... 100
2.2.3 Schäfer
& Ott, ‘Lehrbuch der ökonomischen Analyse des Zivilrechts’ (1995)......................................... 100
2.2.4 Runesson,
‘Rekonstruktion av ofullständiga avtal’ (1996)........................................................................ 101
2.2.5 Critique...................................................................................................................................................... 105
2.3 Theory of efficient non-performance................................................................................................................... 107
2.4 Conclusion.............................................................................................................................................................. 109
3 The theory of the governance of commercial transactions........................................................................................ 109
3.1 Transaction cost economics................................................................................................................................. 110
3.1.1 The relation to the New Institutional Economics...................................................................................... 111
3.1.2 Tools of analysis........................................................................................................................................ 115
3.1.2.1.... Transaction costs....................................................................................................................... 116
3.1.2.2.... Incentives against opportunism................................................................................................. 118
3.1.2.3.... Mechanisms for ex post-adaptation........................................................................................... 119
3.2 The mechanisms of governance of commercial transactions......................................................................... 119
3.2.1 The nature of business............................................................................................................................... 121
3.2.1.1.... Asset specificity........................................................................................................................... 121
3.2.1.2.... Frequency of transaction............................................................................................................ 124
3.2.1.3.... Relation to contract typologies in legal reasoning...................................................................... 125
3.2.1.4.... Relation to contemporary contract law thinking........................................................................ 126
3.2.2 The governance mechanisms...................................................................................................................... 127
3.2.2.1.... Alternative governance mechanisms.......................................................................................... 128
3.2.2.1.1.... Market governance.................................................................................................. 128
3.2.2.1.2.... Governance by hybrids (trilateral governance)....................................................... 129
3.2.2.1.3.... Governance by hierarchies (transaction specific
governance)................................. 130
3.2.2.2.... Relation to contracting practice in business transactions.......................................................... 131
3.2.2.3.... Relation to contemporary legal theories..................................................................................... 132
3.3 The relation to risk management........................................................................................................................ 133
4 The theory of incomplete contracts................................................................................................................................ 136
5 An outline for the theory for contractual risk management..................................................................................... 138
5.1 The compatibility of the economic theories with legal reasoning............................................................... 138
5.1.1 Fully rational vs. boundedly rational decision-making.............................................................................. 139
5.1.2 Wealth maximizing vs. governance economizing........................................................................................ 141
5.1.3 Complete versus incomplete contract........................................................................................................ 144
5.1.4 The choice of the economic theory for contractual risk management........................................................ 146
5.2 A proposal for a theory of contractual risk management.............................................................................. 147
IV Contractual risk management in practice.......................................................................................... 151
1 The identification and evaluation of the default norms of risk allocation............................................................... 153
1.1 Nordic contract law.............................................................................................................................................. 154
1.1.1 Impossibility-oriented............................................................................................................................... 156
1.1.1.1.... The doctrine of impossibility – force majeure............................................................................ 156
1.1.1.2.... The doctrine of commercial impracticability.............................................................................. 160
1.1.1.3.... Norms of impossibility............................................................................................................... 160
1.1.2 Mistake-oriented........................................................................................................................................ 161
1.1.2.1.... The doctrine of mistake.............................................................................................................. 162
1.1.2.2.... The doctrine of (failed) assumptions.......................................................................................... 162
1.1.2.2.1.... Reconstruction of the hypothetical risk allocation................................................. 165
1.1.2.2.2.... Identification of typical assumptions..................................................................... 166
1.1.2.2.3.... Critique.................................................................................................................... 168
1.1.2.2.3.1.... The perception of changing circumstances....................................... 169
1.1.2.2.3.2.... The conceptualization of risks........................................................... 172
1.1.2.2.3.3.... Good or bad faith concerning risks?................................................ 173
1.1.2.2.4.... Conclusions............................................................................................................. 174
1.1.3 Reasonability-oriented............................................................................................................................... 176
1.1.3.1.... The principle of unjust enrichment............................................................................................. 176
1.1.3.2.... The adjustment of a contract according to Section 36 of the
............... Nordic Contracts Acts................................................................................................................ 177
1.1.3.2.1.... Descriptive and legal-technical analyses................................................................. 179
1.1.3.2.1.1.... Contracts between unequal business parties..................................... 182
1.1.3.2.1.2.... Contracts between equal business parties......................................... 185
1.1.3.2.2.... Normative analyses................................................................................................. 186
1.1.3.2.3.... Risk management analysis....................................................................................... 190
1.1.3.3.... Rules of adjustment of rent for business premises..................................................................... 192
1.1.3.4.... Liability for specific performance according to Sections 23 and 53 of the Nordic
............... Sale of Goods Acts.................................................................................................................... 197
1.1.3.5.... Norms of immediate withdrawal from contract due to important reasons................................ 201
1.1.4 Process-oriented......................................................................................................................................... 204
1.1.4.1.... Norms of withdrawal from contract........................................................................................... 205
1.1.4.1.1.... Cancellation of an order........................................................................................... 208
1.1.4.1.1.1.... Contracts on sale of goods................................................................ 209
1.1.4.1.1.2.... Contracts on carriage of goods by sea............................................. 214
1.1.4.1.2.... Termination by notice............................................................................................. 215
1.1.4.1.2.1.... Agency contracts............................................................................... 215
1.1.4.1.2.2.... Contracts on the lease of business premises..................................... 217
1.1.4.1.2.3.... General principle of the right to termination of
continuous
..................... contracts by notice............................................................................ 223
1.1.4.1.2.4.... The implications of risk management............................................... 225
1.1.4.2.... The norms for the adjustment of a contract price due to
............... changed circumstances.............................................................................................................. 227
1.1.4.2.1.... The Norwegian rules for the adjustment of rent for
business premises due to
.................. changed
circumstances............................................................................................. 227
1.1.4.2.2.... The rules for the increase of price due to an increased
risk of danger according to
.................. the
Nordic Maritime Acts....................................................................................... 230
1.1.4.2.3.... The norms for the adjustment of a contract price due to
.................. changes
in tax legislation.......................................................................................... 231
1.1.5 (Risk) Management-oriented..................................................................................................................... 232
1.1.5.1.... Management liability (control liability) according to Sections 27, 40 and
............... 57 of the Nordic Sale of Goods Acts........................................................................................... 233
1.1.5.1.1.... Management spheres............................................................................................... 237
1.1.5.1.1.1.... The inner sphere (performance management
..................... liability)............................................................................................. 239
1.1.5.1.1.2.... The outer sphere (contract management liability)............................. 241
1.1.5.1.1.3.... The external sphere (loss management liability)............................... 253
1.1.5.1.2.... The nature and extent of management liability........................................................ 261
1.1.5.1.3.... The risk allocation effects of management liability................................................. 265
1.1.5.2.... The liability to mitigate damages for a breach of contract according to
............... Section 70 of the NSGA.............................................................................................................. 269
1.2 The Principles of European Contract Law 1998............................................................................................. 271
1.3 The UNIDROIT
Principles of International Commercial Contracts............................................................ 273
1.4 Is there need to change the default allocation of risks?................................................................................ 274
2 The contractual tools of risk management................................................................................................................... 274
V Summary and conclusions................................................................................................................................ 277
1 Assumptions or management of risks?........................................................................................................................ 277
2 Contractual risk management........................................................................................................................................ 278
3 The implications of the risk management-approach for nordic contract law......................................................... 279
4 Conclusions........................................................................................................................................................................ 281
Bibliography........................................................................................................................................................................ 282
Index of statutes and equivalent instruments.......................................................................................... 304
Index of Cases...................................................................................................................................................................... 307
List of documents............................................................................................................................................................. 309
Index OF AUTHORS............................................................................................................................................................... 310
INDEX OF FIGURES.................................................................................................................................................................. 314