No general hardship doctrine
Hardship addresses the situation where performance remains possible but has become excessively onerous - distinct from force majeure (performance prevented) and frustration (automatic discharge). English law recognises no general hardship doctrine. The principle of pacta sunt servanda applies strictly: economic hardship alone will never discharge a contract, and the courts have no power to rewrite or adapt a contract to changed circumstances.
So relief for hardship is available only through an express contractual provision. Without one, a party facing a collapsed margin must still perform.
The civil law contrast
This is a sharp divergence from civil law systems, which is worth knowing for cross-border deals. French law (Article 1195 of the Civil Code) allows a party facing an unforeseeable change that makes performance excessively onerous to request renegotiation, and ultimately allows a court to revise or terminate the contract. German law (section 313 BGB, Storung der Geschaftsgrundlage) allows adaptation where a fundamental change to the basis of the transaction makes literal enforcement unreasonable.
So a hardship that would trigger renegotiation or judicial adaptation on the Continent will, under English law, do nothing unless the contract provides for it. (These are civil-law rules, flagged for cross-border deals - take local advice.)
The UNIDROIT and ICC frameworks
Two transnational instruments offer ready models. The UNIDROIT Principles (Articles 6.2.1 to 6.2.3) define hardship as events that fundamentally alter the equilibrium of the contract - whether by increasing the cost of performance or reducing its value - subject to conditions (the events arose or became known after contracting, could not reasonably have been anticipated, were beyond the disadvantaged party's control, and the risk was not assumed). The disadvantaged party may request renegotiation, must keep performing meanwhile, and, failing agreement, a court or tribunal may terminate or adapt the contract.
The ICC Hardship Clause 2020 takes a similar shape: the affected party must show performance has become excessively onerous from an event beyond its reasonable control that could not have been anticipated or avoided, the parties must renegotiate in good faith, and if that fails the clause offers a choice - from termination by the disadvantaged party to allowing a judge or arbitrator to adapt or terminate the contract.
Drafting a hardship clause
An effective clause needs a defined trigger, a clear procedure, and a defined consequence. Define the triggering events (cost increases in raw materials, labour, transport, or energy; currency moves; regulatory change; supply-chain failure) and set a threshold - a quantified percentage (commonly a 15 to 25% change) gives certainty, while a material adverse effect formula gives flexibility at the cost of certainty.
Then set the procedure: notice of hardship, continued performance during renegotiation (important for commercial continuity), and a good-faith renegotiation obligation - defined with specific behavioural requirements rather than a vague duty to negotiate, which risks being an unenforceable agreement to agree. Finally, set the consequence if renegotiation fails: termination, automatic adjustment by a formula or index, or expert or tribunal determination that can adapt the contract.
Keep hardship separate from force majeure
Hardship and force majeure must not be confused. Force majeure is for events that prevent, hinder, or delay performance; hardship is for events that leave performance possible but excessively onerous. The same facts should not fall under both, so a well-drafted contract carves economic hardship out of the force majeure clause and addresses it in a dedicated hardship clause.
Decide consciously whether you want hardship relief at all. Many English-law contracts deliberately omit it, leaving market risk where it falls; but for long-term supply, energy, or construction contracts exposed to volatile costs, a calibrated hardship clause can be worth far more than litigating a hopeless frustration argument later.
Use at the desk
Practical checklist
- Do not expect any hardship relief from English law - draft for it or bear the risk.
- For cross-border deals, note civil-law hardship rules (French CC Art 1195; German BGB s.313) that English law lacks.
- Use the UNIDROIT Principles or ICC Hardship Clause 2020 as drafting models.
- Define a clear trigger and threshold (a quantified percentage gives certainty).
- Require continued performance during a defined, good-faith renegotiation - avoid an unenforceable agreement to agree.
- Set a clear consequence if renegotiation fails (termination, formula adjustment, or expert/tribunal adaptation), and keep hardship separate from force majeure.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
Product demo
Use the guide for context. Use Veqtor for the Word documents.
Watch Claude compare negotiation drafts and create a separate Word document with proposed tracked changes.
See Veqtor work with Word redlines