A hardship clause is a contractual provision that allows for renegotiation or adjustment in the event of a fundamental change in circumstances. Energy prices, raw materials, and interest rates can reverse within months. As a result, long-term contracts sometimes become commercially unsustainable. In our practice, we advise Dutch entrepreneurs on hardship clauses based on the ICC model — a workable way out without breaking the entire agreement.
What is the legal problem?
A contract that becomes disproportionately burdensome for a party under changed circumstances often leads to silence, non-performance, or disputes. Unlike force majeure, hardship does not make performance impossible, but it does make it excessively costly. Internationally, the rules differ: civil law systems often provide for a form of imprevision, while common law is stricter and often accepts hardship only contractually.
What does the law say?
Under Dutch law, Article 6:258 of the Civil Code stipulates that the court may modify or dissolve an agreement in the event of unforeseen circumstances of such a nature that, according to standards of reasonableness and fairness, the other party cannot expect it to remain unchanged. The Supreme Court applies this with restraint (HR 13 October 2017, NJ 2018/22).
French law has recognized imprevision in Article 1195 of the Code Civil since 2016. German law applies the Wegfall der Geschäftsgrundlage in Section 313 of the BGB. Under English law, frustration exists only under very strict conditions. The ICC issued a renewed Hardship Clause in 2020. UNIDROIT Principles regulate hardship in Articles 6.2.1-6.2.3.
What risks do companies face?
Without a hardship clause, you must perform under loss-making conditions or terminate with compensation. Statutory rules regarding unforeseen circumstances are applied sparingly by judges under Article 6:258 of the Dutch Civil Code. An awkward hardship clause with vague triggers leads to endless renegotiations. In arbitration or litigation, costly discussions arise regarding whether the threshold for hardship has been reached.
Practical example from our practice
We advised a Dutch energy-intensive manufacturer with a long-term supply contract at fixed prices. Due to rising energy prices, supply became loss-making. The contract did not contain a hardship clause. The appeal to Article 6:258 of the Dutch Civil Code was rejected due to an insufficient threshold. Renegotiation failed. Upon renegotiation, we incorporated the ICC Hardship Clause 2020: mandatory renegotiation within 60 days if energy costs rise above 30 percent; adjustment by arbitrator if no agreement is reached. The next period of price increases yielded a workable adjustment within 90 days.
What can you do?
Include a hardship clause in long-term or high-risk contracts. Define triggers concretely (for example, a price increase above 30 percent). Incorporate an obligation to renegotiate with a time limit. Provide for an arbitrator or expert for adjustment if renegotiation fails. Align with Article 6:258 of the Dutch Civil Code. Use international models such as the ICC Hardship Clause 2020. See also our article on Force Majeure in International Contracts.