Case-law based analysis of contractual unpredictability under rwandan law

SECTION 3. JUDGE TO RESTORE DE FACTO EQUALITY

The judicial intervention in the contract has been based on concepts already existing in our civil code book III and administrative law: good faith, fairness, good morals and public order, considered as instruments of social constraints.

¹⁴³Article 33 para 3 of civil code book III states that agreements must be executed in good faith

144 Ph. MALAURIE et L. AYNÈS, Cours de droit civil: les contrats spéciaux, civils et commerciaux, 7e éd., Paris, Cujas, 1993-1994, p. 410.

145 Ibid.

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These concepts have grown dramatically. Thus, good faith is now considered as a substantial principle requiring the parties to behave honestly in contractual relations. Good faith can be found in the life of the contract (formation, performance and termination).

3.2. The intervention of the judge in contractual relations

The contract is conceived as the product of the meeting of two wills free and equal. As a result, judicial intervention in the relations between the contractors should be limited. The intervention of the judge in the contract had to be adapted; the contract did not escape the broader movement of proceduralisation of law. Today, the judge is no longer strange to the contract. The finding of de facto inequality in some agreements has led to intervene more often to protect the weak party: He becomes the judge providence¹⁴⁶.

3.1.1. The place of the judge in the contract

Article 33 of the Civil Code Book III inspired by the famous phrase of Domat, one of the drafters of the French Civil Code of 1804, has the following formula: agreements legally formed become a law for those who have entered into them.

The principle here is therefore the principle of intangibility which corresponds to the binding force of contracts for the parties. The principle binds similarly the judge who should respect and ensure respect for the contract. The judge is a servant of the contract and must refuse any request which would tend to modify or revise the contract¹⁴⁷.

146 Frédérique Eudier, Modèles et anti-modèles dans le rôle du juge en matière contractuelle, available at http://www.institut-idef.org/Modeles-et-anti-modeles-dans-le.html accessed on 19^th October 2011

147 F. FERRAND, Droit privé allemand, Paris, Dalloz, 1997, n° 271

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The judge will have his role in the contract, in case of non-performance of that contract or in case of poor performance. Indeed, if one party fails to perform his obligation, the other party may seek a court resolution of the contract¹⁴⁸. Termination of the contract allows the contractual balance because the aggrieved party will be released from its obligation.

3. 1. 2. The powers of the judge regarding the contract.

Some modifications may arise during the execution of the contract. This occurs especially when the legislature adopts a new law and decided that it is immediately applicable to contracts in progress. It often happens that despite the principle, new laws apply to the contract concluded previously.

What interests us is the hypothesis of a modification of the contract in which the judge intervenes. The change is made by the judge but by authorization of the law that is to say that we are dealing with a situation where the legislature will allow the judge to modify a contract. The judge may also grant himself the power to modify the contract in a given situation. In this case, the law creates exceptions to the principle of intangibility of the contract¹⁴⁹.

Some authors like Denis Philippe and others have recommended a transaction when a party fails to fulfill his contractual obligations due to occurrence of an unpredictable event at the conclusion of the contract: the judge who finds the unpredictability could impose upon the parties the obligation to renegotiate their contract¹⁵⁰. If one party comes to refuse this negotiation, he would see his contractual liability engaged¹⁵¹.

148 F. TERRE et al. Droit civil. Les obligations, Paris, Dalloz, 2002, p. 576.

149 A. BENABENT, Droit civil, Les obligations, 8^e éd., Montchrestien, Domat Droit Privé, 2001, n° 311.

150 J.L. AUBERT, Droit des obligations, Le contrat, 2^e éd., Paris, Dalloz, 2000, p. 98.

151 Ibid.

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This idea is inspired by the renegotiation clauses existing in some international contracts such as transport contracts and international sale contracts. It is a clause stipulated in the contract, and which allows each party to seek a reorganization of the contract, if it occurs a change in circumstances that alters the contractual balance which may subject to another party "unfair rigor"¹⁵². This clause comes from international trade and is frequently used in context of international trade. It is best known as the clause of "hardship"¹⁵³.

3.2. Maintaining a de facto equality

The principle of consensualism is a legal principle that the contract should not be formed in a particular form. Under this ideology, the predominant criterion for the existence of the contract will be the existence of consent and a voluntary agreement of the parties.

Even where the contract is a legal obligation, consent is always required, even though one might think that the law can substitute consent. This is not, and cases in which consent is not possible are very rare and motivated by reasons of public order for example in case of requisition. The judges are nonetheless very attached to the principle of consensualism¹⁵⁴.

3.3. Nature of the legal effects

Our law gives the judge great freedom in choosing the mode of intervention in contracts where there has been a change of circumstances in the contract. In determining the legal regime, a performance of the contract consistent with its economy must be guaranteed by priority¹⁵⁵.

152 X. Hardship clause on international contracts, available at

http://papers.ssrn.com/sol3/papers.cfm?abstract id=1490751 accessed on 5^th October 211

153 X. Trade issues, http://www.fita.org/webindex/ accessed on 5^th October 2011

154 RC 0039/05/TD/Kro of 30 September 2005, op. cit

155 A. BENABENT, op. cit, n^o 345

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Once established the circumstances referred to in contractual unpredictability, the judge will refer the parties to the negotiating table if a solution on the dispute can be envisaged amicably¹⁵⁶. Otherwise, he will adjust a contract according to the realization of the purpose of the contract, he can impose modalities in this adjustment he deems necessary¹⁵⁷. When the contractual objectives have become permanently unattainable, he will dissolve the contract¹⁵⁸.

3.4. Criteria and measures of burden sharing between the contractors

It is argued that the consequences included within the assumed contractual risk bear the burden of the party prejudiced by the change of circumstances¹⁵⁹. The distribution of burden in accordance with the contractual risk is not only consistent with the contractual justice but, more importantly, it introduces a factor of security and legal logic¹⁶⁰.

When the risk has not been assigned and the contract can no longer be executed, the court will dissolve the contract by ensuring appropriate compensation for expenses incurred and reimbursement of profits made by contractors.

When the risk has been assigned and that the performance of the contract is no longer possible, the judge may grant damages intended to compensate partially the other party of the rupture of contract; compensation will be allocated in equity, depending on the contractual risk assumed.

156 RC 0040/07/TGI/NGYE of 19^th March 2007 of Higher Instance Court of Nyarugenge, Unpublished

157 J.L. AUBERT, op. cit, p.105.

158 Ibid.

¹⁵⁹J. LACOMBE, Théorie générale des obligations en droit malgache, Paris, Editions Cujas, 1967, p. 124 160 Ibid.

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