Case-law based analysis of contractual unpredictability under rwandan law

SECTION 1. OVERVIEW OF THE THEORY OF UNPREDICTABILITY

At first glance, the notion of unpredictability is not based on any text under positive law in Rwanda that is why it is important to begin this section with the notion of contractual unpredictability.

1.1. Concept of contractual unpredictability

The litigation of unpredictability seems, at present, to constitute a special problem, despite the continuation of the discussions on this theory in many legal systems. However, despite the general idea of unpredictability, none of the arguments made by the authors for or against this theory seems to have totally won the adherence of the courts¹⁴.

¹²L. J. AUBERT, Les contrats, Paris, Dalloz, 1996, p.134.

¹³ X. «Theory of unpredictability», available at http://www.centrorisorse.org/theory-of-unpredictability.html, accessed on 4^th September 2011

¹⁴ P. GUIHO, Cours de droit civil. Les obligations, 2^ème éd., V. 4, Lyon, L'Hermès, 1984, p. 89.

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R. GUILLIEN and J. VINCENT define unpredictability as a theory under which the judge must restore the balance of a contract that its performance conditions have been severely altered to the detriment of one party as a result of events reasonably unforeseeable at the time of conclusion of the contract'⁵. For the repertory of civil law, the unpredictability consists in that, by the effect of economic circumstances which do not constitute a force majeure, the respective value of benefits under the contract is substantially changed and that the balance that parties had to realize was destroyed'⁶.

In summary, the theory of unpredictability would then tend to recognize to the judge the power to review the contract in order to restore the equilibrium in the contract. In this context, we consider contractual unpredictability as consisting in the imbalance of reciprocal benefits which comes to occur in successive contracts or deferred, as a result of extraordinary and abnormal events subsequent to the formation of the contract that are beyond the control of the parties, that it was reasonably impossible to foresee them and it appears certain that the parties would not have contracted if they were able to predict it'⁷.

1.2. Legal basis of the theory

The indemnity granted under the theory of unpredictability allows indeed, preventing the occurrence of an irremediable inability to perform the public service that would result sooner or later, in the persistence of imbalance in contract. It can be argued that the continuity of public service remains the essential basis for the theory of unpredictability'⁸.

¹⁵ R. GUILLIEN et J. VINCENT, op. cit, p. 236.

¹⁶ Répertoire de droit civil, 2^eme éd., Relais Printemps, Paris, Dalloz, ,1983.

¹⁷ H. DE PAGE, Traité élémentaire de droit civil belge: les obligations, T. II, Vol. 2, 3^eme éd., Bruxelles, Ets Bruylant, 1964, n^o 574.

¹⁸ M. WALINE, Traité de droit administratif, Paris, Dalloz, 1963, p.623.

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However, this basis cannot explain alone all the decisions pronounced by the courts. To justify the theory of unpredictability, it was also mentioned, beside the continuity of public services, common notions of administrative law and civil law such as equity and the interpretation of contracts and good faith¹⁹. The basis of this latter concept will be developed in the chapters that will follow.

1.3. The theory of unpredictability

A change in circumstances after the conclusion of the contract that were not foreseen or couldn't logically be expected, may provoke a state of things that make performance a disproportionate pecuniary sacrifice for the debtor, or seriously prejudicial to the creditor. Thus, one of the parties affected by the contingency believing that feels it is unpredictable; it raises the termination of the contract or alters its terms²⁰.

1.3.1. The fate of the contract after contractual unpredictability

In administrative contracts, the obligation is justified by the principle of continuity of public service. Thus, the French Conseil d'Etat refused to compensate the contractor of administration, which had unilaterally terminated the contract²¹. This rule is derogated when the exploitation of public service is, definitively, no longer viable²².

The judge after checking the hypothesis of unpredictability invites the parties to proceed with a layout of contract which would permit its continuation. The renegotiation of the contract, which, in concession, would be a rate increase to

¹⁹ Ibid., see also articles 33 and 34 of CCB III: Good faith, Equity, usage and article 4 of the law n° 12/2007 of 27/03/2007 on public procurement: other legal basis: economy, efficiency and fairness.

²⁰X. Good faith and assurance of the contractual balance, available at www.uab.ro/revise drept/.../30noslacan accessed on 4^th September 2011

²¹ Cons. d'Et., 8 février 1918, société d'éclairage de Poissy.

²² A. BASOMINGERA, op cit, p. 86

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consumers' tariffs, is the way most likely to ensure continuity of public service²³.

1.3.2. Allocation and methods of calculating the compensation

The granting of compensation where there has been an unpredictable event that disrupts the economy will be done by calculating the deficit and depending on the period of deficit.

The delimitation of the period for which compensation may be claimed seems necessary. Compensation shall be limited to deficits of exploitation of the period during which the threshold of disruption of the contractual economy has been achieved²⁴.

To determine the deficit suffered, we will compare the revenue and operating expenses for each exercise.

Exercises that were beneficiaries during the period of upheaval in the economy of contract will not be taken into account; the results of activities considered are those related to the contract²⁵.

The fraction of the deficit due to mismanagement does not enter into account when calculating the extra burden. In case of deficit prior to the disruption of the economy of contract, the judge will compensate only the part of the deficit due to change of circumstances²⁶.

²³ M. WALINE, op. cit, p. 624.

²⁴ A. DE LAUBADERE, op. cit, p. 122.

²⁵ Id. p. 123

²⁶ L. BACH, Droit civil. Les obligations, T.1, 13^eme éd., Paris, Sirey, 1999, p. 422

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The judge will proceed to the distribution of burden on the basis of reasonable interpretation of the contract. He will take into account elements other than those used to determine the disruption of the economy of contract or deficit²⁷.

So the judge will consider:

- Efforts done or negligence committed by one of the contractors;

- The contractor's financial position and profits outside the contract or out of the extra contractual period²⁸.

1.3.3. Several customers to satisfy

If a supplier committed to deliver to several clients a quantity of goods, and as a result of a shortage he is not able to satisfy all his customers, he can ask the judge either to fulfill fully a fraction of his customers, or to satisfy partially all his customers²⁹.

1.4. Specific problem to some contracts such as dietary contracts

This paragraph emphasizes on the alimony paid in the contract of divorce by mutual consent.

1.4.1. Alimony determined in the agreements prior to divorce by mutual consent

It is necessary to distinguish the pension for the maintenance of children on the one hand and on the other hand, for the spouse.

²⁷ G. CARLE et autres, La fin du contrat, Bruxelles, A.B.J.E, 1993, p. 375

²⁸ G. CARLE et autres, op. cit, p. 376

²⁹ Id. p. 578

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a) Alimony allocated to children

The judge may increase the amount paid by debtor of alimony at the request of the spouse who has custody of the child, if s/he is unable to ensure the child maintenance and education required³⁰.

This inability is assessed according to:

- Resources of the parent who has custody, - The amount of the pension.

It is recognized that such alimony may be reviewed depending on the means of the debtor and the creditor needs. Thus in the case of Mrs. M.A and M.T.S, alimony allocated to children have been revised because the husband had found another job³¹.

b) Alimony granted to spouses

The compensatory allowance determined under the agreements prior to divorce by mutual consent cannot, in the absence of contractual provision, be subject to revision. Thus in the case of N.M and F.M the primary court of Kicukiro has refused to modify the alimony awarded to the wife by the husband in the contract signed before referral to the court³².

This is the application to the contract of divorce, principles governing law of contract set out in article 33 of the Civil Code Book III which states that Agreements legally formed become a law for those who have entered into.

³⁰ Article 282 of civil code book I

³¹ RC 0140/07/TB/KCY of 05 September 2007 of district court of Kacyiru, unpublished

³² RC 0039/05/TD/Kro of 30 September 2005 of district court of Kicukiro, unpublished

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1.4.2. Life annuities

A life annuity is an annuity paid periodically until the death of the beneficiary or annuitant. The adjustment of annuities is subject to that of depreciation meaning that they can be modified at any time they seem to have economically lost their normal value. They can be increased or decreased according the value of currency³³.

SECTION 2. NEIGHBOURING CONCEPTS OF CONTRACTUAL UNPREDICTABILITY

As Rwandan law does not have a legal institution organizing the upheaval of the contractual economy, I will sometimes use other concepts to solve problems envisaged in other European countries like Germany. I will analyze successively force majeure, interpretation, good faith, the lesion, the act of government (fait du prince), abuse of law and the cause.

2.1. Force majeure

Force majeure constitutes an event external to the party invoking it, unforeseeable and irresistible, making impossible to fulfill the obligation of the contract. It has the effect of releasing the debtor from his obligation or, if it is a temporary impossibility, suspends the execution of the contract³⁴.

Several authors like P. VOIRIN and A.M. NGAGI have emphasized to the distinction between force majeure and unpredictability. While being a supporter of the unpredictability, P. VOIRIN emphasizes that force majeure does not solve the problems of unpredictability³⁵. Indeed, the sanction which is attached to the force majeure is inadequate. In addition, the person who would

³³ L. BACH, op. cit, p. 495

³⁴ J. CARBONNIER, Droit civil. Les obligations, T.4, Paris, PUF, 1974, n^o 74.

³⁵ P. VOIRIN, De l'imprévision dans les rapports de droit prive, Paris, Dalloz, 1922, p. 123.

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be entitled to rely on unpredictability cannot always establish the existence of his impediment (inability or difficulty in performance)³⁶.

Moreover, the French courts have repeatedly stated that the circumstances making the contract more expensive or more difficult do not constitute a hypothesis of force majeure³⁷. Among the few decisions that have applied the force majeure in the unpredictability, there is an old decision rendered in a hypothesis quite significant.

In April 1842, Merlin-Dispot engaged to establish for a period of two years, taxi driving service between Rouen and Paris, whose correspondents were Robillard and Compagnie. There was no indication at the time to plan, noticed the judge, that the railway construction would already be operational in 1843. The railway was three times faster and twice cheaper than the taxi service³⁸. Then the taxi driving service lost its customers because of that new transport using trains. Seized with the claim, the judge decided to modify the contract in favor of Merlin-Dispot saying that being operational of the railway after one year of the conclusion of the contract constitutes a force majeure for the debtor.

It can be stated that premature use of the railway was to be expected for an experienced professional. The force majeure has been applied in a case where the contract had lost much of its utility for the contractors.

2.2. The interpretation

When the contracting parties have not determined a clear legal regime which must govern their contract, the judge finds the exact meaning and scope of the

³⁶ Ibid.

³⁷ This is a decision of commercial court of Rouen of 28 August 1943, confirmed by the Court of Appeal of Rouen in a decision dated February 9, 1944.

³⁸ J. Carbonnier, op. cit, n^o 66.

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contract in such circumstances. He will refer particularly to the legal provisions governing such contracts, as well as the common intention of the parties³⁹.

In case of unexpected change of circumstances, the judge may choose the equitable solution with reference to the will of the parties.

When the contract is silent, the judge must seek first of all to achieve the right goal inspired by the commutative principle summed up in the doctrine of equivalence⁴⁰. He will give to the general interpretative rules established by our civil code book III in Articles 54 to 58⁴¹, the application they merit, instead of seeing in them only vague ideas and treat them as always negligible. And so, the judge will be a minister of equity, and will honestly serve as social utility.

An interesting decision of the Brussels civil court applied the interpretation in terms of unpredictability⁴². In 1852, the city of Brussels was committed to the municipality of Schaerbeek, at its expense to establish the system of distribution of water throughout the considered urban part of the town; the agreement stated that the inhabitants of Schaerbeek would enjoy the same benefits as those of Brussels. Between 1853 and 1870, the population of Schaerbeek increased from 11,000 to 18,000 inhabitants. The water with which the city of Brussels had the distribution was not possible to cover new needs.

In 1870, the city of Brussels was paying more for water for the inhabitants of Schaerbeek than those inhabitants of Brussels. The municipality of Schaerbeek assigned the city of Brussels for breach of its contractual obligations. The judgment rejected the interpretation given to the convention by the municipality of Schaerbeek. The city of Brussels has acted; the judge

³⁹ Art 54 of decree of 30 July 1888 establishing civil code book III

⁴⁰ J. PINEAU, Théorie des obligations, Montréal, Les Editions Thémis Inc., 1979, p. 115.

⁴¹ Art 54: We must, in the conventions, look what was the common intention of the contracting parties, instead of to the literal meaning of words. Art 56: Words susceptible of two meanings should be taken in the direction that best suits the subject of the contract.

⁴² Civ. Bruxelles, 24 mai 1884

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considered, with the purpose of benevolence and humanity, it would also be contrary to equity and the spirit of the convention to subject it to burdens for which are subjected the work done for the purpose of speculation, and making it responsible for a lack of water that neither party had expected⁴³.

2.3. Good faith

Conventions must be executed in good faith⁴⁴ that is to say according to intention of the parties and the purpose for which they were formed.

Ghestin defines good faith as the consideration of a requirement of loyalty, by which the degree, but not the principle, can be defined by the legislator or otherwise, determined by the case law from usage, and generally from good contractual practices⁴⁵. Good faith is seen therefore as the mere basis of the theory of unpredictability, it is argued that the good faith elaborated in article 33 of our civil code book three obliges parties to modify the contract if an unpredictable event comes to alter its economy during its execution.

2.4. Lesion

J. Carbonnier wrote that lesion is the financial loss caused to any party, of inequality of value between the benefits⁴⁶.

The lesion is the objective imbalance of benefits of the contract. The contractual unpredictability is not only inequality in value between the benefits, but the disappearance of function of the contract in general, regardless of its origin. In addition, the contractual unpredictability applies in case of changed circumstances after the conclusion of the contract⁴⁷.

⁴³ Civ. Bruxelles, 24 mai 1884, op. cit.

⁴⁴ Art 33 CCB III Para 3

⁴⁵ J. GHESTIN, La notion d'erreur en droit français, Paris, Dalloz, 1963, p.142.

⁴⁶ J. CARBONNIER, op. cit, n^o 21.

⁴⁷ Ibid.

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In France, in a particular case, the lesion was applied to changed circumstances occurred during the execution of the contract. The hypothesis was the following⁴⁸: A unilateral promise to sell was signed under which the owner reserved to the other party the right to repurchase the building at a fixed price either for an extended period or for a date fixed in future. The time between the conclusion of the agreement to sell and the removal of the promise might take several years. The price surge that accompanied the First World War had the effect of making the fixed price in the promise to sell derisory in relation to the value of the building upon the removal of the promise.

The court have ordered the rescission of the sale resulting from the removal of the promise on the basis of articles 1674 and following⁴⁹ of the French Civil Code relating to the lesion of more than seven twelfth in immoveable matters. In fact, the lesion, according to the case, is appreciated at the time the sale is perfect, that is to say upon acceptance.

2.5. Acts of government

The Acts of government cannot be invoked when the government intervenes by general measures that affect all people in the same situation as the contractor of the administration⁵⁰.

However, general measures, which very often were not enacted directly by the contracting authority, are subject to full compensation for the damage they cause to the contracting party of the administration, if, these laws and regulations affect a term which can be considered to be a condition in the conclusion of the contract, a matter that a consideration decided the contractor has concluded the contract when it appears and the contractor has agreed to

⁴⁸ Cass. Civ. 14 novembre 1921, D. 1921, p.34.

⁴⁹ Art 1674: Si le vendeur a été lésé de plus de sept douzièmes dans le prix d'un immeuble, il a le droit de demander la rescision de la vente, quand même il aurait expressément renoncé dans le contrat à la faculté de demander cette rescision, et qu'il aurait déclaré donner la plus-value.

⁵⁰ A. BASOMINGERA, Cours de droit administratif, Notes de cours, Butare, UNR, 2009, p. 108

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be bound in consideration of a certain state of affairs existing at the time of the contract⁵¹.

If there is a law, order, instruction or decision issued by competent authority, that changes the provisions of the contract, the procuring entity and the successful bidder shall agree on the decisions to be taken with the view to:

1. «Modify the provisions of the contract so that the contract execution continues;

2. Determine the compensation that may be granted to the disadvantaged party;

3. Cancelling the contract⁵²».

2.6. Abuse of law

The abuse of law has been in rare applications for hypothesis characterized by a change in circumstances. In France, a person who rented an apartment for a year was transferred by his employer two months after the conclusion of the contract. She left area and stopped paying rent. The Court of Appeal granted payment of the remaining ten months of rent to the lessor. The Supreme Court quashed this decision criticizing the Court of Appeal that it didn't look the legitimacy of the motives that animated the lessor and in particular not checking if he was not animated by the malicious intent to harm the other contracting party⁵³. It was impossible for the lessee, decided the court, to predict that he will be transferred from that area at the time of conclusion of the contract.

⁵¹ Arrêt Tanti du conseil d'Etat du 28 novembre 1924 (R.D.P, 1925, PP. 76 ET SS.).

⁵² Art 107 of the Law n° 12/2007 of 27/03/2007 on public procurement , O.G n° 8 of 15 April 2007

⁵³ Cass. Civ. 22 février 1968, D. 1968, p. 607

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2.7. The cause

The cause is generally defined as the social-economic function of the contract and that the motives are not considered in determining the cause. The cause in its classic definition is a concept devoid of meaning, the concept of cause to be effective, should allow including all interests in the economy of the contract, thus taking into account the circumstances that affect contractual economy⁵⁴.

The existence of the cause must be determined during the formation of the contract. This principle, therefore forbids courts to restore the economic balance of contract broken by the unexpected events during its execution⁵⁵.

SECTION 3. SPECIFIC HYPOTHESIS ON CONTRACTUAL UNPREDICTABILITY

3.1. Disappearance of the function of the contract

The content of a contract is not only limited to the express terms of the agreement. It must be supplemented by the implied terms deriving from the law, custom, and nature of the contract or its context⁵⁶ if an unpredictable event comes to alter the contractual economy after the conclusion of the convention.

When the contract loses all interests for parties, it is necessary to declare the cancellation of the agreement on grounds of force majeure.

Where an agreement which has its cause in another contract was signed or is accessory to another, the disappearance of the contract establishing the cause of the agreement leads to the dissolution of the agreement⁵⁷.

⁵⁴ J. PINNEAU, op. cit, p.85.

⁵⁵ Ibid.

⁵⁶ O.T. ROBERTS, Implied Terms in Contract, N.L.J., London, 1978, p. 280 see also art 34 CCB III

⁵⁷ R. SAVATIER, Théorie des obligations, vision juridique et économique, 3^eme éd., Paris, Dalloz, 1969, p. 77.

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3.1.1. Occurrence of a temporary obstacle: effect on the contract

In case of force majeure, a temporary obstacle can allow the debtor to

terminate the contract, if it appears, upon the occurrence of the obstacle, that it shall take effect for a period as the contract will become irrelevant if the obstacle is lifted.

French law seems to respond positively. Thus, a charter contract may be disturbed by the requisition of the ship. If the probable duration of the requisition is likely to make lost all utility of the contract, the parties may, upon requisition, terminate the contract⁵⁸.

According to J. Treillard, the cause will guide the determination of the effects of force majeure, we will respect the will of the parties as reflected in the convention and their behavior, the nature of benefits and the possibility to ensure the execution of the contract in the circumstances of each case will be considered⁵⁹.

3.2. Imbalance of benefits

We seek to determine whether the solution adopted depends on the type of circumstances (depreciation, war, strike) and their influence on the contract (reduced value of the counter-benefit).

⁵⁸ J.F. ARTZ, La suspension du contrat à exécution successive, Paris, Dalloz, 1979, pp. 95 .

⁵⁹ J.TREILLARD, La suspension des contrats: dans la tendance à la stabilité du rapport contractuel, Paris, Dalloz, 1982, p.68.

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3.2.1. Currency depreciation

According to the nominal principle, the amount of money due is the numerical sum stated in the contract. The same rule applies when the value of money has been officially adapted as a devaluation or revaluation⁶⁰.

The rejection of judicial intervention is justified by the following reasons:

- Changing the value of money is part of economic policy and raises issues of opportunities that are not within the jurisdiction of the judge⁶¹.

- The currency depreciation is a general phenomenon, and the judge intervenes in specific and precise hypothesis, assigning to the judge the determination of effects of the depreciation would lead to insecurity and probably unequal treatment between individuals⁶².

The French Supreme Court has refused to adapt conventional amounts due in case of the decrease in the real value of the contract⁶³.

Only the nominal principle also explains the rejection of the adaptation of amounts due to the depreciation of the foreign currency.

It may be recalled the devaluation of the pound during the crisis of the thirties. The pound was chosen as the reference currency of loans in guarantee of exchange⁶⁴. The French Conseil d'Etat refused any adaptation following the devaluation of the amount due, in principal or interest⁶⁵.

⁶⁰ H.L.J MAZEAUD et F. CHABAS, Les obligations. Théorie générale, T. II, 9^eme éd., Paris, Montchretien, 1998, p. 231.

⁶¹ H. CAPITANT, L'influence des variations monétaires en matière de contrats administratifs : rapports français, Paris, Travaux d'association Henri Capitant, 1955, p. 207.

⁶² Ibid.

⁶³ Cass. Civ. I, 20 mars 1956 JCP 1956

⁶⁴ H. CAPITANT, op. cit, p.208.

⁶⁵ Ibid.

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3.2.2. Increase in the cost production

We will distinguish between the slow process of changed contractual relations and influence of a sudden process of changed contractual relations due to an exceptional event.

«The decision of the German Supreme Court provides an interesting illustration of this problem. A company exploiting a mine by its activities has dried up a source that distributed water to its owner. The company then agreed to indemnify the owner and, by contract signed in 1901, undertook to provide the water he would need by paying a small fee equivalent to the source.

Three-quarters of a century later, the beneficiary of the mining company asked the court to rule that the current owner was required to pay the price that was current rates for the delivery of the same amount of water.

The Court of Appeal of Berlin had partially granted the application. It took into account the following changed circumstances:

- The new requirement for the quality of water, - The increase in consumption,

- The increase in production cost.

The Supreme Court reformed the decision. It pointed out that the increase in cost production of potable water since 1901 and the deep mismatch between current costs and the fixed price at the time cannot be considered⁶⁶».

If within a lump sum contract the entrepreneur is facing significant difficulties affecting the matter to be treated, he is entitled to claim compensation on the basis of the theory of unpredictable subjections⁶⁷. Difficulties of both material

⁶⁶ B.G.H 4Octobre 1978, M.D.R, 1979, p. 490

⁶⁷ A. BASOMINGERA, op. cit, p. 197

and economic on the one hand, or occurred after the conclusion of the contract on the other hand, can result in the application of this theory.

In administrative law, this factor is likely to result in the application of the theory of unpredictability or unpredictable subjections. In civil law however, it does not allow, in principle, any adaptation of the contract⁶⁸.

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⁶⁸ Ibid.

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CHAPTER II. CASE LAW BASED ANALYSIS OF CONTRACTUAL UNPREDICTABILITY UNDER RWANDAN

The concept of contractual unpredictability is recognized in a given legal system when the jurisprudence applies an institution whose essential purpose is to allow the modification or termination of the contract when change of circumstances is transforming the contractual obligation assumed⁶⁹.

The recognition of the contractual unpredictability is likely to offer a fair solution in situations where the maintenance of the performance of the original contract is contrary to the principles of justice.

Obviously the essential element in either case is the readjustment of the risk of unforeseen events so that no one of the parties becomes the benefactor and another the victim of an occurrence not allowed for in the contractual balance of interest⁷⁰.

SECTION 1. APPROACH OF THE CONCEPT OF CONTRACTUAL UNPREDICTABILITY IN GENERAL

This section covers the recognition of the concept of contractual unpredictability under Rwandan law and its legal basis, the conditions of its application and the effect of circumstances on the contract and the contractual waive of the benefit of unpredictability.

1.1. Recognition of the concept

The considerations raised in the first chapter lead us to propose the introduction into our legal system the concept of contractual unpredictability. This would allow the readjustment or extinction of one or more contractual

⁶⁹ R. GOTTSCHALK, Impossibility of Performance in Contract, London, Cavendish publishing, 1945, p. 126

⁷⁰ J.H. DALHUISEN, Changed Circumstances and the Role of the Judiciary, Exempel dwingt, Kischbundel, 1972, p. 27

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obligations when arise, after the conclusion of the contract, the circumstances having the following characteristics: being not attributable to that party, and have the effect of a radical change of the contractual obligation assumed⁷¹.

Thus, the Court of First Instance of Kibungo granted in 1992 compensation to the French company CORAS that built the road Rusumo-Kayonza when it met during the execution of the contract, a rock in the zone of Kibaya that had not been anticipated in the formation of the contract⁷².

We will consider in the following paragraphs the legal basis, the applicability and effect of the concept.

1.2. Legal Basis: good faith

If good faith requires not to mislead the other party, it also requires not be enriched by his divests, if unforeseen circumstances make the contract other than what had been envisaged by the parties⁷³.

Article 33 paragraph 3 CCB III states that the agreements must be performed in good faith⁷⁴. To understand the meaning of the third paragraph of this article we must necessarily closer it to those which precede it. However, the article states first that agreements legally formed become a law for those who have entered into. Then it adds that they can be revoked by mutual consent or for causes authorized by the law, which means that a party cannot revoke an agreement by his own willingness.

⁷¹ Ibid.

⁷² RC 867/92 of 28^th September 1992 of First Instance court of Kibungo, unpublished

⁷³ M. PLANIOL et G. RIPERT, Traité pratique de droit civil français, T.VI, Paris, L.G.D.J, 1930, p. 554

⁷⁴ Civil code book III, op cit.

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Or no text of the code allows one party to seek termination on the grounds that subsequent events make the performance of his obligation more difficult and heavier than how he had been expected.

Thus, in the case between Mr. K. T and Mr. R. R the Court of Appeal of Ruhengeri refused the modification of the contract⁷⁵ on the basis of Article 33 of the Civil Code Book III, which prohibits any kind of modification to the conventions of the parties. Indeed K.T. committed to transport hardware materials from Mombasa to Kigali to Mr. R.R for a period of 18 months. The liberation war between the RPF and the Armed Forces of Rwanda (ex-FAR) in 1992 caused insecurity which prevented the carrier to pass the normal route Mombasa-Kampala-Kigali, the route was modified in Mombasa, Dar-es-salaam-Kigali, which increases the cost of transport for the carrier.

The Court of Appeal of Kigali reformed this decision by confirming that the change in the route for the carrier is an event that could not have been foreseen at the conclusion of the contract and good faith set out in Article 33 paragraph 3 requires parties to share the risk of unforeseen change of circumstances⁷⁶.

Good faith allows introducing and systematizing the moral rule in the law, it aims to ensure contractual justice where the rules governing the convention are too rigid and where their effects create an obvious injustice.

1.3. The conditions of application

The application of contractual unpredictability depends on the type of contract whose execution was blocked by the occurrence of an unpredictable event at its conclusion and the circumstances that have disrupted its economy.

⁷⁵ R.C.A 7608/Ruh of 27 April 1992 of the Appeal court of Ruhengeri, unpublished

⁷⁶ RCA 8769/kig of 29 July 1993 of the Appeal court of Kigali, unpublished

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1.3.1. Types of legal relation

In general, the theory based on the analysis of the contract shall apply to all contracts, whether unilateral or bilateral. In addition, the new event may exceptionally occur after the contract has been executed⁷⁷.

Theories based on the unpredictability apprehend contracts with the execution of, at least one of the benefits are deferred. The French civil law writers state that the theory applies to contracts of successive or continuous performance. The disturbing event must, in these theories, occur before the contract is fully executed⁷⁸.

Are the random contracts covered by the theory of unpredictability? Rwandan jurisprudence does not exclude the application of the concept to random contracts. Thus, life insurance premiums stipulated in 1991 between SONARWA and Mr. N. A. have been adjusted due to currency depreciation since 1991 and 2001 by the Court of First Instance of Gisenyi. Indeed, the court has considered that the hazard was not about the element of the contract⁷⁹.

In our opinion, for random contracts, occurrence of the hazard can certainly cause an imbalance in the contractual benefits. If the change in circumstances does not concern contractual hazard, I don't think it is logical to deprive the aggrieved party the benefit of contractual unpredictability. The problem therefore arises not in terms of nature of the contract, but in terms of contractual risk.

⁷⁷ R. DAVID, L'imprévision dans les droits européens, Paris, Etudes Jauffret, 1974, p.220

⁷⁸ R. DAVID, op. cit, p. 220

⁷⁹ RC 3720/R10/2001 of 12^th October 2001 of the First Instance Court of Gisenyi, unpublished

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1.3.2. The circumstances

Circumstances, object of the unpredictability, must be objective and independent of the will of the parties. The application of contractual unpredictability must be rejected after having ascertained that the course of events depended on the will of either party⁸⁰.

1.3.2.1. Nature of the circumstances

In theory directed towards the intensity of the change of circumstances, unpredictability is often the result of a contractual economic risk (currency depreciation, price increases). Indeed, nothing prevents the application of this theory at the time of the occurrence of an event of a different nature such as war, natural disaster, etc⁸¹. In theory-based on analysis of the contract, the nature of the new circumstances is irrelevant⁸².

In our opinion, there is no reason to limit the application of unpredictability to a type of circumstances. What matters is the impact of circumstances on the contract and not the fact that it is a war or an increase in oil prices.

Some theories such as unexpected subjections in administrative law are applicable to present circumstances as well as in circumstances subsequent to the conclusion of the contract. In French and Belgian law, the concepts of error and cause allow to apprehend, reasonably satisfactorily, problems relating to mismatches between the present circumstances in the contract and the contractual economy⁸³.

⁸⁰ G.M. SEN, Doctrine of Frustration in the Law of Contract, Special Issue, London, J. Ind. L. Inst., 1972, p.417

⁸¹ P.S. ATIYAH, An introduction to the law of contract, Oxford, Oxford University Press, 1981, p. 217

⁸² Ibid.

⁸³ M. WALINE, op. cit, p. 619

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It seems clearer to guide the application of contractual unpredictability to change of circumstances after the conclusion of the contract.

1.3.2.2. Characteristics of circumstances and their effects

The occurrence of disturbing events must be characterized by non-imputability of party invoking it and unpredictability of these events.

a) Non-imputability

The contractual unpredictability certainly must not result from the mere fault of the aggrieved party. P. Voirin has also written that the condition of non-imputability was unnecessary, if the change in circumstances is attributable to one party, the problem is, according to the author, analyzed in terms of breach of contract and not at the equivalence of benefits⁸⁴.

Thus, two farmers H.E and G. C had rented a farm land to a single landowner R. G in the municipality of Satinsyi in the prefecture of Gisenyi. They committed themselves to him jointly and severally. Subsequently, one of them (H.E) refused to continue his activities. Could the other party invoke contractual unpredictability? No, said the Court of First Instance of Gisenyi, because it is a voluntary act on behalf of a contractor that his partner must respond under the character of joint and several obligations⁸⁵.

Is it then that the change in circumstances be totally stranger to that party? We must distinguish three distinct problems:

- The character of the new circumstances; - The determination of fault, if any;

⁸⁴ P. VOIRIN, op cit, p.187

⁸⁵ RC 2745/R7/2000 of 17^th October 2000 of the First Instance Court of Gisenyi, unpublished

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- The causal link between the fault and the disappearance of the contractual basis.

The new circumstances should be of a supra individual⁸⁶. Thus, death or illness of the debtor is not in principle such a circumstance, as well as the financial difficulties faced by the debtor. This principle may be subject to exceptions in the case of certain contracts such as dietary contracts. Thus, in these contracts, the financial resources of the parties are directly related to the purpose of contract⁸⁷.

The imputability of contractual unpredictability also requires the violation of specific contractual obligations or general obligation of diligence. The new circumstances can be caused by the act of the debtor or jointly by external factors⁸⁸.

b) Being unpredictable

The unpredictability is appreciated at the time of conclusion of the contract. It should not be absolute, it is sufficient that the occurrence of an event be improbable. It is evaluated on the basis of an appreciation of different circumstances (profession and intellectuality of the debtor, the degree of change in circumstances in a period shorter or longer preceding conclusion of the contract, indices permitting at conclusion of the contract to foresee the change in circumstances). The condition is also verified when a predictable event leads to unpredictable consequences⁸⁹.

The unpredictability is appreciated in a double angle.

⁸⁶ H. DESCHENAUX, La révision des contrats par le juge, RDS, Vol. 61, Paris, Editions Cujas, 1942, p. 515

⁸⁷ Ibid.

⁸⁸ M. A. FLAMME, op. cit, p.203

⁸⁹ M. WALINE, op cit, p.623

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Firstly, the change in circumstances must exceed the normal measure of randomness considered in its past form. Changes in circumstances prior to conclusion of the contract thus determine if a hazard should or should not be considered as normal⁹⁰. Moreover, the threshold of abnormality of the hazard will be as higher as the duration of the contract is extended⁹¹.

Secondly, at the conclusion of the contract, there was no reason to believe that in the future, a sudden change would alter the contractual risks that had been assumed⁹².

1.3 Effect of circumstances on the contract: risk analysis

Categories of unpredictability can be a predefined processing at the contract, but in the absence of such provisions the question arises: to what extent gross imbalance of a contract resulting from a change after the formation of the contract and up to cause the ruin of one party allows the latter to get free or to renegotiate it⁹³.

1.3.1 Contractual economy

This point therefore covers the determination of the essential elements of the contract which, in execution, come to disappear or suffer significant changes.

We find the notion of contractual economy in the definition of unpredictability in administrative law. It represents the balance and arrangement of contractual services. Its determination arises from an analysis of the nature (public service) and sometimes the terms of the agreement⁹⁴.

⁹⁰ P. FOUCHARD, «L'adaptation des contrats à la conjoncture économique» Revue de l'arbitrage, Paris, Dalloz, 1978, p. 65

⁹¹ Ibid.

⁹² Id. p. 68

⁹³ P. FOUCHARD, op. cit, p. 70

⁹⁴ X. DIEUX et autres, Les obligations contractuelles, Paris, Ed. du Jeune Barreau, 1984, p.156

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It is not necessary that a circumstance has been integrated into the motivation of all contracting parties. It is sufficient that a state of things form the common basis of evaluation of terms of contract. This is not a psychological evaluation, but logic, implicit in the reality existing at the conclusion of the contract with the interests of the subject.

The upheaval of the economy of contract involves a radical change of the contractual obligation and exceeding the risk assumed⁹⁵.

When the disruption of the economy of the contract is established, the Contractor may obtain compensation. In the event that the stabilization of economic conditions occurs at a level that contract clauses definitely prove to be inadequate, the courts consider that it is for contractors to carry out their revision of court. Failing such agreement on that point, the courts reserve the right to order the termination of the contract⁹⁶.

Sometimes the scope of the occurrence of a disruptive event may appear to be limited. The judge will refuse to apply the rules of risk allocation established in case of contractual unpredictability whenever the change in circumstances does not alter profoundly the contractual obligation assumed⁹⁷.

3.3.2 Risks

By contracting, the parties shall in particular ensure the legal enforcement of obligations undertaken by their partners, their desire for security would be disappointed and therefore, the contract would lose its value if any change of circumstances allowed a reconsideration of obligations freely assumed⁹⁸.

⁹⁵ Id. 157

⁹⁶ Id. P. 158

⁹⁷ R. DEKKERS, Précis de droit civil. Les obligations, T.II, Bruxelles, Bruylant, 1955, p. 501

⁹⁸ P. VOIRIN, op cit, p.111

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However, contractual risks constitute precisely burdens or consequences resulting mainly from changes in circumstances subsequent to conclusion of the contract.

Therefore, the first rule of risk allocation can be stated as follows: the change in circumstances affecting the contractual benefits does not change the conventions⁹⁹.

Thus, the creditor of an amount of money will withstand the effects of currency depreciation, the tenant who is transferred by his employer in a distant town and who is unable to enjoy the leased premises, shall continue to pay the rent, increase in production costs is payable by the contractor.

These rules must be refined by the following factors:

- Contractual clauses allowing the parties to derogate from the general rule of risk allocation. Thus, contractors may sell land on the precedent condition of granting the building permits;

- The judge will then have recourse to legal rules. These are often residual; - Risks can be allocated from the interpretation of contracts. The

qualification allows to discover the nature of the contract and therefore

the distribution of the risk that govern it¹⁰⁰.

1.3.3 Unenforceability of the obligations under the good faith

Good faith contained in the contractual relationship requires to not enrich on the divests of the contractor when an event has disrupted the economy of the contract. This is also the principle that in case of impossibility no person shall be liable implicitly covered by Article 46 of our Civil Code which provides that it should be no damages when, as a result of force majeure or unforeseeable

⁹⁹ Ibid.

100 U.K Law Reform Act, Frustrated contracts, of 1943, ch. IV, n^o 1.4.

circumstances, the debtor was unable to give or do what he had to, or have done what was forbidden.

1.4. The parties may waive in the contract the benefit of unpredictability?

Several administrative law authors like A. De Laubadère and M. Waline write that the theory of unpredictability is of public order; they refer to the basis of the theory which requires the payment of compensation in case of increased expenses of the original contract. The essence of the contractual unpredictability prevents contractual waiver beforehand.