Private Law Theory

ABSTRACT
This research addresses how shocks to markets impact private contracting. We compare how private contracting, and judicial systems have responded to Brexit, Covid 19, and the war in Ukraine. The UK, the US, France, and Germany are compared in terms of the legal doctrines that excuse performance due to a market-shocking event. We broadly look at how material change in circumstance, improvision, force majeure, frustration of purpose, and impossibility have been viewed by courts in response to Brexit, Covid-19, and the war in Ukraine. These shocks to markets frustrated the performance of some types of contracts and led to judicial intervention when a party sought an excuse from performing a contract.

We consider the economic impact of doctrines that excuse performance of contractual duties and examine how risk preferences are reflected in private contracting and in judicial applications of these doctrines. This analysis shows how distinct risk preferences among individuals and firms influence contract drafting and performance. Additionally, we suggest that states have adopted risk preferences which are reflected in the development and judicial applications of these doctrines.

When there is a systemwide shock to markets, private parties may face a significantly changed economic outlook for the contracts they have entered. Systemic shocks such as political devolution, health pandemics, and war may make some contracts impossible to perform, economically wasteful to perform, or asymmetrically risky to perform. Private parties and states can adjust their approaches to contracting and contract enforcement to limit the impact of shocks on markets and private contracting. When looking at this decision to adopt a specific approach, ex ante and ex post responses must be weighed against each other. This analysis relates to ex ante risk evaluations by individuals, firms, and states, how much information asymmetry is present in the negotiation stage, transaction costs due to shocks and in anticipation of shocks, the ability of court systems to efficiently function, and the functioning of free markets, and ex post applications of these doctrines, which excuse performance.

By considering private and public responses to Brexit, Covid 19, and the war in Ukraine, we identify how risk preferences may play a role in parties’ decisions. We consider 1. A private party’s ex ante decision to enter into and negotiate contracts and allocate potential future risks between contracting parties before they materialize, 2. How private parties make decisions ex post, after a shock representing a risk has occurred, which creates economic uncertainty and an associated increase in performance costs, 3. How states ex ante develop doctrines related to the impact of shocks on private contracting, which can be expressed through the law, which itself reflects risk preference, and 4. judicial interpretations of these doctrines when they are being asserted by private parties seeking an excuse from performance, allocate risk between parties to a contract. We consider the relevant statutory and case law in France, Germany, the UK, and the US to demonstrate how legal systems use doctrines related to excuse of performance. Additionally, we examine how these doctrines have been reinforced or refined by the courts and legislation when states face shocks and their corresponding impacts on private businesses.

Aubrecht, Paul and Karsunke, Simon, Material Change in Circumstance, Force Majeure, Impossibility, and Related Doctrines: A Comparative Law and Economics Evaluation of the Impact of Recent Shocks on Private Contracting (May 8, 2026).