Legal and economic analysis of the effect of pandemic diseases on the performance of contractual obligations

Document Type : Scientific research

Authors

Seyyed Hossin Tahami ¹

Sayyed Mohammad Mahdi Qabuli Dorafshan ²

Saeed Mohseni ²

Azam Ansari ³

¹ Ph.D. Student in Private Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad

² Associate Professor of Private Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad

³ Assistant Professor of Private Law, Faculty of Law and Political Science, Ferdowsi University of Mashhad

https://doi.org/10.22067/economlaw.2022.75835.1162

Abstract

This paper, from the point of Economic Analysis of Law and by the descriptive-analytical method, has studied the effect of the prevalence of pandemic diseases such as Covid-19 on the performance of contractual obligations. Since many different contracts may be affected by pandemic outbreak, the effect of pandemic outbreak cannot be assessed under one subject and with a specific sanction. Therefore, the legal status of contracts affected by this disease has been examined under the "impossibility to performance the obligation", "hardship" and "frustration". Considering to the possibility of a new purpose for contract law in the contemporary world, entitled "economic efficiency", some principles related to economic analysis of law, such as "efficient allocation of risk" and "efficiency criteria", especially the Pareto efficiency and Caldor-Hicks efficiency, have been considered in order to select a proper and efficient sanction. Also, some applicable sanctions including "legal deferral", "fair deadline", "Suspension of contract", "modify the contract", "Revoke" and "dissolved", has been reviewed separately; so that while observing the legal principles, the most economically efficient sanctions has been considered for each specific situation. The possibility of sharing damages, under the title of "efficient allocation of risk" between the parties, is also one of the issues under consideration in some special sanctions.

Keywords

"Efficient sanction"

"covid-19"

"modify the contract"

"frustration"

"hardship"

---

©2022 The author(s). This is an open access article distributed under Creative Commons Attribution 4.0 International License (CC BY 4.0)

References

•  

   

  • Abdollahian, Omid. (2011). Economic Efficiency in Contract Law With Regard to the Iran's law, Faculty of Law, Shahid Beheshti Universiy
  • Abedi, Mohammd. (2016). Deadline in Obligations and Contracts (Comparative Study), Tehran: Sahamie Enteshar Company.
  • Alipour Herisi, Ahdieh, (2013). Economic Analysis of Adjustment of Contracts for the Change of Circumstances, Faculty of law and political sciences, Allameh Tabatabaii University.
  • Anh Son, Duong & Le Na. (2020). Efficient Breach of Contract, Journal of US-China Public Administration, 4.
  • Babaii, Iraj. (2007). Theoretical Foundations of Economic Analysis of Law, Journal of Law and Policy Research, 23.
  • Badini, hassan and samadi, afroz. (2017). Suspension of contract a general rule or a rule specific to labor law with a comparative study of French and English law, Comparative Law Researches, 21. 2.
  • Beigdeli, Saeid. (2015). Contract modification, Tehran: Mizan Publication.
  • Berger, Klaus Peter and Behn, Daniel. (2020). “Force Majeure and Hardship in the Age of Corona: A Historical and Comparativ Study”, McGill Journal of Dispute Resolution, 4.
  • Craswell, Richard. (2000). Two Economic Theories of Enforcing Promises, Stanford Law School, 203.
  • Dadgar, Yadollah and Rahmani, Timur. (2013). Principles and Principles of Economics, Qom, Bustan book Institute.
  •  

  Legal and Economic Analysis of the Effect of Pandemic Diseases on the Performance…             7

  • Ghamami, majid and Khodadadi, Hossein. (2015). Difficulty of contract performance and its effect, Private Law Studies Quarterly Journal, 4.
  • Ghanavati, jalil. (2020). comparative study of the effect of Covid-19 on contractual obligation, Islamic Law Journal, 64.
  • Ghasemi Hamed, Abbas. (2015). Economic law, Journal of Legal Research, 4.
  • Hatami, Ali asghar and Rodijani, Mohammd Mojtaba. (2008). A comparative study of the Cairo power, Journal of the Faculty of Humanities, Semnan University, 23.
  • Hillman, Robert. (2021). Health Crises and the Limited Role of Contract Law, Cornell Law School, 21.17.
  • Jafari Langroudi, Mohammad Jafar. (2020). Law Terminology, Tehran: Ganje Danesh.
  • Jafari, Ali and Talkhabi, Majid. (2010). Comparative study of contract performance excuses, Journal of Religions, Religions and Mysticism, 148.
  • Jalali, farid. (2010). Economic Analysis of Contractual liability, faculty of law, shahid Beheshti University.
  • Janssen, Andre´ & Johannes Wahnschaffe, Christian. (2020). COVID-19 and international sale contracts: unprecedented grounds for exemption or business as usual, Unif. L. Rev, Vol. 25.
  • Javaheri Mohammdi, Hossein. (2020).The effect of corona outbreak on contract performance in the light of judicial precedent, Tehran: Judiciary Research Institute.
  • Katouzian, Naser. (2011). an Introduction to Law and the Study of Iranian Legal System, Tehran: Sahamie Enteshar Company.
  • Katouzian, Nasser. (2015). General Principles of Contracts. Vol. 4, Tehran: Sahamie Enteshar Company.
  • Katouzian, Nasser. (2016). General Theory of Obligations, Tehran: Mizan Publication.
  • Katouzian, Nasser. (2018). General Principles of Contracts. Vol. 3, Tehran: Ganje Danesh Publications.
  • Katz, Avery. (2011). Virtue ethics and efficient breach, Suffolk University Law Review, 45.
  • Kazemi, Mahmoud. (2022) Suspension of the Contract in Case of Temporary Impossibility of Performance of the Obligation, Legal research quarterly, 97.
  • Keyvani Hafshejani, Dariuosh and Shahabi, Mahdi and Toghyani, Mahdi. (2020). An Explanation of the Fundamental Link between Economics and the Property and Contract law with an Emphasis on the Concept of Resource Scarcity, Comparative Law Review, 1.
  • Kotter, RobertandYolen, Thomas. (2012). Law and Economics Tehran: Tarbiat Modares University Press and Nor Ghalam.
  • Kotz, Hein. (2017). European Contract Law, translated from the German by Mertens, Gill and Weir, Tony, United Kingdom: Oxford University Press.
  •  

  Encyclopedia of Economic law Journal, 29: 21, 2022                                                                       8

  • MacMillan, Catharine. (2021). Covid-19 and the Problem of Frustrated Contracts, King's Law Journal, 32.1.
  • Niazabadi, maidi and Ansari, narges. (2020). Analysis of The Situation Caused by The Outbreak of Coronavirus Under the Justifiable Impediments for The Non Performance of Contractual Obligations, Journal of Legal Research, 90.
  • Olatoye, Deji. (2021). Law in a Time of Corona: Global Pandemic, Supply Chain Disruption and Portents for“Operationally‐Linked (but) Legally Separate” Contracts, UNIVERSITY OF BOLOGNA LAW REVIEW, 6.2.
  • Parsapour,Mohammad Bagher and zakerinia, Hanieh (2015) Sorts, Provisions and Effects of Non-performance Contract Excuses (Comparative Study on Iranian Legal System, Romano-Germanic, Common Law and Some International Instruments), Comparative Law Researches, 19.
  • Posner, Eric. (2003). "Economic Analysis of Contract Law after Three Decades: Success or Failure? Yale Law Journal, 829.
  • Robertson,Andrew and Paterson, Jeanine. (2020) PRINCIPLES OF CONTRACT LAW, Australia: Thomson Reuters (Professional) Australia Limited.
  • Rodijani, Mohammd Mojtaba. (2017). Contractual liability, comparative study of The Sanction of the provisions of the contract, Tehran: Ava Book.
  • Ruff, Anne. (2011). nutcases contract law, Tehran: Mizan Publication.
  • Salehi mazandirani, Mohammad and Ostadi, Mona. (2014) Comparative Analysis of Impossiblity of Contract Performance in the Islamic Jurisprudence, Iranian Law and Common Law, Comparative Islamic and Western Law, 1.
  • Schwartz, Andrew. (2020). Contracts and COVID-19, Stan. L. Rev. Online, 48.
  • Shabani, Omid. (2010). Investigating the contract performance excuses in jurisprudence and Iranian law, Journal of Islamic Law & Jurisprudence Researches, 6.
  • Shahidi, Mehdi. (2012). Effects of Contracts and Obligations, Tehran: Majd.
  • Shami Aghdam, Shahin. (2009). Economic analysis of The Sanctions of contractual obligations in Iranian law, Faculty of law and political sciences, Allameh Tabatabaii University.
  • Shavell, Steven. (2009). Foundations of Economic Analysis of Law, Tehran: Islamic Parliament Research Center.
  • Tahami, Seyed Hossein. (2017). The dissolving or avoidance term of the contract in case of non- performance of commitment with emphasis on jurisprudence, Faculty of Economic and Administrative sciences, Ferdowsi University of Mashhad.
  • Tosi, Abbas. (2011) Law and economics methodology, Journal of Legal Research, 4.
  • Twigg-Flesner, Christian. (2020). A comparative Perspective on Commercial Contracts and the impact of Covid-19 - Change of Circumstances, Force Majeure, or what? Published in: Pistor, Katharina, https://scholarship.law.columbia.edu/books/240
  •  

  Legal and Economic Analysis of the Effect of Pandemic Diseases on the Performance…              9

  • Vahidi, gholam hossein. (2008). Judicial modification of the contract in Iranian law "by comparative study", Faculty of Law, Shahid Beheshti Universiy.
  • Yazdanian, Ali Reza. (2006). Adjustment of contractual obligations based on the principles and rules governing Islamic jurisprudence, MAQALAT WA BARRASIHA Journal, 92.