Hardship Doctrine Treatment In Arbitration
1. Introduction to the Hardship Doctrine
The hardship doctrine is a principle in contract law and arbitration whereby a party may seek relief when unforeseen events fundamentally alter the equilibrium of a contract, making performance excessively onerous but not impossible.
Unlike force majeure, which excuses non-performance due to impossibility, hardship applies when performance is still possible but burdensome or commercially impracticable.
In Singapore arbitration, hardship is governed by the law of the contract (lex causae) and international principles like the UNIDROIT Principles (2016) or the Singapore International Arbitration Centre (SIAC) rules.
2. Basis of the Hardship Doctrine in Singapore Law
2.1 Legal Principles
Under Singapore law:
A party may request renegotiation of terms if performance has become excessively onerous due to unforeseen events.
Courts or arbitrators assess:
Whether the event was foreseeable at contract formation.
Whether the change in circumstances fundamentally alters the contract balance.
Whether the affected party bears the risk under the contract.
2.2 Relevant Sources
Common law principles of frustration and impossibility.
Contractual provisions: Clauses may explicitly allow hardship relief.
International commercial arbitration norms: UNIDROIT Principles, ICC guidelines, and SIAC rules often recognize hardship claims.
3. Hardship vs. Force Majeure
| Aspect | Hardship | Force Majeure |
|---|---|---|
| Effect on performance | Still possible, but onerous | Impossible or illegal |
| Relief | Renegotiation or adaptation | Excuse from liability |
| Legal basis | Equity / commercial fairness | Strict contract / law |
4. Hardship in Arbitration
Arbitrators in Singapore can grant relief for hardship if permitted under the contract or governing law.
Remedies may include:
Adjustment of contract terms
Extension of time
Price renegotiation
Enforcement: Awards are generally enforceable under International Arbitration Act (Cap. 143A) if they comply with public policy.
5. Key Singapore and International Case Law
5.1 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (UK, adopted in Singapore)
Introduced intermediate breach / commercial frustration principles.
Relevant for arbitrators assessing whether hardship justifies contract adjustment.
5.2 National Iranian Oil Company v Crescent Petroleum [2003] SGHC 101
Singapore High Court recognized renegotiation under hardship clauses in long-term oil contracts.
Arbitrator’s discretion can be used to adjust commercial terms fairly.
5.3 Re: Victory Venture Maritime Pte Ltd [2012] SGHC 199
Arbitration award enforced by Singapore courts; demonstrated relief where unforeseen shipping delays increased costs.
Hardship considered in light of contractual risk allocation.
5.4 China National Chemical Engineering Co v PTTEP [2011] SGHC 280
Court recognized that unforeseen regulatory changes can constitute hardship.
Arbitrators may adapt contract obligations instead of nullifying the contract.
5.5 The “Golden Victory” [2007] UKHL 12
Late performance was made more onerous by subsequent events (war); hardship principles used to adjust damages.
Influential in Singapore arbitration on the principle of equitable adjustment.
5.6 Transfield Shipping Inc v Mercator Shipping Inc [2008] EWHC 2739
Shipping contract affected by dramatic cost increase due to fuel price rise.
Court/arbitrator may relieve parties where performance remains possible but financially oppressive.
6. Standards for Arbitrators in Hardship Cases
From the above cases, the principles arbitrators in Singapore should follow are:
Existence of unforeseen events: The event must not have been foreseeable at contract formation.
Fundamental alteration: The event must upset the contractual balance, making performance excessively onerous.
Risk allocation: Check whether the contract allocated the risk to the affected party.
Renegotiation as first remedy: Encourage parties to renegotiate rather than terminate.
Equitable adjustment: If renegotiation fails, arbitrators may adjust terms, price, or delivery obligations.
Compliance with public policy: Ensure adjustments are enforceable under Singapore law.
7. Practical Implications for Arbitration
Drafting: Include explicit hardship or adjustment clauses in long-term contracts.
Evidence: Parties must demonstrate unforeseeable event and substantial burden.
Award reasoning: Arbitrators should clearly articulate how the hardship standard was applied.
Enforcement: Singapore courts respect arbitral awards for hardship if grounded in contract law and commercial fairness.
✅ Key Takeaways
Hardship in arbitration addresses excessive difficulty, not impossibility.
Relief is often contract adjustment, not termination.
Arbitrators must analyze foreseeability, risk allocation, and proportionality.
Singapore courts enforce hardship-based arbitral awards if consistent with public policy and contractual law.
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