Modern contract law accords considerable significance to the basic assumptions on which a contract is made. It thus takes to heart a failure of a belief whose truthfulness is taken for granted by both parties. Where the failure results from the parties’ mistake at the time of formation, ‘the contract is voidable by the adversely affected party’, if that mistake ‘has a material effect on the agreed exchange of performances’ and unless that party ‘bears the risk of the mistake’. Where, in turn, the failure of such a basic assumption results from the parties’ erroneous beliefs about future states of the world, a party’s duty to render performance may be discharged if they are not responsible for the supervening impracticability or frustration and ‘unless the language or the circumstances indicate the contrary’. These doctrines, which together regulate cases of failure of basic assumption – the FBA doctrines, as we term them – are familiar to every student of contract …
Hanoch Dagan and Ohad Somech, When Contract’s Basic Assumptions Fail, Canadian Journal of Law and Jurisprudence, https://doi.org/10.1017/cjlj.2021.5. Published online by Cambridge University Press: 26 May 2021.