Pacta sunt servanda – agreements are binding. That is the main rule of Danish contract law. However, all rules have their exceptions. The purpose of this thesis is to derive the relevant and efficient economic rationales, and analyze the Danish judgments accordingly to conclude, whether or not Danish court decisions are efficient. The main source of law is Aftaleloven § 36. The provision makes it possible for courts to override an entire agreement or parts thereof. The court may do so if the agreement is unreasonable or contrary to good faith. When deciding whether something is reasonable or unreasonable, you can’t consider feelings or moral opinions because these may vary from person to person. In this thesis I look at economical efficiency as the benchmark for when overriding agreements should be allowed. The economical part of the thesis builds on what is economically efficient and creates the highest payoff. In the economic world efficient contracts are those, which maximize the joint value of the parties. When contracts are made, the contracting parties are bound by their limited rationality, transaction costs, asymmetric information etc., which makes the contracts imperfect. When unexpected circumstances arrive, the contract can end up inefficient ex post and in some circumstances it is more rational to change it or override it completely. I use two main theories to explain why it can be efficient to set aside contract terms – impracticability and good faith. When courts decide whether or not to allow the use of Aftaleloven § 36, they need to bear in mind that contractual agreements are built on mutual faith and trust in the agreed contract. The allowance of the use of the provision should therefore be limited to the cases, where the reallocation of risk increases the joint contract value immensely. From the used economical theory of law and economics and the judicial decisions in the field of the provision, I have concluded that the Danish Courts derive the economically efficient results.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||95|