Closest to Carrying the Risk in Contract Law

Jacob Roland & Jens Houen Zakarias

Student thesis: Master thesis


In Danish caselaw the judiciary often refers to the term ‘closest to carrying the risk’, when ruling which contracting party should carry the cost incurred due to an unforeseen event. This thesis is a study in the field of Danish contract law and the interpretation of contracts. The thesis aims to clarify the use of the term ‘closest to carrying the risk’ and to classify the term amongst the Danish sources of law. The thesis deduces several underlying considerations used by the courts by doing an in-depth analysis of selected cases in which the courts explicitly use the term and cases where they do not, but where they still use the same considerations. The thesis finds that the term ‘closest to carrying the risk’ does not have the value of an independent source of law, as it often cannot be used as a basic legal principle on its own. Instead, the term ‘closest to carrying the risk’ is viable in legal argumentation in support of other legal regulations or basic legal principles. In support of this the term is not viable in its own, but instead acts as a way for the courts and parties to subsume the underlying principles of efficient risk allocation. When the courts deduce which part is ‘closest to carrying the risk’ it looks at the underlying principles of prevention and pulverization seen in the law of torts. In contract law the principle of prevention implies that the contracting parties each do their part to reduce the risk of a loss. The contracting party with the option to undertake an economically efficient reduction of the risk is liable if the reduction was not taken, and the missing watchfulness from the contracting party lead to the loss. The courts use the principle in terms of which party, can at the most economically efficient cost either: obtain useful information, investigate the risk beforehand, draft the terms in the allocation or by the contracting party’s own actions reduce the risk. If the principle of prevention is not obvious, the courts instead base their risk allocation on which party has the chance to most easily pulverize the loss. This is often the most professional part since the most professional part often is least risk averse and can insure the risk to the lowest premium. Overall by doing an interdisciplinary analyses of selected case law, and applying theories from law and economics, the thesis finds that the courts often derives the efficient risk allocation amongst the contracting parties. However, the courts tend to weight the professional’s capability to carry the loss, higher than the consumer’s capability to prevent the loss.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages122
SupervisorsHenrik Lando