A hardship clause allows parties to renegotiate a contract if unforeseen circumstances make it difficult to fulfill. It does not preclude performance but provides wiggle room for an alternative plan. An example is given where Mr. A and Mr. B renegotiate their contract due to equipment failure and incorrect design.
A hardship clause is a contractual term which refers to a situation where the parties to a contract may encounter a situation in the course of their contractual relationship which can make it extremely difficult for both to fulfill the terms agreed in their contract. In this situation, the hardship clause provides an option for both parties to renegotiate the terms, making performance of the contract reasonably easier for both parties. One point to note is the fact that a hardship clause is not intended to preclude either party from performing the terms of the contract. Rather, the hardship clause simply leaves some sort of wiggle room for the parties to the contract to sit down and draw up an alternative plan.
An example of the application of the hardship clause can be drawn using an example of two business partners and parties to a contract: Mr. A and Mr. B. In this situation, suppose that Mr. A and Mr. B have signed a contract for Mr A for the construction of a prefabricated building for Mr B on his company by a certain date and according to a specific design. During the construction and production of Mr. B’s prefab building, Mr. A mistakenly receives the design of another customer, Mr. C, who has a similar design to Mr. B’s. Mr. A produces the ‘building which Mr B refuses, because it doesn’t exactly conform to his specifications. Meanwhile, part of Mr. A goes up in flames and he does not have the necessary equipment to produce the exact requirements of Mr.’s building. b.
With the application of the hardship clause in the contract between Mr. A and Mr. C, could renegotiate the contract in which Mr. Would B choose another plan that Mr. A can produce with the available equipment since he no longer has the necessary capacity or equipment to produce the previous design. Furthermore, Mr. A cannot replace the destroyed equipment, because the company that manufactures the equipment needed to produce Mr. B’s exact design has filed for bankruptcy and no longer manufactures the equipment. In this case, Mr. A should still produce a prefab building for Mr. B since he has other equipment capable of performing the best alternative to the project. However, the two sides would have to work out an alternative which would allow Mr. To fulfill the obligations of him as indicated by the provisions of the hardship clause.
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