War, Uncertainty and Contractual Equilibrium: Adaptation of Construction Contracts in Conflict Zones

Abstract

This article examines the limits of statutory hardship rules in international construction contracts performed in conflict-affected regions and argues for a proactive, contract-based model of adaptation. Construction projects are particularly vulnerable to armed conflict, civil unrest, political instability, economic collapse and sudden regulatory change. Their long duration, complex structure, substantial investment and dependence on multiple actors mean that disruptions may seriously affect performance, cost, timing and the contractual balance. Although national laws and standard forms provide remedies such as force majeure, impossibility, extension of time and cost adjustment, these mechanisms often fail to address the dynamic risks arising in conflict zones.

The article first situates hardship within a comparative legal framework. Civil law systems generally recognise judicial adaptation or termination where unforeseeable changes fundamentally disturb the contractual equilibrium. Turkish law allows adaptation under Article 138 of the Turkish Code of Obligations and contains a specific rule for construction contracts under Article 480/II. German, Swiss and French law also recognise mechanisms that may lead to renegotiation, adaptation or termination. By contrast, common law systems remain more reluctant to intervene, except in cases of frustration. This divergence creates uncertainty in cross-border projects, especially where parties do not wish to rely on unpredictable judicial intervention.

The article then examines FIDIC and ICC clauses. FIDIC contracts contain mechanisms that may respond to certain disruptive events, including price adjustment, exceptional events, employer’s risks, changes in law and claim procedures. However, FIDIC does not contain a true hardship clause allowing general adaptation where performance remains possible but becomes excessively onerous. ICC hardship clauses address the issue more directly. The 2003 ICC Hardship Clause essentially allowed termination, whereas the 2020 version offers alternatives including termination after failed renegotiation, judicial or arbitral adaptation, and judicial or arbitral declaration of termination.

A central claim of the article is that statutory default rules are not sufficiently responsive to conflict-zone realities. The mere existence of war does not automatically justify adaptation; a causal link between the conflict and the specific project must be established. Yet war is not a clearly bounded event. Its geographic reach, intensity and practical consequences may change rapidly. A site that appears unaffected today may become vulnerable tomorrow due to escalation, road closures, security threats, sanctions, supply chain disruption or political developments. This unstable pattern makes hardship a developing process rather than a single event.

The article draws an important lesson from the COVID-19 pandemic. Although legal systems already contained default rules on impossibility and hardship, many jurisdictions adopted special legislation to address pandemic-related contractual disruption. This suggests that general default rules may fail to produce fast, predictable and equitable results during systemic crises. Unlike COVID-19, however, conflict risk in certain regions may be foreseeable at the time of contracting, even if its concrete consequences remain uncertain. Parties should therefore use the information available at the drafting stage to design project-specific mechanisms instead of relying solely on statutory rules.

The proposed model rests on freedom of contract, good faith, cooperation and the relational nature of construction contracts. Parties are usually better placed than courts or arbitral tribunals to allocate, price and insure risks in advance. Tailor-made clauses can therefore express the parties’ intentions more accurately than general default rules. International instruments such as the UNIDROIT Principles, PECL, DCFR and CESL also reflect a movement towards renegotiation, adaptation and equitable risk-sharing.

The article proposes four contractual mechanisms. First, contracts should provide for early third-party determination of whether an extraordinary event exists and whether it affects the project. This may take the form of an independent expert report, a board determination or reliance on objective institutional declarations. Such mechanisms can reduce evidentiary disputes and prevent parties from waiting until the conflict reaches the construction site itself.

Secondly, contracts should include detailed notice obligations. The affected party should notify the other party of the event, its estimated duration, the activities that can continue, those that cannot reasonably continue and the expected effects on performance. The employer should respond within a defined period. This structured communication may prevent overreaction, underreaction and escalation.

Thirdly, the article emphasises tolerance periods and temporary hardship. Parties should determine how long a party must endure disruption before termination or substantial adaptation becomes available. In recurring conflict scenarios, the contractor may face repeated mobilisation and demobilisation, rising costs and lost opportunities. A staged mechanism may allocate costs differently over successive periods and trigger renegotiation if uncertainty persists.

Finally, renegotiation is identified as the key contractual tool. Since not all risks can be fully anticipated, the contract should impose a binding duty to renegotiate, supported by consequences for breach, such as loss of adaptation rights, liquidated damages or cost sanctions. The contract should also clarify whether performance continues or is suspended during renegotiation. Properly drafted, renegotiation preserves party autonomy, reduces reliance on courts and tribunals, and enables commercially realistic solutions.

In conclusion, the article argues that conflict-zone construction contracts require more than abstract hardship doctrines. A carefully designed contractual framework can provide greater predictability, fairness and resilience by combining objective triggers, notice duties, temporary adaptation, tolerance periods, renegotiation and limited third-party involvement.