Duty to renegotiate in international commercial law and uncontemplated behavioural effects

3.1 Economic rationale: general assessment

Economics analysis shows that the ‘renegotiation’ requirement could be a source of inefficiency and opportunism. ⁴³ A requirement whereby a party faced with ruinous losses asks the other contracting party to renegotiate the contract and even to continue performing their obligations (despite this now being excessively onerous) during the renegotiation may destroy the contractual balance, create a superior bargaining position for one party and shift the negotiation strength to the detriment of the party with the weaker bargaining position. ⁴⁴ Namely, a party’s negotiation position is determined by two elements. First and most importantly, what happens when negotiations fail. ⁴⁵ The second element relates to time. The longer negotiations last, the higher the opportunity costs of negotiating. ⁴⁶ These costs include lawyers’ fees, foregone opportunities to contract with other parties, excessively onerous costs of performance, interest rates on capital etc. Such costs may also include the cost of destructive behaviour. ⁴⁷ As time goes by, the cooperation surplus may shrink, but not necessarily in a symmetric way. For example, a person who has been unemployed for a long time is typically quite desperate to find a job and may thus be willing to accept work at almost any wage. ⁴⁸

Hence, that party with the least to lose (usually non-performing parties in settings of unforeseen contingencies) is in the strongest bargaining position (ceteris paribus) and can extract rents and unjustified gains. The weaker party is then willing to accept almost any share of the surplus in order to more quickly strike a deal. Muthoo also suggests that a key principle is that a ‘player’s bargaining power (as captured by her share of the surplus) is greater the more patient (i.e. the lease she has to lose with a passage of time) she is relative to the other negotiator’. ⁴⁹ The sheer possibility of such a delay and related cost then shapes, in an unjust manner, the terms of the negotiated agreement as they influence each bargainer’s expectations of what the other will agree to. ⁵⁰

There are four more aspects to the compulsory renegotiation requirement. The first is that renegotiations cost both time and effort. ⁵¹ Second, in a mandatory renegotiation process there is a danger of a ‘hold-up problem’ when one party might try to ‘take the other party for a ride’ in the renegotiation by demanding, for instance, an unreasonable payment or the fulfilment of special conditions. ⁵² Third, renegotiation may not cure the problems of undesirable risk bearing at all. Namely, if specific performance (for example in French contract law) or a very high damage remedy is available for a breach of contract then while renegotiating the promisor might have to pay a very large sum to the promisee to be excused from performance when the performance costs would be great. ⁵³ Fourth, instead of inducing a game of cooperation in the withdrawal process, the deadlines by which renegotiations must take place actually create a non-cooperative environment that leads parties to refuse to cooperate, where the optimal strategy of winning the negotiations is completely irrational behaviour (or at least gives the other party the impression of complete irrationality). ⁵⁴ In these circumstances, a cooperative scenario becomes highly unlikely and the parties might finally refuse to cooperate (which could also prove to be the most rational strategy). Such an irrational strategy induced by these international instruments might then produce non-cooperative, destructive outcomes.

However, in that case would a right to terminate a contract if such renegotiations fail or if one party faces such a hold-up problem constitute a feasible antidote to these problems? For example, Article 1195 (2) of the new French Civil Code provides that in ‘the case of refusal or the failure of renegotiations, the parties may agree to terminate the agreement’ and here one may indeed argue that this possibility represents a solution to a hold-up problem because a promisor could simply refuse to renegotiate and then terminate the contract. Yet such a termination would only provide an equitable solution in cases of mutual termination of a contract. ⁵⁵ In other instances, such a possibility then induces a hold-up problem and implies that the other non-terminating party can later claim expectation damages (or even specific performance) and again a promisor would be caught between the difficult prospect of the contract and the expectation damage remedy. ⁵⁶ Namely, they must either perform the contract and sustain ruinous losses due to the sharp rise in the cost of performing or pay even bigger expectation damages. This would then constitute a greater risk for the promisor that they never accounted for (they never charged the insurance premium to bear such an increased risk) and might not want to bear. Such factors associated with the compulsory renegotiation requirement must be taken into account while assessing renegotiation as a device for tackling the problems of unforeseen contingencies. Hence, the renegotiation requirement might be open to criticism since it may open the door to hold-up problems, various forms of extortion, moral hazard and could deter cooperation, create inequality between parties, lower certainty and overall good faith among parties.

3.2 The ‘chicken game’ and the duty to renegotiate

In many situations, people decide on what to do based partly on how others are likely to act. In politics, business, legal and social interactions, parties regularly anticipate the behaviour of others while making their decisions. ⁵⁷ Game theory deals with such situations. ⁵⁸ Now highly developed, modern game theory is a general, analytical theory of rational choice in strategic interactions and provides a useful, flexible way of organizing thinking about strategic decision-making. ⁵⁹ In its broad conceptualization, game theory works by simplifying a given social situation and stepping back from the many details that are irrelevant to the problem at hand. ⁶⁰ Two particular games are relevant for our investigation – the ‘you quit first game’ and the ‘chicken game’.

In the original chicken game, two men have to drive towards each other at high speed. If, at any moment, one of them becomes scared and moves to the right, they are the loser – the chicken. They lose respect, while the other man wins the admiration of the girls. If, however, both keep driving straight ahead, they crash and both lose a leg, arm, even their lives.

The strangest thing about the ‘chicken game’ is that the biggest ‘fool’ has the greatest chances of winning. If, for example, one party can convince the other that they are so crazy that they would in any case leave the renegotiations without an agreement (and potentially sustain huge economic losses), they will then win. In such games, in a sense it is rational to behave as if, or at least give to the other party the impression that, you are completely irrational. ⁶¹ Yet such games are usually catastrophic. Namely, in the best scenario the outcome is a zero-sum solution (zero-sum game) and, in the worst case, it is a minus-sum outcome, meaning that wealth is destroyed (minus-sum game) and everyone is worse off. The question then arises of why a rational party would ever agree to play such a destructive game. The answer is that, in the real world, we do not always have a free choice.

The extension and further refinement of such a destructive chicken game is the ‘you quit first game’. ⁶² In this game, two men have been arrested by the police. Assume that the police officer knows one of them is a sadist and the other is an innocent person. The only problem is that he does not know who the ‘good boy’ is and who is the ‘bad boy’. Of course, the two men know who the sadist is, but keep on pretending it is the other one. Therefore, the police officer decides to confine them both in a single cell and advises they are not allowed to leave before they reveal which one is the sadist. There is enough food for the next 30 years. Should either one decide to leave the room before an agreement is reached, that person will be considered to be the sadist. The one who quits last will be considered the ‘good guy’. Both men will play the game: ‘Please, you quit first’, ‘No, you quit first.’ They might threaten to never quit.

What is the outcome of this game? Although both outcomes are possible, the chances are higher that the good man will quit first – so that the legal system (and public opinion) sanctions the wrong person. The reason is as follows. The sadist is quite happy in that room: he can ill-treat the good boy. For the good boy, the stay is less pleasant. Of course, the good boy could try to win the game by threatening to never quit, but his threat is less (or not at all) credible than that of the sadist. Hence who wins this ‘you quit first game’? In fact, it is the party with the best negative-externality-generating capabilities or the party for whom (even in the absence of this destructive behaviour) the cooperation was least rewarding. If party A keeps his promises but party B is in breach (albeit this is not verifiable by a third party), staying in the relationship is least attractive for party A. Consequently, and somewhat paradoxically, the non-breacher (i.e. the good boy) is most likely to quit first and the legal system sanctions the wrong person.

This ‘you quit first’ procedure indeed appears to be a very irrational technique for ascertaining who is responsible for failure in the typical household and who is guilty (i.e. who is the ‘bad boy’). One can hardly imagine that legal systems (or society at large) would ever adopt such a procedure. Yet, for example, III.1:110 (3) (d) of the DCFR holds that a court may only change or terminate the contract if ‘the debtor has attempted, reasonably and in good faith, to achieve by negotiation a reasonable and equitable adjustment of the terms regulating the obligation’. Namely, finding out which party negotiated in bad faith may prove very difficult for courts and therefore courts may look for indirect signs (signals)and easily observable facts believed to be associated with the negative behaviour they wish to discourage. For example, they might consider the party who first left the house or first started another relationship as the one who is responsible for breaking up the marriage. Yet these signals may unintentionally create a ‘you quit first game’.

Thus, game theory offers additional insights into the potential impacts of the duty to renegotiate and also shows how demanding it might be for courts to conceptualize bad faith breaches of such a duty to renegotiate in a renegotiating process.

3.3. Behavioural implications and the duty to renegotiate

The observed behavioural inconsistencies and apparent shortcomings of the conventional economic approach have led some scholars to investigate the motivation underlying the behaviour of people in order to improve existing theories and make more accurate predictions. Simon’s pioneering work and introduction of ‘bounded-rationality’ ⁶³ was followed by several significant contributions ⁶⁴ and, at the end of 1970s, the field of behavioural economics was established. In 1979, Kahneman and Tversky published their ground-breaking article on prospect theory in which they introduced fundamental concepts in relation to reference points, loss-aversion, utility measurement and subjective probability judgements. ⁶⁵ This seminal work was followed by Thaler’s contribution to a positive theory of consumer choice where the concept of mental accounting was introduced. ⁶⁶ These pioneering works were later expanded and further elaborated by numerous scholars. ⁶⁷ Today, behavioural economics is far from a uniform methodological approach, seeing substantial differences with respect to the nature of assumptions, the value of empirical evidence and conclusions regarding rationality, efficiency and optimization. In recent years, this trend has continued with, for example, the introduction of experimental economics ⁶⁸ and neuroeconomics. ⁶⁹

Moreover, the resurgence of psychology in economics has also inspired some legal scholars to employ additional scholarship in both cognitive psychology and behavioural economics, which suggest that human behaviour often deviates from rational choice in systematic and predictable ways, to explain legal phenomena and argue for legal reforms. ⁷⁰ This novel approach (methodology) is now known as behavioural law and economics. ⁷¹ It has fundamentally altered the ways economists (and to some extent lawyers) conceptualize the world and represents an umbrella of approaches that seek to extend the standard economics framework to account for relevant features of human behaviour that are missing from the standard economics framework. ⁷² In the last decade, behavioural economics has borrowed from psychology and sociology to explain decisions inconsistent with traditional economics and thereby revolutionized the ways economists view the world (especially in the fields of applied economics/finance and consumer behaviour). Behavioural law and economics argues that individuals display bounded rationality and they: (i) suffer from certain biases, such as overoptimism and self-serving conceptions of fairness; (ii) follow heuristics, like availability, that lead to mistakes; (iii) display incomplete self-control that induces them to make decisions in conflict with their long-term interests; ⁷³ and (iv) behave according to prospect theory rather than expected utility theory. ⁷⁴ In addition, people might have bounded willpower and might be tempted and myopic. ⁷⁵ People might also be concerned by the well-being of others and this concern and their self-conception could lead them in the direction of cooperation at the expense of their own material self-interest. ⁷⁶

The behavioural economics approach extends the rational choice and equilibrium models and in no way calls for them to be abandoned. ⁷⁷ Jolls, Sunstein and Thaler also suggest that behavioural insights should be employed to help better explain both the effects and the content of the law. ⁷⁸ Such insights should support the lawmaker in achieving specific ends like deterring socially undesirable behaviour.

Behavioural economics ⁷⁹ offers an additional set of informative arguments that support a critical attitude to the ‘renegotiation requirement’ contained in the previously discussed international instruments. Namely, Nobel prize winners for economics Daniel Kahneman and Amos Tversky identify in their prospect theory the ‘endowment effect’ where the asymmetric intensity of motives to avoid losses and achieve gains features as a typical behavioural pattern among humans. ⁸⁰ Loss aversion, reference points and anchors in individual decision-making are, according to Kahneman, an ever-present feature of negotiations, especially renegotiations of an existing contract. ⁸¹ The existing terms define the reference points and any change proposed to any aspect of the agreement is viewed as a concession that one side makes to the other. ⁸² These reference points are important because other outcomes are compared to them and coded and evaluated in terms of this comparison. ⁸³ In turn, this coding affects preferences due to characteristic differences in the evaluation of positive and negative outcomes. ⁸⁴ These characteristic differences then suggest psychological processes that might cause renegotiations to fail. ⁸⁵ Consequently, negotiators who are bargaining over losses tend to make fewer concessions, find fewer integrative solutions, and more often fail to reach an agreement than negotiators bargaining over gains. ⁸⁶ The identified loss aversion in the renegotiation process creates asymmetry that makes it extremely difficult to reach an agreement. ⁸⁷ Namely, as Gächter and Riedl show, bargainers in many negotiations regard these reference points as entitlements. ⁸⁸ Such entitlement effects in renegotiations then adversely shape opening offers, the duration of bargaining, concessions, disagreements and even their fairness judgements. ⁸⁹ Their experimental results also indicate that the entitlements (agreed on in the ‘original’ transaction) expressed by negotiators in renegotiations are not simply used for strategic purposes, but bear a close relationship with what negotiators believe and actually do in order to advance their self-interest. ⁹⁰

The existing terms that function as reference points in renegotiations also exacerbate the hold-up problem. That is, as a consequence of renegotiation, each party shares some of the fruits of prior (noncontractible) investments with the other party. ⁹¹ Nobel prize winner Oliver Hart and his co-authors Fehr and Zehnder in their experimental study, for example, also show that the renegotiating parties do not feel entitled to outcomes outside the contract but may feel entitled to a different outcome within the contract. ⁹² Thus, if a renegotiation party does not get what they feel they are entitled to (reference points from the previous/original contract) they become aggrieved and engage in shading by providing a perfunctory rather than a consummate performance, causing a deadweight loss and costly punishment.

Moreover, renegotiations over a shrinking pie, which is the case of unforeseen contingencies where the contractual surplus is severely reduced by its excessively onerous performance, are especially difficult because they require an allocation of losses. ⁹³ In these circumstances of bargaining over losses (i.e. excessively onerous performance), negotiators tend to make fewer concessions, find fewer integrative solutions and more often fail to reach an agreement than negotiators who are bargaining over gains. ⁹⁴ Such renegotiations may then open the way to unjust and unfair results, different forms of extortion, opportunism and lead to strategic behaviour that reduces the cooperative surplus and minimizes the social wealth.

Further, as the literature shows, bargaining parties often suffer from overoptimism and overestimate their chances of winning in court. ⁹⁵ This overoptimism is a key explanation of the costly bargaining delay which results in a Pareto-inefficient allocation of resources. ⁹⁶ Namely, the argument is simply that, when the parties are excessively optimistic about the future, there may not be any agreement that can satisfy both parties parties’ inflated expectations. ⁹⁷ In this case, there cannot be an agreement that all parties accept, making delay inevitable. ⁹⁸ This explanation is corroborated by a large body of evidence that suggests that optimism and self-serving biases are common ⁹⁹ and that even seasoned negotiators exhibit these biases. ¹⁰⁰

Thus, behavioural economics offers a set of arguments suggesting that an otherwise mutually beneficial renegotiation could lead to bad feeling and thus ‘shading’, opening the door to hold-up problems whereby one party might try to force a renegotiation in order to grab more of the surplus.

3.4 Synthesis: the likely effects of the duty to renegotiate

Given the above, one might then wonder what are the likely effects of such a duty to renegotiate? The proposed conceptual framework suggests there are two main economic effects: (i) court decisions are delayed, since when a party concludes that a settlement or voluntary agreement is impossible they must still wait until the mandatory renegotiation period is over before going to court; and (ii) parties are induced to play a chicken game and a you-quit-first game in which they must try to make the other party leave the negotiation table first (making the other then held responsible for the failure of the renegotiations) or to strategically improve their bargaining position and consequential share of the gains. ¹⁰¹

As mentioned, the duty to renegotiate also creates a superior bargaining position for one party and shifts the negotiation strength to the detriment of the weaker party. ¹⁰² The party with the least to lose (typically non-performing parties in settings of changed circumstances) might then be in the superior bargaining position (ceteris paribus) and can extract rents and unjustified gains. ¹⁰³ One party could actually seek to take advantage of the other by pushing the limits of that party in the renegotiation by demanding, for example, an unreasonable payment or the fulfilment of special conditions (i.e. the hold-up problem). Consequently, renegotiation may not cure the problems of undesirable risk bearing at all.

Moreover, the identified loss aversion in the renegotiation process creates asymmetry that makes it extremely difficult to reach an agreement. Behavioural economics suggests that negotiators in circumstances of bargaining over losses tend to make fewer concessions, find fewer integrative solutions and more often fail to reach an agreement. ¹⁰⁴ Strategically driven renegotiations like this could then open the way to unjust and unfair results, inequality among parties, hold-up problems, different forms of extortion, opportunism as well as strategic behaviour that reduces the cooperative surplus and represents a deadweight loss. Insightfully, such a duty contained in certain international instruments cannot be found in the English, German or American law of contracts. Along these lines, behavioural and game theoretical literature indeed tends to suggest that the legal duty to renegotiate might be pointless at best and harmful at worst.

4.1. Provisions of the CISG in line with the conceptual framework

As noted, the CISG’s provisions on excessively onerous performance in cases of unforeseen contingencies or frustration of purpose do not contain any mandatory duty to renegotiate and are thus aligned with the proposed conceptual framework. Despite the previously mentioned scholarly criticism ¹⁰⁶ of the non-existence of such a duty in the CISG, in instances of excessively onerous performance the CISG may deter strategic behaviour and strategic bargaining to the detriment of the weaker party, prevent opportunism, hold-up problems, foster voluntary renegotiations and decrease the transaction costs that could be generated by such strategic renegotiations. Moreover, the design of the current CISG provisions (Article 79) ¹⁰⁷ might deter different forms of extortion, opportunism that could eventually produce undesirable strategic behaviour. The CISG’s provisions hence increase the cooperative surplus and may also be viewed as an efficient default rule. ¹⁰⁸ Further, Article 79 of the CISG may deter the unjustified extraction of rents and gains and, from a game theoretical perspective, avoid the creation of the ruinous, undesirable ‘chicken game’ and ‘you quit first game’ outcomes. ¹⁰⁹

4.2 The UNIDROIT Principles, PECL, DCFR and possible unintended effects

Article 6.2.3 of the UNIDROIT Principles (PICC) states that:

in case of hardship the disadvantaged party is entitled to request renegotiations. The request shall be made without undue delay and shall indicate the grounds on which it is based. The request for renegotiation does not in itself entitle the disadvantaged party to withhold performance. Upon failure to reach agreement within a reasonable time either party may resort to the court. If the court finds hardship it may, if reasonable, terminate the contract at a date and on terms to be fixed, or adapt the contract with a view to restoring its equilibrium. ¹¹⁰

Is such an explicit duty to renegotiate as embodied in those international instruments a good idea? Of course, in fact parties should always voluntarily renegotiate and indeed both parties will have incentives (with/without such a legal obligation) to do so because they have, for example, strong incentives to settle cases in general (because voluntary renegotiations may be simply cheaper for them than going to trial). Still, voluntary renegotiations should be driven by the parties’ undistorted incentives and there is no need for any specific legal ‘duty’ or obligation. Evidently, both parties can always freely renegotiate and, since such voluntary renegotiation is always possible, the actual substantive question is ‘in the shadow of what parties have then to renegotiate’. ¹¹³ The literature suggests that renegotiations may take place in the shadow of a third-party decision, of the original contract or, eventually, of potential termination. ¹¹⁴ The UNIDROIT Principles (as well as the PECL, DCFR and CESL) opt for negotiations in the shadow of a court decision, which is per se a good option, yet the legal duty to renegotiate is, as the proposed conceptual framework suggests, pointless at best and harmful at worst.

The economically inspired conceptual framework presented here and the related behavioural and game theoretical insights suggest that such duties might result in different effects to those that the classic literature tends to indicate. Such a duty to renegotiate may thus create a superior bargaining position for one party and shift the negotiation power to the detriment of the weaker party. ¹¹⁵ The party with the least to lose (usually non-performing parties in settings of changed circumstances) might then be in a superior bargaining position (ceteris paribus) and consequently extract unjustified rents and gains. ¹¹⁶ In other words, the costs of delay shape the terms of the negotiated agreement by influencing each bargainer’s expectations concerning what the other will agree to. This delay then also impacts the bargaining outcome since the higher is a given party’s cost of delay, the smaller is that person’s share of the rationally negotiated gains from the trade interaction. ¹¹⁷

In summarizing the proposed conceptual framework, it is clear that the identified loss aversion in the renegotiation process creates asymmetry that makes it extremely difficult to reach an agreement. Namely, as emphasized, behavioural economics suggests that negotiators in circumstances of bargaining over losses tend to make fewer concessions, find fewer integrative solutions and more often fail to reach an agreement. ¹¹⁸ Such strategically driven renegotiations may then open the way to unjust and unfair results, inequality among parties, hold-up problems, different forms of extortion, and opportunism, and lead to strategic behaviour that reduces the cooperative surplus and represents a deadweight loss.

In addition, the paper identifies two additional shortcomings: (i) court decisions might be delayed, since when a party concludes that settlement or a voluntary agreement is impossible they must still wait until the mandatory renegotiation period is over before going to court; and (ii) that might be induced to play a chicken game and a you-quit-first game in which they must try to make the other party leave the negotiation table first (making the other then held responsible for the failure of the renegotiations) and/or to strategically improve their bargaining position and the consequential share of the gains. For instance, the duty to renegotiate in good faith contained in Article III.1:110 (3) (d) of the DCFR might produce an adverse effect. That is, as mentioned, finding out which party negotiated in bad faith may prove very difficult for courts and they may look at indirect signs (signals) and easily observable facts believed to be associated with the negative behaviour they wish to discourage. Yet these signals may, unintentionally, create a destructive ‘you quit first’ game whose potential outcome would represent exactly the effect that several eminent authors have attempted to avoid. Moreover, such strategically driven renegotiations could then open the door to unjust and unfair results, inequality among parties, hold-up problems, different forms of extortion, and opportunism, and trigger strategic behaviour that reduces the cooperative surplus and represents a deadweight loss.

4.3 Principles of the CESL and potential regulatory improvement

The proposed principles concerning changed circumstances found in Article 89 ¹¹⁹ of the CESL provide that ‘a party must perform its obligations even if performance has become more onerous, whether because the cost of performance has increased or because the value of what is to be received in return has diminished.’ Where performance becomes excessively onerous due to an exceptional change in circumstances, the parties have a duty to enter into negotiations with a view to adapting or terminating the contract. If the parties fail to reach an agreement within a reasonable time, then, upon the request of either party a court may: ‘(a)adapt the contract in order to bring it into accordance with what the parties would reasonably have agreed at the time of contracting if they had taken the change of circumstances into account; or (b) terminate the contract’. ¹²⁰ Obviously, the CESL’s provision is also not aligned with proposed conceptual framework and the CESL’s duty to renegotiate could also generate uncontemplated game theoretical and behaviour effects. Compulsory renegotiation requirement has four main aspects. First, since compulsory renegotiations cost time and effort, they unnecessarily raise transaction costs. Second, such a mandatory renegotiation process might induce the ‘hold-up problem’ when one party might take advantage of the other by pushing the limits of that party in the renegotiation by demanding, for example, an unreasonable payment or the fulfilment of special conditions. Third, compulsory renegotiation may not cure the problems of undesirable risk bearing at all. Fourth, instead of inducing a cooperation game in the withdrawal process, the deadlines by which compulsory renegotiations must occur in fact generate a non-cooperative environment that leads the parties to refuse to cooperate, where the optimal strategy for winning the negotiations is completely irrational, destructive behaviour that represents a pure waste of scare resources (minus-sum game).

In other words, the CESL’s duty to renegotiate might also be seen as harmful at worst and useless at best. As mentioned, the identified loss aversion in the renegotiation process creates asymmetry that makes it extremely difficult to reach an agreement. Behavioural findings also suggest that negotiators in circumstances of bargaining over losses tend to make fewer concessions, find fewer integrative solutions and more often fail to reach an agreement. Such strategically driven compulsory renegotiations may then open the way to unjust and unfair results, hold-up problems, different forms of extortion, and opportunism, and lead to strategic behaviour that shrinks the cooperative surplus.

However, one should be stress that all of these behavioural biases and resulting hold-up problems occur when there is a duty to renegotiate (compulsory renegotiations) before one can trigger the application of the excuse provisions for excessively onerous performance in cases of unforeseen contingencies or frustration of purpose and require the contract to be either discharged or adapted. ¹²¹ Namely, if parties in circumstances of unforeseen contingencies that render performance excessively onerous voluntarily renegotiate their contracts, then all of those behavioural biases, hold-up problems and extortions might not materialize. Voluntary renegotiations, without any legal duty that also implies legal consequences for a failure to renegotiate and then serve as a mechanism that triggers and amplifies the previously discussed behavioural phenomena, are of course beneficial given that they reduce litigation costs, economize on transaction costs and promote settlements and safe, beneficial exchanges. Still, as noted, the regulatory provision of compulsory renegotiation before one can rely on the excuse doctrine (requesting the judicial discharge of performance in cases of supervening events) shifts the bargaining power to the detriment of the weaker party and initiates the previously mentioned behavioural phenomena. Therefore, a party’s incentive stream is distorted and resources might be inefficiently allocated.