Contract Variation Arising out of the Time-inconsistency in the Long-term Oil Contracts

Document Type : ISI

Author

Department of Private law, College of Farabi University of Tehran, Qom. Iran.

Abstract

The completion of the terms of offer and acceptance is a crucial aspect of any contract, and any violation of this covenant is considered a breach. However, if there is a legal reason for such disobedience, it may be deemed valid, such as a later agreement between the parties or having a legitimate reason. The need for time to change the provisions of offer and acceptance is a common issue in long-term contracts, and it is a requirement of such agreements. Time inconsistency, which refers to the breaking of the covenant over time, is a phenomenon that is often encountered in long-term contracts, particularly in the oil industry. Its legal effect may result in the termination, adjustment, or variation of the contract. The variation of the contract, which may involve changes in the volume, method, and time of the work subject to the contractor's commitment, can be followed with the agreement of both parties or the unilateral will of either party. However, the legitimacy of such changes under Iranian law may be questioned, and it may be considered an additional or unknown condition. Furthermore, the unilateral authority of the employer in the new order during execution may be objected to due to the risk it poses to the contractor. Therefore, it is necessary to analyze the impact of such changes on the price, duration, and third parties, particularly guarantors and insurers. The Iranian legislator should pass new regulations to address the legal ambiguities surrounding contract variation, particularly in state contracts. While there is no doubt about the legitimacy of such variation, the existence of various ambiguities necessitates further examination.

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References

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Journal Of Researches Energy Law Studies
Volume 9, Issue 1
August 2023
Pages 79-98

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