Abstract
This paper argues for reforming the rules governing the control of remedial clauses in (Commonwealth) common law jurisdictions. In simple terms, this paper argues that remedial terms should not be seen, as some would have it, as creating a debt or ironclad obligation on the promisor. Instead, such clauses should be treated as a security against default, which is adjustable according to circumstances prevailing at the time of breach or enforcement. This argument is based on two socioeconomic levers—radical uncertainty and (the imperative to curb) over-indebtedness. Based on the first lever, a case is made for applying hindsight in enforcing remedial provisions. The second lever aims to demonstrate the fragility of economic systems and that widespread indebtedness, coupled with the strict enforcement of remedial clauses, can weaken promisor firms’ resilience in a climate of economic contraction or recession.