What is Hardship Clause?
Updated: 24 March 2026
A hardship clause is a contractual provision that obliges parties to renegotiate when unforeseen circumstances fundamentally disrupt the balance of the contract. Unlike force majeure, where performance becomes impossible, hardship applies when performance is still possible but has become unreasonably burdensome for one party. Examples include extreme raw material price increases, major regulatory changes, or economic crises that make the contract fundamentally unbalanced.
How does hardship clause work?
A hardship clause fills the gap between two extremes: performing the contract as agreed while circumstances have changed dramatically, or invoking force majeure when performance is technically still possible. The clause offers a middle path by requiring parties to renegotiate in good faith.
In Dutch law, the concept of "unforeseen circumstances" already exists through Article 6:258 of the Civil Code, but going to court is expensive and slow. A contractual hardship clause achieves the same outcome more quickly, cheaply, and predictably. You do not need a judge; you sit down with your contract partner.
The clause must clearly define what qualifies as hardship. Common triggers include: a raw material price increase exceeding a specified percentage, fundamental changes in legislation or regulation, currency fluctuations above a certain threshold, or natural disasters and pandemics that disrupt the market.
The clause then describes the process: who can invoke hardship, within what timeframe must the other party respond, and what happens if renegotiation fails? Good clauses include an escalation mechanism: first negotiation, then mediation, and only as a last resort termination or litigation.
Since the COVID-19 pandemic and the subsequent supply chain disruptions, hardship clauses have become significantly more popular, including in the SMB segment. The lesson was clear: long-term contracts without a renegotiation option can be destructive for both parties during major market disruptions.
Why does this matter for SMBs?
The COVID-19 pandemic, the energy crisis, and raw material shortages have demonstrated that "unforeseen circumstances" are less exceptional than previously assumed. SMBs with long-term procurement contracts without a hardship clause were locked into prices and volumes that were no longer workable.
A hardship clause protects you against the scenario where you can technically perform but doing so is no longer financially responsible. It is a safety valve that prevents a contract from damaging your business rather than protecting it.
How to manage this correctly
- 1Define hardship triggers concretely: for example, a price increase of more than 15% relative to the contract price
- 2Agree a renegotiation period of no more than thirty days after hardship is invoked
- 3Build in an escalation path: first negotiation, then mediation, only then termination
- 4Make the clause reciprocal — both parties should be able to invoke it
- 5Combine the hardship clause with a price indexation clause for regular price adjustments
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