Vol. 9, No. 6, Pg. 36. The Euro Cometh A Legislative Proposal to Ensure Continuity of South Carolina Commercial Contracts.

• Author: By Stephen M. Cox and Denis Ladegaillerie

South Carolina Lawyer

1998.

Vol. 9, No. 6, Pg. 36.

The Euro Cometh A Legislative Proposal to Ensure Continuity of South Carolina Commercial Contracts

36"The Euro Cometh" A Legislative Proposal to Ensure Continuity of South Carolina Commercial ContractsBy Stephen M. Cox and Denis LadegaillerieIn recent years, South Carolina has become home to a sizable number of international businesses whose activities have propelled the state into the global marketplace. Undoubtedly, this exposure has made our business community more sophisticated and competitive. Yet it has also had some disorienting side effects.

South Carolina firms are now affected by economic developments that occur continents away as activities in distant markets ripple across the globe. Labor strikes and stock market crashes in Djakarta and Seoul are felt in Greenville and Charleston. And most importantly for the legal community, the rise of international commerce forces lawyers to acquaint themselves with foreign customs and regulations.

Today, the lawyer advising a corporate client in a typical business transaction is often expected to have some understanding of international financial trends and to foresee issues that may not have seemed significant in an era of purely domestic commerce.

Of all the international economic developments that affect South Carolina's business community, perhaps none looms larger than the establishment of the European Monetary Union (EMU). Established by the 1992 Treaty of Maastricht, the Union represents the complete economic integration of virtually all the European nations. When all intra-continental trade barriers finally disappear at the turn of the millennium, Europe will boast the world's largest and most powerful single market.

Central to the success of the EMU is the establishment of a single currency--the euro. By 2002, all of the national currencies of the EMU's member states will have disappeared, replaced by a single medium of exchange.

The withdrawal of national currencies in places like Paris and Bonn may seem to have little relevance to the affairs of business people here in South Carolina. Yet the consequences may be alarmingly direct, particularly in the context of commercial contracts. Many firms that regularly conduct business abroad are parties to agreements that call for payment in a variety of European currencies: francs, marks and pounds sterling. After 2002, how is a party to meet its obligation to pay in a vanished currency?

The legal questions raised by the introduction of the euro are most directly addressed by the equitable doctrines of frustration

38 and impossibility. These doctrines, both of which justify a party's nonperformance under a contract, are similar but not identical.

Frustration is an appropriate defense to nonperformance when "after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event, the...