German Treaty Overrides: Contractual Duties Meet Fiscal Interests

The Latin principle pacta sunt servanda (‘‘agreementsmust be kept’’) serves as a cornerstone of socialinteraction, peace, and justice. If a breach of contractdid not have some sort of ramification, the motivationto stick to the stipulations of the treaty would decreasegreatly, the ultimate consequence being that the partybearing the detrimental effects of the contractual relationshipis the one not breaching the contract. That’swhy a breach of contract without a sound justificationis punished in all areas of law — well, except for internationaltax law.[...]