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Reproduced with the permission of Oceana Publications

excerpt from

INTERNATIONAL SALES LAW

United Nations Convention on Contracts for the International Sale of Goods

Convention on the Limitation Period in the International Sale of Goods

Commentary by
Prof. Dr. jur. Dr. sc. oec. Fritz Enderlein
Prof. Dr. jur. Dr. sc. oec. Dietrich Maskow

Oceana Publications, 1992

Article 79 [Impediments beyond debtor's control]

[TEXT OF THE UNIFORM LAW]

(1) A party is not liable [1] for a failure to perform any of his obligations if he proves that the failure [2] was due to an impediment [3] beyond his control [4] and that he could not reasonably be expected to have taken the impediment into account [5] at the time of the conclusion of the contract or to have avoided or overcome it or its consequences [6].

(2) If the party's failure is due to the failure by a third person whom he has engaged [7] to perform the whole or a part of the contract, that party is exempt from liability only if:

(a) he is exempt under the preceding paragraph [8]; and
(b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him [9].

(3) The exemption provided for in this article has effect for the period during which the impediment exists [10].

(4) The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party [11] who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt [12].

(5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention [13].

[WORDS AND PHRASES, CONCEPTS

1. a party is not liable
2. for a failure to perform any of his obligations
3. if he proves that the failure to perform was due to an impediment
4. beyond his control
5. and that he could not reasonably be expected to have taken the impediment into account
6. at the time of the conclusion of the contract or to have avoided or overcome it or its consequences
     - change of circumstances, hardship
7. if the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if
8. he is exempt under the preceding paragraph; and
9. the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him
10. the exemption provided for in this article has effect for the period during which the impediment exists
11. the party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party
12. within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt
13. nothing in this article prevents either party from exercising any right other than to claim damages under this Convention
     - impact on penalty or liquidated damage clauses
     - right to avoid the contract
     - right to delivery of substitute goods
     - right to reduction of the price
     - right to require performance
     - provision a stimulus to renegotiation ]

[COMMENTARY]

[1] [a party is not liable ]

      [1.1] It can be seen from paragraph 5 (note 13) that not being liable does not go so far as it might seem at first sight. [page 319]

      [1.2] It is in our view important to stress that the Convention has developed a concept of its own in regard to impediments, which cannot be directly traced back to any national law. This saves from borrowing from a domestic law in interpretation, which could be very misleading, especially when it comes to one's own domestic law. We, therefore, believe that it is not very helpful when Nicholas (Freiburg, 286 fol) tries to prove that the Convention is based on a concept of fault. Possible clues for it from its history can be interpreted differently (Schlechtriem, 95), and representatives of the legal systems which provide for liability in the case of fault do not see that concept implemented in the Convention (Stoll/Freiburg, 270). Vischer (Lausanne, 174) who wants to recognize in the rule of liability under the CISG what he considers as the Anglo-Saxon model, is the -- though considerably more restrained -- counterpart of Nicholas.

For this reason we are, like Tallon (BB, 595), also skeptical in regard to the recommendation by Honnold (434) to adopt the comparative law approach when it comes to the interpretation of the grounds for exemption. There are no generally recognized methods which could be used to comprehensively identify the prevailing patterns and trends of modern domestic law which he recommends.

There is, however, another proposal by Honnold (434 fol) which we consider as acceptable, namely to obtain ideas for the interpretation of the grounds for exemption from contractual practice. Clauses, model contracts, etc. which have prevailed in a certain context, can play a role in this regard. However, the General Conditions of the ECE Nos. 188 and 574 mentioned by Honnold, inter alia, do not seem to be the best examples to give because they are quite favourable to the seller and are criticized by the developing countries.

[2] [ for a failure to perform any of his obligations ]

The term "failure to perform" is to be conceived here in the broadest sense of the word. Apart from late performance and non-performance it includes, in particular, non-conform[ing] performance and relates to the obligations of both the seller and the buyer.

The possibilities of exemption in the case of non-conformity are unusual for the common law, so that differences of opinion become visible where interpretation is concerned. The CISG uses the notion "impediments" (in this case in the meaning of disturbances, compare Introductory remarks 3) and no longer mentions "circumstances" as in Article 74 ULIS, the discussion of which had been controversial already at that time. Honnold (430 fol) has tried to assess this fact in such a way as to explain that this modification was to exclude exemption in the event of non-conformity. This is doubted even by other common law representatives (Nicholas, 240), and this has [page 320] been rightly contradicted by others (Tallon/BB, 579). The clear wording of the introductory part of the article cannot be changed by pretending that an impediment could not cause non-conformity (in this sense, also Vischer/Lausanne, 177 fol). But we, too, are of the opinion that these differences of opinion are of little practical weight, because impediments as defined in Article 79, paragraph 1 will seldom be the cause of non-conformity (c. also Stoll/Freiburg, 275).

[3] [ if he proves that the failure to perform was due to an impediment ]

      [3.1] The exemption becomes effective when the non-performance, breach of contract, is based on an impediment which cumulatively fulfils three conditions (notes 4-6). The decisive prerequisite for an impediment to be taken into consideration is its causality in regard to the breach of contract. It is also possible that the impediment excuses only part of the breach, like for instance one part of the period of delay where the delivery is not made within the period for delivery.

      [3.2] When the impediment occurs during the delay, its causality for the breach of contract is given only if it had an effect in the case of delivery within the period prescribed (Rudolph/Moscow, 82).

      [3.3] The causality of the impediment for the breach of contract, in this case by the seller, depends on how much the goods have been individualized. The two extremes in this regard are specific and generic obligations. With respect to specific obligations, it should be sufficient for an exemption that the impediment has an effect on the goods themselves. Where limited generic obligations are concerned, which have to be fulfilled by delivering goods from a certain manufacturing plant or by delivering goods from a certain region, from an agreed stock, etc., exemption will be granted when the limited generic goods are affected. When it is affected only partly, the buyers to be delivered would have to be supplied in part, where this is possible. Otherwise, the seller should have a choice to decide in good faith who he supplies. In the event of obligations in regard to unlimited generic goods, it will generally be difficult to grant an exemption. The seller may, however, prove that because of impediments he was not in a position to obtain supplies of the generic goods in question. Similarly to Vischer (Lausanne, 178) and unlike Tallon (BB, 582), we are of the opinion that the principle "genera non pereunt" cannot be used within the scope of the CISG to prove that exemption is excluded where generic obligations are concerned. Like in the case of obligations in regard to specific goods, it will be granted when the goods are clearly identified to the contract with a view to fulfilling generic obligations.

      [3.4] Unlike Tallon (BB, 583), we believe that it cannot be required that the impediment is the exclusive cause of a breach of contract. This is true not only of cases in which it covers the breach of contract only partially, but the impediment should in our view also be accepted when a cause overtakes another cause. In an example given by Tallon, improperly packed goods later perish because of an accident which constitutes an impediment. Tallon does not want to allow an exemption. We believe that it must be possible. It is only the damages which are affected by the exemption, and the damage to the buyer has not become worse because of the fact that the perished goods were packed improperly. (We neglect here that Tallon distorts the problem by demanding accident-proof packing.) It is decisive, as we hold, whether the impediment lastly has caused the breach of contract. If this is so, it consumes other breaches of contract for which there are no grounds for exemption insofar as those no longer appear independently.

      [3.5] The burden of proof for the existence of impediments lies with the aggrieved party.

      [3.6] A list of impediments which takes into account such typical categories as natural phenomena; decisions by the State; other extraordinary events (war, blockade, accidents); acts by third parties (sabotage, robbery); and forms of industrial action was not included. Many of the above-mentioned phenomena will generally become impediments. But they are not such per se and without any examination; further criteria must serve as the measure for them. From this it may result, for instance, that a fire, which in most cases will constitute an impediment will not be such in a specific case because the person concerned has violated the most elementary requirements of protection against fire so that the result was within his control.

      [3.7] The parties often agree concrete impediments which can be examined in regard to their causality for the breach of contract, but not to their character as impediments (note 4-6).

[4] [ due to an impediment beyond his control ]

      [4.1] In requiring that the impediment must be beyond the control of the party concerned, the scope of risk of the latter is determined, though only roughly.

Within the control of the seller are all those factors which are connected with an orderly organization of his manufacturing and/or procurement process. To explain this in giving an example, he must have the necessary capacities in terms of personnel and technical equipment, use them appropriately and maintain his equipment according to his expert judgement so as to prevent any breakdown. [page 322]

His control also includes that he disposes of the required financial means to ensure manufacture and procurement, timely takes care of needed sub-supplies, and does all that is in his power to obtain authorizations by the State.

      [4.2] Opinions may differ as to whether strikes are beyond the control of the party concerned, for their causes are often found in the enterprise. We believe that one should follow those authors who like Vischer (Lausanne, 179) take a careful stand in the matter and do not exclude strikes as impediments, except when they are internal confrontations at a factory and provided that the other conditions of impediments are fulfilled, too (c. also Tallon/BB, 584). Rudolph (Moscow, 84) even believes that strikes could generally be considered as possible in the context of negotiations on pay and therefore would not constitute an impediment (note 5) because they happen at specific intervals. This is true of strikes which can be foreseen at the time of the conclusion of the contract. Lockouts are, at least to a certain extent, not exterior to the activities of the debtor and can, therefore, not be considered as impediments (Rudolph, ibid).

[5] [ and that he could not reasonably be expected to have taken the impediment into account ]

      [5.1] This second condition, which an impediment to cause an exemption will have to fulfill, describes in a very flexible manner the criterion of foreseeability, which is known from the force majeure clauses.

Insofar the impediment was in existence even before the contract was concluded, it has to be required that the party concerned neither knew nor, as we believe, ought to have been aware of it because otherwise he would have had to take it into consideration.

      [5.2] Where the impediments occur before the contract is concluded, they will in part be such as to render performance impossible, e.g. a specific good is lost before the time of the conclusion of the contract, and in part such as to hinder it only temporarily. In respect of the former case, national laws often stipulate that declarations and/or contracts regarding impossible performances are void. For this reason, some authors (Tallon/BB, 578) believe that because of Article 4, subpara. (a), domestic law will have to be applied so that the Convention becomes irrelevant in this context. We can, however, not join such a view because of the considerations expounded already in another context (Article 68, note 5.4.).

      [5.3] The rule does not require foreseeability per se. Here we see a difference, compared to the usual rules and clauses governing cases of force majeure. In the end, most of the phenomena that might become impediments are foreseeable. It is, however, not expected that such events are taken into account which, given general foreseeability, [page 323] are not expected to materialize before the contract is performed and/or if they do nevertheless, they are at least not expected to have an effect on it.

These expectations are further qualified in stipulating that they will have to be reasonable, i.e. that it is proceeded in the customary way, like comparable parties would do. Thereby, an objectivization is effected.

[6] [ at the time of the conclusion of the contract or to have avoided or overcome it or its consequences]

      [6.1] It is in line with the general liability of the parties in regard to the obligations they have assumed that they have to counteract impediments. The two main forms of doing so are mentioned here.

First, disturbances will have to be avoided. In order to achieve this, measures will have to be taken against such impediments which are generally looming ahead but cannot, a priori, be put in relation to the fulfilment of concrete obligations. These include measures of protection against accidents and specifically fire; a factory management which guarantees peaceful labour relations; etc. Above all, measures have to be taken against disturbances which are clearly approaching.

Second, where a disturbance has already revealed itself, it has to be overcome as speedily as possible invoking, for instance, remedies against hindering decisions by the State insofar as they have a chance of succeeding. It is the requirement of overcoming which is aimed at removing the consequences of disturbances. Hence, the effects of accidents have to be removed fast. No clear distinction can be made between avoidance and overcoming when it comes to looking for a replacement for a supplier lost.

      [6.2] The yardstick used to measure the efforts of the party concerned is again what can reasonably be expected from him. And that is what is customary, or what similar individuals would do in a similar situation. The exemption is thus granted when efforts would have been necessary that go beyond the former.

      [6.3] [change of circumstances, hardship] The Convention provides no specific rule as to whether a disturbance which does not fully exclude performance, but makes it considerably more difficult, such as change of circumstances, hardship, can be considered as an impediment. The facts of that case would have to be considered in the context of Article 79. The majority of commentators, therefore, want to allow changes in the circumstances in serious cases to be impediments (Schlechtriem, 96; Honnold, 443; Vischer/Lausanne, 178 fol). Herein we also see the best way for finding a solution. There is nonetheless a conspicuous reticence on the part of the authors in regard to their general commitment [page 324] to it and also in regard to its importance. But if one takes the wording of the CISG literally (and what is at issue here is the obligation to avoid and/or overcome) and applies it to the main case of changed circumstances, to the changes in the ratio between performance and counter-performance, one has to note that the subsumption, actually is not that extraordinary. It is in our view not the essential criteria whether the party concerned would be put on the way to ruin in the event of non-recognition of the exemption (Vischer/Lausanne, 179) because then the subjective financial liquidity would be decisive. Neither can one, like Schlechtriem (96) does, infer the non-recognition of the impediment from the liability for financial liquidity. The criterion for it is the limit of what can reasonable be expected. It may be different in the different sectors, and speculative transactions hardly permit reliance on such impediments. It seems to us that in shifting the equivalence by 100 per cent, the extent of efforts which can reasonably be expected is surpassed; and this is frequently the case when the discrepancy is much smaller. This is true, however, of both directions, wherefrom follows a pressure to adjust in most cases (Introductory remarks 2). Stoll (Freiburg, 274) who represents the outsider opinion that economic impossibility and Wegfall der Geschäftsgrundlage (which is the terminology used in the FRG), do not constitute impediments in the meaning of Article 79, concedes, however, that insistence on unchanged performance could contradict the requirement of good faith under Article 7, paragraph 1. This view is more flexible than the one held by a majority because it does not tie to the inflexible scheme of legal effects under Article 79, in particular paragraph 5. Without wanting to speak in favour of rejecting changed circumstances as impediments, we do not want to exclude reliance on good faith in these cases. This follows from the fact that one form of changed circumstances, frustration of purpose (the plant for whose reconstruction a machine is to be delivered is destroyed by an earthquake), cannot be solved by invoking Article 79. What good is a possible exemption from payment of damages because of not taking delivery, when the obligation to pay the price is retained and is probably secured irrevocably, and when the obligation to take delivery of the goods continues to exist (note 13). Tallon (BB, 593 fol) has good reasons to attack recourse to good faith, but the same reasons, vagueness, in the end, unfortunately also apply to the other solution.

Anyway, the discussion shows that at present it cannot be determined with sufficient security how the issue of changed circumstances can be decided on the basis of the CISG. The parties are, therefore, urgently recommended to make arrangements in the matter and/or to exclude adjustment (Maskow, Bewältigung, 16, as well as other solutions in PICC, Article 5.2.1. to 5.2.3.). [page 325]

[7] [f the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if ]

      [7.1] It is to be welcomed that the CISG, by contrast to Article 74 ULIS, directly bears on the problem of exemption where a breach of contract is caused by a third party, even if an interpretation of the relevant rule in detail proves to be difficult.

      [7.2] A third party whose non-performance can also lead to exemption of the debtor is defined in the Convention itself so that supplementary recourse to national law, e.g. in regard to a sub-contractor, is not necessary. From the possibility of exemption granted as an exception follows basic liability of a third party.

In respect of the categories of persons involved in the performance of the contract, apart from the actual parties to it, most commentators distinguish three groups: (a) the employees of the parties; (b) those, who on the basis of relevant contracts with one of the contracting parties, create the general prerequisites for the party in question to conduct his business (in the following referred to as suppliers); and, (c) those who are described in paragraph 2 (in the following referred to as sub-contractors). Every party basically has the right to engage such third parties. Insofar nothing to the contrary follows from the circumstances or the contract, for a Pakistani proposal, which aimed at making that right dependent on agreement, was rejected (O.R., 134 fol).

Apart from a few exceptions, the first category includes mostly natural persons, whereas the other two are composed of mostly legal persons. Every party is responsible for the conduct of his employees, at least where the latter are used in the organization of contract performance and where their behaviour is concerned. We would, however, not go so far as Stoll (Freiburg, 276) who presumes that the party should always vouch for them. If a party had employed, in excusable ignorance, a saboteur or an arsonist, he should not be liable when that person becomes active. The exemption would, however, have to be granted on the basis of paragraph 1 in this case.

There are problems when it comes to delimiting categories two and three. We have already given a definition of the supplier. These include suppliers of raw materials and parts, electric companies, providers of communal services, etc. In the context of omission on their part, the party can, according to an apparently unanimously held view, be exempted only under paragraph 1, but not paragraph 2. [page 326]

A sub-contractor, finally, can be defined as taking charge of part of the contract performance. His performance is, therefore, regularly aimed at fulfilling a certain contract. This notion includes companies which manufacture or introduce the goods to be delivered on instruction by the seller an deliver them to the buyer. It also includes carriers who work for the one or the other party. The fact that a third party carries out a performance directly vis-à-vis another party may indicate that he is a third party in the meaning of the CISG. As to its definition, the third party has to be legally independent of the party for whom he works. But it is, in our opinion, not required and not necessary that he be economically independent. The rule requires the existence of grounds for exemption on the part of both the contracting party and the third party and hinders, therefore, a conspiracy between them (seemingly of a different view Tallon/BB, 585).

      [7.3] There was no agreement at the diplomatic conference as to how far the exemption under paragraph 1 would reach and whether or not the one under paragraph 2 would entail stricter liability (O. R., 378 fol). A more detailed analysis, in our view, produces the result that the differences between the two paragraphs are not that great and that, above all, it cannot be said whether the one or the other of the two paragraphs offers a basis for stricter liability. We wish to demonstrate this in comparing a classic supplier and a classic sub-contractor. When a supplier fails to deliver, the seller (the same applies to the buyer who, for instance, is to supply sub-deliveries) does not have to prove that there were grounds for the exemption of the former, but only that this was the case in regard to himself. In this context he can even rely on failure by the supplier, and it will then be examined whether this constitutes a reason for exemption. In general this will not be the case because recourse can be demanded to other sources. Where there are, in exceptional instances, no such sources, e.g. because only one electric power company can be engaged or the only possible supplier of certain microelectronic chips has sold elsewhere, exemption can be granted even though, especially in the latter case, the supplier has obviously not breached his obligation because of grounds for exemption (c. also Honnold, 439 fol).

Let us consider now the case of the sub-contractor. The impediment is, similar to the case of the supplier, a breach of contract by the third party. But by contrast to the former example, the breach of contract is not a ground for exemption of the third party when the reason for exemption is given for the seller. It must have been given also for the sub-contractor. Because of this cumulation, greater requirements are made for an exemption to be granted. Conversely, [page 327] the requirements that are made for the seller's own conduct to be a ground for exemption are less far-reaching (note 8).

It can thus be summarized that the exemption under paragraph 2 is granted for such impediments which are based on non-performance by a certain category of partners of the seller. It is judged according to criteria which, because of the different actual circumstances, diverge from those of paragraph 1. Constellations that are comparable in structure can, therefore, lead to an exemption under paragraph 1, but not under paragraph 2 or vice-versa. The attempt to compare the strictness of the two norms is therefore misleading.

A differentiation of the rule aims toward finding proper solutions for different circumstances. It has to be admitted, however, that the distinction between supplier and sub-contractor is not always easy (so already the Danish delegate at the diplomatic conference - O.R., 379). Often this question can only be answered considering the function of the rule. Insofar we can agree with Honnold (441) who does not want to apply paragraph 2 in the event of a pure re-sale, assuming that the goods resold are goods which have already been manufactured and are the subject of an obligation to deliver unascertained goods. In that case, there would be an obligation to procure the goods (so also Oberlandesgericht Hamm in a decision of December 19, 1983 in the case 24310/82 on the similar Article 74 ULIS - printed in Schlechtriem/Magnus, 294 fol). Where, by contrast, equipment that is tied to a project is ordered for re-sale and is destroyed when almost finished, paragraph 2 will apply.

      [7.4] In the discussions at the diplomatic conference and in publications, the question of an imposed sub-contractor was also dealt with. According to our experience, it plays a role in regard to all categories of persons engaged in the performance of the sales contract, even though there are differences as to the degree. We believe that the imposed engagement of third parties in the fulfilment of the contract does not per se lead to a change in liability for him (in this sense also Tallon/BB, 585; of a different view apparently Loewe, 97). However, if the buyer requests the seller to employ workers from the buyer's country to assemble the machines delivered and/or to engage specific suppliers, hence in the event that liability in the meaning of paragraph 1 is invoked, the feature "beyond his control" would be affected because the scope of influence of the buyer would be diminished to this extent. We can subsume (note 8) also a reduction in the liability for the sub-contractor under this rule. This is relevant for an exemption only insofar as it caused an impediment. Exemption can, for instance, not be granted when the forcedly employed workers have been insufficiently organized and [page 328] instructed, but it can very well be granted when the personnel made available has not been sufficiently qualified.

If one assumes under paragraph 2 the existence of liability for the orderly choice of the sub-contractor, as it is done in some publications (note 8), exemption should be granted from it, fully or partially, depending on the situation in the event that the sub-contractor was imposed. But the buyer is not helped when the third party does not supply without grounds for exemption being given. Therefore, the solution offered by Vischer (Lausanne, 180) is understandable and should not be neglected insofar to reject liability relying on Article 80. It has to be taken into consideration, however, that the engagement of a third party regularly will have been fixed up to the conclusion of the contract, so that the seller acts in performing an obligation under the contract. There is an indirect causality of the buyer's acts in regard to the breach of obligation by the seller in these and similar circumstances. Therefore, additional contractual agreements are recommendable.

      [7.5] The rule will be of practical relevance mainly for the obligations of the seller. But it refers, as already repeatedly indicated, to both parties. It may gain relevance for the buyer, for instance, when he engages a carrier in the event of Ex works deliveries or when the delivery in a distance sale is to be made to a third final purchaser who is to fulfil the obligation of the buyer to take delivery of the goods. Here, too, the question may arise whether the party is to be considered the counterpart of a supplier or a sub-contractor, which is to be answered in accordance with the criteria indicated. We cannot follow Stoll (Freiburg, 278) who for such cases seemingly assumes a general parallel to the case of the supplier.

      [7.6] The fact of full performance by a third party is given above all, when he, in a distance sale, delivers directly to the buyer. A splitting of performance can be done in regard to the goods (the third party delivers only part of the goods) or also in regard to the completion of a successful delivery (the third party carries out only one of the necessary partial operations, e.g. transport).

[8] [ he is exempt under the preceding paragraph ]

It is spelled out in publications that the exemption under paragraph 1 in this context refers above all to the choice of a third party (Tallon/BB, 585). We doubt that this is what is meant. To start with, this argument strongly resembles the civil law principle of liability for fault in choosing a third party and may insofar cause suspicion among common law jurists. But also, apart from this fact, it is not convincing. When grounds for exemption have arisen on the part of a third party, it is not understandable why the correct choice of the third party should matter. It is irrelevant because unsuitability is no [page 329] reason for exemption. Conversely, a correct choice does not help the party concerned when there are, at the same time, no grounds for exemption on the part of the third party. An interpretation of subpara. (a) which aims at integrating into the acts of the third party the engaging party by way of the obligation to a correct choice of the former leads, therefore, to absurd results.

By contrast, the principle of correct choice, taken by itself, is of relevance in the context of paragraph 1, namely both in connection with the scope of influence of the party concerned and its obligation to avoidance. The engaging party has a responsibility for choosing a suitable third party of which he can discharge himself when he could not fulfil it because of impediments. But this does not concern the issue discussed here.

The discussion at the diplomatic conference could not convince us that there is consensus on the substance of subpara. (a). It has, therefore, to try to give an interpretation following objective criteria. In our view, the rule should be conceived to apply only when an engaging party and a third party jointly undertake an act which proves to be a breach of contract. Hereby they can act successively (grounds for exemption because of belated delivery and delay in transportation) and jointly. The exemption always reaches as far as it applies to one or both of the parties. Where the breach of contract is committed only by the third party, subpara. (a) becomes irrelevant. Hence, when the goods identified to a contract, because of a seaquake, perish during transportation before the risk has passed, exemption will be granted even when the seller has not orderly chosen the carrier. This interpretation is not customary, but it seems to us that it meets the idea of the rule best.

[9] [ and the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him]

Irrespective of whether the CISG applies to the relations between the engaging party and a third party, the grounds for exemption provided by it are used as the measure for judging whether or not exemption will be granted. This fiction has the effect that there will not necessarily be congruence in assessing the claims which are asserted vis-à-vis the engaging party, on the one hand, and his claims for recourse vis-à-vis the third party, on the other. This is the case, in particular, where the non-performance is caused by a carrier who can obtain exemption for other reasons. Therefrom results the requirement to diminish discrepancies in the process of shaping the contract. It has to be taken account that it will not be easy for the engaging party to prove impediments when the third party can obtain exemption on completely different grounds. [page 330]

[10] [the exemption provided for in this article has effect for the period during which the impediment exists]

      [10.1] While at the end of paragraph 1 a distinction is made between the impediment and its consequences because under that paragraph, they are addressed separately in relation to the obligation of avoidance or overcoming. Such a differentiation is not made here. But the "period during which the impediment exists" has to be conceived in those cases in which there is a difference between it and his consequences, e.g. earthquake and its consequences in contrast to temporary ban on transportation, as including the period during which its consequences have an effect. However, not every period actually used to overcome the consequences is to be taken into account, but only that which is necessary provided that the party concerned makes appropriate efforts. A proposal by the former GDR, which provided for expressly mentioning the consequences, was referred to the Drafting Committee and taken into consideration and, in accordance with the Norwegian proposal, the word "only" before "period" was deleted (O.R., 135 fol).

      [10.2] In particular, where the overcoming of impediments is concerned, this temporary exemption can be of great relevance. When, for instance, a supplier (note 7) fails to deliver, there is no permanent ground for exemption because of the general obligation to supply. But the delay, which, depending on how long before the period for performance the failure occurred, arises because another supplier will have to be found, may be excused.

In our interpretation (note 13.6.) this rule, even though not with the desirable clarity as to the substance and the legal techniques, has the effect of suspending the obligation to perform as it is often prescribed in international economic contracts and in some instances also in laws as the primary consequence of force majeure.

[11] [the party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party ]

Account is insofar taken of the receipt of a notice. This is done in deviation from the rule of dispatch as spelled out in Article 27, but corresponds with Article 48, paragraph 4. This is important insofar as that notice can be conceived as a notice under Article 48, paragraph 2 or 3. The term "received" should be interpreted by analogy in the same way as the term "reaches" in Article 24.

[12] [ within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt]

This is the damage which is caused and/or could not have been avoided because the creditor of the performance concerned was not given proper notice of the impediment.

[13] [nothing in this article prevents either party from exercising any right other than to claim damages under this Convention]

This laconic formulation offers many tough nuts to crack in regard to interpretation. [page 331]

      [13.1] [impact on penalty or liquidated damage clauses] First of all, it will have to be clarified how far the notion of damages reaches. A proposal by the former GDR to expressly include penalties under the contract in their different manifestations (penalties and liquidated damages) was rejected without being put to a vote (O.R., 135), but above all because penalties under the contract are not a claim following from the Convention and the shaping of contracts in that respect should not be influenced (O.R., 385 fol). This objection is not realistic insofar as penalties are agreed frequently without the question of possible exemptions being touched upon. If the latter happens, the contractual agreement will in any way supersede the Convention. The reasons given for the rejection do not exclude that, other contractual clues lacking, the grounds for exemption will also be extended to penalty claims (so also Loewe, 96. The Secretariat's Commentary (O.R., 55), however, is in favour of applying domestic law). This does not apply to interest claims (Article 78, note 2.1.).

      [13.2] [right to avoid the contract] The existence of grounds for exemption without any doubts (but see Tallon/BB, 589 fol) does not preclude the right to avoid the contract. That right is given above all when there is a fundamental breach of contract. The character of a conduct being a breach of contract is not affected by the existence of impediments (Introductory remarks 5.). It is, in our view not excluded that the existence of impediments is taken into consideration where a breach of contract is classified as fundamental. From a doctrinal point of view, this may be substantiated by the principle of good faith. But this indicates that the risk for the emergence of such grounds should not be located adopting a one-sided approach. A point in favour of this opinion is furthermore that the definition of a fundamental breach of contract in Article 25 in a certain way refers to the conduct of the party in breach, even though it relates mainly to the effects the breach of contract has on the other party. The expectations of the latter may, however, be influenced by the possibility of impediments.

It is problematic though that even where grounds for exemption exist, the right to avoid the contract remains limited to the party against which the breach is committed. Considerations by the former GDR following a less far-reaching Norwegian proposal to introduce such a right also for the other party (O.R., 134 fol, 381 fol) did not meet with a response so that the problem is now to be solved in the context of the right to performance (note 13.6.). [page 332]

      [13.3] [right to delivery of substitute goods] The rights to delivery of substitute goods (Article 46, paragraph 2) or repair (Article 46, paragraph 3), persist where there are grounds for exemption. When the latter, however, hinders the satisfaction of exactly those rights, and is taken into account in the conditions for repair claims, the general problem of the right to performance will arise (note 13.6.).

      [13.4] [right to reduction of the price] The right to reduction of the price (Article 50) is not affected because it is aimed at maintaining the originally agreed equivalence and does not constitute a claim for damages.

      [13.5] The fact that claims under notes 13.3. and 13.4. which emerge in the event of delivery of non-conforming, hence defective goods, are retained by all means shows that there is no reason to exclude liability for non-conformity from the grounds for exemption. The claims of the greatest practical relevance continue to exist. Many laws are still cautious when it comes to approving damage claims because of non-conformity.

      [13.6] [right to require performance] There will still be the right to performance when there are impediments. This seems to amount to an obvious contradiction because it is supposed that performance is not possible. Requests by Norway and the FRG, which had intended to avoid this, could not be carried through (O.R., 134 fol). Given today's far-spread practice of credit sales in international trade, the following situation is characteristic: The seller has delivered the goods, but because of currency transfer regulations introduced later, payment is prevented. The seller could withdraw from the contract in this case, but may not be interested in doing so because for commercial (the goods have effectively been sold to a third party) or foreign trade reasons (re-exportation is prohibited) he cannot again obtain possession of the goods or because he cannot use them for another purpose. Should he therefore be hindered to require payment? Such concerns as they have been articulated, in particular by Soviet delegates (O.R., 384), have prevented many delegations from supporting the FRG proposal. At the diplomatic conference, it was not possible to find a flexible answer to the question of what is to become of the right to performance. The rigid solution that has been adopted led to the most diverse interpretations which were guided by the idea of making it manageable in practice.

It has become clear at least that the right to performance continues to exist in the event of temporary grounds for exemption and that auxiliary claims that are related to it, like interest, continue to accumulate thus stimulating, as in particular the Swedish delegate stressed at the diplomatic conference (O.R., 384), the parties concerned to make greater efforts to overcome the impediments. Furthermore, [page 353] the synallagmatic connection to the corresponding right of the other party is underlined.

On the other hand, the prevailing opinion at the conference (O.R., 383 fol) was that a non-fulfillable claim must not be granted. This is reflected in publications. But there are differences in details. Tallon (BB, 589 fol) is in favour of dissolving the contract by virtue of law in the event of a total and definitive failure to perform, but it is not clear whether it should be based on national law or the Convention. The view expressed by Rudolph (Moscow, 86 fol) in 1983 amounts to something similar. We do not consider that interpretation as correct. It contradicts the wording of the Convention and also the renunciation of the ipso facto avoidance as it was completed with the transition from ULIS to the CISG. The argument that a party could be forced to perform although the other party is hindered by impediments, is not conclusive because the functional synallagma is secured by the Convention in many ways (e.g. Article 71 fol; 80). Others would have wanted to invoke domestic law by way of Article 28 in order to avoid a sentencing by a court in respect of performance (Schlechtriem, 51 and 97; Vischer/Lausanne, 175 fol). We do not think that this is the optimum way but believe that, in general, it is well-founded and acceptable. Even though national laws diverge in the matter, it is not to be reckoned with that this would lead to serious differences in the practical application of the CISG. The rights to performance should, at any rate, be seldom asserted where there are impediments, whether disputable or not. Claims for damages will generally dominate because the creditor of the characteristic performance cannot wait until a decision is taken on a right to performance whose possibility of realization may be doubted after all. Claims for payment which are granted cannot be realized easily either when there are impediments in their way, but the interest continues to accumulate until performance. And, furthermore, there might be opportunities for execution which are not touched upon by grounds for exemption, e.g. assets of the debtor in countries where there are no currency transfer regulations which may constitute grounds for exemption.

If one wanted to avoid the unequal treatment of obligations in money and goods which is entailed, one would have to try to develop an interpretation that conforms to the Convention and would apply to both obligations as the optimum solution. It could amount to that a right to performance must not be awarded insofar as the grounds of exemption are in effect. A relevant sentence could thus only require performance after they have ceased to be effective. Interest would continue to accumulate until that time. It is difficult, however, to discover a respective principle (Article 7, paragraph 2) in [page 334] the CISG which avowedly does not provide for issues of validity (Article 4, subpara. (a)).

In some cases, the problem can be solved in that it is assumed that the right to performance is aimed to deliver a commercially reasonable substitute (Nicholas, 241; Secretariat's Commentary, O.R., 55). We believe that the party affected by impediments can only be obligated to deliver such substitute in exceptional cases because this otherwise could lead to a far-reaching and, above all, undefined modification of his obligation to perform. When, for instance, payment in the agreed freely convertible currency is prohibited, but can be made in other such currencies, it will have to be assumed that the buyer has the obligation to switch to those currencies. By contrast, it may be too far-reaching when the seller in the event of a prohibition of fluorocarbons as propellant is obligated to use other propellants because he might lack the technological prerequisites for it. When the party concerned, because of the performance requirement offers substitutes, the other party would contradict his own behaviour and thus violate the principle of good faith in international trade (Article 7) were he to reject them, even though they are commercially equivalent. This offers in our view a basis for permanent objection to the claim for performance. The same applies when the seller offers the substitute on his own and its rejection would be considered as an harassment (Article 7).

      [13.7] [stimulus to renegotiation] This may have served to show that the rule governing grounds for exemption, as rigid as it may seem at first sight, in practice might well help to initiate a process of negotiation among the parties to solve the problems that have arisen. It is exactly in this direction that often aim the contractual clauses on force majeure. [page 335]

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