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CISG number

Art. 79

432. The text of article 50, as adopted by the Working Group on the International Sale of Goods, is as follows:

433. The Committee discussed generally the most important aspects of article 50 and then referred the formulation of a revised text to a Special Working Group composed of the representatives of the Federal Republic of Germany, Ghana, Mexico, the Philippines, the Union of Soviet Socialist Republics and the United Kingdom.

General discussion of paragraph (1) Extent of exemption

434. The Committee considered a proposal that the words "in damages" be deleted from the first sentence of paragraph (1). The purpose of this proposal and a number of similar proposals was to extend the exemption provided by article 50 to all obligations of the non-performing party and not merely provide exemption from damages.

435. In support of this proposal it was stated that the exemption from liability for damages may become worthless where the other party can force performance." Therefore, the duty to perform should also be exempted during the period of the impediment. It was also stated that it would be helpful in some common law jurisdictions to make it clear that, in circumstances attracting the operation of article 50, an action requiring performance under the draft Convention would not lie. If this were not done, a court might be constrained to grant an order requiring performance which could cause great difficulty for a non-performing party if he were unable to comply with the court order because of the impediment.

436. However, another view was that the exemption provided by article 50(1) was rightly limited to damages for if the impediment was of a permanent nature and, if the exemption encompassed all remedies, it would never be possible to avoid the contract. It was also noted that an express exemption from specific performance would lead to the conclusion in some legal systems that there was no breach of contract. As a result the party expecting performance would be unable to declare the contract avoided. Finally, it was observed that it would be undesirable to deal with the question of exemption from the specific performance of the contract in the draft Convention since it would not be possible to also include provisions covering restitution.

437. The Committee, after deliberation, retained proposal to delete the words "in damages."

Deletion of express reference to "fault"

438. The Committee considered a proposal to delete any express reference to "fault." In support of this proposal it was noted that article 50 provided an exemption from liability to the non-performing party if the non-performance was not due to his "fault." It was also noted that the term "fault" was defined in article 50 in objective terms. Therefore, it would be possible to define the exemption in objective terms without reference to fault.

439. The Committee retained this proposal. At the same time it decided that a party should not be exempt from liability for non-performance if the cause of the non-performance was his own fault. The Committee considered unnecessary a proposal to include a separate paragraph which expressly excluded the operation of paragraph (1) if the impediment was caused by the party seeking exemption. It was thought that the same result could be achieved by providing that the impediment must have been "beyond his control", although some representatives found this phrase vague and considered that it would be difficult to apply in some legal systems.

Non-performance of "one of his obligations"

440. It was proposed that the expression "one of his obligations" be replaced by "his obligations" to indicate that there may be a failure to perform more than one obligation. Support for this proposal was also based on the proposition that this amendment would lead to the desirable conclusion that it would prevent exemption from liability to supply conforming goods. In opposition to this proposal it was stated that exemption should be available for failure to supply conforming goods in appropriate cases.

441. It was also proposed that article 50(1) be redrafted so that it would not enable a buyer to claim that an impediment beyond his control prevented him from paying the price. In support of this view it was stated that payment of the price is an absolute obligation which it was never legally impossible to perform.

442. However, under another view, it was considered that the article should extend in appropriate cases to inability to pay the price, such as when payment was prohibited by the outbreak of war or the imposition of exchange controls.

443. The Committee did not retain either of these proposals.

Time at which impediment must have been taken into account

444. It was proposed that the phrase "he could not reasonably have taken it into account" be followed by "at the time of the conclusion of the contract" to make it clear the foreseeability of the impediment be judged at the time of the conclusion of the contract.

445. The Committee adopted this proposal.

General discussion of paragraph (2)

446. The Committee considered proposals that paragraph (2) be deleted. Under one view the paragraph was too harsh as it required that the seller, in effect, guarantee the performance of a subcontractor. It was suggested that, at most, the liability of a seller for the fault of a subcontractor appeared to be justified only in cases where the seller could obtain an indemnity from the subcontractor. Another view was that the paragraph was unjustified because the seller's liability for the conformity, and delivery of the goods should not be affected by the use of a subcontractor unless a contrary conclusion appeared from their contract.

447. Under another view it was important to retain the uniform rule provided by paragraph (2) rather than leave the question to be determined by national law.

448. The Committee decided to delete the word "subcontractor." The term was said to be unknown in some legal systems and in others to refer primarily to legal relationships in the context of construction contracts. In place of this term the Committee decided to substitute "a person whom [the seller] has engaged to perform the whole or a part of the contract."

449. It was noted that in this manner it would be clear that a seller would not be exempt from liability for failure to perform any of his obligations because of the failure of one of his suppliers to perform since a supplier of the seller could not be considered to be a person the seller had engaged to perform any portion of the seller's contract. [page 56]

450. The Committee did not retain a suggestion that the seller could avail himself of the exemption only if he had exercised "his own judgement" in selecting the "person whom he has engaged to perform the whole or a part of the contract."

General discussion of paragraph (3)

451. The Committee considered a number of proposals whose objective was to extend the operation of article 50 to impediments which exist for a prolonged period of time. The general approach of these proposals was to enable the contract to be avoided in cases where the impossibility to perform the contract would extend for such a length of time so as radically to change the nature of the obligation to perform. One proposal sought to give this right to the non-performing party while another sought to give it to the party awaiting performance. There was also considerable support to enable both parties to declare the contract avoided in cases of prolonged impossibility of performance.

452. However, under another view the extension of the exemption from performance of contractual obligations to cases of prolonged impossibility of performance was wrong in principle since, although the provision would operate satisfactorily in relation to failures to deliver or failures to take delivery, it would appear to extend also to cases where the impediment had resulted in defects in the goods. It was considered unjust for the seller to be exempt from the obligation to repair or replace defective goods.

453. The Committee decided not to extend to the non-performing party the right to avoid the contract because of a radical change of circumstances during the period of the temporary impediment. However, it was noted that under paragraph (1) of the original text and paragraph (5) of the text as finally adopted by the Committee the party expecting performance would be able to avoid the contract once the delay in performance amounted to a fundamental breach even though the non-performing party was exempted for liability for damages for that breach by virtue of article 50.

Paragraph (4)

454. The Committee decided that the risk of transmission of the notice by the non-performing party should be on that party.

Paragraph (5)

455. The Committee considered that, as a result of its decision to delete the words "in damages" in paragraph (1), it was necessary to insert a new paragraph to state specifically what remedies the party expecting performance retained if the non-performing party was exempted from liability under article 50.

455a. The Committee was in general agreement that the party expecting performance should have the right to avoid the contract if the failure to perform amounted to a fundamental breach. There was also general agreement that he should have the right to reduce the price in appropriate circumstances. However, the Committee was more evenly divided as to whether he should be able to exercise the remedy of specific performance of the contract. Under one view if there was such an impediment that performance was impossible, the law should not purport to give the party expecting performance a right which he could never exercise. Under another view, it could happen that a temporary impediment would cease and at such time a right to specific performance should not be precluded.

456. The Committee decided, after deliberation, that nothing in article 50 prevents either party from exercising any remedy other than damages as a result of the non-performance by the other party.

Decision

457. The Committee therefore recommends that the Commission should adopt the following text, now renumbered 51:

"Article 51

"(1) A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.
"(2) 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 he is exempt under paragraph (1) of this article and if the person whom he has engaged would be so exempt if the provisions of that paragraph were applied to him.
"(3) The exemption provided by this article has effect only for the period during which the impediment exists.
"(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 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.
"(5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention."

Proposed article on hardship

458. The Committee considered a proposal that the following provision be added after article 50:

459. In support of this proposal it was stated that one of the most important problems for parties to a contract of sale of goods is the problem of changes of circumstances which could not have been foreseen by the parties at the time of the conclusion of the contract. As these changes can result in excessive difficulties for one of the parties it was proposed that the Convention should include a provision enabling any party to renegotiate the conditions of the contract or call for its termination. Such a provision would thus prevent one party from benefiting from windfall gains. It was pointed out that this proposal differed from those made in respect of article 50(3) in that those proposals presupposed a change in circumstances only during a temporary impediment.

460. The Committee did not retain this proposal. [page 57]

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