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Remedies for Non-performance - Perspectives from CISG, UNIDROIT Principles and PECL,
Liu Chengwei *
INTRODUCTION
[INTRODUCTION]
LIST OF ABBREVIATIONS
A. For Documents
B. For Journals
C. For Organizations
D. For Citations
PART I. GENERAL REVIEW
CHAPTER 1. SOURCES OF INSPIRATION
[CHAPTER 1. SOURCES OF INSPIRATION]
1.1 INTRODUCTION
1.2 OVERVIEW OF THE STUDIED INSTRUMENTS
1.2.1 CISG
1.2.2 UNIDROIT Principles
1.2.3 PECL
1.2.4 Brief Comparison
1.3 MAJOR SOURCES OF INFORMATION
CHAPTER 2. REMEDIES AVAILABLE UPON NON-PERFORMANCE
[CHAPTER 2. REMEDIES AVAILABLE UPON NON-PERFORMANCE]
2.1 INTRODUCTION
2.2 THE CONCEPTS: BREACH OF CONTRACT vs. NON-PERFORMANCE
2.3 REMEDIAL SCHEMES OF THE STUDIED INSTRUMENTS
2.3.1 CISG Part III (Partial)
2.3.2 UNIDROIT Principles Chapter 7
2.3.3 PECL Chapters 8, 9
2.3.4 Concluding Remarks
2.4 STRUCTURE OF THIS PRESENTATION
PART II. PRESERVING PERFORMANCE
PART III. TERMINATION
PART IV. DAMAGES
PART V. EXCUSES
PART II. PRESERVING PERFORMANCE
CHAPTER 3. SPECIFIC PERFORMANCE
[CHAPTER 3. SPECIFIC PERFORMANCE]
3.1 COMPRISED APPROACH UNDER THE CISG
3.1.1 Introduction
3.1.2 Primacy of Specific Performance under Arts. 46/62
3.1.3 Forum's Rule under Art. 28
3.2 BUYER'S RIGHT TO SPECIFIC PERFORMANCE: CISG ART. 46
3.2.1 Introduction
3.2.2 General Rule: Art. 46(1)
3.2.2.1 Right to require performance
3.2.2.2 Non-resorting to inconsistent remedies
3.2.3 Right to Demand Cure: Arts. 46(2) and 46(3)
3.2.3.1 In general
3.2.3.2 Delivery of substitute goods: Art. 46(2)
3.2.3.3 Right to repair: Art. 46(3)
3.2.3.4 Time limit restriction
3.2.3.5 A summary
3.3 SELLER'S RIGHT TO SPECIFIC PERFORMANCE: CISG ART. 62
3.3.1 Rationale of Art. 62
3.3.2 General Application
3.3.3 Potential Problems
3.4 UNIFORM REMEDY IN UNIDROIT PRINCIPLES / PECL
3.4.1 Introduction
3.4.2 Performance of Monetary Obligation
3.4.2.1 Money due generally recoverable
3.4.2.2 Money not yet due
3.4.3 Performance of Non-monetary Obligation: In General
3.4.4 Exceptions to Performance of Non-monetary Obligation
3.4.4.1 The principle and exceptions
3.4.4.2 Performance impossible
3.4.4.3 Unreasonable burden
3.4.4.4 Performance from another source available
3.4.4.5 Performance of an exclusively personal character
3.4.4.6 Unreasonable delay in requiring performance
3.4.5 Right to Require Remedying of Defective Performance
3.4.6 Other Issues
CHAPTER 4. NACHFRIST FOR LATE PERFORMANCE
[CHAPTER 4. NACHFRIST FOR LATE PERFORMANCE]
4.1 GENERAL CONSIDERATIONS
4.2 RATIONALE UNDERLYING THE OPTIONAL APPROACH
4.2.1 Optional Approach under the Studied Instruments
4.2.2 Underlying Rationale
4.2.3 Granting Additional Period in Two Situations
4.3 SETTING OF A NACHFRIST NOTICE
4.3.1 Transmission of the Intention
4.3.1.1 Form of the notice
4.3.1.2 Risk in transmission
4.3.2 Fixing of the Time-limit
4.3.2.1 Fixed period
4.3.2.2 Reasonable length
4.4 EFFECTS OF SERVING A NACHFRIST NOTICE
4.4.1 Remedies Available/Suspended during the Period
4.4.2 Early End of the Existing Uncertainty upon Rejecting Notice
4.4.3 Termination upon Expiry of the Extension
4.4.3.1 In general
4.4.3.2 CISG approach
4.4.3.3 UNIDROIT Principles / PECL approach
CHAPTER 5. CURE BY NON-PERFORMING PARTY
[CHAPTER 5. CURE BY NON-PERFORMING PARTY]
5.1 INTRODUCTION
5.2 CONDITIONS FOR INVOKING CURE
5.2.1 In General
5.2.2 Reasonableness of Notice
5.2.3 Appropriateness of Cure
5.3 SELLER'S RIGHT TO CURE AND BUYER'S RIGHT TO TERMINATION
5.4 EFFECTS OF EFFECTIVE NOTICE
5.4.1 Right to Inquire vs. Duty to Accept Cure
5.4.2 Suspension of Inconsistent Remedies
5.4.3 Retained Rights of the Aggrieved Party
CHAPTER 6. PRICE REDUCTION FOR NON-CONFORMITY
[CHAPTER 6. PRICE REDUCTION FOR NON-CONFORMITY]
6.1 GENERAL CONSIDERATIONS
6.2 FEATURES OF CISG ART. 50
6.2.1 Unique Role and Justification
6.2.2 Self-help Remedy
6.2.3 Seeming Advantages
6.3 IN CONTRAST WITH DAMAGES
6.3.1 Introduction
6.3.2 Distinctions from Damages under the CISG
6.3.2.1 Diverse ratio legis
6.3.2.2 Different manner in calculation
6.3.2.3 Other differences
6.3.2.4 A summary
6.3.3 An Alternative to Damages
6.3.3.1 Introduction
6.3.3.2 In conjunction with force majeure
6.3.3.3 In case of falling market
6.3.3.4 Upon difficulty in proving damages
6.3.3.5 A summary
6.4 ESSENTIALS OF CISG ART. 50
6.4.1 Scope of Application
6.4.1.1 General application in case of non-conformity
6.4.1.2 Ambiguity over defects in title
6.4.2 Exercise of the Right to Price Reduction
6.4.3 Calculation of Proportional Reduction
6.4.3.1 Decisive point: time of delivery
6.4.3.2 Place for comparing
6.4.4 Limited by the Cure
6.5 STATUS OF THE PRICE REDUCTION UNDER UNIDROIT PRINCIPLES / PECL
6.5.1 Exclusion under the UNIDROIT Principles
6.5.2 Inclusion under the European Principles
PART III. TERMINATION
CHAPTER 7. RIGHT TO TERMINATION
[CHAPTER 7. RIGHT TO TERMINATION]
7.1 GENERAL CONSIDERATIONS
7.2 GROUNDS FOR TERMINATION
7.3 CONCLUDING REMARKS
CHAPTER 8. FUNDAMENTAL NON-PERFORMANCE
[CHAPTER 8. FUNDAMENTAL NON-PERFORMANCE]
8.1 GENERAL CONSIDERATIONS
8.2 FORESEEABLE SUBSTANTIAL DETRIMENT
8.2.1 Introduction
8.2.2 Substantial Detriment
8.2.2.1 Existing detriment
8.2.2.2 Substantial deprivation
8.2.2.3 Discernible expectations
8.2.3 Foreseeability
8.2.3.1 Introduction
8.2.3.2 Test for foreseeability
8.2.3.3 Time for foreseeability
8.2.3.4 Burden to prove unforeseeability
8.3 OTHER ELEMENTS IN DEFINING FUNDAMENTAL NON-PERFORMANCE
8.3.1 Strict Compliance of Essence
8.3.2 Intentional Non-performance
8.3.3 No Reliance on Future Performance
8.3.4 Disproportionate Loss
8.4 CONCLUDING REMARKS
CHAPTER 9. ANTICIPATORY NON-PERFORMANCE
[CHAPTER 9. ANTICIPATORY NON-PERFORMANCE]
9.1 GENERAL CONSIDERATIONS
9.2 GROUNDS FOR SUSPENSION
9.3 SELLER'S RIGHT TO STOP GOODS IN TRANSIT UPON SUSPENSION
9.4 DUTY TO GIVE NOTICE IN EXERCISING SUSPENSION
9.5 RESTORING PERFORMANCE BY GIVING ADEQUATE ASSURANCE
9.6 TERMINATION UPON ANTICIPATORY FUNDAMENTAL NON-PERFORMANCE
9.6.1 In General
9.6.2 Clear Indication of A Fundamental Non-performance
9.6.3 Notice Given in case of Termination
9.7 ADEQUATE ASSURANCE OF DUE PERFORMANCE
9.7.1 Purpose of Rule
9.7.2 Non-receipt of Adequate Assurance
9.8 CONCLUDING REMARKS
CHAPTER 10. TERMINATION OF BREACHED INSTALLMENT OR PART
[CHAPTER 10. TERMINATION OF BREACHED INSTALLMENT OR PART]
10.1 TERMINATION OF INSTALLMENT CONTRACTS: CISG ART. 73
10.2 TERMINATION OF FUTURE INSTALLMENTS: CISG ART. 73(2)
10.3 TERMINATION OF A CONTRACT AS A WHOLE: CISG ART. 73(3)
10.4 PARTIAL TERMINATIO: CISG ART. 51
10.5 COMBINED APPROACH: PECL ART. 9:302
10.6 CONCLLUDING REMARKS
CHAPTER 11. DECLARATION OF TERMINATION
[CHAPTER 11. DECLARATION OF TERMINATION]
11.1 NO AUTOMATIC TERMINATION
11.2 INFORMALITY OF THE NOTICE
11.3 TRANSMISSION OF THE INTENTION
11.4 RISK IN COMMUNICATION
11.4.1 CISG Approach
11.4.2 Receipt Principle under the UNIDROIT Principles
11.4.3 Combined Approach under the PECL
11.5 TIME LIMIT FOR THE DECLARATION: IN GENERAL
11.6 DECLARATION WITHIN REASONABLE TIME
11.6.1 Definition of reasonable time
11.6.2 CISG Approach
11.6.3 UNIDROIT Principles / PECL Approach
11.6.4 Concluding Remarks
CHAPTER 12. EFFECTS OF TERMINATION
[CHAPTER 12. EFFECTS OF TERMINATION]
12.1 INTRODUCTION
12.2 RELIEF OF FUTURE PERFORMANCE
12.3 RETROSPECTIVE OR PROSPECTIVE APPROACH
12.4 UNAFFECTED RIGHTS AND OBLIGATIONS AFTER TERMINATION
12.4.1 Continuing Right to Claim Damages
12.4.2 Unaffected Clauses Intended to Apply despite Termination
12.5 RESTITUTION
12.5.1 In General
12.5.2 Entitlement of Parties to Restitution on Termination
12.5.3 Restitution under the PECL
12.5.3.1 Property reduced in value: Art. 9:306
12.5.3.2 Recovery of money paid and property: Arts. 9:306, 9:307
12.5.3.3 Concluding remarks
12.5.4 Restitution of Benefits Received
12.5.5 Exceptions: Restitution Not Possible or Appropriate
12.5.5.1 CISG approach: making restitution a prerequisite for avoidance
12.5.5.2 UPICC/PECL approach: focusing on the allowance upon impossible restitution
12.5.5.3 Comparative perspectives
12.5.5.4 Concluding remarks
PART IV. DAMAGES
CHAPTER 13. GENERAL MEASURE OF DAMAGES
[CHAPTER 13. GENERAL MEASURE OF DAMAGES]
13.1 RIGHT TO DAMAGES
13.2 FULL COMPENSATION
13.3 RECOVERABLE LOSSES
13.4 COMPENSATION OF NON-PECUNIARY LOSS
13.5 COMPUTATION OF LOSSES AND GAINS
CHAPTER 14. LIMITS TO CLAIMS FOR DAMAGES
[CHAPTER 14. LIMITS TO CLAIMS FOR DAMAGES]
14.1 GENERAL CONSIDERATIONS
14.2 FORESEEABILITY OF LOSS
14.2.1 In General
14.2.2 Test for Foreseeability
14.2.3 Party Concerned and Reference Point
14.2.4 Evaluation of Foreseeability
14.2.5 Content of Foreseeability
14.2.6 Concluding Remarks
14.3 CERTAINTY OF HARM
14.4 CONTRIBUTION TO HARM
14.4.1 In General
14.4.2 Ways of Contributing to the Harm
14.4.3 Remedies Affected by the Contribution
14.4.3.1 Remedies available upon non-performance caused solely by the contribution
14.4.3.2 Damages proportionately reduced due to partial contribution
14.5 DUTY TO MITIGATE
14.5.1 In General
14.5.2 Reasonable Measures Taken
14.5.3 Effects of Failure to Mitigate
CHAPTER 15. DAMAGES UPON TERMINATION
[CHAPTER 15. DAMAGES UPON TERMINATION]
15.1 GENERAL CONSIDERATIONS
15.2 DAMAGES UPON SUBSTITUTE TRANSACTIONS
15.2.1 Introduction
15.2.2 Presupposed Situations Calling for Concrete Calculation
15.2.3 Substitute Transaction must be Reasonable Substitute
15.3 DAMAGES UPON CURRENT PRICE
15.3.1 Introduction
15.3.2 Presupposed Situations Calling for Abstract Calculation
15.3.3 Determination of "Current Price"
15.3.3.1 In general
15.3.3.2 Reference point
15.3.3.3 Relevant place
15.4 FURTHER DAMAGES
CHAPTER 16. AGREED PAYMENT FOR NON-PERFORMANCE
[CHAPTER 16. AGREED PAYMENT FOR NON-PERFORMANCE]
CHAPTER 17. RECOVERY OF ATTORNEYS' FEES
[CHAPTER 17. RECOVERY OF ATTORNEYS' FEES]
17.1 GENERAL CONSIDERATIONS
17.1.1 Introduction
17.1.2 Recoverability under "Loser-pays" Principle
17.1.3 Excluded by "American Rule"
17.2 CISG DECISIONS CONCERNING ATTORNEYS' FEES
17.3 PROBLEMATIC RECOVERY UNDER ART. 74 CISG
CHAPTER 18. PAYMENT OF INTEREST
[CHAPTER 18. PAYMENT OF INTEREST]
18.1 INTRODUCTION
18.2 GENERAL ENTITLEMENT TO INTEREST
18.3 ADDITIONAL DAMAGES
18.4 INTEREST ON DAMAGES
18.5 ACCRUAL OF INTEREST
18.6 RATE OF INTEREST
PART V. EXCUSES
CHAPTER 19. CHANGE OF CIRCUMSTANCES
[CHAPTER 19. CHANGE OF CIRCUMSTANCES]
19.1 INTRODUCTION
19.2 UNSDERLYING DOCTRINCE; REBUS SIC STANTIBUS
19.3 DIFFERENT APPROACHES TO CHANGED CIRCUMSTANCES
19.3.1 Historical Review
19.3.2 National Doctrines
19.3.3 International Perspective
19.3.3.1 Public international law
19.3.3.2 International commercial practice
19.3.4 Conclusion
19.4 DEFINITIONS OF force majeure AND HARDSHIP
19.4.1 Force Majeure
19.4.2 Hardship
19.4.3 Comparison
19.5 GENERAL APPROACHES IN THE STUDIED INSTRUMENTS
19.5.1 Approach under the CISG
19.5.2 Approach under the UNIDROIT Principles
19.5.3 Approach under the PECL
19.5.4 Concluding Remarks
CHAPTER 20. force majeure
[CHAPTER 20. force majeure]
20.1 INTRODUCTION
20.2 RELEVANT TEXTS
20.2.1 Exemptions: CISG Art. 79
20.2.2 Force Majeure: UNIDROIT Principles Art. 6.1.7
20.2.3 Excuse Due to an Impediment: PECL Art. 8:108
20.2.4 Comparison
20.3 GENERAL RULE
20.3.1 Scope of Excusable Non-performance
20.3.2 Existence of Qualifying Impediment
20.3.2.1 Introduction of a new word
20.3.2.2 Interpretation of the word
20.3.2.3 Problematic situations
20.3.3 Conditions for Exempting Impediment
20.3.3.1 Beyond control
20.3.3.2 Unforeseeable
20.3.3.3 Unavoidable or insurmountable
20.3.3.4 Causation
20.4 RESPONSIBILITY FOR THIRD PARTIES
20.5 TEMPORARY IMPEDIMENT
20.6 DUTY TO NOTIFY
20.7 EFFECTS
20.7.1 In General
20.7.2 Effect on Right to Damages
20.7.3 Effect on Right to Performance
20.7.4 Effect on Right to Termination
CHAPTER 21. HARDSHIP
[CHAPTER 21. HARDSHIP]
21.1 GAP IN THE CISG?
21.2 INTERPLAY BETWEEN CISG EXCUSE AND UNIDROIT PRINCIPLES / PECL HARDSHIP
21.2.1 Hardship: UNIDROIT Principles Arts. 6.2.1 through 6.2.3
21.2.2 Change of Circumstances: PECL Art. 6:111
21.2.3 Gap-filling Application of Hardship Provisions?
21.3 CONDITIONS FOR INVOKING HARDSHIP
21.3.1 In General
21.3.2 Crucial Point: Fundamental Alteration of Equilibrium
21.3.3 Additional Requirements for Hardship to Arise
21.3.3.1 Time factor: occurrence after conclusion
21.3.3.2 Unforeseeability
21.3.3.3 Risk not assumed
21.4 EFFECTS OF HARDSHIP
21.4.1 In General
21.4.2 Triggering of Renegotiation
21.4.2.1 Request for renegotiation
21.4.2.2 Renegotiation in good faith
21.4.3 Court Measures in case of Hardship
21.4.4 Concluding Remarks
CHAPTER 22. FORCE MAJEURE and HARDSHIP CLAUSES
[CHAPTER 22. FORCE MAJEURE and HARDSHIP CLAUSES]
22.1 GENERAL CONSIDERATIONS
22.2 FORCE MAJEURE CLAUSE
22.2.1 Introduction
22.2.2 Drafting Considerations
22.3 HARDSHIP CLAUSE
22.3.1 Introduction
22.3.2 Drafting Considerations
22.4 OVERLAPPING OF THE CLAUSES
22.5 USE OF STANDARD FORMS: ICC No. 421 (partial)
Endnotes
Endnotes
Metadata
SiSU Metadata, document information
Manifest
SiSU Manifest, alternative outputs etc.
Remedies for Non-performance - Perspectives from CISG, UNIDROIT Principles and PECL,
PART V. EXCUSES
CHAPTER 19. CHANGE OF CIRCUMSTANCES
As to be furthered below, it seems that the law has gradually changed from absolute contractual obligations, the strict pacta sunt servanda, towards more flexible attitudes, especially in relation to changed circumstances. 1014
With regard to whether courts should intervene to provide relief or require an adjustment in the obligation of performance of a contract when an unforeseen frustrating event occurs, the Modernist camp urges, albeit on differing theoretical bases, that intervention by courts to fill a gap in the parties' agreement is required. The occurrence of a contingency or frustrating event that was unforeseeable at the time of contracting creates circumstances that were not within the contemplation of the parties, and therefore performance exceeds the assent induced and given. Consequently, intervention is required. Economic theory and risk sharing based on "fairness" are two prevailing views on the methodology to be employed by the courts in gap-filling. 1015
Generally speaking, this principle of changed circumstances will be a tool providing more equity than the harsh distinction between "possibility" and "impossibility" of performance of an obligation. 1016 It is to be noted that not all changes in circumstance may affect the contract. Only changes in circumstances which are known or should have been known by both parties to be an assumption upon which the contract is concluded are relevant. It is only if these circumstances no longer exist that the common Basis for the transaction disappears. 1017 Further, an important restriction is to be borne in mind: a change in circumstances will not be taken into account if it occurred during a delay in performance of the person alleging application of the doctrine, this because the principle is based on the "good faith" concept. 1018
At the outset, it is to be clarified that the discussion below will be focused on changed circumstances relating to non-performance rather than invalidity and therefore, for example, initial impossibility will not be studied in this PART. 1019 In this chapter, a brief review is firstly made upon the doctrine underlying the principle of changed circumstances, i.e. rebus sic stantibus. Once this doctrine is examined generally, different approaches to changes of circumstances, nationally or internationally, are to be outlined briefly. Then the two major legal concepts, i.e. force majeure and hardship which are exceptions to the basic rule pacta sunt servanda, dealing with the problem of changed circumstances are to be considered on a general and theoretical basis. Finally, a particular regard will be had to the rights or relieves concerning changed circumstances established under the studied international instruments, namely the CISG, UPICC and PECL.
1014. See Tom Southerington in "Impossibility of Performance and Other Excuses in International Trade": Tuula Ämmälä ed., Publication of the Faculty of Law of the University of Turku, Private law publication series B:55 (2001). Available online at ‹http://www.cisg.law.pace.edu/cisg/biblio/southerington.html›
1015. See Sarah Howard Jenkins in "Exemption for Nonperformance: UCC, CISG, UNIDROIT Principles -- A Comparative Assessment": 72 Tulane Law Review (1998); pp. 2017-2020. Available online at ‹http://www.cisg.law.pace.edu/cisg/biblio/jenkins.html› See also, Joseph M. Perillo: All contracts involve risks. Some contracts are almost purely aleatory. If one sells shares of stock on the stock exchange that one does not have -- the so-called "short sale" -- it is a contract of pure risk and I can conceive no circumstance (absent fraud or the like) in which a court should relieve the seller or buyer from a total loss even if unexpected and unforeseeable events disrupted the market. On the other hand, in the more typical contract involving the sale of goods or services, or the rental of real estate, each party expects to gain from the contract and each party understands that the other party also expects to gain. In such contracts, neither party expects to gain from the other's loss, although both realize that such an imbalance may occur. In the common law, several kinds of events produce an almost automatic excuse for nonperformance: death of a person who is to personally perform, supervening illegality of a performance, and the destruction of the subject matter. When one goes beyond these three categories, relief is most justified if unexpected events inflict a loss on one party and provide a windfall gain for the other or where the excuse would save one party from an unexpected loss while leaving the other party in a position no worse than it would have without the contract. (Infra. note 14, pp. 119-120.)
1016. See Katsumoto, M. in "Kigyo no torihikihippaku to jijohenko no gensoku": NBL No. 55 (1974); p. 9. Impossibility is appropriately seen as an extreme example of changed circumstances.
1017. See van Houtte, Hans in "Changed Circumstances and Pacta Sunt Servanda": Gaillard ed., Transnational Rules in International Commercial Arbitration, ICC Publ. Nr. 480,4, Paris (1993); p. 116. TLDB Document ID: 117300.
1018. See Puelinckx, A.H. in "Frustration, Hardship, Force Majeure, Imprévision, Wegfall der Geschäftsgrundlage, Unmöglichkeit, Changed Circumstances": 3 J.Int'l Arb. No. 2 (1986); p. 64. TLDB Document ID: 128100.
1019. Several classifications of impossibility have been introduced in the literature. Their value would seem to be in distinguishing different kinds of situations from another where the legal consequences of impossibility should be different. Often a distinction has been made between initial (pre-existing, original) and subsequent (intervening) impossibility. Initial impossibility refers to a situation where performance has been impossible already at the moment the contract was concluded, whereas subsequent impossibility refers to situations where performance was initially possible but became impossible after the conclusion of the contract. The division of impossibility into initial and subsequent seems to be useful since different kinds of solutions have been introduced to manage some of these situations. Initial impossibility may, for example, lead to the use of rules related to mistake or perhaps fraud and subsequent impossibility to the rules on frustration. (Supra. note 2.) Both the UNIDROIT Principles and the European Principles deal with such initial impossibility, respectively in Arts. 3.3 and 4:102, but such initial impossibility seems to be more appropriately related to the invalidity of contract caused by the defects of content, which is not covered under the CISG, rather than non-performance issue.
