Under the CISG, one of the most important reasons for exemption is force majeure which is described in Art. 79, 1093 though not denominated as such. Art. 79 is the provision of the CISG, that deals with situations of changed circumstances, which is like its predecessor, Art. 74 of ULIS, 1094 and again placed under the heading of "Exemption". 1095 Art. 79 reads as follows:
"(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: (a) he is exempt under the preceding paragraph; and (b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.
(3) The exemption provided by this article has effect 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 by the other party 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."
Art. 79 deals with the circumstances in which the buyer or seller may be excused from performance of his contractual obligations because of an extraneous event that is judged sufficiently important to warrant the excuse--what in the common law is referred to as frustration of the contract and in civilian legal systems under such headings as force majeure, cause étrangère, and Wegfall der Geschaftsgrundlage. 1096
Art. 79, like its predecessor, art. 74 of ULIS, is more civilian than common law in its conception, 1097 governing the extent to which a party is exempted from liability for a failure to perform any of his obligations because of an impediment beyond his control. 1098 Paras. (2) and (4) fill particular gaps left by the ULIS text, but do not raise any questions of wider interest. It is paras. (1), (3) and (5) which correspond to the ULIS text, and it will be seen that the most obvious changes are in matters of drafting: the new text is very much more economical and elegant in its formulation. So far as matters of substance are concerned, the noticeable changes are (a) the substitution in para. (1) of "impediment" for "circumstances", and (b) the replacement of the old para. 2 by the new, and very brief, para. (3). 1099
Briefly speaking, para. (1) describes the circumstances when a party "is not liable" for a failure to perform any of his obligations. Para. (2) is an extension of the first paragraph and is concerned with the effect of non-performance by a third party whom the contracting party has engaged to perform some of his duties. Para. (3) regulates the period of the exemption and para. (4) imposes a duty of notification on the party failing to perform. Para. (5) deals with the consequences of the non-performance and the remedies available to the parties.
Art. 7.1.7 of the UNIDROIT Principles seems to be very similar to Art. 79 CISG, and reads under the heading "force majeure" as follows:
"(1) Non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it 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) When the impediment is only temporary, the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on the performance of the contract.
(3) The party who fails to perform must give notice to the other party of the impediment and its effect on its ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, it is liable for damages resulting from such non-receipt.
(4) Nothing in this article prevents a party from exercising a right to terminate the contract or to withhold performance or request interest on money due."
Like the CISG, the UNIDROIT Principles rely on the same exemption principle. But it seems to approach the real problems in a more direct manner, corresponding to the situations in which these problems occur. 1100 In both cases the respective article starts with a paragraph saying that a party is not liable for a failure to perform or that a party's nonperformance is excused if the said circumstances occur. In this respect, the prerequisites for an exemption in UPICC Art. 7.1.7 (1) are almost identical to those in CISG Art. 79(1).
However, UPICC Art. 7.1.7 contains no provisions such as CISG Art. 79(2) on third persons, and is therefore more lenient, but it is said that the same rule would follow from the concept of force majeure as defined in Art. 7.1.7(1) UPICC. 1101 In the remaining paragraphs of the provisions two differences may be noted. Para. (3) in CISG Art. 79 provides for the case of a temporary non-performance that "the exemption provided by this article has effect for the period during which the impediment exists". In the UNIDROIT Principles (para. (2)) the rule is framed more flexibly: "when the impediment is only temporary, the excuse shall have effect for such a period as is reasonable taking into account the effect of the impediment on performance of the contract." Another difference is that, unlike in CISG Art. 79(5), Art. 7.1.7(4) does not limit the scope of the article to damages only. Art. 7.1.7 exempts the non-performing party both from performance and damages (at least for the time performance is affected by the impediment), though its primary aim is in releasing the obligor from liability in damages. It is said that para. (5) of CISG Art.79, which seems to warrant the right to claim performance even if performance has become permanently impossible, has been replaced by a rule specifying that force majeure does not prevent a party from exercising a right to terminate the contract or withhold performance or request interest on money due (Art. 7.1.7(4)). 1102
Thus, the function of force majeure under the UNIDROIT Principles as an exemption has been enlarged in comparison with the CISG. In Art. 79 CISG the effect of the exemption is reduced to claims for damages only. All other claims are allowed, so that one might even ask whether penalties are allowed, which in someone's view would be absurd. But performance in general can be claimed in spite of the existence of exemptions which has led to a vivid discussion. The UNIDROIT Principles use quite the opposite approach. They adhere to the principle that the excuse is general, but in Art. 7.1.7(4) they make important exceptions in determining certain claims which are not affected by force majeure, namely the right to terminate the contract or withhold delivery or request interest on money due. That means that in case of force majeure, performance cannot be claimed, including, of course, damages and penalties. 1103
Under the PECL, a rule similar to CISG Art. 79 is provided for in Art. 8:108, which reads under the heading "Excuse Due to an Impediment" as follows:
_1"(1) A party's non-performance is excused if it proves that it is due to an impediment beyond its control and that it could not reasonably have been expected to take the impediment into account at the time of the conclusion of the contract, or to have avoided or overcome the impediment or its consequences.
(2) Where the impediment is only temporary the excuse provided by this Article has effect for the period during which the impediment exists. However, if the delay amounts to a fundamental non-performance, the creditor may treat it as such.
(3) The non-performing party must ensure that notice of the impediment and of its effect on its ability to perform is received by the other party within a reasonable time after the non-performing party knew or ought to have known of these circumstances. The other party is entitled to damages for any loss resulting from the non-receipt of such notice."
There is an apparent similarity in the wording of the corresponding PECL provisions to Art. 79 CISG, since the conditions laid down in the first paragraph for the operation of Art. 8:108 PECL are analogous to the conditions traditionally required for force majeure: (a) event outside the debtor's sphere of control ("impediment beyond its control"); (b) which could not have been taken into account ("it could not reasonably have been expected to take the impediment into account at the time of the conclusion of the contract"); and (c) of insurmountable nature ("or to have avoided or overcome the impediment or its consequences").
However, the differences in the scope of the two regimes become clear when a regard is had to the PECL commentary, which helps explain its provisions. The scope of application of Art. 8:108 is defined by Comment A to the PECL, which states: "Article 8:108 governs the consequences when an event which is not the fault or responsibility of a party prevents it from performing. The Principles also contain a provision for revision of the contract if unforeseen circumstances supervene and makes performance excessively onerous (Article 6:111). Thus, unlike the equivalent article of CISG [...] Article 8:108 has to apply only in cases where an impediment prevents performance." 1104
Furthermore, according to Art. 8:101(2) PECL, where there is an impediment which fulfils the conditions set by PECL Art. 8:108, the aggrieved party may resort to any of the remedies set out in PECL Chapter 9 except claiming performance and damages. Thus, in contrast with the approach adopted by the UNIDROIT Principles, which adhere to the principle that the excuse is general, but in Art. 7.1.7 (4) make important exceptions in determining certain claims which are not affected by force majeure, the PECL follows a similar approach to the CISG, which specifies the cases where the breaching party is exempted by such impediments; but on the other hand, expressly unlike the CISG, which only provides the breaching party with a defense against an action for damages, Art. 8:101(2) PECL provides that, if the non-performing party is excused under PECL Art. 8:108, he will have a defense against an action for specific performance (PECL Arts. 9:101 and 9:102) and damages (including liquidated damages).
force majeure is one of the two major legal concepts dealing with the problem of changed circumstances. All the three texts mentioned above define it in the term "impediment", although under different heading. The descriptions of events that constitute force majeure for the three texts are exactly the same: they all permit the exoneration of the party who was unable to perform its obligation due to an event beyond its control that was unforeseeable at the time of conclusion of the contract, and that is insurmountable. However, some take the view that the descriptions in the three texts are not exactly the same as force majeure as it is usually understood by international commercial arbitrators: " ... force majeure as defined under anational law is the only possible case of impossibility of performance". What is described in Art. 79 CISG, Art. 8:108 PECL and Art. 7.1.7 UNIDROIT Principles is a similar notion, but more flexible, as they do not require absolute, but rather only relative impossibility in order to be applicable. 1105
However, neither Art. 7.1.7 UPICC nor Art. 8:108 PECL contains provisions such as CISG Art. 79(2) on third persons. Nonetheless, the same rule would follow from the term "impediment" used in Arts. 7.1.7(1) UPICC and 8:108(1) PECL. The term "impediment", covers every sort of event (natural occurrences, restraints of princes, acts of third parties). 1106 In matters of temporary non-performance, for the European Principles, like the CISG, the excuse for non-performance is only available during the time that performance is impossible, not more, not less; whereas under the UNIDROIT Principles the excuse is available for "such period as is reasonable, having regard to the effect of the impediment on the performance of the contract". Nonetheless, PECL Art. 8:108(3), similar to both CISG Art. 79(4) and UPICC Art. 7.1.7(3), provides for the non-performing party's duty to notify the aggrieved party. It is apparent that the three texts put risk of non-receipt or delay on receipt of the notice (non-communication or delay in communication) on the sender in case of force majeure. If notice of the impediment and of its effect on its ability to perform is not received by the creditor of the obligation, the non-performing party will be liable for damages resulting from such non-receipt.
The most important thing is to consider the effects of such qualifying impediments or the fate of the contract in cases of force majeure. On the one hand, the UNIDROIT Principles adhere to the principle that the excuse is general, but in Art. 7.1.7(4) they make important exceptions in determining certain claims which are not affected by force majeure, namely the right to terminate the contract or withhold delivery or request interest on money due. By contrast, both the CISG and the PECL generally permit the aggrieved party to resort to any of the remedies in case of force majeure, but specify the remedies which the aggrieved party can't resort to: respectively to claim damages under the CISG (Art. 79(5)), and to claim performance and damages under the PECL (Art. 8:101(2)). On the other hand, in case of temporary impediment (infra. 21.5) the UNIDROIT Principles provide that the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on the performance of the contract (Art. 7.1.7(2)), while according to the CISG (Art. 79(3)) or the European Principles (Art. 8:108(2)) the effect of the excuse is limited to the period during which the impediment exists; even in case of total and permanent impediment the CISG (Art. 79(5)) or the UNIDROIT Principles (Art. 7.1.7(4)) make termination dependent on the initiative of the parties, while the European Principles provide for automatic termination of the contract in such cases (Art. 9:303(4)).
Finally, it is of great significance to note that international commercial contracts often contain much more precise and elaborate provisions in this regard, since none of the three texts is mandatory. The rules governing force majeure are expressed in fairly general terms, permitting the parties to provide more concise provisions in their agreement, adapted to their particular situation. The party may therefore find it appropriate to adapt the content of the three texts, and may modify the allocation of the risk of impossibility of performance, either in general or in relation to a particular impediment so as to take account of the particular features of the specific transaction. Usages (especially in carriage by sea) may have the same effect. 1107
1093. Another one is Art. 80, which reads: "A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party's act or omission."
1094. ULIS Art. 74 reads as follows: " 1 Where one of the parties has not performed one of his obligations, he shall not be liable for such non-performance if he can prove that it was due to circumstances which, according to the intention of the parties at the time of the conclusion of the contract, he was not bound to take into account or to avoid or to overcome; in the absence of any expression of the intention of the parties, regard shall be had to what reasonable persons in the same situation would have intended. 2 Where the circumstances which gave rise to the non-performance of the obligation constituted only a temporary impediment to performance, the party in default shall nevertheless be permanently relieved of his obligation if, by reason of the delay, performance would be so radically changed as to amount to the performance of an obligation quite different from that contemplated by the contract. 3 The relief provided by this Article for one of the parties shall not exclude the avoidance of the contract under some other provision of the present Law or deprive the other party of any right which he has under the present Law to reduce the price, unless the circumstances which entitled the first party to relief were caused by the act of the other party or of some person for whose conduct he was responsible."
1095. Two concepts are used which Maskow calls shortly the fault principle and the exemption principle, the first being more or less characteristic of the continental law, the second of the common law. While according to the fault principle a party is only liable if it has committed a fault, according to the exemption principle the party which has committed a breach is held to be liable, unless it can establish reasons for exemption. In general, this would lead to opposite the burden of proof, but, in certain cases, also under the fault principle, the party in breach has to prove its innocence. As far as the practical is concerned it is well known that the two principles do not greatly differ. This is partially due to the fact that a party can best prove its lack of fault, if it can establish exemptions. The CISG, the most important international document in contract law, uses the exemption principle. Interpretations which try to make clear that the fault principle is implemented in the CISG do not correspond to reality. (See Maskow, Dietrich, infra. note 11.)
1096. Supra. note 2.
1097. See Jacob S. Ziegel in "Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods" (1981). Available online at ‹http://www.cisg.law.pace.edu/cisg/text/ziegel79.html›
1098. See Secretariat Commentary on Art. 65 of the 1978 Draft [draft counterpart of CISG Art. 79], Comment 1. Available online at ‹http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-79.html›
1099. See Barry Nicholas in "force majeure and Frustration": 27 American Journal of Comparative Law(1979); pp. 231-245. Available online at ‹http://www.cisg.law.pace.edu/cisg/biblio/nicholas.html› [This is a commentary on the counterpart to force majeure contained in Art. 65 of the 1978 Draft Convention. It is to be noted that, the match-up indicates that para. (3) of Art. 65 of the 1978 Draft and para. (3) of CISG Art. 79 reflect a change which can be significant under certain circumstances. The remainder of the paragraphs of these articles are substantively the same. See the match-up available online at ‹http://www.cisg.law.pace.edu/cisg/text/matchup/matchup-d-79.html]›
1100. See Maskow, Dietrich in "Hardship and Force Majeure": 40 Am.J.Comp.L. (1992); p. 664. TLDB Document ID: 126400.
1101. See Hartkamp, Arthur in "The UNIDROIT Principles For International Commercial Contracts and the United Nations Convention on Contracts for the International Sale of Goods": Boele-Woelki/Grosheide/Hondius/Steenhoff eds., Comparability and Evaluation, Dordrecht, Boston, London (1994); p. 95. TLDB Document ID: 113000.
1102. Ibid., p. 96.
1103. See Joern Rimke in "Force majeure and hardship: Application in international trade practice with specific regard to the CISG and the UNIDROIT Principles of International Commercial Contracts": Pace Review of the Convention on Contracts for the International Sale of Goods, Kluwer (1999-2000); p. 238. Available online at ‹http://www.cisg.law.pace.edu/cisg/biblio/rimke.html›
1104. See Comment and Notes to the PECL: Art. 8:108. Comment A. Available online at ‹http://www.cisg.law.pace.edu/cisg/text/peclcomp79.html›
1105. See Sylvette Guillemard in "A comparative study of the UNIDROIT Principles and the Principles of European Contracts and some dispositions of the CISG applicable to the formation of international contracts from the perspective of harmonisation of law": Pace Review of the Convention on Contracts for the International Sale of Goods (CISG), Kluwer Law International (2000-2001); pp. 83-113. Available online at ‹http://cisgw3.law.pace.edu/cisg/biblio/guillemard1.html›
1106. Supra. note 15, Comment B.
1107. See Comment 4 on Art. 7.1.7 UPICC; also supra. note 15.
Eric von Hippel
Erik S. Raymond