22.5 USE OF STANDARD FORMS: ICC No. 421 (partial)

The use of standard forms of contract is widespread in international trade. They are valid if the parties have expressly or impliedly concluded their contract by reference to them. In general it must be said that, depending on the scope and duration of the transaction in question, the topic of changed circumstances is too important to be addressed in standardised force majeure or hardship clauses. In this respect, the ICC has promulgated its Document No. 421 (1985). There are two sets of provisions: The first lays down the conditions for relief from liability when performance has become literally or practically impossible (force majeure). The second covers the situation where changed conditions have made performance excessively onerous (hardship). One should note, however, ICC Document No. 421 contains a rather elaborate model force majeure clause and responds to many of the defects that have been ascribed to Art. 79 CISG. The clause, however, does not provide for the adaptation of the contract. The second set of provisions dealing with hardship do not provide a draft clause suitable for incorporation, but rather drafting suggestions. This is in recognition of the fact that the concept of "hardship" is relatively recent in international contract law. Alternatively, parties to international commercial contracts are recommended to agree that the UNIDROIT Principles or the European Principles, which could offer sufficiently elaborate and widely accepted rules on hardship and force majeure, shall govern their contract. The two sets of Principles may also have the function of standard forms of contracts. Here, the model force majeure clause contained in ICC Document No. 421 is appended as follows:

Force majeure (exemption) clause

"Grounds of relief from liability

1. A party is not liable for a failure to perfom any of his obligations in so far as 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 and its effects upon his ability to perform into account at the time of the conclusion of the contract; and

- that he could not reasonably have avoided or overcome it or at least its effects,

2. An impediment within paragraph (1) above, may result from events such as the following, this enumeration not being exhaustive

(a) war, whether declared or not, civil war, riots and revolutions, acts of piracy, acts of sabotage;

(b) natural disasters such as violent storms, cyclones, earthquakes, tidal waves, floods, destruction by lightning;

(c) explosions, fires, destruction of machines, of factories, and of any kind of installations;

(d) boycotts, strikes and lock-outs of all kinds, go-slows, occupation of factories and premises, and work stoppages which' occur in the enterprise of the party seeking relief;

(e) acts of authority, whether lawful or unlawful, apart from acts for which the party seeking relief has assumed the risk by virtue of other provisions of the contract; and apart from the matters mentioned in paragraph 3, below.

3 . For the purposes of paragraph (1) above, and unless otherwise provided in the contract, impediment does not include lack of authorisations, of licences, of entry or residence permits, or of approvals necessary for the performance of the contract and to be issued by a public authority of any kind whatsoever in the country of the party seeking relief.

Duty to notify

4 . A party seeking relief shall as soon as practicable after the impediment and its effects upon his ability to perform became known to him give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases.

5 . The ground of relief takes effect from the time of the impediment or, if notice is not timely given, from the time of notice. Failure to give notice makes the failing party liable in damages for loss which otherwise could have been avoided.

Effects of grounds of relief

6 . A ground of relief under this clause relieves the failing party from damages, penalties and other contractual sanctions, except from duty to pay interest on money owing as long as and to the extent that the ground subsists.

7 . Further it postpones the time for performance, for such period as may be reasonable, thereby excluding the other party s right, if any, to terminate or rescind the contract. In determining what is a reasonable period, regard shall be had to the failing party s ability to resume performance, and the other party s interest in receiving performance despite the delay. Pending resumption of performance by the failing party the other party may suspend his own performance.

8 . If the grounds of relief subsist for more than such period as the parties provide [the applicable period to be specified here by the parties, or in the absence of such provision for longer than a reasonable period, either party shall be entitled to terminate the contract with notice.

9 . Each party may retain what he has received from the performance of the contract carried out prior to the termination. Each party must account to the other for any unjust enrichment resulting from such performance. The payment of the final balance shall be made without delay."

Force Majeure clause - model reference clause

Parties who wish to incorporate this clause by reference in their contracts are recommended to use the following wording:

"The Force Majeure (Exemption) clause of the International Chamber of Commerce (ICC Publication No. 421) is hereby incorporated in this contract".