CISG re met tht prty cn be exempt from libility
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- Art. 79 CISG sets the requirements as to when a party can be exempted from liability for failure to perform its contractual obligations. In accordance with this article, the Respondent must prove that there was an impediment to perform the contract.
- The Respondent is not relieved from liability under Art. 79 CISG. The risk for not being able to meet contractual obligations lies with the promisor. If an obstacle for delivery occurs, the seller is still liable. The possibility of exception under Art. 79 CISG does not change the allocation of the contractual risk (Vine Wax, BGH, Germany, 24 March 1999). Therefore, it is only if the requirements under Art. 79(1) CISG are met that a party can be exempt from liability. It is a strict and close to objective standard for excusing the promisor (Schlechtriem, p. 603). Also Šarčević & Volken, p. 32: “generally speaking, the decisions show that both national courts and arbitral tribunal adopt a rather restrictive attitude towards permitting any exemptions under Article 79”, with reference to i.a.: Nuova Fucinati v. Fondmetall, Tribunale Civile de Monza, Italy, 14 January 1993, and ICC Case No. 6281,1989.
- An exemption under Art. 79 CISG is only granted if the promisor proves: “that the failure was due to an unpredictable and inevitable impediment, which lies outside his sphere of control, or due to an overwhelming obstacle, which is not the case in situations within his sphere of control” (FCF v. Adriafil, Bundesgericht, Switzerland, 15 September 2000). The Claimant submits that the Respondent shall not be exempt from liability under Art. 79 CISG. The Respondent could reasonably have been expected to take the performance of the third party into account at the time of contracting and in addition, it did not do everything it could to overcome the impediment.
- The UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods in the para TREATMENT OF PARTICULAR IMPEDIMENTS: BREACH BY SUPPLIERS № 14 : “Certain claimed impediments appear with some frequency in the available decisions. One such impediment is failure to perform by a third-party supplier on whom the seller relied to provide the goods. In a number of cases sellers have invoked their supplier’s default as an impediment that, they argued, should exempt the seller from liability for its own resulting failure to deliver the goods (CLOUT case No. 271 [Bundesgerichtshof, Germany, 24 March 1999]; Tribunal de Commerce de Besançon, France, 19 January 1998, Unilex). Several decisions have suggested that the seller normally bears the risk that its supplier will breach, and that the seller will not generally receive an exemption when its failure to perform was caused by its supplier’s default (CLOUT case No. 140 [Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Russian Federation, award in case No. 155/1994 of 16 March 1995]; CLOUT case No. 277 [Oberlandesgericht Hamburg, Germany, 28 February 1997]; ICC Court of Arbitration, award No. 8128, 1995; CLOUT case No. 166 [Arbitration—Schiedsgericht der Handelskammer Hamburg, 21 March, 21 June 1996].
- In a detailed discussion of the issue, a court explicitly stated that under the CISG the seller bears the “acquisition risk”—the risk that its supplier will not timely deliver the goods or will deliver non-conforming goods—unless the parties agreed to a different allocation of risk in their contract, and that a seller therefore cannot normally invoke its supplier’s default as a basis for an exemption under article 79.
- The delay of delivery of the chips by High Performance was something the Respondent could reasonably have been expected to take into account.
- The fact that the impediment lies with the Respondent’s suppliers cannot surmount to exemption, as the sphere of risk is extended to cover also the supplier, cf. the Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 16 March 1995, and Schiedsgericht der Handelskammer Hamburg, Germany, Arbitral Award, 21 March 1996. In these cases it was held that problems that were within the supplier's sphere of risk did not constitute an exemption under Art. 79 CISG.
- The Respondent chose to enter into this business and thereby accepted that delivery problems might occur. If the Respondent could not bear the risk, or did not want to, it should have contractually limited it or excluded it (Schlechtriem in the commentary to the case of Vine Wax, BGH, Germany, 24 March 1999, section 1.d, above para. 86). Any exclusion would be to the detriment of the buyer and thus make the contract less valuable. Consequently, it had commercial value not to make any exclusion of risks. The Respondent must take the consequence of presenting the contract as it did without any hardship clause. It is not unusual to exclude certain risks by incorporating a hardship or force majeure clause in the contract. Something, which has also been recommended when entering into international commercial transactions (Bund, p. 10, Bianca & Bonell, p. 576 and similarly Lookofsky USA, p. 128).
GERMANY: Bundesgerichtshof 24 March 1999
Case law on UNCITRAL texts (CLOUT) abstract no. 271
Reproduced with permission from UNCITRAL
The seller, the unsuccessful party in Case No. 272, appealed to the Supreme Court.
The court confirmed the seller's liability without deciding whether or not article 79 was applicable, stating that even if it were applicable, it would not exclude the seller's liability since the defect in the wax was not an impediment beyond the seller's control. Although it was not the case here, the court stated that when defects of the goods are caused by the seller's supplier, the seller is only exempt from liability under article 79 if the failure to perform is due to an impediment beyond the control of the seller and each of the seller's suppliers. Thus, the court left open the question of whether or not article 79 of the CISG can be raised as a defense against all kinds of non-performance, including the delivery of defective goods. The court also pointed out that the exemption provided under article 79 does not alter the allocation of risk. Liability of the seller resulted from its failure to comply with its obligation to deliver conforming goods; it made no difference whether the defect was the fault of the seller or its supplier.
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"Force Majeure and Impossibility of Performance Guide"
Edward H. Bergin
Jones Walker E*Bulletin
September 17, 2008 III. Force Majeure Under Texas Law
Once an obligation has been incurred, a party bound to perform may run into obstacles that make performance impossible. Except where the Uniform Commercial Code may be applicable, common law jurisdictions generally require a force majeure clause if the parties wish to limit the risk that a future event will prevent performance and subject them to liability for non-performance. If there is no such clause, the obligation to perform is absolute and cannot be excused under the force majeure doctrine. See e.g., GT & MC, Inc. v. Texas City Refining, Inc., 822 S.W.2d 252, 259 (Tex. App. Houston 1991).
Today, in Texas and nationwide, force majeure refers not to a common law doctrine used to interpret contract performance but to a provision parties typically include in their contract to provide for circumstances such as acts of God that might hinder performance. Parties include force majeure clauses in their contracts in order to limit the risk that a future event will prevent performance and subject them to liability for non-performance. Christopher J. Costantini, Allocating Risk in Take-Or-Pay Contracts: Are Force Majeure and Commercial Impracticability the Same Defense?, 42 Sw.L.J. 1047, 1060 (1989).
1. When there is no force majeure provision in the contract, no force majeure excuse should be allowed.
When bringing or facing a claim of excused non-performance under the doctrine of force majeure, the first step is to identify the force majeure clause in the contract at hand. If there is no such clause in the contract, unless a contract of sale is involved, then the obligation to perform is absolute and cannot be excused under this doctrine. GT & MC, Inc. v. Texas City Refining, Inc., 822 S.W.2d 252, 259 (Tex. App. Houston 1991). In other words, when the parties do not bargain for such excusing conditions, common law will not insert them into the agreement. “Where the obligation to perform is absolute, impossibility of performance occurring after the contract was made is not an excuse for nonperformance if the impossibility might have reasonably been anticipated and guarded against in the contract.” Metrocon Construction Co., Inc. v. Gregory Construction Co., 663 S.W.2d 460, 462 (Tex. App. Dallas 1983), quoting Kolterman v. Underream Piling Co., 563 S.W.2d 950, 957 (Tex. Civ. App. San Antonio 1977).
The contract contains no limitation or exclusion clause (Procedural Order No.2, para 4), the purpose of which is to place a limit on the amount that can be claimed for a breach of the contract.
If there is no limitation liability provisions, liability is unlimited and claimant can recover all types of damages