Source: http://cisgac.com/opinion-17/
Timestamp: 2019-04-21 07:07:12+00:00

Document:
To be cited as: CISG-AC Opinion No. 17, Limitation and Exclusion Clauses in CISG Contracts, Rapporteur: Prof. Lauro Gama Jr., Pontifical Catholic University of Rio de Janeiro, Brazil. Adopted by the CISG-AC following its 21st meeting in Bogotá, Colombia, on 16 October 2015.
1. The Convention governs the incorporation and interpretation of clauses providing for the limitation and exclusion of liability of the obligor for failure to perform a contract for the international sale of goods (“limitation and exclusion clauses”).
2. According to the principle of freedom of contract laid down in Article 6 CISG the parties may derogate from the provisions of the Convention by including limitation and exclusion clauses.
3. Article 11 CISG preempts the application of form requirements for limitation and exclusion clauses provided for in the otherwise applicable law or rules of law.
4 (a) The Convention does not preempt provisions for the protection of the obligee under the applicable law or rules of law, relying on notions such as intentional or willful breach, gross negligence, breach of an essential term, gross unfairness, unreasonableness, or unconscionability.
(b) However, in the application of these provisions, the international character of the contract and the general principles underlying the CISG are to be observed, including the principles of freedom of contract and reasonableness.
1.1. Generally defined, limitation and exclusion of liability clauses (“limitation clauses”, “exemption and limitation clauses”) are contract terms which directly exclude or limit the non-performing party’s liability in the event of non-performance or defective performance. In other words, such contractual agreements derogate from the legal regime otherwise applicable in the case of breach of contract.
1.2. The most common remedies for breach of contract are monetary damages. This is why limitation and exclusion clauses usually target liability for damages. The remedy of damages varies from jurisdiction to jurisdiction but usually include: compensatory damages, restitution, punitive, consequential, and liquidated damages.
1.3. Because damages are difficult to measure in a precise manner before the contract is actually breached, the parties may wish to deal with this risk beforehand, i.e. at the stage of contract negotiations.
1.4. Take for example a contract for the sale of machinery. The seller can mitigate its damages risks in a number of ways: (i) by training the buyer how to operate the machines so as to prevent hazardous situations; (ii) by transferring all risks to the buyer (by providing for an exclusion clause); (iii) by sharing the risks with the buyer (by providing for a limitation clause); or (iv) by purchasing an insurance policy in the marketplace. Between the options above, limitation and exclusion clauses stand as a cost-efficient mechanism for allocating contractual risk for the seller.
1.5. Limitation clauses may be expressed in different ways (e.g., fixed sum, ceiling or cap, percentage of the performance in question, deposit retained).
Not only may the parties limit their liability to a certain amount of money, but also to certain types of losses (e.g., direct damages), to certain types of conduct (e.g., negligent conduct, as opposed to grossly negligent conduct). They may also exclude liability for damages altogether by agreeing to an exemption clause.
1.6. Moreover, a contract term providing that a party who does not perform is to pay a specified sum to the aggrieved party for such non-performance (“agreed sums”) or “liquidated damages”) can also have the effect of limiting the compensation due to the aggrieved party. This will be the case whenever the agreed sum is fixed at a lower level than the expected damages. In this situation it is irrelevant whether the parties intended to limit the obligor’s liability, so long as the clause performs that limiting function.
1.7. The parties may also limit or exclude remedies available for breach, other than damages. For example, in a contract governed by the Convention they may limit the buyer’s rights under Article 46 CISG: (1) to require performance by the seller of his obligations, (2) to require delivery of substitute goods by the seller, or (3) to require the seller to remedy the lack of conformity of the goods by repair.
1.8. In contrast to agreed sums, exclusion and limitation clauses do not attempt to induce the obligor to perform the contract. They are always stipulated for the obligor’s benefit.
1.9. It is generally assumed to be beneficial to economic activity that a party to a contract should not be subject to unlimited economic loss. This explains why, despite the principle of full compensation,the extent of damages is regulated by most legal systems, as it is by the CISG (Article 74). More importantly, it explains why it is often self-regulated by the parties. Self-regulation affords the parties more certainty in managing their contractual risks, allowing them to calculate and, where applicable, minimize potential damages.  The same rationale explains why the parties are free to tailor any remedy available to them besides damages.
1.10. As with other terms and conditions of a business contract, limitation and exclusion clauses are generally governed (and at the same time limited) by the fundamental principles of modern contract law, namely: a) the freedom of contract (party autonomy); b) good faith and fair dealing (reasonableness); and c) public policy (which include mandatory rules). In respect of CISG contracts, it is disputed whether the principle of good faith and fair dealing applies as such to the parties’ behavior and their agreement. On the other hand, public policy (“ordre public interne”) and mandatory rules of domestic origin (“lois d’ordre public interne”) only apply to CISG contracts to the extent that the CISG does not provide otherwise (Article 4).
1.11.The limitation and exclusion of liability agreed to by the parties to a contract for the international sale of goods is a matter governed but not settled by the Convention.
1.12. In spite of the limitations imposed by the CISG on the contractual liability of the parties, namely the foreseeability rule (Article 74), the duty to mitigate (Article 77) and the exemptions due to an impediment (Article 79) or to other circumstances (Article 80)  – there is no provision in the Convention specifically addressing the parties’ agreement on the limitation or exclusion of liability for failure to perform the contract, in whole or in part. Article 19(3) CISG, on the reply to an offer, qualifies the “extent of one party’s liability to the other” as a term that materially alters the offer, however it does not claim to govern limitation and exclusion clauses.
1.13. Rule 1 expresses the undisputed view that agreements on the exclusion or limitation of liability, except for their substantive validity, are governed but not settled by the Convention. In other words, the regulation of such agreements constitutes an “internal gap” in the Convention, as opposed to matters outside its scope or “external gaps”.
1.14. The parties’ agreement on the limitation or exclusion of their own liability falls under the scope of the Convention for two reasons. First, it is a matter connected with the rights and obligations of the buyer and seller arising from the contract, as envisaged by Article 4, first sentence CISG. Second, it deals with the scope of the buyer’s or seller’s remedies for breach of contract under the Convention.
1.15. These remedies include not only damages, available for both the buyer and the seller under Art. 45(1)(b) and Art. 61(1)(b), respectively, but also other remedies. Buyer’s remedies, such as specific performance (Art. 46(1)), delivery of substitute goods (Art. 46(2)), repair of lack of conformity of the goods (Art. 46(3)), price reduction (Art. 50), and the remedy of avoidance (Art. 49) may be limited or even excluded by agreement of the parties. Likewise the seller’s remedies, namely: to require the buyer to pay the price, take delivery or perform other obligations (Art. 62), and to avoid the contract (Art. 64).
1.16. By reason of the limitation or exclusion clause, the obligee must not be placed in a position where it is left with no remedies at all. In other words, the parties’ agreement to limit or exclude one or more contractual remedies must not amount to a situation where the performance of the contract becomes optional, subject only to the will of the obligor.
1.17. As regards claims to compensation for the breach of contractual obligations, which are primarily delineated by Article 74 CISG, the parties are free to limit or exclude by agreement both the amount that can be claimed and the circumstances under which damages can be claimed. As to limiting other remedies available under the CISG, which seldom occurs in practice, the parties must not exclude all remedies in favor of the aggrieved party.
1.18. In sum, the parties’ agreement on the exemption or limitation of liability under the sales contract modifies the remedies regime established in the Convention.
1.19. Rule 1 recognizes that the Convention allows the parties to agree on the limitation or exclusion of their own liability under the international sales contract (Article 6 CISG). On the same line of reasoning, it states that the Convention governs the formation of such clauses (Articles 14 – 24). The parties may agree to a limitation or exclusion clause initially, at the conclusion of their contract, or subsequently, during the course of their contractual relationship (Article 29).
1.20. Where the limitation or exclusion of liability clause is contained in standard terms, its incorporation into the contract must be consistent with CISG-AC Opinion No. 13 Inclusion of Standard Terms under the CISG.
1.21. The interpretation of exemption and limitation of liability clauses and their particular elements is subject to the provisions set forth in Articles 8 and 9 CISG. Thus, terms and conditions in CISG contracts are to be construed in light of both the subjective and objective intent of the parties, as envisaged by Article 8. The parties’ obligations under the sales agreement are further determined by the practices established between the parties and by the trade usages they have agreed to – Article 9(1) –, or by those that the parties “knew or ought to have known and which in international trade [are] widely known and regularly observed” - Article 9(2).
1.22. Since there is an “internal gap” in the Convention relating to this type of contractual agreement, this gap is to be filled in accordance with Article 7(2), first part, CISG. In other words, such questions are to be primarily settled in conformity with the general principles on which the Convention is based. Only in the absence of any general principle are gaps in the CISG to be settled in conformity with the otherwise applicable law or rules of law.
1.23. Hence, in order to fill this “internal gap” of the Convention it is necessary to find one or more general principles in the CISG that can support a uniform rule or approach to the regulation of limitation and exclusion of liability clauses in CISG contracts. Rules 2 and 4 intend to build up these general principles.
1.24. Issues of substantive validity of exemption and limitation clauses are, however, not governed by the Convention, as set forth in Article 4, second sentence (a) CISG.
1.25. Rule 4, below, specifically addresses situations where a provision under the applicable law or rules of law invalidates, with the purpose of protecting the obligee, the exclusion or limitation clause. While these issues are to be decided only by the otherwise applicable law or rules of law, the CISG provides the backdrop against which the limitation or exclusion clause has to be assessed under the applicable validity test.
2.1. Limitation and exclusion of liability clauses permit contractual parties to preventively regulate the scope of the obligor’s liability should there be a breach of contract, thus modifying the legal regime of remedies otherwise applicable. Owing to the principle of freedom of contract, such clauses vary widely both in language and scope. For example, the parties may exclude any liability of the relevant party, agree on a cap on damages or limit the type of damages to be compensated (e.g,, by excluding indirect losses). They may also limit remedies other than damages, such as specific performance or avoidance of the contract. Additionally, the parties may agree on the modification of time-limits and/or the reversal of the burden of proof.
In some cases, an exemption or limitation of liability is a necessary condition to the performance of risky ventures. It is often required to make the risk insurable. It may also benefit the other party in the form of a price reduction.
2.2. Such clauses are found in all types of contracts, including sales contracts. They deal with the allocation of liability between the parties in a way that is functionally similar to clauses providing for the payment of agreed sums for failure to perform the contract (“agreed sums”).
2.3. Clauses that limit or exclude one party’s liability for non-performance are subject to specific regulation in several legal systems. While preserving the freedom to contract and the full compensation principles, legal instruments and case law have attempted to protect the weaker party by the means of techniques designed to make it difficult to exclude liability under certain circumstances (e.g., in cases of personal injury or gross negligence). In particular, an agreement to limit or exclude the obligor’s liability for breach must not leave the obligee with no contractual remedies to enforce its rights under the contract.
2.5. The grounds for invalidation of exemption or limitation of liability clauses vary across regions and legal traditions. In some countries (e.g., England) the clause must satisfy a reasonableness test. In other countries, they are deemed null and void in explicit circumstances, namely, (a) where the non-performing party has willfully breached the contract (e.g., Germany); (b) where non-performance results from gross fault or grossly negligent conduct (e.g., China); (c) where the clause limits or exempts liability for death or personal injury (e.g., Quebec); and (d) where the clause contravenes mandatory norms, such as consumer protection rules (e.g., Brazil).
2.6. Exemption and limitation of liability clauses are permitted in most legal systems within the civil law tradition, including France, Belgium, Germany, Italy, Switzerland, Spain, Turkey, Brazil, Colombia, Argentina, Russia, China, Japan and Korea. Such agreements may be voided under specific circumstances (see Annex 1 for more details).
2.8. In mixed systems such as Quebec (Canada) and South Africa, limitation and exclusions clauses are generally accepted, subjecting to the same kind of restrictions found in other jurisdictions, namely: exclusion of liability for willful conduct, for death or moral injury etc (see Annex 1 for more details).
2.9. The CISG applies only to the sale of goods for business purposes. Contracts for the sale of goods for personal use, which generally characterize consumer contracts, fall outside the scope of the Convention (Article 2(a) CISG).  Therefore, the European Union instruments in the field of consumer protection dealing with the validity of exemption and limitation clauses are of little or no importance for comparative purposes (see Annex 1 for more details).
2.12. Other international instruments, such as the 1999 Montreal Convention on the Unification of Certain Rules for International Carriage by Air, establish limitations and exclusions of liability and, by the same token, invalidate any agreement to the contrary (see Annex 1 for more details).
2.13. Rule 2 of this Opinion acknowledges that exemption and limitation of liability clauses are particularly common in international contract law and practice and constitute a usual feature of international sales contracts.
2.15. This Rule emphasizes the parties’ freedom to derogate from any of the CISG remedial provisions, as long as the obligee is not deprived of all remedies available under the Convention. The obligee must retain at least a minimum adequate remedy. In other words, the limitation or exclusion of remedies must not amount to a situation where the fulfillment of the sales contract becomes optional, subject only to the will of the obligor.  Such a situation would contravene both the general principle of reasonableness,  recognized as one of the most fundamental principles of the CISG, and the observance of good faith in international trade (Article 7(1) CISG).
2.16. Though frequently concerned with damages for breach in favor of the buyer (Art. 45(1)(b)) and the seller (Art. 61(1)(b)), these clauses may also limit or exclude other remedies available to the aggrieved party under the CISG.
2.17. These other remedies include: a) remedies available to the buyer: specific performance (Art. 46(1)), delivery of substitute goods (Art. 46(2)), repair of lack of conformity of the goods (Art. 46(3)), price reduction (Art. 50), and the remedy of avoidance (Art. 49); and b) to the seller: specific performance of the buyer’s obligations (Art. 62), and the remedy of avoidance (Art. 64). The seller’s right to cure (Art. 48) may also be limited or excluded by agreement of the parties.
2.18. Sometimes demand for a certain good is such that the seller may be in a position to impose the exclusion of one or more remedies available to the buyer. Take for example the market of rare earth elements, which present a given country as a quasi-monopoly supplier. If the market creates a huge demand for this product, the seller may wish to exclude the buyer’s remedy of specific performance, and may also wish to limit its liability for damages in case of failure to deliver the goods.
2.19. In other situations, the goods are sold at such a low price that the seller may wish to limit its liability to the greatest extent possible. For example: a clothing wholesaler may wish to sell all of its old summer collection at very competitive prices. On the other hand, it may require buyers to agree to the exclusion of any remedies concerning the non-conformity of the goods, such as delivery of substitute goods (Art. 46(2) CISG) and repair (Art. 46(3) CISG). In addition, the seller may limit its liability to 50% of the contract price.
2.20. Given the circumstances of the parties’ deal in the above examples, the agreed exclusion and limitation clauses referring to remedies other than damages seem perfectly reasonable and therefore enforceable. In contract practice, though, limitation and exclusion clauses concerning damages are way more frequent than those limiting other remedies under the CISG.
At subsequent meetings, the CISG-AC elected as additional members Prof. Pilar Perales Viscasillas, Universidad Carlos III, Madrid; Professor Ingeborg Schwenzer, University of Basel; Prof. John Y. Gotanda, Villanova University; Prof. Michael G. Bridge, London School of Economics; Prof. Han Shiyuan, Tsinghua University, Prof. Yesim Atamer, Istanbul Bilgi University, Turkey, and Prof. Ulrich Schroeter, University of Mannheim. Prof. Jan Ramberg served for a three-year term as the second Chair of the CISG-AC. At its 11th meeting in Wuhan, People’s Republic of China, Prof. Eric E. Bergsten of Pace University School of Law was elected Chair of the CISG-AC and Prof. Sieg Eiselen of the Department of Private Law of the University of South Africa was elected Secretary. At its 14th meeting in Belgrade, Serbia, Prof. Ingeborg Schwenzer of the University of Basel was elected Chair of the CISG-AC.
 See e.g., Article 7.1.6 of the UNIDROIT Principles (2010) (n. 163) [hereinafter also referred to as « UPICC »] and its official comments, para. 2. This Opinion does not consider exemption clauses that permit a party to render a performance substantially different from what the other party reasonably expected, referred to by Article 7.1.6 of the UPICC and Section 3(2) (b) (i) of the English Unfair Contract Terms Act 1977. They appear to be incompatible with some of the main features of a contract for the international sale of goods governed by the CISG contract, which include legal certainty and a certain balance between the rights and obligations of the parties.
 In this regard, see generally: Fontaine, Marcel and De Ly, Filip – Drafting international contracts: analysis of contract clauses, Ardsley, NY: Transnational Publishers (2006) [hereinafter referred to as « Fontaine and De Ly on contract clauses »]; Ghestin, Jacques (ed.) – Les clauses limitatives ou exonératoires de responsabilité en Europe – actes du colloque des 13 et 14 décembre 1990, Paris: LGDJ, (1990) [hereinafter referred to as « Ghestin – actes du colloque »]; Alpa, Guido – Droit italien, in Ghestin – actes du colloque; Beale, Hugh – Droit anglais, in Ghestin – actes du colloque; Fontaine, Marcel – Observations sur les clauses limitatives ou exonératoires de responsabilité en Europe, in Ghestin – actes du colloque; Garcia-Cantero, Gabriel – Droit espagnol, in Ghestin – actes du colloque; Reich, Norbert – La transparence des clauses limitatives dans le droit allemand, in Ghestin – actes du colloque; Schmidt-Salzer, Joachim – Droit allemand, in Ghestin – actes du colloque; Stauder, Bernd – Droit suisse, in Ghestin – actes du colloque; Yates, David – Exclusion clauses in contracts, 2nd edition, London: Sweet and Maxwell (1982) [hereinafter referred to as « Yates on exclusion clauses »]; Lawson, Richard – Exclusion clauses and unfair contract terms, 5th edition, London: Sweet and Maxwell (1998) [hereinafter referred to as « Lawson on exclusion clauses »]; Prata, Ana – Cláusulas de exclusão e limitação de responsabilidade contractual, Reimpressão, Coimbra: Almedina (2005); Oliveira, Nuno Manuel Pinto – Cláusulas acessórias ao contrato: cláusulas de exclusão e de limitação do dever de indenizar e cláusulas penais, 2a. ed., Coimbra: Almedina (2005); Ponzanelli, Giulio – Le clausole di esonero dalla responsabilità civile, studio di diritto comparato, Milano: Giuffrè (1984); Adriano, Germana Carlotta – Clausole di esonero e di limitazione della responsabilità civile, Roma: Aracne (2009); Lata, Natalia Álvares – Cláusulas restrictivas de responsabilidad civil, Granada: Comares (1998); Larroumet, Christian – Droit Civil, Tome 3, Les Obligations – Le Contrat, 3e édition, Paris : Economica (1996) [hereinafter referred to as « Larroumet »]; Farnsworth, E. Allan – Contracts, 3nd edition, New York: Aspen Law & Business (1999) [hereinafter referred to as « Farnsworth on Contracts »; Azevedo, Antonio Junqueira de Azevedo – Cláusula cruzada de não indenizar (cross waiver of liability), ou cláusula de não indenizar com eficácia para ambos os contratantes. Renúncia ao direito de indenização. Promessa de fato de terceiro. Estipulação em favor de terceiros. in Estudos e pareceres de direito privado, São Paulo: Saraiva (2004) [hereinafter referred to as « Azevedo, Antonio Junqueira de Azevedo – Cláusula cruzada de não indenizar (cross waiver of liability) »]; Fernandes, Wanderley – Cláusulas de Exoneração e de Limitação de Responsabilidade, São Paulo: Direito GV – Saraiva (2013) [hereinafter referred to as « Fernandes – Cláusulas de Exoneração e de Limitação »].
 “Compensatory damages” are the most common breach of contract remedy. When compensatory damages are awarded, a court orders the person that breached the contract to pay the other person enough money to get what they were promised in the contract elsewhere. “Restitution”: When a court orders restitution, it orders the person who breached the contract to pay the other person back. “Punitive damages” are a sum of money intended to punish the breaching party, and are usually reserved for cases in which something morally reprehensible happened, such as a manufacturer deliberately selling a retailer unsafe or substandard goods. “Liquidated damages” are those that the parties agree to pay in the event a contract is breached.
 For examples of limitation of liability clauses in sale contracts see « Fontaine and De Ly on contract clauses » (n. 2), Ch. 7, and Annex 2 of this Opinion.
 For more information on “agreed sums clauses”, see CISG-AC Opinion No. 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, Rapporteur: Dr. Pascal Hachem, Bar & Karrer AG, Zurich, Switzerland. Adopted by the CISG-AC following its 16th meeting in Wellington, New Zealand on 3 August 2012.
 Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce, Russian Federation, 23 November 1994 (Arbitral award No. 251/93, Unilex, available at http://www.unilex.info/case.cfm?id=250 (accessed on 15 Jan. 2015). The seller was to deliver certain goods for a sum which had been paid by the buyer in advance. The buyer received a smaller quantity of goods than had been agreed: 415 pieces of the goods were missing. The buyer requested the Tribunal, with reference to Art. 74 CISG, to order the seller to return the payment of the price of the undelivered goods and to award damages for the damage sustained by the buyer as a result of the seller's breach of the contract with regard to the time of deliver and to the quality of the goods. Damages included the loss of profit on the sale of these goods to the buyer's customers, mainly because the goods were of a seasonal nature. The Tribunal held that the buyer was entitled to be reimbursed the amount it had paid for the undelivered goods. As regards the claim for damages the Tribunal came to the conclusion that the clause in the contract which stipulated the payment of a penalty in case of a delay in delivery was of an exclusive nature and did not provide for payment of damages in excess of the sum due in accordance with this clause. The Tribunal decided to award damages for the delay only to the limited amount indicated in the penalty clause. The Tribunal refused to award damages relating to the poor quality of the goods since the buyer had not been able to prove the amount of the loss sustained as a result of the poor quality of the goods.
 The goal of damages provisions is to place the aggrieved party in the same economic position it would have been in had the breach not occurred. According to E. A. Farnsworth (apud Gotanda, John Y., p. 991, n. 1, in : Kroll, S. , Mistelis, L. and Viscasillas, Pilar P. (eds.), UN Convention on Contracts for the International Sale of Goods (CISG), Munich/Oxford: C.H. Beck/ Hart Publishing (2011) [hereinafter referred to as « Kroll, Mistelis and Viscasillas on CISG ») such provisions are designed to give the aggrieved party the benefit of the bargain or its expectations/performance interest.
 See CISG-AC Opinion No. 6, Calculation of Damages under CISG Article 74, Rapporteur: Prof. John Y. Gotanda, Villanova University School of Law , Villanova, Pennsylvania, USA. Adopted by the CISG-AC at its Spring 2006 meeting in Stockholm, Sweden; esp. at paragraphs 1.2 and 1.3. See also Zeller, Bruno – Damages Under the Convention on Contracts for the International Sales of Goods, 2nd edition, Oxford: Oxford University Press (2009) [hereinafter referred to as « Zeller on Damages »], Ch. 6, esp. p. 82. See also Honnold, John O. (edited and updated by Flechtner, Harry M.) – Uniform Law for International Sales under the 1980 United Nations Convention, 4th edition, Alphen aan den Rijn: Kluwer Law International (2009) [hereinafter referred to as « Honnold on CISG »] para. 403.
 Zeller on Damages (n. 8), p. 81. See also Mackaay, Ejan - Law and Economics for Civil Law Systems, Cheltenham (U.K.) : Edward Elgar (2013) [hereinafter referred to as « Mackaay on Law and Economics »] p. 442, on the topic of “risk allocation” between the contracting parties.
 See Article 74 CISG, Zeller on Damages (n. 8), p. 82, and Gotanda, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 74 CISG, paras. 4 and 37-73. There are other limitations on damages. Under the CISG, damages: a) are limited to monetary relief; b) and to material loss (and do not include moral damages, as set forth in Article 7.4.2. of the UNIDROIT Principles); c) do not permit the recovery of punitive damages; d) nor does it permit the recovery of damages for death and bodily injury (Article 5 CISG). See also Schwenzer, in : Schwenzer (ed.), Schlechtriem & Schwenzer – Commentary on the UN Convention on the International Sale of Goods, 3rd edition, Oxford : Oxford University Press (2010) [hereinafter referred to as « Commentary »], Art. 74 CISG, para. 2 and 45-57; and Schlechtriem, P. and Butler, P., UN Law on International Sales – The UN Convention on the International Sale of Goods, Berlin: Springer-Verlag (2009) [hereinafter referred to as « Schlechtriem & Butler », p. 209-16.
 See Article 4 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 4 CISG, paras. 17 and 43; and Honnold on CISG (n. 8), Art. 74, para. 408.1. See also Djordjevic, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 4 CISG, paras. 8 and 26. The same reasoning presented by the author in para. 26 applies to exemption and limitation of liability clauses.
 See Article 7(2) CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 7, par. 27-30, 34. See also Viscasillas, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 7 CISG, paras. 52-53. In accordance with Article 7(2) CISG, matters governed by the Convention that are not expressly provided for in it (internal gaps) are to be dealt with exclusively by the Convention, despite their characterization under domestic law. Once an internal gap is detected, the first step is to apply the specific provisions of the CISG directly, by way of analogy created by scholars and case law. If the gap cannot be filled, resort is to be had to the general principles on which the CISG is based (internal principles) or in their absence to other external principles. Finally, if the gap still remains, domestic law may then be applied.
 See Article 4 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 4, par. 17 and Art. 7, par. 30. See also Djordjevic, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 4 CISG, para. 8.
 See Schwenzer/Hachem, Commentary (n. 10), Art. 4, par. 43.
 In some jurisdictions such a situation qualifies as a purely potestative condition, i.e. a condition made in a contract the fulfillment of which is entirely in the control of one of the parties to the contract. It subjects the contract performance to the free will of one of the parties only. For example: there is a purely potestative condition where the buyer is left with the option to fix the price of the goods sold at its own will. Not only are purely potestative conditions null and void under many domestic laws but also the underlying contracts where they have been included (e.g., Art. 1174 of the Belgian Civil Code; Articles 122 and 489 of the Brazilian Civil Code; Article 1500 Quebec Civil Code).
 See Article 74 CISG and Schwenzer, Commentary (n. 10), Art. 74, and Zeller on Damages (n. 8), p. 102.
 This corresponds to the common law maxim according to which: “for every right, there is a remedy; where there is no remedy, there is no right”, which also applies to the civil law and other contemporary legal traditions.
 See Article 6 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 6, par. 28. See also Mistelis, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 6 CISG, para. 8.
 See Article 4 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 4, par. 17.
 CISG-AC Opinion No. 13, Inclusion of Standard Terms under the CISG, Rapporteur: Professor Sieg Eiselen, College of Law, University of South Africa, Pretoria, South Africa. Adopted by the CISG-AC following its 17th meeting in Villanova, Pennsylvania, USA, on 20 January 2013.
 See Article 8 and 9 CISG and Schmidt-Kessel, Commentary (n. 10), Arts. 8 and 9. See also Zuppi and Viscasillas, respectively, Mistelis, Kroll, Mistelis and Viscasillas on CISG (n. 7), Arts. 8 and 9 CISG; and Honnold on CISG (n. 8), Arts. 8 and 9, paras. 104-122.
 In line with the modern approach to private international law rules, this Opinion understands that the “otherwise applicable law” includes not only the otherwise domestic law applicable but also “rules of law”, which do not originate from formal State sources of law. For more information on this topic, see Choice of Law in International Contracts, Hague Conference of Private International Law, esp. Draft Commentary on the Draft Hague Principles on the Choice of Law in International Contracts at http://www.hcch.net/upload/wop/princ_com.pdf (accessed on April 26, 2014).
 See Article 4 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 4, par. 38 and 43.
 For examples of limitation of liability clauses in sale contracts see Annex 2.
 See generally Fontaine and De Ly on contract clauses » (n. 2), Ch. 7.
 See, for example, Sections 305 to 310 of the German Civil Code (BGB), which govern standard contract terms. Those provisions have replaced the Standard Contract Terms Act (Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen, AGB-Gesetz). For an English translation, see: http://www.iuscomp.org/gla/statutes/BGB.htm#b2s2 (accessed on April 27, 2014). See also CISG-AC Opinion No. 13, Inclusion of Standard Terms under the CISG (n. 21).
 In this regard see Article 4.6 of the UNIDROIT Principles (2010).
 BGB, Section 309. For more information on the German law of standard terms, see: Zerres, Thomas. Principles of the German Law on Standard Terms of Contract, available at: http://www.jurawelt.com/sunrise/media/mediafiles/14586/German_Standard_Terms_of_Contract_Thomas_Zerres.pdf (access on 5 Sept. 2015).
 For example, Article 2.1.20 of the UNIDROIT Principles (2010) establishes that surprising terms in standard contract terms are not effective.
 See Farnsworth on Contracts (n. 2), para. 4.26, in which the author states that “a number of cases support discharge of a duty to pay damages for partial breach of contract by renunciation, written or oral, by the obligee on acceptance from the obligor of some performance under the contract” and para. 9.1. See also Yates on exclusion clauses (n. 2), p. 197 and Lawson on exclusion clauses (n. 2).
“… where the defendant had so egregiously breached the contract so as to deny the plaintiff substantially the whole of its benefit … the innocent party was excused from further performance but the defendant could still be held liable for the consequences of its ‘fundamental breach’ even if the parties had excluded liability by clear and express language”. See Annex 3 for more details.
 In the past the English and US courts developed a criterion for the validity assessment of exemption clauses that rendered such clauses unenforceable where they compromised “the very core and essence of the contract”, which became known as “fundamental breach” or “breach of a fundamental term”. However, this validity requirement has lost its appeal more recently. On this topic, see Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), p. 394-395.
 See Article 2(a) CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 2, par. 4-7.
 For the full text of Article 7.1.6 of the 2010 UNIDROIT Principles and the official comments, see Annex 2.
 See Article 7.1.6 of the 2010 UNIDROIT Principles and the official comments. See also Schelhaas, Harriet, in Vogenauer, Stefan (ed.). Commentary on the UNIDROIT Principles of International Commercial Contracts, 2nd ed., Oxford: OUP (2015) [hereinafter referred to as « Commentary on the UNIDROIT Principles »], p. 858-863, esp. 861.
 See Article 6 CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 6, par. 7 and 8. See also Mistelis, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 6, paras. 1, 7-10, 23; and Honnold on CISG (n. 8), Art. 6, para. 74. On the principle of freedom of contract in the CISG, see also CISG-AC Opinion No. 16, Exclusion of the CISG under Article 6, Rapporteur: Doctor Lisa Spagnolo, Monash University, Australia. Adopted by the CISG-AC following its 19th meeting in Pretoria, South Africa on 30 May 2014.
 See Schwenzer/Hachem, Commentary (n. 10), Art. 74, par. 60.
 See note 16 supra on “purely potestative condition”.
Which is why it is said that such a definition also fits the manner in which this concept is used in the CISG. As a general principle of the CISG, reasonableness has a strong bearing on the proper interpretation of all provisions of the CISG.
[xlv] Finland 12 April 2002 Turku Court of Appeal (Forestry equipment case) [translation available] [Cite as: http://cisgw3.law.pace.edu/cases/020412f5.html], reported at the CISG Digest 2012 (n. 44) p. 343, para. 6, n. 8.
[xlvi] China International Economic and Trade Arbitration Commission, People’s Republic of China, 1 April 1993, Arbitral award No. 75, Unilex, available at http://www.unilex.info/case.cfm?id=429 (accessed on April 27, 2014), reported at the CISG Digest 2012 (n. 44) p. 343, para. 6, n. 11.
[xlvii] Oberster Gerichtshof, Austria, 7 September 2000, Case No. 8 Ob 22/00v, Unilex, available at http://www.unilex.info/case.cfm?id=473 (accessed on 15 Jan. 2015).
[xlviii] Amtsgericht Nordhorn, Germany, 14 June 1994, Case No. 3 C 75/94, Unilex, available at http://www.unilex.info/case.cfm?id=114 (accessed on 15 Jan. 2015).
[xlix] Court of Appeals of Warsaw, Poland, 20 November 2008, Case No. I ACa 1258/07, Unilex, available at http://www.unilex.info/case.cfm?id=1721 (accessed on 15 Jan. 2015). CLOUT case 1305.
[l] See Articles 6 and 74 CISG and Schwenzer, Commentary (n. 10), Art. 74, paras. 58, 60. See also Honnold on CISG (n. 8), Art. 74, para. 408.1.
[li] See Article 74 and Schwenzer/Hachem, Commentary (n. 10), Art. 7, para. 35, and Art. 74, para. 3; and Gotanda, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 74, paras. 1-5. See also CLOUT case No. 541 [Oberster Gerichtshof, Austria, 14 January 2002] (see full text of the decision); CLOUT case No. 93 [Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft-Wien, Austria, 15 June 1994] (citing article 74 for general principle within meaning of article 7 (2)), reported at the CISG Digest 2012 (n. 44) p. 343, para. 5, n. 5.
[liv] See Schwenzer, Commentary (n. 10), Art. 79, paras. 57-58, and Art. 80, para. 2; Atamer, Kroll, Mistelis and Viscasillas on CISG (n. 7), Art. 79, para. 89, 93; and Honnold on CISG (n. 8), Art. 79, para. 424. See also the reported decisions at the CISG Digest 2012 (n. 44), p. 393, para. 23.

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