Source: http://cisgw3.law.pace.edu/cisg/text/anno-art-79.html
Timestamp: 2017-07-25 02:44:00
Document Index: 533193668

Matched Legal Cases: ['art. 79', 'art. 35', 'arty\n79', 'art.\n79', 'art.\n79', 'art. 79', 'art. 79', 'art. 79', 'art. 49', 'art.\n79', 'Art. 79', 'Art. 79', 'Art. 79', 'Art. 79', 'art. 79', 'art. 79', 'art. 79', 'art. 79', 'art. 77', 'art-79', 'Art. 79', 'Art. 7', 'Art. 79', 'Art. 79', 'Art. 7', 'Art. 79', 'Art. 79', 'Art. 79', 'Art. 79', 'Art. 50', 'Art. 78', 'Art. 25', 'Art. 79', 'Art. 7', 'Art. 79', 'Art. 8', 'Art. 8', 'Art. 9', 'Art. 8', 'Art. 79', 'Art. 79', 'Art. 79', 'Art. 79', 'Art. 35', 'Art. 79', 'Art. 79', 'Art. 7', 'Art. 7', 'Art. 79', 'art. 79', 'Art. 50', 'Art. 50']

Article 79 Go to Database Directory || Go to Information on other available case data
Article 79. Impediment Excusing Party from Damages
Text of Article 79
Annotated comparatives - UNIDROIT Principles
79A Central issue: exemption from liability for damages (art. 79(1))79A1 Excuse not applicable to defects in goods (art. 35) 79A11 Or refunds of payments not earned 79B Impediments excusing party
79B1 General elements for excusing 79B11 Impediment beyond party's control 79B12 Impediment not foreseeable 79B13 Impediment not avoidable or overcomeable 79B2 Types of impediments 79C Non-performance attributable to third-party contractor (art.
79(2))
79C1 Party claiming exemption meets standards of article
79(1) 79C2 Third party also meets exemption standards (art.
79(2)(b)) 79C3 Problems: e.g., default by general supplier
79D Temporary impediment (art. 79(3))
79D1 Delay during extended period; change of circumstances
79E Notice of impediment (art. 79(3))
79E1 Non-receipt of notice within reasonable time; damages
79F Preservation of remedies other than damages (art. 79(5))
79F1 Normal remedy is avoidance (art. 49, 64) 79F2 Problem: Suit to compel excused performance (see arts. 48, 62) 79F21 Available following temporary impediment (art.
79(3)) 79G Other problems
Exemptions or impediments ; Hardship
UNCITRAL has identified relevant cases in Digests containing case annotations for each article of the CISG. UNCITRAL cites 27 cases in its Digest of Art. 79 case law:
Belgium 1 Hungary 1 Netherlands
1 Bulgaria 2
Presented below is a composite list of Art. 79 cases reporting UNCITRAL Digest cases and other Art. 79 cases. All cases are listed in chronological sequence, commencing with the most recent. Asterisks identify the UNCITRAL Digest cases, commencing with the 9 January 2002 citation reported below. Cases are coded to the UNCITRAL Thesaurus.
English texts and full-text English translations of cases are provided as indicated. In most instances researchers can also access UNCITRAL abstracts and link to Unilex abstracts and full-text original-language case texts sourced from Internet websites and other data, including commentaries by scholars to the extent available. For another analysis of Article 79 case law - also Art. 79 doctrine and legislative history - see Sonja A. Kruisinga, "(Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?", Intersentia (2004) 123-154.
For a more recent case annotated analysis of issues associated with Article 79, go to CISG-AC Opinion no. 7, dated 12 October 2007. Rapporteur: Professor Alejandro M. Garro,
Columbia University School of Law. Analysis endorsed by: Jan Ramberg (Chair), Eric E.
Bergsten, Michael Joachim Bonell, Alejandro M. Garro, Roy M. Goode, John Y. Gotanda,
Sergei N. Lebedev, Pilar Perales Viscasillas, Ingeborg Schwenzer, Hiroo Sono, Claude Witz
(Members); Loukas A. Mistelis (Secretary)
There are scholars who believe that there are circumstances in which the UNIDROIT Principles of International Commercial Contracts may be used to interpret or supplement this Article of the CISG. See match-up of this Article with counterpart provisions of the Principles and commentary on this subject. To the extent this reasoning fits, cases on the counterpart provisions of the UNIDROIT Principles may be relevant. To the extent available, such cases may be found on the Unilex website. Germany 18 November 2008 Oberlandesgericht [Appellate Court] Brandenburg (Beer case) 79E [translation available]
United States 20 August 2008 U.S. District Court [New York] (Hilaturas Miel, S.L. v. Republic of Iraq) 79B
Netherlands 9 July 2008 Rechtbank [District Court] Maastricht (Agristo N.V. v. Macces Agri B.V.) 79B [translation available] United States 16 April 2008 U.S. District Court [New York] (Macromex Srl. v. Globex International, Inc.) 79B13 ; 79G
Germany 5 March 2008 Oberlandesgericht [Appellate Court] München (Stolen car case) 79B [translation available]
Germany 27 November 2007 Bundesgerichtshof [Federal Supreme Court] 79B [translation available] American Arbitration Association 23 October 2007 [Interim Award] (Macromex Srl. v. Globex International Inc.) 79B13 ; 79G
Spain 23 October 2007 Juzgado de Primera Instancia [District Court] La Laguna
Germany 21 March 2007 Oberlandesgericht [Appellate Court] Dresden (Stolen automobile case) 79A [translation available] United States 4 April 2006 Federal District Court [New Jersey] (Valero Marketing v. Green Oy) 79B China 7 December 2005 CIETAC Arbitration Award [CISG/2005/05] (Heaters case) [translation available] Russia 21 November 2005 Arbitration Award 42/2005 (Equipment case) 79B [translation available] China 25 May 2005 CIETAC Arbitration Award [CISG 2005/09] (Iron ore case) 79B [translation available]
Finland 24 May 2005 Hovioikeus / hovrätt [Appellate Court] Turku (Radiated spice case)
Switzerland 5 April 2005 Bundesgericht [Supreme Court] [translation available] Belgium 25 January 2005 Rechtbank van Koophandel [District Court] Tongeren (Scaforn International BV & Orion Metal BVBA v. Exma CPI SA) 79B [translation available] United States 6 July 2004 U.S. District Court [Illinois] (Raw Materials Inc. v. Manfred Forberich GmbH & Co., KG) 79B ; 79B12 France 30 June 2004 Cour de Cassation [Supreme Court] 79B [translation available] Austria 21 April 2004 Oberster Gerichtshof [Supreme Court] (Omnibus case) 79C [translation available]
Russia 9 April 2004 Arbitration Award 129/2003 79C [translation available]
Switzerland 12 March 2004 Amtsgericht [County Court] Willisau 79B [translation available] Switzerland 11 February 2004 Appelationshof [Appellate Court] Bern (Cable case) [translation available] Germany 2 February 2004 Oberlandesgericht [Appellate Court] Zweibrücken 79B [translation available]
Switzerland 29 October 2003 Tribunale d�appello [Appellate Court] Lugano, Cantone del Ticino 79C [translation available]
China 17 September 2003 CIETAC Arbitration Award [CISG 2003/14] (Australia cotton case) 79B1 [translation available]
China 26 June 2003 CIETAC Arbitration Award [CISG 2003/10] (Alumina case) 79B [translation available]
Russia 16 June 2003 Arbitration Award No. 135/2002 79B [translation available]
Switzerland 3 December 2002 Handelsgericht [Commercial Court] St. Gallen [translation available] China 21 October 2002 CIETAC Arbitration Award [CISG 2002/16] (Engraving machine case) 79A [translation available]
China 9 August 2002 CIETAC Arbitration Award [CISG 2002/21] (Yellow phosphorus case) 79A [translation available]
Belgium 18 February 2002 Rechtbank van Koophandel [District Court] Ieper 79B
China 4 February 2002 CIETAC Arbitration Award [CISG 2002/17] (Steel bar case) 79B ; 79E [translation available]
Russia 4 February 2002 Arbitration Court [Appellate Court] for the Moscow Region 79B [translation available]
* Germany 9 January 2002 Bundesgerichtshof [Federal Supreme Court] 79A [translation available]
China 25 December 2001 CIETAC Arbitration Award [CISG 2001/04] (DVD HiFi case) 79C [translation available]
Russia 30 July 2001 Arbitration Award No. 198/2000 79B [translation available]
France 12 June 2001 Cour d'appel [Appellate Court] Colmar 79B [translation available]
Russia 27 April 2001 Constitutional Court of Russian Federation (Resolution No. 7-P) [translation available]
Bulgaria 19 March 2001 Bulgaria Chamber of Commerce Arbitration award, Case 26/99 79B [translation available]
Germany 23 October 2000 Oberlandesgericht [Appellate Court] Dresden (Powdered milk case) 79B [translation available] Switzerland 15 September 2000 Bundesgericht [Federal Supreme Court] [4C.105/2000] [translation available] Switzerland 15 September 2000 Bundesgericht [Federal Supreme Court] [4P.75/2000] 79B [translation available] * Italy 12 July 2000 Tribunale [District Court] Vigevano [translation available]
China 30 June 2000 Wuhan Economic and Technology Development Zone People's Court [District Court] (Shen Zhen fengshen Industry Development Co. v. INTER SERVICE INTERNATION France)
Russia 6 June 2000 Arbitration award 406/1998 79B [translation available] ICC 2000 International Court of Arbitration, Case 8790 79A [English text]
Austria 29 June 1999 Oberster Gerichtshof [Supreme Court] [translation available] ICC June 1999 International Court of Arbitration, Case 9187 [English text] China 31 May 1999 CIETAC Arbitration Award [CISG/1999/27] (Indium ingot case) 79B [translation available] * Germany 24 March 1999 Bundesgerichtshof [Federal Supreme Court] 79B1 ; 79C [translation available]
* Switzerland 10 February 1999 Handelsgericht [Commercial Court] Zürich 79C [translation available]
Austria 15 December 1998 Oberster Gerichtshof [Supreme Court] 79B [translation available] China 15 December 1998 CIETAC Arbitration Award [CISG/1998/09] (Shirt case) 79B [translation available]
Italy 11 December 1998 Corte di Appello [Appellate Court] Milano 79A [translation available]
Russia 24 November 1998 Arbitration award 96/1998 79B1 [translation available]
Russia 6 October 1998 Arbitration award 269/1997 79B [translation available]
* Netherlands 2 October 1998 Arrondissementsrechtbank [District Court] 's
Hertogenbosch 79B [translation available] Russia 10 June 1998 Arbitration award 83/1997 [translation available]
* Germany 31 March 1998 Oberlandesgericht [Appellate Court] Zweibrücken (Vine was case) 79B ; 79C [translation available] * Russia 16 February 1998 High Arbitration Court [Information Letter No. 29] 79B * Bulgaria 12 February 1998 Bulgaria Chamber of Commerce Arbitration award, Case 11/1996 79B [translation available]
* France 19 January 1998 Tribunal de commerce [District Court] Besançon 79C [translation available]
Russia 12 January 1998 Arbitration award 152/1996 79B [translation available] China 31 December 1997 CIETAC Arbitration Award [CISG/1997/37] (Lindane case) [translation available] France 18 December 1997 Tribunal de commerce [District Court] Colmar [translation available]
China 30 November 1997 CIETAC Arbitration Award [CISG/1997/33] 79B [translation available] China 29 September 1997 CIETAC Arbitration Award [CISG/1997/28] (Aluminium oxide case) 79B [translation available]
* Germany 4 July 1997 Oberlandesgericht [Appellate Court] Hamburg 79B1 [translation available] China 25 June 1997 CIETAC Arbitration Award [CISG/1997/16] (Art paper case) 79B [translation available]
Russia 11 June 1997 Arbitration award 255/1994 79B [translation available] Russia 13 May 1997 Arbitration award 3/1996 79A [translation available] Russia 11 May 1997 Arbitration award 2/1995 79B [translation available] Hungary 8 May 1997 Budapest Arbitration award Vb 96036
China 7 May 1997 CIETAC Arbitration Award [CISG/1997/11] (Sanguinarine case) 79B [translation available]
Germany 17 April 1997 Landgericht [District Court] Frankenthal * Germany 28 February 1997 Oberlandesgericht [Appellate Court] Hamburg 79B [translation available] * Russia 22 January 1997 Arbitration award 155/1996 79A [translation available] Finland 17 January 1997 Tampere Court of First Instance [translation available]
ICC January 1997 International Court of Arbitration, Case 8786 79B [English text] Russia 1997 High Arbitration Court [Ruling No. 4, case 4] China 31 December 1996 CIETAC Arbitration Award [CISG/1996/58] (High carbon tool steel case) 79B [translation available]
* Hungary 10 December 1996 Budapest Arbitration award Vb 96074 79G [English text]
China 30 July 1996 CIETAC Arbitration Award [CISG/1996/33] (Ferro-molybdenum alloy case) 79A ; 79C [translation available]
China 2 May 1996 CIETAC Arbitration Award [CISG/1996/21] ("FeMo" alloy case) 79B [translation available] * Bulgaria 24 April 1996 Bulgaria Chamber of Commerce Arbitration award 56/1995 79B [translation available]
* Germany 21 March 1996 Hamburg Arbitration award 79B ; 79C [translation available] China 14 March 1996 CIETAC Arbitration Award [CISG/1996/14] (Dried sweet potatoes case) 79B [translation available]
Russia 10 February 1996 Arbitration Award No. 328/1994 79B ; 79E [translation available] Austria 6 February 1996 Oberster Gerichtshof [Supreme Court] 79E [translation available] China 30 January 1996 CIETAC Arbitration Award [CISG/1996/05] (Compound fertilizer case) 79C [translation available]
Russia 13 December 1995 Arbitration Award 364/1994 79B [translation available] Russia 1 December 1995 Arbitration award 369/1994 [translation available] Germany 16 November 1995 Landgericht [District Court] Köln * Russia 17 October 1995 Arbitration award 123/1992 79B [translation available]
* Germany 21 August 1995 Landgericht [District Court] Ellwangen [translation available] Russia 15 May 1995 Arbitration award 321/1994 79B [translation available]
* Belgium 2 May 1995 Rechtbank van Koophandel [District Court] Hasselt 79B
China 28 April 1995 CIETAC Arbitration Award [CISG/1995/08] (Rolled wire rod coil case) 79B [translation available]
Switzerland 26 April 1995 Handelsgericht [Commercial Court] Zürich [translation available] * Russia 16 March 1995 Arbitration award 155/1994 79B1 ; 79C [translation available]
China 10 March 1995 CIETAC Arbitration Award [CISG/1995/04] (Wool case) 79C [translation available]
* ICC 1995 International Court of Arbitration, Case 8128 79C [translation available]
Russia 17 November 1994 Arbitration award 493/1993 Germany 15 September 1994 Landgericht [District Court] Berlin (Shoes case) [translation available]
Germany 2 August 1994 Landgericht [District Court] München China 17 June 1994 CIETAC Arbitration Award [CISG/1994/08] (Warm rolled steel plates case) 79C [translation available] * Germany 4 May 1994 Amtsgericht [Lower Court] Charlottenburg 79A ; 79E [translation available] Israel 22 August 1993 Supreme Court (Examin v. Textile and Footware) [translation available] China 7 August 1993 CIETAC Arbitration Award [CISG/1993/11] (Semi-automatic weapons case) 79B12 [translation available]
* Germany 14 May 1993 Landgericht [District Court] Aachen 79F [translation available]
* Italy 14 January 1993 Tribunale Civile [District Court] Monza 79B [translation available]
ICC 1993 International Court of Arbitration, Case 6653 [translation available] Hungary 1992 Legfelsobb Biróság [Supreme Court] 79B1 ; 79C
* ICC 1992 International Court of Arbitration, Case 7197 79B China 6 June 1991 [date claim filed] Shenzhen CIETAC Arbitration award 79B [translation available] * ICC 1989 International Court of Arbitration, Case 6281 79G [English text] CASE DIGEST AND ANALYSIS
A/CN.9/SER.C/DIGEST/CISG/79 [8 June 2004] Reproduced with the permission of UNCITRAL
[Text of Article 79
Digest of Article 79 case law
- Overview of Article 79- Article 79 in general
- Breaches for which an exemption is available:
- Article 79(1): "impediment" requirement
- Treatment of particular impediments:
- Requirement that:
- The impediment be beyond the control of the party claiming exemption
- The party claiming exemption could not reasonably be expected to:
- Have taken the impediment into account at the time of the conclusion of the contract
- Avoid or overcome the impediment
- Failure to perform be "due to" the impediment
- Article 79(2)
- Article 79(5): Consequences of exemption
- Derogation from Article 79: Relationship between Article 79 and force majeure clauses]
(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:�
(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.
DIGEST�OF�ARTICLE 79 CASE LAW
Overview of Article 79
1.	Article 79 specifies the circumstances in which a party "is not liable" for failing to
perform its obligations, as well as the remedial consequences if the exemption from liability
applies. Para. (1) relieves a party of liability for "a failure to perform any of his obligations" if
impediment"; the impediment was "beyond his control"; the impediment is one that the party "could not reasonably be expected to have taken into account at the time of the conclusion of the contract"; the party could not reasonably have "avoided" the impediment; and the party could not reasonably have "overcome" the impediment "or its consequences".
2.	Article 79(2) deals with the situation where a party engages a third person "to perform the whole or a part of the contract" and the third person fails to perform.
3.	Article 79(3), which appears not to have been the subject of significant attention in case
law, limits the duration of an exemption to the time during which the impediment that justifies
the exemption continues to exist. Article 79(4) requires a party that wishes to claim an
exemption for non-performance "to give notice to the other party of the impediment and its
effect on his ability to perform". The second sentence of article 79(4) specifies that failure to
give such notice "within a reasonable time after the party who fails to perform knew or ought
to have known of the impediment" will make the party who failed to give proper notice "liable
for damages resulting from such non-receipt". Article 79(4) also appears not to have attracted
significant attention in case law, although one decision did note that the party claiming
exemption in that case had satisfied the notice requirement.[1]
4.	Para. (5) makes it clear that article 79 has only a limited effect on the remedies
available to the party that has suffered a failure of performance for which the non-performing
party enjoys an exemption. Specifically, article 79(5) declares that an exemption precludes only
the aggrieved party's right to claim damages, and not any other rights of either party under the
5.	Several decisions have suggested that exemption under article 79 requires satisfaction
of something in the nature of an "impossibility" standard.[2] One decision has compared the
standard for exemption under article 79 to those for excuse under national legal doctrines of
force majeure, economic impossibility, and excessive onerousness [3] - although another decision
asserted that article 79 was of a different nature than the domestic Italian hardship doctrine of
eccessiva onerosità sopravvenuta.[4] It has also been stated that, where the CISG governs a
transaction, article 79 preempts and displaces similar national doctrines such as Wegfall der
Geschäftsgrundlage in German law [5] and eccesiva onerosità sopravvenuta.[6] Another
decision has emphasized that article 79 should be interpreted in a fashion that does not
undermine the Convention's basic approach of imposing liability for a seller's delivery of non-conforming goods without regard to whether the failure to perform resulted from the seller's
fault.[7] And a court has linked a party's right to claim exemption under article 79 to the absence
of bad faith conduct by that party.[8]
6.	Many decisions have suggested that the application of article 79 focuses on an
contract.[9] The decisions suggest, in other words, that the essential issue is to determine whether
the party claiming an exemption assumed the risk of the event that caused the party to fail to
perform. Thus in one case, a seller had failed to make a delivery because the seller's supplier
could not supply the goods without an immediate infusion of substantial cash, and the seller did
not have the funds because the buyer had justifiably (but unexpectedly) refused to pay for
earlier deliveries. The seller's claim of exemption under article 79 was denied because the
buyer, as per the contract, had pre-paid for the missing delivery and the tribunal found that this
arrangement clearly allocated to the seller risks relating to the procurement of goods.[10] The risk
analysis approach to exemption under article 79 is also evident in cases raising issues
concerning the relationship between article 79 and risk of loss rules. Thus where the seller
delivered caviar and risk of loss had passed to the buyer, but international sanctions against the
seller's State prevented the buyer from taking immediate possession and control of the caviar
so that it had to be destroyed, an arbitral tribunal held that the buyer was not entitled to an
sustained by the party who bore the risk at the moment the force majeure occurred.[11] And
where a seller complied with its obligations under CISG article 31 by timely delivering goods
to the carrier (so that, presumably, risk of loss had passed to the buyer), a court found that the
seller was exempt under article 79 from damages caused when the carrier delayed delivering
the goods.[12]
7.	Article 79 has been invoked with some frequency in litigation, but with limited success.
In two cases, a seller successfully claimed exemption for a failure to perform,[13] but in at least
nine other cases a seller's claim of exemption was denied.[14] Buyers have also twice been
granted an exemption under article 79 [15] but have been denied in at least six other cases.[16]
8.	It has been questioned whether a seller that has delivered non-conforming goods is
eligible to claim an exemption under article 79. On appeal of a decision expressly asserting that
such a seller could claim an exemption (although it denied the exemption on the particular facts
of the case),[17] a court recognized that the situation raised an issue concerning the scope of
article 79.[18] The court, however, reserved the issue because the particular appeal could be
disposed of on other grounds. More recently, that court again noted that it had not yet resolved
this issue, although its discussion seemed to suggest that article 79 might well apply when a
seller delivered non-conforming goods.[19] Nevertheless, at least one case has in fact granted an
article 79 exemption to a seller that delivered non-conforming goods.[20]
9.	Decisions have granted exemptions for the following breaches: a seller's late delivery
of goods;[21] a seller's delivery of non-conforming goods[22], a buyer's late payment of the price;[23] and a buyer's failure to take delivery after paying the price.[24] Parties have also claimed
exemption for the following breaches, although the claim was denied on the particular facts of
the case: a buyer's failure to pay the price;[25] a buyer's failure to open a letter of credit;[26] a
seller's failure to deliver goods;[27] and a seller's delivery of non-conforming goods.[28]
10.	As a prerequisite to an exemption, article 79(1) requires that a party's failure to
perform be due to an "impediment" that meets certain additional requirements (e.g., that it was
beyond the control of the party, that the party could not reasonably be expected to have taken
it into account at the time of the conclusion of the contract, etc...). One decision has used
language suggesting that an "impediment" must be "an unmanageable risk or a totally
exceptional event, such as force majeure, economic impossibility or excessive onerousness".[29]
Another decision asserted that conditions leading to the delivery of defective goods can
constitute an impediment under article 79;[30] on appeal to a higher court, however, the
exemption was denied on other grounds and the lower court's discussion of the impediment
requirement was declared moot.[31] More recently, one court appeared to suggest that the non-existence of means to prevent or detect a lack of conformity in the goods may well constitute
a sufficient impediment for exemption of the seller under article 79.[32] Yet another decision
indicated that a prohibition on exports by the seller's country constituted an "impediment"
within the meaning of article 79 for a seller who failed to deliver the full quantity of goods,
although the tribunal denied the exemption because the impediment was foreseeable when the
contract was concluded.[33]
11.	Other available decisions apparently have not focused on the question of what
constitutes an "impediment" within the meaning of article 79(1). In those decisions in which a
party was deemed exempt under article 79, the tribunal presumably was satisfied that the
impediment requirement had been met. The impediments to performance in those cases were:
refusal by State officials to permit importation of the goods into the buyer's country (found to
delivery);[34] the manufacture of defective goods by the seller's supplier (found to exempt the
seller from damages for delivery of non-conforming goods where there was no evidence the
seller acted in bad faith);[35] the failure of a carrier to meet a guarantee that the goods would be
delivered on time (found, as an alternative ground for denying the buyer's claim to damages,
to exempt the seller from damages for late delivery where the seller had completed its
performance by duly arranging for carriage and turning the goods over to the carrier);[36] seller's
delivery of non-conforming goods (found to exempt the buyer from liability for interest for a
delay in paying the price).[37]
12.	In certain other cases, tribunals that refused to find an exemption use language
suggesting that there was not an impediment within the meaning of article 79(1), although it is
often not clear whether the result was actually based on failure of the impediment requirement
or on one of the additional elements going to the character of the required impediment (e.g.,
that it be beyond the control of the party claiming an exemption). Decisions dealing with the
following situations fall into this category: a buyer who claimed exemption for failing to pay the
price because of inadequate reserves of currency that was freely convertible into the currency
of payment, where this situation did not appear in the exhaustive list of excusing circumstances
catalogued in the written contract's force majeure clause;[38] a seller who claimed exemption
for failing to deliver based on an emergency halt to production at the plant of the supplier who
manufactured the goods;[39] a buyer who claimed exemption for refusing to pay for delivered
goods because of negative market developments, problems with storing the goods, revaluation
of the currency of payment, and decreased trade in the buyer's industry;[40] a seller who claimed
exemption for failing to deliver because its supplier had run into extreme financial difficulty,
causing it to discontinue producing the goods unless the seller provided it a "considerable
amount" of financing.[41] 13.	The bulk of available decisions that deny a claimed exemption do so on the basis of
requirements other than the impediment requirement, and without making clear whether the
tribunal judged that the impediment requirement had been satisfied. The claimed impediments
in such cases include the following: theft of the buyer's payment from a foreign bank to which
it had been transferred;[42] import regulations on radioactivity in food that the seller could not
satisfy;[43] increased market prices for tomatoes caused by adverse weather in the seller's
country;[44] significantly decreased market prices for the goods occurring after conclusion of the
contract but before the buyer opened a letter of credit;[45] an international embargo against the
seller's country that prevented the buyer from clearing the goods (caviar) through customs or
making any other use of the goods until after their expiration date had passed and they had to
be destroyed;[46] a remarkable and unforeseen rise in international market prices for the goods
that upset the equilibrium of the contract but did not render the seller's performance
impossible;[47] failure of the seller's supplier to deliver the goods to seller and a tripling of the
market price for the goods after the conclusion of the contract;[48] failure of the seller's supplier
to deliver the goods because the shipping bags supplied by the buyer (made to specifications
provided by the seller) did not comply with regulatory requirements of the supplier's
government;[49] failure of a third party to whom buyer had paid the price (but who was not an
authorized collection agent of the seller) to transmit the payment to the seller;[50] an order by the
buyer's government suspending payment of foreign debts;[51] chemical contamination of the
goods (paprika) from an unknown source.[52]
14.	Certain claimed impediments appear with some frequency in the available decisions.
One such impediment is failure to perform by a third-party supplier to whom the seller looked
as the source for the goods.[53] 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 [54] or for its delivery of non-conforming goods.[55] 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.[56] 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.[57] The court, which linked its analysis to the
Convention's no-fault approach to liability for damages for breach of contract, therefore held
that the seller in the case before it could not claim an exemption for delivering non-conforming
goods furnished by a third-party supplier. It disapproved of a lower court's reasoning which
had suggested that the only reason the seller did not qualify for an exemption was because a
proper inspection of the goods would have revealed the defect.[58] Nevertheless, another court
has granted a seller an exemption from damages for delivery of non-conforming goods on the
basis that the defective merchandise was manufactured by a third party, which the court found
was an exempting impediment as long as the seller had acted in good faith.[59]
15.	Claims that a change in the financial aspects of a contract should exempt a breaching
party from liability for damages have also appeared repeatedly in the available decisions. Thus
sellers have argued that an increase in the cost of performing the contract should excuse them
from damages for failing to deliver the goods,[60] and buyers have asserted that a decrease in the
value of the goods being sold should exempt them from damages for refusing to take delivery
of and pay for the goods.[61] These arguments have not been successful, and several courts have
expressly commented that a party is deemed to assume the risk of market fluctuations and other
cost factors affecting the financial consequences of the contract.[62] Thus in denying a buyer's
claim to an exemption after the market price for the goods dropped significantly, one court
asserted the such price fluctuations are foreseeable aspects of international trade, and the losses
they produce are part of the "normal risk of commercial activities".[63] Another court denied a
seller an exemption after the market price for the goods tripled, commenting that "it was
incumbent upon the seller to bear the risk of increasing market prices ...".[64] Another decision
indicated that article 79 did not provide for an exemption for hardship as defined in the
domestic Italian doctrine of eccesiva onerosità sopravvenuta, and thus under the CISG a
seller could not have claimed exemption from liability for non-delivery where the market price
of the goods rose "remarkably and unforeseeably" after the contract was concluded.[65] Other
reasons advanced for denying exemptions because of a change in financial circumstances are
that the consequences of the change could have been overcome,[66] and that the possibility of
the change should have been taken into account when the contract was concluded.[67]
Requirement that the impediment be beyond the control of the party claiming exemption
16.	In order to qualify for an exemption, article 79(1) requires that a party's failure to
perform be due to an impediment that was "beyond his control". It has been held that this
requirement was not satisfied, and thus it was proper to deny an exemption, where a buyer paid
the price of the goods to a foreign bank from which the funds were stolen and never received
by the seller.[68] On the other hand, some decisions have found an impediment beyond the
control of a party where governmental regulations or the actions of governmental officials
prevented a party's performance. Thus a buyer that had paid for the goods was held exempt
from liability for damages for failing to take delivery where the goods could not be imported
into the buyer's country because officials would not certify their safety.[69] Similarly, an arbitral
tribunal found that a prohibition on the export of coal implemented by the seller's State
constituted an impediment beyond the control of the seller, although it denied the seller an
exemption on other grounds.[70] Several decisions have focused on the issue whether a failure
of performance by a third party who was to supply the goods to the seller constituted an
impediment beyond the seller's control.[71] In one decision, the court found that the fact defective
goods had been manufactured by a third party satisfied the requirement, provided the seller had
not acted in bad faith.[72] Where the seller's supplier could not continue production of the goods
unless the seller advanced it "a considerable amount of cash", however, an arbitral tribunal
found that the impediment to the seller's performance was not beyond its control, stating that
a seller must guarantee its financial ability to perform even in the face of subsequent,
unforeseeable events, and that this principle also applied to the seller's relationship with its
suppliers.[73] And where the seller's supplier shipped to the buyer, on the seller's behalf, a
newly-developed type of vine-wax that proved to be defective, the situation was found not to
involve an impediment beyond the seller's control: a lower court held that the requirements for
exemption were not satisfied because the seller would have discovered the problem had it
fulfilled it obligation to test the wax before it was shipped to its buyer;[74] on appeal, a higher
court affirmed the result but rejected the lower court's reasoning, stating that the seller would
not qualify for an exemption regardless of whether it breached an obligation to examine the
goods.[75]
Requirement that the party claiming exemption could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract
17. To satisfy the requirements for an exemption under article 79, a party's failure to perform
must be due to an impediment that the party "could not reasonably be expected to have taken
... into account at the time of the conclusion of the contract". Failure to satisfy this requirement
was one reason cited by an arbitral tribunal for denying an exemption to a seller that had failed
to deliver the goods because of an emergency production stoppage at the plant of a supplier
that was manufacturing the goods for the seller.[76] Several decisions have denied an exemption
when the impediment was in existence and should have been known to the party at the time the
contract was concluded. Thus where a seller claimed an exemption because it was unable to
procure milk powder that complied with import regulations of the buyer's State, the court held
that the seller was aware of such regulations when it entered into the contract and thus took the
risk of locating suitable goods.[77] Similarly, a seller's claim of exemption based on regulations
prohibiting the export of coal [78] and a buyer's claim of exemption based on regulations
suspending payment of foreign debts [79]were both denied because, in each case, the regulations
were in existence (and thus should have been taken into account) at the time of the conclusion
of the contract. Parties have been charged with responsibility for taking into account the
possibility of changes in the market value of goods because such developments were
foreseeable when the contract was formed, and claims that such changes constitute
impediments that should exempt the adversely-affected party have been denied.[80]
Requirement that the party claiming exemption could not reasonably be expected to avoid or overcome the impediment
18.	In order to satisfy the prerequisites for an exemption under article 79(1), a party's
failure to perform must be due to an impediment that the party could not reasonably be
expected to have avoided. In addition, it must not reasonably have been expected that the party
would overcome the impediment or its consequences. Failure to satisfy these requirements
were cited by several tribunals in denying exemptions to sellers whose non-performance was
allegedly caused by the default of their suppliers. Thus it has been held that a seller whose
supplier shipped defective vine wax (on the seller's behalf) directly to the buyer,[81] as well as
a seller whose supplier failed to produce the goods due to an emergency shut-down of its
plant,[82] should reasonably have been expected to have avoided or surmounted these
impediments, and thus to have fulfilled their contractual obligations.[83] Similarly, it has been held
that a seller of tomatoes was not exempt for its failure to deliver when heavy rainfalls damaged
the tomato crop in the seller's country, causing an increase in market prices: because the entire
tomato crop had not been destroyed, the court ruled, the seller's performance was still
possible, and the reduction of tomato supplies as well as their increased cost were impediments
that seller could overcome.[84]
19.	In order to qualify for an exemption under article 79(1), a party's failure to perform
must be "due to" an impediment meeting the requirements discussed in the preceding
paragraphs. This causation requirement has been invoked as a reason to deny a party's claim
to exemption, as where a buyer failed to prove that its default (failure to open a documentary
credit) was caused by its government's suspension of payment of foreign debt.[85] The operation
of the causation requirement may also be illustrated by an appeal in litigation involving a seller's
claim to be exempt under article 79 from damages for delivering defective grape vine wax . The
seller argued it was exempt because the wax was produced by a third party supplier that had
shipped it directly to the buyer. A lower court denied the seller's claim because it found that
the seller should have tested the wax, which was a new product, in which event it would have
discovered the problem.[86] Hence, the court reasoned, the supplier's faulty production was not
an impediment beyond its control. On appeal to a higher court, the seller argued that all vine
wax from its supplier was defective that year, so that even if it had sold a traditional type (which
it presumably would not have had to examine) the buyer would have suffered the same loss.[87]
The court dismissed the argument because it rejected the lower court's reasoning: according
to the court, the seller's responsibility for defective goods supplied by a third party did not
depend on its failure to fulfill an obligation to examine the goods; rather, the seller's liability
arose from the fact that, unless agreed otherwise, sellers bear the "risk of acquisition", and the
examine them before delivery. The court apparently found that, even if the seller had sold
defective vine wax that it was not obliged to examine, the default would still not have been
caused by an impediment that met the requirements of article 79.
20.	Several decisions assert that article 79(1) -- in particular the language indicating that
a party is exempt "if he proves that the failure [to perform] was due to an impediment beyond
his control ..." -- expressly allocates the burden of proving the requirements for exemption
to the party claiming the exemption, thus also establishing that questions concerning the burden
of proof are matters within the scope of the Convention.[88] Such decisions also maintain that
article 79(1) evidences a general principle of the Convention allocating the burden of proof to
the party who asserts a claim or who invokes a rule, exception or objection, and that this
general principle can be used, pursuant to CISG article 7(2), to resolve burden of proof issues
that are not expressly dealt with in the Convention.[89] The approach and/or language of several
other decisions strongly imply that the burden of proving the elements of an exemption falls to
the party claiming the exemption.[90]
21.	Article 79(2) imposes special requirements if a party claims exemption because its own
failure to perform was "due to the failure by a third person whom he has engaged to perform
the whole or a part of the contract". Where it applies, article 79(2) demands that the
requirements for exemption under article 79(1) be satisfied with respect to both the party
claiming exemption and the third party before an exemption should be granted. This is so even
though the third party may not be involved in the dispute between the seller and the buyer (and
hence the third party is not claiming an exemption), and even though the third party's obligations
may not be governed by the Sales Convention. The special requirements imposed by article
79(2) increase the obstacles confronting a party claiming exemption, so that it is important to
know when it applies. A key issue, in this regard, is the meaning of the phrase "a third person
whom he [i.e., the party claiming exemption] has engaged to perform the whole or a part of the
contract". Several cases have addressed the question whether a supplier to whom the seller
looks to procure or produce the goods is covered by the phrase, so that a seller who claims
exemption because of a default by such a supplier would have to satisfy article 79(2).[91] In one
decision, a regional appeals court held that a manufacturer from whom the seller ordered vine
wax to be shipped directly to the buyer was not within the scope of article 79(2), and the
seller's exemption claim was governed exclusively by article 79(1).[92] On appeal, the court
avoided the issue, suggesting that the seller did not qualify for exemption under either article
79(1) or 79(2).[93] An arbitral tribunal has suggested that article 79(2) applies when the seller
claims exemption because of a default by a "sub-contractor" or of the seller's "own staff", but
not when the third party is a "manufacturer or sub-supplier".[94] On the other hand, another
arbitral tribunal assumed that a fertilizer manufacturer with whom a seller contracted to supply
the goods and to whom the buyer was instructed to send specified types of bags for shipping
the goods was covered by article 79(2).[95] It has also been suggested that a carrier whom the
seller engaged to transport the goods is the kind of third party that falls within the scope of
article 79(2).[96]
22.	Article 79(5) of the Convention specifies that a successful claim to exemption protects
a party from liability for damages, but it does not preclude the other party from "exercising any
right other than to claim damages". Claims against a party for damages have been denied in
those cases in which the party qualified for an exemption under article 79.[97] A seller's claim to
interest on the unpaid part of the contract price has also been denied on the basis that the buyer
had an exemption for its failure to pay.[98] In one decision it appears that both the buyer's claim
to damages and its right to avoid the contract were rejected because the seller's delivery of
non-conforming goods "was due to an impediment beyond its control", although the court
permitted the buyer to reduce the price in order to account for the lack of conformity.[99]
23.	Article 79 is not excepted from the rule in article 6 empowering the parties to "derogate
from or vary the effect of" provisions of the Convention. Decisions have construed article 79
in tandem with force majeure clauses in the parties' contract. One decision found that a seller
was not exempt for failing to deliver the goods under either article 79 or under a contractual
force majeure clause, thus suggesting that the parties had not preempted article 79 by agreeing
to the contractual provision.[100] Another decision denied a buyer's claim to exemption because
the circumstances that the buyer argued constituted a force majeure were not found in an
exhaustive listing of force majeure situations included in the parties' contract.[101]
1. [GERMANY Amtsgericht [Lower Court] Charlottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>]. 2. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at
<http://cisgw3.law.pace.edu/cases/970704g1.html>]; [BELGIUM Rechtbank van Koophandel
[Commercial Court] 2 May 1995, available online at
<http://cisgw3.law.pace.edu/cases/950502b1.html>]; CLOUT case No. 277 [GERMANY
Oberlandesgericht [Appellate Court] Hamburg 28 February 1997, available online at
<http://cisgw3.law.pace.edu/cases/970228g1.html>] (suggesting that a seller can be exempt from liability for failure to deliver only if suitable goods were no longer available in the market); CLOUT
case No. 54 [ITALY Tribunale Civile [District Court] Monza 14 January 1993, available online
at <http://cisgw3.law.pace.edu/cases/930114i3.html>]. But see [GERMANY Amtsgericht [Lower
Court] Charlottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>], where the court implied that article 79
imposes something less than an impossibility standard when it held that the buyer was exempt from
interest for a delayed payment of the price even though timely payment was clearly possible - albeit
not reasonably to be expected in the circumstances, according to the court.
3. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996,
available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> /
<http://cisgw3.law.pace.edu/cases/960621g1.html>]. 4. CLOUT case No. 54 [ITALY Tribunale Civile [District Court] Monza 14 January 1993,
available online at <http://cisgw3.law.pace.edu/cases/930114i3.html>] (see full text of the
5. CLOUT case No. 47 [GERMANY Landgericht [District Court] Aachen 14 May 1993, available
online at <http://cisgw3.law.pace.edu/cases/930514g1.html>] (see full text of the decision).
6. CLOUT case No. 54 [ITALY Tribunale Civile [District Court] Monza 14 January 1993,
available online at <http://cisgw3.law.pace.edu/cases/930114i3.html>]. 7. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]. 8. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>]. 9. See CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
1996, available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> /
<http://cisgw3.law.pace.edu/cases/960621g1.html>] (in discussing application of article 79, tribunal
asserts "[o]nly the apportionment of the risk in the contract is relevant here") (see full text of the
decision); CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24
March 1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>] ("The
possibility of exemption under CISG article 79 does not change the allocation of the contractual
risk"). For other cases suggesting or implying that the question of exemption under article 79 is
fundamentally an inquiry into the allocation of risk under the contract, see [NETHERLANDS
Rechtsbank [District Court] 's-Hertogenbosch 2 October 1998, available online at
<http://cisgw3.law.pace.edu/cases/981002n1.html>]; [BELGIUM Rechtbank van Koophandel
[Commercial Court] Hasselt 2 May 1995, available online at
<http://cisgw3.law.pace.edu/cases/950502b1.html>]; [BULGARIA Arbitration Award case No.
11/1996 of 12 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980212bu.html>] CLOUT case No. 102 [ICC International
Court of Arbitration, case No. 6281 of 1989, available online at
<http://cisgw3.law.pace.edu/cases/896281.html>] CLOUT case no. 277 [GERMANY
<http://cisgw3.law.pace.edu/cases/970228g1.html>] [ICC International Court of Arbitration,
case No. 8128 of 1995, available online at <http://cisgw3.law.pace.edu/cases/958128i1.html>]
CLOUT case No. 410 [GERMANY Landgericht [District Court] 12 May 1995, available online
at <http://cisgw3.law.pace.edu/cases/950512g1.html>] 10. See CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
<http://cisgw3.law.pace.edu/cases/960621g1.html>](see full text of the decision).
11. CLOUT case No. 163 [HUNGARY Budapest Arbitration Award, case No. Vb96074 of 10
December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>].
12. CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 10
February 1999, available online at <http://cisgw3.law.pace.edu/cases/990210.html>] 13. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>] seller granted exemption from damages for
delivery of non-conforming goods, although the court ordered the seller to give the buyer a partial
refund); CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 10
February 1999, available online at <http://cisgw3.law.pace.edu/cases/990210s1.html>] (seller
found exempt from damages for late delivery of goods).
14. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>]; [NETHERLANDS
Rechtbank [District Court] 's-Hertogenbosch 2 October 1998, available online at
<http://cisgw3.law.pace.edu/cases/981002n1.html>]; [GERMANY Bundesgerichtshof [Federal
Supreme Court] 24 March 1999, available online at
<http://cisgw3.law.pace.edu/cases/990324.html>], affirming (on somewhat different reasoning)
CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31 March
1998, available online at <http://cisgw3.law.pace.edu/cases/980331g1.html>]; [BULGARIA
Arbitration Award, case No. 56/1995 of 14 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960414bu.html>]; CLOUT case No. 277 [GERMANY
Oberlandesgericht [Appellate Court] 28 February 1997, available online at
<http://cisgw3.law.pace.edu/cases/970228g1.html>]; [ICC International Court of Arbitration,
case no. 8128 of 1995, available online at <http://cisgw3.law.pace.edu/cases/958128i1.html>];
CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996,
<http://cisgw3.law.pace.edu/cases/960621g1.html>], [GERMANY Landgericht [District Court]
Ellwangen 21 August 1995, available online at
<http://cisgw3.law.pace.edu/cases/950821g2.html>]. See also CLOUT case No. 102 [ICC
International Court of Arbitration, case No. 6281 of 1989, available online at
<http://cisgw3.law.pace.edu/cases/896281i1.html>] (tribunal applies Yugoslav national doctrines,
but also indicates that exemption would have been denied under article 79).
15. [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997, available online at
<http://cisgw3.law.pace.edu/cases/970122r1.html>] (buyer that had paid price for goods granted
exemption for damages caused by its failure to take delivery); [GERMANY Amtsgericht [Lower
Court) Charlottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>] (buyer granted exemption from liability for
interest and damages due to late payment).
16. CLOUT case No. 142 [RUSSIA Arbitration Award case No. 123/1992 of 17 October 1995,
available online at <http://cisgw3.law.pace.edu/cases/951017r1.html>]; [RUSSIA High Arbitration
Court, Information Letter No. 29 of 16 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980216r1.html>]; [BELGIUM Rechtbank van Koophandel
<http://cisgw3.law.pace.edu/cases/950502b1.html>]; [BULGARIA Arbitration Award, case No.
<http://cisgw3.law.pace.edu/cases/980212bu.html>]; CLOUT case No. 410 [GERMANY
Landgericht [District Court] Alsfeld 12 May 1995 , available online at
<http://cisgw3.law.pace.edu/cases/950512g1.html>]; CLOUT case No. 104 [ICC International
Court of Arbitration, case No. 7197 of 1993, available online at
<http://cisgw3.law.pace.edu/cases/937197i1.html>]. 17. CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31
March 1998, available online at <http://cisgw3.law.pace.edu/cases/980331g1.html>].
18. CLOUT case No. 271 [GERMANY Bundesgerichshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]. 19. [GERMANY Bundesgerichtshof [Federal Supreme Court] 9 January 2002, available online at
<http://cisgw3.law.pace.edu/cases/020109g1.html>]. 20. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>]. 21. CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 10
February 1999, available online at <http://cisgw3.law.pace.edu/cases/990210s1.html>]. 22. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/98-119f1.html>]. 23. [GERMANY Amtsgericht [Lower Court] Chalottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>]. 24. [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997, available online at
<http://cisgw3.law.pace.edu/cases/970122r1.html>]. 25. CLOUT case No. 142 [RUSSIA Arbitration Award case No. 123/1992 of 17 October 1995,
Court, Information Letter 29 of 16 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980216r1.html>]; CLOUT case No. 163 [HUNGARY Budapest
Arbitration Award case No. Vb 96074 of 10 December 1996, available online at
<http://cisgw3.law.pace.edu/cases/961210h1.html>]; [BULGARIA Arbitration Award case No.
Landgericht [District Court] Alsfeld 12 May 1995, available online at
<http://cisgw3.law.pace.edu/cases/950512g1.html>]. 26. CLOUT case No. 104 [ICC International Court of Arbitration, case No. 7197 of 1993,
available online at <http://cisgw3.law.pace.edu/cases/937197i1.html>]; [BELGIUM Rechtbank van
Koophandel [Commercial Court] Hasselt 2 May 1995, available online at
<http://cisgw3.law.pace.edu/cases/950502b1.html>]. 27. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
<http://cisgw3.law.pace.edu/cases/981002n1.html>]; [GERMANY Oberlandesgericht [Appellate
Court] Hamburg 4 July 1997, available online at <http://cisgw3.law.pace.edu/cases/970404g1.html
>]; CLOUT case No. 102 [ICC International Court of Arbitration, case No. 6281 of 1989,
available online at <http://cisgw3.law.pace.edu/cases/896281i1.html>] ; [BULGARIA Arbitration
Award case No. 56/1995 of 24 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960424bu.html>]; CLOUT case No. 277 [GERMANY
<http://cisgw3.law.pace.edu/cases/970228g1.html>] ; [ICC International Court of Arbitration,
CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996
, available online at <http://cisgw3.law.pace.edu/cases/960321g1.html> /
<http://cisgw3.law.pace.edu/cases/960621g1.html>]. 28. CLOUT case No. 271 [GERMANY Bundestgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]; [GERMANY
Landgericht [District Court] Ellwangen 21 August 1995, available online at
<http://cisgw3.law.pace.edu/cases/950821g2.html>] . See also [NETHERLANDS Rechtbank
[District Court] 's-Hertogenbosch 2 October 1998, available online at
<http://cisgw3.law.pace.edu/cases/981002n1.html>] (denying exemption for seller that failed to
deliver because it could not acquire conforming goods)
29. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
<http://cisgw3.law.pace.edu/cases/960821g1.html>]. 30. CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31
March 1998, available online at <http://cisgw3.law.pace.edu/cases/980331g1.html>]. The court
nevertheless denied the seller claim of exemption on the facts of the particular case.
31. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]. For further
discussion of the question whether a seller can claim exemption under article 79 for delivery of non-conforming goods, see supra para. 8.
32. [GERMANY Bundesgerichtshof [Federal Supreme Court] 9 January 2002, available online at
<http://cisgw3.law.pace.edu/cases/020109g1.html>]. 33. [BULGARIA Arbitration Award case No. 56/1995 of 24 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960424bu.html>]. The seller also claimed exemption for failing
to deliver the goods (coal) because of a strike by its country's coal miners, but the court denied
the claim because the seller was already in default when the strike occurred.
34. [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997, available online at
<http://cisgw3.law.pace.edu/cases/970122r1.html>]. 35. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>]. 36. CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] 10 February
1999, available online at <http://cisgw3.law.pace.edu/cases/990210s1.html>] (see full text of the
37. [GERMANY Amtsgericht [Lower Court] Charlottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>]. 38. CLOUT case No. 142 [RUSSIA Arbitration Award case No. 123/1992 of 17 October 1995,
available online at <http://cisgw3.law.pace.edu/cases/951017r1.html>]. 39. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>]. 40. [BULGARIA Arbitration Award case No. 11/1996 of 12 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980212bu.html>]. 41. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
<http://cisgw3.law.pace.edu/cases/960621g1.html>].
42. [RUSSIA High Arbitration Court: Information Letter No. 29 of 16 February 1998, available
online at <http://cisgw3.law.pace.edu/cases/980216r1.html>. 43. [NETHERLANDS Rechtsbank [District Court] 's-Hertogenbosch 2 October 1998, available
online at <http://cisgw3.law.pace.edu/cases/981002n1.html>]. 44. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at
<http://cisgw3.law.pace.edu/cases/970704g1.html>]. 45. [BELGIUM Rechtbank van Koophandel [Commercial Court] 2 May 1995, available online
at <http://cisgw3.law.pace.edu/cases/950502b1.html>]. 46. CLOUT case No. 163 [HUNGARY Budapest Arbitration Award case No. Vb 96074 of 10
December 1996, available online at <http://cisgw3.law.pace.edu/cases/961210h1.html>]. 47. CLOUT case No. 54 [ITALY Tribunale Civile [District Court] Monza 14 January 1993,
available online at <http://cisgw3.law.pace.edu/cases/930114i3.html>]. 48. CLOUT case No. 277 [GERMANY Oberlandesgericht [Appellate Court] Hamburg 28
February 1997, available online at <http://cisgw3.law.pace.edu/cases/970228g1.html>].
49. [ICC International Court of Arbitration, case No. 8128 of 1995, available online at
<http://cisgw3.law.pace.edu/cases/958128i1.html>]. 50. CLOUT case No. 410 [GERMANY Landgericht [District Court] Alsfeld 12 May 1995,
available online at <http://cisgw3.law.pace.edu/cases/950512g1.html>]. 51. CLOUT case No. 104 [ICC International Court of Arbitration, case No. 7197 of 1992,
available online at <http://cisgw3.law.pace.edu/cases/927197i1.html>]. 52. [GERMANY Landgericht [District Court] Ellwangen 21 August 1995, available online at
<http://cisgw3.law.pace.edu/cases/950821g2.html>]. An arbitral panel noted on the basis of
domestic Yugoslavian law that a 13.16% rise in the cost of steel - which the tribunal found as a
predictable development - would not exempt the seller from liability for failing to deliver the steel
(the panel suggested that the domestic Yugoslavian law was consistent with art. 79); see CLOUT
case No. 192 [ICC International Court of Arbitration, case No. 6281 of 1989, available online
at <http://cisgw3.law.pace.edu/cases/896281i1.html>] (see full text of the decision).
53. This situation also raises issues concerning; the applicability of article 79(2) - a topic that is
discussed infra, para. 21.
54. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>]; [GERMANY Hamburg
Arbitration Award of 21 March / 21 June 1996, available online at
<http://cisgw3.law.pace.edu/cases/960321g1.html> /
<http://cisgw3.law.pace.edu/cases/960621g1.html>]; [ICC International Court of Arbitration,
CLOUT case No. 277 [GERMANY Oberlandesgericht [Appellate Court] Hamburg 28 February
1997, available online at <http://cisgw3.law.pace.edu/cases/970228g1.html>]. 55. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]; [FRANCE Tribunal
de Commerce [District Court] Besançon 19 January 1998, available online at
<http://cisgw3.law.pace.edu/cases/980119f1.html>]. 56. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/960316r1.html>; CLOUT case No.
[GERMANY Oberlandesgericht [Appellate Court] Hamburg 28 February 1997, available online
at <http://cisgw3.law.pace.edu/cases/970228g1.html>]; [ICC International Court of Arbitration,
<http://cisgw3.law.pace.edu/cases/960621g1.html>]. In another case, the seller claimed that
chemical contamination of the goods did not result from its processing, but the court declared that
the source of the contamination was irrelevant for purposes of article 79; see [GERMANY
<http://cisgw3.law.pace.edu/cases/950821g2.html>]. 57. CLOUT case No. 271 [GERMANY Bundesterichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990524g1.html> (see full text of the
58.The lower court opinion is CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate
Court] Zweibrücken 31 March 1998, available online at
<http://cisgw3.law.pace.edu/cases/980321g1.html>. Another case also suggested that a seller's
opportunity to discover a lack of conformity by pre-delivery inspection was relevant in determining
the seller's entitlement to exemption under article 79; see [GERMANY Landgericht [District Court]
<http://cisgw3.law.pace.edu/cases/950821g2.html>]. 59. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>. For discussion of the requirement that an
impediment be beyond a party's control as applied to situations in which a seller's failure of
performance is due to a default by its supplier, see para. 16 infra.
60. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at
<http://cisgw3.law.pace.edu/cases/970704g1.html>]; CLOUT case No. 102 [ICC International
<http://cisgw3.law.pace.edu/cases/896281i1.html>]; CLOUT case No. 277 [GERMANY Hamburg
<http://cisgw3.law.pace.edu/cases/960621g1.html>. See also CLOUT case No. 54 [ITALY
Tribunale Civile [District Court] Monza 14 January 1993, available online at
<http://cisgw3.law.pace.edu/cases/930114i3.html>] (court's opinion concerning whether article
79 would exempt a seller from liability for non-delivery where the market price of the goods rose
"remarkably and unforeseeably" after the contract was concluded).
61. [BELGIUM Rechtbank van Koophandel [Commercial Court] Hasselt 2 May 1995, available
online at <http://cisgw3.law.pace.edu/cases/950502b1.html>]; [BULGARIA Arbitration Award
case No. 11/1996 of 12 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980212bu.html>]. 62. See [BULGARIA Arbitration Award case No. 11/1996 of 12 February 1998, available online
at <http://cisgw3.law.pace.edu/cases/980212bu.html>]; CLOUT case No. 102 [ICC International
<http://cisgw3.law.pace.edu/cases/896261i1.html> ; CLOUT case No. 277 [GERMANY
<http://cisgw3.law.pace.edu/cases/970228g1.html>; CLOUT case No.166 [GERMANY Hamburg
<http://cisgw3.law.pace.edu/cases/960621g1.html>]. 63. [BELGIUM Rechtbank van Koophandel [Commercial Court] Hasselt 2 May 1995, available
online at <http://cisgw3.law.pace.edu/cases/950502b1.html>]. 64. CLOUT case No. 277 [GERMANY Oberlandesgericht [Appellate Court] Hamburg 28
February 1997, available online at <http://cisgw3.law.pace.edu/cases/970228g1.html>]. 65. CLOUT case No. 54 [ITALY Tribunale Civile [District Court] Monza 14 January 1993,
66. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at
<http://cisgw3.law.pace.edu/cases/970704g1.html>]. 67. [BULGARIA Arbitration Award case No. 11/1996 of 12 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980212bu.html>]; CLOUT case No. 102 [ICC International
<http://cisgw3.law.pace.edu/cases/896281.html>]. 68. [RUSSIA High Arbitration Court: Information Letter No. 29 of 16 February 1998, available
online at <http://cisgw3.law.pace.edu/cases/980216r1.html>]. 69. [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997, available online at
<http://cisgw3.law.pace.edu/cases/970122r1.html>]. 70. [BULGARIA Arbitration Award case No. 56/1995 of 24 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960424bu.html>] (denying an exemption because the
impediment was foreseeable at the time of the conclusion of the contract).
71. For further discussion of the application of article 79 to situations in which the seller's failure
of performance was caused by a supplier's default, see supra para. 14 and infra paras. 17, 18,
72. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>]. 73. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
<http://cisgw3.law.pace.edu/cases/960621g1.html>]. 74. CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31
March 1998, available online at <http://cisgw3.law.pace.edu/cases/980331g1.html>]. 75. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1998, available online at <http://cisgw3.law.pace.edu/cases/980324g1.html>]. A tribunal that finds
a party exempt under article 79 presumably is satisfied that the requirement that an impediment be
beyond the control of a party has been met, whether or not the tribunal expressly discusses the
element. Without discussing the requirement, the following decisions held that the prerequisites for
exemption under article 79 had been met: CLOUT case No. 331 [SWITZERLAND Handelstericht
[Commercial Court] 10 February 1999, available online at
<http://cisgw3.law.pace.edu/cases/990210s1.html>] (seller found exempt from damages for late
delivery of goods); [GERMANY Amtsgericht [Lower Court] Charlottenburg 4 May 1994, available
online at <http://cisgw3.law.pace.edu/cases/940504g1.html>] (buyer granted exemption from
liability for interest and damages due to late payment).
76. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>]. For further discussion of
the application of article 79 to situations in which the seller's failure of performance was caused by
a supplier's default, see supra paras. 14 and 16, and infra paras. 18 and 21.
77. [NETHERLANDS Rechtbank [District Court] 's-Hertogenbosch 2 October 1998, available
online at <http://cisgw3.law.pace.edu/cases/981002n1.html>]. 78. [BULGARIA Arbitration Award case No.56/1995 of 24 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960424bu.html>]. 79. CLOUT case No. 104 [ICC International Court of Arbitration, case No. 7197 of 1992,
available online at <http://cisgw3.law.pace.edu/cases/927197i1.html>] (see full text of the
80. [BELGIUM Rechtbank van Koophandel [Commercial Court] Hasselt 2 May 1995, available
online at <http://cisgw3.law.pace.edu/cases/950502b1.html>] (a significant drop in the world
market price of frozen raspberries was "foreseeable in international trade" and the resulting losses
were "included in the normal risk of commercial activities"; thus buyer's claim of exemption was
denied: [BULGARIA Arbitration Award case No. 11/1996 of 12 February 1998, available online
at <http://cisgw3.law.pace.edu/cases/980212bu.html>] (negative developments in the market for
the goods "were to be considered part of the buyer's commercial risk" and "were to be reasonably
expected by the buyer upon conclusion of the contract); CLOUT case No. 102 [ICC International
<http://cisgw3.law.pace.edu/cases/896281i1.html>] (when the contract was concluded a 13.16%
rise in steel prices in approximately three months was predictable because market prices were
known to fluctuate and had begun to rise at the time the contract was formed; although decided on
the basis of domestic law, the court indicated that the seller would therefore have been denied an
exemption under article 79 (see full text of the decision).
A tribunal that finds a party exempt under article 79 presumably believes the requirement that the
party could not reasonably have taken the impediment into account when entering into the contract
has been met, whether or not the tribunal expressly discusses that element. Although they did not
discuss the requirement, the following decisions held that the prerequisites for exemption under
article 79 had been met: CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial
Court] Zürich 10 February 1999, available online at
liability for interest and damages due to late payment); [FRANCE Tribunal de Commerce [District
Court] Besançon 19 January 1998, available online at
<http://cisgw3.law.pace.edu/cases/980119f1.html>] (seller granted exemption from damages for
refund); [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997, available online at
exemption for damages caused by its failure to take delivery).
81. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>], affirming (on
somewhat different reasoning) CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate
<http://cisgw3.law.pace.edu/cases/980331g1.html>]. In CLOUT case No. 271, the court
generalized that a supplier's breach is normally something that, for purposes of article 79, the seller
must avoid or overcome.
82. CLOUT case No. 140 [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>]. 83. For further discussion of the application of article 79 to situations in which the seller's failure
of performance was caused by a supplier's default, see supra paras. 14, 16 and 17, and infra
84. [GERMANY Oberlandesgericht [Appellate Court] Hamburg 4 July 1997, available online at
<http://cisgw3.law.pace.edu/cases/970704g1.html>]. A tribunal that finds a party exempt under article 79 presumably believes the requirements that the
party could not reasonably be expected to have avoided the impediment or to have overcome it
or its consequences have been met, whether or not the tribunal expressly discusses these elements.
Although they did not discuss these requirements, the following decisions held that the prerequisites
for exemption under article 79 had been met: CLOUT case No. 331 [SWITZERLAND
Handelsgericht [Commercial Court] Zürich 10 February 1999, available online at
online at <http://cisgw3.law.pace.edu/cases/950504g1.html>] (buyer granted exemption from
85. CLOUT case No. 104 [ICC International Court of Arbitration, case No. 7197 of 1992,
available online at <http://cisgw3.law.pace.edu/cases/927197i1.html> (see full text of the decision).
See also [BULGARIA Arbitration Award case No. 56/1995 of 24 April 1996, available online at
<http://cisgw3.law.pace.edu/cases/960424bu.html>] (seller's argument that a miners' strike should
exempt it from damages for failure to deliver coal rejected because at the time of the strike seller
was already in default).
86. CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31
87. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]. 88. CLOUT case No. 378 [ITALY Tribunale [District Court] Vigevano 12 July 2000, available
online at <http://cisgw3.law.pace.edu/cases/000712i3.html>]; [GERMANY Bundesterichtshof
[Federal Supreme Court] 9 January 2002, available online at
<http://cisgw3.law.pace.edu/cases/020109g1.html>]. The latter case, however, distinguishes the
question of the effect on the burden of proof of an extra-judicial admission of liability, viewing this
matter as beyond the scope of the Convention.
89. CLOUT case No. 378 [ITALY Tribunale [District Court] Vigevano 12 July 2000, available
online at <http://cisgw3.law.pace.edu/cases/000712i3.html>; [GERMANY Bundesgerichtshof
<http://cisgw3.law.pace.edu/cases/020109g1.html>]; CLOUT case No. 380 [ITALY Tribunale
[District Court] Pavia 29 December 1999, available online at
<http://cisgw3.law.pace.edu/cases/991229i3.html>] (see full text of the decision).
90. CLOUT case No. [RUSSIA Arbitration Award case No. 155/1994 of 16 March 1995,
available online at <http://cisgw3.law.pace.edu/cases/950316r1.html>] (denying the seller's claim
to exemption because seller was unable to prove the required facts); CLOUT case No. 104 [ICC
International Court of Arbitration, case No. 7197 of 1992, available online at
<http://cisgw3.law.pace.edu/cases/927197i1.html> (denying the buyer's exemption claim because
buyer did not prove that its failure to perform was caused by the impediment); CLOUT case No.
166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June 1996, available online at
<http://cisgw3.law.pace.edu/cases/960621g1.html>] (tribunal uses language suggesting that the
seller, who was claiming an exemption, had to submit the facts to substantiate the claim).
91. The application of the requirements of article 79(1) to situations in which a seller claims
exemption because its supplier defaulted on its own obligations to the seller is discussed supra
paras. 14, 16, 17 and 18.
92. CLOUT case No. 272 [GERMANY Oberlandesgericht [Appellate Court] Zweibrücken 31
March 1998, available online at <http://cisgw3.law.pace.edu/cases/980331g1.html>]. 93. CLOUT case No. 271 [GERMANY Bundesgerichtshof [Federal Supreme Court] 24 March
1999, available online at <http://cisgw3.law.pace.edu/cases/990324g1.html>]. 94. CLOUT case No. 166 [GERMANY Hamburg Arbitration Award of 21 March / 21 June
<http://cisgw3.law.pace.edu/cases/960621g1.html>] (see full text of the decision).
95. [ICC International Court of Arbitration, case No. 8128 of 1995, available online at
<http://cisgw3.law.pace.edu/cases/958128i1.html>]. 96. CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 10
February 1999, available online at <http://cisgw3.law.pace.edu/cases/990210s2.html>]. 97. CLOUT case No. 331 [SWITZERLAND Handelsgericht [Commercial Court] Zürich 10
February 1999, available online at <http://cisgw3.law.pace.edu/cases/990210s1.html>] (see full
text of the decision); [RUSSIA Arbitration Award case No. 155/1996 of 22 January 1997,
available online at <http://cisgw3.law.pace.edu/cases/970122r1.html>].
98. [GERMANY Amtsgericht [Lower Court] Charlottenburg 4 May 1994, available online at
<http://cisgw3.law.pace.edu/cases/940504g1.html>]. 99. [FRANCE Tribunal de Commerce [District Court] Besançon 19 January 1998, available online
at <http://cisgw3.law.pace.edu/cases/980119f1.html>]. 100. CLOUT case No. 277 [GERMANY Oberlandesgericht [Appellate Court] Hamburg 28
February 1997, available online at <http://cisgw3.law.pace.edu/cases/970228g1.html>]. 101. CLOUT case No. 142 [RUSSIA Arbitration Award case No. 123/1992 of 17 October
1995, available online at <http://cisgw3.law.pace.edu/cases/951017r1.html>]; [RUSSIA High
Arbitration Court: Information Letter No. 29 of 16 February 1998, available online at
<http://cisgw3.law.pace.edu/cases/980216r1.html>]. ANALYSIS OF CISG CASE LAW
3. Impediment (Excuse) to Performance: Article 79
A buyer may still be barred from recovering foreseeable damages if the defendant seller can prove that
non-performance was due to an impediment. Under Article 79, a party will not be held liable for
failure to perform his contractual 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.[783] A party may also be excused from performance, under limited circumstances,
if the failure to perform is due to the failure of a third person.[784] As is the case with avoidance,
a party who fails to perform because of an impediment must provide notice to the other party within
a "reasonable time" after the party who fails to perform knew or ought to have known of the
impediment.[785] If the other party does not receive such notice, then the party who fails to
perform will be liable for damages that could have been avoided if proper notice had been given.
To be excused, the circumstances constituting the impediment must be [page 424] beyond the party's
control.[787] The burden of proof is on the non-performing party to prove the circumstances
entitling it to an excuse from liability.[788] For example, a seller who fully performed his
obligations under the contract, then placed the goods in the hands of a carrier, was not held liable for
the carrier's failure to deliver on time.[789]
As a general rule, however, national courts are not inclined to excuse a party for an impediment to
performance.[790] A party cannot rely on the exemption merely on the ground that performance
has become unforeseeably more difficult or unprofitable.[791] For example, in International
Chamber of Commerce Case 6281 of 1989,[792] an arbitration panel held that a seller could not
be relieved of the obligation to deliver the goods at the contract price due to a change in the market
price. It reasoned that the increase in the market price was neither sudden nor unforeseeable.
[793] In another case involving the sale of defective powdered milk, the German Supreme Court
held that the seller could only be freed from its obligation to pay damages by proving that the
infestation of the delivered milk could not have been detected and that the probable source of
infestation was outside of its sphere of influence.[794]
Other circumstances where parties were not granted an excuse under Article 79 include the buyer's
inability to obtain foreign currency,[795] "hardship" caused by an almost 30% increase in the cost
of goods,[796] [page 425] inability to deliver the goods because of an emergency production
stoppage,[797] and financial difficulties of the seller's main supplier.[798] In cases of
shortage, a seller can only claim impediment if goods of an equal or similar quality are no longer
available on the market. In the case of price fluctuations, the seller is allocated the risk of increasing
market prices at the time of the substitute transaction. As is evidenced by these representative cases,
a high standard is set for a party to successfully claim excuse due to impediment. [page 426]
783. CISG, supra note 4, at art. 79(1).
784. Id. at art. 79(2). To be excused from performance due to the failure by a third party, both
the party to the contract and the third party must be able to meet the requirements of Article 79(1).
785. Id. at art. 79(4).
786. Id.
787. Id. at art. 77; Constitutional Court of the Russian Federation No. 7-P, Apr. 27, 2001
(Russ.), available at <http://cisgw3.law.pace.edu/cases/010427r1.html> [English translation by Yelena Kalika].
788. Trib. di Vigevano, July 12, 2000, n. 405, supra note 39.
789. HG Zürich, HG 97 0238.1, Feb. 10, 1999 (Switz.), available at
<http://cisgw3.law.pace.edu/cases/990210s1.html> [English translation by Ruth M. Janal].
790. See, e.g., BGH VIII ZR 121/98, Mar. 24, 1999, supra note 95. The German Supreme
Court considered a seller's liability for the delivery of non-conforming goods when the seller was only
acting as an intermediary. In that case, the non-conformity was caused during the time the goods
were in the control of either his supplier or his supplier's supplier.
791. See generally Dionysios Flambouras, Remarks on the Manner in Which the PECL may be
Used to Interpret or Supplement Article 79 CISG (May 2002), available at
<http://cisgw3.law.pace.edu/cisg/text/anno-art-79.html> (the drafting history of the CISG reveals that
Article 79 is a stricter version of its predecessor which was criticized for excusing non-performance
too readily, such as where performance merely became more difficult). See generally FCF S.A. v.
Adriafil Commerciale S.r.l., BGE, supra note 646 (determinative facts do not reveal the existence of
circumstances that may constitute an unforeseeable or unavoidable impediment or an obstacle that
the party could not have reasonably overcome).
792. ICC International Court of Arbitration no. 6281, Aug. 26, 1989, available at
<http://cisgw3.law.pace.edu/cases/896281i1.html>.
793. Id.
794. BHG VIII ZR 304/00, Jan. 9, 2002, supra note 289.
795. ICA Arbitral Tribunal 123/1992, Oct. 17, 1995 (Russ.), CLOUT Case No. 142, available at <http://cisgw3.law.pace.edu/cases/951017r1.html> [English translation by Yelena Kalika, translation edited by Mykhaylo Danylko].
796. Nuova Fucinati S.p.A. v. Fondmetal International A.B., Tribunale Civile [District Court]
di Monza, 4267/88, Jan. 14, 1993 (It.), available at <http://cisgw3.law.pace.edu/cases/930114i3.html> [English translation by Alessandra Michelini].
797. ICA Arbitral Tribunal 155/1994, Mar. 16, 1995, (Russ.), CLOUT Case No. 140, available at [<http://cisgw3.law.pace.edu/cases/950316r1.html>] [English translation by Yelena Kalika].
798. Schiedsgericht der Handelskammer, Hamburg 1996, 3229, Mar. 21, 1996, supra note 618. See also, OLG Hamburg 1 U 167/95, Feb. 28, 1997, supra note 704 (sellers excuse was denied when
it did not receive goods from its supplier). The seller would only be able to claim impediment if
goods of an equal or similar quality are no longer available on the market; furthermore, it is also
incumbent on a seller to bear the risk of increasing market prices at the time of the substitute
transaction. Id. The court also held that although the market price had risen to triple the agreed-upon priced, this did not amount to a "sacrificial sale price," as the transaction (sale of iron-molybdenum from China) was said to be highly speculative. Id.
Comparison between provisions of the CISG regarding exemption of liability for damages (Art. 79) and the counterpart provisions of the UNIDROIT Principles (Art. 7.1.7)
Exemption of liability for damages when the party claiming impossibility is a third-party supplier
of the seller: Why this was omitted from Article 7.1.7 of the UNIDROIT Principles?
1. The similarities between the counterpart provisions of the CISG and the
UNIDROIT Principles are made obvious in the preceding comparative chart that,
although paying no heed to the order of the paragraphs of Article 79 CISG, places in
parallel the individual paragraphs of Article 7.1.7 of the UNIDROIT Principles on
2. Aside from minor differences in syntax, the most noticeable difference is the absence of a
counterpart to CISG Art. 79(2) in the UNIDROIT Principles. This omission reflects the gap
between the assumed function that this paragraph was to take in the mind of its drafters and the
misunderstandings and complexities inherent in the distinction of excuses based on the failure of a
third person to perform. One can also notice the difference in phraseology between the last
paragraph included in both instruments: CISG Art. 79(5) is expressed in terms of limiting the
exemption to liability for damages, whereas UNDROIT Principles Art. 7.1.7(4) refers to the
availability of the non-breaching party, in case the other party's non-performance is excused, to
terminate, withhold performance or request interest on money due.
3. Another, less noticeable yet more significant, difference between both instruments is that the
UNIDROIT Principles also contain provisions on hardship (Chapter 6, Section 2, Articles 6.2.1,
6.2.2 and 6.2.3), a subject not specifically addressed in the CISG. This absence bears a
consequence in the interpretation of both texts, even though both seemingly address the same issue.
II. Exemption of liability for damages when the party claiming impossibility is a third-party supplier of the seller: Why this was omitted from Article 7.1.7 of the UNIDROIT Principles?
1. When the failure to deliver conforming goods results from the failure to perform on part of "a
third person whom (the seller) has engaged to perform the whole or part of the contract," it seems
sensible not to exempt the seller from liability because, except in extreme cases,[1] the seller is the
party who is in the best position to avoid or minimize non-compliance by someone whom he himself
"has engaged to perform all or part of the contract" [emphasis added]. Those whom the seller
"has engaged" include parties providing the seller with raw materials or semi-manufactured parts;
namely, those that may fall under the generic rubric of "ancillary suppliers" of the seller. They are
deemed to be within the seller's sphere of influence, and the seller is held responsible for the
conformity caused by those employed by him to perform the contract. In other words, the seller
cannot be exempted of liability vis-à-vis the buyer, even if those ancillary suppliers are in a position
to invoke successfully the defense of force majeure.
2. Some delegations, however, pushed for the inclusion of a second paragraph to Article 79 in
order to tighten the prerequisites of the excuse in case the seller engages a sub-contractor or a third
party who is not deemed to be within his sphere of influence.[2] Thus, CISG Article 79(2) seeks to
tighten the conditions under which a seller may claim the defense of impossibility or force majeure
whenever the defect in performance is attributed to an "independent" third person within the
meaning of Article 79(2), that is, a third person genuinely outside the seller's organizational
structure and sphere of control who, though not employed by the seller, is nevertheless "engaged"
3. Thus, whereas CISG Article 79(2) is meant to apply whenever the seller claims an exemption
of liability for damages due to defects in performance resulting from a failure to perform by a "third
person" (i.e., those who are independently engaged to perform the whole or part of the contract),
Article 79(1) addresses a situation where the seller claims an exemption of liability due to the
misconduct of a general supplier or some other "third person" employed by the seller. 4. The assumed function of CISG Article 79(2) is that the seller's liability stretches to answer for
the conduct of such "independent" third person unless the impediment was insuperable for the seller
and, additionally, the independent third person would himself qualify for exemption under Article
79(1). Thus, Article 79(2) is meant to increase the seller's liability, because the prerequisites for
exemption must be met cumulative by both the seller and the third person. From the buyer's
perspective this means, for all practical purposes, that the seller is in principle responsible for
defective performance incurred by independent third persons as if it were the seller's own conduct.
It appears then that the failure to perform by a third person, supposing such third person is within
the meaning of CISG Art. 79(2), will seldom lead to the exemption of he party to the main
contract. 5. Although it seems more difficult for the defaulting party to be exempted of liability for the acts
of an "independent" third person under Article 79(2), than to be exonerated for the delivery of non-conforming goods procured from or manufactured by a supplier whom the seller has engaged to
deliver conforming goods, the fact of the matter is that it is not easy to distinguish between both
types of "third persons". More important, under either the first or second paragraph of CISG
Article 79 the third person's failure to perform will seldom lead to the exemption of the party to the
main contract. 6. In those cases where a supplier chosen by the seller had failed to deliver the promised goods,
courts and arbitral tribunals held that the seller was not exempted, even in cases where the failure
to deliver was unforeseeable by the seller. Decisions vary, however, as to the method followed by
the courts to subsume the seller's exemption of liability under Article 79. Some courts place the
analysis of whether the seller qualifies for such an exemption under paragraph (1) of Article 79;[3] other tribunals prefer to examine the seller's exoneration under paragraph (2) of Article 79;[4] and
still others opt for deciding the issue on the basis of Article 79 in the abstract.[5] Indeed, the analysis
undertaken by the Federal Supreme Court of Germany on March 24, 1999, suggests that those
differences are not so great: "From the buyer's point of view, it makes no difference whether the
seller produces the goods himself - with the consequence that the non-performance is generally
in his actual control so that, as a rule, a dispensation pursuant to CISG Art. 79(1) is generally
excluded - or whether the seller obtains the goods from suppliers ...".[6]
7. Therefore, even if a party's excuse due to the failure of an independent "third person" is likely
to be more difficult to be established under the "double force majeure" solution provided in CISG
Art. 79(2) than if the situation were solely appraised under CISG Art. 79(1), the latter provision
should suffice to take care of all possible scenarios of force majeure -- not only when the
defaulting party was to perform himself or with the aid of employees or his staff, but also whenever
his performance is conditioned upon performance by a third party. Even if that third party's failure
to perform may be excused vis à vis the defaulting party, the latter is still bound to avoid or
overcome such impediment vis-à-vis the non-defaulting party to the contract, so that dispensation
under Article 79(1) is excluded. This is so because the internal relationship between the third party
and the defaulting party is irrelevant to the other contracting party.
8. It does not make much of a difference, in other words, whether the excuse is sought to be
found under the first or second paragraph of Article 79, and even assuming that a distinction
between the different types of third parties were warranted, the difficulty in distinguishing between
an excuse grounded on the failure to perform by different types of third parties (e.g., employees,
agents, suppliers, sub-contractors, etc) is not worth the candle. In essence, the "impediment" to
which CISG Article 79(1) refers suffices to cover the situation where the lack of or defective
performance is owed to the act or omission of a third party. 9. It was a wise decision on part of the drafters of the UNIDROIT Principles Article 7.1.7 not
to carry over CISG Article 79(2) into the Principles. In principle, if the seller entrusts the
manufacture or delivery of conforming goods to another person, or if the buyer entrusts the
payment to a bank or an intermediary, both seller and buyer remain responsible with the other
party.[7] CISG Article 79(1) suffices to take care of the exceptional circumstances in seller or buyer
may be exempted of liability on account of the third person's defaulting performance. III. Remedies still available to the aggrieved party when the other party's non-
1. When CISG Article 79(1) says that "a party is not liable ...", it actually means that the
defaulting party to be excused is not liable in damages; all the other remedies of the other party
remain unaffected according to CISG Article 79(5). Yet, the other remedies remain actually
available to the other party depend on the particular circumstances of the case and contractual
obligations arising under the contract.
2. Article 7.1.7(4) of the UNIDROIT Principles does not carry over the restriction found in
CISG Article 79(5) to the effect that the party who was to receive performance may be entitled
to exercise all his rights under the contract except to claim damages. Instead, the counterpart of
the UNIDROIT Principles phrases the potentially available remedies in less restrictive terms, stating
that the aggrieved party who was to receive performance from the defaulting party that succeeded
in establishing an excuse may nevertheless claim "a right to terminate the contract or to
withhold performance or request interest on money due". Indeed, remedies other than
damages are not limited to those listed in this provision of the UNIDROIT Principles, because the
right to reduce the price (CISG Art. 50) and to compel specific performance (CISG Arts. 46 and
62) may remain as available as the right to avoid or terminate (CISG Arts. 49 and 64) and the right
to collect interest on money due (CISG Art. 78).[8]
3. Indeed, there are good reasons to include price reduction as a possible available remedy in
a situation of a qualified exemption for the seller's failure to delivery conforming goods. This is one
of those instances where price reduction may well serve its purpose, which is not to compensate
the aggrieved buyer in damages, but to "preserve[e] the bargain between the parties and [...]
rebalance[e] the performance required by both sides ...".[9] 4. The exempting impediment clearly should not preclude the disappointed party from putting an
end to the contract, provided that the excused failure to perform amounts to a fundamental breach
(CISG Art. 25).If the non-performance were to be total and permanent, termination may be an
automatic consequence of the impediment, in which case it may not be necessary to require the
aggrieved party (which is the only party entitled to avoid the contract) to serve a termination notice
by a unilateral declaration.[10] Once avoidance has been declared, however, the effects of avoidance
insofar as "restitution" is concerned apply to both parties (CISG Arts. 81-84).
5. CISG Article 79(5) exempts the defaulting party of liability for damages in a negative form,
without referring expressly to the question whether the aggrieved party may be nevertheless entitled
to interest on the money that is owed to him.[11] The nature of the obligation to pay interest, as
expressed in the CISG, leads to the conclusion that an Article 79 exemption does not preclude the
aggrieved party from claiming and recovering interest. First, the purpose of the obligation to pay
interest under CISG Article 78, in addition to the obligation to pay monetary compensation for
damages, is to compensate the obligee for the financial cost experienced for not receiving payment
at the time it is due. Second, CISG Article 78 seems to distinguish between the obligation to pay
damages and the obligation to pay interest when it fixes the commencement of the obligation to pay
interest as of the moment there is delay in payment, even if the obligee has not suffered any damage
from such delay and the debtor is not liable. It is on the basis of this conceptual understanding that
UNIDROIT Principles Article 7.1.7(4) provides, though expressly, that the aggrieved party is
entitled to interest. UNIDROIT Principles Article 7.4.9(1) consistently states that "the aggrieved
party is entitled to interest ...whether or not the non-payment is excused."[12]
6. CISG Article 79(5) seems to warrant the right of the aggrieved party to claim specific
performance even if, as a result of an impediment, performance is likely to have become impossible
(e.g., the goods are destroyed or the transfer of funds has been prohibited). Of course there can
be no specific performance if the failure to perform turns on the fact that the total goods have
perished or the payment has been rendered impossible or illegal. Yet, where a temporary
impediment results in a partial non-performance or a delayed performance, then in such a case the
exemption effect is only for the period during which the impediment exists (CISG Art. 79(3);
UNIDROIT Principles Article 7.1.7(2)). In such a case, the right to performance continues to exist
and may actually encourage the parties to invest in efforts to overcome the impediments. When the
temporary impediment disappears and has no effect any longer, the exemption from specific
performance is no longer justified.
7. Both CISG Article 79(5) and UNIDROIT Principles Article 7.1.7(4) leave open the
possibility for the aggrieved party to demand specific performance, a claim that is not necessarily
affected by the impediment excusing the non-performance. To this extent, both texts do not rigidly
exclude the possibility of specific performance.[13] Whether the temporary impediment will merely
result in delayed performance or is likely to deprive the performance of most of its value is another
question concerning the impact of the temporary impediment in the overall performance, this
question is certainly not governed by this provision on force majeure and its consequences.
IV. Is there any room for an exemption of liability on account of hardship under CISG Article 79?
1. Another issue of significance in the comparison between both instruments is the absence in
CISG Article 79 of any reference to a situation, short of physical or legal impossibility, in which
performance by one party becomes extremely and totally unpredictably harsh. UNIDROIT
Principles Article 6.2.2 expressly provides for a situation of hardship, in addition to the force
majeure or impossibility scenario contemplated in Article 7.1.7, so that the defaulting party may
choose claiming one or the other excuse.[14] Did the CISG fail to include a provision on hardship
because the "impediment" referred to in its Article 79 may conceivably grant relief to a party who
finds himself or herself in a dire situation of excessive and unpredictable hardship to perform? Or
should the failure to include such a provision be interpreted as a rejection of the doctrine of
hardship under the CISG?
2. Scholarly opinion is divided on this question. Some commentators state that the wording of
Article 79 appears sufficiently flexible to include an extreme situation of unexpected hardship within
the meaning of "impediment".[15] Others opine that there is no place in the CISG for any relief on
account of economic hardship.[16] As to judicial decisions on this subject, there are too few and
inconclusive to this date to warrant a stable trend either excluding or including hardship within the
purview of CISG Article 79. Moreover, none of the reported decisions have extended the
exemption of CISG Article 79 to cases of economic hardship. However, it must be admitted that
no real "hard" cases of hardship have been presented so far.
3. The first issue to tackle is whether it is conceivable to find a situation of hardship calling for a
legal response of some kind, be it under a stretched interpretation of CISG Article 79 or the CISG
underlying general principles via Article 7(2) or under some national law that may eventually be
rendered applicable. Once we have found a proper hypothetical covering hardship, the next
question is to ascertain whether it is at all possible to deal with a genuine hardship situation via
CISG Article 79 or whether we should resign ourselves to the application of some national law
admitting relief in a situation of hardship (provided, of course that the applicable rule of private
international law would lead to the application of a domestic legal system contemplating relief for
hardship, which is not altogether certain). 4. There are not many real cases dealing with genuine situations of hardship in which courts have
found it fair to provide relief and well-grounded reasons explaining why the change in circumstances
was actually unpredictable and why one type of relief was more appropriate than others. This
notwithstanding, most commentators would not go as far as to deny the possibility that in very rare
cases, probably during truly exceptional historical periods (e.g., pre-war Germany during the
1920's) and really unstable economies or countries (e.g., hyperinflation in Argentina during the
1970's), judicial relief from a genuine hardship situation may be fairly justified. Admittedly, there
are those who think that "a contract always a contract;" and would not admit an inch of an
exception to the pacta sunt servanda. For those who share this point of view, it makes no sense
to explore any further whether CISG Article 79 could be relied upon to tackle a genuine situation
of hardship. This opinion goes on to examine the availability of a response on the assumption that
pacta sunt servanda is a principle rather than a rule, though a principle that ought to be respect
almost at all costs. It is at least conceivable that a defaulting party may be justified in obtaining some
type of relief despite the fact that the "impediment" falls short of a strict case of physical or legal
impossibility to perform. 5. Resorting to the type of scenarios designed in the comments accompanying UNIDROIT
Principles Article 6.2.2, one may envision a situation where a buyer "A", domiciled in State X,
concludes a contract of sale with a seller "B", domiciled in State Y. Payment is agreed to be made
in State Z within three months, upon delivery of the goods, in the currency of State Z. Let us
imagine that within a month of the conclusion of the contract a totally unpredictable political and
economic crisis, which the parties could not have reasonably taken into account, leads to a massive
devaluation of 80% of Z's currency, as a result of which the sale turns out extremely burdensome
for the buyer "A" and a gross windfall for the seller "B". Admittedly, it is not easy to ascertain
whether the change in circumstances could not have been reasonably foreseen. It is not an easier
task to distinguish between the risk of loss that every contracting party should be deemed to have
assumed and the extraordinary disastrous economic disadvantages amounting to a "limit of
sacrifice" (because there is indeed such a limit), beyond which the obligor should not be expected
to perform the contract as written. But if there is such a "truly hard hardship problem," i.e., a deal
unexpectedly and turned a "nightmare" for one party and a "steal" for the other, well, this is it.[17]
6. Assuming that the CISG applies to this contract, and also assuming that the foregoing
hypothetical falls squarely within a factually justified case of hardship, the most relevant question
to explore at this point is whether a case of economic hardship as this one should be settled by the
CISG, either by reading the word "impediment" in Article 79 to include economic hardship or by
concluding that there is a gap within the CISG to be filled by some underlying general principle via
the "governed-but-not-settled" gap-filling technique promoted in CISG Art. 7(2). If the CISG
applies, then it naturally preempts other potentially applicable domestic rules dealing with hardship.
But if the hardship question cannot be thus settled, then there is no alternative other than resorting
to domestic legal rules, hoping that the applicable law would provide for some risk-share allocation
of remedies. The alternative of resolving the hardship problem within the four corners of the CISG
is more palatable, because leaving the question to the conflict of law rules of the forum leads to a
great diversity of potentially applicable legal doctrines (impracticability, frustration, Wegfall der
Geschäftsgrundlage, eccesiva onerosità sopravvenuta, imprévision, etc.). Thus, the interpreter
who takes seriously the CISG's stated purpose of unifying the law of sales will probably exhaust
all technically available means to respond to the hardship problem within the "four corners" of the
Convention. 7. First, it is necessary to confirm, convincingly, that the hardship situation is not expressly or
impliedly excluded from the scope of the CISG. Second, it is important to examine the legislative
and drafting history of what is now CISG Article 79, to the extent that they may be considered
legitimate and valuable aid in its interpretation.
8. To the extent that termination or adjustment of a contract on grounds of hardship may be
regarded in some legal systems as a validity-related issue, it may be argued that the hardship issue
is excluded by CISG Article 4.[18] The argument deserves careful consideration, because in some
Scandinavian legal systems the issue of hardship appears to be approached as an issue of validity,[19]
and also because there is something to be said in favor of giving the defaulting party the benefit of
choosing among competing domestic doctrines of hardship. But this approach does not sound
convincing or persuasive. Unlike a situation of unconscionability (usury, lésion or gross disparity
of the performances at the time the contract is concluded), which clearly falls under the rubric of
validity, the hardship problem is associated in most legal systems with force majeure or
impossibility of performance, that is, a situation of exoneration or mitigation of liability due to events
subsequent to the conclusion of the contract, more than as a case of nullity or avoidance due to
infirmities or flaws affecting the contract from its inception.[20] Moreover, every benefit potentially
obtained from allowing national doctrines of hardship to compete for its application is more than
offset by the high price in terms of uniformity that is to be paid under this approach.
9. It is still necessary to trace the legislative and drafting history of the pertinent CISG provisions
to ascertain whether they are indicative of a firm intention to exclude hardship from the scope of
Article 79. The legislative history clearly indicates that Article 79 was drafted in response to the
criticism of Article 74 of the 1964 Uniform Law on International Sales, to the effect that "a party
could be too readily excused from performing his contract." But the criticism that ULIS Article 74
was insufficiently clear and subjective led to the substitution of the word "impediment" for
"circumstances," so that the conditions for exemption identified are more narrowly and objectively
under the CISG. But this legislative history is inconclusive to warrant the conclusion that CISG
Article 79 cannot exempt a party to perform, in whole or in part, when the impediment is
represented by a totally unexpected event that makes performance exceedingly difficult. 10. The exclusion (rectius: rejection) of hardship from the CISG would emerge, according to
other authors, from its drafting history.[21] Indeed, at the time the draft article that later became CISG
Article 79, the Working Group of UNCITRAL considered a proposed provision allowing a party
to claim avoidance or adjustment of a contract whenever facing unexpected "excessive damages".
After setting out the arguments in support of this proposal the Committee concluded by stating that
it was not adopted, not reappearing in subsequent discussions.[22] 11. Others have relied upon another fragment from the drafting history of the Convention, the
rejection of a Norwegian proposal linked to CISG Art. 79(3), to infer a rejection of the possibility
of extending the application of Article 79 to a situation of genuine hardship. When the issue of
temporary impediment came up for discussion, the delegation from Norway suggested the inclusion
of an additional provision to the effect that the temporary exemption from performing may turn into
a permanent one if, after the impediment ceases to exist, the circumstances had so changed that
performance would become manifestly unreasonable. The proposal gained significant support from
other delegations, but it as finally turned down after the French delegate raised his concerns that
introducing such a provision may be regarded as an acceptance of doctrines such as imprévision,
frustration of purpose, and the like.[23] Although the recollection of the discussions among the
participant delegates, or what should be made out of those discussions, is far from uniform, there
is no dispute that the issue of economic hardship was not specifically discussed in connection with
12. Speculation about what the intention of the drafting group might have been with regard to the
scope of application of CISG Article 79 is unlikely to be too accurate, especially when we are left
to our inferences from fragments in the "travaux préparatoires". Indeed, the dismissal of a
proposal which did not even address whether hardship should be given any space within the
Convention is no proper foundation upon which to build an argument on the "intention of the
legislator". If anything, the drafting history of the Convention evidences that the discussions were
not sufficiently conclusive on this question.
13. So, if Article 79(1) neither expressly or implicitly excludes the possibility of economic hardship
as an impediment that may exempt a party's failure to perform, and if it is accepted that a situation
of genuinely unexpected and radically changed circumstances, in truly exceptional cases, deserves
some legal response, then we are inclined to favor a broad interpretation of CISG Article 79 that
would preempt the application of a domestic rule on hardship, assuming that the applicable
domestic law provides for one. Thus, the next and final step is to ascertain the contours of at least
some guidelines as to what is to be understood by a genuine situation of "hardship" and,
immediately thereafter, speculate as to what may be the most appropriate remedy or relief after
hardship has been found to exist.
14. I do not think it is possible or even convenient to attempt a definition of hardship, beyond
accepting that the impediment may entail a situation of "economic impossibility" (wirtschaftliche
Unmöglichkeit) that, while short of an absolute bar to perform, imposes what in some legal
systems is conceptualized as a "limit of sacrifice" (äusseerste Opfergrenze) beyond which the
obligor cannot be reasonably expected to perform. It seems clear that in most cases market
fluctuations are not to be considered an "impediment" under CISG Article 79, because such
fluctuations are a normal risk of commercial transactions in general. Whether wild and totally
unexpected market fluctuations in goods or currency could ever become an "impediment" is
another matter. Indeed, the theoretical possibility of such radical and unexpected changes admits
the application of Article 79 in those rare instances as the one exemplified above.
15. As to the possible remedies following a finding of hardship, the analysis of this problem should
start by acknowledging that this is another "governed-but-not-settled" gap that needs to be filled
within the Convention. There are no "general principles underlying the Convention" from where to
extract the obligation of the parties to renegotiate the terms of the contract, as it would be most
likely the case if the parties had incorporated a hardship clause. Neither can one find such a widely
accepted general principle pointing to the possibility, in case negotiations fail, to "adjust," or
"revise" the terms of the contract so as to restore the balance of the performances. 16. For those who are not willing to resort to the principle of good faith buried in CISG Article
7(1) in order to find a balance of the performances,[24] CISG Article 79(5) may be relied upon to
open up the possibility for a court or arbitral tribunal to determine what is owed to each other, thus
"adapting" the terms of the contract to the changed circumstances. Other than the payment of
damages, a court or arbitral tribunal may order, if justified under the CISG, the termination of the
contract as of a certain date. Of course, it is impossible to require specific performance as called
by the contract, but a flexible method for the purposes of adjusting the terms of the contract may
be obtained by resorting to price reduction under CISG Article 50.[25] [See also commentary by the author on this subject in John Felemegas ed., An International
International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press
(2006) 236-246.]
1. For instance, if the supplier of the goods is the only available source to supply the goods, or when
supplies are unavailable to unforeseeable and extraordinary events that are not related to the typical
procurement risks assumed by a seller.
2. According to UNCITRAL's official records, tightening the conditions under which a seller could claim
exemption who sought to avoid a contract includes, among other consequences, "that a party should be
exempted from liability because he had chosen an unreliable supplier...". Commentary on the Draft
Convention on Contracts for the International Sale of Goods prepared by UNCITRAL's Secretariat, Official
Records, United Nations, New York, 1981 [hereinafter "Commentary on the 1978 Draft Convention"] � 23 at
379 par. 23 (motion by Denmark) and � 35 at 380 (comment by Norwegian delegate).
3. Germany 28 February 1997 Oberlandesgericht [Appellate Court] Hamburg, case presentation including
English translation available at <http://cisgw3.law.pace.edu/cases/970228g1.html>; Germany 21 March 1996
Schiedsgericht der Handelskammer [Arbitral Tribunal] Hamburg [partial award], case presentation
including English translation available at <http://cisgw3.law.pace.edu/cases/960321g1.html>. 4. ICC Arbitration Case No. 8128 of 1995, International Chamber of Commerce, case presentation including
English translation available at <http://cisgw3.law.pace.edu/cases/958128i1.html>.
5. Russia 16 March 1995 Arbitration proceeding 155/1994, case presentation including English translation
available at <http://cisgw3.law.pace.edu/cases/950316r1.html>. 6. Germany 24 March 1999 Bundesgerichtshof [Supreme Court], translation available at
<http://cisgw3.law.pace.edu/cases/990324g1.html> with comment by Peter Schechtriem, 15/16 Juristen
Zeitung (13 Aug. 1999) 794-97.
7. Compare European Principles of Contract Law ("PECL") Article 8:107 ("A party which entrusts
performance of the contract to another person remains responsible for performance"). See also Comments
and Notes on PECL Art. 8:107, Comment C, available at
<http://cisg.law.pace.edu/cisg/text/peclcomp79.html>.
8. Compare with PECL Art. 8:101, allowing for the aggrieved party's possibility of exercising any other
remedy with the exception of damages and performance (Where a party's non-performance is excused
under Article 8:108, the aggrieved party may resort to any of the remedies set out in Chapter 9 except
claiming performance and damages).
9. See generally, Erika Sondahl, "Understanding the Remedy of Price Reduction - A Means to Fostering a
More Uniform Application of the United Nations Convention on Contracts for the International Sale of
Goods", 7 Vindobona Journal of International Commercial Law and Arbitration (2003) 255-276, at fn. 38,
also available at <http://cisgw3.law.pace.edu/cisg/biblio/sondahl.html>.
10. Compare with PECL Art. 9:303(4) (If a party is excused under Article 8:108 through an impediment
which is total or permanent, the contract is terminated automatically and without notice at the time the
impediment arises).
11. See, e.g., Dennis Tallon in Commentary on the International Sales Law: The 1980 Vienna Sales
Convention (ed. by M. Bianca and M.J. Bonnell, Milan, 1987) at 589, also available at
<http://cisgw3.law.pace.edu/cisg/biblio/tallon-bb79.html>, in favor of exempting the excused defaulting
party from the payment of interest on the ground that the payment of interests should be considered as part
of an award of damages).
12. Compare with PECL Arts. 8:101(2) and 9:508 (Delay in payment of Money) (Interest is owed whether or
not non-payment is excused under Article 8:108).
13. Compare with PECL Art. 8:108(1) , providing that the aggrieved party may resort to any of the remedies
set by PECL Chapter 9, except claiming performance and damages.
15. See, e.g., Dennis Tallon in Commentary on the International Sales Law Article 79 at � 3.2 (1987) ("[T]he
judge will have a natural tendency to refer to similar concepts in his own law. Thus, the judge of a socialist
country will have a restrictive approach to force majeure ... On the contrary a common lawyer will feel
inclined to refer to the more flexible notions of frustration and impracticability. In the Roman-German
system, the judge will reason in terms of force majeure ..."). See also M. J. Bonell, Force majeure e hardship
nel diritto uniforme della vendita internazionale, in Diritto del commercio internazionale 590 (1990)
(observing that by requiring that the obligor "could not reasonably be expected ... to have avoided or
overcome [the impediment] or its consequences" suggests that, at least in principle, the possibility should
be entertained that performance has become so onerous that it would be unreasonable to enforce it).
16. See, e.g., Barry Nicholas, who observed that exemption of liability on account of unexpected and
excessive economic hardship was "out of place" in a sales law. Progress Report of the Working Group on
the International Sale of Goods on the Work of its Fifth Session (A/CN.9/87, Annex III, reprinted in
UNCITRAL Yearbook V: 1974 (1975) at 66).
17. See Joseph Lookofsky, Walking the Article 7(2) Tightrope Between CISG and Domestic Law,
unpublished manuscript submitted to the symposium on "25 Years United Nations Convention on
Contracts for the International Sale of Goods (CISG)", Vienna, March 15-16, 2005 (on file with the author).
18. See J. Lookofsky, Understanding the CISG in the USA (2d ed., 2004) � 2.6 and Joseph Lookofsky, "The
Limits of Commercial Contract Freedom Under the UNIDROIT 'Restatement' and Danish Law", 46
Am.J.Comp.Law 485, 496 (1998), also available at <http://cisgw3.law.pace.edu/cisg/biglio/lookofsky6.html>,
referring to the hardship provisions in the General Clause of the Danish Contracts Act, authorizing a court
to refuse enforcement or to adjust "any unreasonable contract or term, and that includes a term which
becomes unreasonable after the contract is made". Professor Lookofsky also refers to Dutch Civil Code
Article 6.258(1) as an illustration of a provision that appears to question the "validity" of a contract ("Upon
the demand of one of the parties, the court may modify the effects of a contract or it may set it aside; in
whole or in part, on the basis of unforeseen circumstances of such a nature that the other party, according
to standards of reasonableness and fairness, may not expect the contract to be maintained in unmodified
form. The modification or setting aside may be given retroactive effect.").
19. See, e.g., Tom Southerington, Impossibility of Performance and Other Excuses in International Trade,
Publication of the Faculty of Law of the University of Turku, Private law publication series B:55, also available at <http://cisgw3.law.pace.edu/cisg/biblio/southerington.html>. Southerington refers to Section
36(1) of the Finnish Contracts Act, which the author considers as a rule of validity akin to
20. This seems to be the case of Italian law, whose Article 1467 of the Codice Civile and the scholarly
doctrine surrounding it has been taken as a model in several Latin American legal systems. A much
criticized 1993 decision by the Tribunale Civile di Monza entered (unnecessarily for the purposes of the
case before the court) to examine the legal nature of hardship under Italian law and its relationship with the
CISG. The Italian court stated that "... hardship is not a matter expressly excluded in Article 4 of the CISG ...
Dissolution of the contract for supervening excessive onerousness affects neither the validity of the
contract nor ownership over the goods ..."). Italy 14 January 1993 Tribunale Civile [District Court] Monza,
Nuova Fucinati v. Fondmetall International, case presentation including English translation available at
21. See, e.g., Barry Nicholas, who observed that exemption of liability on account of unexpected and
22. Report of Committee of the Whole I Relating to the Draft Convention on the International Sale of Goods
(A/32/17, annex I, paras. 458-60), reprinted in UNCITRAL Yearbook VIII: 1977 (1978), 57). See also John
Honnold, Documentary History of the Uniform Law for International Sales 350 (1989).
23. See A/Conf.97/C.1/SR.27 at 10. The Norwegian proposal led to the deletion of the word "only" in Article
79(3), so that even if the initial and temporary impediment vanishes, the resulting change of circumstances,
which may well be of an economic nature, may turn into another impediment leading to that party's
24. A suggestion by Peter Schlechtriem to this effect may be found in Transcript of a Workshop on the Sales
Convention, in 18 Journal of Law and Commerce 191-258 (1999), also available at
<http://cisgw3.law.pace.edu/cisg/biblio/workshop-79.html>.
Remarks on the manner in which the PECL may be used to interpret or supplement Article 79 CISG Dionysios Flambouras [*]
The rules dealing with situations of changed or supervening contractual circumstances are
oriented on the two basic concepts of hardship and force majeure - they constitute
exceptions to the cardinal canon of pacta sunt servanda and ameliorate its strictness.
Hardship refers to the performance of the disadvantaged party having become much more
burdensome, but not impossible, while force majeure refers to the performance of one
party's obligations that has become impossible, even on a temporary basis.[2] 2. Is hardship covered under Art. 79 CISG? The CISG deals with the issue of changed circumstances on an international level by
avoiding any reference to existing domestic concepts. The most difficult question concerning the application of Article 79 CISG is whether
situations of hardship (i.e., where the performance by one of the parties has become much
more onerous and difficult - but not impossible - usually in financial terms) are covered in
the embedded exemption.[3] The solution to this issue cannot come by direct reference to domestic legal systems[4] that
differ greatly from each other in regard to rules of hardship or imprévision,[5] as this would
produce divergent results in the interpretation and application of the Convention. This
would contravene the uniformity mandate of article 7(1) CISG. Also no reference to domestic laws can be attempted under the gap-filling operation of
Article 7(2), as the legislative history of Article 79 excludes the possibility of the existence
of a relevant gap.[6] As the term impediment is not defined, an interesting question is whether the hardship
provisions in Articles 6:111 (Change of Circumstances) and 8:108 (Excuse due to an
impediment) of the Principles of European Contract Law can be invoked to expand the
meaning of impediment found in the CISG to include cases of economic or commercial
hardship.[7]
3. The legislative history of Article 79 CISG Article 79 CISG uses the term "impediment" to describe the types of event beyond the
contracting party's control that will be acceptable as an excuse for nonperformance of its
The drafting history of the Convention is a legitimate and valuable aid in the interpretation
of the Convention's provisions. It reveals that Article 79 CISG is indeed a stricter version
of its predecessor, Article 74 ULIS, which had been criticized for excusing non-performance too readily, such as where performance merely became more difficult.[8]
The legislative history of Article 79 also indicates that a party cannot rely on the
exemption merely on the ground that performance has become unforeseeably more
difficult or unprofitable.[9] The UNCITRAL debates show that the CISG drafters were opposed to allowing
commercial or economic hardship as an excuse for non-performance and that this was the
reason for adopting the requirement of an impediment as a precondition for relief in place
of the more liberal ULIS test of a change of circumstances.[10] It is clear in the travaux préparatoires that the purpose of Article 79 CISG is to set
definite limits on the promisor's liability for breach of contract and that the word
"impediment" represents a unitary conception of exemption from liability in contracts
governed by the Convention, as opposed to other theories of imprévision or hardship that
are based on "changed circumstances".[11] 4. The legal effect of the exemption in CISG and issues of specific performance
The legal effect of the exemption in the Convention is stated in Art. 79(5) CISG.[12] Although the wording of Article 79(5) would allow a claim for performance in situations
where obligations are physically impossible to fulfill, it is thought that the general belief
expressed at the Vienna Conference that judgment for a physically impossible performance
would neither be sought nor obtained should lead to a reasonable limitation of Article
79(5) CISG.[13]
The term "impediment" was used in the drafting of the Convention to denote an external
force that objectively interferes with performance of the contract and renders performance
impossible.[14] The creditor of the obligation in question may still require specific performance of the
obligation under Article 79(5) CISG. This solution, however, may not appear satisfactory
in the situations where performance has been rendered impossible, i.e., the subject matter
of the performance no longer exists (the goods have perished) or the performance would
be excessively onerous or expensive (e.g., necessity for expensive salvage operation or
subsequent illegality[15]). One suggested approach to the problem in such extreme situations is to admit a "limit of
sacrifice" beyond which the promisor of the obligation could not reasonably be expected
to perform his obligation.[16] In a leading case on article 79 CISG, the German Supreme Court identified the existing
debate among scholars as to whether: "CISG Art. 79 encompasses all conceivable cases
and forms of non-performance of contractual obligations creating a liability and is not
limited to certain types of contractual violations and, therefore, includes the delivery of
goods not in conformity with the contract because of their defectiveness"; or "whether a
seller who has delivered defective goods cannot rely on Art. 79 CISG at all."[17]
It is arguable that an interpretation based on the plain meaning of the language in Article
79 CISG would suggest that a seller's obligation to deliver goods in conformity with the
contract under Art. 35 may also be conceivably excused due to an impediment under Art.
There is an apparent similarity in the wording of the corresponding PECL provisions to
Article 79 CISG.[18] However, the differences in the scope of the two regimes becomes
clear when we consult the PECL commentary. The Comments to the PECL help explain
its provisions. The scope of application of Article 8:108 is defined by Comment A to the
PECL, which states that "unlike the equivalent article of CISG [�] Article 8:108 has to
apply only in cases where an impediment prevents performance."
Comment C expressly states that the circumstances of the impediment are like those
"traditionally required for force majeure."[19] 6. Article 6:111 PECL - Change of Circumstances Although the question whether financial difficulties constitute a ground for exemption was
a controversial point of discussion in UNCITRAL during the drafting of the CISG, "in the
end, the general view was probably that both physical and economic impossibility could
exempt an obligor. [�] As a rule, however [�] increased procurement and production
costs do not constitute exempting impediments."[20]
According to Professor Schlechtriem, "under very narrow conditions - impediment also
includes 'unaffordability'" (id.). Schlechtriem explains that "[i]t is imperative, in [his]
opinion to treat radically changed circumstances as 'impediments' under Article 79 in
exceptional cases in order to avoid the danger that courts will find a gap in the Convention
and invoke domestic laws and their widely divergent solutions."[21] In contrast to the single paragraph found in the Convention (see Art. 79(1) CISG),[22] the
Principles deal with the issue of change of circumstances in a quite thorough way,
providing not only a basic statement of principle (see Article 6:111(1) PECL) and the
operational parameters of the concept (see Article 6:111 (2) PECL), but also the
mechanism for the adaptation or termination of the contract by the court (see Article
6:111(3) PECL). It is also clear that the effect of the PECL provisions follow a different scheme, because
they entitle the party whose performance has become "excessively onerous because of a
change of circumstances" to request re-negotiation of the contract, with the support of the
court and even its intervention if the parties fail to reach agreement. The adaptation of the
contract by the judge, however, is not expressly allowed by the CISG, and must therefore
be regarded as impossible in that context.[23]
Both the CISG and the PECL contain provisions for exemption for the nonperformance of
contractual obligations. Article 79 CISG only governs impossibility of performance and
the majority of academic opinion supports that a disturbance which does not fully exclude
performance, but makes it considerably more difficult / onerous (e.g., change of
circumstances, hardship, economic impossibility, commercial impracticability, etc.) cannot
be considered as an impediment (doctrine of clausula rebus sic standibus).[24] In contrast
to the Convention, which in Article 79 CISG only includes impediments which must be
equated with actual impossibility, the PECL provide for special rules concerning hardship
(Article 6:111 PECL). Although there is some generic similarity in language and the
substantive requirements between the Convention and the PECL, both the scope and the
rationale, as well as the application of the respective provisions vary substantially.[25]
A match-up of CISG Article 79 and PECL Articles 8:108
[Excuse due to an impediment] and 6:111 [Change of circumstances (Hardship)] is available at <http://cisgw3.law.pace.edu/cisg/text/peclcomp25.html>. The match-up is accompanied by: - Comments on PECL 8:108 and 6:111 authored by the
European Commission describing and illustrating the manner in which they
are�to be applied; and - Notes that compare these provisions with continental and common law domestic rules, doctrine and jurisprudence.
1. See Albert H. Kritzer, International Contract Manual - Guide to Practical Applications of the United
Nations Convention on Contracts for the International Sale of Goods - Detailed Analysis 623 (1994). For
an excellent discussion of the two competing attitudes on 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, see Sarah Howard Jenkins, "Exemption for Nonperformance: UCC, CISG, UNIDROIT
Principles - A Comparative Assessment", 72 Tulane Law Review (1998) 2015-2030; also available at
For an interesting comparison see also Dionysios Flambouras, "The Doctrine of Impossibility of
Performance and Clausula Rebus Sic Standibus in the 1980 Convention on Contracts for the International
Sale of Goods and the Principles of European Contract Law - A Comparative Analysis" 13 Pace
International Law Review 261-293 (Fall 2001).
2. For a discussion of these two concepts and a comparative analysis of their function in the CISG and the
UNIDROIT Principles, see J. Rimke, "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) 197-243; also available at <http://www.cisg.law.pace.edu/cisg/biblio/rimke.html>.
3. In other words, the difficulty arises in the cases where it is hard to distinguish between "absolute
impossibility" and "economic impossibility" ("rendering performance extremely onerous", see Tallon in
C.M. Bianca & M.J. Bonell (eds), Commentary on the International Sales Law - The 1980 Vienna
Convention (1987) � 2.6.4 p. 581-582.
4. "The Convention's autonomy, illustrated by the lack of reference to accepted wording and concepts of
domestic laws (force majeure, frustration, impracticability, Wegfall der Geschäftsgrundlage), renders the
interpretation of Article 79 extremely difficult because one cannot resort to these laws as a guide." See
Fritz Enderlin & Dietrich Maskow, United Nations Convention on Contracts for the International Sale of
Goods, at 320 (1992).
5. See Stoll, in Commentary on the UN Convention on the International Sale of Goods, at 618 (Peter
Schlechtriem ed.,1998).
6. The legislative history of the Convention reveals that the problem of hardship was considered during the
drafting process of Article 79, but a provision specifically dealing with it has been deliberately omitted
from the CISG; i.e., no gap praeter legem exists. See Rimke, op. cit., at 220; see also John O. Honnold,
Documentary History of the Uniform Law For International Sales (1989), at 349-350.
7. Cf. J. Ziegel, "Comparative Editorial Remarks on article 79 CISG and its UNIDROIT Principles counterparts", available at <http://www.cisg.law.pace.edu/cisg/principles/uni79.html>, where the author
discusses the same question in terms of article 79 CISG and the comparable provisions in the UNIDROIT
8. For instance, the term "circumstances" in Article 74 ULIS was replaced by the term "impediment" in
Article 79 CISG, thus narrowing the exemption and providing an objective criterion. See John Honnold,
Uniform Law for the International Sales under the 1980 United Nations Convention 534; 534-537 (2d
ed.1991). See also, generally, Rimke, op. cit., at 222. Cf. Stoll, at 603, where it is noted that the deletion of the word "only" from the draft Article 79(3) -
previously limiting the exemption "only" for the period during which the impediment existed - indicates
that when the impediment ceases to exist, an exemption for the non-performing party on account of a
change in circumstances cannot be ruled out entirely.
9. See also Rimke, op.cit., at 223. However, note that under a literal interpretation of the text, a very serious
change in circumstances could arguably qualify as an "impediment" for the purposes of Article 79 CISG.
See John Honnold, Uniform Law for the International Sales under the 1980 United Nations Convention (2d ed.1991), at 543; Enderlein & Maskow, United Nations Convention on Contracts for the International
Sale of Goods (1992), at 325.
"The borderline between impracticability and a reasonably insurmountable impediment is [�] uncertain".
See Denis Tallon, in Commentary on the International Sales Law - The 1980 Vienna Sales Convention, C.M. Bianca & M.J. Bonnell eds. (1987), 576, where the author concludes that the standard demanded in Article 79 CISG is more flexible than that of traditional force majeure, but stricter than frustration or hardship. 10. See J. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (2d ed.
1991), � 432.1 432.2.
12. "Paragraph (5) restrains the effects of the exemption to one remedy alone and reserves to the party who
did not receive the agreed performance all of its remedies except damages. These remedies include the
right to reduce price (Article 50), the right to compel performance (Articles 46 and 62), the right to avoid
the contract (Articles 49 and 64) and the right to collect interest as separate from damages (Article 78)";
see Rimke, op. cit., at 217. See also text contained in footnote 22, infra, that refers to the Secretariat
Commentary to the Draft Convention 1978.
13. See Albert H. Kritzer, International Contract Manual - Guide to Practical Applications of the United
Nations Convention on Contracts for the International Sale of Goods - Detailed Analysis 642 (1994). Cf. Article 28 CISG (limiting orders of specific performance) and Article 8.109 PECL (Clause limiting or
excluding remedies for non-performance).
14. See J. Honnold, ibid., at � 427. The impediment must actually prevent performance, see id. � 432.1.
Cf. Some other commentators have noted that Article 79 embodies the CISG's provisions for frustration of
purpose and impossibility, see, e.g., Henry D. Gabriel, "A Primer on the United Nations Convention on
the International Sale of Goods: From the Perspective of the Uniform Commercial Code", 7 Ind. Int'l &
Comp. L. Rev. 279, 280 (1997).
See also, e.g., Nuova Fucinati v. Fondmetall International, Italy 14 January 1993, [District Court Monza],
CLOUT case no. 54, also available at <http://cisgw3.law.pace.edu/cases/930114i3.html>. In that case, an
Italian court held that although the Convention did not apply to the contract, even if Art. 79 CISG had
applied, nonetheless the court would have rejected the seller's request for dissolution on the basis of
supervening excessive onerousness (caused by a market price increase by 30%) by reading "impediment"
to mean "impossible", as per the domestic law (Article 1463 of the Italian Civil Code). In the court's
opinion, the seller could not rely on hardship as a ground for avoidance, since the Convention did not
contemplate such a remedy in Article 79 or elsewhere in the CISG.
It seems that the Italian court would have dealt with the matter as one that was governed but not expressly
settled by the Convention and it would have resolved the issue by turning to the conflict of law rules of the
forum, under Art. 7(2) CISG. It is arguable that this approach to the interpretation of impediment does not promote uniformity.
Similarly, divergent results would be produced by the possible introduction of "hardship" as a general
principle of the Convention under Art. 7(2); a possibility that would be contrary to the intention of the
drafters and the legislative history of the Convention. 15. Honnold, Uniform Law for International Sales (1999) p. 493-495 � 435.5. Note that, even though not
precluded by Article 79(5) CISG, there can be domestic law restrictions on one's ability to require specific
performance under such circumstances by virtue of the statement in Article 28 CISG that "a court is not
bound to enter a judgement for specific performance unless the court would do so under its own law in
respect of similar contracts of sale not governed by this Convention." See related reference to Article 28 in
paragraph 9 of note 22 infra.
This approach is advocated mainly by German commentators, who refer to cases of imprévision or great
difficulty to perform as "economic impossibility" (wirtschaftliche Unmöglichkeit) -and suggest that a
"limit of sacrifice" (Opfergrenze) should be allowed, in the event of an unforeseeable impediment to
performance as a result of a material change in economic conditions. That approach to the problem of change in circumstances bases the exemption on the principle of good
faith, as stated in Article 7(1) CISG. Note, however, that this approach has been criticized as hindering
uniformity/harmony in the Convention's application; see Rimke, op.cit., at 224.
17. The court did not deem it necessary to resolve this conflict stating that the specific defect in the goods
was not outside the seller's control and, thus, the seller was responsible for the consequences of a delivery
of goods not in conformity with the contract. See Germany, 24 March 1999 Federal Supreme Court,
CLOUT case no. 271, also available at <http://cisgw3.law.pace.edu/cases/990324g1.html>. Thus, the
court left open the question of whether or not Art. 79 CISG can be invoked by a party to excuse the failure
to perform "any of its obligations" under the contract, including the delivery of defective goods.
The court also spoke on many other CISG-related issues in the case (issues of validity, international
character of the Convention, conformity of the goods, damages, mitigation; see A.H. Kritzer, Editorial
Comments in the online presentation of the court judgment, ibid.)
18. Compare the wording in CISG articles 79(1)-(5) with the corresponding provisions in PECL articles
8.107, 8.108(1)-(3), 8.109.
19. See Comment and Notes to the PECL; Article 8:108, available online at
<http://www.cisg.law.pace.edu/cisg/text/peclcomp79.html>. 20. Peter Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of
Goods, (Manz, Vienna: 1986), at 102. Also available at
<http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-79.html>.
Also note that a proposal aimed at incorporating an Article in the Convention that allowed a party to
"claim an adequate amendment of the contract or its termination" on account of "excessive difficulties"
was expressly rejected by UNCITRAL's Working Group, see J. Honnold, Documentary History of the
Uniform Law for International Sales (1989), at 350.
21. P. Schlechtriem, id., at footnote 422a; see also that author's text in footnote 423, id. 22. Note that the text of the Secretariat Commentary on article 65 of the 1978 Draft [draft counterpart of
CISG article 79] provides additional important guidance:
"8. The effect of article 65 [draft counterpart of CISG article 79(1)] in conjunction with article
65(5) [draft counterpart of CISG article 79(5)] is to exempt the non-performing party only from liability
for damages. All of the other remedies are available to the other party, i.e. demand for performance,
reduction of the price or avoidance of the contract. However, if the party who is required to overcome an
impediment does so by furnishing a substitute performance, the other party could avoid the contract and
thereby reject the substitute performance only if that substitute performance was so deficient in
comparison with the performance stipulated in the contract that it constituted a fundamental breach of
contract. "9. Even if the impediment is of such a nature as to render impossible any further performance,
the other party retains the right to require that performance under article 42 or 58 [draft counterpart of
CISG article 46 or 62]. It is a matter of domestic law not governed by this Convention as to whether the
failure to perform exempts the non-performing party from paying a sum stipulated in the contract for
liquidated damages or as a penalty for non performance or as to whether a court will order a party to
perform in these circumstances and subject him to the sanctions provided in its procedural law for
continued non-performance. [Cf. article 26 [draft counterpart of CISG article 28] which provides that if,
in accordance with the provisions of this Convention, one party is entitled to require performance of an
obligation by the other party, a court is not bound to enter any judgment for specific performance unless
the court [would] do so under its own law in respect of similar contracts of sale not governed by this
Convention]."
23. See Denis Tallon, in Commentary on the International Sales Law - The 1980 Vienna Sales Convention
(C.M. Bianca & M.J. Bonnell eds.,1987), at 592. See also Todd Weitzmann, "Validity and Excuse in the U.N. Sales Convention", 16 Journal of Law and
Commerce (1997) 265-290, also available at <http://www.cisg.law.pace.edu/cisg/biblio/1weitzm.html>.
Weitzmann examines some theoretical issues of contract law that flow from the similarities between the
effects of excuse and validity provisions (including the academic debate between Honnold and Tallon), as
well as the pitfalls created in the application of Article 79 CISG that undercut the development of a
uniform excuse principle. The author has captured the essence of the problem when he states: "Two
theoretical difficulties with Article 79 emerged [�] both of which could undercut the development of a
uniform excuse principle. First, Article 79 could be supplanted directly by a country's domestic law of
excuse by virtue of a court concluding that excuse is a validity issue, to be decided under domestic law
according to Article 4(a). Second, the principle of justice represented by Article 79 could be averted
indirectly when a court reads the language of the Convention in light of presuppositions derived from
domestic traditions."
25. For a similar conclusion (in the context of the UNIDROIT Principles this time and their potential to
supplement art. 79 CISG), Cf. J. Ziegel, "Comparative Editorial Remarks on article 79 CISG and the
UNIDROIT Principles", available at <http://www.cisg.law.pace.edu/cisg/principles/uni79.html>. See also,
Anja Carlsen, "Can the Hardship Provisions in the UNIDROIT Principles Be Applied When the CISG is
the Governing Law?" (Pace Essay 1998), where the author, in a more expansive and thorough discussion
of the issues, also concludes that the "hardship" provisions in the UNIDROIT Principles should not be
applied in a gap-filling manner when the CISG is the governing law of a contract; essay available at
<http://www.cisg.law.pace.edu/cisg/biblio/carlsen.html>.
Cf. Tom Southerington, "Impossibility of Performance and Other Excuses in International Trade",
available on-line at <http://www.cisg.law.pace.edu/cisg/biblio/southerington.html>. In the Southerington
article, the author points out that under Section 36(1) of the Contracts Act (Finland), which contains rules
on validity of contracts, a term of a contract governed by Finnish law (the Sale of Goods Act and the
CISG, since Finland is a Contracting State) may be adjusted or set aside if that term "is unconscionable or
its application would lead to unconscionability". Under Finnish internal law, a term of the contract or
even the entire contract may be adjusted or declared discharged if it is considered to be unconscionable.
There is a concern that the rationale for excluding issues of validity from the realm of the CISG is linked
to differences in approach to the issue by the divergent legal traditions. It is the Southerington thesis that,
in a contract governed by the CISG, it is possible that a domestic doctrine of hardship may coexist with
the UN Sales Convention via Article 4(a) of the CISG, i.e., in circumstances in which there is a domestic
validity rule on unconscionability such as the Section 36(1) of the Contracts Act (Finland). This is
arguably an indirect way of removing issues from the sphere of the Convention and resorting to national
laws and as such it undercuts uniformity in the application of the international sales law. See also footnote text reference to Todd Weitzmann's article, supra note 23. Cf. P. Schlechtriem suggests a possible basis for arguing that the problem of hardship and adjustment of
the sales contract is matter governed by the Convention, see "Transcript of a Workshop on the Sales
Convention", 18 Journal of Law and Commerce (1999) 191-258, excerpt available at
<http://www.cisg.law.pace.edu/cisg/biblio/workshop-79.html>. The Schlechtriem argument refers to the
remedy of price reduction under CISG Art. 50 as "a kind of adjustment of the contract to reflect a
disturbed balance between performance on one side and obligation on the other side. The defects in the
goods, or the non-conformities of the goods, constitute a disturbance of the equilibrium or balance of the
exchanged performances." Id., at 237. Schlechtriem's argument for the use of the principle underlying
Art. 50 "as a springboard to develop a general rule of adjustment in hardship cases" would entail that the
solution comes from within CISG, thus eliminating divergent results in the interpretation and application
of the Convention's provisions.
Institute of International Commercial Law - Last updated September 2, 2009