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Reproduced with permisssion from 16 Journal of Law and Commerce (1997) 265-290

Validity and Excuse in the U.N. Sales Convention

Todd Weitzmann

I. Introduction

Domestic legal systems have very different policies for excusing the contractual obligations of non-performing parties when performance has become impossible, or at least extremely burdensome. For example, in the United Kingdom, the doctrine of "frustration" may be triggered by the "supervening destruction of the subject-matter, or by its temporary unavailability, or by frustration of purpose . . . or by supervening illegality."[1] By comparison, under French law, the defense of "force majeure" is "far narrower [in scope] than that of frustration in English law."[2] Thus, "it is said that an event will only be a ground of discharge if it is unforeseeable, irresistible, and makes performance absolutely impossible. It is also said to be a requirement that the obstacle must be 'insurmountable.' "[3] The Italian Civil Code, in Article 1467, allows for excuse in the case of long-term performance when "performance has become 'excessively onerous' because of an 'extraordinary or unforeseeable event,' unless the supervening hardship was 'a normal risk of contract.' "[4]

Moreover, within the U.N. Convention on Contracts for the International Sale of Goods (the Convention),[5] it is not altogether clear if a court should advert to these divergent domestic policies or if it should solve this kind of contractual dispute solely by reference to the Convention's own excuse policy, incorporated into Article 79. If courts were to apply a single standard for contractual excuse it would certainly help to achieve the Convention's goal of establishing uniformity in the field of international commercial sales law.[6]

However, the decision to apply domestic or Convention law turns on another article of the Convention. Article 4 explains that the Convention is not concerned with "[t]he validity of the contract or of any of its provisions or of any usage."[7] Thus, if excuse is considered to raise an issue of validity, Article 4 suggests that it should be resolved by reference to the domestic legal system of the forum. These provisions reveal that there is at least a potential tension between the notions of validity and excuse within the Convention.

Further complicating the decision to apply domestic or Convention law are the inherent similarities between the doctrines of excuse and validity, particularly with respect to their effects. For example, when a party is excused from performing an obligation under a contract, it is no longer liable for failing to perform, no matter how clearly the contract expressed the terms of the obligation.[8] On the other hand, one scholar has noted that validity is a "functional term that refers to an effect -- i.e., void, voidable, and perhaps also unenforceable."[9] Both doctrines have the effect of rendering an explicit and unambiguous contract (or merely a provision of the contract [10]) unenforceable to the extent that the disappointed party cannot collect damages from the non-performing party.

But what conclusion follows from the observation that there are similarities between the effects of excuse and validity provisions? One might be tempted to conclude that, because an excused contract shares the same effects as a contract not enforced for validity reasons, the doctrine of excuse is a validity issue. Nevertheless, this conclusion is unwarranted, and a closer examination of some of the philosophical premises of contract law helps to explain why.

II. Contract Law and Distributive Justice [11]

Charles Fried has defined the parameters of contract law in a manner that focuses attention on the role of individual actors.[12] According to Fried, contract law provides a mechanism for individuals to exchange or transfer property in the way that they determine is most preferable.[13] Fried's argument exemplifies a libertarian [14] view in two senses: first, private norms or standards are used to decide how and when one disposes of one's property; and second, private parties enforce these rights of disposition when they allegedly are violated.[15] This view emphasizes the importance of individual liberty and the minimal authority of the state to infringe upon this liberty. This view of the inherently private nature of contractual arrangements raises the question of what role the state may legitimately play in enforcing contracts.[16] An expansive understanding of individual liberty threatens to preclude the state from interjecting its authority, even to resolve contractual disputes.

One such dispute may arise when parties request a court to excuse contractual obligations. The doctrine of excuse asks when a court can permit a non-performing party to escape its contractual obligations. Fried's view, by contrast, raises the earlier question of when a court may lend its imprimatur to any obligation arranged by private contract. Addressing this question may lead to insights into the excuse problem. If it is possible to articulate a rationale for the court's power to enforce obligations, then this rationale might imply some limitations, such as when a court could refuse to enforce such obligations.[17]

There are several possible bases for justifying a court's legitimacy in enforcing contractual obligations. Two views accept the notion that contractual duties are self-imposed and embody fundamentally private norms, but nevertheless conclude that the state has an enforcement role for separate reasons. First, a utilitarian view suggests that the state has a legitimate interest in providing access to its machinery of enforcement in order to ensure the efficient functioning of markets.[18] Professor Murray discusses this intersection of law and economics by noting that utility is maximized when the "resources of society are allocated by its members in a relatively unfettered fashion, with the market mechanism incorporating the subjective value judgments of each decision maker and creating an objective determinant -- the 'price' -- for all of the resources of that society."[19] In this case, the market operates efficiently when subjective value judgments are enforced as the basis for exchange. The second justification for the state's enforcement of private contracts is grounded in notions of morality: the state ought to enforce what is morally correct, such as keeping one's promises.[20] Professor Murray notes that "[h]istorically and philosophically, the most fundamental concept of contract is that promises ought to be kept. . . ."[21]

There is another more provocative justification, however, that does not accept the notion that contracts consist primarily of self-imposed duties and obligations. Recall Fried's libertarian notion that contracts are derived from promises, and that courts are not entitled either to "promote an independent ideal of justice by refusing to enforce bad or hard deals, or to further the economic or other aims of society as a whole."[22] In contrast, the alternative view points out that explicit promises are neither necessary nor sufficient [23] for a contractual duty to arise, and external standards of justice and public policy are imposed on contracts, even when not included in an explicit promise.[24]

This conceptual dispute between Fried and the public policy alternative suggests a fundamental conundrum: "[d]oes contract law enforce promises or does it enforce external standards of justice or utility, and is it therefore an appropriate institution by which a state can legitimately seek to promote its conception of the public good?"[25] Anthony Kronman has argued that public principles of "distributive justice" are relevant in the enforcement of contracts.[26] Kronman's argument, in combination with Fried's, is helpful not only in discovering where courts derive their power to enforce contracts, but also in articulating a principled basis for a court's decision to enforce a contract and, possibly, to excuse a non-performing party.

Kronman's argument begins by assuming the validity of the strongest counterargument: Fried's libertarian view denying the legitimacy of non-consensual transfers, particularly when a transfer is effected by the state to serve some public policy ends.[27] Under Fried's view, only voluntary transfers are legitimate.[28] However, as Kronman points out, the notion of "voluntariness" obscures an underlying connection between contract law and the distribution of wealth in society.[29]

If, as Fried suggests, a court may only enforce voluntary transfers, then the court must distinguish between those transfers that are "voluntary" and those that are "involuntary." According to Kronman, it is in this process of distinguishing between voluntary and involuntary transfers that courts necessarily must advert to notions of public policy. Put differently, there are inherent limitations which constrain an individual's right to dispose of his or her property, even under the libertarian view of freedom, and these limitations are delineated by courts when a particular disposition of property is found to be objectionable. Thus, to the extent that a transfer is found to be involuntary, it is objectionable, and alternatively, if a transfer is voluntary, it is unobjectionable.

Kronman develops this argument about a contract's "voluntariness" by noting that all transfers, whether voluntary or not, involve a form of "advantage-taking" to exploit the skills or resources at one's disposal.[30] For example, a party might succeed in obtaining a favorable contractual arrangement through its use of superior access to information about a product or market. This superior information, however, might be unobjectionable if it is the result of diligent research, but it could become objectionable when obtained by affirmative misrepresentation or fraud.[31]

To differentiate between the two types of "advantage-taking," Kronman groups objectionable "advantage-taking" into three broad categories: (1) problems with the promisor, such as ignorance, mistake, or insanity; (2) problems with the promisee, such as force or fraud imposed by another party; or (3) problems in the relationship between the promisor and promisee, such as "gross disparities in relative bargaining strength."[32] Any "advantage-taking" that does not fall into one of these three categories is considered to be unobjectionable. Thus, when a court places a contractual relationship into one of these three categories of objectionable "advantage-taking," it is effectively holding that a party has participated in the transfer involuntarily.[33]

In either case -- whether the court finds a transfer to be unobjectionable (voluntary) or objectionable (involuntary) -- Kronman suggests that the outcomes of contracts "necessarily reflect patterns of advantage in talents and resources."[34] More specifically, "[t]o enforce a contract is to sanction the existing distribution of talents and resources as a basis for redistribution by agreement. To refuse to do so is to object to the existing pattern as a basis for redistribution by agreement. To do either requires a standard of distributive justice."[35] Here, Kronman links his notion of advantage-taking to principles of distributive justice. In other words, the determination of objectionable or unobjectionable advantage-taking requires the court to consider public standards and norms: "[t]he court, in essence, is deciding which of a person's resources can be exploited by him to improve his relative wealth."[36]

This view stands in stark contrast to the one expressed by Fried. Recall that Fried argued that contracts redistribute wealth according to the standards and desires of the individual parties, as expressed by the voluntariness of the agreement.[37] However, in Kronman's view, the notion of "voluntariness" is transformed from a solely private standard to a public one. Contracts redistribute wealth according to public principles of distributive justice because courts must first either approve of or reject the existing distributions of skills and resources and how they have been used in a particular transfer. Thus, courts have a kind of public policy veto power over what would otherwise be private arrangements. The instrument of this veto power is the notion of whether a contract is "voluntary" or not, a determination that is made on the basis of public policy concerns.[38]

In summary, Kronman's notion of advantage-taking bridges two distinct aspects of his argument. On one hand, advantage-taking is linked to the concept of voluntariness in an attempt to ensure that the contract does not legitimize some objectionable power relationship. Here, Kronman's focus is the process and dynamics of contract formation. On the other hand, advantage-taking also serves as the focal point for the court's search for a standard upon which the decision to enforce a contract can be based. In this context, Kronman suggests that the court will necessarily move beyond the purely private nature of the agreement (as described by Fried) and resort to public principles of justice.

These conceptual insights from the dispute between Fried and Kronman bear upon the doctrine of excuse in fundamental ways. First, the notion of voluntariness provides an entrée into a discussion of validity and, further, suggests that it is possible to distinguish between types of voluntariness. In other words, the voluntariness of the contract formation process could be classified as an issue of validity, whereas the voluntariness of the contract performance stage could be classified as an issue of excuse. Second, the notion that a court must appeal to public principles of distributive justice when deciding whether to enforce a particular contractual arrangement leads to a discussion of what principles of justice are involved in excusing a party from performance.

While Kronman argues that public principles of distributive justice are always involved in this analysis, even in the face of an otherwise entirely explicit agreement between two private parties, his argument seems even more persuasive in the context of excuse. Under the doctrine of excuse, a court must allocate a new burden that, by definition, was not part of the parties' explicit agreement. It is necessary, therefore, to discover what principles of distributive justice are embodied in Article 79 of the Sales Convention. These two issues -- validity and distributive justice -- will be discussed in turn.

III. Validity

The dispute between Fried and Kronman suggested a rationale for a court's decision to enforce contractual agreements in a way that is tied to the notion of voluntariness. Kronman discussed voluntariness by examining the degree to which a court would permit a party to exploit skills or resources at its disposal. This discussion led to an analysis of acceptable advantage-taking: the limits society places upon an individual's right to dispose of property in any way he or she sees fit. One way to delimit the scope of this inquiry is to recognize that Kronman is not only concerned with the process of contract formation, but that he is interested in a specific aspect of that process: the distribution of skills or resources between the parties. He sees this distribution as subject to the public standards of distributive justice. Thus, Kronman's inquiry is not solely procedural; there is an overlapping substantive component that is brought into the analysis by the notion of voluntariness.

At the same time, as Professor Flechtner has pointed out, "[t]here is consensus among commentators that the law governing fraud, duress and certain other matters -- including capacity to contract and agent's authority, illegal contracts, and unconscionability -- are matters of 'validity.' "[39] Each of the validity issues identified by Professor Flechtner involves a problem at the contract formation stage. For example, illegal contracts usually involve the presence of a statute or other governmental regulation, in existence at the time of the contract formation, that prohibits enforcement of the contract, notwithstanding the presence of all the requirements of an enforceable agreement.[40] Unconscionability has an even more obvious focus on both the contract formation process and the "voluntariness" of the parties to the agreement.[41] Thus, like Kronman's notions of voluntariness and advantage-taking, the concept of validity is an inquiry that assesses the distribution of skills or resources (during contract formation) through a lens of public policy concerns.

Defined in this way, validity [42] can be contrasted with the separate doctrine of excuse. Excuse concerns the problems raised when "unforeseen occurrences, subsequent to the date of the contract, render performance either legally or physically impossible, or excessively difficult, impracticable or expensive, or destroy the known utility which the stipulated performance had to either party."[43] In other words, while validity concerns the distribution of skills or resources at contract formation, excuse examines the distribution of risks that arise during the stage of contract performance.[44]

It is also possible to identify a second element of the distinction between validity and excuse. The voluntariness of using the resources at one's disposal in order to gain a bargaining advantage can be contrasted to the voluntariness of responding to circumstances beyond one's control that arise after the agreement has been reached. Recall that, in Kronman's view, the notion of voluntariness amounts to no more than a statement by the court that a given arrangement/distribution of skills or resources is not objectionable, for reasons determined by underlying public policies. With respect to the doctrine of excuse, a court is interested in a different kind of voluntariness: one that focuses on the degree to which a party assumed the risk that circumstances that might arise during performance that prevent the completion of contractual obligations. This distinction highlights the difference between a concern for the allocation of skills or resources and the allocation of risks.

The importance of the underlying public policy concerns raised by the issue of validity has been emphasized repeatedly by commentators. The notion of contractual "validity" addresses "those points of domestic law which express a country's public policies."[45] More specifically,

[a] characteristic of some aspects of the law governing the validity of contracts is that it is an important vehicle by which the political, social and economic philosophy of the particular society is made effective in respect of contracts. This is most obviously the case in respect of rules invalidating a contract because of a violation of a statutory prohibition or of public policy . . . It is [also] by the extensive or the restrictive interpretation of [validity] rules that many legal systems have effected the balance between a philosophy of sanctity of contract with the security of transactions which that affords and a philosophy of protecting the weaker party to a transaction at the cost of rendering contracts less secure.[46]

To the extent that validity touches upon such fundamental public policy matters, it is properly an issue that should be decided by the domestic laws of a country. At the same time, the allocation of risks arising during performance does not implicate the same domestic policy concerns. In fact, the doctrine of excuse implicates an entirely separate body of interests arising within the context of international commercial transactions. These international interests, originating with the emergence of the ancient lex mercantoria,[47] have developed rules specifically tailored to provide predictability and certainty in the higher-risk context of international commercial transactions.[48] In short, it is conceptually reasonable for concerns about the allocation of risk to be addressed by transnational rules, especially since many states have explicitly agreed to be bound by such rules by becoming contracting parties to the Sales Convention.[49]

But how does the Sales Convention respond to the foregoing analysis, which concludes that validity issues may be decided under domestic laws while the separate doctrine of excuse is more properly subject to transnational rules?

The Sales Convention contains provisions addressed to both concepts: Article 4 states that the Convention "is not concerned with . . . [t]he validity of the contract."[50] and Article 79 contains the Convention's excuse provision. At first glance, these rules seem quite straightforward. However, the text retreats from the absolute statement that the Convention is never concerned with issues of validity (thereby always referring to domestic laws for the resolution of validity issues). Instead, Article 4 contains a proviso that the Convention is not concerned with issues of validity "except as otherwise expressly provided in this Convention."[51] Moreover, the term "validity" is not defined in the Convention,[52] a concession likely due to the disparate understandings of the term in various legal systems.[53]

These two ambiguities within Article 4 create uncertainty in the application of Article 79. Does the Convention intend excuse to be considered an issue of "validity?" Even if excuse is a validity issue, does Article 79 "expressly provide" a separate rule, thereby supplanting the otherwise applicable domestic law?

Professor Kritzer has compiled the different scholarly responses to these and other questions concerning the meaning of the Article 4 validity provision.[54] Kritzer identifies two "schools of thought" on Article 4:

Some say the [overall effect of Article 4's] language "makes it clear that the validity of the contract should be determined by the applicable domestic law absent the existence of the CISG." Others, focusing on the phrase "except as otherwise expressly provided in this Convention[,]" . . . segregate all domestic validity doctrines into two categories: non-competing, i.e., where the matter is not "otherwise expressly provided" in the Convention; and competing, where the matter is "otherwise expressly provided" in the Convention. Their rule is, where the domestic validity doctrine thus competes with the Convention, the Convention pre-empts; where it does not, it does not.[55]

Kritzer largely dismisses those who always refer to domestic law, regardless of the applicable Convention provisions. This view seems less plausible in view of the language of the text. On the other hand, those scholars who segregate all domestic validity doctrines into two categories -- competing and non-competing -- have devised a framework for applying the Convention in specific cases.

Consider the doctrine of mistake, a concept similar in some respects to the doctrine of excuse. As Kritzer notes, "[m]istake seems to have elicited more controversy than any other validity issue."[56] In fact, scholars seem equally divided on the issue of whether a court interpreting the Convention should look to the domestic law or the Convention for the resolution of a mistake claim.[57] In large part, the difficulty caused by the doctrine of mistake is due to its dual nature: on one hand, it seems like a validity issue because the decision to enter a contract can be induced by a mistake;[58] on the other hand, it seems like a risk allocation issue because parties that contract "with complete awareness of their lack of knowledge concerning potential risks"[59] might have allocated these risks in their agreement.

There have been a number of commentaries on the doctrine of mistake in cases where the subject matter of the agreement was non-existent at the time the contract was formed.[60] In these cases, the doctrine of mistake is a conceptual bridge between issues of validity and excuse. Mistake is similar to validity because it deals with a state of affairs at the time of contract formation (i.e., things were not as parties believed them to be); but it is also like excuse because, in the performance stage of the contractual obligations, one party could not perform (i.e., performance was impossible or extremely difficult). Thus, under the framework identified by Kritzer, a court interpreting the Convention in the case of an alleged mistake must proceed through a complex analysis.

Assuming, for the moment, that mistake does in fact raise a validity issue, the court must ask whether the Convention provides a competing rule of its own that addresses this situation, where the subject matter of a contract was non-existent at the time of contract formation. According to Kritzer, if the Convention provides such a rule, it would pre-empt the otherwise applicable domestic law; if not, then the domestic law would apply.

In this context, Article 79 seems to apply. It states that a non-performing party is excused from liability if it can show, among other things, that it "could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract. . . ."[61] If the goods were non-existent "at the time of the conclusion of the contract," then Article 79 appears to provide a rule for the court's decision whether the non-performing party should be excused. In deciding whether this Convention rule would "compete" with a similar domestic rule (mistake), Professor Honnold has pointed out, "the crucial question is whether the domestic rule is invoked by the same operative facts that invoke a rule of the Convention."[62] In this case, it may be possible to argue that the same "operative facts" do trigger both Article 79 and a similar domestic rule of mistake. This view finds support in an UNCITRAL Secretariat Commentary which suggests that Article 79's excuse provision can apply in situations where the goods to be transferred by contract have already perished at the time of contract formation.[63] Thus, if Article 79 would apply, the domestic rule would be supplanted.

In a critical response to this view, Professor Tallon writes:

The Secretariat's Commentary affirms, without justifying its position, that Article 79 applies to this case. . . . But the answer to this question is not obvious in countries, such as France, where the existence of the subject matter at the time of the conclusion of the contract is regarded as a condition of validity, as one cannot imagine a contract of sale that would relate to goods which do no longer exist. In this case, the absence of the subject matter raises a problem of validity which is not governed by the Convention (see Article 4(a)). One may think that in other systems it will be possible to rely on the theory of mistake. In both cases, the contract will be declared void.[64]

Tallon's view is that Article 79 would be pre-empted by a relevant domestic law because the non-existence of the contract subject matter at the time of contract formation raises an issue of validity. Implicit in Tallon's view is the argument that if a domestic law considers a situation to raise a validity issue, then the domestic law applies whether or not the Convention offers a separate, competing rule.

The circularity of the debate between Honnold and Tallon at first appears hopeless. Both arguments could be accused of begging the question of the meaning of Article 4's proviso, "unless otherwise expressly provided." In other words, Honnold asserts but does not explain why the same "operative facts" in a Convention provision should constitute grounds for supplanting a relevant domestic validity law. Similarly, Tallon asserts but does not explain why a domestic law's own characterization of a "validity" issue should be sufficient to supplant a rule contained in the Convention.

At this point, the analytical distinction between validity and excuse that was suggested by Fried and Kronman is useful. The Fried-Kronman dispute provides an analytically clear distinction between validity and excuse, based upon the point at which public policy concerns may be triggered because of the overweening bargaining power of one of the parties (that is, where the allocation of skills or resources of the parties was a proper concern of the state). Here, the contract formation stage served to trigger the state's public policy concerns. Later, during the performance stage of the contract, the state's interest was considered to be less significant, thus triggering other regulatory mechanisms (or the parties' agreement itself).

One way to apply the clarity of the Fried-Kronman insights to this dilemma involving mistake is to return to the language of Article 79. Both Honnold and the Secretariat's Commentary pointed to the phrase "at the time of the conclusion of the contract" as evidence that Article 79 should apply in cases where the subject matter of the contract has perished at the time of contract formation.[65] However, this phrase does not appear to describe the existence of the "impediment" at the time of contract formation. Instead, it only appears to modify the state of mind of the parties, with respect to the risks that they could foresee at the time of contract formation. Under this interpretation, forward-looking parties will be held to have assumed the risk of those future "impediments" that they reasonably could be expected to have foreseen at the time of contract formation. This interpretation would preclude the application of Article 79 in those situations where the "impediment" existed at the time of contract formation.

The virtue of this interpretation is that a mistake as to the initial existence of the subject matter of the contract would be a validity issue, to be handled under domestic law, while Article 79 is rescued from the circularity of the Honnold-Tallon dispute over the meaning of Article 4's proviso, "unless otherwise expressly provided." On the other hand, this interpretation does impose a chronological structure-contract formation and post-contract formation -- that may not fairly be read into Article 79. As Professor Hartnell explains, the drafters of Article 79 simply did not make a clear decision about whether domestic validity rules would apply in the case of this kind of mistake.[66]

In any event, even if this kind of mistake (where the goods had already perished at the time of contracting) does create analytical confusion over the applicability of Article 79, it is a relatively narrow portion of the overall doctrine of excuse. Most excuse claims will be made in the context of an "impediment" arising after the contract has been made, but before performance could be completed. In these cases, the extent of an external change which affects the parties' explicit agreement will be the focus of the court's attention. By definition, under Article 79, this "impediment" must be "beyond [the non-performing party's] control" such that it could not be "avoided or overcome."[67] The "impediment" must not reasonably have been "taken . . . into account" by the parties, and hence, by implication, was not included in the parties' explicit agreement.[68] A court in this situation is confronted with the challenge of allocating this burden. Therefore, the court must turn to the excuse principles incorporated in Article 79.

IV. Justice

Even if it is usually clear that excuse is distinct from issues of validity, it remains to discover exactly how the Convention, through the application of Article 79, distributes the burden of an unforeseen "impediment." The significance of the decision to select the conditions under which a party's obligations will be excused goes to the core of the theory of contracts as risk allocation devices.[69] There is an inherent tension between the fundamental concept that promises ought to be kept -- pacta sunt servanda -- and the possibility that a party could fail to perform a promised obligation and yet escape liability for breach. Thus, to the extent that contracts exist to provide predictability in business transactions and to protect the expectation interests of contracting parties, courts likely will be reluctant to excuse a non-performing party from its obligations under its contract.

Nevertheless, there are instances where holding a party to its promise causes manifest unfairness.[70] In the international context, such unfairness might result in numerous settings: in times of "war, embargo and other governmental prohibitions, breakdown of transport facilities (e.g., the closing of the Suez Canal), strikes, the shutdown or bankruptcy of a supplier -- these are only points on a continuum of difficulties with varying degrees of scope, severity and unpredictability."[71]

Furthermore, one commentator has warned that it is "imperative . . . 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 with their widely divergent solutions."[72] More specifically, the "gap" that courts likely will find is the "validity" exception in Article 4(a).

However, the use of a conclusory term like "unfairness" to describe radically changed circumstances masks the underlying analysis that the court must confront -- much like the analysis that Kronman uncovered beneath the conclusory notion that all agreements must be "voluntary." After all, in a case where a party requests excuse, the court, in essence, "determin[es] which party bears the burden of an unexpected barrier to performance."[73] Although Kronman's original claim might have been provocative insofar as he argued that public principles of distributive justice are relevant to every contractual agreement,[74] his claim is more persuasive in the context of the doctrine of excuse. In the case of excuse, the court must deal with a new burden which is not explicitly in the parties' agreement, and decide which party shall bear that burden.[75]

In addition to the competing interests of the parties, Article 79 also must grapple with a number of other difficulties. First, as noted at the outset of this Article, there are widely divergent conceptual differences in approach to the doctrine of excuse in the major legal systems.[76] These conceptual differences, however, belie even more invidious difficulties with a uniform law of excuse such as Article 79. Professor Tallon aptly describes the problems arising from the various backgrounds of the judges interpreting the Convention:

The 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. Judges in socialist countries will also have a peculiar attitude with regard to strikes. 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. The risk of divergence thus exists and must not be underestimated.[77]

To compound the interpretive problems of the judges' own backgrounds, Professor Nicholas notes that Article 79 uses "elastic words," such as "due to" and "impediment," which have not yet acquired a "patina of legal meaning" as similar words in a domestic legal system have.[78] Nicholas explains that, "[t]he objection to elastic words like 'due to an impediment' is therefore that they will be read in the context of each system's view of the limits within which an excuse of this kind should be admitted."[79]

In spite of all these threshold difficulties, judges must attempt to discover exactly what Article 79 means. Article 79(1) sets out the test for excuse as follows:

A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.[80]

As Professor Honnold has pointed out, the terms of this provision are potentially broad in their application.[81] That is, excuse may be claimed by either party, and it may apply to "any" of the party's "obligations."

This language sets out a three-part [82] test for excuse. The non-performing party must establish the following elements: (1) that the failure to perform was due to an "impediment beyond [the non-performing party's] control;" (2) at the time of the contract formation, the non-performing party "could not reasonably be expected to have taken the impediment into account;" and (3) subsequent to the contract's formation, the non-performing party could not reasonably be expected "to have avoided or overcome [the impediment] or its consequences."[83] Although all three elements must be established for the court, the central problem of proof -- and interpretation -- in this case is exactly how high a standard the article incorporates. That is, what must a party prove to establish that an "impediment" exists that justifies non-delivery or non-acceptance? [84]

The "ordinary meaning"[85] of "impediment" is not evident from context, but the drafting history of Article 79 does reveal some interpretive insights. For example, the drafters of the forerunner of the Sales Convention, the Uniform Law of International Sales (ULIS),[86] also faced the dilemma of which obligations would be excused from non-performance. At the 1964 Hague Conference for the drafting of ULIS, the delegations disagreed over the terms "circumstances" or "obstacles" as the triggering events for excuse.[87] The majority, wanting to avoid an overly narrow restriction on excuse, drafted the provision allowing non-performance in "circumstances" that the non-performing party was not bound to take into account at the time of contract formation.[88] As Professor Honnold recounts, the decision to use the term "circumstances" was urged by the German delegation, which feared that the use of "obstacle" might "refer only to supervening and external events, as contrasted with the more personal issue as to the seller's due care or fault, and might bar excuse based on an extreme and onerous change in economic circumstances."[89]

When UNCITRAL revisited this issue at the Vienna drafting conferences for the Sales Convention, the provision was changed to replace "circumstances" with "impediment," a term that implies a barrier to performance.[90] Thus, under the Convention, excuse should apply only to "impediments" that prevent performance -- not to the more wide-ranging "circumstances" that might make performance merely difficult or unprofitable.[91] Professor Honnold has also noted that this change precludes the application of Article 79 to cases of defective performance, such as the supply of non-conforming goods.[92]

In addition, this change also highlights the fact that the nature of the "impediment" is to be determined from an objective, or reasonable person, perspective rather than from the point of view of the non-performing party.[93] In this regard, the language from Article 79(1) which requires that the non-performing party "could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract" suggests that the purpose of the provision is to give effect to reasonable expectations -- not necessarily the (unreasonable) subjective expectations of the non-performing party.[94] Professor Nicholas explains that in order to give effect to "reasonable expectations," the court "must necessarily take account of the terms of the contract, the whole context in which it was made and the current trade practices in the areas concerned."[95]

Although Article 79's "impediment" connotes a barrier that prevents performance, it is not immediately evident exactly how insurmountable the standard should be in practice. Clearly, Article 79 represents a retreat from the more lenient grounds for excuse in the ULIS. Professor Honnold describes this retreat as a response "to concerns that the reference to 'circumstances' [in ULIS] could be a basis for excuse merely because performance became more difficult or unprofitable."[96] Nevertheless, there is evidence that the barrier intended by the use of the term "impediment" is not limited to physical or legal bars to performance.[97]

For example, "economic dislocations" can at times prevent performance as effectively as more traditional barriers to performance. In fact, as Professor Honnold notes, sometimes "[e]xtreme price and (especially) currency dislocations may be sufficiently widespread to lead to laws or administrative regulations that require contract readjustment."[98] If "the supply of material needed for performance of a contract unexpectedly becomes so reduced in quantity and inflated in price that only a minority of producers that need this material can continue in production," Honnold writes, "[t]his situation clearly constitutes an 'impediment.' "[99] On the other hand, if the goods needed were not of a "limited kind," and other goods were available to replace them, then performance would not be excused.[100]The difference between these cases lies not in a single factor, like price or availability, but in the interplay of many factors at once: reasonable foreseeability,[101] the party's control of the barrier,[102] and even the practices of international trade.[103]

The best way to illustrate the possible meaning of the standard for excuse in Article 79 is to apply it in concrete examples. In a recent case, an Italian trial court considered an excuse claim brought under the Sales Convention.

V. Application

In Nuova Fucinati S.P.A. v. Fondmetall Int'l A.B.,[104]an Italian seller of metal (Nuova Fucinati) sought to be excused from its sales contract with a Swedish buyer (Fondmetall Int'l). Under the terms of the February 3, 1988 contract, the seller was to deliver 1,000 tons of ironchrome "Lumpy" in exchange for payment of Lira 545 per kilogram. The contract permitted the buyer to choose a delivery date between March 20, 1988 and April 10, 1988.

Between the date of contract formation and the date selected by Buyer for delivery, the price of ironchrome "Lumpy" increased 43.71% on the international market. Apparently, the contract did not contain a clause expressly providing for excuse of performance obligations in cases of force majeure.

At the March 1, 1990 hearing before the court, Seller argued [105] that the injunctive order compelling delivery should be repealed, and further, that the contract should be avoided [106] because of "supervening excessive onerousness" ("excessive onerosità sopravvenuta") caused by the market price increase. Buyer responded by requesting avoidance of the contract along with damages for non-performance.[107] Buyer argued in the alternative that either Article 79 of the Sales Convention had preempted the assertion of supervening excessive onerousness, or that there was no supervening excessive onerousness as a factual matter in this case.

The court explained its holding in three parts. First, it lifted the July 20, 1988 injunction against Seller. Second, it avoided the contract for sale due to non-performance by the Seller. Finally, it rejected the request of Seller for dissolution based on supervening excessive onerousness and non-performance.[108]

In deciding to avoid the contract in favor of the Buyer, the court concluded that the Seller was not entitled to be excused from its obligations under the contract.[109] More specifically, the court found that Article 79 of the Convention would not excuse a party from its obligations unless performance had become "impossible."[110] The court was not convinced that Seller's documentation of the price increase of ironchrome on the international market established the legal conclusion that Seller's obligations should be excused.[111] This brief characterization of the court's holding, however, obscures the most significant analytical moves in the decision.

Although the court was faced with the threshold issue of the applicability of the Sales Convention, it chose initially to address the issues raised by the parties as though the Convention applied. Only at the end of the opinion did the court decide that the Convention did not apply and, instead, Italian law should serve as the rule of decision.[112] Nevertheless, the court did examine the Convention issues in detail, and it concluded that even if Article 79 had applied, it only provided for "release from a duty made impossible by a supervening impediment,"[113] and thus did "not seem to contemplate the remedy of dissolution of contract for supervening excessive onerousness."[114]

This distinction between "impossible" and "excessively onerous" performance is a crucial one in the court's reasoning because it highlights the important role of the structure of the Italian Civil Code in the outcome of the case. Under the Civil Code, a contract can be dissolved where performance that is made "impossible by a supervening impediment not ascribable to the party."[115] Civil Code Article 1467, by contrast, provides for dissolution in cases of "supervening excessive onerousness" of performance, at least with respect to contracts involving "continuous or periodic or deferred performance."[116]

The court superimposed this dichotomy within the Italian Civil Code onto the Convention. From the court's first mention of CISG Article 79, Italian domestic law seemed to have intruded upon the court's analysis, at least as a frame of reference for deciding the meaning of an "impediment" to performance.

By imbuing the Sales Convention with meaning by virtue of a reference to the court's own domestic laws, the court seemed to pre-determine the outcome of the case.[117] In other words, even if the court had found that the Convention did apply to the dispute at hand, it would have read the "impediment" term in Article 79 as meaning "impossible," the meaning that is suggested by the Civil Code. On the other hand, because the court found that Italian law applied to the case, it was able to decide the case under the "supervening excessive onerousness" standard -- a lower standard than impossibility. The significant point here is not that the court ended up using a more lenient standard. Instead, it is important to notice that the court's initial reference to its domestic law confined its interpretation of the Sales Convention to a standard that may have been more restrictive than intended by the drafters.

VI. Conclusion

Two theoretical difficulties with Article 79 emerged during the course of this paper, 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. Although commentators worry about each difficulty, the more likely scenario -- as illustrated by the Italian court -- is the indirect method.

One possible solution to these difficulties is for contracting parties to avoid the uncertainties of Article 79 altogether. As a general matter, the Sales Convention permits contracting parties to arrange the terms of their obligations. In particular, contracting parties may specify the exact conditions which will suffice to excuse performance.[118] When the issue of difficult or impossible performance arises, the prior express agreement of the parties can be especially useful in avoiding the application of a general rule of excuse, whether domestic or international.[119] To some extent, the use of contractual excuse clauses is the most pragmatic response to the conceptual differences in approach which exist in various states' excuse doctrines.

On the other hand, Article 79 presents a plausible opportunity for the development of a uniform excuse doctrine. There is some flexibility incorporated into the notion of "impediment" which situates Article 79 somewhere in the middle of the divergent views of excuse taken by domestic laws.[120] Perhaps most important of all, however, is the need for courts to become conscious of the pitfalls of interpreting Article 79 and thereby avoid the difficulties revealed in this paper.


FOOTNOTES

1. G.H. Treitel, Frustration and Force Majeure para. 2-045, at 57-58 (1994) (citation omitted). Professor Treitel describes the broad terms of the conflict between opposing views of excuse as follows:

[F]irst is the principle of sanctity of contract, sometimes expressed in the Latin maxim pacta sunt servanda. This principle insists on the literal performance of contracts in spite of the fact that events occurring after the contract was made have interfered with the performance of one party, or reduced its value to the other; it is based on the view that one of the principal purposes of contract as a legal and commercial institution precisely is to allocate the risk of such events. It takes the position that those risks, having been so allocated by the parties, should, as a general rule, not be re-allocated in a different manner by the courts. On the other hand, the principle of sanctity of contract, like many legal principles, is not considered to express an absolute value. It is qualified by a counter-principle that parties who enter into contracts often do so on the basis of certain shared, but unexpressed assumptions. This counter-principle is also sometimes expressed in a Latin phrase, rebus sic stantibus. Its effect is in certain cases to discharge contractual obligations because circumstances have changed since the conclusion of the contract so as to destroy a basic assumption which the parties had made when they entered into the contract.

Id. para. 1-001.

2. Id. para. 12-017, at 433 (quoting Barry Nicholas, French Law of Contract 202 (2d ed. 1987)).

3. Id. (citing 2 Konrad Zweigert & Hein Kötz, Introduction to Comparative Law 217 (Tony Weir trans. 2d ed. 1987); 2 Henri Mazzeaud et al., Leçons de Droit Civil 573 (7th ed. 1993)).

4. Harold J. Berman, Excuse for Nonperformance in the Light of Contract Practices in International Trade, 63 Colum. L. Rev. 1413, 1414 n.3 (1963).

5. United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 19 I.L.M. 668 (1980) [hereinafter CISG] (entered into force on Jan. 1, 1988), available in 15 U.S.C.A. app. at 49 (West Supp. 1996), 52 Fed. Reg. 6262-80, 7737 (1987), U.N. Doc. A/CONF.97/18 (1980).

6. See id. art. 7.

7. Id. art. 4. Professor Drobnig describes the issue of the substantive validity of international commercial contracts as "the most sensitive crossroad of uniform law and of domestic legal systems." Ulrich Drobnig, Substantive Validity, 40 Am. J. Comp. L. 635, 635 (1992).

8. See John Edward Murray, Jr., Murray on Contracts § 115(A) (3d ed. 1990).

9. Helen Elizabeth Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale J. Int'l L. 1, 51 (1993).

10. See CISG, supra note 5, art. 4(a).

11. This section was inspired by chapter four of Jeffrie G. Murphy & Jules L. Coleman, Philosophy of Law 143-80 (rev. ed. 1990) [hereinafter Coleman (because Professor Coleman had "primary responsibility" in writing chapter four)].

12. See generally Charles Fried, Contract as Promise (1981).

13. See id. at 2. Actually, Fried situates contract law into a larger framework, along with property, tort, and criminal law. He distinguishes among the concepts by noting that property law defines the "borders" of one's possessions, id. at 1-2, tort law secures these borders by providing redress for unwanted "border crossings," id. at 2, and contract law facilitates the owner's disposition of his or her possessions. Moreover, criminal and tort law enforce public standards that specify "the conditions under which taking what another has a right to or putting him at risk without his consent is impermissible." Coleman supra note 11, at 161. Criminal law enforces these standards publicly, through an instrumentality of the state, while tort law enforces these standards privately, in an action brought by the injured party. See id. at 161-62.

14. Although it is useful to use terms from political theory in this discussion of Fried's and Kronman's arguments, it is perhaps worth noting at this stage that these terms roughly correspond with the positions taken by civil and common law countries with respect to the doctrine of excuse. That is, the libertarian view corresponds with the more restrictive civil law principle of the sanctity of contract, whereas the distributive justice view of contract corresponds to the common law notion that contractual obligations can be discharged in certain circumstances.

15. See Coleman, supra note 11, at 161-62.

16. It is important to keep in mind that the legitimacy of a court's power to enforce is a separate issue from a court's decision to use that power to enforce a particular contract.

17. In addition, once the basis of the court's power to enforce contracts becomes evident, it might be possible to discover insights into what constitutes a valid contract, and thus to determine whether the doctrine of excuse does in fact raise validity issues.

18. See Coleman, supra note 11, at 162.

19. Murray, supra note 8, § 7, at 15.

20. See Coleman, supra note 11, at 162.

21. Murray, supra note 8, § 1.

22. Coleman, supra note 11, at 163.

23. In this regard, consider the damage remedies that are available for contract breaches. For example, reliance damages repair the losses that a party incurs due to actions taken in reliance on a promise or as in the case of promissory estoppel (detrimental reliance), even where no explicit promise has been made. Restitution damages annul the wrongful gains that the breaching party enjoys. It is really only expectation damages that are consistent with Fried's view of contract as promise. See Coleman, supra note 11, at 163-64.

24. See id. at 163.

25. Id. at 164.

26. See generally Anthony T. Kronman, Contract Law and Distributive Justice, 89 Yale L.J. 472 (1980).

27. See Coleman, supra note 11, at 168.

28. See id.

29. See id. The notion of voluntariness also obscures (or more accurately, collapses into one term) several legal doctrines that have identified more specific reasons for the enforcement of contracts. See generally Murray, supra note 8, §§ 52-67 and §§ 92-98 ("The Validation Process" and "Abuse of Bargain, Unconscionability, Good Faith, and Illegality").

30. Coleman, supra note 11, at 166, 168.

31. See id. at 166. Coleman notes that:

[I]n each of these cases in which a promisor claims that his promise is not voluntarily given, "the promisee enjoys an advantage of some sort which he has attempted to exploit for his own benefit. The advantage may consist in his superior information, intellect, or judgment, in the monopoly he enjoys with regard to a particular resource, or in his possession of a powerful instrument of violence or a gift for deception. In each of these cases, the fundamental question is whether the promisee should be permitted to exploit his advantage to the detriment of the other party, or whether permitting him to do so will deprive the other party of the freedom that is necessary, from a libertarian point of view, to make his promise truly voluntary and therefore binding."

Id. at 166-67 (quoting Kronman, supra note 26, at 480).

32. Id. at 166.

33. See id.

34. Id. at 168.

35. Id. at 168-69.

36. Id. at 168.

37. Id. at 167. See supra notes 12-15 and accompanying text.

38. Interestingly, Kronman suggest that, when courts determine whether a contractual transfer was objectionable or not, they are performing a function equivalent to the libertarian's determination of which exchange relationships are compatible with the libertarian conception of individual freedom. See supra notes 27-29 and accompanying text.

39. Harry M. Flechtner, More U.S. Decisions on the U.N. Sales Convention: Scope, Parol Evidence, "Validity" and Reduction of Price Under Article 50, 14 J.L. & Com. 153, 166 (1995) (citations omitted). See generally Hartnell, supra note 9, at 62-84.

40. See generally Murray, supra note 8, § 98. Professor Murray also notes, however, that in rare cases a court will enforce an "illegal" contract that was "legal" where made. This exception has the quite unintended effect of proving the general rule: the court's focus remains on the contract formation stage. See id at § 98(S).

41. See generally id. § 96. In the late 19th Century, it became clear that "unrestrained freedom of contract permits one party with an enormous bargaining advantage to dictate the terms of the contract to the weaker party, thereby undermining the essence of contract, volition." Id. at 482.

42. It is beyond the scope of this paper to define validity in a manner that is meaningful in all contexts. By contrast, this paper seeks a functional definition of validity that reveals the separate -- but in some ways competing -- principles comprehended by the doctrine of excuse. For a very thorough discussion of validity, as applied in several contexts, see Hartnell, supra note 9.

43. Hans Smit, Frustration of Contract: A Comparative Attempt at Consolidation, 58 Colum. L. Rev. 287, 287 (1958), quoted by Wanki Lee, Exemptions of Contract Liability Under the 1980 United Nations Convention, 8 Dick J. Int'l L. 375, 375 (1990).

44. See Murray, supra Note 8, § 115(A). Professor Murray states:

[T]he effect of a failure to perform on a party whose performance is excused because of impracticability or frustration of purpose will depend upon whether the excused performance is due to a supervening event or whether the event giving rise to the excuse existed at the time of contract formation. Thus, if the impracticability or frustration occurred because of a supervening event, the existing duty of the excused party is discharged. If, however, the excused party's performance is impracticable or frustrated at the time the contract is made, no duty to render performance for which that party could be held liable ever arose.

Id. (citations omitted). See generally id. § 112(D) (distinguishing between "existing impracticability" and "mistake").

45. Drobnig, supra note 7, at 635, quoted in 1 Albert H. Kritzer, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods 37 (1989).

46. Kritzer, supra note 45, at 37 (alterations and omission in original) (quoting 8 U.N. Commission on Int'l Trade L. -Y.B. 92-93, para. 20(e)(ii) (1977), U.N. Doc. A/CN.9/SER.A/1977. See also Hartnell, supra note 9, at 4 (Some domestic rules, such as validity, are "so vital to the domestic legal order that they are excepted from the realm of contractual freedom.").

47. See Harold J. Berman, The Law of International Commercial Transactions (Lex Mercantoria), in International Business Transactions pt. 3, fol. 3, at 1-13 (Walter Sterling Surrey & Don Wallace, Jr., eds., 1983), cited in 1 Ronald A. Brand International Business Transactions 1-12 (1996) (unpublished course materials).

48. See Mark W. Janis, An Introduction to International Law 274 (2d ed. 1993) Professor Janis states:

Since national laws are normally drafted with a state's own economic, social, and political interests in mind, it is not unusual for the application of any country's laws to an international economic transaction to conflict with the interests of other states and, sometimes, with the interests of the international economy in general. There is, therefore, a large body of international economic law and organization devoted to the general moderation and coordination of the particular international economic regulatory activities of the many states.

Id.: see also Ronald A. Brand, Nonconvention Issues in the Preparation of Transnational Sales Contracts, 8 J.L. & Com. 145 (1988).

49. See Journal of Law and Commerce CISG Contracting States and Declaration Table, 15 J.L. & Com. 205 (1995) (listing 47 participating states).

50. CISG, supra note 5, art. 4.

51. Id.

52. See Harry M. Flechtner, Remedies Under the New International Sales Convention: The Perspective From Article 2 of the U.C.C., 8 J.L. & Com. 53, 79-80 (1988).

53. See Fritz Enderlein & Dietrich Maskow, International Sales Law 44 (1992) ("[I]t was indeed not possible . . . to bring about broad unification [with respect to the meaning of "validity"] and . . . the States could not renounce the inclusion of a relevant reservation in regard to national law.").

54. See generally 1 Kritzer, supra note 45, at 35-44r.

55. Id. at 38 (citations omitted) (quoting Steven J. Stein, Sales Contracts and the Impact of the U.N. Convention on the International Sale of Goods on U.S. Business, in International Commercial Agreements 1990: Handling Basic Problems in Negotiating, Drafting, and Litigating, at 59 (PLI Commercial Law & Practice Course Handbook Series No. 553, 1990)).

56. Id. at 44g. Kritzer explains the controversy in the following terms:

If . . . one believes that the Convention must be examined to determine whether there is competition [with the domestic law], resolution of the issue [of mistake] becomes complex -- particularly complex in the case of mistake because its various domestic validity doctrines revolve around different fact patterns -- with the possibility of a different conclusion as to pre-emption depending on the fact pattern addressed by the domestic doctrine and the attention or inattention to that fact pattern by the CISG.

Id. at 44g-44h.

57. See id. at 44k (concluding that those scholars who would look to the domestic law include the following: Bydlinsky, Eörsi, Farnsworth, Hartnell, Huber, Tallon, Volken, and von Caemmerer; those who would look to the Convention for the answer include the following: Enderlein & Maskow, Heiz, Honnold, Nicholas, and Schlechtriem).

58. See generally Murray, supra note 8, § 91. Murray notes that an offeree might have some knowledge of the "mistake," or reasonably should have some knowledge (as in those cases where offeree has failed to read the contract he or she signs), or the "mistake" could be due to misrepresentation. See id. § 91 (C). The latter case seems squarely within the parameters of validity issues discussed earlier in this paper. See supra notes 29-35 and accompanying text.

59. Id. § 91(D)(3). Murray discusses the famous case of Wood v. Boyton, 25 N.W. 42 (Wis. 1995), in which an owner of a stone, ignorant of its value, agreed to sell it to another, who was also ignorant of its value, for $1.00. When the seller discovered that the stone was worth $700, she sought its return by tendering $1.10 to the buyer, who refused. According to Murray:

[T]he seller had agreed to assume that risk by agreeing to sell the stone with such consciousness, i.e., the seller said, in effect, I hereby part with my ownership of this "thing," regardless of what it is worth, for one dollar, and I assume all risks of value in relation to this transaction. To require the parties to express a specific agreement concerning risk allocation in such a setting in order to find that they had agreed upon such allocation is excessively formalistic.

Murray, supra note 8, § 91(D)(3), at 448.

60. See 1 Kritzer, supra note 45, at 44l.

61. CISG, supra note 5, art. 79(1) (emphasis added).

62. John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention § 65 (2d ed. 1991) Honnold eschews analysis based on mere labels instead of substance: "[t]he fact that a domestic rule bears a label such as 'validity' or 'fraud' does not determine the question whether the rule is one of 'validity' within the meaning of Article 4(a) of the Convention." Id.

63. See 1 Kritzer, supra note 45, at 44l.

64. D. Tallon, Article 79 Commentary, in Commentary on the International Sales Law: the 1980 Vienna Sales Convention 572, 577-78 (C.M. Bianca & M.J. Bonell eds., 1987); see also 1 Kritzer, supra note 45, at 44l (Kritzer also cites Schlechtriem for the proposition that "[u]nder German law, a contract stipulating a performance that is impossible from the onset is void. § 306 BGB.").

65. See 1 Kritzer, supra note 45, at 628.

66. See Hartnell, supra note 9, at 78-79. Hartnell uses the term "initial impossibility" for those situations where "the goods had already perished or where the seller did not actually own the goods at the time of contracting." Id. at 78.

67. CISG, supra note 5, art. 79.

68. Id.

69. See generally Murray, supra note 8, § 5.

70. See id. § 112, at 635 (discussing the modern doctrine of impossibility as introduced by Taylor v. Caldwell, 32 L.J.Q.B. (N.S.) 164 (1863)).

71. Honnold, supra note 62, § 423.

72. Id. § 432.2 n.19 (quoting Schlechtriem, 1986 Commentary 102 n.422a).

73. Id. § 423.1; see also Barry Nicholas, Impracticability and Impossibility in the U.N. Convention on Contracts for the International Sale of Goods, in International Sales: the United Nations Convention on Contracts for the International Sale of Goods § 5.02, at 5-7 (Nina M. Galston & Hans Smit eds. 1984) ("We should probably all agree that what a court is doing when it applies a provision such as article 79 is to determine which party ought to bear the risk of the occurrence which has given rise to the dispute.").

74. See supra notes 34-36 and accompanying text.

75. Professor Murray notes that "[m]odern courts now recognize that they are allocating the risk of the occurrence of the supervening event to one of the parties when they decide that the promisor is either excused or not excused because of the changed circumstances." Murray, supra note 8, § 112, at 635-36 (citing Mishara Constr. Co. v. Transit-Mixed Concrete Corp., 310 N.E.2d 363, 367 (Mass. 1974)).

76. See supra notes 1-4 and accompanying text.

77. Tallon, supra note 64, at 594 (citations omitted).

78. See Nicholas, supra note 73, § 5.02, at 5-4 to 5-5.

79. Id. at 5-5.

80.CISG, supra note 5, art. 79(1).

81. See Honnold, supra note 62, § 423.4.

82. There is some disagreement about the number of elements in Article 79's test for excuse. However, the disagreement is largely insignificant because the various versions of the test all agree on the essential elements set out in the text above. See, e.g. Honnold, supra note 62, § 423.4 (three-part test); Tallon, supra note 64, at 578 (four-part test); Nicholas, supra note 73, § 5.02, at 5-4 (three-part test).

83. See Honnold, supra note 62, at § 423.4.

84. See id. § 428. "The nub of our problem is this: It is not practicable to enumerate the circumstances that will excuse a failure to perform. Instead, words must try to express a dividing point on a continuum between 'difficult' and 'impossible.' "). Id. § 432.1.

85. See generally Vienna Convention on the Law of Treaties, May 23, 1969, arts. 31-33, 632 U.N.T.S. 131, reprinted in Barry E. Carter & Philip R. Trimble, International Law: Selected Documents 55 (1995), U.N. Doc. A/CONF. 38/27. The general rule of interpretation is "good faith in accordance with the ordinary meaning," but "[r]ecourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion" in order to confirm the general rule. Id. art. 31(1), 32.

86. Convention Relating to a Uniform Law on the International Sale of Goods, July 1, 1964, 834 U.N.T.S. 107 [hereinafter ULIS] in 3 I.L.M. 855 (1964).

87. See Honnold, supra note 62, § 427, Professor Honnold explains that the German delegation, leading a civil law group, was concerned that the term "obstacle" might bar excuse in more "personal" situations, such as those dealing with seller's due care or fault, or drastic changes in economic circumstances.

88. See id.

89. Id.

90. See id.; see also Tallon, supra note 64, at 581 ("The impediment must also be unavoidable.").

91. See Tallon, supra note 64, at 581.

92. See Honnold, supra note 62, §427.

93. See Tallon, supra note 64, at 579 ("By adopting the word 'impediment', the Vienna Conference aimed at emphasizing the objective nature of the hindrance rather than its personal aspect. . . . What is actually at issue . . . is the external character of the impediment with regard to the activity of the defaulting party . . . ."). Professor Tallon also identifies an inconsistency between two official versions of the Convention:

The notion of "impediment beyond his control" is not easy to explain, owing partly to the difference that exists for instance between the English and French versions. By using the expression indépendant de sa volonté (literally, independent of his will), the French text appears to adopt a more subjective approach.

Id.

94. See Nicholas, supra note 73, § 5.02, at 5-8 to 5-9.

95. Id. at 5-9.

96. Honnold, supra note 62, § 432.2. Professor Honnold also notes that the drafters of the Convention were also responding to the claim that "[e]xemption under ULIS should be narrowed since it was not confined to cases 'where performance was [sic] radically changed' but might apply when performance had become unexpectedly onerous or based on an 'unforeseen rise in prices.' " Id. at 543 n.18 (quoting 5 U.N. Commission on Int'l Trade L.-Y.B. 39, para. 108 (1974), U.N. Doc. A/CN.9/SER.A./1974).

97. See Tallon, supra note 64, at 583 ("At the utmost, one may refer to the traditional categories of force majeure, i.e., natural catastrophes (e.g., earthquakes, storms, etc.) and of the fait du prince which is gradually extending on account of the greater interference of States in international commercial relations (e.g., embargo, blockade, war and, more recently, export prohibitions).").

98. Honnold, supra note 62, §432.2.

99. Id.

100. See, Tallon supra note 64, at 582.

101. See, e.g. id. at 580 ("[I]f the event were foreseeable, the defaulting party should, in the absence of any contrary provision in the contract, be considered as having assumed the risk of its realization."); Nicolas, supra note 73, § 5.02, at 5-9 (discussing "reasonable expectation[s]"); Enderlein & Maskow, supra note 53, at 323-24 ("The rule does not require foreseeability per se. . . . In the end, most of the phenomena that might become impediments are foreseeable. It is, however, not expected that such events are taken into account which, given general foreseeability, are not expected to materialize before the contract is performed and/or if they do nevertheless, they are at least not expected to have an effect on it.").

102. See Enderlein & Maskow, supra note 53, at 322 ("Within the control of the seller are all those factors which are connected with an orderly organization of his manufacturing and/or procurement process.").

103. See Nicholas, supra note 73, § 5.02, at 5-14 ("The important thing is that national courts should see [Article 79] in the context of the Convention as a whole and of the practices of international trade. . . . The more sophisticated and widespread international commerce becomes, the more difficult it is to say that a party could not reasonably have been expected to take an impediment into account.").

104. 15 J.L. & Com. 153 (Alessandra Michelini trans. 1995) (judgment of the Tribunale di Monza (ordinary court of first instance) on Jan. 14, 1993) [hereinafter Nuova Fucinati].

105. In its original pleadings, seller's principal argument was "that it was impossible to deliver the goods within the agreed delivery dates . . .because [the buyer] was late in taking delivery of another load of goods (700 cubic tons of ironchrome "Fine") ordered at the same time." Id. at 154. Seller chose to relegate this argument to subordinate status at the hearing before the court, and the court did not address it. See id. at 154-55.

106. With respect to legal terminology, the court's opinion apparently uses several different terms interchangeably. For example, the court notes specifically that Article 61 of the Convention provides for "the remedy of avoidance ('dissolution' in the terminology of our Civil Code)." Id. at 156. In other sections of the opinion, the court (and the translator) refers to "excuse," "release," and "dissolve." Id. at 155.

107. Buyer availed itself of Article 1453(2) of the Italian Civil Code which permits a claim for dissolution even when an action previously has been brought for specific performance. See id. at 155 n.1.

108. The court noted that it was submitting the suit to the examining judge for further judicial inquiry into the buyer's request for compensatory damages. Id. at 158.

109. See Nuova Fucinati, supra note 104, at 158.

110. Id. at 155.

111. See id. at 158.

112. The court concluded that the Convention did not apply because Sweden ratified the Convention after the date of contract formation and therefore was not a Contracting State under Article 1(1)(a). See id. at 157.

113. Id. at 155.

114. Nuova Fucinati, supra note 104, at 155.

115. See id.

116. See id.

117. Professor Honnold writes at length about the "danger that local tribunals may unconsciously read the patterns of their domestic law into the general language of the Convention -- an approach that would be inconsistent with the Convention's basic goal of international unification (Art. 7(1))." See Honnold, supra note 62, § 429.

118. See e.g., Commercial Practices Commission, International Chamber of Commerce, Force Majeure and Hardship 8-10 (1985).

119. Professor Honnold emphasizes the value of special excuse provisions because "impediments arise in a countless variety of circumstances and involve infinite gradations of difficulty and unpredictability." Honnold, supra note 62, § 424.

120. See 1 Kritzer, supra note 45, at 623 ("Article 79 appears to be more liberal than civil codes that define force majeure as an event which is unforeseeable and irresistible and that renders an obligation impossible to perform. However, the test for an exemption under Article 79 is stricter than the 'commercial impracticability' under the U.S. Uniform Commercial Code.").


PACE CISG DATABASEPace Law School Institute of International Commercial Law - Last updated August 11, 1999
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