1. Mrs. SOARES (Portugal), introducing the amendment proposed by Argentina, Portugal and Spain to the last sentence of paragraph 1 of article 54 [became CISG article 58 ] (A/CONF.97/C.1/L.189), consideration of which had been deferred from the 25th meeting (A/CONF.97/C.1/SR.25), said that it was a drafting amendment to reformulate the last sentence in which the use of the word "condition", which had a precise legal meaning, was misleading.
2. Mr. ROGNLIEN (Norway) considered that the amendment failed to make clear the important point that the handing over of the goods and the payment should be concurrent.
3. Mr. MINAMI (Japan) concurred.
4. The amendment by Argentina, Portugal and Spain to the last sentence of paragraph 1 (A/CONF.97/C.1/L.189) was rejected by 17 votes to 7.
5. Mr. ZIEGEL (Canada), introducing the joint proposal by Australia and Canada for a new article 62 (bis) [proposed modification to the text that became CISG article 71 ], said that it dealt with a practical problem to which article 62 [became CISG article 71 ] did not provide a definite solution. It should be made clear that if a party did not receive adequate assurance of the other party's ability to perform he was entitled to avoid the contract and not merely suspend performance. If, for example, a buyer heard rumours that the seller from whom he had ordered equipment for a hydroelectric installation, might be unable to build the items concerned and did not receive any assurance from the latter, suspension of performance would merely delay the entire project still further. Similarly, a seller who had taken on special staff and entered into subcontracts to build a particular piece of equipment would not have his problem solved by suspension if he received no adequate assurance from the buyer. He must be able to take a definite decision with regard to the continued employment of staff and to the subcontracts. The solution in the joint proposal was to be found in the domestic legislation of various countries. The cases with which it was concerned were perhaps covered by the commentary on article 63 [became CISG article 72 ] (A/CONF.97/5, page 164) or by [Secretariat Commentary ] example 73B (ibid., page 191) [see Secretariat Commentary ], but the matter should perhaps be expressly dealt with.
6. Mr. BENNETT (Australia) explained that his delegation supported the general idea of suspension of contract set out in article 62 [became CISG article 71 ], although it was not a concept known to Australian law. However, without the joint proposal, the text would prejudice the rights of the non-defaulting party by leaving him in a position of intolerable uncertainty.
7. Mr. SEVÓN (Finland) said that the proposed new article appeared to enable the party requiring assurance of performance to avoid the contract even if the other party asserted that there were no grounds for questioning his ability to perform. He could not therefore support the proposal as drafted.
8. Mr. FOKKEMA (Netherlands) disagreed with the Finnish representative's interpretation of the proposed new article. Article 62 [became CISG article 71 ] stated that there must be good grounds for concluding that the other party would not perform his obligations. In the last analysis, that would be for the courts to decide and if the judgement was that no good grounds existed the article would not apply. He had held the opinion that the cases cited by the Canadian representative would fall under article 63 [became CISG article 72 ]. If, however, there was any doubt on the matter, he would support the joint proposal.
9. Mrs. FERRARO (Italy) opposed the joint proposal. The Convention established the principle that avoidance of contract could follow a fundamental breach but the exact circumstances should not be specifically defined in each article. That should be left to the courts to decide.
10. Mr. INAAMULLAH (Pakistan) said that the present text of article 62 [became CISG article 71 ] placed too much confidence on the ability of one party to judge the other's capacity to perform. No objective test was proposed. The joint proposal was on the same lines and he could not support it.
11. Mr. HJERNER (Sweden) also opposed the joint proposal. The UNCITRAL Working Group had considered the cases mentioned by the Canadian representative but had reached the conclusion that, as a matter of principle, avoidance of contract should stem only from fundamental breach and anticipatory avoidance on the grounds of anticipatory fundamental breach only in the clear case dealt with under article 63 [became CISG article 72 ].
12. The CHAIRMAN said that the joint proposal did not seem to command wide support. He took it that the Committee did not wish to adopt it.
13. It was so agreed.
(A/CONF.97/C.1/L.191/Rev.1, L.210, L.190, L.186, L.223, L.208, L.217)
14. Mr. ROGNLIEN (Norway), introducing his delegation's amendment to paragraph 1 (A/CONF.97/C.1/L.191/Rev.1), said that the amendment in the first line was merely a matter of drafting. With regard to the amendment in the third line -- the substitution of the words "of a kind which" for the word "that" -- his delegation considered that it might be doubtful whether a party could foresee all the details of an impediment but he should be able to foresee the kind of impediment likely to arise. For example, he could reasonably be expected to foresee difficulties arising from general climatic conditions, but he could not anticipate the exact time and place of a particular thunderstorm.
15. The CHAIRMAN suggested that the drafting amendment in the first line of paragraph 1 should be sent to the Drafting Committee.
16. It was so agreed.
17. Mr. HERBER (Federal Republic of Germany) said that he could not support the Norwegian amendment to the third line of paragraph 1. The proposed formulation was too general. Under the present well-balanced text which had been adopted in UNCITRAL there must have been a concrete impediment the party could not have foreseen. It should be left to the courts to consider whether a particular concrete impediment should have been foreseeable or not.
18. Mr. ROGNLIEN (Norway) said he appreciated the view of the representative of the Federal Republic of Germany that the application of paragraph 1 should be left to the courts.
19. The CHAIRMAN said that he took it the Committee did not wish to adopt the Norwegian amendment to the third line of paragraph 1.
20. It was so agreed.
21. Mr. ADAL (Turkey), introducing his delegation's proposal to delete paragraph 2 (A/CONF.97/C.1/L.210), said it would be dangerous to accept failure by a third person as an exemption since it would provide a ready excuse for parties unwilling to fulfil their obligations. For example, a seller behindhand with his deliveries could assert that a company which was in reality wholly under his control constituted a third person; it would be difficult for a buyer in a foreign country to prove otherwise. On the other hand, a buyer might excuse late payment on the grounds that those who owed him money were also late with their payments. In his delegation's view, paragraph 1 was adequate to cover unexpected circumstances, including failure by a third person.
22. The CHAIRMAN said that the Turkish proposal did not seem to command wide support. If necessary, the Committee might revert to it after it had considered various other proposals to amend paragraph 2.
23. Mr. VINDING KRUSE (Denmark), introducing his delegation's proposal (A/CONF.97/C.1/L.186), said that paragraph 2 of article 65 [became CISG article 79 ] covered cases where impediments were caused by third parties engaged to perform the whole or a part of the contract but not cases where impediments were caused by suppliers to the contracting party. It did not seem reasonable that a party should be exempted from liability because he had chosen an unreliable supplier, whereas he was liable if he had chosen an independent contractor to fulfil his obligations. The buyer might have no knowledge of whether the seller had engaged an independent contractor or had used a supplier, and thus the whole matter would be outside his control. The distinction between an independent contractor and a mere supplier could often lead to uncertainty in regard to liability. There should be no difference made in such cases as to the seller's responsibility, and his delegation therefore proposed that the words "by his supplier or" should be inserted.24. Mr. MICHIDA (Rapporteur) reminded members that the question of the wording of paragraph 2, and in particular the addition of the words "by his supplier or" proposed by the Danish delegation, had been extensively discussed at the UNCITRAL Working Group in January and February 1974. It had been decided at that time that the words should not be included because they would make the provision too loose and would thus tend to exempt the seller from liability to an extent that might, notably in view of the current crisis in oil supplies, eventually paralyse the world economy.
25. Mr. HJERNER (Sweden) said he too recalled the discussions in the UNCITRAL Working Group on the wording of paragraph 2. However, the current discussion was more confusing, because of the differing interpretations that were being placed on the meaning of paragraph 1. The object of the Danish proposal was not to exempt the failing party from his responsibility; on the contrary, its purpose was to make his liability stricter. The Rapporteur's arguments were based on the assumption that any failure by the supplier could not be covered by paragraph 1, whereas the Danish delegation, and his own, interpreted the position in the opposite way. As now drafted, paragraph 1 was far too wide. If the seller himself was given exemption in cases where failure was due to force majeure, he saw no reason why the same exemption should not apply in the case of subcontractors and suppliers. He therefore supported the Danish proposal.
26. Mr. DATE-BAH (Ghana) said he was somewhat confused by the different arguments that had been put forward. He had felt that the Danish proposal would tend to erode the obligation assumed by the seller to too great an extent, but the previous speaker's comments had raised some doubts in his mind. However, he felt that the most natural interpretation of article 65 [became CISG article 79 ] was that implied in the intervention by the Rapporteur, namely that possible breaches of a contract caused by failure of suppliers to perform their obligations constituted a commercial risk which the seller could reasonably be expected to take into account and should not be entitled to pass on. He therefore could not support the proposal.
27. Mr. BONELL (Italy) also preferred the existing text of paragraph 2. The case of a third person engaged by the seller to perform all or part of the contract was normally the kind of case in which the seller had to be held liable for his choice, since it was inevitably his choice alone. He had some hesitation in supporting the proposal to broaden the scope of the provision by including also a reference to the supplier, because, unlike the third person, a supplier might not necessarily be chosen by the seller in every case. He considered that the cases the proposal envisaged could generally be covered by the existing provisions of paragraph 1, which would have the advantage of providing a more flexible solution.
28. Mr. ZIEGEL (Canada) considered the word "supplier" contained in the Danish proposal highly ambiguous. The courts would have great difficulty in construing its meaning, and there was no reason why they should necessarily interpret it in the sense intended by the Danish delegation. It appeared from the discussion that some representatives had in mind a situation where a seller of a finished article had alternative sources of supply in respect of certain raw materials, but there might also be cases where an important element in the process of manufacture (such as, for example, electricity or natural gas) was available only from a single source. In such a case, the argument that the seller was not responsible for the choice of his supplier was irrelevant. The situation was clearly one which would fall within the scope of paragraph 1, and was one in which it would be unfair to subject the seller to the double conditions imposed in paragraph 2. He was therefore opposed to the inclusion of the supplier in paragraph 2; the question of the extent to which the seller or corresponding party could rely on the failure of his sources of supply should be governed by the provisions of paragraph 1.
29. Mr. HERBER (Federal Republic of Germany) was strongly opposed to the amendment. He pointed out that article 65(1) [became CISG article 79(1) ] already imposed a heavy responsibility on the seller, and permitted only a very limited exemption. The liability envisaged was one which went beyond most national legislations. Paragraph 2 was even stronger with respect to third parties whom the party in breach had engaged to perform his contractual obligations, in particular his servants. He did not think it just that the supplier should be regarded in the same way as a third party engaged by the seller to perform the whole or part of the contract, since, as had already been shown, there were many different types of supplier and in some cases the seller had no freedom of choice between them.
30. Mr. SEVÓN (Finland), Mr. VINDING KRUSE (Denmark), and Mr. WAGNER (German Democratic Republic) expressed their willingness to withdraw their delegations' proposal (A/CONF.97/C.1/L.190, L.186, and L.217) in view of the Rapporteur's comments as to the interpretation of article 65 [became CISG article 79 ].
The meeting was suspended at 1.25 a.m. and resumed at 11.45 a.m.
31. Mr. INAAMULLAH (Pakistan), introducing his delegation's amendment to paragraph 2 (A/CONF.97/C.1/L.223), said that he would be prepared to accept the Turkish proposal to delete the paragraph but as an alternative, he was proposing the introduction of a final proviso which would make it clear that the exemption from liability under paragraph 2 would only apply where subcontracting was envisaged in the contract itself.
32. Mr. VISCHER (Switzerland) said that he supported the Pakistan amendment as an alternative to the Turkish proposal. It was his impression that the doubts raised by paragraph 2 had not been dispelled.
33. Mr. INAAMULLAH (Pakistan) observed that the Turkish proposal to delete the paragraph was prompted by the provision's lack of precision and clarity. His own amendment would improve the text in that respect.
34. Mr. MATHANJUKI (Kenya) considered that the Turkish amendment should be regarded as the main proposal and the Pakistan amendment as an alternative in the event of its rejection.
35. Mr. VINDING KRUSE (Denmark) pointed out that, for the purposes of article 65 [became CISG article 79 ], it was necessary to distinguish clearly between a supplier on the one hand and an independent contractor on the other. The provisions of the article had been interpreted by the Swedish representative and the Rapporteur as meaning that a party could be excused for failure to perform his obligetions if the failure was attributable to failure by a subcontractor to perform his obligations. Paragraph 2 of the article covered the case of the independent contractor. Its provisions were formulated as an exception to paragraph 1 but they in fact constituted a broadening of the party's liability. That broadening of liability resulted from the requirement that the circumstances preventing performance should be beyond the control of the party concerned. For an independent contractor liability would thus be broader than that specified in paragraph 1 for a supplier. His delegation wished to retain paragraph 2 and did not support the proposal to delete it. It wished at the same time, however, not to limit the liability of the parties.
36. The CHAIRMAN said that his interpretation of article 65 [became CISG article 79 ] differed from that of the Rapporteur. Paragraph 1 provided for exclusion of liability where the party concerned was prevented from performing his obligations by events outside its control. Paragraph 2, on the other hand, made provision form much broader exception. It exempted the party concerned if his failure to perform his obligations was due to the failure to perform on the part of a subcontractor whom he had engaged to perform the whole or part of the contract. The amendments by Denmark and Finland would have had the effect of broadening the exemption still further.
37. Mr. DATE-BAH (Ghana) said that in the light of the discussion he believed that the Turkish proposal to delete the paragraph would not serve its intended purpose.
38. The CHAIRMAN, noting that only a minority supported the amendment by Pakistan (A/CONF.97/C.1/L.223), said that if there was no objection, he would consider the proposal rejected.
39. It was so agreed.
40. The CHAIRMAN asked whether any delegation wished to revive the Turkish proposal to delete paragraph 2.
41. Mr. ADAL (Turkey) said that his proposal still stood.
42. Mr. WIDMER (Switzerland) supported the Turkish proposal.
43. Mrs. KAMARUL (Australia) also supported the Turkish proposal. The primary purpose of paragraph 2 was to restrict the operation of the provisions of paragraph 1. Paragraph 2 was thus an exception under paragraph 1, not a new and separate exception. The wording of paragraph 2, however, suggested a wider exception than was desired. Her delegation believed that it would be better to drop paragraph 2 and leave the rule in paragraph 1 to be interpreted by the courts.
44. Mr. ROGNLIEN (Norway) observed that there were wide differences between the interpretations placed upon paragraph 2 by different delegations. The text was obviously ambiguous. He suggested that a small working group should be set up to produce an unambiguous text capable of attracting wide support.
45. His interpretation of paragraph 2 was that its provisions constituted a limitation of the exemption under paragraph 1 and therefore provided for an enlargement of the liability of the parties under the contract. If that interpretation was correct, it was preferable to keep paragraph 2 in the text. If, however, one accepted the Chairman's interpretation, it would be preferable to delete the paragraph.
46. Mr. OLIVENCIA RUIZ (Spain) considered that the exception provided for in paragraph 2 should remain confined to the case of the subcontractor and should not be broadened to other third parties. He supported the suggestion to set up a working group to reformulate the paragraph but would oppose any suggestion to refer the matter to the Drafting Committee.
47. Mr. ADAL (Turkey) said that his delegation maintained its proposal to delete paragraph 2 but would be prepared to participate in a working group to reformulate its provisions.
48. Mr. KUCHIBHOTLA (India) supported the suggestion to set up a working group.
49. The CHAIRMAN noted that there was general support for the suggestion to set up a working group and proposed that it should consist of the representatives of the German Democratic Republic, Ghana, Pakistan, Spain, Sweden, Switzerland and Turkey. If there was no objection, he would take it that the Committee agreed to set up a working group consisting of those members.
50. It was so agreed.
51. Mr. HONNOLD (United States of America) hoped that the working group would not embark on a general recasting of the provisions of paragraph 2 and that its mandate would be confined to clarifying the relationship between the provisions of paragraphs 1 and 2.
52. Mr. ROGNLIEN (Norway), introducing his delegation's amendment (A/CONF.97/C.1/L.191 /Rev.1), said that the text of paragraph 3 could be construed as meaning that the exemption ceased with the impediment, even if the latter was of very long duration. That result was undesirable because, in the case of a long-term impediment, circumstances could change radically and make it totally unrealistic to impose performance at that late stage. In reality, the problem of permanent relief had not been dealt with in the paragraph; the matter had been left to national law. Accordingly, his delegation proposed that the rule now embodied in the single sentence of paragraph 3 should relate to temporary impediment. His delegation's proposal contained also a separate provision, in the form of a new second sentence, to deal with the problem which arose when, after the removal of the impediment, the circumstances were so radically changed that it would be manifestly unreasonable to hold liable the party concerned.
53. The question had been discussed for a long time within UNCITRAL without arriving at any agreement. His delegation's proposal would, he hoped, provide a solution. If no agreement could be reached on the proposed formula, he would suggest the deletion of the word "only" from paragraph 3 a second best solution based on the understanding that the paragraph and the whole of article 65 [became CISG article 79 ] did not contain provisions regulating a possible permanent relief.
54. Mr. FELTHAM (United Kingdom) remarked that the existing provision did not even make it clear that the question of permanent exemption was left to national law. The buyer was protected under the Convention by his right to avoid a contract on the grounds of fundamental breach. After a long period, the seller should also be able to claim exemption if the situation had changed so radically that it was unreasonable to expect him to perform. The Norwegian proposal covered that eventuality.
55. Mr. MEIJER (Netherlands) also supported the proposal. The seller should not be entitled to insist on performance in all circumstances after a long period of impediment. By that time, the original basis of the contract might have been radically changed. In that connection, he drew the Committee's attention to the footnote to example 65G of the comments on that article [see Secretariat Commentary] which referred to possible special provisions in individual contracts (A/CONF.97/5, page 173).
56. Mrs. KAMARUL (Australia) was also in favour of the Norwegian proposal, which filled a gap in the existing paragraph 3.
57. Mr. MASKOW (German Democratic Republic) said that his delegation endorsed the underlying idea of the second sentence of the draft proposal but would like to extend it. It would prefer the party affected by the impediment also to have the right to avoid the contract. According to the existing text the other party had such a right because the non-performance could constitute a fundamental breach, whereas the party in breach seemed not to possess such a right. If that idea was accepted, the reference to the removal of the impediment in the Norwegian proposal would no longer be necessary because even before it was removed it would have become clear that the circumstances had so radically changed as to make performance impossible. He would therefore like the wording redrafted along those lines.
58. Mr. HJERNER (Sweden) said that his delegation opposed the proposal. Such a provision had been omitted from the draft Convention for the very good reason that it was impossible to cover all eventualities. The Norwegian proposal in fact was tantamount to introducing a provision similar to the doctrine of frustration in English law or the théorie de l'imprévision in French law. It took into account only part of the problem, namely, the situation of the non-conforming party at the time the impediment ceased to exist. There could, however, be other more serious complications. For instance, what was the position of the party which had performed and had made no breach? It would be manifestly unjust that he should not be compensated for expenses incurred by performance. In business relations there were various possible solutions, such as that neither party could recover anything from the other, which was unjust to the non-failing party, that that party might recover his expenses but not the anticipated profits or that the losses might be shared equally between parties. A just solution greatly depended on the nature of the business involved. In view of all those problems, the working group had decided to leave the matter open in the Convention to be solved either by some contractual arrangement between the parties or by applicable law. He strongly recommended that the existing text should be retained.
59. Mr. PLANTARD (France) also opposed the proposal. Paragraph 3, which referred to paragraph 1 of the same article, covered cases where performance was impossible due to an impediment, in which case the party concerned was exempt from liability. In the Norwegian proposal, the impediment which made performance impossible was something very different from force majeure and much closer to the théorie de l'imprévision in French law or the doctrine of frustation in Anglo-Saxon law.
60. Mr. BOGGIANO (Argentina) pointed out that under the Norwegian proposal, the radical change in circumstances envisaged seemed to refer to a situation in which the basis of the contract was fundamentally altered. In such a situation, the outcome should not be exemption from liability for one party but an equitable revision of the contract. A matter of fundamental principle was involved. His delegation opposed the proposal because it could lead to injustice.
61. Mr. BONELL (Italy) supported the Norwegian proposal. It did not refer to what was commonly called force majeure or impediment in the strict sense but only to partial impediment. The first sentence of the proposed paragraph 3 fell well within the scope of paragraph 1 and made it clear that the exemption would have effect only for the period during which the impediment existed. The second sentence made an exception to that general rule but did not introduce a new concept of the impediment. He noted that the problem had been dealt with by ULIS in a way similar to that proposed in the Norwegian amendment and that that rule had not so far as he knew been strongly criticized.
62. Mr. ROGNLIEN (Norway) said that the difficulty lay not in the proposal but in the subject itself. The consequences of, and problems involved in, the existing provision would be much worse than those in his proposed solution. The problems of the conforming party had not been mentioned because in case of impediment, he would almost always be able to avoid the contract on the grounds of fundamental breach or could ask for restitution of goods or services supplied.
63. His delegation's proposal had attempted to solve part of the problem on the basis of uniformity. The rest would have to be left to national law or to another article in the Convention. However, he thought it a mistake to abandon any attempt at solution just because the whole problem could not be solved.
64. Mr. MINAMI (Japan) said that his delegation supported the idea underlying the proposal but had doubts about the wisdom of introducing it into the Convention in the light of the many difficult problems involved.
65. Mr. HONNOLD (United States of America) strongly supported the proposal. It certainly should not be rejected on the grounds that it did not solve all possible problems. The Norwegian amendment went some way to solving some of those problems and would substantially improve the existing text, which, as at present drafted, might lead to further difficulties.
66. Mr. SAMI (Iraq) considered that the proposal might create more problems than it solved. For instance, the party experiencing the temporary impediment might be tempted to extend it to his own advantage.
67. The CHAIRMAN invited the Committee to vote on the Norwegian draft proposal as a whole.
68. The Norwegian draft proposal was rejected.
69. The CHAIRMAN invited the Committee to vote on the alternative Norwegian amendment to delete the word "only" from paragraph 3.
70. The amendment was adopted.