Force Majeure & Frustration Of Contracts

Front 1

What sections of the UCC and CISG are applicable for measuring damages for non-delivery

Back 1

UCC Section 2-713
CISG Articles 75 and 76

Front 2

What are the applicable UCC and CISG sections for frustration of contracts?

Back 2

UCC §2-615
CISG Article 79

Front 3

What is the first question to ask when writing or reviewing a contract?

Back 3

What is the choice of law?

Front 4

impossibility doctrine

Back 4

The only excuse for non-permance is the complete and total impossibility of performance under the terms of the contract

Front 5

commercial impracticability doctrine

Back 5

Excuse granted only when unexpected change in circumstances makes contract performance impossible.
Requirements for commercial impracticability are less demanding than impossibility.
Unforeseeability is an important factor.

Front 6

Efficient breach

Back 6

Any breach that is good for the individual breaching party when the other party will be no worse off

Front 7

CISG Article 6

Back 7

The parties may exclude the application of the Convention or, subject to article 12, derogate from or vary the effect of any of its provisions. (i.e. using force majeure clauses to override general law)

Front 8

Force majeure clause

Back 8

Intended to excuse a party from liability if some unforeseen event beyond the control of that party prevents it from performing its obligations under the contract.

Front 9

Force majeure defense

Back 9

Arguing that a situation out of your control is an excuse for your failure to perform under the terms of the contract.

Front 10

Impracticable

Back 10

Impossible to carry out or put into practice. Whereas impractical just means difficult to carry out.

Front 11

Ocean Tramp Tankers Corp. v. V/O Sovfracht (The Eugenia)

Back 11

Relevant in force majeure analysis

Front 12

Differences between UCC §2-615 and CISG Article 79

Back 12

o Article 79 provides an excuse for impossibility while UCC uses test of commercial impracticability
o The CISG applies to both parties. 2-615 is only applicable to the sellers of goods
o CISG applies to all aspects impeding contractual performance, while the UCC limits its defense to situations involving delay, or non-delivery
o CISG allows excuse for “impediments beyond [the contracting party’s] control” Much more lenient than 2-615’s requirement that the “non-occurrence of the event that occurs be a basic assumption on which the contract is based.

Front 13

3 elements must be proven before excuse or adjustment becomes available under UCC §2-615

Back 13

1) seller must not have assumed the risk of some unknown contingency;
2) nonoccurrence of the contingency must have been a basic assumption underlying the contract; and
3) the occurrence of that contingency must have made performance commercially impracticable

Front 14

CISG Article 79

Back 14

Describes a sort of cascading liability. If a seller can’t perform because of an “impediment” as described in paragraph (1) like a subcontractor causing him not to perform, he is only excused if that subcontractor would also qualify to be excused under paragraph (1). If not, the subcontractor is still liable for damages to the seller and thus the seller is still liable for damages to the buyer.

Front 15

Commonality between national jurisdictions in frustration of contracts

Back 15

• Occurrence of an event after the making of the contract
• Exceptionality and unforeseeability of the event
• Alteration of the contract in an intolerable degree
• No fault on the obligor’s part

Front 16

Requirements for an impossibility defense under the CISG

Back 16

1. failure was due to an external impediment beyond the party’s control
2. the impediment was not reasonably foreseeable at the time the contract was made
3. both the impediment and its effects were unavoidable

Front 17

CISG Article 75

Back 17

Permits damages to be measured by the difference between the contract price and the “price in the substitute transaction” if the buyer purchases substitute goods “within a reasonable time after avoidance”.

Front 18

CISG Article 76

Back 18

When buyer does not purchase substitute goods “under Article 75”. Market price “at the time of avoidance” of the contract is used in assesing damages.