ff. Specifically: Hardship

The notion of hardship or economic impossibility is concerned with a situation in which a party, generally the seller, is exempt from liability because performance of its duty while technically still possible became too onerous from an economic point of view due to a change of circumstances. Such situations, particularly market prices that increase significantly between conclusion of the contract and delivery, can constitute an impediment in terms of Art. 79. Consequently, all domestic provisions dealing with this situation are not applicable. It is, however, important to note that the high threshold of Art. 79 is reached in these situation only in rare and exceptional cases.

Generally, each party bears the risk whether the transaction actually brings the economic gain anticipated when the contract was concluded. Therefore, exemption under Art. 79 is only possible where performance would require the party to exceed the so called ultimate limit of sacrifice. Where this limit of sacrifice lies has to be determined on a case to case basis. Particularly in cases where goods are sold whose price generally fluctuated significantly the threshold of this limit of sacrifice is set high. By way of example, when selling certain kinds of raw materials it is considered foreseeable if the price triples. As a rule of thumb, an increase in cost of 100% is not sufficient to reach the ultimate limit of sacrifice.

If the limit of sacrifice is reached it is not entirely clear which legal consequences are entailed. Obviously, a claim for damages is excluded by virtue of Art. 79. Yet, sometimes it is argued that the parties are under a duty to renegotiate the contract to find a new equilibrium according the new circumstances. As basis for this argument Art. 6.2.3(2) of the Unidroit Principles on International Commercial Contracts (PICC) is brought forward either as trade usage under Art. 9 or as underlying principle under Art. 7. Yet, the opposite view argues that the CISG does not contain a duty to renegotiate the contract and that there is no need for one. Art. 6.2.3(2) PICC might in some cases live up to an applicable trade usage but cannot be considered an international and thus by default applicable trade usage in terms of Art. 9(2). Also there is no such principle underlying the provisions of the CISG. Rather, the solution found within the boundaries of the CISG is that in case the breaching party offers to fulfill the contract under reasonably changed conditions that breach is not fundamental in terms of Art. 25. Consequently, the aggrieved party is not only barred from claiming damages by virtue of Art. 79 but is also unable to avoid the contract based on a fundamental breach.

Last modified: Friday, 23 October 2015, 6:42 PM