Remedies for "Hardship" under the CISG International Sales Convention and the Decision by the Belgian Supreme Court in Scafom International v. Lorrain Tubes (2009)

by Joseph Lookofsky

In light of the decision by the Belgian Supreme Court in Scafom International v. Lorrain Tubes (2009), American contract law practitioners need to be aware of the relationship between an exemption from liability for non-performance under CISG Article 79 and the more fluid concept of financial "hardship" as recognized in Belgium and a number of other CISG Contracting States. The case is discussed in this article by Professor Joseph Lookofsky.

Excerpt:

The United Nations Convention on Contracts for the International Sale of Goods (CISG) is currently in force in the United States, as well as more that 75 other CISG Contracting States. In light of the controversial decision by the Belgian Supreme Court in Scafom International v. Lorrain Tubes (2009) American contract law practitioners must be aware of the relationship between an exemption from liability for non-performance under CISG Article 79 and the more fluid concept of financial "hardship" as recognized in Belgium and a number of other CISG Contracting States.

Impracticability under the UCC

Although the concept of hardship is largely foreign to American legal doctrine, commercial practitioners in the U.S. are likely to be familiar with UCC § 2-615, which provides authority to relieve a non-performing seller by reason of impracticability. These practitioners know that American courts apply § 2-615 with caution and that they are highly unlikely to excuse a non-performing seller by reason of changed economic circumstances, such as increased costs.

Liability Exemptions under the CISG

If a merchant based in California buys goods - say 10 dozen dresses or 1,000 pounds of cheese - from a seller in France, that contract is governed by the CISG (by default), ⁷ simply because the parties have their places of business in different CISG Contracting States. That French seller is of course bound to deliver the goods as promised, just as the California buyer is bound to pay the price agreed. In exceptional circumstances, however, a CISG seller who does not perform as promised might seek a liability "exemption" - this by virtue of an "impediment" which (allegedly) renders performance impossible (or at least impracticable, to borrow a UCC term). Paragraph 1 of CISG Article 79 provides:

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.

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Joseph Lookofsky is Professor of Commercial Law at the University of Copenhagen. He is a native of New York and studied law at the New York University School of Law (J.D. 1971). After his admission to the New York State Bar, he served as in-house legal counsel for United Artists Corporation. Later, Mr. Lookofsky relocated in Denmark and studied law at the University of Copenhagen where he received his Danish degrees (cand.jur. 1981; dr.jur. 1989). His numerous books and articles comprise topics within the law of Contracts, Domestic and International Sales, Transnational Litigation & Commercial Arbitration, Conflict of Laws, and Comparative Law.