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Can RESPONDENT Rely on Article 79 CISG and Be Exempted from Obligation to Pay Damages?

RESPONDENT’s breach is caused by the failure of Specialty Devices to supply the processing units on time. If Specialty Devices satisfies all of the requirements of Article 79(1) CISG, RESPONDENT may be exempted from liability under Article 79 CISG. High Performance’s decision not to supply Specialty Devices with D-28 chips resulted in the latter’s failure to supply RESPONDENT with processing units on time and led to RESPONDENT'S breach. The whole chain of sub-contractors will have to satisfy the requirements of Article 79 and the sub-contractors would have to be necessary additional third parties for RESPONDENT to be able to rely on an Article 79 defence.

 

To be exempted from the liability towards the payment of damages on account of late delivery the RESPONDENT should have met the requirements of Article 79 CISG. According to Article 79 (1) CISG, a party is not liable for a failure to perform any of his obligations if it 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. And in case the failure is due to the failure of a third party, Article 79(2) CISG demands that the requirement of exemption under Article 79(1) CISG be satisfied with respect to both parties, i.e., the party claiming the exemption and the third party before an exemption could be granted. In the case at hand the chain is a bit longer but arguably the same standard is applicable.

 

RESPONDENT will have to demonstrate that the RESPONDENT itself and Specialty Devices were faced with an impediment beyond their control. RESPONDENT also has to show that neither itself nor Specialty Devices could or should have taken into account the events claimed by them as an impediment. Further RESPONDENT will have to show that there is a causal link between the alleged impediment and the RESPONDENT's failure to perform its obligation. Finally, RESPONDENT will have to demonstrate thatit and Specialty Devices could not have overcome their alleged impediment.

 

The RESPONDENT argues that the RESPONDENT’s “failure is due to the failure by a third party whom he has engaged to perform the whole or a part of the contract”, ie Specialty Devices. Thus the provisions of Article 79(2) are applicable to the case and in order to satisfy the requirements of Article 79(2) CISG, the RESPONDENT needs to prove that both the RESPONDENT and Specialty Devices qualify under Article 79(1) CISG. The burden of proof lies on the RESPONDENT. Article 79 contains four requirements a party must meet to qualify for the exemption of liability. Firstly, there must be "an impediment beyond the defaulting party's control." Secondly, the impediment "could not have been reasonably taken into account by the defaulting party at the conclusion of the contract." Thirdly, the impediment or the consequences of the impediment "could not have been reasonably avoided or overcome". Fourthly, the "defaulting party proves that the challenged non-performance was due to such an impediment." In order to qualify for exemption under Article 79 CISG, the RESPONDENT will have to prove that both the RESPONDENT and Specialty Devices meet all the four requirements mentioned above.



 

Since no unified notion of “impediment” has been adopted by scholars or practitioners, the question whether an event represents an “impediment” should be assessed in light of the conditions required by the CISG and the accepted international practice. We have here an excellent opportunity for teams to engage in discussion of facts and work on alternative assumptions. There is also useful arbitral and judicial case law to be considered in this context. Objectively identifying the key impediment is a challenging task that would allow very good teams to excel. This is a technical legal determination and should be applied as such. Then the factual and legal causation ought to be demonstrated.

 


Date: 2015-12-11; view: 1134


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