Türkçe
United Nations Convention on International Contracts on the Sale of Goods (“CISG”), known as the Vienna Convention, was adopted on 11.4.1980 and entered into force on 1 January 1988 to ensure uniformity of the legal rules regarding the purchase and sale of movable property in international trade and harmonization of the legal regulations within the civil law and common law systems.
Turkey has confirmed its participation to CISG with ratification law No. 5870 which was published in Official Gazette on April 14, 2009 and accordingly, CISG was entered into force in Turkey on 1 August 2011. As of the aforementioned effective date, the CISG has been applied directly to the international sales contracts to which Turkish companies are parties, just like the Turkish laws, unless the parties expressly agree otherwise. So, what are the regulations related to force majeure under CISG, of which many companies are not even aware?
BREACH OF THE CONTRACT AND COMPENSATION OBLIGATION WITHIN THE SCOPE OF CISG
Contrary to Turkish Law of Obligations; under CISG, no sanctions for different types of breaches such as delayed or incomplete performance, defective performance, default, temporary or partial impossibility, were envisaged and merely the notion of “breach of the contract” was accepted and the consequences for such breach is regulated. If any of the contracting parties fails to fulfill its obligations under the contract for any reason, there is a “breach of the contract”.
Under CISG; the remedies for breach of contract by the seller are regulated under Article 45 and subsequent articles and the remedies for breach of contract by the buyer are regulated under Article 61 and subsequent articles.
However, in addition to such rights and entitlements granted to the parties, it is stipulated under Article 74 that the party breaching the contract will be liable to pay compensation to the other party. Pursuant to such Article 74 “Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.”
As can be seen; in the event of a breach of contract, the non-breaching party will be able to exercise the optional rights granted to him under CISG, as well as to request for the compensation of its damages and losses caused by such breach of contract. These damages cover not only direct losses incurred due to the breach, but also indirect losses such as loss of profit.
FORCE MAJEURE UNDER CISG
In accordance with the first paragraph of Article 79 of CISG; “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.”
Subsequent paragraphs of such Article are as follows;
“(2) If the party’s failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if:
(a) he is exempt under the preceding paragraph; and
(b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.
(3) The exemption provided by this article has effect for the period during which the impediment exists.
(4) The party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt.
(5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention.
Similar to the general rules of Turkish legal system; in order to accept the existence of force majeure within the scope of CISG, there should be an obstacle beyond the debtor’s control and it should not be possible for the party claiming force majeure to anticipate or avoid this obstacle on the date of execution of the contract.
However; as can be understood from the second paragraph of the article, if the failure of the party claiming force majeure to fulfill its obligations is resulted from the failure of a third party who is assigned to perform the contract partially or completely, this situation will not provide direct relief from the responsibilities. In this case, the conditions stated under the second paragraph of the article must be fulfilled, in other words; the party claiming force majeure and the party who is charged with the performance of the contract should be released from their obligations under the first paragraph.
For example; in the event that some of the products that the seller undertakes to provide the buyer under the contract are manufactured by a local producer, the failure of such local producer to duly deliver the products to the seller will not directly constitute a force majeure for the seller. However, if the production facility of the local producer has damaged due to a fire or earthquake which made it impossible for such producer to deliver the products, then the conditions indicated under the first paragraph of the article would have occurred and accordingly, this situation constitute a force majeure for the seller.
In accordance with the last paragraph of the article; failure of one of the contracting parties to fulfill their obligations due to force majeure will only eliminate the liability of compensation and will not prevent the other party from exercising other rights provided CISG.
ERKUT LAW OFFICE
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