Chapter 1 Introduction 1
1 Force Majeure and Hardship in International Commercial Transactions 1
2 General Principles of Commercial Contracts：Methodological Approach 9
Chapter 2 Scope of Application of General Contract Principles 23
3 General Remarks on the Governing Law and the Application of General Contract Principles 23
4 Choice of Law Agreement Providing for the Application of a National Law 28
5 No Choice of Law Made by the Parties 43
Chapter 3 The Concept of Non-performance 57
6 The Concept of Non-performance Under General Contract Principles 57
Chapter 4 Force Majeure Excuse 75
7 The Force Majeure Excuse as a General Principle of Law 75
8 Individual Requirements of the Force Majeure Excuse Under General Contract Principles 110
9 Legal Effects of the Force Majeure Excuse 345
10 Interpretation and Effects of Force Majeure Clauses 383
Chapter 5 Hardship (Change of Circumstances)：Fundamental Change of the Equilibrium of the Contract 391
11 Hardship as a General Principle of Law 391
12 Individual Requirements of the Hardship Defence 420
13 Legal Effects of Hardship 479
14 Interpretation and Legal Effects of Hardship Clauses 512
15 Hardship Distinguished from Other Remedies 517
Chapter 6 Conclusion 533
Bibliography 537
Principles on Force Majeure in the CISG，UPICC，PECL，the TLDB-Principles and ICC Force Majeure Clause 2003 563
Principles on Hardship in the UPICC，PECL，the TLDB-Principles and ICC Hardship Clause 2003 569
Index 573
Acknowledgements 21
List of Abbreviations 23
Chapter 1 Introduction 1
1 Force Majeure and Hardship in International Commercial Transactions 1
Ⅰ The Need for Transnational Instead of Domestic Rules in the Context of International Commercial Transactions 1
Ⅱ The Need for Predictable Rules 6
Ⅲ The Objective：Establishing Specific Standards and 'Case Groups' for the Different Elements of the Exemptions under Review 8
2 General Principles of Commercial Contracts：Methodological Approach 9
Ⅰ The Traditional Lex Mercatoria Doctrine，Its Deficiencies and the Distinct Concept of General Contract Principles 9
A The Deficiencies of the Traditional lex mercatoria Doctrine 9
B The Emergence of the New，New lex mercatoria 11
C The Concept of General Contract Principles 12
Ⅱ General Principles of Law Method 14
A Introduction 14
B Prima Facie Evidence of General Contract Principles 17
1 The CISG 17
2 Soft Law Codifications，Particularly the UPICC 19
Chapter 2 Scope of Application of General Contract Principles 23
3 General Remarks on the Governing Law and the Application of General Contract Principles 23
Ⅰ Introduction 23
Ⅱ The Parties’ Authority to Provide for the Application of General Principles of Law 24
Ⅲ The Appropriateness for the Parties to Select General Principles of Law beyond Their Use As a Means of Interpreting and Supplementing a National Law or the Terms of the Contract 26
4 Choice of Law Agreement Providing for the Application of a National Law 28
Ⅰ Interpreting and Supplementing the Applicable National Law and the Terms of the Contract by General Contract Principles 28
A Introduction 28
B Comparative Method of Construction under the Applicable Domestic Law 32
C Autonomous Basis：Specificity of International Transactions and International Arbitration in Particular-Application of the Domestic Law with a ‘Broader Brush’ 33
D Distinguishing between the Concept of International Trade Usages and General Principles of Law 36
E Limits of the Use of General Contract Principles As a Means of Interpreting Domestic Law or the Terms of the Contract 38
F The Practical Significance of Interpretation and Gap-Filling of Domestic Law in the Light of the ‘Force Majeure’ and ‘Hardship’ Exemptions 39
Ⅱ Interpreting and Supplementing International Uniform Law Instruments with General Contract Principles，in Particular the CISG 41
5 No Choice of Law Made by the Parties 43
Ⅰ Authority to Apply General Contract Principles in the Absence of a Choice of Law：‘Rules of Law’；‘Voie Directe’；Review of Awards by State Courts 43
A ‘Rules of Law’ versus a National System of Law 43
B ‘Voie directe’：Direct Choice Method 44
C Awards Made in Application of General Principles of Law in the Absence of a Choice of Law by the Parties Have Survived Judicial Challenge 45
Ⅱ Different Options as to How General Contract Principles May Be Applied or Taken Into Account in the Absence of a Choice of Law by the Parties 48
A General Contract Principles as a Means of Interpreting and Supplementing the Applicable National Law 48
B Concurrent Application of General Contract Principles in Conjunction with a National Law 49
C Application of General Contract Principles Supplemented with the Law of a Particular State：Comparison with the tronc commun Doctrine 50
D Selection of General Contract Principles As the Governing Law： ‘Centre of Gravity Test’ and Negative Choice of Law 51
Chapter 3 The Concept of Non-performance 57
6 The Concept of Non-performance Under General Contract Principles 57
Ⅰ Main Features of the Concept of Non-performance 57
A Overview 57
B Definition of Non-performance：Breach of Contract 58
Ⅱ The Concept of Strict Contractual Liability：No Fault Requirement 61
A The Concept of Strict Liability under General Contract Principles 61
B The Concept of Strict Liability in Common Law and the Relevance of Fault for Contract Excuses 62
C The Concept of Liability Based on Fault in Civil Law and Its Restrictions 65
D Conclusion 68
Ⅲ The Requirement of Non-performance in Particular：Distinction between Obligations of Best Efforts and Obligations to Achieve a Specific Result 70
Chapter 4 Force Majeure Excuse 75
7 The Force Majeure Excuse as a General Principle of Law 75
Ⅰ Salient Features of the Force Majeure Excuse Under General Contract Principles 75
Ⅱ Recognition of the Force Majeure Excuse as a General Principle of Law 77
A Overview of Standards in Domestic Laws 77
1 Impossibility of Performance 77
a In Civil Law Systems 77
b The Concept of the Revised German BGB in Particular 80
c Evaluation：The Decline of the Concept of Impossibility in Connection with Damages Claims 87
2 Frustration of Contract (English Law) 88
a Introduction 88
b Legal Basis of Doctrine 89
c Legal Effects of Frustration 90
d Basic Features of the Doctrine of Frustration and Different Groups of Cases 91
e Impracticability Not Covered by the Doctrine of Frustration 93
f Evaluation 93
3 Standards Adopted in the United States 94
a Impracticability 94
b Frustration of Purpose 97
c Evaluation 98
B Article 79 CISG and Its Reception by Domestic Laws，the UPICC，the PECL and Contract Practices 101
1 Article 79 CISG and Article 74 ULIS as Its Predecessor 101
2 Reception of the Standard of Article 79 CISG by Domestic Laws：The Example of China 105
3 Reception of the Standard of Article 79 CISG by the UPICC/PECL 106
4 Compatibility of the Standard of Article 79 CISG with Contract Practices (Force Majeure Clauses) 107
C Conclusion 108
8 Individual Requirements of the Force Majeure Excuse Under General Contract Principles 110
Ⅰ Introduction 110
A Scope of Application of the Force Majeure Excuse：Non-performance of a Contractual Obligation 110
B The Requirements and Legal Effects of the Force Majeure Excuse in a Nutshell 111
C Exemption Due to Interference by the Other Party and Force Majeure 113
Ⅱ Contractual Assumption or Limitation of the Risk of the Occurrence of Certain Impediments 116
A Prevalence of a Contractual Risk Allocation：Typical Sphere of Control of the Obligor，Contractual Amendments and Risk Allocation 116
B Typical Situations of Explicit or Implicit Contractual Risk Assumption or Exclusion or Limitation of a Particular Risk 118
1 Explicit or Implicit Risk Assumption 118
a Express Undertakings，Guarantees，Adaptation Clauses 118
b Narrow or Broad Interpretation of a Clause Allocating the Risk of the Occurrence of a Specified Event 122
c Typical Situations of Implicit Risk Assumption：Foreseeable Contingencies；Speculative Nature of the Transaction；the Supplier’s Performance Obligation Includes an Inherent Risk (Technological Breakthrough Cases)；the Buyer’s Risk to Use the Purchased Goods As Intended；Risk Assumption by the Buyer Furnishing the Seller with Specifications；CIF-Contracts and Fluctuations in Freight Rates 124
2 Assumption of the Risk to Obtain an Import or Export Licence or Other Authorization by a State Authority 126
a Introduction 126
b Identification of the Party Responsible for Obtaining a Required Authorization 127
c Standard of Duty/Assumption of Risk and Consequences 129
3 Implicit Assumption of a Risk on the Basis of the Economic Principle of the Superior Risk Bearer？ 143
4 Explicit or Implicit Exclusion or Limitation of a Particular Risk 147
a Overview 147
b Clauses Limiting the Seller’s Procurement Risk，Especially Delivery-against-Supply Clauses 148
c Requirements and Output Contracts 149
d Clauses Excluding or Limiting the Liability in General and Their Validity (Exemption and Exculpatory Clauses) 150
C Unforeseeability of the Impediment (Could Not Reasonably Be Taken into Account) 156
1 Foreseeability and Risk Allocation 156
2 Three-Step Approach; Examples 158
3 Changes of Law in Particular 165
Ⅲ Impediments Beyond the Typical Sphere of Risk and Control of the Obligor 167
A Typical Sphere of Control of the Obligor：Responsibility for Its Own Organization，for the Measures to Be Taken to Perform the Contract，Responsibility for Its Own Personnel；Strikes；Financial Ability 167
B Typical Risk of the Seller：Procurement Risk in Case of Generic Goods 171
1 The Notion of Procurement Risk，Limitation and Legal Effects 171
2 Contractual Limitation of the Procurement Risk；Delivery-against-Supply Clauses 175
3 Contract Interpretation with Regard to the Contractually Agreed Source(s) of Performance 180
C Responsibility for ‘Independent’ Third Parties (Subcontractors，Suppliers) 185
D Typical Risk Allocation in Case of Non-conformity of Goods Sold 189
E Typical Risk Allocation in Case of Building Contracts 194
1 Destruction of a Building or Work in Course of Construction；Impossibility of Completion 195
2 Lump Sum Prices (Fixed Prices)：Allocation of the Risk of Price Increases or Decreases 203
Ⅳ Impediments 206
A Typical Impediments beyond the Obligor’s Control：Acts of Public Authority，Armed Conflicts，Acts of God，Fire，Explosion，General Labour Disturbances and the Like 206
B Economic ‘Unaffordability’ or ‘Unreasonableness’of Performance 213
1 Practical Considerations 215
2 Legislative History of the CISG 216
3 Conclusions Regarding the Treatment of Hardship Situations under the CISG 218
4 Relationship with the Hardship Defence 221
a Decrease in the Value of the Performance Received by the Other Party Fails Exclusively under the Hardship Exemption 222
b Increases in Cost of Performance Also Fall，in Principle，under the Hardship Exemption 222
c Exception：The Obligor Is Excused from Rendering Specific Performance Where the Events Leading to an Excessive Increase in the Cost of Performance Do Not Affect the Obligee’s Performance Interest 223
d Conclusion：Legal Consequences of the Hardship Exemption Should Generally Prevail 225
e Illustration 226
C Impediments Existing at the Time of the Conclusion of the Contract (Initial or Antecedent Impediments) 227
1 The Treatment of Initial Impediments in Domestic Laws 227
a Traditional Approach in Civil Law Systems Based on the Roman Law Rule‘impossibilium nulla obligatio’ 227
b Modern Trend in Civil Law，Particularly the Concept of the New German Law 228
c Common Law Approach 231
d Approach under General Contract Principles 232
2 Initial Impediments and the Rules on Mistake Distinguished 235
a General Considerations 235
b Hardship and the Rules on Mistake 238
c Mistakes about the Future 241
3 Invalidity of Contracts Due to Illegality and Force Majeure/Hardship Events Distinguished 242
D Temporary and Partial Impediments 246
1 Temporary Impediments 246
a Equation of Temporary Impediments with Permanent Impediments in Comparative Law 251
b Equation of Temporary Impediments with Permanent Impediments under General Contract Principles 257
(1) Probable duration of the impediment 257
(2) Interests of the obligor 257
(3) Interests of the obligee 258
(4) Relevant point in time for the assessment 258
c Legal Consequences of a Temporary Impediment Which Is to Be Equated with a Permanent Impediment 259
2 Partial Impediments 260
Ⅴ Legal Impediments (Acts of Public Authority) in Particular 263
A Overview 263
B Mandatory Rules of Law in International Arbitration 265
1 Competence of Arbitral Tribunals to Apply Mandatory Rules (Arbitrability)，Enforceability of Awards in Disregard of Mandatory Rules 267
2 Consideration of Mandatory Rules by Arbitral Tribunals As to the Substance of a Case：Two Categories of Cases 269
C Application and Impact of Transnational Public Policy Rules 274
1 Direct Application of Transnational Public Policy Rules，Especially in Connection with the Issue of Contract Validity 274
a Mandatory Rule Causes the Invalidity of the Contract in Whole or in Part 275
b Mandatory Rule May Justify the Termination of the Contract 277
c Impact of Mandatory Rules on the Extent of Damages，the Status of a State-Owned Company，or the Prohibition by Certain Islamic Countries to Pay Interest on Outstanding Debts (Examples) 278
2 Validity and Interpretation of Agreements to Disregard Mandatory Rules 279
D Force Majeure Excuse and Mandatory Rules：Relevant Criteria and Examples 281
1 General Rule：Consideration of Mandatory Rules as a Factual Element 281
2 Unilateral Prohibitions of Trading and Conflicting Mandatory Rules：Preference to the Rule Permitting Performance at the Place Where Specific Performance Can Be Rendered 284
3 Criteria for the Consideration of an Act of Public Authority under the Force Majeure Excuse 289
a Overview 289
b Examples Regarding the Requirement of a Close Connection 292
c Example Regarding a Work Subcontract (Allocation of Risk between Main Contractor and Subcontractor) 294
(1) Application of the embargo legislation ratione materiae to the subcontract 295
(2) Permanent impediment 295
(3) Obligation of the main contractor to compensate the subcontractor for the work already performed 296
E Involvement of States or State Enterprises (State Arbitrations) 296
1 Guidelines According to Which an Act of Public Authority Is Attributable to a State Enterprise 296
2 Examples 304
a Czarnikow Ltd v. Rolimpex (State Enterprise Excused) 304
b Krupp-Koppers GmbH v. Kopex (State Enterprise Not Excused) 307
c Jordan Investment Ltd. v. Sojuznefteksport (State Enterprise Excused) 310
3 Expropriation As a Distinct Concept 312
4 Force Majeure and State of Necessity under the ILC Draft Articles on the Responsibility of States for Internationally Wrongful Acts 314
Ⅵ Unforeseeable， Unavoidable and Unsurmountable Impediments 320
A Unforeseeable Impediments 320
B Unavoidable and Insurmountable Impediments 320
1 Introduction 320
2 Commercially Reasonable Substitute Performance 323
3 The Risk Allocation under CIF-Contracts 329
a Extra Costs of Shipping 329
b CIF-Contracts and Export Prohibition；Duty to Overcome the Impediment and to Buy Afloat 332
4 Groups of Cases Where the Typical Risk Structure of the Contract Limits the Duty to Overcome an Impediment (Sales Contracts of Specified Goods；Lease Contracts；Storage Contracts) 333
a Sales Contracts for Specific Goods：Limitation of the Obligation to Overcome an Impediment As a Result of the Typical Contractual Risk Allocation 334
b Lease Contracts 337
c Storage Contracts 338
Ⅶ Requirement of a Causal Link between the Impediment and the Non-performance 340
Ⅷ Notice Requirement 342
9 Legal Effects of the Force Majeure Excuse 345
Ⅰ Overview 345
Ⅱ Exclusion of the Right to Claim Damages；Penalties，Liquidated Damages；‘Surrogate Benefits’ 347
A Exclusion of the Right to Claim Damages and Application to Penalties or Liquidated Damages 347
B Doctrine of ‘Surrogate Benefit’ 349
C Excursus：Note on Other Defences to a Claim for Damages 352
Ⅲ Exclusion of the Right to Claim Specific Performance 358
A Introduction 358
B Approach under General Contract Principles 360
C Article 79(5) CISG and the (Non-)exclusion of the Right to Performance 360
D Termination upon Allowance for Extra Time for Performance；Request for Repair or Delivery of Substitute Goods 366
Ⅳ Unaffected Remedies 366
A The Right to Terminate and the Legal Consequences 366
1 In General 366
2 Notice Requirement：No ipso facto Termination and Exception in case of Excused Permanent and Total Impediments 368
3 Effects of Termination 373
B Withholding Performance 376
C Price Reduction 377
D Interest on Money Due 377
Ⅴ Burden of Proof 382
10 Interpretation and Effects of Force Majeure Clauses 383
Chapter 5 Hardship (Change of Circumstances)：Fundamental Change of the Equilibrium of the Contract 391
11 Hardship as a General Principle of Law 391
Ⅰ Salient Features of the ‘Hardship’ Defence under General Contract Principles 391
A Introduction 391
B Salient Features of the Hardship (Change of Circumstances) Defence under General Contract Principles 396
Ⅱ Recognition of the Hardship Defence as a General Principle of Law 401
A General Approach in Civil Law 401
B Common Law 407
C ‘Frustration of Purpose’ As a Sub-category of a Fundamental Alteration of the Equilibrium of the Contract 411
D International Law 413
E Arbitration Practice 414
F Conclusion 418
12 Individual Requirements of the Hardship Defence 420
Ⅰ Introduction 420
A General Relevance of the Force Majeure Requirements 420
B Distinguishing between the Concept of Implied Terms and Hardship 421
Ⅱ Circumstances Beyond the Control and Sphere of Risk of the Obligor Bringing about a Fundamental Alteration of the Equilibrium of the Contract 423
A Contractual Assumption or Limitation of the Risk of the Occurrence of a Change of Circumstances 423
B Percentage of the Cost or the Value of the Performance Likely to Amount to a ‘Fundamental’Alteration of Equilibrium of the Contract (Threshold Test of the Hardship Exemption) 426
1 The Usefulness of a Threshold Test As a Basic Yardstick 426
2 Overview of Percentages Referred to in Domestic Legal Systems 428
a English Law and the Doctrine of Frustration of Purpose 428
b American Law 429
c German Law and Other Civil Law Jurisdictions 430
3 Relevant Percentages As a Reference Point under General Contract Principles 431
a General Rule：100% Alteration Required；Calculation 431
b Impending Financial Ruin of the Obligor 435
C Long-Term Contracts in Particular 438
1 Risk Allocation 438
2 Examples of Risk Assumption in International Investment Contracts：The CMS Gas Award and the Himpurna Award 441
a CMS Gas Transmission Company v.The Argentine Republic 441
b Himpurna California Energy Ltd. (Bermuda) v.PT. (Persero) Perusahaan Listruik Negara (Indonesia) 445
3 Inflation in Particular 451
a Introduction 451
b Creeping Inflation；Escalator and Index Clauses 452
c Relationship between Escalator Clauses and the Hardship Exemption 455
d Cases Involving Extreme Inflation 458
D Point of Reference in Case of Complex，Long-term or Instalment Contracts 461
1 Relevancy of the Entire Undertaking 461
2 Application to Long-Term or Instalment Contracts 462
Ⅲ Frustration of Purpose as a Particular Group of Cases of Hardship 464
A Introduction 464
B Distinguishing between Different Groups of Cases 466
1 Cases Where the Purpose of the Contract Is Achieved or Frustrated before Performance Can Be Effected (‘Zweckerreichung’；‘Zweckfortfall’) 466
2 Non-conformity of Goods Sold 468
C The Requirement of a ‘Joint Purpose’ 468
D Requirement That the Frustration of Purpose Be Nearly Total and That It Cannot Be Reasonably Overcome 474
E Provisional or Temporary Character of Frustrations of the Purpose，in Particular in Case of Changes of the Law 477
13 Legal Effects of Hardship 479
Ⅰ Overview 479
Ⅱ Duty to Renegotiate 480
A Legal Nature and Consequences in Case of Infringement 480
B Contents of the Duty to Renegotiate 485
C Exercise of the Right to Request Renegotiations 486
D No Withholding of Performance by the Aggrieved Party as a Consequence of a Request for Renegotiation 487
E A Party’s Right to Resort to the Court upon Failure to Reach Agreement；Determination of Time When Renegotiation Failed；Suspension of Court Proceedings 488
Ⅲ Courts’ and Arbitrators’ Power to Adapt the Contract 490
A The Court’s or Arbitral Tribunal’s Power to Adapt the Contract as a Matter of Substantive Law：Recognition as a General Principle 490
1 Civil Law 490
2 Common Law 491
3 Conclusion 492
B The Arbitrators' Power to Adapt the Contract under the lex arbitri 493
C The Mechanism of Contract Adaptation 498
D Procedural Aspects；in Particular Significance of the Relief Sought 502
E Comparison of the Procedural Aspects under the General Approach with the Approach Taken by Italian Law and the ICC Hardship Clause 2003 506
Ⅳ The Right to Request Termination of the Contract 508
A General Remarks 508
B Relationship with the Right to Request Adaptation of the Contract 509
C Termination of the Contract at a Date and on Terms to Be Determined by the Court 510
14 Interpretation and Legal Effects of Hardship Clauses 512
15 Hardship Distinguished from Other Remedies 517
Ⅰ Avoidance of Contract for Relevant Mistake 517
Ⅱ Termination of Relational Long-term Contracts for ‘Irreconcilable Differences’ (‘Good Cause’；‘Valid Reasons’) 517
A Introduction 517
B Relationship with the Hardship Concept/Doctrine of Change of Circumstances 520
C Basic Features of the Right to Terminate for Irreconcilable Differences 521
1 Scope of Application 521
a Long-Term or Relational Contracts 521
b Termination for Fundamental Non-performance As a Distinct Remedy 525
2 Irreconcilable Differences (‘Good Cause’) in Case of Partnership Agreements 525
a Swiss Law 253
b American Case Law 528
c The Case of Arthur Andersen v. Andersen Consulting 530
Chapter 6 Conclusion 533
Bibliography 537
Principles on Force Majeure in the CISG，UPICC，PECL，the TLDB-Principles and ICC Force Majeure Clause 2003 563
Principles on Hardship in the UPICC，PECL，the TLDB-Principles and ICC Hardship Clause 2003 569
Index 573