When there is a breach of international contract then in which currency the

damages may be assessed under UNIDROIT Principles of International

Commercial Contracts?

Introduction of UNIDROIT Principles of International Commercial

Contracts 2016:
Adoption:

On May 9th, the International Institute for the Unification of Private Law (UNIDROIT)
published1the fourth (2016) edition of the UNIDROIT Principles of International Commercial
Contracts, which includes the amendments and additions to the 2010 edition of the Principles,
elaborated by the Working Group of the UNIDROIT Secretariat and adopted by the Governing
Council at its 95th session (Rome, 18-20 May, 2016).
Edition:

There are four edition of these principles which were published in four editions:

 1994
 2004
 2010
 2016

The UNIDROIT Principles of International Commercial Contracts (hereinafter “the UNIDROIT

Principles”), first published in 1994, with a second edition in 2004 and in their third (2010)
edition (hereinafter “UNIDROIT Principles 2010”), represent a non-binding codification or
“restatement” of the general part of international contract law and now current edition in 2016.
Welcomed from their first appearance as “a significant step towards the globalisation of legal
thinking”, over the years they have been well received not only by academics but also in
practice, as demonstrated by the numerous court decisions and arbitral awards rendered world-
wide that refer in one way or another to the UNIDROIT Principles

Purpose of the Principles:

These Principles set forth general rules for international commercial contracts:

 They shall be applied when the parties have agreed that their contract be governed
 by them.
 They may be applied when the parties have agreed that their contract be governed by
 general principles of law, the lex mercatoria or the like.
 They may be applied when the parties have not chosen any law to govern their
 contract.
 They may be used to interpret or supplement international uniform law instruments.
 They may be used to interpret or supplement domestic law.

When there is a breach of international contract then in which currency the damages
may be assessed under UNIDROIT Principles of International Commercial Contracts?

When there is a breach of international contract then chapter 7 of section 4 deal with the
damages under UNIDROIT Principles of International Commercial Contracts.

When there is a breach of international contract then article 6.1.9 deal with the currency
under UNIDROIT Principles of International Commercial Contracts.

UNIDROIT Principles Chapter 7 - Non-Performance

Section 4 - Damages
Section 4: Damages

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.

Article 7.4.1 - Right to Damages

Any non-performance gives the aggrieved party a right to damages either exclusively or in
conjunction with any other remedies except where the non-performance is excused under
these Principles.

1.Right to damages in general:

This Article establishes the principle of a general right to damages in the event of non-
performance, except where the non-performance is excused under the Principles, as in the
case of force majeure or of an exemption clause. Hardship does not in principle give rise to a
right to damages. The Article recalls that the right to damages, like other remedies, arises
from the sole fact of non-performance. It is enough for the aggrieved party simply to prove
the non-performance, i.e. that it has not received what it was promised. In particular, it is not
necessary in addition to prove that the non-performance was due to the fault of the non-
performing party.

The right of damages exist:

The right to damages exists in the event of failure to perform any of the obligations which
arise from the contract. Thus, it is not necessary to draw a distinction between principal and
accessory obligations.

2. Damages may be combined with other remedies:

This Article also states that the aggrieved party may request damages either as an exclusive
remedy (for example, damages for delay in the case of late performance or for defective
performance accepted by the aggrieved party; damages in the event of impossibility of
performance for which the non-performing party is liable), or in conjunction with other
remedies.

Aggrieved party is entitled to non-performance damages:

The aggrieved party is entitled to non-performance damages, which is typically measured by

the market value of the benefit of which the aggrieved party has been deprived through the
breach, or the costs of reasonable measures to bring about the situation that would have
existed had the contract been properly performed.

Entitled to any net gains:

The aggrieved party is entitled to any net gains prevented as a result of the breach..

Entitled to damages for pecuniary loss:

The aggrieved party is entitled to damages for pecuniary loss resulting from claims by third
parties as a result of the breach of contract.

Entitled to damages for loss of Goodwill:

The aggrieved party is entitled to damages for loss of goodwill as a consequence of the
breach.

ARTICLE 6.1.9
Currency of payment
(1) If a monetary obligation is expressed in a currency other than that of the place for
payment, it may be paid by the obligor in the currency of the place for payment unless (a)
that currency is not freely convertible; or (b) the parties have agreed that payment should be
made only in the currency in which the monetary obligation is expressed.

(2) If it is impossible for the obligor to make payment in the currency in which the monetary
obligation is expressed, the obligee may require payment in the currency of the place for
payment, even in the case referred to in paragraph (1)(b).
 (3) Payment in the currency of the place for payment is to be made according to the
applicable rate of exchange prevailing there when payment is due.

Monetary obligations:
Monetary obligations are usually expressed in a certain currency (currency of account), and
payment must normally be made in the same currency. However, when the currency of the
place for payment is different from the currency of account, paragraphs (1) and (2) of this
Article provide for those cases where the obligor may or must make payment in the former
currency.

1. Monetary obligation expressed in currency different from that of place for payment As a
general rule, the obligor is given the alternative of paying in the currency of the place for
payment, which may have definite practical advantages and, if that currency is freely
convertible, this should cause no difficulty to the obligee.
2. Illustrations :
A company from country X receives an order for machinery from a buyer from country Y,
the price being expressed in US dollars. According to Article 6.1.6, payment of that monetary
obligation must in principle be made at the obligee’s place of business, i.e. country X. If the
company from country Y finds it more convenient, it may pay the price in euro which is the
currency of X (see Article 6.1.9(1)). 2. The same company from country X frequently needs
to buy from suppliers in country Z certain parts to be included in the machines, and has
stipulated that the buyer from country Y should pay only in US dollars. In this case, payment
may only be made in dollars (see Article 6.1.9(1)(b)). 3. The same company from country X
has a plant in country W, where the machines will be assembled. The contract provides that
the buyer from country Y has to pay the price to the firm’s subsidiary in country W. Since
the currency of country W is not convertible, payment may only be made in dollars (see
Article 6.1.9(1)(a)).

Impossibility for obligator:

2. Impossibility for obligor to make payment in currency in which obligation is expressed In
some instances, the obligor may find it impossible to make payment in the currency in which
the obligation was expressed. This may be the result of the application of exchange
regulations or other mandatory rules, or due to any other cause preventing the obligor from
obtaining that currency in sufficient quantity. Paragraph (2) gives the obligee the option of
requiring payment in the currency of the place for payment, even if the contract contains an
effectivo clause. This is an additional option open to the obligee who may find it acceptable
or even advantageous in the circumstances. It does not preclude the exercise of any available
remedy in the event of the obligor’s inability to pay in the currency of account amounting to
a non-performance of the contract (e.g. damages).
Illustration:
A, a Swiss bank, lends USD 1,000,000 to B, to be reimbursed in Geneva. At maturity, B is
unable to find the necessary US dollars. A, which knows that B has deposits in Swiss francs
with another local bank, may require payment in Swiss francs, even though the loan
agreement stipulated that reimbursement was to be made only in US dollars (see Article
6.1.9(2)).

3. Determination of applicable rate of exchange:

Determination of applicable rate of exchange Paragraphs (3) and (4) deal with the problem of
the determination of the rate of exchange to be chosen when payment is made in the currency
of the place for payment rather than in a different currency stipulated in the contract. This
may occur when the obligor avails itself of paragraph (1), or the obligee the provisions of
paragraph (2).

Two widely accepted solutions are offered:

Two widely accepted solutions are offered. In normal cases, the rate of exchange is that
prevailing when payment is due. If, however, the obligor is in default, the obligee is given an
option between the rate of exchange prevailing when payment was due or the rate at the time
of actual payment. The double reference to the “applicable” rate is justified by the fact that
there may be different rates of exchange depending on the nature of the operation.

Illustration:
The facts are the same as in Illustration 4. A chooses to be reimbursed in Swiss francs (CHF)
and payment, which was due on 10 April, actually takes place on 15 September. The rate of
exchange on 10 April was 2 Swiss francs to 1 US dollar. By 15 September it has become
CHF 2,15 to USD 1. A is entitled to apply the latter rate. If the US dollar had depreciated
rather than increased in value, A would have chosen the rate applicable on 10 April.

Conclusion:
To conclude I can say that The right to claim damages as a result of a breach of contract is
probably the single most important remedy available to the aggrieved party. The law of
damages is a complex set of rules and principles hiding behind the fairly simple-looking
formulae such as those found in CISG articles 74 to 76.and article 6.1.9 is relevant with
currency.