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 EXEMPTION OF NON-PERFORMANCE OF THE
SELLER'S CONTRACTUAL OBLIGATIONS
(COMPARATIVE STUDY)

Dr. Aburima Abdullah Ghizth**

Introduction

The buyer cannot rely on remedies when any supervening event, such
as war, trade embargo, closure of the international waterways, or so forth,
has occurred subsequent to the concluding of the contract. In such a case,
subject to certain qualifications, the seller will be exempted from liability
for non-performance of his contractual obligations. This principle is well
established in all legal systems,' and plays a very important rule in inter-
national trade, since supervening events in international transactions pre-
sent greater effects on the performance of the contract than on local
contracts. 2 However, domestic legal systems have not adopted one theory
for exemption. Several terms (such as force majeure, frustration, impossibility,
Act of God, impracticability, and hardship) have been used for the achieve-
ment of the same goal, but with different concepts, scopes, and effects on
the contractual obligations.
This Article will deal with the elements of the supervening events under
selected legal systems, namely, the Vienna Convention on Contracts for the
International Sale of Goods (hereinafter CISG), English law, in particu-
lar the Sale of Goods Act 1979, as amended (hereinafter SGA), and the
Libyan Civil Code (hereinafter LCC); reference is also made, when it is
necessary, to the Uniform Law on the International Sale of Goods, the
Hague Convention 1964 (hereinafter ULIS).

** LLB, LLM, Ph.D, Legal Advisor for the Libyan National Oil Corporation
(NOC), Part time Lecturer, Faculty of Law, AI-Fateh University, Tripoli, Libya.
See Berman, Excuse for Nonperformance in the Light of Contract Practice in
International Trade, 63 Colum. L. L. Rev. (1963), p. 1413.
2 See ibid., p. 1415.

© Koninklijke Brill NV, Leiden, 2006 Arab Law Quartery 20,3

Also available online - www.brill.nl
 EXEMPTION OF NON-PERFORMANCE

The Elements of the Exemptions

The CISG
According to Article 79 of the CISG, there are a number of qualifications
which must be fulfilled by the parties who wish to rely on the exemption
of non-performance: 1- That the failure of performance is due to an
impediment occurring at or after the concluding of the contract. 2- That
the impediment is beyond his control. 3- That he could not foresee it at
the time of the conclusion of the contract. 4- That the impediment and the
consequences are irresistible.

Time of Impediment and Loss in Transit

The first requirement under Article 79 of the CISG is that performance
is rendered impossible due to an "impediment" occurring at the concluding
the contract. Therefore, a supervening event occurring before making the
contract does not give rise to an exemption, e.g., where the contract in-
volves the sale of specific goods which are lost before the time of the
conclusion of the contract. In such a case a question of validity will arise.
The CISG does not decide whether or not such a contract has legal exis-
tence; this question is outside the scope of the CISG and is left for the
applicable domestic law to decide.' Nevertheless, problems may arise in
a situation where the goods are sold in transit. If a ship is lost by an
unidentifiable event, it may be difficult to determine whether the destruc-
tion of the goods occurred before or after the time of the conclusion of
the contract. This controversial point is regulated by the provision of the
passing of risk. Thus, Article 68 of the CISG states that:
The risk in respect of goods sold in transit passes to the buyer from the time of the
conclusion of the contract. However, if the circumstances so indicate, the risk is
assumed by the buyer from the time the goods were handed over to the carrier who
issued the documents embodying the contract of carriage...

The risk of loss according to this rule passes to the buyer retrospectively
from the moment the goods are handed over to the carrier "if the cir-
cumstances so indicate". Which circumstances can indicate such a retro-
spective passing of risk seem to be obscure.4 It follows that the exemption

s Article 4 of the CISG states that: ".... except as otherwise expressly provided in
this Convention, it is not concerned with: (a) the validity of the contract or of any
of its provisions or of any usage..."
' Professor Honnold pointed out that: "It would be difficult to find clearer indicative
 ABURIMA ABDULLAH GHITH

rule may not apply in the case of a sale of goods in transit, even though
the goods are lost due to an unforeseen event. The reasoning underlining
this result was said to be that such destruction is normally covered by
insurance and, even if it is not covered by insurance, the buyer is in a
better position than the seller to cope with such a result.'

Failure Due to Impediment

The term "impediment" was adopted as a compromise solution after long
discussion at the UNCITRAL Working Groups.6 It is not based on any
particular domestic law theory,7 and is different from the test adopted by
Article 74 of ULIS which requires that non-performance must be "due
to circumstances" which are wider than "impediment".'
These two approaches have different notions. The ULIS approach may
give rise to a wide interpretation based on a subjective criterion,' i.e.,
"an aspect personal to the seller's performance"." ° The requirement is that
performance is merely onerous. The legislative history of Article 74 of ULIS
reveals that the term "obstacle" was first adopted to cover supervening
and external events." However, this narrow approach was rejected by
the Hague Conference, which preferred to adopt the term "circumstances".
This formula extends "supervening event" to cover extreme and onerous
changes in economic circumstances. 2 Such a criterion was rejected by
the UNCITRAL Working Group, on the ground that it widens the scope

circumstances than taking over the seller's policy of insurance", see Honnold, Uniform
Law for InternationalSales under the 1980 United Nations Conventions (3ed), The Hague, The
Netherlands, Kluwer Law International (1999), p. 411.
See Honnold, ibid., p. 473.
6 See the progress Report of the Working Group on the International Sale of
Goods on the Work of its fifth Session, A/CN. 9/87, V YB, p. 39, paras. 107-115.
reprinted in Honnold, Documentay History of the Uniform Law for International Sales,
Deventer, Netherlands, Kluwer Law and Taxation Publishers (1989), p. 185; see also
A/CN.9/100, VI YB, p. 60, paras. 102-107, reprinted in Honnold, ibid., pp. 251-252.
7 See Bianca & Bonell, Commentary on the International Sales Law, the 1980
Vienna Sales Convention, Milan, Giuffre (1987), p. 574; see also Enderlein & Maskow,
International Sales Law United Nations Convention on Contractsfor the InternationalSale of Goods,
London, Oceana Publication (1992), p. 320.
o See infra.
9 See Nicholas, Force Majeure and Frustration, 27 AmJ.Comp.L. (1979), p. 240.
10See Honnold, Uniform Law, supera note 5, p. 487.
" See Nicholas, supra, note 9, p. 238; see Honnold, Uniform Law, supra note 4,
pp. 477-478.
"2See Nicholas, ibid. see also Lee, Exemption of Contract Lability under the 1980
United Nations Convention, 8:3 DickJ.Int'l.L. (1990), p. 388.
 EXEMPTION OF NON-PERFORMANCE

of the exemption to include economic difficulties. 3 Therefore, they adopted

the term "impediment", which is similar to the term "obstacle", and
appeared in the earlier draft of Article 79 of the CISG. 4
The term "impediment" has not been clearly defined by the CISG. How-
ever, the general view seems to suggest that it means an external event
such as war, trade embargo, or natural disaster, which renders performance
physically impossible.1 This interpretation is supported by the legislative
history of Article 79 of the CISG which reveals that "impediment" does
not extend to cover extreme and fundamental changes in economic cir-
cumstances.' 6 Thus, in one CISG case, 1 7 a Hong Kong company contracted
with a German company for the delivery and distribution of Chinese
goods. The Hong Kong company was in charge of the business relations
with Chinese manufacturers, and the German company was responsible
for the distribution of the goods in Europe. A Chinese manufacturer failed
to deliver the goods to the Hong Kong company, due to financial difficulties.
As a result, the latter was unable to comply with its contractual obligation
with the German company. On the question of damages, it was held that
there was no exemption under Article 79 of the CISG on the ground that:
the financial difficulties of the ...Chinese manufacturer were within the sphere of
the claimant's [i.e. the Hong Kong company] responsibility. 8

However, some of the commentators of the CISG suggest different inter-

pretations. 9 Professor Honnold, for example, points out that:
The language of Article 79 (1) seems to leave room for exemptions based on eco-
nomic dislocations that provide an "impediment" to performance comparable to non-
economic barriers that excuse failure of performance ...Extreme price and (especially)
currency dislocations may be sufficiently widespread to lead to laws or administra-
tive regulations that require contract readjustment."

Economic difficulties and dislocation, according to this view, give rise to

an excuse "only if they constitute a barrier to performance that is com-

'" See A/CN.9/87, V YB, p. 39, par.108, reprinted in Honnold, Doc.Hist, supra,
note 6, p. 185; see also A/CONF.97/5, O.R. 410, para. 11, reprinted in Honnold,
ibid., p. 631.
" See ibid.; see also Honnold, Uniform Law, supera note 4, p. 478.
15 See Honnold, Uniform Law, ibid.
16 See supra, para.
' See Schiedsgericht der HandelskammerHamburg, published in German: Neue Juristische
Wochenschrijf (J7W) 1996, 3229, reprinted in A/CN.9/SER.C/Abstracts/12 English.
' See ibid.
'9See Lee, supra, note 12, p. 390; see also Honnold, Uniform Law, supra, note 4,
p. 1484.
21 See Honnold, ibid., pp. 484-485.
 ABURIMA ABDULLAR GHITH

parable to other types of exempting causes."'" However, it seems that any

liberal interpretation may contradict the intention of the draftsmen of the
CISG who oppose the term "circumstances" provided by Article 74 of
the ULIS. Such a rejection aims to restrict the exemption to the occurrence
that absolutely bars the seller from performance. Moreover, the common-
law theory of frustration, which allows (as will be seen later)22 an exemp-
tion for a radical change of circumstances (imprevision), which authorizes
23 24
the court to readjust the contract, was rejected by the Vienna Conference.
It follows that "impediment" under Article 79 of the CISG must be inter-
preted without resort to any domestic law background. 5
It must be noted that the failure of the seller to deliver unascertained
goods does not generally justify discharge for impossibility.16 The reason
is that, in such a case, replacement goods are normally available in the
market. However, if substitute goods are not readily available in the mar-
ket, or the goods have to be delivered from a particular stock or manu-
factory and delivery from these sources becomes impossible, the seller will
be excused for non-performance.27

English Law
English Law adopts the doctrine of frustration,28 which exempts whole
performance in situations where it is impossible to perform the contract
because of a subsequent unforeseeable event. Examples of frustration

21 See ibid., p. 485.

22 See infra, p. 000.
23 See This theory has been adopted by Article 147 of the LCC, see infra, pp. 000.
24 See the discussion made by the Fifth Committee, A/CONF.97/5, O.R.381-382,
reprinted in Honnold, Doc.Hist., supra, note 6, pp. 602-603; for the rejection of the
theory of imprevision, see Shafick, ittifaq~yat al ummam al muttahidah bi-sh'an al-bay' al-
dawli lil-bada'I: dirasahfi qanun al-tjarah al-dawli, Cairo, Dar al-nahdah al-arabyyah (1988),
p. 253; see also Bianca & Bonell, supra, note 7, p. 594.
25 See Bianca & Bonell, ibid., p. 574.
26 See Secretariat Commentary on the 1978 Draft, Article 65, A/CONF.97/5,
OR., para. 9, example 65 B, p. 56, reprinted in Honnold, Doc.Hist., supra note 6,
p. 446; see also Bianca & Bonell, supra, note 7, p. 582; see Enderlein & Maskow,
supera note 7, p. 321; see also Lookofsky, Fault and No-Fault in Danish, American
and International Sales Law. The Reception of the 1980 United Nations Sales
Convention, 27 Scan. S.L. (1983), p. 132.
27 See Bianca & Bonell, supra, note 7, p. 582; see also Enderlein & Maskow, supra,
note 7, p. 321.
25The doctrine of frustration introduced after the decision of Taylor v Caldwell
(1863) 3 B&S 826, see Treitel, Frustration and Force Majeure, London, Sweet & Maxwell
(1994), p. 13.
 EXEMPTION OF NON-PERFORMANCE

events are when the subject matter of the contract has been destroyed
before the time of performance, 29 or performance became illegal,3" or
where the foundation of the contract-of what the parties are deemed to
have had-has disappeared due to an event which prevents the performance
of the contract." Frustration also extends to cover situations such as the
perishing of specific goods which no longer match the contract description,32
as well as cases where a "fundamental change"33 or "radical change"34
has occurred with regard to what the parties have originally contracted for. 5
However, a mere rise of prices or supervening events that render per-
formance unprofitable to the seller do not justify the discharge of the
contract.36 Such risk normally falls on the seller.37
It follows that the boundaries of frustration are wider than the con-
cept of the "impediment" as adopted by the CISG 8 It seems that it
extends to encompass not only the physical impossibility of performance
but also cases where the object of the contract is defeated. 9 It recog-
nized, basically, that a frustration event may take the form of any funda-
mental change in the circumstances which is beyond the control of the
non-performing party and makes it impossible to perform the contract.
Therefore, impossibility of performance is not the only basis for exemp-
tion under English Law. Frustration may occur where the foundation of

'9 See Taylor v Caldwell, ibid.

'0 When the contract involves goods which are forbidden for sale or import, or
export of the goods has been prohibited, such cases are regarded as a supervening
event and this is so even if the parties expressly exclude them as a basis of frustra-
tion on the ground that such an agreement contradicts the public policy, see Ertetbieber
Co. v Rio Tinto Co. Ltd. [1918] A.C. 260, 274, 280; see also Treitel, The Law of Contract,
(9ed), London, Sweet & Maxwell/Stenens & Sons (1995), pp. 799-800.
31 See, for example, Krell v Henery [1903] 2 K.B. 740.
32 See s 7 of the SGA 1979 (as amended).
11 See British Movietonews Ltd. V London and District Cinemas Ltd. [1951] 2
ALL.ER. 617.
14 See Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956]

A.C. 696, 729.

'5 See Davis case, ibid.
36 See British Movielonews Ltd. Case, supra, note 33, p. 617; see also The Nema
[1982] A.C. 724, 752; see Superior Oversease Development CPN v British Gas CPN [1982]
1 Lloyd's Rep. 262; The Eugenia [1964] 2 QB. 226, 239; see also Benjamin's Sale of
Goods (5ed.), London, Sweet 7 Maxwell (1997), Para. 6-048.
17 See Benjamin's Sale of Goods, ibid.

" See Jenkins, Exemption for Nonperformance: UCC, CISG, UNIDROIT Principles-
A Comparative Assessment, 72 Tul. L. Rev. (1998), p. 2018, reproduced in the
Internet, http://www.cisg.law.pace.edu/cisg/biblio/jenkins.htmil, p. 5.
11 The best example for this approach is the coronation cases, e.g Krell v Heny
[1903] 2 K.B. 740.
 ABURIMA ABDULLAH GHITH

the contract becomes unachievable, even where performance is possible. 40

In contrast, impediment under the CISG, as has been seen, means an
intervening event which gives rise to an impossibility of performance.
Furthermore, it has been observed that "it is not possible to tabulate or
41
to classify the circumstances to which the doctrine of frustration applies",
and even a radical or fundamental change in the circumstances has been
differently interpreted by English Courts. This can be shown in the deci-
sions of the Suez Canal cases. For example, take the case of Tsakiroglou
& Co. lDd v Noblee Thorl G.M.B.H.,42 involving the sale of Sudanese ground
nuts to be shipped by C.I.F. Hamburg during November and December
1956. On 2 November the Suez Canal was closed as a result of the
aggression on Egypt. The sellers failed to ship the goods. It was held that
the closure of the Canal could not be considered a frustration event. The
reasoning underlining this decision was that the sellers could have shipped
the goods around the Cape of Good Hope and
shipping the goods on a vessel routed via the Cape of Good Hope was not com-
mercially or fundamentally different from its being performed by shipping the goods
on a vessel routed via the Suez Canal.43

Performance through the Cape increases the length of the voyage from 2300
miles to 10500 miles and the cost of the shipment from about C6 (pounds)
per ton to between k27 9s (shillings) and C29 per ton, as well as taking
extra time. Lord Hodson has pointed out that:
unless shipment by the Cape route was so onerous to the sellers as to make the per-
formance of the contract fundamentally different in kind from any performance they
had promised, the contract ... remained binding between the parties."

In contrast, in Societi Franco Tunisienne d'Annement v Sidermar,45 a vessel was

chartered to carry iron ore from Masulipatan, on the east cost of India, to
Genoa. The customary route for shipment at that time was through the
Suez Canal. A cargo of iron ore, tendered by the charters, was loaded
between 13 and 18 November 1956; on 20 November the ship owners
claimed that the closure of the Canal terminated their contract. It was
held that the contract was frustrated, although the closure of the Canal

40 See Krell v Heny, ibid.

4' See Cheshire, Ffoote and Frustration Law of Contract (13ed), London, Butterworths
(1996), p. 587.
42 [1962] A.C. 93.

4 See ibid., p. 93.

" See ibid., p. 128.
4- [1961] 2 QB. 278.
 EXEMPTION OF NON-PERFORMANCE

was not a barrier that prevents performance. The ship owners had not
refused to perform the contract through the Cape of Good Hope but
claimed an increase in freight charges for the longer journey required.
It seems that the main reason for the decision in the former case was
not that the blocking of the Canal did not give rise to frustration or to the
extra length of the voyage and cost was not extremely onerous, but it was
thought that in C.I.F. contracts, the shipment meant placing the goods on
the ship, and the buyer not objecting whether he received the goods through
this route or the other. In other words, the route in such contracts is not
the basis of the contract. 46 While, in the latter case (which involved a
charter-party contract), the method of performance was an important ele-
ment. Therefore, if the ship owner was obstructed by a closure of the
Canal, he would be exempt from liability.
It follows that a radical or fundamental change in the circumstances has
a different standard; it depends on a number of factors, for example, the
nature of the contract. Therefore, a closure of international waterways may
justify as an excuse in the contract of a charter party because the method
of performance in such a contract is important, while it has no significance
in a contract of sale of goods, even though the parties in both contracts
47
face a similar lOSS.
But even this position was rejected in a case involving sale of goods
(C.I.F.). In Carapapyoti & Co. Ltd. V E.T Green Ltd,48 it was held that the
contract was frustrated by the closure of the Suez Canal, on the basis that
performance via the Cape would radically change the obligations of the
sellers from those which they had contracted for. Moreover, in OceanTtramp
Tankers Corporation v VI O Soufracht (The Eugenia),49 a ship was let to carry
cargo from the Black Sea to India. She was delivered on 25 September
1956 at Genoa and sailed on 25 October 1956. The customary route to
India was by the Suez Canal. It was held that the charters were liable for
damages, a decision which was based on the breach of the charters of their

46 In Blackburn Bobbin Co. Ltd. V T. W. Allen & Sons Ltd. [1918] 2 K.B. 467,
it was pointed out that "Why a purchaser of goods, not specific goods, should be
deemed to concern himself with the way in which the seller is going to fulfill his con-
tract ... ? The seller in this case agreed to deliver the timber free on rail at Hull,
and it was no concern of the buyers as to how the seller intended to get the timber
there", Pickford LJ., ibid., at p. 469.
47 See Societi Franco Tunisienne d'Annenent v Sidernar [1961] 2 QB. 278; see also
Blackburn Bobbin Co. Ltd. V TW. Allen & Sons Ltd. [1918] 2 K.B. 467.
4 [1959] 1 QB. 131.
19 [1964] 2 Q.B. 226.
 ABURIMA ABDULLAH GHITH

obligations not to take the vessel into a dangerous area. However, discus-
sion was concentrated on the frustration element. It was concluded that,
in any case, whether or not there was a breach, the closure of the Canal
"... did not bring about so fundamentally a different situation as to frus-
50
trate the venture".
According to these authorities, the nature of the contract is not nec-
essarily relevant as a ground for frustration. In this connection Lord
Denning stated that:
I know that a contract of affreightment is different from a contract for the sale of
goods, but I should find it strange if, in the case of a ship loaded with cargo, the
contract of affreightment was frustrated by the closure of the canal and the contract
of sale was not frustrated. It would lead to endless complications. 1

These decisions demonstrated that English courts have not adopted one
standard for frustration, even where they are dealing with contracts of
the same facts.52 However, the decision of Carapanayoti & Co. v E.T Green
Ltd,5 3 was overruled by a subsequent case,54 though the Ocean Tramp Tankers
Corporation v VI O Soufracht (The Eugenia)as has not been free from criticism.56
It follows that they may not be taken as leading authorities. The prevailing
view seems to be that such circumstances similar to those caused by the
closure of the Canal are not considered as a radical or fundamental
enough to lead to frustration in contract of sale of goods,57 while they
58
may do so in the case of a contract of charter parties.
Notwithstanding this, it appears that frustration depends on the true
construction of the contract taking into account all the relevant circumstances
including the nature of the contract. In Societi Franco Tunisienne D'armement

" See ibid.; see also Fairest, Self-Induced Frustration-The Implied Term Theory
Buried?, C.LJ. (1964), pp. 187-189.
"' See Ocean Tramp Tankers Corporation v V/O Soufracht (The Eugenia) [1964] 2 QB.
226, 241.
52 See Lee, supra, note 12, p. 384; see also Birmingham, A Second Look at the
Suez Canal Cases: Excuse for Nonperformance of the Contractual Obligations in the
light of Economic Theory, 20 The Hastings. LJ. (1969), pp. 404-406.
13 [1959] 1 Q.B. 131.
54 See Tsakiroglon & Co. Ltd. V Noblee Thorl G.m.B.H. [1962] A.C. 93.
55 [1964] 2 QB. 226.
56 It was stated that, "The Eugenia is wrong in its holding that closing the Suez
Canal did not frustrate charter parties which would normally have traveled through
the Canal". See Schlegel, Of Nuts, and Ships, and Sealing Wax, Suez, and Frustrating
Things-The Doctrine of Impossibility of Performance, 23 Rut. L.Rev. [1962], p. 437.
5 This position was affirmed by the House of Lords in Tsakirogluo & Co. v Noblee
Thorl G.m.b.H. [1962] A.C. 93.
58 See ibid.
 EXEMPTION OF NON-PERFORMANCE

v Sidermar S.P.A. (The Massalia),5 9 for example, the main basis for the frus-
tration was the express terms of the contract, and the surrounding cir-
cumstances, which indicated that performance through the Cape was
6
fundamentally different from the route via the Suez Canal. " It follows
that if the route is specified in the contract of sale of goods (C.I.F.) to
be, for example, via the Suez Canal, the closure of the Canal will, no
6
doubt, frustrate the contract. '

The Sale of Goods Act

The Sale of Goods Act deals with frustration in one particular situation
only, the perishing of specific goods. Thus Section 7 of the SGA 1979
(as amended) states that:

Where there is an agreement to sell specific goods and subsequently the goods, with-
out any fault on the part of the seller or buyer, perish before the risk passed to the
buyer, the agreement is avoided.

Section 7 of the SGA restricts the scope of frustration to the agreement to

sell specific goods which have perished before the passing of risk. Therefore,
if the contract involves a sale of unascertained goods or specific goods
and the goods are destroyed by supervening events other than by perishing,
63
this section will not apply. 62 Such cases are covered by common law. How-
ever, it seems that frustration, even under common law, does not apply
to the contract of unascertained goods on the ground that substitute goods
are normally available in the market.' Notwithstanding, some unascertained
goods may come under the scope of frustration, where the parties are 6
agreed that such goods are to be delivered from a particular source. 1

5 [1962] 2 QB. 278.

6 Pearson J. states that "in my view, having regard to the express provisions of
the contract and the surrounding circumstances, the proper view is that it was a term
of the contract (whether express or implied) that the vessel was to go by the Suez
Canal route, that was the voyage which the ship-owners undertook to perform", see
ibid., p. 298; see also the argument made by Lord Radcliffe, in Davies Contractors Ltd.
V Fareham Urban District Council [1956] A.C. 696, 730.
61 See Hamison, Contract-C.I.F.-Frustration-Closure of Suez Canal, C.LJ. (1961),

pp. 150-151.
62 See Bridge, The Sale of Goods, Oxford, Clarendon Press (1997), p. 131.
" See Atiyah, The Sale of Goods, (9ed.), London, Pitman (1995), p. 308.
64 See Bradgate, Commercial Law, (2ed.), London, Butterworths (1995), p. 319.
65 See Howell v Coupland (1876) 1 Q.B.D. 258; see also Re Badische Co. Ltd. [1921]
2 Ch. 331; see Atiyah, The Sale of Goods, supra, note 63, pp. 308-309, see also Treitel,
Remedies for Breach of Contract, Oxford, Clarendon Press (1988), p. 17.
 ABURIMA ABDULLAH GHITH

Thus in Howell v Coupland,66 the plaintiff contracted to buy 200 tons of

Regent potatoes grown in the land belonging to the defendant. It was
agreed that delivery was to be made during September or October 1872.
In July and August the crop was attacked by disease. As a result the seller
was unable to deliver the whole quantity to the buyer. It was held that
the seller was not liable for non-performance on the ground that the con-
tract was for delivery of potatoes "of particular kind, grown on a specific
place '6 7 and delivery from that place became impossible.

The LCC

Likewise, under the LCC the contract may be terminated by subsequent

events that are beyond the parties' control and which render performance
either impossible or fundamentally different from that which was con-
tracted for. However, the LCC recognizes two concepts of exemption,
namely the force majeure,6 and the theory of changed circumstances.69 These
two terms have different meaning and different consequences on the oblig-
ations of the parties.
Force majeure under the LCC, which originated from French Law,7" has
a narrower sense than frustration in English Law,7 and is similar to the
definition of "impediment" under the CISG; it refers to events which ren-
der performance physically or legally impossible. Thus, Article 168 of the
LCC states that:
in the absence of a provision of the law or an agreement to the contrary, a person
is not liable to make reparation, if he proves that the injury resulted from a cause
beyond his control, such as unforeseen circumstances, force majeure, the fault of the
victim or of a third party.

Also, Article 360 of the LCC provides that:

An obligation is extinguished if the debtor establishes that its performance has become
impossible by reason of causes beyond his control.

Any obligation means, according to this Article, that the impediment may
excuse a party from non-performance of a particular obligation without

66 (1876) 1 QB.D. 258.

67 See Lord Coleridge, ibid., at p. 261.
68 See Article 360 of the LCC.
61 See Article 147 of the LCC.
7o See Al-sunhuri, al-wasit, Vol. 3, Beirut, dar ihy'a al-turath al-arabi (1958), p. 981.
7 For the concept of frustration under French Law, see Nicholas,
French Law of
Contract, London, Butterworths (1982), p. 196; see also David, Frustration of Contract
in French Law, 28 (part. 3), J.Comp.Legis. (1946), pp. 11-14.
 EXEMPTION OF NON-PERFORMANCE

such affecting the continuance of the contract. It is different from the con-
cept of frustration under English Law, which has an effect on the contract
as a whole,72 i.e., to bring the contract to an end automatically.73
Performance of an obligation must become impossible. Therefore, events
such as difficult or onerous performance or change of circumstances or
economic hardship do not give rise to exemption as long as performance
is possible.7 4 The impossibility must be absolute and permanent, i.e., per-
formance physically or legally becomes permanently impossible.75 Whether
or not the supervening events discharge the contract is a question of fact.
It is, therefore, open to the lower court to decide, and its finding can-
not be challenged by the Cassation Court.76 But, such a finding is con-
clusive only on matters of facts; it does not bind the Higher Court when
it determines an appeal on points of law.77 Likewise, in other legal sys-
tems under discussion, force majeure is not an imperative rule-the parties
can agree otherwise. Thus the Egyptian Court of Cassation ruled that
the agreement between the parties to omit the responsibility of the tenant
of the land from any destruction of the crops caused by the force majeure
was legal on the ground that such agreement did not contradict the pub-
lic policy.78
However, as mentioned earlier, the LCC has also adopted a more lib-
eral rule of excuse for non-performance, i.e., the theory of changed cir-
cumstances which applies to contracts generally and is not limited to
administrative contracts. 79 It extends its scope to situations where perfor-
mance of the contract is rendered onerous, i.e., cases in which there is

72 See the comparison between force majeure under French law and frustration under
English law made by Professor Goode, Commercial Law (2ed), London, Butterworths
(1995), p. 140.
73 See ibid.
74 See Al-sunhuri, al-wasit, Vol. 3, supra not 70, p. 983.
71 See Al-sunhuri, al-wasit, ibid., pp. 983-984.
76 See ibid., p. 984.
71 See ibid.
71 Case no. 230, 13/11/1958, see Fahmi, al-Qawa'd al-Qanuniyah al-arabiyah wal-
dawliyyah Lil-Qwah al-Qahir'a wal zuruf al-tari'at wa tatbiqatiha'ahfi al-Uqud al-tjariyyah, al-
riyadh mjles al-ghurfah al-tjariyyah al-saudyyah, (Saudi Chambers Council) (1994), pp.
40-41.
'9 See Al-sunhuri, al-wasit, Vol. 1, Beirut, dar ihya'a al-turath al-arabi, (undated),
pp. 641-642; see also El-Hassan, Freedom of Contract, the Doctrine of Frustration,
and Sanctity of Contracts in Sudan Law and Islamic Law, 1 (Part 1) A.L.Q., (1985),
p. 53. French Law recognizes this principle but limits its application to administra-
tive contracts, see David, supra, note 71, p. 13. A similar approach is also adopted
by the UNIDROIT Principles under the term hardship, see s 6.2 of the UNIDROIT
Principles 1994.
 ABURIMA ABDULLAH GHITH

no physical impossibility of performance but the circumstances are radi-

cally changed because of a general contingency contrary to the basic
assumption on which the contract was made.8" Thus, Article 147 (2) of
the LCC states that:
When, however, as a result exceptional and unpredictable events of a general char-
acter, the performance of the contractual obligation, without becoming impossible,
becomes excessively onerous in such way as to threaten the debtor with exorbitant
loss, the judge may, according to the circumstances, and after taking into consider-
ation the interests of both parties, reduce to reasonable limits, the obligation that has
become excessive. Any agreement to the contrary is void.8

Accordingly, there are three main conditions limiting the application of

the theory of changed circumstances:
1- There must be exceptional circumstances of general and not particular
character;
2- The circumstances must be unforeseeable;
3- The seller must be exposed to excessive economic difficulties.

This principle has been designed to protect the obligor against unjust
losses. The LCC has not provided an example for such an event82 because
it is submitted that the events which might fall into this category cannot
be determined. It is a matter of fact depending on the circumstances of
each case, provided that the essential elements listed above have been met.
Therefore, its scope extends to include any change in the circumstances
which make performance difficult for the seller.
The difference that arises betweenforce majeure and the doctrine of changed
circumstances is that the latter does not apply to all contracts; it applies
only to continuous contracts where there is a period of time between the

80 See Saleh, Some Aspects of Frustrated Performance of Contracts under Middle

Eastern Law, 33 Int'l. & Comp. L.Q. (1984), p. 1049; see also Rayner, The Theoy of
Contracts in Islamic Law, London, Graham, & Trotman (1991), pp. 260-263. This the-
ory was rejected by the CISG, see Shafik, supra, note 24, p. 253.
8' This Article is identical to Article 147 of the Egyptian Civil Code. The theory
of changed circumstances is recognized by the Shari'a Law. See Rayner, The Theory
of Contracts in Islamic Law, ibid., p. 263; see also Amin, The Theory of Changed
Circumstances in International Trade, L.M.C.L. (1982), p. 582. However, it is not
clear whether Article 147 is influenced by the Shari'a Law or based on another legal
system. In this connection, it was pointed out that "Although... the literal source of
these provisions lies in Article 269 of the Polish Civil Code of 1 January 1934, shar-
i'a's recognition of the theory of excuse and natural disaster helped in the enactment
of these provisions", see Saleh, ibid., p. 1049.
82 See Amkhan, The Effect of Change in Circumstances in Arab Contract Law,
A.1.Q. (1994), p. 263.
 EXEMPTION OF NON-PERFORMANCE

concluding of the contract and its performance, as well as to periodical

contracts on the ground that the occurring of such circumstances requires
enough time between making the contract and performing it.83 In contrast,
force majeure may apply to any contract. Moreover, Article 147 (2) of the
LCC made it very clear that the parties have no right to exclude such an
excuse in their contract. In other words, this principle (unlike force maeure)
overrides express contractual terms. The reason for such an imperative
rule seems to be that it is in the interest of public policy to mitigate an
onerous performance in unforeseen events.
It is to be noted, however, that exemption under this theory is not based
on the personal circumstances of the seller. Circumstances should be of
a general nature, such as flood, storm, or war, which affect the whole area
in which the contract is to be performed.84 The reasoning underlining
these objective criteria is to avoid the escape of liability for an individual
event, such as personal financial difficulties due to the making of a bad
bargain.
The other differences between this theory and force majeure are: Firstly,
performance of the contract in the former does not become impossible.
Secondly, the effects of this concept are different from the effects of force
majeure. In events that are covered by the theory of changed circumstances
that do not justify discharge of the contract,85 the court is only autho-
rized to readjust the contractual obligations of the parties.
It follows that, whileforce majeure under the LCC is similar to the imped-
iment concept under the CISG, the principle of change of circumstances,
however, contradicts the approach of the CISG, which does not allow
exemption re-adjustments of the contractual obligations for such cases.

83 See Bkir, Atar al istihalah al nisbiyyah ala tanfid al iltizam, issue 1-2, Year 66
al muhamah (1986), pp. 51-52; the Egyptian Court of Cassation held that Article 147
(2) of the Egyptian Civil Code is wide enough to implement the theory of changed
circumstances on all contracts which allow a period of time between their conclu-
sions and performance during which an unforeseen event occurring makes the per-
formance of the contract onerous, case no. 240, 27 Judicial Year, see Bkir, ibid.
84 The explanatory Memorandum of Article 147 of the Egyptian Civil Code revealed
that the word "general nature" was added by the Drafting Committee to avoid apply-
ing this rule to the private circumstances of the party who relies on the exemption.
See Al-sunhuri, al-wasit, Vol. 1, supra, note 79, p. 630, footenote 1.
85 See Article 147 (2) of the LCC.
 ABURIMA ABDULLAH GHITH

Beyond His Control

The CISG
The seller (according to Article 79 of the CISG) is exempted from liability
only if he shows that the non-performance is beyond his control and
unavoidable. It follows that, if the impediment occurs due to his negligence,
or he fails to take reasonable steps to avoid it, he cannot rely on this rule.86
Therefore, if the seller delays delivery, and then the goods are destroyed
by a supervening event, the seller will not be protected by Article 79,
because the non-performance is due to his breach of not delivering the
goods at the agreed time.
However, the CISG has not provided a clear meaning or an example
of the cases which grant an excuse for impediments beyond party's control.
Problems, therefore, may arise relating to two situations: firstly, where defects
in the goods have occurred and the seller could not discover them; sec-
ondly, where the defects have occurred due to an external event. Explanation
of these situations may depend on the definition of "impediment". The
defects of the goods which existed at the time of the conclusion of the
contract are outside the scope of "impediment", and it is irrelevant as to
whether they have been known or not. It is a question of conformity, which
comes under the responsibility of the seller.87 But if the defects of the
goods occur due to external events, such as governmental intervention,
the position is not clear. Such a case may not be considered as an imped-
iment because performance is still possible. Nevertheless, it seems that the
seller may be granted an exemption on the ground that the breach of
performance is beyond his control.
As it has been seen above, the requirement that the impediment should
be beyond the seller's control is subject to a qualification that the supervening
event is unavoidable. The seller, therefore, can rely on such a clause only
if he has taken all reasonable steps to avoid such an event and its result.88
The test of these criteria is not based on the seller's own judgment. It is
based on the expected act of a reasonable person in the same circum-
stances of the seller.88

8'6 See Bianca & Bonell, supra note 7, pp. 579-580.

87 See Article 35 of the CISG.
88 See Article 79 (1) of the CISG.
88 See Bianca & Bonell, supra, note 7, p. 581, see also Lee, supra, note 12, p. 391.
 EXEMPTION OF NON-PERFORMANCE

English Law and Libyan Law

The rule that the contingency must be beyond the defaulting party's con-
trol, or is not "self-induced" as used in common law9" and irresistible, is
also recognized by English Law. The doctrine of frustration does not pro-
vide exemption for a party who is responsible for the event which makes
performance impossible. 9' These elements of "self-inducement" under
English Law perform the same function as the CISG "beyond his con-
trol" concept.
In Libyan Law, too, exemption applies only to external events which
are unforeseen, unavoidable, and beyond the seller's control. 92 Upon a
finding of impossibility, it is important under the LCC to determine whether
or not the non-performance is due to an event beyond the non-performing
party's control. Where his inability to perform is not beyond his control,
he will not be exempted from liability.93

Foreseeability

The CISG
The other element of exemption is the foreseeability test; the impediment
should not have been foreseen by the seller at the time of the conclusion
of the contract.94 A seller, therefore, cannot rely on an event which was
or should have been reasonably foreseen by him. The CISG adopts an
objective test that depends on whether the impediment has been reasonably
foreseen by a reasonable person. Therefore, it is not enough for the seller
to say that he has not foreseen it; it is a matter for the court to decide
according to the circumstances of the case.95
However, in international transactions, the seller may find it difficult

90 See Nicholas, Rules and Terms-Civil Law and Common Law, 48 Tul. L.Rev.
(1974), p. 955.
9' See Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd. [1942]
A.C. 154; see Maritime National Fish Ltd. V Ocean Trawlers Ltd. [1935] A.C. 524; see
also Ocean Tramp Tankers Corporation v V/O Soufracht (The Eugenia) [1964] 2 Q.B. 226,
237; see Nicholas, ibid.; see Treitel, The Law of Contract, supra note 30, p. 817.
92 See Article 360 of the LCC; see Al-sunhuri, al-wasit, Vol. 1, supra note 79, p. 878.
9'See Article 218 of the LCC; see also Habib, al-masadir al-iradyyah lil-iltizamfi al
Qanun al-liby, Benghazi, Libya, mansuratjami'at gar-youni (1978), p. 469.
'4 See Article 79 (1) of the CISG.
9 See Bianca & Bonell, supra, note 7, p. 581.
 ABURIMA ABDULIAH GHITH

to prove that "he could not reasonably have been expected to have taken
the impediment into account. ."' International events, such as war, eco-
nomic embargo, or the closure of waterways are always expected, especially
in conflict areas. For example, in the Iraqi crisis over weapons inspection,
it was expected that some oil shippings (for instance) might be delayed or
cancelled. In such a case can the seller rely on the exemption rule? According
to Article 79 (1) of the CISG, the answer depends on two elements, i.e.,
the time of the conclusion of the contract, and the expectation of the
reasonable person. In other words, can this conflict be foreseen by the
reasonable person at the time of the conclusion of the contract? If so,
the seller would not be excused for non-performance.
However, even such an interpretation is not straightforward, on the
ground that the closure of the Suez Canal (for example) was in some
degree or other expected. Notwithstanding this, the contracts (which its
performance related to the Canal) were frustrated. 7 It follows that mere
foreseeability may not bar the seller from relying on an excuse for non-
performance. It is a question of whether or not he could have expected
the event to last for a considerable time, extending to the course of per-
formance of the contract.9"
It may be inferred that foreseeability under the CISG is a question of
fact depending on the circumstances of each case. If the Court is not satisfied
that at the time of the conclusion of the contract the supervening events
could not reasonably have been foreseen to occur during its performance,
the seller will not be excused. It follows that mere foreseeability does not
bar exemption, it requires a high degree of possibility that the impedi-
ment is likely to occur.9

English Law
The principle that an excuse cannot be granted where the impediment has
been foreseen or could have been foreseen is also recognized by English
Law,"° and it seems there is no significant difference between the approaches

" See the Secretariat Commentary on the 1978 Draft, A/CONF.97/5, O.R.,
p. 55, reprinted in Honnold, Doc. Hist., supra note 6, p. 445.
" See supra, pp. 5-7.
98 See Denning in Ocean Tramp Tankers Corporation v V/O Soufracht (The
Eugenia) [1964] 2 Q.B. 222, 239.
' See Schlechtriem, Commentary on the UN Convention on the International Sale of Goods
(CISG) (2ed.) (in translation), Oxford, Clarendon Press (1998), p. 611.
'00See Davis Contractors Ltd. V Fareham Urban District Council [1956] A.C. 696;
 EXEMPTION OF NON-PERFORMANCE

adopted by the CISG and English Law. However, one point must be
added here, i.e., under English Law, a contract may be frustrated (in cer-
tain cases) even where the intervening event has been foreseen by both
parties. Two cases are worth mentioning: firstly, a contract may be frus-
trated even though the parties foresaw the occurrence of the supervening
event; where they agree to take such an event into account, non-performance
will be excused in spite of the foreseeability;' °' secondly, in a case where
performance of the contract contradicts public policy, for example trad-
ing with the enemy; in such a case, the contract is frustrated in spite of
the foreseeability.' 2

The LCC
In Libyan Law, the language of Article 168 of the LCC seems to give
rise to a confusion relating to the unforeseeability for the force majeure
cases. It states that:
... a person is not liable to make reparation, if he proves that the injury resulted
from a cause beyond his control, such as unforeseen circumstances, force majeure,
the fault of the victim or of a third party.

It appears that Article 168 distinguishes between two kinds of impediment:

in circumstances which are unforeseen, and force majeure, which exempts
the seller even if it could have been foreseen as long as it is irresistible. °3
However, such an interpretation was rejected by Al-sunhuri, the lead-
ing draftsman of the LCC. He pointed out that force majeure must fulfil
two conditions: impossibility that the event must render the performance
of the contract absolutely impossible, and it could have not been fore-
seen by the seller at the time of the conclusion of the contract.'O° Moreover,
foreseeability is one of the conditions which are required by the principle

see also Walton Harvey Ltd. V Walker & Homfrays Ltd. [1931] 1 Ch. 274, 281, 285;
see Treitel, The Law of Contract, supra note 30, p. 813. CF Lord Denning argued
that foreseeability is not a limitation of the doctrine of frustration. He pointed out
that "It has frequently been said that the doctrine of frustration only applies when
the new situation is 'unforeseen' or 'unexpected' or 'uncontemplated', as if that were
an essential feature. But it is not so. The only thing that is essential is that the par-
ties should have made no provision for it in their contract", in Ocean Tramp Tankers
Corporation v VIO Soufracht (the Eugenia) [1964] 2 QB. 226, 239.
101 See Treitel, The Law of Contract, supra note 30, p. 816.
102 See Treitel, ibid., p. 814.
103 See Al-sunhuri, al-wasit, Vol. 1, supra, note 79, p. 876.

104See ibid., pp. 876-878.

 ABURIMA ABDULLAH GHITH

of the theory of changed circumstances which applies, as has been seen, to

circumstances less onerous than force majeure.1' s Accordingly, unforesee-
ability of an intervening event is an important element for excusing the
seller from liability of non-performance. It follows that, LCC is in line
with the CISG.

Non-performance Due to a Third Pary under the CISG

Article 79 (2) of the CISG deals with cases where non-performance by
the seller is due to a failure of a third person. This provision was intro-
duced by the CISG, since it has no counterpart in ULIS. ' 6 In order to
apply this rule, it is important to determine what is meant by the third
person. Does it include any sub-contractor engaged by one of the par-
ties, say the seller, to perform the whole or part of the contract? Or must
he be a person related to the performance of this particular contract?
The drafting history of this provision reveals that the third person must
not be a general supplier of the goods or raw material to the seller. He
must be someone who engages with the seller to perform the whole or
part of the contract," 7 provided that he is not working for the seller as
an employee or representative for whose conduct the seller is responsi-
ble. If he does so, the seller may not be exempted unless he proves that
the requirements of Article 79 (1) of the CISG have been met.' 018
Therefore, a distinction must be made between a third person and a
general supplier. However, the problem, as the delegate of Denmark put
it, is that "The buyer might have no knowledge of whether the seller had
engaged an independent contractor or had used a supplier."'' 9 This, how-
ever, seems to be a matter of proof which is placed on the party relying
on the exemption."'

105 See supra, pp. 9-10.

106 See Bianca & Bonell, supra note 7, p. 584.
'0 See the Secretariat Commentary on the 1978 Draft, Article 65, A/CONF.97/5,
O.R., para. 12, p. 56, reprinted in Honnold, Doc.Hist., supra note 6, p. 446.
108 See Dawwas, Impediments Affecting Performance of Contractual Obligations under CISG,

Islamic Law and the Jordanian Civil Law, Ph.D Thesis submitted to the Faculty of Law
of the University of Fribourg (Switzerland) (1996), p. 40; see also Schlechtriem, Com-
mentay, supra, note 99, p. 615.
" See A/CONF.97/5, O.R., para. 23, p. 379, reprinted in Honnold, Doc.Hist.,
supra note 6, p. 600.
.0 See Bianca & Bonell, supra, note 7, p. 586.
 EXEMPTION OF NON-PERFORMANCE

A third person, then, is restricted to an "independent" person"11 engaged

by the seller to perform (wholly or partially) a particular contract." 2 In the
words of Professor Tallon: ". . there must be an organic link between it
and the main contract."' " This may be illustrated by the following example:
assume that a car manufactory contracted to sell a number of cars to a
buyer, and delivery was to be made within six months, which started to
run from the time of the conclusion of the contract; assume also that part
of the cars, say the engines, were produced by another independent com-
pany. The latter company is considered as a third party whom the seller,
the car manufactory, has engaged to perform part of the contract, i.e.,
to provide the required engines for the cars. Assume that a supervening
event, within the meaning provided by Article 79 (1) of the CISG, has
occurred preventing the third party from performing his contractual oblig-
ation. In such a case, the seller is exempted from liability.
It follows that failure of non-performance due to a general supplier
does not excuse the seller from liability." 4 The reason is obvious; in the
case of the failure of a general supplier, there is generally no impediment-
the seller can obtain goods elsewhere and perform his obligations. It does
not, however, follow that failure of the general supplier bars him from
excuse. If, for example, the general supplier has been prevented by war
or trade embargo, which gives rise to impediment in the sense discussed
earlier, he will be exempted from liability." 5
It is not enough for the seller to show that the non-performance is due
to a third person's failure. Exemption can only be granted if the require-
ments provided by Article 79 (1) have been met with regard to both the
seller and the third person." 6 Firstly, the seller must prove that performance
became impossible without his negligence. Secondly, the third person's
failure was due to an impediment which cannot be foreseen, is irresistible
and beyond his control." 7 In short, the exemption of the seller from his
non-performance of his original contractual obligations depends on the

See the point made by the delegate of Denmark, A/CONF.97/5, O.R., para. 35,
p. 380 reprinted in Honnold, Doc.Host., supra note 6, p. 601; see also Bianca & Bonell,
surpa, note 7, p. 585.
112 See Bianca & Bonell, ibid.
"' In Bianca & Bonell, ibid.
"4 See the delegate of Ghana's view, A/CONF.97/5, O.R., para. 26, p. 379, re-
printed in Honnold, Doc.Hist., supra, note 6, p. 600.
"I See Honnold, Uniform Law, supra, note 4, p. 489.
116 See Schlechtriem, Commentary, supra, note 99, p. 615.
"' See Bianca & Bonell, supra, note 7, pp. 585-586.
 ABURIMA ABDULLAH GHITH

exemption of the third person for non-performance of his obligations

which connected to the first contract.
But, as with the other provisions of the CISG, this rule can be overridden
by the agreement of the parties. The parties can, for example, state in
their contract that any impediment which may prevent the third party
(as defined above) from performing his obligations to the seller, such
obstacle will not exempt the seller from non-performance of his con-
tractual obligations." 8

Conclusion

It can be concluded that, although exemption for non-performance has

been recognized by the legal systems related in this Article, the standard
of exemption in these Laws is not the same. Impediment, which has been
adopted by the CISG, is not identical to frustration in English law, nor
to force majeure, nor to a theory of changed circumstances in the LCC.
The draftsmen of the CISG deliberately avoided the use of any domestic-
law theory of exemption. Therefore, in applying the provisions of the
CISG, careful interpretation must be followed, taking into consideration
two important points: the international character of the CISG, and the
principle of good faith which is expressly recognized by the CISG.119 An
automatic use of domestic-law standards of exemption may cause confu-
sion and uncertainty.

18 The parties' right to agree otherwise is provided by Article 6 of the CISG.

"9 See Article 7 of the CISG.