Force majeure and hardship under the US law,

CISG, and Vietnam law

I. Definition and purpose
1. Force majeure
a. Definition
 The definition of Force majeure in Cambridge dictionary is defined
as “Force majeure is an unexpected event such as a war, crime, or a
natural disaster which prevents someone from doing something that
is written in a legal agreement”
 In the legal system, Force majeure is described as a provision in a
contract that frees both parties from obligation if an extraordinary
event directly prevents one or both parties from performing. (Cornell
Law School)

Example: The case of Wilson and tenants is an example of a force

majeure event, typically The World War II.

 The occurrence of a force majeure event leads to the – at least

temporary – suspension of the primary obligations of both
contracting parties. Either party has to bear the adverse conse-
quences of non-performance or the delay in performance. As a
consequence, the liability dispenses and the other party is unable to
claim compensation for damages.

2. Hardship
 The explanation of Hardship in the Oxford dictionary is defined as
“Hardship is a situation that is difficult and unpleasant.”
 In the legal system, hardship is defined as any event occurring after
the conclusion of contract, which was unforeseeable at the time the
contract had been formed, despite the utmost care; and Hardship
does not cause the impossibility of performance, but allows parties
to renegotiate the contract. (Lorenz & Partners Law Firm)

Example: Delivery requirements for countries that have become

inaccessible due to political reasons or because of international trade
embargo.
  Hardship clauses typically recognise that parties must perform their
contractual obligations even if events will render performance more
difficult than one would reasonably have anticipated at the time of
the conclusion of the contract. However, where continued
performance has become excessively burdensome due to an event
beyond a party’s reasonable control, a hardship clause can oblige the
parties to negotiate alternative contractual terms. The purpose of a
hardship clause is to provide a higher level of flexibility and to
balance the risk between the parties.
II. Force majeure under the US law, CISG, and Vietnam law
1. Under the US law
 In US Law there is no codified definition of force majeure. The
enforceability of force majeure clauses is highly dependent on the
specific state law, the wording of the clause and the court’s
interpretation.
Therefore, companies must be aware of how force majeure clauses
are interpreted and enforced in the particular state. Nevertheless, as
the US contract law supports the principle of freedom of contract, it
is a good idea to implement a force majeure clause as it is mostly not
construed into a contract by the courts.

2. CISG
a. About the CISG
 The United Nations Convention on Contracts for the
International Sale of Goods (CISG), sometimes known as the
Vienna Convention, is a treaty that is to provide a modern,
uniform and fair regime for contracts for the international sale
of goods. And it has been ratified by 95 countries.
 Thus, the CISG contributes significantly to introducing
certainty in commercial exchanges and decreasing transaction
costs.
b. Force majeure under CISG
 According to Clause 1 of Article 79 of the 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.”
  Article 79 of the CISG also applies only if the impediment
cannot be overcome, which applies not to the impediment
itself, but rather to the actual breach of contract. This makes it
more difficult for the seller to present exonerating evidence,
given that the seller bears the procurement risk even in case
of force majeure.
 However, under Article 79 of the CISG, the seller is only
exempt from paying damages. The buyer generally still
retains its claim to performance, as well as its other rights,
such as e.g. its right to void the contract (Article 49 of the
CISG) and to reduce the price (Article 50 of the CISG).
3. Under Vietnam law
 Clause 1 of Article 156 of the Vietnam Civil Code defines as “An
event of force majeure is an event which occurs in an objective
manner which is not able to be foreseen and which is not able to be
remedied by all possible necessary and admissible measures being
taken.”

 The consequences of force majeure are stipulated in Clause 2 and

clause 3 of Article 420 of the Vietnam Civil Code:
“2. Where circumstances change substantially, the party whose
benefits are affected has the right to request the other party to
renegotiate the contract within a reasonable period of time.
3. Where the parties are unable to reach agreement on amendment
of the contract within a reasonable period of time, either party may
request a court to:
(a) Terminate the contract at a definite time;
(b) Amend the contract to balance legitimate rights and benefits of
the parties due to substantial change in circumstances.
The court is only permitted to make a decision on amendment of the
contract in a case where termination of the contract will cause loss
and damage of an amount higher than the costs for performance of
the contract if the contract is amended.”

III. Hardship under the US law, CISG, and Vietnam law

1. Under the US law
 In the US contract law, there is no common definition of hardship.
Nevertheless, hardship clauses can be used, but it is difficult to
create the hardship if the relevant event is too vague. Therefore, a
force majeure clause in combination with the requirement to firstly
 renegotiate the contract accomplishes what a hardship clause could
provide in other legal systems.
2. CISG
 The CISG does not contain a hardship clause, and the prevailing
opinion is that Art.79 CISG does not cover hardship. Renegotiation
is therefore not an option.
3. Under vietnam law
 Article 420 of the Vietnam Civil Code 2015, regulates the
performance of contract when the circumstances change
substantially
“Article 420: Performance of contracts when circumstances change
substantially
1. Circumstances shall [be deemed to] change substantially when
the following conditions are satisfied:
(a) There is a change to the circumstances due to objective
reasons, occurring after the contract is entered into;
(b) At the time when the contract is entered into, the parties
are unable to foresee the change of circumstances;
(c) There is such a big change in circumstances that the
contract would not have been entered into or would have been
entered into with completely different contents if the parties had
foreseen such change;
(d) The continuation of performance of the contract without
changing the contents of the contract will cause serious loss and
damage to one party;
(dd) The party whose benefits are affected has taken all
necessary measures to the best of its ability and appropriate with the
nature of the contract but is unable to prevent or mitigate the level
of affecting the benefits.
2. Where circumstances change substantially, the party whose
benefits are affected has the right to request the other party to
renegotiate the contract within a reasonable period of time.
3. Where the parties are unable to reach agreement on amendment
of the contract within a reasonable period of time, either party may
request a court to:
(a) Terminate the contract at a definite time;
(b) Amend the contract to balance legitimate rights and
benefits of the parties due to substantial change in circumstances.
The court is only permitted to make a decision on amendment
of the contract in a case where termination of the contract will cause
loss and damage of an amount higher than the costs for
performance of the contract if the contract is amended.
4. During the process of negotiation of amendment or termination of
the contract and during the period the court resolves the case, the
parties must continue to perform their obligations under the
contract, unless otherwise agreed.”