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    ‘Force Majeure’ Clause in Contracts with American Companies

    The United Nations Convention on Contracts for the International Sale of Goods – The CISG – contains a Force Majeure clause and it is important to know about it if you have a contract with an American company where COVID-19 has impeded performance of the contract.

    Article 79(1) of the CISG states:

    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.

    Essentially, then, if COVID-19 has impeded performance under your contract, you may be able to rely on Article 79(1) to negate a potential claim for breach of contract.

    What is the CISG

    The CISG is the law that governs contracts between private buyers and sellers that conduct their primary business in different countries.

    The CISG applies when:

    1. There is a contract for a sale of goods between two private parties;
    2. Those parties’ places of business are in different States; and
    3. Those States have adopted the CISG.

    Currently 84 States have adopted the CISG. Along with Canada, some notable States which have adopted the CISG include the United States, Mexico, Brazil, China, Iraq, Israel, Italy, Germany, and France.

    For a complete list see: https://www.cisg.law.pace.edu/cisg/countries/cntries.html

    Therefore, for example, if you have a contract for the sale of goods with a company in the United States, then by default the CISG applies as the law that governs your contract.

    The Purpose

    The stated purpose of the CISG is to “provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs” (United Nations Statement on the CISG).

    It allows parties, regardless of the State they are conducting business in, to understand and have certainty regarding the law that applies to their contract when dealing internationally.

    Concerns

    Many parties, however, are unaware that the CISG applies, let alone even exists, but it is vital to know that it applies to any dealings that meet the above criteria.

    The CISG governs formation of a contract, delivery obligations, payment obligations, inspection obligations, and the remedies available in the event of a contractual breach.

    However, not being aware that the CISG applies means that as a buyer or a seller, you might not conduct yourself according to the CISG and leave yourself open to a breach, or an inability to claim damages if the other party breaches.

    Opting Out

    Contracting parties can opt out of the CISG in part or in whole. This is allowed; however, it may not be advisable and should not be the parties’ default. It is important to understand how the CISG applies, how it affects your obligations while performing your contractual duties, and the mechanisms available if there is a breach of contract.

    If you have any questions about the CISG, cross-border contracts or how COVID-19 affects performance of a contract, contact litigation lawyer, Aaron King, at Merovitz Potechin LLP.

    The content on this website is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship. If you would like to discuss your specific legal needs with us, please contact our office at 613-563-7544 and one of our lawyers will be happy to assist you.

    Posted By: Aaron King of Merovitz Potechin LLP

    Associate

    Aaron King is a litigation associate at Merovitz Potechin LLP practicing in the areas of commercial and civil litigation, estate litigation, mortgage enforcement and other debt collection.

    Aaron enjoys the intricacies and challenges of litigation and approaches each unique case attentively and thoroughly. He focuses on how he can help his clients in the most effective ways, understanding that litigation is rarely an ideal situation.

    Aaron has always had an interest in law and knew early on he wanted to become a lawyer. Prior to law school, Aaron attended Carleton University where he graduated with a Bachelor of Arts (Honours) with a focus on Legal Studies.

    During law school, Aaron focused on litigation and took on a variety of challenges in different areas of law. Aaron participated in two international competitive moots – The Willem C. Vis moot, an international commercial law and arbitration moot in Vienna, Austria, and the Philip C. Jessup moot, a public international law moot in Washington D.C. Aaron continues to give back to the moot program at the University of Ottawa, most recently coaching the Wilson Moot team.

    Coming from a criminal law background, Aaron has a lot of experience advocating for his clients in the Courtroom with various trial and motion appearances. He recognizes, however, that many disputes can be resolved before going to court and focuses on alternative methods to resolving various issues efficiently and effectively before resorting to trial.

    Outside of the office, Aaron enjoys spending time with his family, playing soccer, and drinking coffee.

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