Issue: The contract agreement between Phar Lap Allevamento and Black Beauty Equestrian was created before the sudden imposing of additional 30% tariffs by the government on the Respondent’s side. The Responded made unlawful action when it rejected paying money to the seller.
Rule: According to Lutz (2004), in 1964, a UNIDROIT conference at The Hague came up with an agreement regarding two conventions. The first one was the Convention relating to a Uniform Law of International Sales (ULIS). The second one was second was the Convention relating to a Uniform Law on the Formation of Contracts for the International Sale of Goods (ULF). Both of these Conventions regulate the trading and sales procedures and, therefore, can be applied to this case.
To solve this issue, UNIDROIT Principles should be applied because although the Respondent was meant to pay all the money to the seller of goods (Claimant), this dispute was not resolved with the help of the CISG document. Thus, if the dispute is beyond the CISG, according to Art. 7(2) of the CISG, the UNIDROIT Principles, should be applied to fill the internal gap mechanism (Bonell, 1996). Therefore, these principles provide legislation for cases of hardships. For instance, they claim that unforeseeable conditions should be considered hardships and, thus, should not change the profits of parties.
Application: Additional costs became known to Claimant after filling the contract and could not be foreseen by the company (Roque et al., 2019). It should be pointed out that hardship is the situation that is caused in case of agreements are being affected by the occurrence of unforeseen events that change the market conditions existing at the moment of the conclusion of the agreement. Therefore, as the increase of tariffs on 30% was unexpected for the Parties, the Claimant could not succeed in adjusting the price of goods to get full revenue from the deal, which makes this condition a hardship for the case. Moreover, applying the rule to this particular case, the Claimant should not lose its money because of unforeseeable conditions, which is supported by the UNIDROIT Principles that provide legislation for cases of hardships.
Conclusion: Summing all written above, as the contract agreement between Phar Lap Allevamento and Black Beauty Equestrian was created before the sudden imposing of additional 30% tariffs, the Claimant faced hardships. Thus, these additional costs became known to Claimant after filling the contract and could not be foreseen by the company. Moreover, the court’s decision to apply the UNIDROIT Principles to this case is valid, as it resolves the case with unexpected governmental decisions, which were not compensated by the Respondent’s side. Finally, it is justified by the discussed principles that the Respondent should pay $1,250,000 to the Claimant as an adaptation of the price caused by the imposing of additional tariffs.
Bonell, M. J. (1996). The UNIDROIT principles of international commercial contracts and CISG – Alternatives or complementary instruments? Uniform Law Review-Revue de droit uniforme, 1(1), 26-39.
Roque, C. A. M., de Medeiros Carreiro, C., & Cerqueira, C. M. T. (2019). Work project: 26th annual Willem C. Vis international commercial arbitration moot. Nova University of Lisbon – School of Law.
Lutz, H. (2004). The CISG and common law courts: Is there really a problem. Victoria U. Wellington L. Rev., 35, 711-734.