Title

VII.2 - Principle of foreseeability of loss

Content

No. VII.2 - Principle of foreseeability of loss

Claims for damages are limited to the loss which the non-performing party foresaw or could reasonably have foreseen at the time of the conclusion of the contract as being the likely result of its non-performance.

Commentary

1 The purpose of the Principle of foreseeability, which is modelled after Art. 74 CISG, is to ensure that the damages to be paid by the non-performing party are linked to the contract and do not fall outside the scope of that contract and are therefore totally unexpected by the other party.

2 This purpose makes it clear that the foreseeability test does not relate to the amount of damages, but to the type and nature of damages which must be seen in relation with the purpose and nature of the contract. The perspective to be taken in performing the foreseeability test is that of the non-performing party at the moment of the conclusion of the contract and, in cases in which that party is unable to foresee the damage for whatever reasons, the perspective of a reasonable person in the situation of that party.

References

Arbitral Awards

ICC Award No. 1526, Clunet 1974, at 915 et seq.ICC Award No. 1795, YCA 1999, at 196 et seq.ICC Award No. 2404, Clunet 1976, at 995 etICC Award No. 5946 of 1990, YCA 1991, at 97 et seq.ICC Award No. 8331, 10 ICC Bull. No. 2, 1999, at 65 et seq. (also published in: Clunet 1998, 1041)ICSID Award Amco Asia Corp. et al. v. Republic of Indonesia, 24 ILM 1985 at 1022 et seq. (also pblished in: Clunet 1987, at 145 et seq.; ICSID Rep. 1993, at 413 et seq.; IntICSID Award, AMCO Asia Corp. et al. v. The Republic of Indonesia, YCA 1992, at 73 et seq.ICSID Award, AMCO Asia Corpoation et al. v. Republic of Indonesia, Clunet 1987, at 145 et seq.

Court Decisions

BGHZ 57, 245Chaplin v. Hicks [1911] 2 KB 786Cour de cassation de Belgique, C090624F, 6th January 2011Koufos v. C. Czarnikow, Ltd. (The Heron II), [1969] 1 A.C. 350

Doctrine

Blase, Friedrich/Höttler, Philipp, Remarks on the Damages Provisions in the CISG, Principles of European Contract Law (PECL) and UNIDROIT Principles of International Commercial Contracts (UPICC)Blessing, Marc, Das neue internationale Schiedsgerichtsrecht der Schweiz - Ein Fortschritt oder ein Rückschritt?, in: Böckstiegel (ed.), Die internationale Schiedsgerichtsbarkeit in der Schweiz (II), Cologne, Berlin, Bonn, Munich 1989, at 13 et seq.Charles T. Kotuby Jr. / Luke A. Sobota, GENERAL PRINCIPLES OF LAW AND INTERNATIONAL DUE PROCESS - Principles and Norms Applicable in Transnational Disputes, New York NY USA 2017Cheng, Bin, General Principles Of Law as Applied by International Courts and Tribunals, reprinted, Cambridge 1987Craig, W. Laurence/ Park, William W./ Paulsson, Jan, International Chamber of Commerce Arbitration, 3rd ed., Dobbs Ferry 2000Derains, Yves, note to ICC Award No. 1526, Clunet 1974, at 918 et seq.Derains, Yves, note to ICC Award No. 2404, Clunet 1976, at 996 et seq.Derains, Yves, note to ICC Award No. 8331, Clunet 1998, at 1044 et seq.Esser, Josef, Grundsatz und Norm in der richterlichen Fortbildung des Privatrechts, 4th ed., Tübingen 1990Ferrari, Franco, Das Verhältnis zwischen den Unidroit-Grundsätzen und den allgemeinen Grundsätzen internationaler Einheitsprivatrechtskonventionen, JZ 1998, at 9 et seq.Ferrari, Franco, The CISG's Interpretative Goals, Its Interpretative Method and Its General Principles in Case Law (Part II), IHR 5/2013, at 181 et seq.Fouchard Gaillard Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John Savage) The Hague 1999Hanotiau, Bernard, La Détermination et l'Evaluation du Dommage Réparable: Principes Généraux et Principes en Emergence, in: Gaillard (ed.), Transnational Rules in International Commercial Arbitration (ICC Publ. Nr. 480,4),Jenks, Edward et al., A Digest of English Civil Law, London, Sydney, Calcutta, Winnipeg, Wellington 1921.Knütel, Rolf, Rechtseinheit in Europa und römisches Recht, 3 ZEuP 1994, at 244 et seq.König, Detlef, Voraussehbarkeit des Schadens als Grenze vertraglicher Haftung (zu Art. 82, 86, 87 EKG), in: Leser/ Marschall v. Bieberstein (eds.), Haager Einheitliches Kaufgesetz, Karlsruhe 1973, at 76 et seq.Kropholler, Jan, Internationales Einheitsrecht, Tübingen 1975Lando, Ole, CISG and Its Followers: A Proposal to Adopt Some International Principles of Contract Law, in: American Journal of Comparative Law 53, Berkley 2005.MacQueen, Hector L./Thomson, Joe, Contract Law in Scotland, Fourth Edition 2016Marrella, Fabrizio, La nuova lex mercatoria, Principi Unidroit ed usi di contratti des comercio internazionale, CEDAM, Tratto di dritto commerciale e di dritto publico dell‘economia, Volume 30, Padova 2003Mustill, Michael, The New Lex Mercatoria: The First Twenty-five Years, Arb.Int'l 1988, at 86 et seq.Ortscheidt, Jérôme, La réparation du dommage dans l'arbitrage commercial international, Paris 2001.Paulsson, Jan, La Lex Mercatoria dans l‘Arbitrage C.C.I, Rev.d.Arb. 1990. at 55 et seq.Schlechtriem, Peter, Rechtsvereinheitlichung in Europa und Schuldrechtsreform in Deutschland, 1 ZEuP 1993, at 230 et seq.Tallon, Denis, Damages, Exemption Clauses, and Penalties, 40 Am.J.Comp.L. 1992, at 675 et seq.Treitel, G.H., Remedies for Breach of Contract, in: David/ von Mehren (eds.), International Encyclopedia of Comparative Law, Bd. VII, Tübingen 1976, at 121 et seq.Wöss, Rivera, Spiller, Dellepiane, Damages in International Arbitration Under Complex Long-Term Contracts, Oxford 2014Weitnauer, Hermann, Kausalitätsprobleme in rechtsvergleichender Sicht, in: Festschrift Wahl, Heidelberg 1973, at 109 et seq.Zeller, Damages under the Convention on Contracts for the International Sale of Goods, 2nd ed. 2009

International Legislation

Fontaine, Marcel, OHADA Uniform Act On Contract Law Preliminary DraftUnited Nations Convention on Contracts for the International Sale of Goods (CISG)

Miscellaneous

Decision taken by the Governing Council of the United Nations Compensation Commission, S/AC.26/1992/9, 06 March 1992

Model Laws

A Contract Code: Drawn up on Behalf of the English Law CommissionPrinciples of Latin American Contract Law (PLACL)The Draft Civil Code for Israel in: Siehr, Kurt/Zimmermann, Reinhard (ed.) The Draft Civil Code for Israel in comparative perspective, 2008Uniform Commercial Code (USA)Uniform Law on the International Sale of Goods

Model Terms

UNECE-General Conditions for the Supply of Plant and Machinery for Export.

National Legislation

Civil Code Québec 1991Contract Law of the People's Republic of ChinaEthiopian Civil CodeFrench Civil Code 2016French Code Civil 1804GIW DDRGIW GDRIndonesian Civil Code (excerpts)Japanese Civil Code 2020
Act No. 89 of 1896
Amendment of Act No. 44 of 2017Louisiana Civil Code 2015Nieuw Burgerlijk Wetboek - New Netherlands Civil Code ( Dutch Civil Code )Philippines Republic Act 386 (Civil Code)UK Sale Of Goods Act 1979, Chapter 54

Principles / Restatements

Principles of European Contract Law - PECLThe Most Recent Legal Principles Adopted by the Arbitral Tribunals under the Auspices of the Cairo Centre, CRCICA-Newsletter, Jan. 1997, page 2 et seq.UNIDROIT Principles of International Commercial Contracts 2016

Contract Clauses

1. Causality between Performance and Damages & ReasonablenessSales & Purchase ContractLiability for Breach of Contract

Any party breaching the Agreement shall take liabilities for breach of contract and compensate for the economic loss to the other party incurred by the violation. The compensation amount shall be equal to the loss caused by the breach, including the benefits that may be acquired after fulfillment the Agreement (...)


2008Services Contract

If the Principal refuses to renew or continue work under this contract, the terminated Agent shall be entitled to reasonable compensation for his activities that may have resulted in the apparent success in the business of the terminated Agent. Specifically, the terminated Agent shall be entitled to compensation for his promotional activities and efforts at client relations that result in goodwill that may accrue to the new Agent.


19832. Limit of Liability Linked to Defaulting Party's PerspectiveSales & Purchase ContractLiability for Breach of Contract

(...) The compensation amount shall not (...) exceed the possible loss that should be foreseen at establishment of contract by the defaulting party


2008