Respondent should be excused from liability under the Article 79 due to Impossibility to overcome and foresee the impediment

ARGUMENT ON LIABILITY

RESPONDENT DID NOT BREACH THE CONTRACT FUNDAMENTALLY

1) Late delivery can not be considered as fundamental breach of contract according to the Article 25 CISG and commentary to it

In Claimant`s understanding late delivery in itself may constitute fundamental breach of contract [MoCl. para. 86]. However late seller’s late performance does not usually cause a fundamental breach of contract [Corte di Appello di Milano, Italy, 20 March 1998, CLOUT case No. 275 Oberlandesgericht Düsseldorf, Germany, 24 April 1997].

Delay ad rem may constitute fundamental breach after the additional period established by the buyer has expired without performance by the obligor [ICC Court of Arbitration, Basel, 1995]. In case at hand there are no grounds to speak about fundamental breach, because there was no additional time for performance fixed by CLAIMANT.

The delay in delivery would cause a fundamental breach of contract also when the time for performance is of essential importance, which is proved by special provision in the contract [CLOUT case No. 277 Oberlandesgericht Hamburg, Germany, 28 February 1997].

However, RESPONDENT was informed about the date of the annual conference of the Worldwide Corporate Executives Association only on 5 August 2010, which is about 3 months after conclusion of contract [P.O. para. 14]. The contract between the Claimant and RESPONDENT did not contain this sort of information. Thus, Control Systems did not know that timely delivery was essential to Elite at the time of conclusion of contract.

RESPONDENT SHOULD BE EXCUSED FROM LIABILITY UNDER THE ARTICLE 79 DUE TO IMPOSSIBILITY TO OVERCOME AND FORESEE THE IMPEDIMENT

1) Late delivery and installation of master control system was caused by the impediment to performance, that was beyond RSPONDENT`S control.

In reply to the claim, RESPONDENT argues, that it should not be liable on the grounds that it had been unable to perform its obligations for reasons “beyond its control”, namely due to failure to receive processing units from Specialty Devices emergency production cessation at the facility produced core elements for goods to be supplied by RESPONDENT [Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, 16 March 1995].

In regard to liability issue it is reasonable to define relationships within the supply chain. Specialty Devices (as a “third person” to RESPONDENT) was barely to manufacture and supply processing units to RESPONDENT [AfA.Para.9] but no to execute RESPONDENT`S obligations entirely. Therefore Specialty Devices performance is “a mere precondition” for the fulfillment of the Control System`s obligations [Comments on Art. 79 from seminal 1986 by Peter Schlechtriem, p.104].

Whereas it is undisputed, the obligor is always responsible for “his own personnel” [Comments on Article 79 from seminal1986 by Peter Schlechtriem, p.104] or for those “whose work the seller is to organize, coordinate, or supervise” [CISG Advisory Council Opinion No. 7, Exemption of Liability for Damages Under Article 79 of the CISG, para. 17].

However at present case Specialty Devices is independent entity that has its own contractual obligation with RESPONDENT. Thus, RESPONDENT did not organize its work and had no power to control and forcibly influence on their performance.

As about High Performance, considering its obligation to produce D-28 chips and deliver them to Specialty Devices, it should be recognized as secondary supplier of Control Systems [AfA. Para 9.].

According to CISG provisions, RESPONDENT is not liable for secondary suppliers that are “beyond its control” and its failure could neither be foreseen nor avoided.

Based on above-mentioned circumstances and case law, RESPONDENT is of opinion, that it is entitled to claim exemption under Art. 79 due to impediment to deliver the system, components of which were produced beyond RESPONDENT`S control and, furthermore, due to absence of “bad faith conduct” by RESPONDENT [Digest of Article 79 case law para.5, Tribunal de comer de de Besançon, France, 19 March 1998].

The legal dictionary gives the definition of “bad faith” as “intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others” [Legal Dictionary http://legal-dictionary.thefreedictionary.com/bad+faith].

Nothing from this description corresponds to the acts of RESPONDENT. There was neither violating basic standards of honesty nor entering into an agreement without the intention or means to fulfill it. RESPONDENT honestly informed the CLAIMANT about the delay and tried to do everything possible to perform the obligation in a proper way.

2) RESPONDENT should be exempt from liability due to good faith conduct

In case of late performance on basis of emergency stoppage on secondary suppliers` plant obligor can be exempt from liability under Art. 79 subject to good faith conduct by itself.

This approach has found support in case law, id est, absence of “bad faith conduct” is considering as essential factor in liability issue [Digest of Article 79 case law para.5, Tribunal de comerce de Besançon, France, 19 March 1998].

In present case RESPONDENT informed Claimant about the impediment and its effect on his ability to perform within reasonable period of time after fire occurred and the RESPONDENT was notified about it (in three days) [Cl. Ex. No.2]. Such an act of conduct perfectly matched Art. 79(4), what definitely falls under the definition “acting in good faith” [Article 79 (2) CISG].

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