|Buyer, a Dutch company, entered into several contracts with Seller, a French company, for the delivery of steel tubes. Subsequently, the price of steel unexpectedly rose by 70%. The contracts contained no price adjustment clause.
The Court of first instance, though admitting that the unforeseen price rise had caused a serious imbalance and continued performance of the contract at the contractual price would be harmful to the seller, excluded the seller's right to renegotiate the price, since the CISG, which governed the contract, was silent on the issue of hardship, and the Court did not determine the law applicable according to the relevant rules of private international law under which the seller might have been able to request renegotiation. The Court of Appeal referred to Article 7(2) of the CISG and ruled that French law applied. Although French law does not provide for remedies in the case of hardship, in certain circumstances, such as in case of substantial imbalance of the contractual obligations, it imposed in accordance with the general principle of good faith the re-negotiation of the contract.
The Court of Cassation, in confirming the decision of the Court of Appeal, pointed out that the fact that the CISG in its Article 79(1) made express provision for force majeure as an exempting event did not mean that it implicitly excluded the relevance of hardship and possibility of re-negotiation of the price, as requested by the seller in the case at hand. First of all, in the view of the Court an unforeseen change of circumstances amounting to a substantial alteration of the contractual equilibrium such as in the case at hand, might in certain circumstances constitute an exempting event under Article 79 (1) CISG. Moreover, the Court recalled that according to Article 7(1) and 7(2) CISG, the Convention was to be interpreted having regard to its international character and the need to promote uniformity in its application, and gaps had to be filled on the basis of the general principles underlying the Convention and only absent such principles on the basis of the domestic law applicable in accordance with the relevant rules of private international law. The Court, after pointing out that in order for gaps to be filled in a uniform manner, regard must be had to the general principles governing the law of international commerce, concluded that according to such principles as laid down, among others, in the UNIDROIT Principles of International Commercial Contracts, a party invoking a change in circumstances fundamentally disrupting the contractual equilibrium, had the right to request re-negotiation of the contract. Accordingly, the Court of Cassation confirmed the decision of the Court of Appeal granting the seller the right to request the re-negotiation of the price and rejected the recourse against that decision by Buyer.