- International Court of Arbitration at the Belarusian Chamber of Commerce and Industry
RIGHT TO SUSPEND PERFORMANCE (ART. 71 CISG) – ONLY IN CASE OF SERIOUS DEFICIENCY IN ABILITY TO PERFORM OR IN CREDITWORTHINESS AND CONDITIONAL ON IMMEDIATE NOTICE TO OTHER PARTY (ART. 71(3) CISG)
[CLOUT Case n.1709 ; abstract prepared by Jan Iosifovich Funk and Inna Vladimirovna Pererva, National Correspondents].
A contract was concluded between the plaintiff (Republic of Belarus) and the defendant (Republic of Cyprus) under which the defendant was to produce and transfer goods, namely components for machinery and equipment, to the plaintiff within a specified time frame. The plaintiff was to take delivery of and pay for the goods.
In accordance with the terms of the contract, the plaintiff was also to make a prepayment, which the plaintiff did while failing to meet some of the deadlines established by the contract. The contract provided that, as a consequence of non-compliance with the prepayment deadlines, the delivery deadlines would be extended, although no specific time period was given. One of the contract provisions, however, clearly indicated that in the event of a delay in the prepayment, the delivery would be postponed correspondingly. Although the plaintiff had made the prepayment in full as per the contract, the defendant delivered only part of the goods. In doing so, the defendant declared that it was suspending the performance of its obligations under the contract.
On the basis of articles 71(1) and (3) CISG, the Court did not accept the defendant’s suspension of the performance of its obligations, for the following reasons.
Under article 71 of the Convention, the parties may indeed suspend the performance of their obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of its obligations as a result of a serious deficiency in its ability to perform or in its creditworthiness, or in its conduct in preparing to perform or in performing the contract. The party suspending performance must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.
The Court found that the aforementioned requirements of Art. 71 CISG had not been met, as there were no precise grounds for suspension under that article and the procedure for suspension as provided for in the article had not been followed. The defendant had not proved a serious deficiency in the plaintiff’s creditworthiness or any other circumstance established by article 71 CISG as a ground for suspension of a party’s performance of its obligations, nor had the defendant informed the plaintiff of the suspension of its performance of its contractual obligations, thus depriving the plaintiff of the opportunity to provide adequate assurance of its performance of its prepayment obligations.
Therefore, the Court rejected the defendant’s suspension of the performance of its obligations under the contract, as that suspension was found unjustified.
Original in Belarusian
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[Case law on UNCITRAL texts, A/CN.9/SER.C/ABSTRACTS/185]}}