Todays world is integrating more and more deeply in all fields, most prominently in goods trading activities between countries. Through international commodity trading, traders can expand the market for their products, and at the same time receive certain benefits. Concurrently, consumers also have the opportunity to use a variety of multinational products, contributing to the promotion of the development and competition of the domestic market. However, the international factor in the sale and purchase of goods will also give rise to specific legal problems compared to the domestic sale of goods. In fact, there have been quite a few disputes that have occurred that are directly related to international goods sale and purchase activities, typically disputes over contracts for the international sale of goods. To clarify this issue, the following content will analyze and comment on the case of Raw Materials Inc v. Manfred Forberich GmbH Co., KG
1 Overview of the dispute 1.1 Parties involved in the dispute Plaintiff Raw Materials, Inc (“RMI”), an Illinois corporation, has brought suit against Defendant Manfred Forberich GMBH & Co., KG ("Forberich"), a German limited partnership, alleging breach of contract and fraud relating to Defendant's undisputed failure to meet its contractual obligation to deliver used railroad rail to Plaintiff The dispute was settled by U.S District Court, Northern District of Illinois, Eastern Division 1.2 Facts RMI’s primary business is purchasing, processing, and selling used railroad which is eventually reheated and rerolled into new products, such as fence posts or sign posts Meanwhile, Forberich’s business is selling used railroad rail On February 7, 2002, RMI entered into a written contract with Forberich in which Forberich agreed to supply RMI with 15,000-18,000 metric tons of used Russian rail The rail was to be shipped from the port in St Petersburg, Russia, by June 30, 2002 It takes approximately three to four weeks for ships loaded with rail to travel from St Petersburg, Russia to the United States The parties agree that their contract is governed by the 1980 Vienna Convention on Contracts for the International Sale of Goods (“CISG”) Forberich intended to use the rails provided by Imperio Trading ("Imperio"), to fulfill its contract with RMI However, in late June 2002, Imperio defaulted on its contractual obligation to provide rail to Forberich So Forberich sought an extension of its time for performance under the contract Through a telephone conversation between Mr Forberich and Mr Ron Owczarzak 1, it is confirmed that RMI agreed to extend the delivery date to a date “later in the calendar year”, but the delivery date was never fixed because the Defendant has not attended a meeting to discuss the extension Plaintiff has assumed that had Forberich delivered the contracted goods to RMI's plant by December 31, 2002, the Contract would have been fulfiled Mr Forberich's declaration states that he understood that Forberich "had until December 31, 2002, load the rails and execute the bill of lading to be in compliance with the contract On around December 1, 2002, the St Peterburg port unexpectedly froze over This event consequenced in Forberich’s breach of contract RMI Vice President Plaintiff has requested the U.S District Court, Northern District of Illinois, Eastern Division for summary judgment on Defendant’s breach of contract The Court made its final judgment on July 6, 2004 1.3 Issues and Applicable rules The question raised by this case is whether Forberich was liable for its failure to perform its shipping obligation To answer the question, Article 79 of the CISG shall be applied Arguments of parties 2.1 Plaintiff’s legal reasoning In application of Article 79, RMI asserts that "while no American court has specifically interpreted or applied Article 79 of the CISG, case law interpreting the Uniform Commercial Code's ("UCC.") provision on excuse provides guidance for interpreting the CISG's excuse provision since it contains similar requirements as those set forth in Article 79 Under Section 2-615 of the UCC, "three conditions must be satisfied before performance is excused: (1) a contingency has occurred; (2) the contingency has made performance impracticable; and (3) the nonoccurrence of that contingency was a basic assumption upon which the contract was made The third condition turns upon whether the contingency was foreseeable; if the risk of the occurrence of the contingency was unforeseeable, the seller couldnot be said to have assumed the risk If the risk of the occurrence of the contingency was foreseeable, that risk is tacitly assigned to the seller Plaintiff does not dispute that the freezing over of the port in St Petersburg was a contingency Rather, it essentially argues that it is entitled to summary judgment because the second and third conditions not apply since the undisputed facts show that the frozen port did not prevent Forberich from performing the contract and that the freezing of the port was foreseeable Plaintiff argued as follows: First, about whether the frozen port could have prevented performance, the answer is no The frozen port could not have prevented Forberich from performing because the port did not freeze over until mid-December 2002, and, since it takes 3-4 weeks for a ship carrying rail to travel from St Petersburg to the United States, Forberich would have had to have shipped out the rail before the port froze for the shipment to arrive by the December 31, 2002 deadline Second, about the foreseeability, the Plaintiff said that it hardly could come as a surprise to any experienced shipping merchant (or any grammar school geography student) that the port in St Petersburg might become icy and frozen in the Russian winter months 2.2 Defendant’s legal reasoning Forberich contended that it was exempted from liability under Article 79 CISG because its failure to deliver as agreed was due to St Petersburg port unexpectedly freezing over at the time of delivery, preventing vessels from entering and exiting the port To prove its point, Defendant argued that the frozen port prevented its performance and such freezing is unforseeable In particular, Forberich presented evidence that it would have been in the position to meet a December 31, 2002, deadline for delivery to the U.S by shipping out rail in the last week or so of November or the first few days of December but was prevented from doing so by the frozen port Furthermore, no conclusive evidence has been presented that any ships left the St Petersburg port until months after November 20, 2002 Forberich also presented evidence that the severity of the winter in 2002 and the early onset of the freezing of the port and its consequences were far from ordinary occurrences Although the St Petersburg port usually froze over in the winter months, this typically did not happen until late January And such freezing did not prevent the vessels from entering and exiting the port It could be said that the winter of 2002 was the worst in St Petersburg in almost sixty years and that ice interfered with shipping at the end of November Even the icebreakers also got stuck in the ice Therefore, Forberich asserted that these were "unexpected weather conditions" and no one could have predicted such an early port freeze Moreover, Forberich also asserted that the fact a Forberich ship left the port on approximately November 20, 2002 is not inconsistent with the port freezing in the remaining ten days or so of that month Furthermore, no conclusive evidence was presented that any ships left the St Petersburg port until months after November 20, 2002 Findings of the court According to the court’s view, it is undisputed that Forberich was contractually obligated to ship 15,000 to 18,000 metric tons of rail to RMI and that it failed to so Thus, Forberich's ability to avoid summary judgment is dependent on whether it has presented sufficient evidence to support its affirmative defense of force majeure based on the theory that it was prevented from performing by the freezing over of the St Petersburg port In applying Article 79 of the CISG, the Court also used as a guide case law interpreting a similar provision of Section 2-615 of the UCC Since the parties implicitly agreed that the freezing over the port in St Peterburg was a contingency, the remaining questions that must be answered are whether the early freezing of the port prevented Forberich's performance and was foreseeable The court reasoned that Plaintiff has failed to demonstrate that the frozen port did not prevent Forberich's performance The Court also noted that the Plaintiff's claim that the freezing of St Peterburg was foreseeable is groundless Ultimately, the court drew conclusion that Defendant’s force majeure affirmative defense may be viable and summary judgment would be inappropriate The court later denied Plaintiff’s motion for summary judgment Comments on the outcome of the case In the current case, the court had applied Article 79 of the CISG in order to determine whether Defendant was liable for its failure to perform its shipping obligation Accordingly, the court had answered three questions: (i) whether an impediment occurred, (ii) whether the impediment made performance impractical, and (iii) whether the impediment was foreseeable However, they are insufficient to prove a breaching party exempted from liability under Art 79 Therefore, we found that the court is erred in its interpretation of Art 79 To prove a breaching party exempted from liability under Art 79, in our opinion, the party must meet the following conditions: (i) His failure to perform any obligations due to an impediment beyond his control; (ii) He could not have foreseen such an impediment objectively at the time of contracting; (iii) He could not have avoided such an impediment and overcome the consequence when the impediment occurred (iv) He has given notice to the non-breaching party of the impediment and its effect on his ability to perform obligations In the case at hand, it is indisputable that the freezing over of the St Petersburg port is an impediment beyond Defendant’s control The defendant had also given evidence proving the consequence of freezing could not have been overcome and the freezing was unforeseeable Nevertheless, the court had not examined whether Defendant gave notice to Plaintiff of the frozen port Art 79.4 requires that Defendant must give notice to Plaintiff of the impediment and its effect on its ability to perform If the notice is not received by Plaintiff within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, Defendant is liable for damages resulting from such non-receipt The court never mentioned the Defendant’s obligation to notify under Art 79.4 Thus, we disagree with the court’s interpretation In sum, we agree with the court’s denial of Plaintiff’s motion for summary judgment but its interpretation of Article 79 of the CISG ... beyond Defendant’s control The defendant had also given evidence proving the consequence of freezing could not have been overcome and the freezing was unforeseeable Nevertheless, the court had not... beyond his control; (ii) He could not have foreseen such an impediment objectively at the time of contracting; (iii) He could not have avoided such an impediment and overcome the consequence... Furthermore, no conclusive evidence was presented that any ships left the St Petersburg port until months after November 2 0, 2002 Findings of the court According to the court’s view, it is undisputed