(Defenses to)

Non-performance

Session 5
Contract Law

Master in Management (MiM)

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 Today’s Program
Defenses to Non-performance 

• Recap
• Standard terms
• Non-performance  
• Defenses to non-
performance 
• Force majeure exercise
• Mining Exercise

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 Recap
of Session 4

• Pre-contractual liability
• Tennor
• Manoukian 
• Quiz
• Contract Interpretation
• UBS v Red Zone
• Haviltex
• Bear Sterns
 

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 Book Recommendation

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 Standard Terms/Conditions
Regulated by Arts. 2.1.19.-2.1.22. UNIDR.
Definition: Art. 2.1.19(2) UNIDR.

Battle of the forms:

Knock-out rule (Art. 2.1.22 UNIDR.)

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 Non-performance
or Breach of Contract

• Contract enforcement (Art. 1.3 UNI): remedies

• Definition: Art. 7.1.1
• Specific performance: Art. 7.2.1 & 7.2.2
• Termination: Art. 7.3.1 
• Money damages: Art. 7.4.1
• Efficient breach
• Partial performance? (Art. 6.1.3 UNI)

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 Defenses to
Contractual Obligations

• How to defend yourself against a claim of non-

performance? 
1) Seek to avoid the contract (on grounds of
invalidity), or 
2) Claim a justification for non-performance (force
majeure) or a renegotiated deal (hardship)  

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 The Defenses Menu
Doctrine  Issue Consequence 
Threat Validity of contract   Possible avoidance of
contract
Mistake  Validity of contract  Possible avoidance of
contract 
Fraud  Validity of contract Possible avoidance of
contract
Hardship  Changed Renegotiation,
equilibrium  termination,
adaptation of contract
Force Majeure  Excusable non- No liability in
performance  damages

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 Threat
• UNIDR. Art. 3.2.6.
• Criteria (so imminent and serious: no
reasonable alternative!) 
• 'Duress' or 'coercion'
• Consequence: avoidance of contract permitted 

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  Mistake & Fraud (I)

• UNIDR. Arts. 3.2.1. & 3.2.2.

• Consequence: avoidance: but Art. 3.2.4. 
• Fraud: Art. 3.2.5. 

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 Mistake & Fraud (II)
• Bernie Madoff's ponzi scheme: fraud
• Cunningham Chapter 3: Simkin & Blank 
• What was the mutual mistake here?
• And the legal consequence?

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 Hardship
• UNIDROIT 6.2.1 to 6.2.3
• A.k.a. frustration of purpose 
• General principle: Art. 6.2.1. (still bound!)
• Fundamental change of equilibrium: 6.2.2. 
• Consequence: renegotiation (or
termination/adaptation by court)  
• Tennor (failed claim of hardship)
• LVMH/Tiffany's 

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• UNIDROIT Art. 7.1.7.
(1) Conditions: impediment beyond control,
reasonable expectations
(2) Temporary nature
(3) Giving notice
(4) Standing rights (termination without liability)
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 Break!

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 Force Majeure Exercise
• Download exercise from Blackboard 
• Take 10 minutes to answer the questions 
• A plenary discussion follows 

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 Mining Exercise
(Rio Tinto in Western Australia)

Watch this clip

Download instructions from Blackboard

15 minutes to prepare

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 Recommendations

Industry (2020-)

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