FORCE MAJEURE, CHANGE OF CIRCUMSTANCES AND TERMINATION OF CONTRACT

Abstract

It is impossible to draw a distinct line between force majeure and change of circumstances, because the two overlap. In order to regulate both force majeure and change of circumstances, the United Nations Convention on Contracts for the International Sale of Goods (CISG) has adopted a unified model in article 79, whereas Chinese law adopts a dual model by treating them as different things and regulating them in different articles. Where the purpose of a contract becomes impossible to achieve because of a force majeure and both the CISG and Chinese Contract Law (the CCL) adopt the same model of termination of the contract, the contract should be terminated by one party with a notice to the other party instead of ipso facto avoidance. In a case of a change of circumstances, in order to terminate the contract, both the CISG and the CCL actually follow the path of raising an action by a notice of avoidance or termination to theother party. Both approaches have their merits and demerits but the differences between them in practice are not as large as presumed. Where force majeure and change of circumstances overlap each other, possible ways for termination of the contract are for a party either to choose their preferred solution or to follow the lex specialis derogat generali. The latter way is preferred in this article; and while in an action for termination the judge may balance the interests of both parties in making a final decision, the uniform application of the law, the safety of the transaction and the fairness of the judgment may be ensured in so doing.