The purposes of the UNIDROIT Principles of International Commercial Contracts as stated in their Preamble are well known. They include the possible application of the Principles when parties have decided that their contract 'be governed by "general principles of law", the "lex mercatoria" or the like'.

The reference to lex mercatoria would seem to imply, as several ICC awards have affirmed,1 that the Principles correspond to current contract practices and that they are an expression of trade usages. However, such a conclusion calls for careful consideration. We would like to argue that to describe the Principles as being 'an expression of international contract practice'2 does not do them full justice. They are much more than this (I), although it is true that in many instances they do reflect current contractual practice (II).

I. The Principles as more than an expression of contractual practice

Far from being a mere compilation of usages, the UNIDROIT Principles are a comprehensive codification of international contract law.

Preparation of the Principles has been based largely, although not exclusively (see below), on comparative studies of various national legal systems and certain international instruments such as the United Nations Convention on Contracts for the International Sale of Goods (CISG). The UNIDROIT Working Group formed for the purpose of drafting the Principles is composed mainly of professors specialized in comparative contract law. In the attempt to prepare rules thought to be at the same time appropriate for international contracts and acceptable to both civil and common lawyers, much inspiration has been drawn from national legal systems.

Usually, the aim has not been to find compromises, but to select what the majority of the Working Group members (or, not infrequently, all of them) felt to be the most fitting solution. The members sit on the Working Group as individuals, not as representatives of governments. Little, if any, nationalism appears in the discussions. There has been a readiness to adopt valuable [Page96:] concepts or mechanisms from different systems, as for example the German Nachfrist (art. 7.1.5), the French obligations de moyens et de résultat (arts. 5.4 and 5.5), or the anticipatory breach of the common law (art. 7.3.3). The Working Group has also adopted original solutions, such as the rules on payments by transfer (art. 6.1.8).

The contents of the Principles are those of a traditional code relating to contracts. Many of the rules set out in the Principles cannot really be thought of as reflecting 'contract practice'. The rules on validity, such as those covering mistake, fraud and threat (arts. 3.4 to 3.9), are a case in point. These rules are similar to those that a legislator would enact, or courts develop, rather than solutions that have emerged from actual practice. Some of the rules may even reflect what could be called 'political options'. The provision on gross disparity (art. 3.10) is an illustration of this: it represents a stand taken in favour of fairness in contractual relationships, in reaction against certain abusive practices. Other examples will be given below.

As a comprehensive codification of contract law, the UNIDROIT Principles are therefore much more - and often something other than - an expression of contractual practice.

II. The Principles as an expression of contractual practice

It is obvious that when preparing an instrument designed to be of use to parties in international contracts, the group of academics comprising the Working Group could not draw inspiration from comparative law treatises alone, and ignore actual contractual practice. Most members of the Working Group have considerable practical experience as counsel, consultants or arbitrators. UNIDROIT is itself strongly desirous of ensuring that actual practice be taken into consideration: when the Working Group first began its task, it received from the UNIDROIT Secretariat a substantial collection of standard contracts used in international trade. This preoccupation with actual practice is reflected in many provisions of the Principles.

Firstly, many of the Principles' articles contain references to usages and practices. Article 1.8 states the general conditions under which parties are bound by usages and practices. More specific references to usages or practices appear in several other provisions, such as those dealing with the modes of acceptance of an offer (art. 2.6(3)), the circumstances relevant to interpretation (art. 4.3(b)), or the sources of implied obligations (art. 5.2(b)).

'Default rules' have normally been devised to correspond to solutions most frequently found in actual practice. This is the case, for instance, with the rules on time of performance (art. 6.1.1), order of performance (art. 6.1.4) or place of performance (art. 6.1.6). It is also true of price determination (art. 5.7). 3

Further examples may be given of specific instances in which a special effort has been made to take account of actual practice. This is due to the fact that practice has burgeoned in the areas concerned. However, as will be seen, taking actual practice into account does not always mean endorsing it unconditionally. Three illustrations will be given below. [Page97:]

1. Contract formation

Chapter 2 of the Principles deals with the formation of contracts. It is enlightening to compare it with Part II of CISG. The comparison clearly demonstrates the superiority of the Principles as far as responding to actual practice is concerned.

CISG is very traditional. Articles 14 to 24 are based exclusively on the classical approach of offer and acceptance (with a host of compromises to accommodate various national solutions). Many of the rules set out in the UNIDROIT Principles (e.g. arts. 2.2 to 2.11) also follow this traditional approach, as they have been much inspired by CISG. However, the Principles go further by including many provisions on the formation of contracts that take actual practice into account. Article 2.1 states that a contract may be concluded not only by the acceptance of an offer, but also by 'conduct of the parties that is sufficient to show agreement', thus covering the frequent situation where an 'offer' and an 'acceptance' are not identifiable steps in the process of agreement. The Principles contain several provisions on negotiations, sadly missing in the Vienna Convention: article 2.15 stating the principle of negotiating in good faith, article 2.16 on confidentiality and article 2.13 on 'conclusion of contract dependent on agreement on specific matters or in a specific form'. Several other clauses common in contracts are regulated by specific provisions of the Principles: writings in confirmation (art. 2.12), merger clauses (art. 2.17) and written modification clauses (art. 2.18). Standard terms are covered by articles 2.19 to 2.22, including the irritating problem of the so-called 'battle of forms'.

2. Hardship and force majeure

The provisions on hardship (arts. 6.2.1 to 6.2.3) and force majeure (art. 7.1.7) also represent significant attempts to meet the preoccupations of contractual practice.

To begin with, the titles of these articles, at least in the original language versions, correspond to the terminology most widely used in international contracts: 'hardship' in French as well as in English, and 'force majeure' in English as well as in French.

a) The inclusion of rules on hardship were in response to a request frequently made by practitioners at the time the Principles were being prepared. Hardship clauses have indeed become very common in international contracts.

It is true that some of the solutions adopted here by the Principles have attracted criticism. 4 One such solution concerns the powers given to courts to intervene where parties fail to reach an agreement when renegotiating their contract (art. 6.2.3(3) and (4)). It was even decided in one arbitral award that on the issue of hardship the UNIDROIT Principles do not reflect an established international usage. 5

In our opinion, this is going too far. While it can be argued that the aforementioned solution does not reflect the most common contractual practice (clauses usually opt for other solutions, such as allowing the aggrieved party, and sometimes even either party, to terminate the contract), the award fails to recognize that hardship clauses have become very frequent. A recent study has [Page98:] shown that 42% of international contracts contain such clauses, which shows that their inclusion in contracts certainly cannot be considered as exceptional. 6

On the other hand, there are cases in which the UNIDROIT rules on hardship have been referred to positively by arbitral tribunals. In several awards, the criteria set by the UNIDROIT Principles have been taken into consideration for the purpose of determining whether or not there was hardship. 7

It must also be remembered that the UNIDROIT provisions on hardship are not mandatory rules. Parties who choose to subject their contract to the Principles may deviate from any of their provisions, barring a few exceptions (art. 1.5). The section on hardship serves the useful purpose of drawing the parties' attention to the problem of a possible change of circumstances and offers certain solutions. It is always possible to modify the proposed rules, especially to replace court intervention by another remedy in the event renegotiations come to a deadlock (e.g., as already mentioned, by giving each party, or the party under hardship, the possibility of terminating the contract).

b) As for the rules on force majeure, they reflect contractual practice inasmuch as article 7.1.7(2) refers to the suspensive effect of the occurrence of such events when the impediment is temporary (this is the basic rule embodied in force majeure clauses, although some national legal systems consider force majeure mainly as a cause for discharge of obligations). Article 7.1.7(3) also reflects actual practice by making it a duty for the party that fails to perform to give the other party notice of the event preventing it from doing so. 8

3. Exemption and liquidated damages

Exemption clauses and liquidated damages clauses are also extremely common in international contracts. They are covered by articles 7.1.6 and 7.4.13 of the UNIDROIT Principles respectively. To what extent do these provisions reflect actual practice?

Insofar as such clauses are frequent and abuse does occur, the inclusion of articles 7.1.6 and 7.4.13 serves a useful purpose. However, the aim of the provisions they contain is not to express actual practice, but to provide for remedies in the event of abuse. The UNIDROIT Principles do not offer model exemption or liquidated damages clauses, but set limits as to their validity, as would a legislator or a court.

These are therefore two examples of what we earlier called 'political options'. Rather than reflecting practice, they are intended to counter abusive clauses through substantive rules: grossly unfair exemption clauses may not be relied upon; grossly excessive penalty clauses may be reduced.

Conclusion

The UNIDROIT Principles were prepared with actual contractual practice in mind. They cover many crucial issues in international contractual practice and reflect a breadth of vision which, as has been shown in relation to contract formation, gives them the edge over CISG. Indeed, more than a mere expression of contractual practice, they constitute a code offering a complete set of rules and remedies for international contracts.

1
e.g. partial award of October 2000 in case 10022, (2001) 12:2 ICC ICArb. Bull. 100; final award of March 2000 in case 10114, (2001) 12:2 ICC ICArb. Bull. 100 at 102.

2
By 'international contract practice' we mean the way practitioners usually draft contractual clauses. This is to be distinguished from broader expressions, such a 'international trade principles', which would include rules generally applied by arbitral tribunals.

3
In its partial award of September 1999 in ICC case 7819, the arbitral tribunal referred to article 5.7 of the Principles to support its assertion that sales without previous price determination are common in international trade, (2001) 12:2 ICC ICArb. Bull. 56 at 57.

4
See our own critical comments in M. Fontaine, 'Les dispositions relatives au hardship et à la force majeure' in M.J. Bonell & F. Bonelli, eds., Contratti commerciali internazionali e Principe UNIDROIT (Milan: Giuffrè, 1997) 183.

5
Final award in ICC case 8873, July 1997, (1999) 10:2 ICC ICArb. Bull. 78 at 80.

6
M. Prado, Le hardship dans le commerce international (Thesis, University of Paris X, 2000) [to be published].

7
See awards in ICC cases 7365 (1997) quoted by M. Prado, op. cit. at 238; 8486 (September 1996), (1999) 10:2 ICC ICArb. Bull. 69 at 70; 9029 (March 1998), (1999) 10:2 ICC ICArb. Bull. 88 at 89ff.

8
Although article 7.1.7 is in part a reflection of actual practice, there are also some discrepancies between certain of its provisions and actual contractual practice. See M. Fontaine, supra note 4.