Nonperformance of Contractual Duty (Breach of Contract) Meaning and Requisites of Nonperformance Type of Nonperformance Effect of Nonperformance Impossibility.

Nonperformance of Contractual Nonperformance of Contractual Duty Duty

(Breach of Contract)(Breach of Contract)

Meaning and Requisites of Meaning and Requisites of NonperformanceNonperformanceType of NonperformanceType of NonperformanceEffect of NonperformanceEffect of NonperformanceImpossibilityImpossibility

Meaning and Requisites of NonpeMeaning and Requisites of Nonperformancerformance

Existence of a Contractual DutyExistence of a Contractual Duty There is a valid contract or an obligation.There is a valid contract or an obligation.

Existence of ImputabilityExistence of Imputability IntentIntent NegligenceNegligence

Gross negligence; Slight negligenceGross negligence; Slight negligence Occurrence of Hurdle to Perform the obligationOccurrence of Hurdle to Perform the obligation

Prestation has been tendered on the due dayPrestation has been tendered on the due day Imperfect performanceImperfect performance

Nothing has been tendered on the due dayNothing has been tendered on the due day Impossibility of performanceImpossibility of performance Delay in performanceDelay in performance Anticipatory RepudiationAnticipatory Repudiation

ImputabilityImputability

IntentIntent NegligenceNegligence

Gross negligence; Gross negligence; Slight negligenceSlight negligence

Burden of Proof to the Defaulting Party’s Burden of Proof to the Defaulting Party’s

FaultFault The delict provided in article 184 first paragraph of Civil The delict provided in article 184 first paragraph of Civil

Code requires “Code requires “intentional or negligently” wrongful act damagintentional or negligently” wrongful act damaged the rights of anothered the rights of another as a requisite element. Thus, the as a requisite element. Thus, the claimant who claims damage from the other person who is claimant who claims damage from the other person who is liable for wrongful act shall bear the burden of proof for liable for wrongful act shall bear the burden of proof for intent of negligent element. In non-performance case, the intent of negligent element. In non-performance case, the reason for assuming liability for damage by the obligor is reason for assuming liability for damage by the obligor is the existence of imputable fact to the obligor. Therefore, the existence of imputable fact to the obligor. Therefore, even though the obligee can prove the existence of even though the obligee can prove the existence of contractual relationship and suffering damages therefrom, contractual relationship and suffering damages therefrom, then he is entitled to claim the debtor to assume the then he is entitled to claim the debtor to assume the liability for non-performance. If the obligor defense that the liability for non-performance. If the obligor defense that the non-performance was caused by the reason that can not be non-performance was caused by the reason that can not be imputable to the obligor, the burden of proof shall be on the imputable to the obligor, the burden of proof shall be on the obligor’s side. (Taiwan Supreme Court Civil Judgment Tai obligor’s side. (Taiwan Supreme Court Civil Judgment Tai Shang No. 267 (1993)). Shang No. 267 (1993)).

PRC CLPRC CL

Article 107     Types of Liabilities for BreachArticle 107     Types of Liabilities for BreachIf a party fails to perform its obligations under a If a party fails to perform its obligations under a contract, or rendered non-conforming performance, contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming specific performance, cure of non-conforming performance or payment of damages, etc. performance or payment of damages, etc.

Article 108     Anticipatory BreachArticle 108     Anticipatory BreachWhere one party expressly states or indicates by its Where one party expressly states or indicates by its conduct that it will not perform its obligations under conduct that it will not perform its obligations under a contract, the other party may hold it liable for a contract, the other party may hold it liable for breach of contract before the time of performance. breach of contract before the time of performance.

PRC CLPRC CL

Article 109     Monetary Specific PerformanceArticle 109     Monetary Specific PerformanceIf a party fails to pay the price or remuneration, the other If a party fails to pay the price or remuneration, the other party may require payment thereof. party may require payment thereof.

Article 110     Non-monetary Specific Performance; Article 110     Non-monetary Specific Performance; ExceptionsExceptionsWhere a party fails to perform, or rendered non-conforming Where a party fails to perform, or rendered non-conforming performance of, a non-monetary obligation, the other party performance of, a non-monetary obligation, the other party may require performance, except where:may require performance, except where:(i)     performance is impossible in law or in fact;(i)     performance is impossible in law or in fact;(ii)    the subject matter of the obligation does not lend (ii)    the subject matter of the obligation does not lend itself to enforcement by specific performance or the cost of itself to enforcement by specific performance or the cost of performance is excessive;performance is excessive;(iii)   the obligee does not require performance within a (iii)   the obligee does not require performance within a reasonable time. reasonable time.

PRC CLPRC CL

Article 111     Liabilities in Case of Quality Non-Article 111     Liabilities in Case of Quality Non-compliancecomplianceWhere a performance does not meet the Where a performance does not meet the prescribed quality requirements, the breaching prescribed quality requirements, the breaching party shall be liable for breach in accordance with party shall be liable for breach in accordance with the contract. Where the liabilities for breach were the contract. Where the liabilities for breach were not prescribed or clearly prescribed, and cannot be not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, determined in accordance with Article 61 hereof, the aggrieved party may, by reasonable election in the aggrieved party may, by reasonable election in light of the nature of the subject matter and the light of the nature of the subject matter and the degree of loss, require the other party to assume degree of loss, require the other party to assume liabilities for breach by way of repair, replacement, liabilities for breach by way of repair, replacement, remaking, acceptance of returned goods, or remaking, acceptance of returned goods, or reduction in price or remuneration, etc. reduction in price or remuneration, etc.

PRC CLPRC CL

Article 112     Liability for Damages Article 112     Liability for Damages Notwithstanding Subsequent Performance Notwithstanding Subsequent Performance or Cure of Non-conforming Performanceor Cure of Non-conforming PerformanceWhere a party failed to perform or rendered Where a party failed to perform or rendered non-conforming performance, if non-conforming performance, if notwithstanding its subsequent notwithstanding its subsequent performance or cure of non-conforming performance or cure of non-conforming performance, the other party has sustained performance, the other party has sustained other loss, the breaching party shall pay other loss, the breaching party shall pay damages. damages.

PRC CLPRC CL

Article 117     Force MajeureArticle 117     Force MajeureA party who was unable to perform a contract due to force A party who was unable to perform a contract due to force majeure is exempted from liability in part or in whole in majeure is exempted from liability in part or in whole in light of the impact of the event of force majeure, except light of the impact of the event of force majeure, except otherwise provided by law. Where an event of force otherwise provided by law. Where an event of force majeure occurred after the party's delay in performance, it majeure occurred after the party's delay in performance, it is not exempted from liability.is not exempted from liability.For purposes of this Law, force majeure means any For purposes of this Law, force majeure means any objective circumstance which is unforeseeable, unavoidable objective circumstance which is unforeseeable, unavoidable and insurmountable. and insurmountable.

Article 118     Duty to Notify in Case of Force MajeureArticle 118     Duty to Notify in Case of Force MajeureIf a party is unable to perform a contract due to force If a party is unable to perform a contract due to force majeure, it shall timely notify the other party so as to majeure, it shall timely notify the other party so as to mitigate the loss that may be caused to the mitigate the loss that may be caused to the

Type of NonperformanceType of Nonperformance

Imperfect performanceImperfect performance Impossibility of performanceImpossibility of performance Delay in performanceDelay in performance Anticipatory RepudiationAnticipatory Repudiation

Effect of NonperformanceEffect of Nonperformance

Specific performanceSpecific performance DamageDamage

RecoveryRecovery Pecuniary damagesPecuniary damages

Liquidated damageLiquidated damage Forfeiture deposit (earnest money)Forfeiture deposit (earnest money)

ImpossibilityImpossibility

Classification of ImpossibilityClassification of Impossibility Initial Impossibility (Initial Impossibility (at the time of the conclusion at the time of the conclusion

of the contract)of the contract), Subsequent Impossibility, Subsequent Impossibility Objective Impossibility, Subjective ImpossibilityObjective Impossibility, Subjective Impossibility Impossibility in Fact, Impossibility in LawImpossibility in Fact, Impossibility in Law Permanent Impossibility, temporary ImpossibilityPermanent Impossibility, temporary Impossibility Total Impossibility, Partial ImpossibilityTotal Impossibility, Partial Impossibility

Case Study 1Case Study 1

X entered into a contract to sell a painting X entered into a contract to sell a painting to Y on Feb 10, 2006 and promised to to Y on Feb 10, 2006 and promised to deliver the painting on Feb 14, 2006. deliver the painting on Feb 14, 2006. If the painting was burned up on Feb 8, what If the painting was burned up on Feb 8, what

relationship between X and Y?relationship between X and Y? If the painting was stolen by Z on Feb 8, what If the painting was stolen by Z on Feb 8, what

relationship between X and Y?relationship between X and Y? If the painting was burned up on Feb 13, what If the painting was burned up on Feb 13, what

relationship between X and Y?relationship between X and Y? If the painting was stolen by Z on Feb 13, what If the painting was stolen by Z on Feb 13, what

relationship between X and Y?relationship between X and Y?

Initial Objective ImpossibilityInitial Objective Impossibility If the prestation of a contract is impossible, If the prestation of a contract is impossible, it is voidit is void..

　　 However, if the impossibility can be removed and if However, if the impossibility can be removed and if the parties, at the time when the contract was constituthe parties, at the time when the contract was constituted, intended to have it performed after the removal of ted, intended to have it performed after the removal of the impossibility, the contract is still valid. (RCC 246)the impossibility, the contract is still valid. (RCC 246)

When a contract is void on account of the impossibility When a contract is void on account of the impossibility of the performance, the party who at the time of constiof the performance, the party who at the time of constituting the contract knew or might know the impossibilituting the contract knew or might know the impossibility is ty is responsible for the damageresponsible for the damage caused to the other pa caused to the other party who, without his own negligence, believed in the varty who, without his own negligence, believed in the validity of the contract. the several prestations subject to lidity of the contract. the several prestations subject to a choice is impossible. (RCC 247I)a choice is impossible. (RCC 247I)

ROC Civil CodeROC Civil Code

Article 246Article 246 If the prestation of a contract is impossible, it is void.If the prestation of a contract is impossible, it is void. 　　 However, if the impossibility caHowever, if the impossibility ca

n be removed and if the parties, at the time when the contract was constituted, intenden be removed and if the parties, at the time when the contract was constituted, intended to have it performed after the removal of the impossibility, the contract is still valid.d to have it performed after the removal of the impossibility, the contract is still valid.If the contract is subject to a suspenseful condition or to a time of commencement, and If the contract is subject to a suspenseful condition or to a time of commencement, and if the impossibility has been removed prior to the fulfillment of the condition or the arrivif the impossibility has been removed prior to the fulfillment of the condition or the arrival of the time, the contract is valid.al of the time, the contract is valid.

Article 247Article 247 When a contract is void on account of the impossibility of the performance, the party whWhen a contract is void on account of the impossibility of the performance, the party wh

o at the time of constituting the contract knew or might know the impossibility is respono at the time of constituting the contract knew or might know the impossibility is responsible for the injury caused to the other party who, without his own negligence, believed isible for the injury caused to the other party who, without his own negligence, believed in the validity of the contract.n the validity of the contract.The provision of the preceding paragraph shall be mutatis mutandis applied if the prestThe provision of the preceding paragraph shall be mutatis mutandis applied if the prestation is partially impossible and the contract is valid in respect to the possible part, or if ation is partially impossible and the contract is valid in respect to the possible part, or if one of the several prestations subject to a choice is impossible.one of the several prestations subject to a choice is impossible.The claims for the injury in the preceding two paragraphs shall be extinguished by prescThe claims for the injury in the preceding two paragraphs shall be extinguished by prescription if not exercised within two years.ription if not exercised within two years.

Japan Civil CodeJapan Civil Code

The obligor is conclusively The obligor is conclusively discharged from his duty and discharged from his duty and although the Japan Civil Code does although the Japan Civil Code does not so provide, impossibility operates not so provide, impossibility operates as grounds for extinction of an as grounds for extinction of an obligation.obligation.

PRC Contract LawPRC Contract Law

PRC CL contains no rule on contracts involving initial PRC CL contains no rule on contracts involving initial impossibility.impossibility.

Following the rule of UNIDROIT art. 3.3(1)Following the rule of UNIDROIT art. 3.3(1) Article 3.3 (Initial impossibility) Article 3.3 (Initial impossibility)

(1) The mere fact that (1) The mere fact that at the time of the conclusion of at the time of the conclusion of the contract the performance of the obligation assumed the contract the performance of the obligation assumed was impossible does not affect the validity of the was impossible does not affect the validity of the contract.contract. (2) The mere fact that at the time of the conclusion of (2) The mere fact that at the time of the conclusion of the contract a party was not entitled to dispose of the the contract a party was not entitled to dispose of the assets to which the contract relates does not affect the assets to which the contract relates does not affect the validity of the contract.validity of the contract.

A contracts involving initial impossibility will be valid and A contracts involving initial impossibility will be valid and the party whose performance is impossible will be liable for the party whose performance is impossible will be liable for non-performance. non-performance.

Initial Subjective ImpossibilityInitial Subjective Impossibility

The rule in Article 246 followed the GermThe rule in Article 246 followed the German Civil Code Article 306. the “Unmoglican Civil Code Article 306. the “Unmoglichkeit” means “objective impossibility.hkeit” means “objective impossibility.””

Subjective impossibility is a gap of law.Subjective impossibility is a gap of law. Analogue to subsequent impossibility.Analogue to subsequent impossibility.

Case Study 2Case Study 2

A lent his laptop to B, B sold to C A lent his laptop to B, B sold to C without A’s assent. C did not know B without A’s assent. C did not know B has no right to sell this laptop. Upon has no right to sell this laptop. Upon A found his laptop in C’s office, A A found his laptop in C’s office, A claimed it back. What result will be? claimed it back. What result will be?

A B

C

Contract for transference of ownership (alienation) (118, indefinitely valid)

Loan for use: valid, §464,470)

Sale of goods: valid, §345,348,367)

If C not in good faith: A may claim it back under §767.

If C in good faith: C gains its ownership under §948, 801

A may claim damages based on torts liability (§184) or liability due to breaching contractual duty(§470, 231); or rescind contract, then claim restitution (§254,259,179)

Delivery

Delivery

Subsequent ImpossibilitySubsequent Impossibility Including objective and subjective ImpossibilityIncluding objective and subjective Impossibility An issue regarding breach of contractAn issue regarding breach of contract Effects can be classified as follows:Effects can be classified as follows:

The impossibility can not be imputable to either of the partiesThe impossibility can not be imputable to either of the parties The debtor will be released from his obligationThe debtor will be released from his obligation to perform ( to perform (RCC 225) RCC 225) The other party shall be released from his obligationThe other party shall be released from his obligation to perform the counter-presta to perform the counter-presta

tion.tion. 　　 If the impossibility is only partial, the counter-prestation shall be reduced pIf the impossibility is only partial, the counter-prestation shall be reduced proportionately. (RCCroportionately. (RCC 266) 266)

The impossibility can be imputable to the obligorThe impossibility can be imputable to the obligor If the performance becomes impossible by reason of a circumstance to which the dIf the performance becomes impossible by reason of a circumstance to which the d

ebtor is imputed, ebtor is imputed, the creditor may claim compensationthe creditor may claim compensation for any injury arising theref for any injury arising therefrom. rom. (RCC 226)(RCC 226)

In cases provided by Article 226, In cases provided by Article 226, the creditor may rescind the contractthe creditor may rescind the contract. . (RCC 256)(RCC 256) The impossibility can be imputable to the obligeeThe impossibility can be imputable to the obligee

The debtor will be released from his obligationThe debtor will be released from his obligation to perform to perform (RCC 225)(RCC 225) If one of the parties is imputed to the impossibility of the other party’s performanIf one of the parties is imputed to the impossibility of the other party’s performan

ce, ce, the later may claim for the counter-prestationthe later may claim for the counter-prestation, but the interests saved or ought , but the interests saved or ought to be saved arising from the release of the performance shall be deducted from the to be saved arising from the release of the performance shall be deducted from the counter-prestation claimed. counter-prestation claimed. (RCC 267) (RCC 267)

The impossibility can be imputable to the both parties.The impossibility can be imputable to the both parties. Applied the rule in impossibility imputable to the obligor then measure the Applied the rule in impossibility imputable to the obligor then measure the

extent of fault of obligee to decide the extent of compensation from obligor, extent of fault of obligee to decide the extent of compensation from obligor, although the ROC Civil Code does not so provide.although the ROC Civil Code does not so provide.

ROC Civil CodeROC Civil Code

Article 225Article 225 The debtor will be released from his obligation to perform if the performance becomes impossible by rThe debtor will be released from his obligation to perform if the performance becomes impossible by r

eason of a circumstance to which he is not imputed.eason of a circumstance to which he is not imputed.If the debtor is entitled to claim compensation for the injury against a third party in consequence of the If the debtor is entitled to claim compensation for the injury against a third party in consequence of the impossibility of the performance under the preceding paragraph, the creditor may claim against the deimpossibility of the performance under the preceding paragraph, the creditor may claim against the debtor for the transfer of the claim for the injury, or for the delivery of the compensation he has received.btor for the transfer of the claim for the injury, or for the delivery of the compensation he has received.

Article 226Article 226 If the performance becomes impossible by reason of a circumstance to which the debtor is imputed, thIf the performance becomes impossible by reason of a circumstance to which the debtor is imputed, th

e creditor may claim compensation for any injury arising therefrom.e creditor may claim compensation for any injury arising therefrom.In the case specified in the preceding paragraph, if one part of the performance becomes impossible anIn the case specified in the preceding paragraph, if one part of the performance becomes impossible and the remaining part, if performed, will be of no interests to the creditor, the creditor may refuse the ped the remaining part, if performed, will be of no interests to the creditor, the creditor may refuse the performance of the remaining part and claim compensation for the injury arising from complete non-perfrformance of the remaining part and claim compensation for the injury arising from complete non-performance.ormance.

Article 227Article 227 If a debtor incompletely performs his obligation by reason of a circumstance to which the debtor is impIf a debtor incompletely performs his obligation by reason of a circumstance to which the debtor is imp

uted, the creditor may execute his right according to the provisions of the default or the impossibility outed, the creditor may execute his right according to the provisions of the default or the impossibility of the performance.f the performance.In addition to the injury arising from the incomplete performance in the preceding paragraph, the crediIn addition to the injury arising from the incomplete performance in the preceding paragraph, the creditor may claim compensation for other injuries arising therefrom, if any.tor may claim compensation for other injuries arising therefrom, if any.

ROC Civil CodeROC Civil Code

Article 266Article 266 If none of the parties is imputed to the impossibility of one party’s If none of the parties is imputed to the impossibility of one party’s

performance, the other party shall be released from his obligation to performance, the other party shall be released from his obligation to perform the counter-prestation.perform the counter-prestation. 　　 If the impossibility is only partial, If the impossibility is only partial, the counter-prestation shall be reduced proportionately.the counter-prestation shall be reduced proportionately.In the case provided in the preceding paragraph, if the counter-prestIn the case provided in the preceding paragraph, if the counter-prestation has been wholly or partially performed, it may be claimed for tation has been wholly or partially performed, it may be claimed for the reimbursement in accordance with the provisions concerning Unjhe reimbursement in accordance with the provisions concerning Unjust Enrichment.ust Enrichment.

Article 267Article 267 If one of the parties is imputed to the impossibility of the other partyIf one of the parties is imputed to the impossibility of the other party

’s performance, the later may claim for the counter-prestation, but ’s performance, the later may claim for the counter-prestation, but the interests saved or ought to be saved arising from the release of tthe interests saved or ought to be saved arising from the release of the performance shall be deducted from the counter-prestation claihe performance shall be deducted from the counter-prestation claimed.med.

ROC Civil CodeROC Civil Code

Article 373Article 373 The profits and dangers of the object sold pThe profits and dangers of the object sold p

ass to the buyer at the time of delivery, unleass to the buyer at the time of delivery, unless otherwise provided by contract.ss otherwise provided by contract.

PRC CLPRC CL

The contract law does not provide for breach due The contract law does not provide for breach due to impossibility of performance as a special to impossibility of performance as a special category and so the general rules on contractual category and so the general rules on contractual liability apply to this type of breach.liability apply to this type of breach.

General justifications for non-performance, such General justifications for non-performance, such as as force majeureforce majeure, assumption of risk and , assumption of risk and contributory conduct, may also apply to breach contributory conduct, may also apply to breach due to impossibility of performance so that the due to impossibility of performance so that the defaulting party’s liability may be exempted or defaulting party’s liability may be exempted or diminished. diminished.

The specific performance shall be denied. (PRCCL The specific performance shall be denied. (PRCCL 110(1))110(1))

PRC CL 110PRC CL 110

Article 110 -monetary Specific Article 110 -monetary Specific Performance; ExceptionsPerformance; Exceptions Where a party fails to perform, or rendered Where a party fails to perform, or rendered

non-conforming performance of, a non-non-conforming performance of, a non-monetary obligation, the other party may monetary obligation, the other party may require performance, except where:require performance, except where:

(i)     performance is impossible in law or in fact(i)     performance is impossible in law or in fact;; (ii)    the subject matter of the obligation does not (ii)    the subject matter of the obligation does not

lend itself to enforcement by specific performance or lend itself to enforcement by specific performance or the cost of performance is excessive;the cost of performance is excessive;

(iii)   the obligee does not require performance within (iii)   the obligee does not require performance within a reasonable time. a reasonable time.

PRC CL PRC CL

Article 117     Force MajeureArticle 117     Force Majeure A party who was unable to perform a contract due to force A party who was unable to perform a contract due to force

majeure is exempted from liability in part or in whole in light majeure is exempted from liability in part or in whole in light of the impact of the event of force majeure, except of the impact of the event of force majeure, except otherwise provided by law. Where an event of force majeure otherwise provided by law. Where an event of force majeure occurred after the party's delay in performance, it is not occurred after the party's delay in performance, it is not exempted from liability.exempted from liability.

For purposes of this Law, force majeure means any objective For purposes of this Law, force majeure means any objective circumstance which is unforeseeable, unavoidable and circumstance which is unforeseeable, unavoidable and insurmountable. insurmountable.

Article 118     Duty to Notify in Case of Force MajeureArticle 118     Duty to Notify in Case of Force Majeure If a party is unable to perform a contract due to force If a party is unable to perform a contract due to force

majeure, it shall timely notify the other party so as to majeure, it shall timely notify the other party so as to mitigate the loss that may be caused to the other party, and mitigate the loss that may be caused to the other party, and shall provide proof of force majeure within a reasonable shall provide proof of force majeure within a reasonable time. time.

PRC CLPRC CL

Article 119     Non-Breaching Party's Duty to Article 119     Non-Breaching Party's Duty to Mitigate Loss in Case of BreachMitigate Loss in Case of Breach Where a party breached the contract, the other party Where a party breached the contract, the other party

shall take the appropriate measures to prevent further shall take the appropriate measures to prevent further loss; where the other party sustained further loss due to loss; where the other party sustained further loss due to its failure to take the appropriate measures, it may not its failure to take the appropriate measures, it may not claim damages for such further loss.claim damages for such further loss.Any reasonable expense incurred by the other party in Any reasonable expense incurred by the other party in preventing further loss shall be borne by the breaching preventing further loss shall be borne by the breaching party. party.

Article 120     Bilateral BreachArticle 120     Bilateral Breach In case of bilateral breach, the parties shall assume their In case of bilateral breach, the parties shall assume their

respective liabilities accordingly. respective liabilities accordingly.

Initial ImpossibilInitial Impossibilityity

Subsequent ImpSubsequent Impossibilityossibility

Objective ImObjective Impossibility possibility

Contract void Contract void (ROC, JP)(ROC, JP)

Contract valid Contract valid (PRC)(PRC)

Valid ContractValid Contract

Subjective ISubjective Impossibilitympossibility

Valid ContractValid Contract Valid ContractValid Contract

CISG 79CISG 79 (1) A party is not liable for a failure to perform any of his (1) A party is not liable for a failure to perform any of his

obligations if he proves that the failure was due to obligations if he proves that the failure was due to an impediment an impediment beyond his controlbeyond his control and that he could not reasonably be expected and that he could not reasonably be expected to have taken the impediment into account at the time of the to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its conclusion of the contract or to have avoided or overcome it or its consequences. consequences.

(2) If the party's failure is due to the failure by a third person (2) If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if: contract, that party is exempt from liability only if:

(a) he is exempted under the preceding paragraph; and (a) he is exempted under the preceding paragraph; and (b) the person whom he has so engaged would be so exempt if the (b) the person whom he has so engaged would be so exempt if the

provisions of that paragraph were applied to him. provisions of that paragraph were applied to him. (3) The exemption provided by this article has effect for the period (3) The exemption provided by this article has effect for the period

during which the impediment exists. during which the impediment exists. (4) The party who fails to perform must give notice to the other (4) The party who fails to perform must give notice to the other

party of the impediment and its effect on his ability to perform. If party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from known of the impediment, he is liable for damages resulting from such non- receipt. such non- receipt.

(5) Nothing in this article prevents either party from exercising (5) Nothing in this article prevents either party from exercising any right other than to claim damages under this Convention.any right other than to claim damages under this Convention.

Doctrine of Change of Doctrine of Change of CircumstancesCircumstances

ROC Civil Code Article 227-2ROC Civil Code Article 227-2 If there is change of circumstances which is not preIf there is change of circumstances which is not pre

dictable then after the constitution of the contract, dictable then after the constitution of the contract, and if the performance of the original obligation ariand if the performance of the original obligation arising therefrom will become obviously unfair, the pasing therefrom will become obviously unfair, the party may apply to the court for increasing or reducinrty may apply to the court for increasing or reducing his payment, or altering the original obligation.g his payment, or altering the original obligation.

The provision in the preceding paragraph shall appThe provision in the preceding paragraph shall apply mutatis mutandis to the obligation not arising frly mutatis mutandis to the obligation not arising from the contract.om the contract.