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Lloyd's Maritime and Commercial Law Quarterly

Partial inability to supply: pro rata provision

Hideo Nakamura *

No one can tell at the outset how long a force majeure event might last or the extent of possible interruption to the contract. An international seller who has many contracts to fulfil but not having enough products to service all will be happy if there is any guiding principle to deal with the situation. Even English law, so accommodating to traders, offers no reliable answer. This article discusses English and US law and proposes a sample provision which should liberate sellers from this quandary .

I. INTRODUCTION1

When a seller, either a manufacturer or an intermediary trader, contracts to sell bulk goods or goods to be sourced from one or more specific origins to just one buyer on one delivery date, and he encounters partial inability to obtain the goods for delivery on that due date for reasons not attributable to him, it is thought that he will be excused from his contractual obligations to the extent that he cannot obtain the goods2 but will remain obliged to deliver them to the extent that he can.3 This seems to be the case whether or not there is an express provision in the contract excusing him. However, when the seller has several contracts to service on the same due date (or period) with different buyers where each contract has terms for periods for performance, delivery and quantity, his position is not clear. The immediate thought that might come to the seller’s mind is to divide the available goods pro rata among the buyers. However, as we shall see, that is easier said than done, both legally and factually. The more we scrutinize the details of various contracts, the less certain it is that the pro rata distribution is the fair and reasonable solution for all concerned.

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