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.
This article looks at the law in both England and the United States in these circumstances and attempts to propose a sample contractual provision which sellers might consider including in their standard form sales contracts.4
* Professor of Law (Law of International Business Transactions), Otaru University of Commerce, Japan.
1. The writer has been strongly inspired by A.H. Hudson, ‘‘Prorating in the English Law of Frustrated Contracts’’ (1968) 31 MLR 535 (hereafter ‘‘Hudson
’’) and G.H. Treitel, Frustration and Force Majeure
(London, 1994) (hereafter ‘‘Treitel
’’).
2. Howell
v. Coupland
[1876] 1 QBD 258.
3. H.R. & S. Sainsbury Ltd
v. Street
[1972] 1 WLR 834.
4. The proposal works best if the provision is contained in all the contracts of the seller; but, even if that is not the case, it will help him argue that he has an established fair and reasonable principle of distribution.
65