The matters concerning the interpretation of an international contract has recently sought its own collocation under several conventions:

  1. in first instance, a tool of uniform application of International Law commonly known as CISG.
  2. in second instance under a unifying source of Law disciplining International Commercial Law called the Unidroit Principles.
  3. thirdly under the Principles of the European Commission on Contract Law (which will be identified by the PECL acronym).

As far as the CISG is concerned, it is essential to bear in mind Art.8 of the Relevant Convention and the jurisprudence applying such provision.

While relating to Unidroit Principles, it is known among jurists that, besides Art.1.6, the entire Chapter 4 features Eight Fundamental Principles to the subject (from 4.1 to 4.8).

It is is also critical to note that, apart from Art. 1.106, there are seven principles (from 5.101 to 5.107) presenting Contract Interpretation as their greatest matter of interest.

-Distinction arising between the Law Interpretation applicable to that contract and the Contract Interpretation per se

Before entering into the legal aspects, it is essential to make clear that the interpretation conceiving an international contract is a completely different operation than the interpretation formulated as far as the lex contractus is concerned.

The dualism attaining to the distinction between Law Interpretation and Contract Interpretation commonly known among Civil Law finds its own side effects even in the International Law context.

Even in legal affairs strictly related to an International Contract, jurists and lawyers always need to split the interpretation of a lex contractus from the one addressing their will in terms of addressing their interests strictly related to a well defined transnational economic operation.

  1. In the first case, the judge is bound to give implementation to the Applicable Law irrespective of what is stated in the contractual provisions.
  2. In the second case, in order to determine the exact extension of their legal obligations, the arbitrator has to interpret the will of the parties in backlight to the contractual provisions offered by the lex contractus.
To conclude, the judge or an international arbitrator should consider, as a threshold criteria to interpret a contract according to the parties will (also known as substantial interpretation), the interpretation addressed to specific contract clauses which would allow him to determine on which jurisdiction settle his primary interpretation.

Contract resolution

Another fundamental principle is the International Contract Preservation.

By means of a joint reading of the Unidroit Principles and the 1980 Vienna Convention on the Law of Treaties it is clear that only a reason of fundamental impeding sets the condition to declare a contract resoluted, notwithstanding the legal obligation to inform the counterpart of the fact that a number of legal obligations set under contract will not be implemented (Art.7.3.1. Unidroit Principles and Art.26 CISG).

Art. 7.1.1 of the Unidroit clairifies the principle according to which “non-performance is a failure by a party to perform any of its obligations under the contract, including defective performance or late performance”.

However, a non-performance does not always determine a contract termination; in fact, under Art.7.3.1 it is stated that a fundamental non-performance shall be had under four cases:

(a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract unless the other party did not foresee and could have not reasonably foreseen such result;

(b) strict compliance with the obligation which has not been performed is of essence under the contract;

(c) the non-performance is intentional or reckless;

(d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance;

(e) the non-performing party will suffer disproportionate loss as a result of the preparation or performance if the contract is terminated.

This conditions could be applied both to cases in which the counterpart is liable for having missed to carry out a legal obligation defined under a specific contract, and to cases in which there are no sussistent elements for the aggrieved party to address its counterpart as responsible for failing in complying with the contract tasks.

There is another provision which deserves to be analyzed: Article 7.3.3 of the Unidroit Principles.

This norm defines the following: if, prior to the date of performance by one of the parties, it is clear that the counterpart will fail to comply with the legal obligations defined under a contract, therefore creating the conditions for non-performance, the other party may terminate the contract.

On one side, a condicio sine qua non for a legal part to apply this article has to seek its roots in the principle that a non- performance of a legal obligation has to be equated with a non-performance which occurred at the time when performance fell.

On the other, in accordance with Art. 7.1.7 of the Unidroit Principles, on the part failing to perform relies the burden of proof consisting in demonstrating that the non-performance was due to an impediment beyond its control and the legal obligation consisting in notifying the counterpart of the impediment and its relevant inability to carry out a legally defined obligation.