THE PRINCIPLES OF EUROPEAN CONTRACT LAW 1997 - (UNOFFICIAL PREVIEW OF THE
PROVISIONAL COMPLETE AND REVISED VERSION)
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CHAPTER 1 - GENERAL PROVISIONS
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SECTION 1 - SCOPE OF THE PRINCIPLES
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ARTICLE 1.101 (EX ART. 1.101) -
APPLICATION OF THE PRINCIPLES
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(1) These Principles are intended to be applied as general rules of contract
law in the European Communities.
(2) These Principles will apply when the parties have agreed to incorporate
them into their contract or that their contract is to be governed by them.
(3) These Principles may be applied
(a) when the parties have agreed that their contract is to be governed by
"general principles of law", the "lex mercatoria" or the like; or
(b) when the parties have not chosen any system or rules of law to govern their
contract.
(4) These Principles may provide a solution to the issue raised where the
system or rules of law applicable do not do so.
ARTICLE 1.102 - FREEDOM OF CONTRACT
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(1) Under these Principles, parties are free to enter into a contract and to
determine its contents, subject to the requirements of good faith and fair
dealing, and the mandatory rules established by these Principles.
(2) Except as otherwise provided in these Principles, the parties may exclude
the application of any of the Principles or derogate from or vary their
effects.
ARTICLE 1.103 - MANDATORY LAW
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(1) Where the otherwise applicable law so allows, the parties may choose to
have their contract governed by the Principles, with the effect that national
mandatory rules are not applicable.
(2) However, effect should be given to those mandatory rules of national,
supranational and international law which, according to the relevant rules of
private international law, are applicable irrespective of the law governing the
contract.
ARTICLE 1.104 - APPLICATION TO QUESTIONS OF CONSENT
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(1) The existence and validity of the consent of the parties to these
Principles shall be determined by these Principles.
(2) Nevertheless, a party may rely upon the law of the country in which he has
his habitual residence to establish that he did not consent if it appears from
the circumstances that it would not be reasonable to determine the effect of
his conduct in accordance with these Principles.
ARTICLE 1.105 (EX ART. 1.103) -
USAGES AND PRACTICES
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(1) The parties are bound by any usage to which they have agreed and by any
practice they have established between themselves.
(2) The parties are bound by a usage which would be considered generally
applicable by persons in the same situation as the parties, except where the
application of such usage would be unreasonable.
ARTICLE 1.106 (EX ART. 1.104) -
INTERPRETATION AND SUPPLEMENTATION
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(1) These Principles should be interpreted and developed in accordance with
their purposes. In particular, regard should be had to the need to promote good
faith and fair dealing, certainty in contractual relationships and uniformity
of application.
(2) Issues within the scope of these Principles but not expressly settled by
them are so far as possible to be settled in accordance with the ideas
underlying the Principles. Failing this, the legal system applicable by virtue
of the rules of private international law is to be applied.
ARTICLE 1.107 (EX ART. 1.113) -
APPLICATION OF THE PRINCIPLES BY WAY OF ANALOGY
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These Principles apply with appropriate modifications to agreements to modify
or terminate a contract, to unilateral promises and other statements and
conduct indicating intention.
SECTION 2. - GENERAL OBLIGATIONS
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ARTICLE 1.201 (EX ART. 1.106) -
GOOD FAITH AND FAIR DEALING
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(1) Each party must act in accordance with good faith and fair dealing.
(2) The parties may not exclude or limit this duty.
ARTICLE 1.202 (EX ART. 1.107) -
DUTY TO CO-OPERATE
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Each party owes to the other a duty to co-operate in order to give full effect
to the contract.
SECTION 3. - TERMINOLOGY AND OTHER PROVISIONS
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ARTICLE 1.301 (EX ART. 1.105) -
MEANING OF TERMS
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In these Principles, except where the context otherwise requires:
(1) "act" includes omission;
(2) "court" includes arbitral tribunal;
(3) an "intentional" act includes an act done recklessly;
(4) "non-performance" denotes any failure to perform an obligation under the
contract and includes delayed performance, defective performance and failure to
co-operate in order to give full effect to the contract.
(5) A matter is "material" if it is one which a reasonable person in one
party's position should have known would influence the other party in his
decision as to whether to contract or as to the terms on which to contract.
(6) "Written" statements [statements in "writing"] include communications made
by telegram, telex and telefax, and other means of communication capable of
providing a readable record of the statement on both sides
ARTICLE 1.302 (EX ART. 1.108) -
REASONABLENESS
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Under these Principles reasonableness is to be judged by what persons acting in
good faith and in the same situation as the parties would consider to be
reasonable. In particular, in assessing what is reasonable the nature and
purpose of the contract, the circumstances of the case, and the usages and
practices of the trades or professions involved should be taken into account.
ARTICLE 1.303 (EX ART. 1.110) -
NOTICE
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(1) Any notice may be given by any means, whether in writing or otherwise,
appropriate to the circumstances.
(2) Subject to paragraphs (4) and (5), any notice becomes effective when it
reaches the addressee.
(3) A notice reaches the addressee when it is delivered to him or to his place
of business or mailing address, or, if he does not have a place of business or
mailing address, to his habitual residence.
(4) If one party gives notice to the other because of the other's
non-performance or because such non-performance is reasonably anticipated by
the first party and the notice is properly dispatched or given, a delay or
inaccuracy in the transmission of the notice or its failure to arrive does not
prevent it from having effect. The notice shall have effect from the time at
which it would have arrived in normal circumstances.
(5) A notice has no effect if a withdrawal of it reaches the addressee before
or at the same time as the notice
(6) In this Article 'notice' includes the communication of a promise,
statement, offer, acceptance, demand, request or other declaration.
ARTICLE 1.304 (EX ART. 1.111) -
COMPUTATION OF TIME
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(1) A period of time set by a party in a written document for the recipient to
reply or take other action begins to run from the date stated as the date of
the document. If no date is shown, the period begins to run from the moment the
document reaches the recipient.
(2) Official holidays and official non-working days occurring during the period
are included in calculating the period. However, if the last day of the period
is an official holiday or official non-working day at the address of the
recipient , or at the place where a prescribed act is to be performed, the
period is extended until the first following working day in that place.
(3) Time-limits expressed in days, weeks, months or years shall begin at 00.00
on the next day of the period and shall end at midnight on the last day of the
period; but any reply which must reach the party who set the period must
arrive, or other act which is to be done must be completed, by the normal close
of business in the relevant place on the last day of the period.
ARTICLE 1.305 (EX ART. 1.109) -
IMPUTED KNOWLEDGE AND INTENTION
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(1) If any person, who with a contracting party's assent was involved in making
a contract, who was entrusted with performance by a contracting party or who
performed with his assent,
(a) knew or foresaw a fact, or should have known or foreseen it; or
(b) acted intentionally or with gross negligence or not in accordance with good
faith and fair dealing,
then these factors are imputed to the contracting party itself.
CHAPTER 2 - FORMATION
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SECTION 1 - GENERAL PROVISIONS
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ARTICLE 2.101 (EX ART. 5.101) -
CONDITIONS FOR THE CONCLUSION OF A CONTRACT
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(1) A contract is concluded if
(a) the parties intend to be legally bound, and
(b) they reach a sufficient agreement without any further requirement.
(2) These Principles do not require a contract to be concluded or evidenced in
writing or to be subject to any other requirement as to form. The contract may
be proved by any means, including witnesses.
ARTICLE 2.102 (EX ART. 5.102) -
INTENTION
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The intention of a party to be legally bound by contract is to be determined
from the party's declarations as they were reasonably understood by the other
party.
ARTICLE 2.103 (EX ART. 5.103) -
SUFFICIENT AGREEMENT
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(1) There is sufficient agreement if the terms
(a) have been sufficiently defined by the parties so that the contract can be
enforced, or
(b) or can be determined under these Principles.
(2) However, if one of the parties refuses to conclude a contract unless the
parties have agreed on some specific matter, there is no contract unless
agreement on that matter has been reached.
ARTICLE 2.104 (EX ART. 5.103 A) -
NOT INDIVIDUALLY NEGOTIATED TERMS
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(1) Contract terms which have not been individually negotiated may be invoked
against a party who did not know of them only if the party invoking them took
reasonable steps to bring them to the other party's attention before or when
the contract was concluded.
(2) Terms are not brought appropriately to a party's attention by a mere
reference to them in a signed contract document.
ARTICLE 2.105 (EX ART. 5.106 A) -
MERGER CLAUSE
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(1) If the parties have concluded a written contract which contains an
individually negotiated clause that the written contract embodies all the terms
of the contract (merger clause), any prior statements, undertakings or
agreements which are not embodied in the writing do not form part of the
contract.
(2) If the merger clause is not individually negotiated it will only establish
a presumption that the parties intended that their prior statements,
undertakings or agreements do not form part of the contract. This rule may not
be excluded or restricted.
(3) The parties' prior statements may be used to interpret the contract. This
rule may not be excluded or restricted except by an individually negotiated
clause.
(4) A party may by his statements or conduct be precluded from asserting a
merger clause to the extent that the other party has reasonably relied on the
statements or conduct.
ARTICLE 2.106 (EX ART. 5.106 B) -
WRITTEN MODIFICATION ONLY
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(1) A clause in a written contract requiring any modification or termination by
agreement to be made in writing establishes only a presumption that an
agreement to modify or end the contract is not intended to be legally binding
unless it is in writing.
(2) A party may by his statement or conduct be precluded from asserting such a
clause to the extent that the other party has reasonably relied on them.
ARTICLE 2.107 (EX ART. 5.108) -
PROMISES BINDING WITHOUT ACCEPTANCE
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A promise which is intended to be legally binding without acceptance is
binding. The rules on contract apply with appropriate adaptations.
SECTION 2 - OFFER AND ACCEPTANCE
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ARTICLE 2.201 (EX ART. 5.201) -
OFFER
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(1) A proposal amounts to an offer if:
(a) it is intended to result in a contract if the other party accepts it, and
(b) it contains sufficiently definite terms to form a contract if accepted.
(2) A proposal which is not made to one or more specific persons (proposal to
the public) may nonetheless be an offer.
(3) A proposal to supply goods or services at stated prices made by a
professional supplier in a public advertisement or a catalogue, or by a display
of goods, is presumed to be an offer to sell or supply at that price until the
stock of goods, or the supplier's capacity to supply the service, is exhausted.
ARTICLE 2.202 (EX ART. 5.202) -
REVOCATION OF AN OFFER
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(1) An offer may be revoked if the revocation reaches the offeree before he has
dispatched his acceptance or, in cases of acceptance by conduct, before the
contract has been concluded under art. 2:205(2) or (3).
(2) A revocation of an offer made to the public can be made effective by the
same means as the offer.
(3) However, a revocation of an offer is ineffective if:
(a) the offer indicated that it is irrevocable; or
(b) it stated a fixed time for its acceptance; or
(c) it was reasonable for the offeree to rely on the offer as being irrevocable
and the offeree has acted in reliance on the offer.
ARTICLE 2.203 (EX ART. 5.203) -
LAPSE OF AN OFFER
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An offer lapses when a rejection reaches the offeror.
ARTICLE 2.204 (EX ART. 5.204) -
ACCEPTANCE
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(1) Any form of statement or conduct by the offeree is an acceptance if it
indicates assent to the offer.
(2) Silence or inactivity does not in itself amount to acceptance.
ARTICLE 2.205 (EX ART. 5.205) -
TIME OF CONCLUSION OF THE CONTRACT
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(1) If an acceptance has been dispatched by the offeree the contract is
concluded once the statement reaches the offeror
(2) In case of acceptance by conduct, the contract is concluded as soon as
notice of the conduct reaches the offeror.
(3) If by virtue of the offer, or as result of practices which the parties have
established between themselves, or of a usage, the offeree may accept the offer
by performing an act without notice to the offeror, the contract is concluded
when the performance of the act begins.
ARTICLE 2.206 (EX ART. 5.206) -
TIME LIMIT FOR ACCEPTANCE
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(1) In order to be effective, acceptance of an offer must reach the offeror
within the time fixed by him.
(2) If no time has been fixed by the offeror acceptance must reach him within a
reasonable time.
(3) In the case of an acceptance by an act of performance under art. 2:205 (3)
that act must be performed within the time for acceptance fixed by the offeror
or, if no such time is fixed, within a reasonable time.
ARTICLE 2.207 (EX ART. 5.208) -
LATE ACCEPTANCE
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(1) A late acceptance is nevertheless effective as an acceptance if without
delay the offeror so informs the offeree.
(2) If a letter or other writing containing a late acceptance shows that it has
been sent in such circumstances that if its transmission had been normal it
would have reached the offeror in due time, the late acceptance is effective as
an acceptance unless, without delay, the offeror informs the offeree that he
considers his offer as having lapsed.
ARTICLE 2.208 (EX ART. 5.209) -
MODIFIED ACCEPTANCE
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(1) A reply by the offeree which states or implies additional or different
terms which would materially alter the terms of the offer is a rejection and a
new offer.
(2) A reply which gives a definite assent to an offer operates as an acceptance
even if it states or implies terms additional to or different from the terms
offered, provided the additional or different terms do not materially alter the
terms of the offer. The additional or different terms then become part of the
contract.
(3) However, such a reply will be treated as a rejection of the offer if:
(a) the offer expressly limits acceptance to the terms of the offer; or
(b) the offeror objects to the additional or different terms without delay; or
(c) the offeree makes his acceptance conditional upon the offeror's assent to
the additional or different terms, and the assent does not reach the offeree
within a reasonable time.
ARTICLE 2.209 (EX ART. 5.210) -
CONFLICTING GENERAL CONDITIONS
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(1) If the parties have reached agreement except that the offer and acceptance
refer to conflicting general conditions of contract, a contract is nonetheless
formed. The general conditions form part of the contract to the extent that
they are common in substance.
(2) However, no contract is formed
(a) if one party has indicated in advance, explicitly, and not by way of
general conditions, that he does not intend to be bound by a contract on the
basis of paragraph 1; or
(b) if later on, one party, without undue delay, informs the other party that
he does not intend to be bound by such contract.
(3) General conditions of contract are the terms which have been formulated in
advance for an indefinite number of contracts of a certain nature.
ARTICLE 2.210 (EX ART. 5.211) -
PROFESSIONAL'S WRITTEN CONFIRMATION
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If professionals have concluded a contract but have not embodied it in a final
document, and one without delay sends the other a writing which purports to be
a confirmation of the contract but which contains additional or different
terms, such terms will become part of the contract unless
(a) the terms materially alter the terms of the contract, or
(b) the recipient objects to them without delay.
ARTICLE 2.211 (EX ART. 5.212) -
CONTRACTS NOT CONCLUDED THROUGH OFFER AND ACCEPTANCE
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The rules in this section apply with appropriate modifications even though the
process of formation of a contract cannot be analysed into offer and
acceptance.
SECTION 3 - LIABILITY FOR NEGOTIATIONS
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ARTICLE 2.301 (EX ART. 5.301) -
NEGOTIATIONS CONTRARY TO GOOD FAITH
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(1) A party is free to negotiate and is not liable for failure to reach an
agreement.
(2) However, a party who has negotiated or broken off negotiations contrary to
good faith is liable for the losses caused to the other party.
(3) It is contrary to good faith, in particular, for a party to enter into or
continue negotiations with no real intention of reaching an agreement with the
other party.
ARTICLE 2.302 (EX ART. 5.302) -
BREACH OF CONFIDENTIALITY
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If confidential information is given by one party in the course of
negotiations, the other party is under a duty not to disclose that information
or use it for its own purposes whether or not a contract is subsequently
concluded. The remedy for breach of this duty may include compensation for loss
suffered and restitution of the benefit received by the other party.
CHAPTER 3 - AUTHORITY OF AGENTS
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SECTION 1 - GENERAL PROVISIONS
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ARTICLE 3.101 (EX ART 1) - SCOPE
OF THE CHAPTER
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(1) This Chapter governs the authority of an agent or other intermediary to
bind his principal in relation to a contract with a third party.
(2) This Chapter does not govern an agent's authority bestowed by law or to the
authority of an agent appointed by a public or judicial authority.
(3) This Chapter does not govern the internal relationship between the agent or
intermediary and his principal.
ARTICLE 3.102 (EX ART. 1A) -
CATEGORIES OF REPRESENTATION
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(1) Where an agent acts in the name of a principal, the rules on direct
representation apply (Section 2). It is irrelevant whether the principal's
identity is revealed at the time the agent acts or is to be revealed later.
(2) Where an intermediary acts on instructions and on behalf of, but not in the
name of, a principal, or acts on instructions from a principal but the third
party does not know and has no reason to know this, the rules on indirect
representation apply (Section 3).
SECTION 2 - DIRECT REPRESENTATION
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ARTICLE 3.201 (EX ART. 2) -
EXPRESS, IMPLIED AND APPARENT AUTHORITY
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(1) The principal's grant of authority to an agent to act in his name may be
express or may be implied from the circumstances.
(2) The agent has authority to perform all acts necessary in the circumstances
to achieve the purposes for which the authority was granted.
(3) A principal is treated as having granted authority if his statements or
conduct induce the third party reasonably and in good faith to believe that the
agent has been granted authority for the act performed by him.
ARTICLE 3.202 (EX ART. 3) - AGENT
ACTING IN EXERCISE OF HIS AUTHORITY
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Where an agent is acting within his authority as defined by article 3.201, his
acts bind the principal and the third party directly. The agent himself is not
bound to the third party.
ARTICLE 3.203 (EX ART. 3A) -
UNIDENTIFIED PRINCIPAL
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If an agent enters into a contract in the name of a principal whose identity is
to be revealed later, but fails to reveal that identity within a reasonable
time after a request by the third party, the agent himself is bound by the
contract.
ARTICLE 3.204 (EX ART. 6) - AGENT
ACTING WITHOUT OR OUTSIDE HIS AUTHORITY
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(1) Where a person acting as an agent acts without authority or outside the
scope of his authority, his acts are not binding upon the principal and the
third party.
(2) Failing ratification by the principal according to article 3:207, the agent
is liable to pay the third party such damages as will place the third party in
the same position as if the agent had acted with authority. This does not apply
if the third party knew or could not have been unaware of the agent's lack of
authority.
ARTICLE 3.205 (EX ART. 8) -
CONFLICT OF INTERESTS
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(1) If a contract concluded by an agent involves the agent in a conflict of
interests of which the third party knew or could not have been unaware, the
principal may avoid the contract according to the provisions of articles 4:112
to 4:116.
(2) There is presumed to be a conflict of interests where
(a) the agent also acted as agent for the third party; or
(b) the contract was with himself in his personal capacity.
(3) However, the principal may not avoid the contract
(a) if he had consented to, or could not have been unaware of, the agent's so
acting; or
(b) if the agent had disclosed the conflict of interest to him and he had not
objected within a reasonable time.
ARTICLE 3.206 (EX ART. 12) -
SUBAGENCY
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An agent has implied authority to appoint a subagent to carry out tasks which
are not of a personal character and which it is not reasonable to expect the
agent to carry out himself. The rules of this Chapter apply to the sub-agency;
acts of the subagent which are within his and the agent's authority bind the
principal and the third party directly.
ARTICLE 3.207 (EX ART. 10) -
RATIFICATION BY PRINCIPAL
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(1) Where a person acting as an agent acts without authority or outside his
authority, the principal may ratify the agent's acts.
(2) Upon ratification, the agent's acts are considered as having been
authorised; without prejudice to the question of the rights of other persons.
ARTICLE 3.208 (EX ART. 11) - THIRD
PARTY'S RIGHT WITH RESPECT TO CONFIRMATION OF AUTHORITY
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Where the statements or conduct of the principal gave the third party reason to
believe that an act performed by the agent was authorised, but the third party
is in doubt about the authorisation, he may send a written confirmation to the
principal or request ratification from him. If the principal does not object or
answer the request without delay the agent's act is treated as having been
authorised.
ARTICLE 3.209 (EX ART. 13) -
DURATION OF AUTHORITY
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(1) An agent's authority continues until the third party knows or ought to know
that
(a) the agent's authority has been brought to an end by the principal, the
agent, or both; or
(b) the acts for which the authority had been granted have been completed, or
the time for which it had been granted has expired; or
(c) the agent has died, become incapacitated or insolvent; or
(d) the principal has become insolvent.
(2) The third party is taken to know that the agent's authority has been
brought to an end under (1) (a) above if this has been communicated or
publicised in the same manner in which the authority had originally been
communicated or publicised.
(3) However, the agent remains authorised during a reasonable time for the
performance of those acts which are necessary to protect the interests of the
principal or his successors.
SECTION 3 - INDIRECT REPRESENTATION
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ARTICLE 3.301 (EX ART. 4) -
INTERMEDIARIES NOT ACTING IN THE NAME OF A PRINCIPAL
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(1) Where an intermediary acts
(a) on instructions and on behalf of, but not in the name of, a principal, or
(b) on instructions from a principal but the third party does not know and has
no reason to know this, the intermediary and the third party are bound to each
other.
(2) The principal and the third party become bound to each other only under the
conditions set out in articles 3:302 to 3:304.
ARTICLE 3.302 (EX ART. 5) -
INTERMEDIARY'S INSOLVENCY OR FUNDAMENTAL NON-PERFORMANCE TO PRINCIPAL
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If the intermediary becomes insolvent, or if he commits a fundamental
non-performance to the principal, or if prior to the time for performance it is
clear that there will be a fundamental non-performance when it becomes due,
(a) on the principal's demand, the intermediary shall communicate the name and
address of the third party to the principal; and
(b) the principal may exercise against the third party the rights acquired on
the principal's behalf by the intermediary, subject to any defences which the
third party may set up against the intermediary.
ARTICLE 3.303 (EX ART. 5A) -
INTERMEDIARY'S INSOLVENCY OR FUNDAMENTAL NON-PERFORMANCE TO THIRD PARTY
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If the intermediary becomes insolvent, or if he commits a fundamental
non-performance to the third party, or if prior to the time for performance it
is clear that there will be a fundamental non-performance when it becomes due
(a) on the third party's demand, the intermediary shall communicate the name
and address of the principal to the third party; and
(b) the third party may exercise against the principal the rights which the
third party has against the intermediary, subject to any defences which the
intermediary may set up against the third party and those which the principal
may set up against the intermediary.
ARTICLE 3.304 (EX ART. 5B) -
REQUIREMENT OF NOTICE
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The rights under articles 3:302 to 3:303 may be exercised only if notice of
intention to exercise them is given to the intermediary and to the third party
or principal, respectively. Upon receipt of the notice, the third party or the
principal is no longer entitled to make performance to the intermediary.
CHAPTER 4 - VALIDITY
====================
ARTICLE 4.101 (EX ART. 6.101) -
MATTERS NOT COVERED
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This Chapter does not deal with invalidity arising from illegality, immorality
or lack of capacity.
ARTICLE 4.102 (EX ART. 6.102) -
INITIAL IMPOSSIBILITY
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A contract is not invalid merely because at the time it was concluded
performance of the obligation assumed was impossible, or because a party was
not entitled to dispose of the assets to which the contract relates.
ARTICLE 4.103 (EX ART. 6.103) -
MISTAKE AS TO FACTS OR LAW
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(1) A party may avoid a contract for mistake of fact or law existing when the
contract was concluded if
(a)
(i) the mistake was caused by information given by the other party; or
(ii) the other party knew or ought to have known of the mistake and it was
contrary to good faith and fair dealing to leave the mistaken party in error;
or
(iii) the other party made the same mistake, and
(b) the other party knew or should have known that the mistaken party, had he
known the truth, would not have entered the contract or would have done so only
on fundamentally different terms.
(2) However a party may not avoid the contract if
(a) in the circumstances his mistake was inexcusable, or
(b) the risk of the mistake was assumed, or in the circumstances should be
borne, by him.
ARTICLE 4.104 (EX ART. 6.104) -
INACCURACIES IN COMMUNICATIONS
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An inaccuracy in the expression or transmission of a communication is to be
treated as a mistake of the person who made or sent the communication and
Article 4:103 applies.
ARTICLE 4.105 (EX ART. 6.105) -
ADAPTATION OF CONTRACT
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(1) If a party is entitled to avoid the contract for mistake but the other
party indicates that he is willing to perform, or actually does perform, the
contract as it was understood by the party entitled to avoid it, the contract
is to be treated as if it had been concluded as the mistaken party understood
it. The other party must indicate his willingness or render such performance
promptly after having been informed of the manner in which the party entitled
to avoid it had understood the contract and before that party has acted in
reliance on any notice of avoidance.
(2) After such indication or performance the right to avoid is lost and any
earlier notice of avoidance is ineffective.
(3) Where both parties made the same mistake, the court may at the request of
either party bring the contract into accordance with what might have been
agreed had the mistake not occurred.
ARTICLE 4.106 (EX ART. 6.106) -
INCORRECT INFORMATION
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A party who has entered a contract relying on incorrect information given him
by the other party to the contract may recover damages in accordance with
Article 4:117(2) and (3) even if the information does not give rise to a
fundamental mistake, unless the party who gave the information had reasonable
grounds for believing that the information was true.
ARTICLE 4.107 (EX ART. 6.107) -
FRAUD
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(1) A party may avoid a contract when he has been led to conclude it by the
other party's fraudulent representation, whether by words or conduct, or
fraudulent non-disclosure of any circumstance which according to reasonable
standards of good faith and fair dealing he should have disclosed.
(2) A party's representation or non-disclosure is fraudulent if it was intended
to deceive.
(3) In determining whether reasonable standards required that a party disclose
a particular fact, regard should be had to all the circumstances, including
(a) whether the party had special expertise;
(b) cost to him of acquiring the relevant information;
(c) whether the other party could reasonably acquire the information for
himself; and
(d) the apparent importance of the fact to the other party.
ARTICLE 4.108 (EX ART. 6.108) -
THREATS
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A party may avoid a contract when he has been led to conclude it by the other
party's imminent and serious threat of an act or omission
(a) which is wrongful in itself, or
(b) which it is wrongful to use as a means to obtain the conclusion of the
contract unless in the circumstances the first party had a reasonable
alternative.
ARTICLE 4.109 (EX ART. 6.109) -
EXCESSIVE BENEFIT OR UNFAIR ADVANTAGE
------------------------------------------------------------------------------
(1) A party may avoid a contract if, at the time of the making of the contract,
(a) he was dependent on or had a relationship of trust with the other party,
was in economic distress or had urgent needs, was improvident, ignorant,
inexperienced or lacking in bargaining skill, and
(b) the other party knew or ought to have known of this and, given the
circumstances and purpose of the contract, took advantage of the first party's
situation in a way which was grossly unfair or took an excessive benefit.
(2) Upon the request of the party entitled to avoidance, a court may if it is
appropriate adapt the contract in order to bring it into accordance with what
might have been agreed had standards of good faith and fair dealing been used.
(3) A court may similarly adapt the contract upon the request of a party
receiving notice of avoidance for excessive benefit or unfair advantage,
provided that this party informs the party who gave the notice promptly after
receiving it and before that party has acted on reliance on it.
ARTICLE 4.110 (EX ART. 6.110) -
UNFAIR TERMS WHICH HAVE NOT BEEN INDIVIDUALLY NEGOTIATED
------------------------------------------------------------------------------
(1) A party may avoid a term which has not been negotiated individually if,
contrary to the requirements of good faith and fair dealing, it causes a
significant imbalance in the parties' rights and obligations arising under the
contract to the detriment of that party, taking into account the nature of the
performance to be made under the contract, all the other terms of the contract
and the circumstances at the time the contract was concluded.
(2) This Article does not apply to
(a) a term which defines the main subject matter of the contract, provided the
term is in plain and intelligible language, ; or to
(b) the adequacy in value of one party's obligations compared to the value of
the obligations of the other party.
ARTICLE 4.111 (EX ART. 6.111) -
THIRD PERSONS
------------------------------------------------------------------------------
(1) Where a third person for whose acts a party is responsible, or who with a
party's assent is involved in the making of a contract,
(a) causes a mistake by giving information, or knows of or ought have known of
a mistake,
(b) gives incorrect information,
(c) commits fraud,
(d) makes a threat, or
(e) takes excessive benefit or unfair advantage remedies will be available
under the same conditions as if the behaviour or knowledge had been that of the
party himself.
(2) Where any other third person
(a) gives incorrect information,
(b) commits fraud,
(c) makes a threat, or
(d) takes excessive benefit or unfair advantage, remedies under this Chapter
will be available if the party knew or ought to have known of relevant facts.
The other party may avoid the contract even if the first party did not know and
had no reason to know of the relevant facts, provided that at the time of
avoidance the first party has not acted in reliance on the contract.
ARTICLE 4.112 (EX ART. 6.112) -
NOTICE OF AVOIDANCE
------------------------------------------------------------------------------
Avoidance must be by notice to the other party.
ARTICLE 4.113 (EX ART. 4.113) -
TIME LIMITS
------------------------------------------------------------------------------
(1) Notice of avoidance must be given within a reasonable time, with due regard
to the circumstances, after the avoiding party knew or ought to have known of
the relevant facts or became capable of acting freely.
(2) However, a party may avoid an individual term under Article 4:110 if he
gives notice of avoidance within a reasonable time after the other party has
invoked the term.
ARTICLE 4.114 (EX ART. 6.114) -
CONFIRMATION
------------------------------------------------------------------------------
If the party who is entitled to avoid a contract confirms it, expressly or
impliedly, after he knows of the ground for avoidance, or becomes capable of
acting freely, avoidance of the contract is excluded.
ARTICLE 4.115 (EX ART. 6.115) -
PARTIAL AVOIDANCE
------------------------------------------------------------------------------
If a ground of avoidance affects only particular terms of a contract, the
effect of an avoidance is limited to those terms unless, giving due
consideration to all the circumstances of the case, it is unreasonable to
uphold the remaining contract.
ARTICLE 4.116 (EX ART. 6.116) -
EFFECT OF AVOIDANCE
------------------------------------------------------------------------------
On avoidance either party may claim restitution of whatever he has supplied
under the contract or the part of it avoided, provided he makes concurrent
restitution of whatever he has received under the contract or the part of it
avoided. If restitution cannot be made in kind for any reason, a reasonable sum
must be paid for what has been received.
ARTICLE 4.117 (EX ART. 6.117) -
DAMAGES
------------------------------------------------------------------------------
(1) A party who avoids a contract under this Chapter may recover from the other
party damages so as to put the avoiding party into the same position as if he
had not concluded the contract, provided that the other party knew or ought to
have known of the mistake, fraud, threat or taking of excessive benefit or
unfair advantage.
(2) If a party has the right to avoid a contract under this Chapter but does
not exercise his right, or had the right but has lost in under the provisions
of articles 4:112 or 4:113, he may recover, subject to the proviso of (1),
damages limited to the loss caused to him by the mistake, fraud, threat or
taking of excessive benefit or unfair advantage. The same measure of damages
shall apply when the party was misled by incorrect information in the sense of
article 4:106.
(3) In other respects the damages shall be in accordance with the relevant
provisions of Chapter 9, Section 5, with appropriate adaptations.
ARTICLE 4.118 (EX. ART. 6.118) -
EXCLUSION OR RESTRICTION OF REMEDIES
------------------------------------------------------------------------------
(1) Remedies for fraud, threats or excessive benefit or unfair advantage-taking
cannot be excluded or restricted.
(2) The parties may exclude or restrict remedies in respect of mistake and
incorrect information except if the exclusion or restriction is unreasonable.
ARTICLE 4.119 (EX ART. 6.119) -
REMEDY FOR NON-PERFORMANCE
------------------------------------------------------------------------------
A party who is entitled to a remedy under this Chapter in circumstances which
afford that party a remedy for non-performance may pursue either remedy.
CHAPTER 5 - INTERPRETATION
==========================
ARTICLE 5.101 (EX ART. 7.101/
101A) - GENERAL RULES OF INTERPRETATION
------------------------------------------------------------------------------
(1) A contract is to be interpreted according to the common intention of the
parties even if this differs from the literal meaning of the words.
(2) If it is established that one party intended the contract to have a
particular meaning and at the time the contract was made the other party could
not have been unaware of the first party's intention, the contract is to be
interpreted in the way intended by the first party.
(3) If an intention cannot be established according to (1) or (2), the contract
is to be interpreted according to the meaning that reasonable persons of the
same kind (condition) as the parties would give to it in the same
circumstances.
ARTICLE 5.102 (EX ART. 7.102) -
RELEVANT CIRCUMSTANCES
------------------------------------------------------------------------------
In interpreting the contract, regard shall be had, in particular, to:
(a) the circumstances in which it was concluded, including the preliminary
negotiations;
(b) the conduct of the parties, even subsequent to the conclusion of the
contract;
(c) the nature and purpose of the contract;
(d) the interpretation which has already been given to similar clauses by the
parties and the practices they have established between themselves;
(e) the meaning commonly given to terms and expressions in the (branch) of
activity concerned and the interpretation similar clauses may already have
received ; and
(f) usages.
ARTICLE 5.103 (EX ART. 7.103) -
CONTRA PROFERENTEM RULE
------------------------------------------------------------------------------
Where there is doubt about the meaning of a contract term not individually
negotiated, an interpretation of the term against the party who supplied it is
to be preferred.
ARTICLE 5.104 (EX ART. 7.104) -
PREFERENCE TO NEGOTIATED TERMS
------------------------------------------------------------------------------
Terms which have been individually negotiated take preference over those which
are not.
ARTICLE 5.105 (EX ART. 7.105) -
REFERENCE TO CONTRACT AS A WHOLE (TO BE READ AS A WHOLE)
------------------------------------------------------------------------------
Terms are interpreted in the light of the whole contract in which they appear.
ARTICLE 5.106 (EX ART. 7.106) -
TERMS TO BE GIVEN (FULL) EFFECT
------------------------------------------------------------------------------
An interpretation which makes the terms of the contract lawful, or effective,
is to be preferred to one which would not.
ARTICLE 5.107 (EX ART. 7.107) -
LINGUISTIC DISCREPANCIES
------------------------------------------------------------------------------
Where a contract is drawn up in two or more language versions none of which is
stated to be authoritative, there is, in case of discrepancy between the
versions, a preference for the interpretation according to the version in which
the contract was originally drawn up.
CHAPTER 6 - CONTENTS AND EFFECTS
================================
ARTICLE 6.101 (EX ART. 8.101) -
STATEMENTS GIVING RISE TO CONTRACTUAL OBLIGATION
------------------------------------------------------------------------------
(1) A statement made by one party before or when the contract is concluded is
to be treated as a contractual undertaking if that is how the other party
reasonably understood it in the circumstances, including:
(a) the apparent importance of the statement to the other party;
(b) whether the party was making the statement in the course of business; and
(c) the relative expertise of the parties.
(2) If one of the parties is a professional supplier who gives information
about the quality or use of services or goods or other property when marketing
or advertising them or otherwise before the contract for them is made, the
statement is to be treated as a term of the contract unless it is shown that
the other party knew or could not have been unaware that the statement was
incorrect.
(3) Such information and undertakings given by a person advertising or
marketing services, goods or other property for the professional supplier, or
by a person in earlier links of the business chain, will also be treated as
contractual undertakings by the professional supplier unless he did not know
and had no reason to know of the information or undertaking.
ARTICLE 6.102 (REPLACES 5.108) -
IMPLIED OBLIGATIONS
------------------------------------------------------------------------------
In addition to the express terms, a contract may contain implied terms which
stem from
(a) the intention of the parties;
(b) the nature and purpose of the contract,
(c) good faith and fair dealing.
ARTICLE 6.103 - SIMULATION
--------------------------
When the parties have concluded an apparent contract which was not intended to
reflect their true agreement, as between the parties the true agreement
prevails.
ARTICLE 6.104 (EX ART. 2.101) -
DETERMINATION OF PRICE
------------------------------------------------------------------------------
Where the contract does not fix the price or the method of determining it, the
parties are to be treated as having agreed on a reasonable price.
ARTICLE 6.105 (EX ART. 2.102) -
UNILATERAL DETERMINATION BY A PARTY
------------------------------------------------------------------------------
Where the price or any other contractual term is to be determined by one party
whose determination is grossly unreasonable, then notwithstanding any provision
to the contrary, a reasonable price or other term shall be substituted.
ARTICLE 6.106 (EX ART. 2.103) -
DETERMINATION BY A THIRD PERSON
------------------------------------------------------------------------------
(1) Where the price or any other contractual term is to be determined by a
third person, and he cannot or will not do so, the parties are presumed to have
empowered the court to appoint another person to determine it.
(2) If a price or other term fixed by a third person is grossly unreasonable, a
reasonable price or term shall be substituted.
ARTICLE 6.107 (EX ART. 2.104) -
REFERENCE TO A NON EXISTENT FACTOR
------------------------------------------------------------------------------
Where the price or any other contractual term is to be determined by reference
to a factor which does not exist or has ceased to exist or to be accessible,
the nearest equivalent factor shall be substituted.
ARTICLE 6.108 (EX ART. 2.105) -
QUALITY OF PERFORMANCE
------------------------------------------------------------------------------
If the contract does not specify the quality, a party must tender performance
of at least average quality.
ARTICLE 6.109 (EX ART. 2.109) -
CONTRACT FOR AN INDEFINITE PERIOD
------------------------------------------------------------------------------
A contract for an indefinite period may be ended by either party by giving
notice of reasonable length.
ARTICLE 6.110 (EX ART. 2.115) -
STIPULATION IN FAVOUR OF A THIRD PARTY
------------------------------------------------------------------------------
(1) A third party may require performance of a contractual obligation when his
right to do so has been expressly agreed upon between the promisor and the
promisee, or when such agreement is to be inferred from the purpose of the
contract or the circumstances of the case. The third party need not be
identified at the time the agreement is concluded.
(2) If the third party renounces the right to performance the right is treated
as never having accrued to him.
(3) The promisee may by notice to the promisor deprive the third party of the
right to performance unless:
(a) the third party has received notice from the promisee that the right has
been made irrevocable, or
(b) the promisor or the promisee has received notice from the third party that
the latter accepts the right.
ARTICLE 6.111 (EX ART. 2.117) -
CHANGE OF CIRCUMSTANCES
------------------------------------------------------------------------------
(1) A party is bound to fulfil his obligations even if performance has become
more onerous, whether because the cost of performance has increased or because
the value of the performance he receives has diminished.
(2) If, however, performance of the contract becomes excessively onerous
because of a change of circumstances, the parties are bound to enter into
negotiations with a view to adapting the contract or terminating it, provided
that:
(a) the change of circumstances occurred after the time of conclusion of the
contract, and
(b) the possibility of a change of circumstances was not one which could
reasonably have been taken into account at the time of conclusion of the
contract, and
(c) the risk of the change of circumstances is not one which, according to the
contract, the party affected should be required to bear.
(3) If the parties fail to reach agreement within a reasonable period, the
court may:
(a) terminate the contract at a date and on terms to be determined by the court
; or
(b) adapt the contract in order to distribute between the parties in a just and
equitable manner the losses and gains resulting from the change of
circumstances ; and
(c) in either case, award damages for the loss suffered through the other party
refusing to negotiate or breaking off negotiations contrary to good faith and
fair dealing.
CHAPTER 7 - PERFORMANCE
=======================
ARTICLE 7.101 (EX ART. 2.106) -
PLACE OF PERFORMANCE
------------------------------------------------------------------------------
(1) If the place of performance of a contractual obligation is not fixed by or
determinable from the contract it shall be:
(a) in the case of an obligation to pay money, the creditor's place of business
at the time of the conclusion of the contract;
(b) in the case of an obligation other than to pay money, the obligor's place
of business at the time of conclusion of the contract.
(2) If a party has more than one place of business, the place of business for
the purpose of the preceding paragraph is that which has the closest
relationship to the contract, having regard to the circumstances known to or
contemplated by the parties at the time of conclusion of the contract.
(3) If a party does not have a place of business his habitual residence is to
be treated as his place of business.
ARTICLE 7.102 (EX ART. 2.107) -
TIME OF PERFORMANCE
------------------------------------------------------------------------------
A party has to effect his performance:
(1) if a time is fixed by or determinable from the contract, at that time;
(2) if a period of time is fixed by or determinable from the contract, at any
time within that period unless the circumstances of the case indicate that the
other party is to choose the time;
(3) in any other case, within a reasonable time after the conclusion of the
contract.
ARTICLE 7.103 (EX ART. 2.108) -
EARLY PERFORMANCE
------------------------------------------------------------------------------
(1) A party may decline a tender of performance made before it is due except
where acceptance of the tender would not unreasonably prejudice his interests.
(2) A party's acceptance of early performance does not affect the time fixed
for the performance of his own obligation.
ARTICLE 7.104 - ORDER OF PERFORMANCE
------------------------------------
To the extent that the performances of the parties can be rendered
simultaneously, the parties are bound to render them simultaneously unless the
circumstances indicate otherwise.
ARTICLE 7.105 - ALTERNATIVE PERFORMANCE
---------------------------------------
(1) Where an obligation may be discharged by one of alternative performances,
the choice belongs to the party who is to perform, unless the circumstances
indicate otherwise.
(2) If the party who is to make the choice fails to do so by the time required
by the contract, then
(a) if the delay in choosing is fundamental, the right to choose passes to the
other party;
(b) if the delay is not fundamental, the other party may give a notice fixing
an additional period of time of reasonable length in which the party to choose
must do so. If the latter fails to do so, the right to choose passes to the
other party.
ARTICLE 7.106 (EX ART. 2.116) -
PERFORMANCE BY A THIRD PERSON
------------------------------------------------------------------------------
(1) Except where the contract requires personal performance the obligee cannot
refuse performance by a third person if:
(a) the third person acts with the assent of the obligor; or
(b) the third person has a legitimate interest in performance and the obligor
has failed to perform or it is clear that he will not perform at the time
performance is due.
(2) Performance by the third person in accordance with paragraph (1) discharges
the obligor.
ARTICLE 7.107 (EX ART. 2.110) -
FORM OF PAYMENT
------------------------------------------------------------------------------
(1) Payment of money due may be made in any form used in the ordinary course of
business.
(2) A creditor who, pursuant to the contract or voluntarily, accepts a cheque
or other order to pay or a promise to pay is presumed to do so only on
condition that it will be honoured. The creditor may not enforce the original
obligation to pay unless the order or promise is not honoured.
ARTICLE 7.108 (EX ART. 2.111) -
CURRENCY OF PAYMENT
------------------------------------------------------------------------------
(1) The parties may agree that payment shall be made only in a specified
currency.
(2) In the absence of such agreement, a sum of money expressed in a currency
other than that of the place where payment is due may be paid in the currency
of that place according to the rate of exchange prevailing there at the time
when payment is due.
(3) If, in a case falling within the preceding paragraph, the debtor has not
paid at the time when payment is due, the creditor may require payment in the
currency of the place where payment is due according to the rate of exchange
prevailing there either at the time when payment is due or at the time of
actual payment.
ARTICLE 7.109 (EX ART. 2.112) -
APPROPRIATION OF PERFORMANCE
------------------------------------------------------------------------------
(1) Where a party has to perform several obligations of the same nature and the
performance tendered does not suffice to discharge all of the obligations, then
subject to paragraph 4 the party may at the time of his performance declare to
which obligation the performance is to be appropriated.
(2) If the performing party does not make such a declaration, the other party
may within a reasonable time appropriate the performance to such obligation as
he chooses. He shall inform the performing party of the choice. However, any
such appropriation to an obligation which:
(a) is not yet due, or
(b) is illegal, or
(c) is disputed, is invalid.
(3) In the absence of an appropriation by either party, and subject to
paragraph 4, the performance is appropriated to that obligation which satisfies
one of the following criteria in the sequence indicated:
(a) the obligation which is due or is the first to fall due;
(b) the obligation for which the obligee has the least security;
(c) the obligation which is the most burdensome for the obligor,
(d) the obligation which has arisen first. If none of the preceding criteria
applies, the performance is appropriated proportionately to all obligations.
(4) In the case of a monetary obligation, a payment by the debtor is to be
appropriated, first, to expenses, secondly, to interest, and thirdly, to
principal, unless the creditor makes a different appropriation.
ARTICLE 7.110 (EX ART. 2.113) -
PROPERTY NOT ACCEPTED
------------------------------------------------------------------------------
(1) A party who is left in possession of tangible property other than money
because of the other party's failure to accept or retake the property must take
reasonable steps to protect and preserve the property.
(2) The party left in possession may discharge his duty to deliver or return:
(a) by depositing the property on reasonable terms with a third person to be
held to the order of the other party, and notifying the other party of this; or
(b) by selling the property on reasonable terms after notice to the other
party, and paying the net proceeds to that party.
(3) Where, however, the property is liable to rapid deterioration or its
preservation is unreasonably expensive, the party must take reasonable steps to
dispose of it. He may discharge his duty to deliver or return by paying the net
proceeds to the other party.
(4) The party left in possession is entitled to be reimbursed or to retain out
of the proceeds of sale any expenses reasonably incurred.
ARTICLE 7.111 (EX ART. 2.114) -
MONEY NOT ACCEPTED
------------------------------------------------------------------------------
Where a party fails to accept money properly tendered by the other party, that
party may after notice to the first party discharge his obligation to pay by
depositing the money to the order of the first party in accordance with the law
of the place where payment is due.
ARTICLE 7.112 - COSTS OF PERFORMANCE
------------------------------------
Each party shall bear the costs of performance of its obligations.
CHAPTER 8 - NON-PERFORMANCE AND REMEDIES IN GENERAL
===================================================
ARTICLE 8.101 (EX ART. 3.101) -
REMEDIES AVAILABLE
------------------------------------------------------------------------------
(1) Whenever a party does not perform an obligation under the contract and the
non-performance is not excused under Article 8:108, the aggrieved party may
resort to any of the remedies set out in Chapter 4.
(2) Where a party's non-performance is excused under Article 8:108, the
aggrieved party may resort to any of the remedies set out in Chapter 4 except
claiming performance and damages.
(3) A party may not resort to any of the remedies set out in Chapter 9 to the
extent that his own act caused the other party's non-performance.
ARTICLE 8.102 (EX ART. 3.102) -
CUMULATION OF REMEDIES
------------------------------------------------------------------------------
Remedies which are not incompatible may be cumulated. In particular, a party is
not deprived of his right to damages by exercising his right to any other
remedy.
ARTICLE 8.103 (EX ART. 3.103) -
FUNDAMENTAL NON-PERFORMANCE
------------------------------------------------------------------------------
A non-performance of an obligation is fundamental to the contract if:
(a) strict compliance with the obligation is of the essence of the contract; or
(b) the non-performance substantially deprives the aggrieved party of what he
was entitled to expect under the contract, unless the other party did not
foresee and could not reasonably have foreseen that result; or
(c) the non-performance is intentional and gives the aggrieved party reason to
believe that he cannot rely on the other party's future performance.
ARTICLE 8.104 (EX ART. 3.104) -
CURE BY NON-PERFORMING PARTY
------------------------------------------------------------------------------
A party whose tender of performance is not accepted by the other party because
it does not conform to the contract may make a new and conforming tender where
the time for performance has not yet arrived or the delay would not be such as
to constitute a fundamental non-performance.
ARTICLE 8.105 (EX ART. 3.105) -
ASSURANCE OF PERFORMANCE
------------------------------------------------------------------------------
(1) A party who reasonably believes that there will be a fundamental
non-performance by the other party may demand adequate assurance of due
performance and meanwhile may withhold performance of his own obligations so
long as such reasonable belief continues.
(2) Where this assurance is not provided within a reasonable time, the party
demanding it may terminate the contract if he still reasonably believes that
there will be a fundamental non-performance by the other party and gives notice
of termination without delay.
ARTICLE 8.106 (EX ART. 3.106) -
NOTICE FIXING ADDITIONAL PERIOD FOR PERFORMANCE
------------------------------------------------------------------------------
(1) In any case of non-performance the aggrieved party may by notice to the
other party allow an additional period of time for performance.
(2) During the additional period the aggrieved party may withhold performance
of his own reciprocal obligations and may claim damages, but he may not resort
to any other remedy. If he receives notice from the other party that the latter
will not perform within that period, or if upon expiry of that period due
performance has not been made, the aggrieved party may resort to any of the
remedies that may be available under chapter 9.
(3) If in a case of delay in performance which is not fundamental the aggrieved
party has given a notice fixing an additional period of time of reasonable
length, he may terminate the contract at the end of the period of notice. The
aggrieved party may in his notice provide that if the other party does not
perform within the period fixed by the notice the contract shall terminate
automatically. If the period stated is too short, the aggrieved party may
terminate, or, as the case may be, the contract shall terminate automatically,
only after a reasonable period from the time of the notice.
ARTICLE 8.107 (EX ART. 3.107) -
PERFORMANCE ENTRUSTED TO ANOTHER
------------------------------------------------------------------------------
A party who entrusts performance of the contract to another person remains
responsible for performance.
ARTICLE 8.108 (EX ART 3.108) -
EXCUSE DUE TO AN IMPEDIMENT
------------------------------------------------------------------------------
(1) A party's non-performance is excused if he proves that it is due to an
impediment beyond his control and that he could not reasonably have been
expected to take the impediment into account at the time of the conclusion of
the contract, or to have avoided or overcome the impediment or its
consequences.
(2) Where the impediment is only temporary the excuse provided by this article
has effect for the period during which the impediment exists. However, if the
delay amounts to a fundamental non-performance, the obligee may treat it as
such.
(3) The non-performing party must ensure that notice of the impediment and of
its effect on his ability to perform is received by the other party within a
reasonable time after the non-performing party knew or ought to have known of
these circumstances. The other party is entitled to damages for any loss
resulting from the non-receipt of such notice.
ARTICLE 8.109 (EX 3.109) - CLAUSE
LIMITING OR EXCLUDING LIABILITY
------------------------------------------------------------------------------
A clause which limits or excludes one party's liability for non-performance may
not be invoked if it would be grossly unfair to do so.
CHAPTER 9 - PARTICULAR REMEDIES FOR NON-PERFORMANCE
===================================================
SECTION 1 - RIGHT TO PERFORMANCE
================================
ARTICLE 9.101 (EX ART. 4.101) -
MONETARY OBLIGATIONS
------------------------------------------------------------------------------
(1) The creditor is entitled to recover money which is due.
(2) Where the creditor has not yet performed his obligation and it is clear
that the debtor will be unwilling to receive performance, the creditor may
nonetheless proceed with his performance and may recover any sum due under the
contract unless:
(a) he could have made a reasonable cover transaction without significant
effort or expense; or
(b) performance would be unreasonable in the circumstances.
ARTICLE 9.102 (EX ART. 4.102) -
NON-MONETARY OBLIGATIONS
------------------------------------------------------------------------------
(1) The aggrieved party is entitled to specific performance of an obligation
other than one to pay money, including the remedying of a defective
performance.
(2) Specific performance cannot, however, be obtained where:
(a) performance would be unlawful or impossible; or
(b) performance would cause the obligor unreasonable effort or expense; or
(c) the performance consists in the provision of services or work of a personal
character or depends upon a personal relationship, or
(d) the aggrieved party may reasonably obtain performance from another source.
(3) The aggrieved party will lose the right to specific performance if he fails
to seek it within a reasonable time after he has or ought to have become aware
of the non-performance.
ARTICLE 9.103 (EX ART 4.103) -
DAMAGES NOT PRECLUDED
------------------------------------------------------------------------------
The fact that a right to performance is excluded under this Section does not
preclude a claim for damages.
SECTION 2 - RIGHT TO WITHHOLD PERFORMANCE
=========================================
ARTICLE 9.201 (EX ART 4.201) -
RIGHT TO WITHHOLD PERFORMANCE
------------------------------------------------------------------------------
(1) A party who is to perform simultaneously with or after the other party may
withhold performance until the other has tendered performance or has performed.
The first party may withhold the whole of his performance or a part of it as
may be reasonable in the circumstances.
(2) A party may similarly withhold performance for as long as it is clear that
there will be a non-performance by the other party when the other party's
performance becomes due.
SECTION 3 - TERMINATION OF THE CONTRACT
=======================================
ARTICLE 9.301 (EX ART. 4.301) -
RIGHT TO TERMINATE THE CONTRACT
------------------------------------------------------------------------------
(1) A party may terminate the contract if the other party's non-performance is
fundamental.
(2) In the case of delay the aggrieved party may also terminate the contract
under Article 8:106 (3).
ARTICLE 9.302 (EX ART 4.302) -
CONTRACT TO BE PERFORMED IN PARTS
------------------------------------------------------------------------------
If the contract is to be performed in separate parts and in relation to a part
to which the counter performance can be apportioned, there is a fundamental
non-performance, the aggrieved party may exercise his right to terminate under
this Section in relation to the part concerned. He may terminate the contract
as a whole only if the non-performance is fundamental to the contract as whole.
ARTICLE 9.303 (EX ART. 4.303) -
NOTICE OF TERMINATION
------------------------------------------------------------------------------
(1) A party's right to terminate the contract is to be exercised by notice to
the other party.
(2) The aggrieved party loses his right to terminate the contract unless he
gives notice within a reasonable time after he has or ought to have become
aware of the non-performance.
(3)
(a) When performance has not been tendered by the time it was due, the
aggrieved party need not give notice of termination before a tender has been
made. If a tender is later made he loses his right to terminate if he does not
give such notice within a reasonable time after he has or ought to have become
aware of the tender.
(b) If, however, the aggrieved party knows or has reason to know that the other
party still intends to tender within a reasonable time, and the aggrieved party
unreasonably fails to notify the other party that he will not accept
performance, he loses his right to terminate if the other party in fact tenders
within a reasonable time.
(4) If a party is excused under Article 8:108 through an impediment which is
total and permanent, the contract is terminated automatically and without
notice at the time the impediment arises.
ARTICLE 9.304 (EX ART. 4.304) -
ANTICIPATORY NON-PERFORMANCE
------------------------------------------------------------------------------
Where prior to the time for performance by a party it is clear that there will
be a fundamental non-performance by him the other party may terminate the
contract.
ARTICLE 9.305 (EX ART. 4.305) -
EFFECTS OF TERMINATION IN GENERAL
------------------------------------------------------------------------------
(1) Termination of the contract releases both parties from their obligation to
effect and to receive future performance, but, subject to Articles 4.306, 4.307
and 4.308, does not affect the rights and liabilities accrued up to the time of
termination.
(2) Termination does not affect any provision of the contract for the
settlement of disputes or any other provision which is to operate even after
termination.
ARTICLE 9.306 (EX ART. 4.306) -
PROPERTY REDUCED IN VALUE
------------------------------------------------------------------------------
A party who terminates the contract may reject property previously received
from the other party if its value to the first party has been fundamentally
reduced as a result of the other party's non-performance.
ARTICLE 9.307 (EX ART. 4.307) -
RECOVERY OF MONEY PAID
------------------------------------------------------------------------------
On termination of the contract a party may recover money paid for a performance
which he did not receive or which he properly rejected.
ARTICLE 9.308 (EX ART 4.308) -
RECOVERY OF PROPERTY
------------------------------------------------------------------------------
On termination of the contract a party who has supplied property which can be
returned and for which he has not received payment or other counter-performance
may recover the property.
ARTICLE 9.309 (EX ART. 4.309) -
RECOVERY FOR PERFORMANCE THAT CANNOT BE RETURNED
------------------------------------------------------------------------------
On termination of the contract a party who has rendered a performance which
cannot be returned and for which he has not received payment or other
counter-performance may recover a reasonable amount for the value of the
performance to the other party.
SECTION 4 - PRICE REDUCTION
===========================
ARTICLE 9.401 (EX ART 4.401) -
RIGHT TO REDUCE PRICE
------------------------------------------------------------------------------
(1) A party who accepts a tender of performance not conforming to the contract
may reduce the price. This reduction shall be proportionate to the decrease in
the value of the performance at the time this was tendered compared to the
value which a conforming tender would have had at that time.
(2) A party who is entitled to reduce the price under the preceding paragraph
and who has already paid a sum exceeding the reduced price may recover the
excess from the other party.
(3) A party who reduces the price cannot also recover damages for reduction in
the value of the performance but remains entitled to damages for any further
loss he has suffered so far as these are recoverable under Section 5 of this
Chapter.
SECTION 5 - DAMAGES AND INTEREST
================================
ARTICLE 9.501 (EX ART. 4.501) -
RIGHT TO DAMAGES
------------------------------------------------------------------------------
(1) The aggrieved party is entitled to damages for loss caused by the other
party's non-performance which is not excused under Article 3.108.
(2) The loss for which damages are recoverable includes:
(a) non-pecuniary loss; and
(b) future loss which is reasonably likely to occur.
ARTICLE 9.502 (EX ART 4.502) -
GENERAL MEASURE OF DAMAGES
------------------------------------------------------------------------------
The general measure of damages is such sum as will put the aggrieved party as
nearly as possible into the position in which he would have been if the
contract had been duly performed. Such damages cover the loss which the
aggrieved party has suffered and the gain of which he has been deprived.
ARTICLE 9.503 (EX ART. 4.503) -
FORESEEABILITY
------------------------------------------------------------------------------
The non-performing party is liable only for loss which he foresaw or could
reasonably have foreseen at the time of conclusion of the contract as a likely
result of his non-performance, unless the non-performance was intentional or
grossly negligent.
ARTICLE 9.504 (NEW; PREVIOUSLY PART OF
4.504) - LOSS ATTRIBUTABLE TO AGGRIEVED PARTY
------------------------------------------------------------------------------
The non-performing party is not liable for loss suffered by the aggrieved party
to the extent that the aggrieved party contributed to the non-performance or
its effects.
ARTICLE 9.505 (NEW; PREVIOUSLY PART OF
4.504) - REDUCTION OF LOSS
------------------------------------------------------------------------------
(1) The non-performing party is not liable for loss suffered by the aggrieved
party to the extent that the aggrieved party could have reduced the loss by
taking reasonable steps.
(2) The aggrieved party is entitled to recover any expenses reasonably incurred
in attempting to reduce the loss.
ARTICLE 9.506 (EX ART. 4.505) -
COVER TRANSACTION
------------------------------------------------------------------------------
Where the aggrieved party has terminated the contract and has made a cover
transaction within a reasonable time and in a reasonable manner, he may recover
the difference between the contract price and the price of the cover
transaction as well as damages for any further loss so far as these are
recoverable under this Section.
ARTICLE 9.507 (EX ART. 4.506) -
CURRENT PRICE
------------------------------------------------------------------------------
Where the aggrieved party has terminated the contract and has not made a cover
transaction but there is a current price for the performance contracted for, he
may recover the difference between the contract price and the price current at
the time the contract is terminated as well as damages for any further loss so
far as these are recoverable under this Section.
ARTICLE 9.508 (EX ART. 4.507) -
DELAY IN PAYMENT OF MONEY
------------------------------------------------------------------------------
(1) If payment of a sum of money is delayed, the aggrieved party is entitled to
interest on that sum from the time when payment is due to the time of payment
at the average commercial bank short-term lending rate to prime borrowers
prevailing for the contractual currency of payment at the place where payment
is due.
(2) The aggrieved party may in addition recover damages for any further loss so
far as these are recoverable under this Section.
ARTICLE 9.509 (EX ART. 4.508) -
AGREED PAYMENT FOR NON-PERFORMANCE
------------------------------------------------------------------------------
(1) Where the contract provides that a party who fails to perform is to pay a
specified sum to the aggrieved party for such non-performance, the aggrieved
party shall be awarded that sum irrespective of his actual loss.
(2) However, despite any agreement to the contrary the specified sum may be
reduced to a reasonable amount where it is grossly excessive in relation to the
loss resulting from the non-performance and the other circumstances.
ARTICLE 9.510 (EX ART. 4.509) -
CURRENCY BY WHICH DAMAGES TO BE MEASURED
------------------------------------------------------------------------------
Damages are to be measured by the currency which most appropriately reflects
the aggrieved party's loss.
==============================================================================
Title: The Principles Of European Contract Law 1997 Parts I and II
(unofficial preview of the provisional complete and revised
version)
Creator: European Union
Rights: Copyright (C) 1997 European Union
Publisher: SiSU http://www.jus.uio.no/sisu (this copy)
Date: 1997
Sourcefile: eu.contract.principles.1997.preview.sst
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