Principles of International Commercial Contracts, 1994 - UNIDROIT
copy @ Lex Mercatoria
Article 7.3.6 - (Restitution)
(1) On termination of the contract either party may claim restitution of whatever it has supplied, provided that such party concurrently makes restitution of whatever it has received. If restitution in kind is not possible or appropriate allowance should be made in money whenever reasonable.
(2) However, if performance of the contract has extended over a period of time and the contract is divisible, such restitution can only be claimed for the period after termination has taken effect.
Para. (1) of this article provides for a right for each party to claim the return of whatever it has supplied under the contract provided that it concurrently makes restitution of whatever it has received.
1. A sells a Renoir painting to B for US$ 2,000,000. B does not pay for the picture when it is delivered. A can claim back the picture.
If the non-performing party cannot make restitution it must make allowance in money for the value it has received. Thus, in the case described in Illustration 1, B has to make allowance for the value of the picture if B has sold and delivered it to a purchaser from whom it cannot be reclaimed.
The rule also applies when the aggrieved party has made a bad bargain. If in the case mentioned in Illustration 1 the true value of the picture is US$ 3,000,000, A may still require the return of the picture and, if it cannot be returned, claim the true value of US$ 3,000,000.
The present article also applies to the situation where the aggrieved party has supplied money in exchange for property, services etc. which it has not received or which are defective.
2. The "Renoir" painting for which B has paid US$ 2,000,000 was not a Renoir but a copy. B can claim back the money and must return the copy to A.
Money returned for services or work which have not been performed or for property which has been rejected should be repaid to the party who paid for it and the same principle applies to custody of goods and to rent and leases of property.
There are instances where instead of restitution in kind, allowance in money should be made. This is the case first of all where restitution in kind is not possible.
3. A, who has contracted to excavate B's site, leaves it after only half the work has been performed. B, who then terminates the contract, will have to pay A a reasonable sum for the work done, measured by the value that work has for B.
Allowance in money is further envisaged by para. (1) of this article whenever restitution in kind would not be "appropriate". This is so in particular when the aggrieved party has received part of the performance and wants to retain that part.
The purpose of specifying that allowance should be made in money "whenever reasonable" is to make it clear that allowance should only be made if, and to the extent that, the performance received has conferred a benefit on the party claiming restitution.
4. A, who has undertaken to decorate a bedroom suite for B, a furniture maker, abandons the work after having completed about half of the decorations. B can claim back the advance payments, but as the decorations made have no value for B, B does not have to pay for the work which has been done.
If the performance has extended over a period of time, restitution can, in accordance with para. (2) of this article, only be claimed in respect of the period after termination.
5. A contracts to service B's computer hardware and software for a period of five years. After three years of regular service A is obliged by illness to discontinue the services and the contract is terminated. B, who has paid A for the fourth year, can claim return of the advance payment for that year but not the money paid for the three years of regular service.
This rule only applies if the contract is divisible.
6. A undertakes to paint ten pictures depicting a historical event for B's festival hall. After delivering and having been paid for five paintings, A abandons the work. B can claim return of the advances paid to A and must return the five paintings to A.
Both the rule in Art. 7.1.3 on the right to withhold performance and Art. 7.2.2 on specific performance of non-monetary obligations apply with appropriate adaptations to a claim for the restitution of property. Thus the aggrieved party cannot claim the return of goods when this has become impossible or would put the non-performing party to unreasonable effort or expense (see Art. 7.2.2 (a) and (b)). In such cases the non-performing party must make allowance for the value of the property. See Art. 7.3.6(1).
In common with other articles of the Principles, Art. 7.3.6 deals with the relationship between the parties and not with any rights which third persons may have acquired on the goods concerned. Whether, for instance, an obligee of the buyer, the buyer's receivers in bankruptcy, or a purchaser in good faith may oppose the restitution of goods sold is to be determined by the applicable national law.