Principles of International Commercial Contracts, 1994 - UNIDROIT
UNIDROIT
Copyright UNIDROIT. The reader is reminded that the complete version of the UNIDROIT Principles contains not only the black-letter rules reproduced hereunder, but also detailed comments on each article and, where appropriate, illustrations. The volume may be ordered from UNIDROIT at http://www.unidroit.org. For an update of international case law and bibliography relating to the Principles see http://www.unilex.info.;
international commercial contracts
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1994
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UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS 2004
2
Preamble - (Purpose of the Principles)
3
These Principles set forth general rules for international commercial
contracts. They shall be applied when the parties have agreed that
their contract be governed by them.1
1
Parties wishing to provide that their agreement be governed by the
Principles might use the following words, adding any desired exceptions
or modifications:
4
They may be applied when the parties have agreed that their contract be
governed by general principles of law, the lex mercatoria or the like.
They may be applied when the parties have not chosen any law to govern
their contract.
5
They may be used to interpret or supplement international uniform law
instruments.
6
They may be used to interpret or supplement domestic law.
7
They may serve as a model for national and international legislators.
8
Chapter 1 - General Provisions
9
Article 1.1 - Freedom of contract
10
The parties are free to enter into a contract and to determine its
content.
11
Article 1.2 - No form required
12
Nothing in these Principles requires a contract, statement or any other
act to be made in or evidenced by a particular form. It may be proved
by any means, including witnesses.
13
Article 1.3 - Binding character of contract
14
A contract validly entered into is binding upon the parties. It can
only be modified or terminated in accordance with its terms or by
agreement or as otherwise provided in these Principles.
15
Article 1.4 - Mandatory rules
16
Nothing in these Principles shall restrict the application of mandatory
rules, whether of national, international or supranational origin,
which are applicable in accordance with the relevant rules of private
international law.
17
Article 1.5 - Exclusion or modification by the parties
18
The parties may exclude the application of these Principles or derogate
from or vary the effect of any of their provisions, except as otherwise
provided in the Principles.
19
Article 1.6 - Interpretation and supplementation of the Principles
20
(1) In the interpretation of these Principles, regard is to be had to
their international character and to their purposes including the need
to promote uniformity in their application.
21
(2) Issues within the scope of these Principles but not expressly
settled by them are as far as possible to be settled in accordance with
their underlying general principles.
22
Article 1.7 - Good faith and fair dealing
23
(1) Each party must act in accordance with good faith and fair dealing
in international trade.
24
(2) The parties may not exclude or limit this duty.
25
Article 1.8 - Inconsistent Behaviour
26
A party cannot act inconsistently with an understanding it has caused
the other party to have and upon which that other party reasonably has
acted in reliance to its detriment.
27
Article 1.9 - Usages and practices
28
(1) The parties are bound by any usage to which they have agreed and by
any practices which they have established between themselves.
29
(2) The parties are bound by a usage that is widely known to and
regularly observed in international trade by parties in the particular
trade concerned except where the application of such a usage would be
unreasonable.
30
Article 1.10 - Notice
31
(1) Where notice is required it may be given by any means appropriate
to the circumstances.
32
(2) A notice is effective when it reaches the person to whom it is
given.
33
(3) For the purpose of paragraph (2) a notice "reaches" a person when
given to that person orally or delivered at that person's place of
business or mailing address.
34
(4) For the purpose of this article "notice" includes a declaration,
demand, request or any other communication of intention.
35
Article 1.11 - Definitions
36
In these Principles
37
-- "court" includes an arbitral tribunal;
38
-- where a party has more than one place of business the relevant
"place of business" is that which has the closest relationship to the
contract and its performance, having regard to the circumstances known
to or contemplated by the parties at any time before or at the
conclusion of the contract;
39
-- "obligor" refers to the party who is to perform an obligation and
"obligee" refers to the party who is entitled to performance of that
obligation.
40
-- "writing" means any mode of communication that preserves a record of
the information contained therein and is capable of being reproduced in
tangible form.
41
Article 1.12 - Computation of time set by parties
42
(1) Official holidays or nonbusiness days occurring during a period
set by parties for an act to be performed are included in calculating
the period.
43
(2) However, if the last day of the period is an official holiday or a
nonbusiness day at the place of business of the party to perform the
act, the period is extended until the first business day which follows,
unless the circumstances indicate otherwise.
44
(3) The relevant time zone is that of the place of business of the
party setting the time, unless the circumstances indicate otherwise.
45
Chapter 2 - Formation and Authority of Agents
46
Section 1 - Formation
47
Article 2.1.1 - Manner of formation
48
A contract may be concluded either by the acceptance of an offer or by
conduct of the parties that is sufficient to show agreement.
49
Article 2.1.2 - Definition of offer
50
A proposal for concluding a contract constitutes an offer if it is
sufficiently definite and indicates the intention of the offeror to be
bound in case of acceptance.
51
Article 2.1.3 - Withdrawal of offer
52
(1) An offer becomes effective when it reaches the offeree.
53
(2) An offer, even if it is irrevocable, may be withdrawn if the
withdrawal reaches the offeree before or at the same time as the offer.
54
Article 2.1.4 - Revocation of offer
55
(1) Until a contract is concluded an offer may be revoked if the
revocation reaches the offeree before it has dispatched an acceptance.
56
(2) However, an offer cannot be revoked
57
(a) if it indicates, whether by stating a fixed time for acceptance or
otherwise, that it is irrevocable; or
58
(b) if it was reasonable for the offeree to rely on the offer as being
irrevocable and the offeree has acted in reliance on the offer.
59
Article 2.1.5 - Rejection of offer
60
An offer is terminated when a rejection reaches the offeror.
61
Article 2.1.6 - Mode of acceptance
62
(1) A statement made by or other conduct of the offeree indicating
assent to an offer is an acceptance. Silence or inactivity does not in
itself amount to acceptance.
63
(2) An acceptance of an offer becomes effective when the indication of
assent reaches the offeror.
64
(3) However, if, by virtue of the offer or as a result of practices
which the parties have established between themselves or of usage, the
offeree may indicate assent by performing an act without notice to the
offeror, the acceptance is effective when the act is performed.
65
Article 2.1.7 - Time of acceptance
66
An offer must be accepted within the time the offeror has fixed or, if
no time is fixed, within a reasonable time having regard to the
circumstances, including the rapidity of the means of communication
employed by the offeror. An oral offer must be accepted immediately
unless the circumstances indicate otherwise.
67
Article 2.1.8 - Acceptance within a fixed period of time
68
A period of acceptance fixed by the offeror begins to run from the time
that the offer is dispatched. A time indicated in the offer is deemed
to be the time of dispatch unless the circumstances indicate otherwise.
69
Article 2.1.9 - Late acceptance. Delay in transmission
70
(1) A late acceptance is nevertheless effective as an acceptance if
without undue delay the offeror so informs the offeree or gives notice
to that effect.
71
(2) If a communication 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 undue delay,
the offeror informs the offeree that it considers the offer as having
lapsed.
72
Article 2.1.10 - Withdrawal of acceptance
73
An acceptance may be withdrawn if the withdrawal reaches the offeror
before or at the same time as the acceptance would have become
effective.
74
Article 2.1.11 - Modified acceptance
75
(1) A reply to an offer which purports to be an acceptance but contains
additions, limitations or other modifications is a rejection of the
offer and constitutes a counteroffer.
76
(2) However, a reply to an offer which purports to be an acceptance but
contains additional or different terms which do not materially alter
the terms of the offer constitutes an acceptance, unless the offeror,
without undue delay, objects to the discrepancy. If the offeror does
not object, the terms of the contract are the terms of the offer with
the modifications contained in the acceptance.
77
Article 2.1.12 - Writings in confirmation
78
If a writing which is sent within a reasonable time after the
conclusion of the contract and which purports to be a confirmation of
the contract contains additional or different terms, such terms become
part of the contract, unless they materially alter the contract or the
recipient, without undue delay, objects to the discrepancy.
79
Article 2.1.13 - Conclusion of contract dependent on agreement on
specific matters or in a particular form
80
Where in the course of negotiations one of the parties insists that the
contract is not concluded until there is agreement on specific matters
or in a particular form, no contract is concluded before agreement is
reached on those matters or in that form.
81
Article 2.1.14 - Contract with terms deliberately left open
82
(1) If the parties intend to conclude a contract, the fact that they
intentionally leave a term to be agreed upon in further negotiations or
to be determined by a third person does not prevent a contract from
coming into existence.
83
(2) The existence of the contract is not affected by the fact that
subsequently
84
(a) the parties reach no agreement on the term; or
85
(b) the third person does not determine the term, provided that there
is an alternative means of rendering the term definite that is
reasonable in the circumstances, having regard to the intention of the
parties.
86
Article 2.1.15 - Negotiations in bad faith
87
(1) A party is free to negotiate and is not liable for failure to reach
an agreement.
88
(2) However, a party who negotiates or breaks off negotiations in bad
faith is liable for the losses caused to the other party.
89
(3) It is bad faith, in particular, for a party to enter into or
continue negotiations when intending not to reach an agreement with the
other party.
90
Article 2.1.16 - Duty of confidentiality
91
Where information is given as confidential by one party in the course
of negotiations, the other party is under a duty not to disclose that
information or to use it improperly for its own purposes, whether or
not a contract is subsequently concluded. Where appropriate, the remedy
for breach of that duty may include compensation based on the benefit
received by the other party.
92
Article 2.1.17 - Merger clauses
93
A contract in writing which contains a clause indicating that the
writing completely embodies the terms on which the parties have agreed
cannot be contradicted or supplemented by evidence of prior statements
or agreements. However, such statements or agreements may be used to
interpret the writing.
94
Article 2.1.18 - Modification in a particular form
95
A contract in writing which contains a clause requiring any
modification or termination by agreement to be in a particular form may
not be otherwise modified or terminated. However, a party may be
precluded by its conduct from asserting such a clause to the extent
that the other party has reasonably acted in reliance on that conduct.
96
Article 2.1.19 - Contracting under standard terms
97
(1) Where one party or both parties use standard terms in concluding a
contract, the general rules on formation apply, subject to Articles
2.1.20 2.1.22.
98
(2) Standard terms are provisions which are prepared in advance for
general and repeated use by one party and which are actually used
without negotiation with the other party.
99
Article 2.1.20 - Surprising terms
100
(1) No term contained in standard terms which is of such a character
that the other party could not reasonably have expected it, is
effective unless it has been expressly accepted by that party.
101
(2) In determining whether a term is of such a character regard shall
be had to its content, language and presentation.
102
Article 2.1.21 - Conflict between standard terms and nonstandard
terms
103
In case of conflict between a standard term and a term which is not a
standard term the latter prevails.
104
Article 2.1.22 - Battle of forms
105
Where both parties use standard terms and reach agreement except on
those terms, a contract is concluded on the basis of the agreed terms
and of any standard terms which are common in substance unless one
party clearly indicates in advance, or later and without undue delay
informs the other party, that it does not intend to be bound by such a
contract.
106
Section 2 - Authority of Agents
107
Article 2.2.1 - Scope of the Section
108
(1) This Section governs the authority of a person ("the agent"), to
affect the legal relations of another person ("the principal"), by or
with respect to a contract with a third party, whether the agent acts
in its own name or in that of the principal.
109
(2) It governs only the relations between the principal or the agent on
the one hand, and the third party on the other.
110
(3) It does not govern an agent's authority conferred by law or the
authority of an agent appointed by a public or judicial authority.
111
Article 2.2.2 - Establishment and scope of the authority of the agent
112
(1) The principal's grant of authority to an agent may be express or
implied.
113
(2) The agent has authority to perform all acts necessary in the
circumstances to achieve the purposes for which the authority was
granted.
114
Article 2.2.3 - Agency disclosed
115
(1) Where an agent acts within the scope of its authority and the third
party knew or ought to have known that the agent was acting as an
agent, the acts of the agent shall directly affect the legal relations
between the principal and the third party and no legal relation is
created between the agent and the third party.
116
(2) However, the acts of the agent shall affect only the relations
between the agent and the third party, where the agent with the consent
of the principal undertakes to become the party to the contract.
117
Article 2.2.4 - Agency undisclosed
118
(1) Where an agent acts within the scope of its authority and the third
party neither knew nor ought to have known that the agent was acting as
an agent, the acts of the agent shall affect only the relations between
the agent and the third party.
119
(2) However, where such an agent, when contracting with the third party
on behalf of a business, represents itself to be the owner of that
business, the third party, upon discovery of the real owner of the
business, may exercise also against the latter the rights it has
against the agent.
120
Article 2.2.5 - Agent acting without or exceeding its authority
121
(1) Where an agent acts without authority or exceeds its authority, its
acts do not affect the legal relations between the principal and the
third party.
122
(2) However, where the principal causes the third party reasonably to
believe that the agent has authority to act on behalf of the principal
and that the agent is acting within the scope of that authority, the
principal may not invoke against the third party the lack of authority
of the agent.
123
Article 2.2.6 - Liability of agent acting without or exceeding its
authority
124
(1) An agent that acts without authority or exceeds its authority is,
failing ratification by the principal, liable for damages that will
place the third party in the same position as if the agent had acted
with authority and not exceeded its authority.
125
(2) However, the agent is not liable if the third party knew or ought
to have known that the agent had no authority or was exceeding its
authority.
126
Article 2.2.7 - Conflict of interests
127
(1) If a contract concluded by an agent involves the agent in a
conflict of interests with the principal of which the third party knew
or ought to have known, the principal may avoid the contract. The right
to avoid is subject to Articles 3.12 and 3.14 to 3.17.
128
(2) However, the principal may not avoid the contract
129
(a) if the principal had consented to, or knew or ought to have known
of, the agent's involvement in the conflict of interests; or
130
(b) if the agent had disclosed the conflict of interests to the
principal and the latter had not objected within a reasonable time.
131
Article 2.2.8 - Subagency
132
An agent has implied authority to appoint a subagent to perform acts
which it is not reasonable to expect the agent to perform itself. The
rules of this Section apply to the subagency.
133
Article 2.2.9 - Ratification
134
(1) An act by an agent that acts without authority or exceeds its
authority may be ratified by the principal. On ratification the act
produces the same effects as if it had initially been carried out with
authority.
135
(2) The third party may by notice to the principal specify a reasonable
period of time for ratification. If the principal does not ratify
within that period of time it can no longer do so.
136
(3) If, at the time of the agent's act, the third party neither knew
nor ought to have known of the lack of authority, it may, at any time
before ratification, by notice to the principal indicate its refusal to
become bound by a ratification.
137
Article 2.2.10 - Termination of authority
138
(1) Termination of authority is not effective in relation to the third
party unless the third party knew or ought to have known of it.
139
(2) Notwithstanding the termination of its authority, an agent remains
authorised to perform the acts that are necessary to prevent harm to
the principal's interests.
140
Chapter 3 - Validity
141
Article 3.1 - Matters not covered
142
These Principles do not deal with invalidity arising from
143
(a) lack of capacity;
144
(b) immorality or illegality.
145
Article 3.2 - Validity of mere agreement
146
A contract is concluded, modified or terminated by the mere agreement
of the parties, without any further requirement.
147
Article 3.3 - Initial impossibility
148
(1) The mere fact that at the time of the conclusion of the contract
the performance of the obligation assumed was impossible does not
affect the validity of the contract.
149
(2) The mere fact that at the time of the conclusion of the contract a
party was not entitled to dispose of the assets to which the contract
relates does not affect the validity of the contract.
150
Article 3.4 - Definition of mistake
151
Mistake is an erroneous assumption relat ing to facts or to law
existing when the contract was concluded.
152
Article 3.5 - Relevant mistake
153
(1) A party may only avoid the contract for mistake if, when the
contract was concluded, the mistake was of such importance that a
reasonable person in the same situation as the party in error would
only have concluded the contract on materially different terms or would
not have concluded it at all if the true state of affairs had been
known, and
154
(a) the other party made the same mistake, or caused the mistake, or
knew or ought to have known of the mistake and it was contrary to
reasonable commercial standards of fair dealing to leave the mistaken
party in error; or
155
(b) the other party had not at t he time of avoidance reasonably acted
in reliance on the contract.
156
(2) However, a party may not avoid the contract if
157
(a) it was grossly negligent in committing the mistake; or
158
(b) the mistake relates to a matter in regard to which the risk of
mistake was assumed or, having regard to the circumstances, should be
borne by the mistaken party.
159
Article 3.6 - Error in expression or transmission
160
An error occurring in the expression or transmission of a declaration
is considered to be a mistake of the person from whom the declaration
emanated.
161
Article 3.7 - Remedies for nonperformance
162
A party is not entitled to avoid the contract on the ground of mistake
if the circumstances on which that party relies afford, or could have
afforded, a remedy for nonperformance.
163
Article 3.8 - Fraud
164
A party may avoid the contract when it has been led to conclude the
contract by the other party's fraudulent representation, including
language or practices, or fraudulent nondisclosure of circumstances
which, according to reasonable commercial standards of fair dealing,
the latter party should have disclosed.
165
Article 3.9 - Threat
166
A party may avoid the contract when it has been led to conclude the
contract by the other party's unjustified threat which, having regard
to the circumstances, is so imminent and serious as to leave the first
party no reasonable alternative. In particular, a threat is unjustified
if the act or omission with which a party has been threatened is
wrongful in itself, or it is wrongful to use it as a means to obtain
the conclusion of the contract.
167
Article 3.10 - Gross disparity
168
(1) A party may avoid the contract or an individual term of it if, at
the time of the conclusion of the contract, the contract or term
unjustifiably gave the other party an excessive advantage. Regard is to
be had, among other factors, to
169
(a) the fact that the other party has taken unfair advantage of the
first party's dependence, economic distress or urgent needs, or of its
improvidence, ignorance, inexperience or lack of bargaining skill, and
170
(b) the nature and purpose of the contract.
171
(2) Upon the request of the party entitled to avoidance, a court may
adapt the contract or term in order to make it accord with reasonable
commercial standards of fair dealing.
172
(3) A court may also adapt the contract or term upon the request of the
party receiving notice of avoidance, provided that that party informs
the other party of its request promptly after receiving such notice and
before the other party has reasonably acted in reliance on it. The
provisions of Article 3.13(2) apply accordingly.
173
Article 3.11 - Third persons
174
(1) Where fraud, threat, gross disparity or a party's mistake is
imputable to, or is known or ought to be known by, a third person for
whose acts the other party is responsible, the contract may be avoided
under the same conditions as if the behaviour or knowledge had been
that of the party itself.
175
(2) Where fraud, threat or gross disparity is imputable to a third
person for whose acts the other party is not responsible, the contract
may be avoided if that party knew or ought to have known of the fraud,
threat or disparity, or has not at the time of avoidance reasonably
acted in reliance on the contract.
176
Article 3.12 - Confirmation
177
If the party entitled to avoid the contract expressly or impliedly
confirms the contract after the period of time for giving notice of
avoidance has begun to run, avoidance of the contract is excluded.
178
Article 3.13 - Loss of right to avoid
179
(1) If a party is entitled to avoid the contract for mistake but the
other party declares itself willing to perform or performs the contract
as it was understood by the party entitled to avoidance, the contract
is considered to have been concluded as the latter party understood it.
The other party must make such a declaration or render such performance
promptly after having been informed of the manner in which the party
entitled to avoidance had understood the contract and before that party
has reasonably acted in reliance on a notice of avoidance.
180
(2) After such a declaration or performance the right to avoidance is
lost and any earlier notice of avoidance is ineffective.
181
Article 3.14 - Notice of avoidance
182
The right of a party to avoid the contract is exercised by notice to
the other party.
183
Article 3.15 - Time limits
184
(1) Notice of avoidance shall be given within a reasonable time, having
regard to the circumstances, after the avoiding party knew or could not
have been unaware of the relevant facts or became capable of acting
freely.
185
(2) Where an individual term of the contract may be avoided by a party
under Article 3.10, the period of time for giving notice of avoidance
begins to run when that term is asserted by the other party.
186
Article 3.16 - Partial avoidance
187
Where a ground of avoidance affects only individual terms of the
contract, the effect of avoidance is limited to those terms unless,
having regard to the circumstances, it is unreasonable to uphold the
remaining contract.
188
Article 3.17 - Retroactive effect of avoidance
189
(1) Avoidance takes effect retroactively.
190
(2) On avoidance either party may claim restitution of whatever it has
supplied under the contract or the part of it avoided, provided that it
concurrently makes restitution of whatever it has received under the
contract or the part of it avoided or, if it cannot make restitution in
kind, it makes an allowance for what it has received.
191
Article 3.18 - Damages
192
Irrespective of whether or not the contract has been avoided, the party
who knew or ought to have known of the ground for avoidance is liable
for damages so as to put the other party in the same position in which
it would have been if it had not concluded the contract.
193
Article 3.19 - Mandatory character of the provisions
194
The provisions of this Chapter are mandatory, except insofar as they
relate to the binding force of mere agreement, initial impossibility or
mistake.
195
Article 3.20 - Unilateral declarations
196
The provisions of this Chapter apply with appropriate adaptations to
any communication of intention addressed by one party to the other.
197
Chapter 4 - Interpretation
198
Article 4.1 - Intention of the parties
199
(1) A contract shall be interpreted according to the common intention
of the parties.
200
(2) If such an intention cannot be established, the contract shall be
interpreted according to the meaning that reasonable persons of the
same kind as the parties would give to it in the same circumstances.
201
Article 4.2 - Interpretation of statements and other conduct
202
(1) The statements and other conduct of a party shall be interpreted
according to that party's intention if the other party knew or could
not have been unaware of that intention.
203
(2) If the preceding paragraph is not applicable, such statements and
other conduct shall be interpreted according to the meaning that a
reasonable person of the same kind as the other party would give to it
in the same circumstances.
204
Article 4.3 - Relevant circumstances
205
In applying Articles 4.1 and 4.2, regard shall be had to all the
circumstances, including
206
(a) preliminary negotiations between the parties;
207
(b) practices which the parties have established between themselves;
208
(c) the conduct of the parties subsequent to the conclusion of the
contract;
209
(d) the nature and purpose of the contract;
210
(e) the meaning commonly given to terms and expressions in the trade
concerned;
211
(f) usages.
212
Article 4.4 - Reference to contract or statement as a whole
213
Terms and expressions shall be interpreted in the light of the whole
contract or statement in which they appear.
214
Article 4.5 - All terms to be given effect
215
Contract terms shall be interpreted so as to give effect to all the
terms rather than to deprive some of them of effect.
216
Article 4.6 - Contra proferentem rule
217
If contract terms supplied by one party are unclear, an interpretation
against that party is preferred.
218
Article 4.7 - Linguistic discrepancies
219
Where a contract is drawn up in two or more language versions which are
equally authoritative there is, in case of discrepancy between the
versions, a preference for the interpretation according to a version in
which the contract was originally drawn up.
220
Article 4.8 - Supplying an omitted term
221
(1) Where the parties to a contract have not agreed with respect to a
term which is important for a determination of their rights and duties,
a term which is appropriate in the circumstances shall be supplied.
222
(2) In determining what is an appropriate term regard shall be had,
among other factors, to
223
(a) the intention of the parties;
224
(b) the nature and purpose of the contract;
225
(c) good faith and fair dealing;
226
(d) reasonableness.
227
Chapter 5 - Content and Third Party Rights
228
Section 1 - Content
229
Article 5.1.1 - Express and implied obligations
230
The contractual obligations of the parties may be express or implied.
231
Article 5.1.2 - Implied obligations
232
Implied obligations stem from
233
(a) the nature and purpose of the contract;
234
(b) practices established between the parties and usages;
235
(c) good faith and fair dealing;
236
(d) reasonableness.
237
Article 5.1.3 - Cooperation between the parties
238
Each party shall cooperate with the other party when such cooperation
may reasonably be expected for the performance of that party's
obligations.
239
Article 5.1.4 - Duty to achieve a specific result. Duty of best efforts
240
(1) To the extent that an obligation of a party involves a duty to
achieve a specific result, that party is bound to achieve that result.
241
(2) To the extent that an obligation of a party involves a duty of best
efforts in the performance of an activity, that party is bound to make
such efforts as would be made by a reasonable person of the same kind
in the same circumstances.
242
Article 5.1.5 - Determination of kind of duty involved
243
In determining the extent to which an obligation of a party involves a
duty of best efforts in the performance of an activity or a duty to
achieve a specific result, regard shall be had, among other factors, to
244
(a) the way in which the obligation is expressed in the contract;
245
(b) the contractual price and other terms of the contract;
246
(c) the degree of risk normally involved in achieving the expected
result;
247
(d) the ability of the other party to influence the performance of the
obligation.
248
Article 5.1.6 - Determination of quality of performance
249
Where the quality of performance is neither fixed by, nor determinable
from, the contract a party is bound to render a performance of a
quality that is reasonable and not less than average in the
circumstances.
250
Article 5.1.7 - Price determination
251
(1) Where a contract does not fix or make provision for determining the
price, the parties are considered, in the absence of any indication to
the contrary, to have made reference to the price generally charged at
the time of the conclusion of the contract for such performance in
comparable circumstances in the trade concerned or, if no such price is
available, to a reasonable price.
252
(2) Where the price is to be determined by one party and that
determination is manifestly unreasonable, a reasonable price shall be
substituted notwithstanding any contract term to the contrary.
253
(3) Where the price is to be fixed by a third person, and that person
cannot or will not do so, the price shall be a reasonable price.
254
(4) Where the price is to be fixed by reference to factors which do not
exist or have ceased to exist or to be accessible, the nearest
equivalent factor shall be treated as a substitute.
255
Article 5.1.8 - Contract for an indefinite period
256
A contract for an indefinite period may be ended by either party by
giving notice a reasonable time in advance.
257
Article 5.1.9 - Release by agreement
258
(1) An obligee may release its right by agreement with the obligor.
259
(2) An offer to release a right gratuitously shall be deemed accepted
if the obligor does not reject the offer without delay after having
become aware of it.
260
Section 2 - Third Party Rights
261
Article 5.2.1 - Contracts in favour of third parties
262
(1) The parties (the "promisor" and the "promisee") may confer by
express or implied agreement a right on a third party (the
"beneficiary").
263
(2) The existence and content of the beneficiary's right against the
promisor are determined by the agreement of the parties and are subject
to any conditions or other limitations under the agreement.
264
Article 5.2.2 - Third party identifiable
265
The beneficiary must be identifiable with adequate certainty by the
contract but need not be in existence at the time the contract is made.
266
Article 5.2.3 - Exclusion and limitation clauses
267
The conferment of rights in the beneficiary includes the right to
invoke a clause in the contract which excludes or limits the liability
of the beneficiary.
268
Article 5.2.4 - Defences
269
The promisor may assert against the beneficiary all defences which the
promisor could assert against the promisee.
270
Article 5.2.5 - Revocation
271
The parties may modify or revoke the rights conferred by the contract
on the beneficiary until the beneficiary has accepted them or
reasonably acted in reliance on them.
272
Article 5.2.6 - Renunciation
273
The beneficiary may renounce a right conferred on it.
274
Chapter 6 - Performance
275
Section 1 - Performance in General
276
Article 6.1.1 - Time of performance
277
A party must perform its obligations:
278
(a) if a time is fixed by or determinable from the contract, at that
time;
279
(b) if a period of time is fixed by or determinable from the contract,
at any time within that period unless circumstances indicate that the
other party is to choose a time;
280
(c) in any other case, within a reasonable time after the conclusion of
the contract.
281
Article 6.1.2 - Performance at one time or in instalments
282
In cases under Article 6.1.1(b) or (c), a party must perform its
obligations at one time if that performance can be rendered at one time
and the circumstances do not indicate otherwise.
283
Article 6.1.3 - Partial performance
284
(1) The obligee may reject an offer to perform in part at the time
performance is due, whether or not such offer is coupled with an
assurance as to the balance of the performance, unless the obligee has
no legitimate interest in so doing.
285
(2) Additional expenses caused to the obligee by partial performance
are to be borne by the obligor without prejudice to any other remedy.
286
Article 6.1.4 - Order of performance
287
(1) 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.
288
(2) To the extent that the performance of only one party requires a
period of time, that party is bound to render its performance first,
unless the circumstances indicate otherwise.
289
Article 6.1.5 - Earlier performance
290
(1) The obligee may reject an earlier performance unless it has no
legitimate interest in so doing.
291
(2) Acceptance by a party of an earlier performance does not affect the
time for the performance of its own obligations if that time has been
fixed irrespective of the performance of the other party's obligations.
292
(3) Additional expenses caused to the obligee by earlier performance
are to be borne by the obligor, without prejudice to any other remedy.
293
Article 6.1.6 - Place of performance
294
(1) If the place of performance is neither fixed by, nor determinable
from, the contract, a party is to perform:
295
(a) a monetary obligation, at the obligee's place of business;
296
(b) any other obligation, at its own place of business.
297
(2) A party must bear any increase in the expenses incidental to
performance which is caused by a change in its place of business
subsequent to the conclusion of the contract.
298
Article 6.1.7 - Payment by cheque or other instrument
299
(1) Payment may be made in any form used in the ordinary course of
business at the place for payment.
300
(2) However, an obligee who accepts, either by virtue of paragraph (1)
or voluntarily, a cheque, any other order to pay or a promise to pay,
is presumed to do so only on condition that it will be honoured.
301
Article 6.1.8 - Payment by funds transfer
302
(1) Unless the obligee has indicated a particular account, payment may
be made by a transfer to any of the financial institutions in which the
obligee has made it known that it has an account.
303
(2) In case of payment by a transfer the obligation of the obligor is
discharged when the transfer to the obligee's financial institution
becomes effective.
304
Article 6.1.9 - Currency of payment
305
(1) If a monetary obligation is expressed in a currency other than that
of the place for payment, it may be paid by the obligor in the currency
of the place for payment unless
306
(a) that currency is not freely convertible; or
307
(b) the parties have agreed that payment should be made only in the
currency in which the monetary obligation is expressed.
308
(2) If it is impossible for the obligor to make payment in the currency
in which the monetary obligation is expressed, the obligee may require
payment in the currency of the place for payment, even in the case
referred to in paragraph (1)(b).
309
(3) Payment in the currency of the place for payment is to be made
according to the applicable rate of exchange prevailing there when
payment is due.
310
(4) However, if the obligor has not paid at the time when payment is
due, the obligee may require payment according to the applicable rate
of exchange prevailing either when payment is due or at the time of
actual payment.
311
Article 6.1.10 - Currency not expressed
312
Where a monetary obligation is not expressed in a particular currency,
payment must be made in the currency of the place where payment is to
be made.
313
Article 6.1.11 - Costs of performance
314
Each party shall bear the costs of performance of its obligations.
315
Article 6.1.12 - Imputation of payments
316
(1) An obligor owing several monetary obligations to the same obligee
may specify at the time of payment the debt to which it intends the
payment to be applied.
317
However, the payment discharges first any expenses, then interest due
and finally the principal.
318
(2) If the obligor makes no such specification, the obligee may, within
a reasonable time after payment, declare to the obligor the obligation
to which it imputes the payment, provided that the obligation is due
and undisputed.
319
(3) In the absence of imputation under paragraphs (1) or (2), payment
is imputed to that obligation which satisfies one of the following
criteria in the order indicated:
320
(a) an obligation which is due or which is the first to fall due;
321
(b) the obligation for which the obligee has least security;
322
(c) the obligation which is the most burdensome for the obligor;
323
(d) the obligation which has arisen first.
324
If none of the preceding criteria applies, payment is imputed to all
the obligations proportionally.
325
Article 6.1.13 - Imputation of nonmonetary obligations
326
Article 6.1.12 applies with appropriate adaptations to the
imputation of performance of nonmonetary obligations.
327
Article 6.1.14 - Application for public permission
328
Where the law of a State requires a public permission affecting the
validity of the contract or its performance and neither that law nor
the circumstances indicate otherwise
329
(a) if only one party has its place of business in that State, that
party shall take the measures necessary to obtain the permission;
330
(b) in any other case the party whose performance requires permission
shall take the necessary measures.
331
Article 6.1.15 - Procedure in applying for permission
332
(1) The party required to take the measures necessary to obtain the
permission shall do so without undue delay and shall bear any expenses
incurred.
333
(2) That party shall whenever appropriate give the other party notice
of the grant or refusal of such permission without undue delay .
334
Article 6.1.16 - Permission neither granted nor refused
335
(1) If, notwithstanding the fact that the party responsible has taken
all measures required, permission is neither granted nor refused within
an agreed period or, where no period has been agreed, within a
reasonable time from the conclusion of the contract, either party is
entitled to terminate the contract.
336
(2) Where the permission affects some terms only, paragraph (1) does
not apply if, having regard to the circumstances, it is reasonable to
uphold the remaining contract even if the permission is refused.
337
Article 6.1.17 - Permission refused
338
(1) The refusal of a permission affecting the validity of the contract
renders the contract void. If the refusal affects the validity of some
terms only, only such terms are void if, having regard to the
circumstances, it is reasonable to uphold the remaining contract.
339
(2) Where the refusal of a permission renders the performance of the
contract im possible in whole or in part, the rules on
nonperformance apply.
340
Section 2 - Hardship
341
Article 6.2.1 - Contract to be observed
342
Where the performance of a contract becomes more onerous for one of the
parties, that party is nevertheless bound to perform its obligations
subject to the following provisions on hardship .
343
Article 6.2.2 - Definition of hardship
344
There is hardship where the occurrence of events fundamentally alters
the equilibrium of the contract either because the cost of a party's
performance has increased or because the value of the performance a
party receives has diminished, and
345
(a) the events occur or become known to the disadvantaged party after
the conclusion of the contract;
346
(b) the events could not reasonably have been taken into account by the
disadvantaged party at the time of the conclusion of the contract;
347
(c) the events are beyond the control of the disadvantaged party; and
348
(d) the risk of the events was not assumed by the disadvantaged party.
349
Article 6.2.3 - Effects of hardship
350
(1) In case of hardship the disadvantaged party is entitled to request
renegotiations. The request shall be made without undue delay and shall
indicate the grounds on which it is based.
351
(2) The request for renegotiation does not in itself entitle the
disadvantaged party to withhold performance.
352
(3) Upon failure to reach agreement within a reasonable time either
party may resort to the court.
353
(4) If the court finds hardship it may, if reasonable,
354
(a) terminate the contract at a date and on terms to be fixed, or
355
(b) adapt the contract with a view to restoring its equilibrium.
356
Chapter 7 - NonPerformance
357
Section 1 - NonPerformance in general
358
Article 7.1.1 - Nonperformance defined
359
Nonperformance is failure by a party to perform any of its
obligations under the contract, including defective performance or late
performance.
360
Article 7.1.2 - Interference by the other party
361
A party may not rely on the nonperformance of the other party to the
extent that such nonperformance was caused by the first party's act
or omission or by another event as to which the first party bears the
risk.
362
Article 7.1.3 - Withholding performance
363
(1) Where the parties are to perform simultaneously, either party may
withhold performance until the other party tenders its performance.
364
(2) Where the parties are to perform consecutively, the party that is
to perform later may withhold its performance until the first party has
performed.
365
Article 7.1.4 - Cure by nonperforming party
366
(1) The nonperforming party may, at its own expense, cure any
nonperformance, provided that
367
(a) without undue delay, it gives notice indicating the proposed manner
and timing of the cure;
368
(b) cure is appropriate in the circumstances;
369
(c) the aggrieved party has no legitimate interest in refusing cure;
and
370
(d) cure is effected promptly.
371
(2) The right to cure is not precluded by notice of termination.
372
(3) Upon effective notice of cure, rights of the aggrieved party that
are inconsistent with the nonperforming party's performance are
suspended until the time for cure has expired.
373
(4) The aggrieved party may withhold performance pending cure.
374
(5) Notwithstanding cure, the aggrieved party retains the right to
claim damages for delay as well as for any harm caused or not prevented
by the cure.
375
Article 7.1.5 - Additional period for performance
376
(1) In a case of nonperformance the aggrieved party may by notice to
the other party allow an additional period of time for performance.
377
(2) During the additional period the aggrieved party may withhold
performance of its own reciprocal obligations and may claim damages but
may not resort to any other remedy. If it 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 this Chapter.
378
(3) Where in a case of delay in performance which is not fundamental
the aggrieved party has given notice allowing an additional period of
time of reasonable length, it may terminate the contract at the end of
that period. If the additional period allowed is not of reasonable
length it shall be extended to a reasonable length. The aggrieved party
may in its notice provide that if the other party fails to perform
within the period allowed by the notice the contract shall
automatically terminate.
379
(4) Paragraph (3) does not apply where the obligation which has not
been performed is only a minor part of the contractual obligation of
the nonperforming party.
380
Article 7.1.6 - Exemption clauses
381
A clause which limits or excludes one party's liability for
nonperformance or which permits one party to render performance
substantially different from what the other party reasonably expected
may not be invoked if it would be grossly unfair to do so, having
regard to the purpose of the contract.
382
Article 7.1.7 - Force majeure
383
(1) Nonperformance by a party is excused if that party proves that
the nonperformance was due to an impediment beyond its control and
that it could not reasonably be expected to have taken the impediment
into account at the time of the conclusion of the contract or to have
avoided or overcome it or its consequences.
384
(2) When the impediment is only temporary, the excuse shall have effect
for such period as is reasonable having regard to the effect of the
impediment on the performance of the contract.
385
(3) The party who fails to perform must give notice to the other party
of the impediment and its effect on its ability to perform. If the
notice is not received by the other party within a reasonable time
after the party who fails to perform knew or ought to have known of the
impediment, it is liable for damages resulting from such nonreceipt.
386
(4) Nothing in this article prevents a party from exercising a right to
terminate the contract or to withhold performance or request interest
on money due.
387
Section 2 - Right to Performance
388
Article 7.2.1 - Performance of monetary obligation
389
Where a party who is obliged to pay money does not do so, the other
party may require payment.
390
Article 7.2.2 - Performance of nonmonetary obligation
391
Where a party who owes an obligation other than one to pay money does
not perform, the other party may require performance, unless
392
(a) performance is impossible in law or in fact;
393
(b) performance or, where relevant, enforcement is unreasonably
burdensome or expensive;
394
(c) the party entitled to performance may reasonably obtain performance
from another source;
395
(d) performance is of an exclusively personal character; or
396
(e) the party entitled to performance does not require performance
within a reasonable time after it has, or ought to have, become aware
of the nonperformance.
397
Article 7.2.3 - Repair and replacement of defective performance
398
The right to performance includes in appropriate cases the right to
require repair, replacement, or other cure of defective performance.
The provisions of Articles 7.2.1 and 7.2.2 apply accordingly.
399
Article 7.2.4 - Judicial penalty
400
(1) Where the court orders a party to perform, it may also direct that
this party pay a penalty if it does not comply with the order.
401
(2) The penalty shall be paid to the aggrieved party unless mandatory
provisions of the law of the forum provide otherwise. Payment of the
penalty to the aggrieved party does not exclude any claim for damages.
402
Article 7.2.5 - Change of remedy
403
(1) An aggrieved party who has required performance of a nonmonetary
obligation and who has not received performance within a period fixed
or otherwise within a reasonable period of time may invoke any other
remedy.
404
(2) Where the decision of a court for performance of a nonmonetary
obligation cannot be enforced, the aggrieved party may invoke any other
remedy.
405
Section 3 - Termination
406
Article 7.3.1 - Right to terminate the contract
407
(1) A party may terminate the contract where the failure of the other
party to perform an obligation under the contract amounts to a
fundamental nonperformance.
408
(2) In determining whether a failure to perform an obligation amounts
to a fundamental nonperformance regard shall be had, in particular,
to whether
409
(a) the nonperformance substantially deprives the aggrieved party of
what it was entitled to expect under the contract unless the other
party did not foresee and could not reasonably have foreseen such
result;
410
(b) strict compliance with the obligation which has not been performed
is of essence under the contract;
411
(c) the nonperformance is intentional or reckless;
412
(d) the nonperformance gives the aggrieved party reason to believe
that it cannot rely on the other party's future performance;
413
(e) the nonperforming party will suffer disproportionate loss as a
result of the preparation or performance if the contract is terminated.
414
(3) In the case of delay the aggrieved party may also terminate the
contract if the other party fails to perform before the time allowed it
under Article 7.1.5 has expired.
415
Article 7.3.2 - Notice of termination
416
(1) The right of a party to terminate the contract is exercised by
notice to the other party.
417
(2) If performance has been offered late or otherwise does not conform
to the contract the aggrieved party will lose its right to terminate
the contract unless it gives notice to the other party within a
reasonable time after it has or ought to have become aware of the offer
or of the nonconforming performance.
418
Article 7.3.3 - Anticipatory nonperformance
419
Where prior to the date for performance by one of the parties it is
clear that there will be a fundamental nonperformance by that party,
the other party may terminate the contract.
420
Article 7.3.4 - Adequate assurance of due performance
421
A party who reasonably believes that there will be a fundamental
nonperformance by the other party may demand adequate assurance of
due performance and may meanwhile withhold its own performance. Where
this assurance is not provided within a reasonable time the party
demanding it may terminate the contract.
422
Article 7.3.5 - Effects of termination in general
423
(1) Termination of the contract releases both parties from their
obligation to effect and to receive future performance.
424
(2) Termination does not preclude a claim for damages for
nonperformance.
425
(3) Termination does not affect any provision in the contract for the
settlement of disputes or any other term of the contract which is to
operate even after termination.
426
Article 7.3.6 - Restitution
427
(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.
428
(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.
429
Section 4 - Damages
430
Article 7.4.1 - Right to damages
431
Any nonperformance gives the aggrieved party a right to damages
either exclusively or in conjunction with any other remedies except
where the nonperformance is excused under these Principles.
432
Article 7.4.2 - Full compensation
433
(1) The aggrieved party is entitled to full compensation for harm
sustained as a result of the nonperformance. Such harm includes both
any loss which it suffered and any gain of which it was deprived,
taking into account any gain to the aggrieved party resulting from its
avoidance of cost or harm.
434
(2) Such harm may be nonpecuniary and includes, for instance,
physical suffering or emotional distress.
435
Article 7.4.3 - Certainty of harm
436
(1) Compensation is due only for harm, including future harm, that is
established with a reasonable degree of certainty.
437
(2) Compensation may be due for the loss of a chance in proportion to
the probability of its occurrence.
438
(3) Where the amount of damages cannot be established with a sufficient
degree of certainty, the assessment is at the discretion of the court.
439
Article 7.4.4 - Foreseeability of harm
440
The nonperforming party is liable only for harm which it foresaw or
could reasonably have foreseen at the time of the conclusion of the
contract as being likely to result from its nonperformance.
441
Article 7.4.5 - Proof of harm in case of replacement transaction
442
Where the aggrieved party has terminated the contract and has made a
replacement transaction within a reasonable time and in a reasonable
manner it may recover the difference between the contract price and the
price of the replacement transaction as well as damages for any further
harm.
443
Article 7.4.6 - Proof of harm by current price
444
(1) Where the aggrieved party has terminated the contract and has not
made a replacement transaction but there is a current price for the
performance contracted for, it 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 harm.
445
(2) Current price is the price generally charged for goods delivered or
services rendered in comparable circumstances at the place where the
contract should have been performed or, if there is no current price at
that place, the current price at such other place that appears
reasonable to take as a reference.
446
Article 7.4.7 - Harm due in part to aggrieved party
447
Where the harm is due in part to an act or omission of the aggrieved
party or to another event as to which that party bears the risk, the
amount of damages shall be reduced to the extent that these factors
have contributed to the harm, having regard to the conduct of each of
the parties.
448
Article 7.4.8 - Mitigation of harm
449
(1) The nonperforming party is not liable for harm suffered by the
aggrieved party to the extent that the harm could have been reduced by
the latter party's taking reasonable steps.
450
(2) The aggrieved party is entitled to recover any expenses reasonably
incurred in attempting to reduce the harm.
451
Article 7.4.9 - Interest for failure to pay money
452
(1) If a party does not pay a sum of money when it falls due the
aggrieved party is entitled to interest upon that sum from the time
when payment is due to the time of payment whether or not the
nonpayment is excused.
453
(2) The rate of interest shall be the average bank shortterm lending
rate to prime borrowers prevailing for the currency of payment at the
place for payment, or where no such rate exists at that place, then the
same rate in the State of the currency of payment. In the absence of
such a rate at either place the rate of interest shall be the
appropriate rate fixed by the law of the State of the currency of
payment.
454
(3) The aggrieved party is entitled to additional damages if the
nonpayment caused it a greater harm.
455
Article 7.4.10 - Interest on damages
456
Unless otherwise agreed, interest on damages for nonperformance of
nonmonetary obligations accrues as from the time of nonperformance.
457
Article 7.4.11 - Manner of monetary redress
458
(1) Damages are to be paid in a lump sum. However, they may be payable
in instalments where the nature of the harm makes this appropriate.
459
(2) Damages to be paid in instalments may be indexed.
460
Article 7.4.12 - Currency in which to assess damages
461
Damages are to be assessed either in the currency in which the monetary
obligation was expressed or in the currency in which the harm was
suffered, whichever is more appropriate.
462
Article 7.4.13 - Agreed payment for nonperformance
463
(1) Where the contract provides that a party who does not perform is to
pay a specified sum to the aggrieved party for such nonperformance,
the aggrieved party is entitled to that sum irrespective of its actual
harm.
464
(2) However, notwithstanding any agreement to the contrary the
specified sum may be reduced to a reasonable amount where it is grossly
excessive in relation to the harm resulting from the nonperformance
and to the other circumstances.
465
Chapter 8 - SetOff
466
Article 8.1 - Conditions of setoff
467
(1) Where two parties owe each other money or other performances of the
same kind, either of them ("the first party") may set off its
obligation against that of its obligee ("the other party") if at the
time of setoff,
468
(a) the first party is entitled to perform its obligation;
469
(b) the other party's obligation is ascertained as to its existence and
amount and performance is due.
470
(2) If the obligations of both parties arise from the same contract,
the first party may also set off its obligation against an obligation
of the other party which is not ascertained as to its existence or to
its amount.
471
Article 8.2 - Foreign currency setoff
472
Where the obligations are to pay money in different currencies, the
right of setoff may be exercised, provided that both currencies are
freely convertible and the parties have not agreed that the first party
shall pay only in a specified currency.
473
Article 8.3 - Setoff by notice
474
The right of setoff is exercised by notice to the other party.
475
Article 8.4 - Content of notice
476
(1) The notice must specify the obligations to which it relates.
477
(2) If the notice does not specify the obligation against which
setoff is exercised, the other party may, within a reasonable time,
declare to the first party the obligation to which setoff relates. If
no such declaration is made, the setoff will relate to all the
obligations proportionally.
478
Article 8.5 - Effect of setoff
479
(1) Setoff discharges the obligations.
480
(2) If obligations differ in amount, setoff discharges the
obligations up to the amount of the lesser obligation.
481
(3) Setoff takes effect as from the time of notice.
482
Chapter 9 - Assignment of Rights, Transfer of Obligations, Assignment
of Contracts
483
Section 1 - Assignment of Rights
484
Article 9.1.1 - Definitions
485
"Assignment of a right" means the transfer by agreement from one person
(the "assignor") to another person (the "assignee"), including transfer
by way of security, of the assignor's right to payment of a monetary
sum or other performance from a third person ("the obligor").
486
Article 9.1.2 - Exclusions
487
This Section does not apply to transfers made under the special rules
governing the transfers:
488
(a) of instruments such as negotiable instruments, documents of title
or financial instruments, or
489
(b) of rights in the course of transferring a business.
490
Article 9.1.3 - Assignability of nonmonetary rights
491
A right to nonmonetary performance may be assigned only if the
assignment does not render the obligation significantly more
burdensome.
492
Article 9.1.4 - Partial assignment
493
(1) A right to the payment of a monetary sum may be assigned partially.
494
(2) A right to other performance may be assigned partially only if it
is divisible, and the assignment does not render the obligation
significantly more burdensome.
495
Article 9.1.5 - Future rights
496
A future right is deemed to be transferred at the time of the
agreement, provided the right, when it comes into existence, can be
identified as the right to which the assignment relates.
497
Article 9.1.6 - Rights assigned without individual specification
498
A number of rights may be assigned without individual specification,
provided such rights can be identified as rights to which the
assignment relates at the time of the assignment or when they come into
existence.
499
Article 9.1.7 - Agreement between assignor and assignee sufficient
500
(1) A right is assigned by mere agreement between the assignor and the
assignee, without notice to the obligor.
501
(2) The consent of the obligor is not required unless the obligation in
the circumstances is of an essentially personal character.
502
Article 9.1.8 - Obligor's additional costs
503
The obligor has a right to be compensated by the assignor or the
assignee for any additional costs caused by the assignment.
504
Article 9.1.9 - Nonassignment clauses
505
(1) The assignment of a right to the payment of a monetary sum is
effective notwithstanding an agreement between the assignor and the
obligor limiting or prohibiting such an assignment. However, the
assignor may be liable to the obligor for breach of contract.
506
(2) The assignment of a right to other performance is ineffective if it
is contrary to an agreement between the assignor and the obligor
limiting or prohibiting the assignment. Nevertheless, the assignment is
effective if the assignee, at the time of the assignment, neither knew
nor ought to have known of the agreement. The assignor may then be
liable to the obligor for breach of contract.
507
Article 9.1.10 - Notice to the obligor
508
(1) Until the obligor receives a notice of the assignment from either
the assignor or the assignee, it is discharged by paying the assignor.
509
(2) After the obligor receives such a notice, it is discharged only by
paying the assignee.
510
Article 9.1.11 - Successive assignments
511
If the same right has been assigned by the same assignor to two or more
successive assignees, the obligor is discharged by paying according to
the order in which the notices were received.
512
Article 9.1.12 - Adequate proof of assignment
513
(1) If notice of the assignment is given by the assignee, the obligor
may request the assignee to provide within a reasonable time adequate
proof that the assignment has been made.
514
(2) Until adequate proof is provided, the obligor may withhold payment.
515
(3) Unless adequate proof is provided, notice is not effective.
516
(4) Adequate proof includes, but is not limited to, any writing
emanating from the assignor and indicating that the assignment has
taken place.
517
Article 9.1.13 - Defences and rights of setoff
518
(1) The obligor may assert against the assignee all defences that the
obligor could assert against the assignor.
519
(2) The obligor may exercise against the assignee any right of setoff
available to the obligor against the assignor up to the time notice of
assignment was received.
520
Article 9.1.14 - Rights related to the right assigned
521
The assignment of a right transfers to the assignee:
522
(a) all the assignor's rights to payment or other performance under the
contract in respect of the right assigned, and
523
(b) all rights securing performance of the right assigned.
524
Article 9.1.15 - Undertakings of the assignor
525
The assignor undertakes towards the assignee, except as otherwise
disclosed to the assignee, that:
526
(a) the assigned right exists at the time of the assignment, unless the
right is a future right;
527
(b) the assignor is entitled to assign the right;
528
(c) the right has not been previously assigned to another assignee, and
it is free from any right or claim from a third party;
529
(d) the obligor does not have any defences;
530
(e) neither the obligor nor the assignor has given notice of setoff
concerning the assigned right and will not give any such notice;
531
(f) the assignor will reimburse the assignee for any payment received
from the obligor before notice of the assignment was given.
532
Section 2 - Transfer of Obligations
533
Article 9.2.1 - Modes of transfer
534
An obligation to pay money or render other performance may be
transferred from one person (the "original obligor") to another person
(the "new obligor") either
535
a) by an agreement between the original obligor and the new obligor
subject to Article 9.2.3, or
536
b) by an agreement between the obligee and the new obligor, by which
the new obligor assumes the obligation.
537
Article 9.2.2 - Exclusion
538
This Section does not apply to transfers of obligations made under the
special rules governing transfers of obligations in the course of
transferring a business.
539
Article 9.2.3 - Requirement of obligee's consent to transfer
540
The transfer of an obligation by an agreement between the original
obligor and the new obligor requires the consent of the obligee.
541
Article 9.2.4 - Advance consent of obligee
542
(1) The obligee may give its consent in advance.
543
(2) If the obligee has given its consent in advance, the transfer of
the obligation becomes effective when a notice of the transfer is given
to the obligee or when the obligee acknowledges it.
544
Article 9.2.5 - Discharge of original obligor
545
(1) The obligee may discharge the original obligor.
546
(2) The obligee may also retain the original obligor as an obligor in
case the new obligor does not perform properly.
547
(3) Otherwise the original obligor and the new obligor are jointly and
severally liable.
548
Article 9.2.6 - Third party performance
549
(1) Without the obligee's consent, the obligor may contract with
another person that this person will perform the obligation in place of
the obligor, unless the obligation in the circumstances has an
essentially personal character.
550
(2) The obligee retains its claim against the obligor.
551
Article 9.2.7 - Defences and rights of setoff
552
(1) The new obligor may assert against the obligee all defences which
the original obligor could assert against the obligee.
553
(2) The new obligor may not exercise against the obligee any right of
setoff available to the original obligor against the obligee.
554
Article 9.2.8 - Rights related to the obligation transferred
555
(1) The obligee may assert against the new obligor all its rights to
payment or other performance under the contract in respect of the
obligation transferred.
556
(2) If the original obligor is discharged under Article 9.2.5(1), a
security granted by any person other than the new obligor for the
performance of the obligation is discharged, unless that other person
agrees that it should continue to be available to the obligee.
557
(3) Discharge of the original obligor also extends to any security of
the original obligor given to the obligee for the performance of the
obligation, unless the security is over an asset which is transferred
as part of a transaction between the original obligor and the new
obligor.
558
Section 3 - Assignment of Contracts
559
Article 9.3.1 - Definitions
560
"Assignment of a contract" means the transfer by agreement from one
person (the "assignor") to another person (the "assignee") of the
assignor's rights and obligations arising out of a contract with
another person (the "other party").
561
Article 9.3.2 - Exclusion
562
This Section does not apply to the assignment of contracts made under
the special rules governing transfers of contracts in the course of
transferring a business.
563
Article 9.3.3 - Requirement of consent of the other party
564
The assignment of a contract requires the consent of the other party.
565
Article 9.3.4 - Advance consent of the other party
566
(1) The other party may give its consent in advance.
567
(2) If the other party has given its consent in advance, the assignment
of the contract becomes effective when a notice of the assignment is
given to the other party or when the other party acknowledges it.
568
Article 9.3.5 - Discharge of the assignor
569
(1) The other party may discharge the assignor.
570
(2) The other party may also retain the assignor as an obligor in case
the assignee does not perform properly.
571
(3) Otherwise the assignor and the assignee are jointly and severally
liable.
572
Article 9.3.6 - Defences and rights of setoff
573
(1) To the extent that the assignment of a contract involves an
assignment of rights, Article 9.1.13 applies accordingly.
574
(2) To the extent that the assignment of a contract involves a transfer
of obligations, Article 9.2.7 applies accordingly.
575
Article 9.3.7 - Rights transferred with the contract
576
(1) To the extent that the assignment of a contract involves an
assignment of rights, Article 9.1.14 applies accordingly.
577
(2) To the extent that the assignment of a contract involves a transfer
of obligations, Article 9.2.8 applies accordingly.
578
Chapter 10 - Limitation Periods
579
Article 10.1 - Scope of the Chapter
580
(1) The exercise of rights governed by these Principles is barred by
the expiration of a period of time, referred to as "limitation period",
according to the rules of this Chapter.
581
(2) This Chapter does not govern the time within which one party is
required under these Principles, as a condition for the acquisition or
exercise of its right, to give notice to the other party or to perform
any act other than the institution of legal proceedings.
582
Article 10.2 - Limitation periods
583
(1) The general limitation period is three years beginning on the day
after the day the obligee knows or ought to know the facts as a result
of which the obligee's right can be exercised.
584
(2) In any event, the maximum limitation period is ten years beginning
on the day after the day the right can be exercised.
585
Article 10.3 - Modification of limitation periods by the parties
586
(1) The parties may modify the limitation periods.
587
(2) However they may not
588
(a) shorten the general limitation period to less than one year;
589
(b) shorten the maximum limitation period to less than four years;
590
(c) extend the maximum limitation period to more than fifteen years.
591
Article 10.4 - New limitation period by acknowledgement
592
(1) Where the obligor before the expiration of the general limitation
period acknowledges the right of the obligee, a new general limitation
period begins on the day after the day of the acknowledgement.
593
(2) The maximum limitation period does not begin to run again, but may
be exceeded by the beginning of a new general limitation period under
Art. 10.2(1).
594
Article 10.5 - Suspension by judicial proceedings
595
(1) The running of the limitation period is suspended
596
(a) when the obligee performs any act, by commencing judicial
proceedings or in judicial proceedings already instituted, that is
recognised by the law of the court as asserting the obligee's right
against the obligor;
597
(b) in the case of the obligor's insolvency when the obligee has
asserted its rights in the insolvency proceedings; or
598
(c) in the case of proceedings for dissolution of the entity which is
the obligor when the obligee has asserted its rights in the dissolution
proceedings.
599
(2) Suspension lasts until a final decision has been issued or until
the proceedings have been otherwise terminated.
600
Article 10.6 - Suspension by arbitral proceedings
601
(1) The running of the limitation period is suspended when the obligee
performs any act, by commencing arbitral proceedings or in arbitral
proceedings already instituted, that is recognised by the law of the
arbitral tribunal as asserting the obligee's right against the obligor.
In the absence of regulations for arbitral proceedings or provisions
determining the exact date of the commencement of arbitral proceedings,
the proceedings are deemed to commence on the date on which a request
that the right in dispute should be adjudicated reaches the obligor.
602
(2) Suspension lasts until a binding decision has been issued or until
the proceedings have been otherwise terminated.
603
Article 10.7 - Alternative dispute resolution
604
The provisions of Articles 10.5 and 10.6 apply with appropriate
modifications to other proceedings whereby the parties request a third
person to assist them in their attempt to reach an amicable settlement
of their dispute.
605
Article 10.8 - Suspension in case of force majeure, death or incapacity
606
(1) Where the obligee has been prevented by an impediment that is
beyond its control and that it could neither avoid nor overcome, from
causing a limitation period to cease to run under the preceding
articles, the general limitation period is suspended so as not to
expire before one year after the relevant impediment has ceased to
exist.
607
(2) Where the impediment consists of the incapacity or death of the
obligee or obligor, suspension ceases when a representative for the
incapacitated or deceased party or its estate has been appointed or a
successor has inherited the respective party's position. The additional
oneyear period under paragraph (1) applies accordingly.
608
Article 10.9 - The effects of expiration of limitation period
609
(1) The expiration of the limitation period does not extinguish the
right.
610
(2) For the expiration of the limitation period to have effect, the
obligor must assert it as a defence.
611
(3) A right may still be relied on as a defence even though the
expiration of the limitation period for that right has been asserted.
612
Article 10.10 - Right of setoff
613
The obligee may exercise the right of setoff until the obligor has
asserted the expiration of the limitation period.
614
Article 10.11 - Restitution
615
Where there has been performance in order to discharge an obligation,
there is no right of restitution merely because the limitation period
has expired.
616
Endnotes
617
Endnotes