3.4 UNIFORM REMEDY IN UNIDROIT PRINCIPLES / PECL

3.4.1 Introduction

While some may argue that parties to a CISG contract do not generally seek specific performance due to the problems and difficulties in execution, and as a commercial solution rather claims damages, the specific performance rule is an important rule, particularly in international trade. The most natural remedy for a breach of contract is the right to require performance, reflecting the importance of the contract made between the parties.  ¹³² 

However, it must be remembered that, in situations, where the CISG will be the applicable law of the dispute, Art. 28 may cause significant problems concerning the possibilities to predict whether the court or arbitral tribunal will enter a judgment for specific performance if the remedy is sought. It follows from the discussion above that specific performance under the CISC scheme leads to disparate results in different forum courts. The reasoning to this is mainly Art. 28, which makes the remedial uniformity uncertain by providing the court the possibility to effectuate specific performance through its own domestic law. It has also been stated that the effect of Art. 28 leads to a risk of forum shopping by the parties and sacrifices the potential benefits of uniformity of remedies. The main reasoning for this is also clear: the basic difference of the common law and civil law systems to approach specific performance.

Therefore, in recent years, there have been several calls for the increased availability of specific performance in all contracts. This assertion is somewhat supported by the examples of the UNIDROIT Principles and the European Principles. As to be demonstrated below, the UPICC/PECL has been more successful in introducing a more coherent and certain scheme regarding specific performance than that in the CISG, by characterizing the specific performance as a remedy not falling in court's discretionary. Both the UNIDROIT Principles and the PECL establish a clear right to specific performance, respectively in Arts. 7.2.1 through 7.2.5 UPICC and in Arts. 9:101 through 9:103 PECL. The two Principles take generally the same approach and make furthermore a clear distinction between monetary obligations and non-monetary obligations, providing, however, that the right to perform for both is the starting point.

3.4.2 Performance of Monetary Obligation

3.4.2.1 Money due generally recoverable

In accordance with the general principle of pacta sunt servanda, Continental Law allows a creditor to require performance of a contractual obligation to pay money. Also according to Common Law an action for an agreed sum is often available, although it is limited in certain respects: it may be brought only when the price has been "earned" by performance, e.g. the performance of a service or the passing of property in the goods.  ¹³³  This is followed under Art. 7.2.1 UPICC, which reads under the heading "Performance of Monetary Obligation": "Where a party who is obliged to pay money does not do so, the other party may require payment." It is also the main rule in the PECL, which stipulates in Art. 9:101(1): "The creditor is entitled to recover money which is due."

As a rule it is always possible to enforce monetary obligations. This is the basis of the rule in PECL Art. 9:101(1). A monetary obligation for the purposes of this rule is every obligation to make a payment of money, regardless of the form of payment or the currency. This includes even a secondary obligation, such as the payment of interest or of a fixed sum of money as damages. But in each case, the monetary obligation must have been earned by the creditor, i.e. it must be due.  ¹³⁴ 

Also, Art. 7.2.1 UPICC reflects the generally accepted principle that payment of money which is due under a contractual obligation can always be demanded and, if the demand is not met, enforced by legal action before a court. The term "require" is used in Art. 7.2.1 UPICC to cover both the demand addressed to the other party and the enforcement, whenever necessary, of such a demand by a court. The article applies irrespective of the currency in which payment is due or may be made. In other words, the right of the obligee to require payment extends also to cases of payment in a foreign currency.  ¹³⁵ 

3.4.2.2 Money not yet due

Most continental systems do not recognise restrictions upon a claim for payment of the price. However, the principle that monetary obligations always can be enforced is not quite so certain where the monetary obligation has not yet been earned by the creditor's own performance and it is clear that the debtor will refuse to receive the creditor's future performance.  ¹³⁶ 

This is the situation regulated by Art. 9:101(2) PECL (no similar rule is found in the UNIDROIT Principles), which reads correspondingly: "Where the creditor has not yet performed its obligation and it is clear that the debtor will be unwilling to receive performance, the creditor may nonetheless proceed with its performance and may recover any sum due under the contract unless: (a) it could have made a reasonable substitute transaction without significant effort or expense; or (b) performance would be unreasonable in the circumstances." The basic approach underlying the rules of PECL Art. 9:101(2) is obvious. Under the principle of pacta sunt servanda the creditor is entitled to make its performance and thereby to earn the price for it. The debtor's unwillingness to receive the creditor's performance is therefore, as a rule, irrelevant. However, according to sub-paras. (a) and (b) of PECL Art. 9:101(2) there are two situations where the above principle does not apply:  ¹³⁷ 

(a) Resale possible

The restriction in Art. 9:101(2)(a) has a precursor in ULIS Art. 61(2), which restricts the seller's right to require payment of the price where a resale was in conformity with usage and reasonably possible. In that case the seller may only claim damages. The CISG however, has not imposed this restriction on the seller's right to perform and claim the price. Under the CISG, it follows from the fact that Art. 62 has dropped this restriction, that the seller is bound to the contract; it is therefore obliged to tender performance to the buyer even if the latter is unwilling to receive performance, and may claim the purchase price.  ¹³⁸ 

It is now reintroduced in the PECL. The underlying consideration is that a debtor should not have to pay for a performance which he does not want in cases where the creditor can easily make a cover transaction or in other cases where it would be unreasonable to oblige the debtor to pay the price. It is clarified in the Official Comment on PECL Art. 9:101(2) that: A creditor which can make a reasonable cover transaction without involving itself in significant trouble or expense is not entitled to continue with performance against the debtor's wishes and cannot demand payment of the price for it. The creditor should terminate the contract and either make a cover transaction, thus becoming entitled to invoke Art. 9:506, or simply claim damages without making any cover transaction (see Art. 9:507 and Comment thereon). The debtor cannot invoke sub-paragraph (a) of paragraph (2) unless two conditions are satisfied. The first is that the creditor can make a cover transaction on reasonable terms because there is a market for its performance or some other way of arranging a substitute transaction. The second is that the cover transaction does not substantially burden the creditor with effort or expense. In certain situations the creditor may even be bound by commercial usage to effect a cover transaction.  ¹³⁹  Such situations are noted in the Official Comment on Art. 7.2.1 UPICC, which states: "Exceptionally, the right to require payment of the price of the goods or services to be delivered or rendered may be excluded. This is in particular the case where a usage requires a seller to resell goods which are neither accepted nor paid for by the buyer."  ¹⁴⁰ 

One should note, also, whenever the creditor makes, or would have been obliged to make, a cover transaction, the creditor may claim from the debtor the difference between the contract price and the cover price as damages under PECL Art. 9:506 or UPICC Art. 7.4.5.

(b) Performance unreasonable

A very different situation is dealt with in PECL Art. 9:101(2)(b): Here performance by the creditor would be unreasonable. A typical example is where, before performance has begun, the debtor makes it clear that it no longer wants it. This situation can arise, for example, in construction contracts, other contracts for work and especially long term contracts. An instance which would not involve unreasonable expenditure is where the creditor must continue to employ its workforce.  ¹⁴¹ 

It is said that Art. 9:101(2)(b) is based on considerations to be found in experience gained from ENGLISH, IRISH and SCOTTISH practice. Once an action for the price was available there was no requirement that it must be reasonable to pursue it rather than to enter a cover transaction. This gave rise to difficulties when a party had announced in advance that it no longer required a service but the other performed it nonetheless and then sued for the price: see White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413 (H.L.). The rule in contracts other than sale of goods now appears to be that if at the date of the repudiation the innocent party has not yet performed his part of the contract, he may complete his performance and claim the price only if he has a legitimate interest in doing so: see Attica Sea Carriers Corp. v. Ferrostaal Poseidon Bulk Reederei GmbH [1976] 1 Lloyds' Rep. 250 (C.A.). If he has no legitimate interest in performing he is confined to an action for damages, and his recovery will be limited by the principle of mitigation. SCOTTISH law is the same - White and Carter (above) is a Scottish case. The guilty party has the onus to show that the innocent party has no legitimate interest in performing (Scotland: Salaried Staff London Loan Co. Ltd. v. Swears and Wells Ltd. 1985 S.L.T. 326, I.H.).  ¹⁴² 

As demonstrated above, the feature common to the two cases dealt with in PECL Art. 9:101(2) is that the debtor is at risk of having forced upon it a performance which it no longer wants. The burden of proving that the existence of one of the exceptions applies is on the debtor. However, none of the two exceptions laid down in PECL Art. 9:101(2) affects the right of a beneficiary under a letter of credit to claim payment from the bank. This is because letters of credit are treated as independent of the underlying contract.  ¹⁴³  One of the consequences that arise if either one of the exceptions applies, is spelt out in Art. 9:101(2): the creditor may not demand the money owed under the contract for the counter-performance, in particular the price. However, damages for non-performance may be claimed.  ¹⁴⁴ 

3.4.3 Performance of Non-monetary Obligation: In General

In accordance with the general principle of the binding character of the contract, each party should as a rule be entitled to require performance by the other party not only of monetary, but also of non-monetary obligations, assumed by that party. While this is not controversial in civil law countries, common law systems allow enforcement of non-monetary obligations only in special circumstances.  ¹⁴⁵ 

With respect to non-monetary obligations, traditionally there are important differences between the common law and civil law, at least in theory. In the common law specific performance is a discretionary remedy that will only be granted if damages are inadequate. In the civil law countries the aggrieved party's right to performance is generally recognized. In the German legal family this is "axiomatic".  ¹⁴⁶  However, one should note that the basic differences between common law and civil law are of theoretical rather than practical importance.  ¹⁴⁷  As stated by Lando: "However, civil law makes exceptions too. On the Continent specific performance is not available when performance has become impossible or unlawful. In several civil- and common-law countries, specific performance will also be refused if it would be unreasonable to grant it, if, for instance, the cost of raising a ship which has sunk after it was sold would considerably exceed the value of the ship. Nor is performance available for contracts which consist in the provision of services or work of a personal character, and in several countries a performance which depends upon a personal relationship such as an agreement to establish or continue a partnership; in such a case, the defaulting partner cannot be legally compelled to play an active role in the partnership. These exceptions show that the difference between civil and common law is ultimately far smaller than might appear at first sight. Furthermore, even in the civil-law countries an aggrieved party will generally pursue an action for specific performance only if he has a particular interest in performance which damages would not satisfy."  ¹⁴⁸ 

With regard to the performance of non-monetary obligations, it is recalled that CISG Art. 46 gives the buyer generally a right to performance. Following the basic approach of CISG Art. 46, UPICC Art. 7.2.2, subject to certain qualifications included in sub-paras. (a)-(e), adopts the principle of specific performance: "Where a party who owes an obligation other than one to pay money does not perform, the other party may require performance". It is said that the principle is particularly important with respect to contracts other than sales contracts. Unlike the obligation to deliver something, contractual obligations to do something or to abstain from doing something can often be performed only by the other contracting party itself. In such cases the only way of obtaining performance from a party who is unwilling to perform is by enforcement.  ¹⁴⁹  Similarly, PECL Art. 9:102(1) generally stipulates that: "The aggrieved party is entitled to specific performance of an obligation other than one to pay money, including the remedying of a defective performance."

Due to lack of a better, generally understood term, the common law phrase "specific performance" is used in PECL Art. 9:102(1). It is said that PECL Art. 9:102 covers all obligations which are not covered by Art. 9:101, e.g. to do or not to do an act, to make a declaration or to deliver something. In some cases a court order itself will act as a substitute for performance by the non-performing party. Specifically speaking, it applies to three situations: first, if no performance at all is tendered by the non-performing party; second, where tender of a non-conforming performance has been made but has been validly rejected by the aggrieved party; third, where the performance is defective but has not been rejected.Furthermore, the Official Comment on PECL Art. 9:102(1) states that the aggrieved party has not only a substantive right to demand the other party's performance as spelt out in the contract. The aggrieved party has also a remedy to enforce this right, e.g. by applying for an order or decision of the court.  ¹⁵⁰  In this point, the Official Comment on UNIDROIT Principles also clearly states: The term "require" is used in Art. 7.2.1 [as well as in Art. 7.2.2] to cover both the demand addressed to the other party and the enforcement whenever necessary, of such a demand by a court.  ¹⁵¹ 

However, the right to performance of non-monetary obligations under UPICC Art. 7.2.2 or under PECL Art. 9:102 is subject to several exceptions, which will focused on in the following discussions.

3.4.4 Exceptions to Performance of Non-monetary Obligation

3.4.4.1 The principle and exceptions

Whether an aggrieved party should be entitled to require performance of a non-monetary obligation, is very controversial. The common law treats specific performance as an exceptional remedy whilst the civil law regards it as an ordinary remedy.  ¹⁵² 

As stated previously, in common law countries specific performance is a discretionary remedy. Even under the uniform sales laws such as the CISG, the remedy of specific performance is at the discretionary of the courts, because CISG Art. 28 provides that courts are not bound to decree performance if they would not do so according to their national law. To the contrary, under the UNIDROIT Principles specific performance is not a discretionary remedy, i.e. a court must order performance, unless one of the exceptions laid down in Art. 7.2.2 applies.  ¹⁵³  Similarly, by contrast with the CISG, under the PECL the aggrieved party also has a substantive right to demand and to enforce performance of a non-monetary obligation. Granting an order for performance thus is not in the discretion of the court; the court is bound to grant the remedy, unless the exceptions of para. (2) or (3) of Art. 9:102 apply. National courts should grant performance even in cases where they are not accustomed to do so under their national law.  ¹⁵⁴ 

Nonetheless, each of the two Principles has sought a compromise under UPICC Art. 7.2.2 or PECL Art. 9:102: a claim for performance is admitted in general but excluded in several special situations. A general right to performance has several advantages. Firstly, through specific relief the creditor obtains as far as possible what is due to it under the contract; secondly, difficulties in assessing damages are avoided; thirdly, the binding force of contractual obligations is stressed. A right to performance is particularly useful in cases of unique objects and in times of scarcity. On the other hand, comparative research of the laws and especially commercial practices demonstrate that even in the Civil Law countries the principle of performance must be limited. Generally, the limitations on the principle of performance are variously based upon natural, legal and commercial considerations. In all these cases other remedies, especially damages and, in appropriate cases, termination, are more adequate remedies for the aggrieved party.  ¹⁵⁵ 

This compromise forms the basis of the formula adopted in UPICC Art. 7.2.2 or PECL Art. 9:102. It is said that the civil-law countries could have allowed the possibility of restricting specific performance to the situations for which this remedy is needed in practice. The common-law countries could have conceded that in these situations specific performance as a genuine right, rather than a discretionary remedy, is the appropriate solution.  ¹⁵⁶  One of the consequences that arise from these exceptions provided for in UPICC Art. 7.2.2(a)-(e) or in PECL Art. 9:102(2) and (3) is expressly set out in these rules: performance cannot be demanded by the aggrieved party.

3.4.4.2 Performance impossible

The first exception is impossibility of performance. Specific performance can't be obtained where: under UPICC Art. 7.2.2(a): "performance is impossible in law or in fact"; similarly, under PECL Art. 9:102(2)(a): "performance would be unlawful or impossible". It expresses the rule impossibilium nulla est obligatio. If restricted to the right to performance as such (as distinct from subsidiary remedies), the rule seems to be common to the laws of most legal systems, while CISG Art. 79 (5) appears to be to the contrary (but this is controversial, see the discussion in Chapter 20).

For obvious reasons, there is no right to require performance if it is impossible. This is particularly true in case of factual impossibility, i.e. if some act in fact cannot be done. The same is true if an act is prohibited by law.  ¹⁵⁷  However, even if the performance itself may be illegal, impossibility does not nullify a contract: other remedies may be available to the aggrieved party.  ¹⁵⁸  Similarly, specific performance is not available where a third person has acquired priority over the plaintiff to the subject matter of the contract. Nonetheless, if an impossibility is only temporary, enforcement of performance is excluded during that time. Whether or not the impossibility makes the non-performing party liable in damages is irrelevant in this context.  ¹⁵⁹ 

It is to be noted, under the UNIDROIT Principles, that the refusal of a public permission which is required under the applicable domestic law and which affects the validity of the contract renders the contract void (see Art. 6.1.17(1)), with the consequence that the problem of enforceability of the performance cannot arise. When however the refusal merely renders the performance impossible without affecting the validity of the contract (see Art. 6.1.17(2)), sub-para. (a) of UPICC Art. 7.2.2 applies and performance cannot be required.  ¹⁶⁰ 

3.4.4.3 Unreasonable burden

Specific performance will not be ordered if the performance would be quite different to the original obligation, e.g. a lessee which has carelessly burned down the leased premises will not be ordered to re-build them.  ¹⁶¹  It is expressly stated that, performance cannot be required if: under UPICC Art. 7.2.2(b): "performance or, where relevant, enforcement is unreasonably burdensome or expensive"; similarly, under PECL Art. 9:102(2)(b): "performance would cause the debtor unreasonable effort or expense".

No precise rule can be stated on when effort or expense is unreasonable. However, considerations as to the reasonableness of the transaction or of the appropriateness of the counter-performance are irrelevant in this context.  ¹⁶²  In exceptional cases, particularly when there has been a drastic change of circumstances after the conclusion of a contract, performance, although still possible, may have become so onerous that it would run counter to the general principle of good faith and fair dealing to require it.  ¹⁶³  However, it is to be noted that this exception is not limited to the kind of drastic changes of circumstances amounting to a case of hardship, which may cause other possible consequences such as renegotiation other than excluding performance (see the discussion in Chapter 21).

It is also to be noted, under UPICC Art. 7.2.2(b), that the words "where relevant, enforcement" take account of the fact that in common law systems it is the courts and not the obligees who supervise the execution of orders for specific performance. As a consequence, in certain cases, especially those involving performances extended in time, courts in those countries refuse specific performance if supervision would impose undue burdens upon courts.  ¹⁶⁴ 

3.4.4.4 Performance from another source available

Many goods and services are of a standard kind, i.e. the same goods or services are offered by many suppliers. If a contract for such staple goods or standard services is not performed, most customers will not wish to waste time and effort extracting the contractual performance from the other party. Instead, they will go into the market, obtain substitute goods or services and claim damages for non-performance.  ¹⁶⁵  In view of this economic reality specific performance is excluded whenever: under UPICC Art. 7.2.2(c): "the party entitled to performance may reasonably obtain performance from another source"; similarly, under PECL Art. 9:102(2)(d): "the aggrieved party may reasonably obtain performance from another source".

It is said that this exception is a compromise between different basic attitudes of the common law and the civil law. It does not directly copy any national legal order. But it links up with ULIS Arts. 25, 42(1)(c). Under the common law the possibility of a cover transaction is an important consideration for denying specific performance. In continental laws, cover is merely an option for the buyer, but he is not obliged to use it, unless there is a usage to that effect.  ¹⁶⁶  Under the two Principles, this exception does not introduce any kind of a test of adequacy of damages in the sense that performance could only be required if damages were an inadequate remedy. Rather, this rule should encourage the aggrieved party to choose from among the remedies which would fully compensate it the one which can most simply be obtained. If the aggrieved party chooses to require performance, this will generally create a presumption that this remedy optimally satisfies its needs. Consequently, the non-performing party will have to prove that the aggrieved party can obtain performance from other sources without any prejudice and that therefore it may reasonably be expected to make a cover transaction.  ¹⁶⁷ 

In fact, once the party entitled to performance may reasonably obtain performance from another source, that party may terminate the contract and conclude a replacement transaction. According to practical experience, termination and damages will often satisfy its requirements faster and more easily than enforcement of performance.  ¹⁶⁸  However, the word "reasonably" indicates that the mere fact that the same performance can be obtained from another source is not in itself sufficient, since the aggrieved party could not in certain circumstances reasonably be expected to have recourse to an alternative supplier.  ¹⁶⁹  Nonetheless, an aggrieved party may reasonably be expected to obtain performance from other sources, even if the cost is higher than the contract price, but only if the defaulting party is in a position to pay the damages for the difference.  ¹⁷⁰  If this is not so, a request for performance is not excluded.

3.4.4.5 Performance of an exclusively personal character

With regard to the fourth exception, PECL Art. 9:102(2)(c) excludes enforcement of performance where "the performance consists in the provision of services or work of a personal character or depends upon a personal relationship". It seems that this Article covers two different situations: (1) it excludes a right to require performance of services or work of a personal character; and (2) excludes specific performance where the parties would be forced to enter or to continue a personal relationship.

As for the first alternative, it is said that this rule is based on three considerations: firstly, a judgment ordering performance of personal services or work would be a severe interference with the non-performing party's personal liberty; secondly, services or work which are rendered under pressure will often not be satisfactory for the aggrieved party; and thirdly, it is difficult for a court to control the proper enforcement of its order. The scope of the first alternative depends on the meaning of the term "services or work of a personal character", which does not cover services or work which may be delegated. A provision in the contract that work may not be delegated does not necessarily make the work of a personal character. If the contract does not need the personal attention of the contracting party but could be performed by its employees, the clause prohibiting delegation may be interpreted as preventing only delegation to another enterprise, e.g. a sub-contractor. Services requiring individual scholars of an artistic or scientific nature and services to be rendered in the scope of a confidential and personal relationship are personal services. The signing of a document would not usually constitute service or work within the meaning of this provision. Such an obligation can mostly be enforced since the non-performing party's declaration can be replaced by a court decree. Secondly, PECL Art. 9:102(2)(c) excludes specific performance where the parties would be forced to enter or to continue a personal relationship. It is said that in case of agreements to enter into a partnership, the second alternative applies if and insofar as the partnership presupposes a close personal contact. But as in case of a contract to form a public company, the specific personal element is sometimes lacking; in this case this rule does not prevent the promise being enforced.  ¹⁷¹ 

While under the UNIDROIT Principles, Art. 7.2.2(d) deals with the fourth exception in a succinct manner, that is to exclude enforcement of performance where "performance is of an exclusively personal character". Indeed, UPICC Art. 7.2.2(d) is based on the same considerations as PECL Art. 9:102(c): Where a performance has an exclusively personal character, enforcement would interfere with the personal freedom of the obligor. Moreover, enforcement of a performance often impairs its quality. The supervision of a very personal performance may also give rise to insuperable practical difficulties, as is shown by the experience of countries which have saddled their courts with this kind of responsibility. Furthermore, UPICC Art. 7.2.2(d) seems to be enough to cover the two alternatives in PECL Art. 9:102(c). Its Official Comment confirms this: The precise scope of this exception depends essentially upon the meaning of the phrase "exclusively personal character". The modern tendency is to confine this concept to performances of a unique character. The exception does not apply to obligations undertaken by a company. Nor are ordinary activities of a lawyer, a surgeon or an engineer covered by the phrase for they can be performed by other persons with the same training and experience. A performance is of an exclusively personal character if it is not delegable and requires individual skills of an artistic or scientific nature or if it involves a confidential and personal relationship.  ¹⁷² 

Finally, it is to be noted that both UPICC Art. 7.2.2(d) and PECL Art. 9:102(c) speak only of positive acts. It is possible to require performance of a negative obligation, e.g. to forebear from rendering services for someone else or from entering into a partnership with someone else. In this respect, it is said that the performance of obligations to abstain from doing something does not fall under this exception.  ¹⁷³  If, however, enforcement of a negative obligation concerning services, work or a personal relationship would result in indirect enforcement of a positive act to provide or maintain the same, it applies.  ¹⁷⁴ 

3.4.4.6 Unreasonable delay in requiring performance

The final exception both contained in the two Principles is the time limit. UPICC Art. 7.2.2(e) excludes the right to performance if: "the party entitled to performance does not require performance within a reasonable time after it has, or ought to have, become aware of the non-performance"; similarly, PECL Art. 9:102(3) does so where: "The aggrieved party will lose the right to specific performance if it fails to seek it within a reasonable time after it has or ought to have become aware of the non-performance." This exception takes up the COMMON LAW view that an aggrieved party who delays unreasonably in requiring performance in natura may lose his claim.  ¹⁷⁵  A similar rule is found in CISG, too, but it is limited to cases where the buyer claims delivery of substitute goods and repair of non-conforming goods (Arts. 46 (2) and (3)).

It is said that UPICC Art. 7.2.2(e) is based on the following reasons: Performance of a contract often requires special preparation and efforts by the obligor. If the time for performance has passed but the obligee has failed to demand performance within a reasonable time, the obligor may be entitled to assume that the obligee will not insist upon performance. If the obligee were to be allowed to leave the obligor in a state of uncertainty as to whether performance will be required, the risk might arise of the obligee's speculating unfairly, to the detriment of the obligor, upon a favourable development of the market.  ¹⁷⁶  The Official Comment on PECL Art. 9:102(3) also clarifies this issue: This provision is supplementary to provisions on limitation and is intended to protect the non-performing party from hardship that could arise in consequence of a delayed request for performance by the aggrieved party. The latter party's interests are not seriously affected by this limitation because it may still choose another remedy. The length of the reasonable period of time is to be determined in view of the rule's purpose. In certain cases, it may be very short, e.g. if delivery can be made out of the non-performing party's stock in trade, in other cases it may be longer. It is the non-performing party which has to show that the delay in requesting performance was unreasonably long.  ¹⁷⁷ 

3.4.5 Right to Require Remedying of Defective Performance

It is remembered that under PECL Art. 9:102(1), the right of the aggrieved party to specific performance includes "the remedying of a defective performance". More generally, UPICC Art. 7.2.3 stipulates under the heading "Repair and Replacement of Defective Performance": "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."

It is said that UPICC Art. 7.2.3 applies the general principles of Arts. 7.2.1 and 7.2.2 to a special, yet very frequent, case of non-performance, i.e. defective performance. For the sake of clarity the article specifies that the right to require performance includes the right of the party who has received a defective performance to require cure of the defect.  ¹⁷⁸  In fact, the Official Comment on PECL Art. 9:102 also makes it clear that if the non-performing party performs, but its performance does not conform to the contract, the aggrieved party may choose to insist upon a conforming performance.  ¹⁷⁹  It is also recalled that CISG Art. 46 grants a right to performance in natura in case of "non-conforming". However, the right to require delivery of substitute goods in CISG Art. 46(2) is limited to cases of fundamental breach of contract.

Cure (Under this PART cure denotes the right both of the non-performing party to correct its performance, see the discussion in Chapter 5; and of the aggrieved party to require such correction by the non-performing party. The present Chapter deals with the latter right.) may be advantageous for both parties. The aggrieved party obtains what it has originally contracted for and the non-performing party eventually obtains the full price. A conforming performance may be achieved in a variety of ways: for example, repair; delivery of missing parts; or delivery of a replacement.  ¹⁸⁰  UPICC Art. 7.2.3 expressly mentions two specific examples of cure, namely repair and replacement. Repairing defective goods (or making good an insufficient service) is the most common case and replacement of a defective performance is also frequent. Unlike the rule under PECL Art. 9:102(1), which generally deals with performance of non-monetary obligation, under UPICC Art. 7.2.3, the right to require repair or replacement may also exist with respect to the payment of money, for instance in case of an insufficient payment or of a payment in the wrong currency or to an account different from that agreed upon by the parties. Apart from repair and replacement there are other forms of cure, such as the removal of the rights of third persons over goods or the obtaining of a necessary public permission.  ¹⁸¹ 

The right to require a conforming performance is, of course, subject to the same exceptions as the general right to performance. Thus a non-performing party cannot be forced by court order to accomplish a performance conforming to the contract if the aggrieved party has failed to demand performance within a reasonable time or if the latter may reasonably be expected to make someone else effect repair of the performance.  ¹⁸²  Most of the exceptions to the right to require performance that are discussed supra. § 3.4.4 are easily applicable to the various forms of cure of a defective performance. Only the application of supra. § 3.4.4.3 calls for specific comment. In many cases involving small, insignificant defects, both replacement and repair may involve "unreasonable effort or expense" and are therefore excluded.  ¹⁸³ 

3.4.6 Other Issues

PECL Art. 9:103 expressly states under the heading "Damages not Precluded": "The fact that a right to performance is excluded under this Section does not preclude a claim for damages." This rule may also be implied in CISG Arts. 45(2) and Art. 61(2), as well as in UPICC Art. 7.4.1 and Comment thereon. These rules make it clear that even in the exceptional cases discussed supra. § 3.4.4 where an aggrieved party cannot require performance the party may recover damages. Damages are always available according to the rules (see the discussion in PART IV) unless the non-performance is excused under force majeure (see the discussion in Chapter 20).

Another issue, which isn't expressly dealt with either in the CISG or in the PECL, is found in UPICC Art. 7.2.5 under the heading "Change of Remedy" as follows: "(1) An aggrieved party who has required performance of a non-monetary obligation and who has not received performance within a period fixed or otherwise within a reasonable period of time may invoke any other remedy. (2) Where the decision of a court for performance of a non-monetary obligation cannot be enforced, the aggrieved party may invoke any other remedy." This Article addresses a problem which is peculiar to the right to require performance. The aggrieved party may abandon the remedy of requiring performance of a non-monetary obligation and opt instead for another remedy or remedies. This choice is permitted on account of the difficulties usually involved in the enforcement of non-monetary obligations. Even if the aggrieved party first decides to invoke its right to require performance, it would not be fair to confine that party to this single option. The non-performing party may subsequently become unable to perform, or its inability may only become evident during the proceedings.  ¹⁸⁴  On the other hand, performance may have become useless for the aggrieved party. In such cases it may then be vexatious to force the non-performing party to stick to its promise.  ¹⁸⁵ 

In this respect, two situations must be addressed. In the first case, the aggrieved party has required performance but changes its mind before execution of a judgment in its favour, perhaps because it has discovered the non-performing party's inability to perform. The aggrieved party now wishes to invoke one or more other remedies. Such a voluntary change of remedy can only be admitted if the interests of the non-performing party are duly protected. It may have prepared for performance, invested effort and incurred expense. For this reason UPICC Art. 7.2.5(1) makes it clear that the aggrieved party is entitled to invoke another remedy only if it has not received performance within a fixed period or otherwise within a reasonable period of time. How much additional time must be made available to the non-performing party for performance depends upon the difficulty which the performance involves. The non-performing party has the right to perform provided it does so before the expiry of the additional period.  ¹⁸⁶  UPICC Art. 7.2.5(2) addresses the second and less difficult case in which the aggrieved party has attempted without success to enforce a judicial decision or arbitral award directing the non-performing party to perform. In this situation it is obvious that the aggrieved party may immediately pursue other remedies.  ¹⁸⁷ 

As for the time limit, in the event of a subsequent change of remedy the time limit provided for a notice of termination under UPICC Art. 7.3.2(2) must, of course, be extended accordingly. The reasonable time for giving notice begins to run, in the case of a voluntary change of remedy, after the aggrieved party has or ought to have become aware of the non-performance at the expiry of the additional period of time available to the non-performing party to perform; and in the case of UPICC Art. 7.2.5(2), it will begin to run after the aggrieved party has or ought to have become aware of the unenforceability of the decision or award requiring performance.  ¹⁸⁸ 

Finally, a unique provision is set out in UPICC Art. 7.2.4 under the heading "Judicial Penalty": "(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. (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." No corresponding provisions is found either in the CISG or in the PECL. In view that the discussion of this contribution focuses on the rights and obligations between the parties and does not involve the specific discretion of a tribunal, this issue will be given no further details.  ¹⁸⁹