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.(*)
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.
They may be used to interpret or supplement international uniform law instruments.They may be used to interpret or supplement domestic law.
They may serve as a model for national and international legislators.
The parties are free to enter into a contract and to determine its content.
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.
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.
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.
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.
(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.
(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.
(1) Each party must act in accordance with good faith and fair dealing in international trade.
(2) The parties may not exclude or limit this duty.
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.
(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
(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.
(1) Where notice is required it may be given by any means appropriate to the circum¬stances.
(2) A notice is effective when it reaches the person to whom it is given.
(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.
(4) For the purpose of this Article “notice” includes a declaration, demand, request or any other communication of intention.
In these Principles
– “court” includes an arbitral tribunal;
– 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;
– “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.
– “writing” means any mode of commun¬ication that preserves a record of the information contained therein and is capable of being reproduced in tangible form.
(1) Official holidays or non-business days occurring during a period set by parties for an act to be performed are included in calculating the period.
(2) However, if the last day of the period is an official holiday or a non-business 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.
(3) The relevant time zone is that of the place of business of the party setting the time, unless the circumstances indicate otherwise.
A contract may be concluded either by the acceptance of an offer or by conduct of the parties that is sufficient to show agreement.
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.
(1) An offer becomes effective when it reaches the offeree.
(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.
(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before it has dispatched an acceptance.
(2) However, an offer cannot be revoked
if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
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.
An offer is terminated when a rejection reaches the offeror.
(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.
(2) An acceptance of an offer becomes effective when the indication of assent reaches the offeror.
(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.
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 of¬feror. An oral offer must be accepted immediately unless the circumstances indicate otherwise.
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.
(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.
(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.
An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective.
(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 counter-offer.
(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.
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.
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.
(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.
(2) The existence of the contract is not affected by the fact that subsequently
the parties reach no agreement on the term; or
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.
(1) A party is free to negotiate and is not liable for failure to reach an agreement.
(2) However, a party who negotiates or breaks off negotiations in bad faith is liable for the losses caused to the other party.
(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.
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.
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.
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.
(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.
(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.
(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.
(2) In determining whether a term is of such a character regard shall be had to its content, language and presentation.
In case of conflict between a standard term and a term which is not a standard term the latter prevails.
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.
(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.
(2) It governs only the relations between the principal or the agent on the one hand, and the third party on the other.
(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.
(1) The principal’s grant of authority to an agent may be express or implied.
(2) The agent has authority to perform all acts necessary in the circumstances to achieve the purposes for which the authority was granted.
(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. (
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.
(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.
(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.
(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.
(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.
(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.
(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.
(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 3.2.9 and 3.2.11 to 3.2.15.
(2) However, the principal may not avoid the contract
if the principal had consented to, or knew or ought to have known of, the agent’s involvement in the conflict of interests; or
if the agent had disclosed the conflict of interests to the principal and the latter had not objected within a reasonable time.
An agent has implied authority to appoint a sub-agent to perform acts which it is not reasonable to expect the agent to perform itself. The rules of this Section apply to the sub-agency.
(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.
(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.
(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.
(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.
(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.
This Chapter does not deal with lack of capacity.
A contract is concluded, modified or ter¬minated by the mere agreement of the parties, without any further requirement.
(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.
(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.
The rules on fraud, threat, gross disparity and illegality contained in this Chapter are mandatory.
Mistake is an erroneous assumption relating to facts or to law existing when the contract was concluded.
(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
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
the other party had not at the time of avoidance reasonably acted in reliance on the contract.
(2) However, a party may not avoid the contract if
it was grossly negligent in committing the mistake; or
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.
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.
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 non-performance.
(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
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
the nature and purpose of the contract.
(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.
(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. Article 3.2.10(2) applies accordingly.
(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.
(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.
Avoidance takes effect retroactively.
(1) On avoidance either party may claim restitution of whatever it has supplied under the contract, or the part of it avoided, provided that the party concurrently makes restitution of whatever it has received under the contract, or the part of it avoided.
(2) If restitution in kind is not possible or appropriate, an allowance has to be made in money whenever reasonable.
(3) The recipient of the performance does not have to make an allowance in money if the impossibility to make restitution in kind is attributable to the other party.
(4) Compensation may be claimed for expenses reasonably required to preserve or maintain the performance received.
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.
The provisions of this Chapter apply with appropriate adaptations to any communication of intention addressed by one party to the other.
(1) Where a contract infringes a mandatory rule, whether of national, international or supranational origin, applicable under Article 1.4 of these Principles, the effects of that infringement upon the contract are the effects, if any, expressly prescribed by that mandatory rule.
(2) Where the mandatory rule does not expressly prescribe the effects of an infringement upon a contract, the parties have the right to exercise such remedies under the contract as in the circumstances are reasonable.
(3) In determining what is reasonable regard is to be had in particular to:
the purpose of the rule which has been infringed;
the category of persons for whose protection the rule exists;
any sanction that may be imposed under the rule infringed;
the seriousness of the infringement;
whether one or both parties knew or ought to have known of the infringement;
whether the performance of the contract necessitates the infringement; and
the parties’ reasonable expectations.
(1) Where there has been performance under a contract infringing a mandatory rule under Article 3.3.1, restitution may be granted where this would be reasonable in the circumstances.
(2) In determining what is reasonable, regard is to be had, with the appropriate adaptations, to the criteria referred to in Article 3.3.1(3).
(3) If restitution is granted, the rules set out in Article 3.2.15 apply with appropriate adaptations.
(1) A contract shall be interpreted according to the common intention of the parties.
(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.
(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.
(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.
In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including
preliminary negotiations between the parties;
practices which the parties have established between themselves;
the conduct of the parties subsequent to the conclusion of the contract;
the nature and purpose of the contract;
the meaning commonly given to terms and expressions in the trade concerned;
Terms and expressions shall be interpreted in the light of the whole contract or statement in which they appear.
Contract terms shall be interpreted so as to give effect to all the terms rather than to deprive some of them of effect.
If contract terms supplied by one party are unclear, an interpretation against that party is preferred.
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.
(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.
(2) In determining what is an appropriate term regard shall be had, among other factors, to
the intention of the parties;
the nature and purpose of the contract;
good faith and fair dealing;
The contractual obligations of the parties may be express or implied.
Implied obligations stem from
the nature and purpose of the contract;
practices established between the parties and usages;
good faith and fair dealing;
Each party shall cooperate with the other party when such co-operation may reasonably be expected for the performance of that party’s obligations.
(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.
(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.
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
the way in which the obligation is expressed in the contract;
the contractual price and other terms of the contract;
the degree of risk normally involved in achieving the expected result;
the ability of the other party to influence the performance of the obligation.
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.
(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.
(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.
(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.
(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.
A contract for an indefinite period may be ended by either party by giving notice a reasonable time in advance.
(1) An obligee may release its right by agreement with the obligor.
(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.
(1) The parties (the “promisor” and the “promisee”) may confer by express or implied agreement a right on a third party (the “beneficiary”).
(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.
The beneficiary must be identifiable with adequate certainty by the contract but need not be in existence at the time the contract is made.
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.
The promisor may assert against the beneficiary all defences which the promisor could assert against the promisee.
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.
The beneficiary may renounce a right conferred on it.
A contract or a contractual obligation may be made conditional upon the occurrence of a future uncertain event, so that the contract or the contractual obligation only takes effect if the event occurs (suspensive condition) or comes to an end if the event occurs (resolutive condition).
Unless the parties otherwise agree :
the relevant contract or contractual obligation takes effect upon fulfilment of a suspensive condition;
the relevant contract or contractual obligation comes to an end upon fulfilment of a resolutive condition.
(1) If fulfilment of a condition is prevented by a party, contrary to the duty of good faith and fair dealing or the duty of co-operation, that party may not rely on the non-fulfilment of the condition.
(2) If fulfilment of a condition is brought about by a party, contrary to the duty of good faith and fair dealing or the duty of co-operation, that party may not rely on the fulfilment of the condition.
Pending fulfilment of a condition, a party may not, contrary to the duty to act in accordance with good faith and fair dealing, act so as to prejudice the other party’s rights in case of fulfilment of the condition.
(1) On fulfilment of a resolutive condition, the rules on restitution set out in Articles 7.3.6 and 7.3.7 apply with appropriate adaptations.
(2) If the parties have agreed that the resolutive condition is to operate retroactively, the rules on restitution set out in Article 3.2.15 apply with appropriate adaptations.
A party must perform its obligations:
if a time is fixed by or determinable from the contract, at that time;
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;
in any other case, within a reasonable time after the conclusion of the contract.
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.
(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.
(2) Additional expenses caused to the obligee by partial performance are to be borne by the obligor without prejudice to any other remedy.
(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.
(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.
(1) The obligee may reject an earlier performance unless it has no legitimate interest in so doing.
(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.
(3) Additional expenses caused to the obligee by earlier performance are to be borne by the obligor, without prejudice to any other remedy.
(1) If the place of performance is neither fixed by, nor determinable from, the contract, a party is to perform:
a monetary obligation, at the obligee´s place of business;
any other obligation, at its own place of business.
(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.
(1) Payment may be made in any form used in the ordinary course of business at the place for payment.
(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.
(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.
(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.
(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
that currency is not freely convertible; or
the parties have agreed that payment should be made only in the currency in which the monetary obligation is expressed.
(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).
(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.
(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.
(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. However, the payment discharges first any expenses, then interest due and finally the principal.
(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.
(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:
an obligation which is due or which is the first to fall due;
the obligation for which the obligee has least security;
the obligation which is the most burdensome for the obligor;
the obligation which has arisen first.
If none of the preceding criteria applies, payment is imputed to all the obligations proportionally.
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
if only one party has its place of business in that State, that party shall take the measures necessary to obtain the permission;
in any other case the party whose performance requires permission shall take the necessary measures.
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
the events occur or become known to the disadvantaged party after the conclusion of the contract;
the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract;contract;
the events are beyond the control of the disadvantaged party; and
the risk of the events was not assumed by the disadvantaged party.
terminate the contract at a date and on terms to be fixed, or
adapt the contract with a view to restoring its equilibrium.
Non-performance is failure by a party to perform any of its obligations under the contract, including defective performance or late performance.
A party may not rely on the non-performance of the other party to the extent that such non-performance was caused by the first party’s act or omission or by another event for which the first party bears the risk.
(1) Where the parties are to perform simultaneously, either party may withhold performance until the other party tenders its performance.
(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.
(1) The non-performing party may, at its own expense, cure any non-performance, provided that
without undue delay, it gives notice indicating the proposed manner and timing of the cure;
cure is appropriate in the circumstances;
the aggrieved party has no legitimate interest in refusing cure; and
cure is effected promptly.
(2) The right to cure is not precluded by notice of termination.
(3) Upon effective notice of cure, rights of the aggrieved party that are inconsistent with the non-performing party’s performance are suspended until the time for cure has expired.
(4) The aggrieved party may withhold performance pending cure.
(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.
Where a party who owes an obligation other than one to pay money does not perform, the other party may require performance, unless
performance is impossible in law or in fact;
performance or, where relevant, enforcement is unreasonably burdensome or expensive;
the party entitled to performance may reasonably obtain performance from another source;
performance is of an exclusively personal character; or
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.
(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 non-performance.
(2) In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether
the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract unless the other party did not foresee and could not reasonably have foreseen such result;
strict compliance with the obligation which has not been performed is of essence under the contract;
the non-performance is intentional or reckless;
the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance;
the non-performing party will suffer disproportionate loss as a result of the preparation or performance if the contract is terminated.
(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.
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.
(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.
(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.
Where the harm is due in part to an act or omission of the aggrieved party or to another event for 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.
(1) The non-performing 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.
(2) The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the harm.
(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 non-payment is excused.
(2) The rate of interest shall be the average bank short-term 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.
(3) The aggrieved party is entitled to additional damages if the non-payment caused it a greater harm.
Unless otherwise agreed, interest on damages for non-performance of non-monetary obligations accrues as from the time of non-performance.
(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.
(2) Damages to be paid in instalments may be indexed.
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.
(1) Where the contract provides that a party who does not perform is to pay a specified sum to the aggrieved party for such non-performance, the aggrieved party is entitled to that sum irrespective of its actual harm.
(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 non-performance and to the other circumstances.
(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 set-off,
the first party is entitled to perform its obligation;
the other party’s obligation is ascertained as to its existence and amount and performance is due.
(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.
Where the obligations are to pay money in different currencies, the right of set-off 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.
The right of set-off is exercised by notice to the other party.
(1) The notice must specify the obligations to which it relates.
(2) If the notice does not specify the obligation against which set-off is exercised, the other party may, within a reasonable time, declare to the first party the obligation to which set-off relates. If no such declaration is made, the set-off will relate to all the obligations proportionally.
(1) Set-off discharges the obligations.
(2) If obligations differ in amount, set-off discharges the obligations up to the amount of the lesser obligation.
(3) Set-off takes effect as from the time of notice.
“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”).
This Section does not apply to transfers made under the special rules governing the transfers:
of instruments such as negotiable instruments, documents of title or financial instruments, or
of rights in the course of transferring a business.
A right to non-monetary performance may be assigned only if the assignment does not render the obligation significantly more burdensome.
(1) A right to the payment of a monetary sum may be assigned partially.
(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.
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.
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.
(1) A right is assigned by mere agreement between the assignor and the assignee, without notice to the obligor.
(2) The consent of the obligor is not required unless the obligation in the circumstances is of an essentially personal character.
The obligor has a right to be compensated by the assignor or the assignee for any additional costs caused by the assignment.
(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.
(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.
(1) Until the obligor receives a notice of the assignment from either the assignor or the assignee, it is discharged by paying the assignor.
(2) After the obligor receives such a notice, it is discharged only by paying the assignee.
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.
(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.
(2) Until adequate proof is provided, the obligor may withhold payment.
(3) Unless adequate proof is provided, notice is not effective.
(4) Adequate proof includes, but is not limited to, any writing emanating from the assignor and indicating that the assignment has taken place.
(1) The obligor may assert against the assignee all defences that the obligor could assert against the assignor.
(2) The obligor may exercise against the assignee any right of set-off available to the obligor against the assignor up to the time notice of assignment was received.
The assignment of a right transfers to the assignee:
all the assignor’s rights to payment or other performance under the contract in respect of the right assigned, and
all rights securing performance of the right assigned.
The assignor undertakes towards the assignee, except as otherwise disclosed to the assignee, that:
the assigned right exists at the time of the assignment, unless the right is a future right;
the assignor is entitled to assign the right;
the right has not been previously assigned to another assignee, and it is free from any right or claim from a third party;
the obligor does not have any defences;
neither the obligor nor the assignor has given notice of set-off concerning the assigned right and will not give any such notice;
the assignor will reimburse the assignee for any payment received from the obligor before notice of the assignment was given.
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
by an agreement between the original obligor and the new obligor subject to Article 9.2.3, or
by an agreement between the obligee and the new obligor, by which the new obligor assumes the obligation.
(1) The parties may modify the limitation periods.
(2) However they may not
shorten the general limitation period to less than one year;
shorten the maximum limitation period to less than four years;
extend the maximum limitation period to more than fifteen years.
(1) The running of the limitation period is suspended
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;
in the case of the obligor’s insolvency when the obligee has asserted its rights in the insolvency proceedings; or
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.
(2) Suspension lasts until a final decision has been issued or until the proceedings have been otherwise terminated.
PLURALITY OF OBLIGORS AND OF OBLIGEES
When several obligors are bound by the same obligation towards an obligee:
the obligations are joint and several when each obligor is bound for the whole obligation;
the obligations are separate when each obligor is bound only for its share.
When several obligors are bound by the same obligation towards an obligee, they are presumed to be jointly and severally bound, unless the circumstances indicate otherwise.
When obligors are jointly and severally bound, the obligee may require performance from any one of them, until full performance has been received.
A joint and several obligor against whom a claim is made by the obligee may assert all the defences and rights of set-off that are personal to it or that are common to all the co-obligors, but may not assert defences or rights of set-off that are personal to one or several of the other co-obligors.
Performance or set-off by a joint and several obligor or set-off by the obligee against one joint and several obligor discharges the other obligors in relation to the obligee to the extent of the performance or set-off.
(1) Release of one joint and several obligor, or settlement with one joint and several obligor, discharges all the other obligors for the share of the released or settling obligor, unless the circumstances indicate otherwise.
(2) When the other obligors are discharged for the share of the released obligor, they no longer have a contributory claim against the released obligor under Article 11.1.10.
(1) Expiration of the limitation period of the obligee’s rights against one joint and several obligor does not affect:
the obligations to the obligee of the other joint and several obligors; or
the rights of recourse between the joint and several obligors under Article 11.1.10.
(2) If the obligee initiates proceedings under Articles 10.5, 10.6 or 10.7 against one joint and several obligor, the running of the limitation period is also suspended against the other joint and several obligors.
(1) A decision by a court as to the liability to the obligee of one joint and several obligor does not affect:
the obligations to the obligee of the other joint and several obligors; or
the rights of recourse between the joint and several obligors under Article 11.1.10.
(2) However, the other joint and several obligors may rely on such a decision, except if it was based on grounds personal to the obligor concerned. In such a case, the rights of recourse between the joint and several obligors under Article 11.1.10 are affected accordingly.
As among themselves, joint and several obligors are bound in equal shares, unless the circumstances indicate otherwise.
A joint and several obligor who has performed more than its share may claim the excess from any of the other obligors to the extent of each obligor's unperformed share.
(1) A joint and several obligor to whom Article 11.1.10 applies may also exercise the rights of the obligee, including all rights securing their performance, to recover the excess from all or any of the other obligors to the extent of each obligor’s unperformed share.
(2) An obligee who has not received full performance retains its rights against the co-obligors to the extent of the unperformed part, with precedence over co-obligors exercising contributory claims.
A joint and several obligor against whom a claim is made by the co-obligor who has performed the obligation :
may raise any common defences and rights of set-off that were available to be asserted by the co-obligor against the obligee;
may assert defences which are personal to itself ;
may not assert defences and rights of set-off which are personal to one or several of the other co-obligors.
If a joint and several obligor who has performed more than that obligor’s share is unable, despite all reasonable efforts, to recover contribution from another joint and several obligor, the share of the others, including the one who has performed, is increased proportionally.
When several obligees can claim performance of the same obligation from an obligor:
the claims are separate when each obligee can only claim its share;
the claims are joint and several when each obligee can claim the whole performance;
the claims are joint when all obligees have to claim performance together.
Full performance of an obligation in favour of one of the joint and several obligees discharges the obligor towards the other obligees.
(1) The obligor may assert against any of the joint and several obligees all the defences and rights of set-off that are personal to its relationship to that obligee or that it can assert against all the co-obligees, but may not assert defences and rights of set-off that are personal to its relationship to one or several of the other co-obligees.
(2) The provisions of Articles 11.1.5, 11.1.6, 11.1.7 and 11.1.8 apply, with appropriate adaptations, to joint and several claims.
(1) As among themselves, joint and several obligees are entitled to equal shares, unless the circumstances indicate otherwise.
(2) An obligee who has received more than its share must transfer the excess to the other obligees to the extent of their respective shares.
*The reader is reminded that the complete version of the Principles contains not only the black letter rules reproduced hereunder, but also detailed comments on each article and, where appropriate, illustrations, which are to be seen as an integral part of the Principles. This complete version is published by UNIDROIT and can be found on the UNIDROIT-homepage . Orders may be addressed to Unidroit, 28 via Panisperna, 00184 Rome, Italy - Tel.: (39 6) 6994 1372; fax: (39 6) 6994 1394; e-mail: email@example.com.