Principles of International
Commercial Contracts, 1994 - Unidroit
Purpose of the Principles
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These Principles set forth general rules for international commercial
contracts.
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They shall be applied when the parties have agreed that their contract
be governed by them.
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They may be applied when the parties have agreed that their contracts be
governed by general principles of law, the lex mercatoria or the like.
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They may provide a solution to an issue raised when it proves impossible
to establish the relevant rule of applicable law.
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They may be used to interpret or supplement international uniform law
instruments.
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They may serve as a model for national and international legislators.
Article
1.1 - Freedom of Contract
The parties are free to enter into a
contract and determine its content.
Article
1.2 - No Form Required
Nothing in these Principles requires a
contract to be concluded in or evidenced by writing. It may be proved by any
means, including witnesses.
Article
1.3 - Binding Character of Contract
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.
Article
1.4 - Mandatory Rules
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.
Article
1.5 - Exclusion or Modification by the Parties
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.
Article
1.6 - Interpretation and supplementation of 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.
Article
1.7 - Good Faith and Fair Dealing
(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.
Article
1.8 - Usages and Practices
(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 usage would be unreasonable.
(1) Where notice is required
it may be given by any means appropriate to the circumstances.
(2) A notice is effective
when it reaches the person to whom it is given.
(3) For the purpose of
paragraph (2) a notice ÒreachesÓ a person when given to that person orally or
delivered at that personÕs place of business or mailing address.
(4) For the purpose of this
article ÒnoticeÓ 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
communication that preserves a record of the information contained therein and
is capable of being reproduced in tangible form.
Chapter 2 - Formation
Article
2.1 - Manner of Formation
A contract may be concluded either
by the acceptance of an offer or by conduct of the parties that is sufficient
to show agreement.
Article
2.2 - Definition of Offer
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.
Article
2.3 - Withdrawal of Offer
(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
Article
2.4 - Revocation of 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
(a) if it indicates, whether
by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
(b) if it was reasonable for
the offeree to rely on the offer as being irrevocable and the offeree has acted
in reliance of the offer.
Article
2.5 - Rejection of Offer
An offer
is terminated when a rejection reaches the offeror.
Article
2.6 - Mode of Acceptance
(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.
Article
2.7 - Time of Acceptance
An offer
must be accepted within the time the offeror has fixed or, if no time is fixed,
within a reasonable time having regard to the circumstances, including the
rapidity of the means of communication employed by the offeror. An oral offer
must be accepted immediately unless the circumstances indicate otherwise.
Article
2.8 - Acceptance Within a Fixed Period of Time
(1) A period of time for acceptance
fixed by the offeror in a telegram or a letter begins to run from the moment
the telegram is handed in for dispatch or from the date shown on the letter or,
if no such date is shown, from the date shown on the envelope. A period of time
for acceptance fixed by the offeror by means of instantaneous communication
begins to run from the moment that offer reaches the offeree.
(2) Official holidays or
non-business days occurring during the period for acceptance are included in
calculating the period. However, if a notice of acceptance cannot be delivered
at the address of the offeror on the last day of the period because that day
falls on an official holiday or a non-business day at the place of business of
the offeror, the period is extended until the first business day which follows.
Article
2.9 - Late Acceptance. Delay in Transmission
(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 letter or other
writing containing a late acceptance shows that it has been sent in such
circumstances that if its transmission had been normal it would have reached
the offeror in due time, the late acceptance is effective as an acceptance,
unless without undue delay, the offeror informs the offeree that it considers
the offer as having lapsed.
Article
2.10 - Withdrawal of Acceptance
An
acceptance may be withdrawn if the withdrawal reaches the offeror before or at
the same time as the acceptance would have become effective.
Article
2.11 - Modified Acceptance
(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.
Article
2.12 - Writings in Confirmation
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.
Article
2.13 - Conclusion of Contract Dependent on Agreement on Specific Matters or in
a Specific Form
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 specific form, no contract is concluded
before agreement is reached on those matters or in that form
Article
2.14 - Contract with Terms Deliberately Left Open
(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
(a) the parties reach no
agreement on the terms; or
(b) the third person does not
determine the term, provided that there is an alternative means of rendering
the term definite that is reasonable in the circumstances, having regard to the
intention of the parties.
Article
2.15 - Negotiations in Bad Faith
(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.
Article
2.16 - Duty of Confidentiality
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.
Article
2.17 - Merger Clause
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.
Article
2.18 - Written Modification Clauses
A contract in writing which contains a
clause requiring any modification or termination by agreement to be in writing
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 acted in reliance on that conduct.
Article
2.19 - Contracting Under Standard Terms
(1) Where one party or both parties use
standard terms in concluding a contract, the general rules of formation apply,
subject to Articles 2.20 - 2.22.
(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.
Article
2.20 - Surprising Terms
(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 is to be had to its content, language and
presentation.
Article
2.21 - Conflict Between Standard Terms and Non-Standard Terms
In case of conflict between a standard term
which is not a standard term the latter prevails.
Article
2.22 - Battle of Forms
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.
Chapter 3 - Validity
Article
3.1 - Matters Not Covered
These
Principles do not deal with invalidity arising from
(a) lack of capacity;
(b) lack of authority;
(c) immorality or
illegality.
Article
3.2 - Validity of Mere Agreement
A contract is concluded, modified or
terminated by the mere agreement of the parties, without any further
requirements.
Article
3.3 - Initial Impossibility
(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.
Article
3.4 - Definition of Mistake
Mistake is an erroneous assumption
relating to facts or to law existing when the contract was concluded.
Article
3.5 - Relevant Mistake
(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 would
not have concluded it at all if the true state of affairs had been known, and
(a) the other party made the
same mistake, or caused the mistake, or knew or ought to have known of the
mistake and it was contrary to reasonable commercial standards of fair dealing
to leave the mistaken party in error; or
(b) the other party had not
at the time of avoidance acted in reliance on the contract
(2) However, a party may not
avoid the contract if
(a) it was grossly negligent
in committing the mistake; or
(b) the mistake relates to a
matter in regard to which the risk of mistake was assumed or, having regard to
the circumstances, should be borne by the mistaken party.
Article
3.6 - Error in Expression or Transmission
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.
Article
3.7 - Remedies for Non-Performance
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.
Article
3.8 - Fraud
A party
may avoid the contract when it has been led to conclude the contract by the
other partyÕs fraudulent representation, including language or practices, or
fraudulent non-disclosure of circumstances which, according to reasonable
commercial standards of fair dealing, the latter party should have disclosed.
Article
3.9 - Threat
A party
may avoid the contract when it has been led to conclude the contract by the
other partyÕs unjustified threat which, having regard to the circumstances, is
so imminent and serious as to leave the first party no reasonable alternative.
In particular, a threat is unjustified if the act or omission with which a
party has been threatened is wrongful in itself, or is wrong to use it as a
means to obtain the conclusion of the contract.
Article
3.10 - Gross Disparity
(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 term unjustifiably gave the other
party an excessive advantage. Regard is to be had, among other factors, to
(a) the fact that the other
party has taken unfair advantage of the first partyÕs dependence, economic
distress or urgent needs, or of its improvidence, ignorance, inexperience or
lack of bargaining skill; and
(b) 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 acted in
reliance on it. The provisions of Article 3.13(2) apply accordingly.
Article
3.11 - Third Persons
(1)
Where fraud, threat, gross disparity or a partyÕs 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 acted in reliance on the contract.
Article
3.12 - Confirmation
If the
party entitled to avoid the contract expressly or impliedly confirms the
contract after the period of time for giving notice of avoidance has begun to
run, avoidance of contract is excluded.
Article
3.13 - Loss of Right to Avoid
(1) If a
party is entitled to avoid the contract for mistake but the other party
declares itself willing to perform or performs the contract as it was
understood by the party entitled to avoidance, the contract is considered to
have been concluded as the latter party understood it. The other party must
make such a declaration or render such performance promptly after having been
informed of the manner in which the party entitled to avoidance had understood
the contract and before that party has acted in reliance on a notice of
avoidance.
(2) After such a declaration
or performance the right to avoidance is lost and any earlier notice of
avoidance is ineffective.
Article
3.14 - Notice of Avoidance
The
right of a party to avoid the contract is exercised by notice to the other
party.
Article
3.15 - Time Limits
(1)
Notice of avoidance shall be given within a reasonable time, having regard to
the circumstances, after the avoiding party knew or could not have been unaware
of the relevant facts or became capable of acting freely.
(2) Where an individual term
of the contract may be avoided by a party under Article 3.10, the period of
time for giving notice of avoidance begins to run when that term is asserted by
the other party.
Article
3.16 - Partial Avoidance
Where a
ground of avoidance affects only individual terms of the contract, the effect
of avoidance is limited to those terms unless, having regard to the
circumstances, it is unreasonable to uphold the remaining contract.
Article
3.17 - Retroactive Effect of Avoidance
(1)
Avoidance takes effect retroactively.
(2) On avoidance either
party may claim restitution of whatever is supplied under the contract or the
part of it avoided, provided that it concurrently makes restitution of whatever
it has received under the contract or the part of it avoided or, if it cannot
make restitution in kind, it makes an allowance for what it has received.
Article
3.18 - Damages
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.
Article
3.19 - Mandatory Character of the Provisions
The
provisions of this Chapter are mandatory, except insofar as they relate to the
binding force of mere agreement, initial impossibility or mistake.
Article
3.20 - Unilateral Declarations
The
provisions of this Chapter apply with appropriate adaptations to any
communication of intention addressed by one party to the other.
Chapter 4 - Interpretation
Article
4.1 - Intention of the Parties
(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.
Article
4.2 - Interpretation of Statements and Other Conduct
(1) The
statements and other conduct of a party shall be interpreted according to that
partyÕs 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.
Article
4.3 - Relevant Circumstances
In
applying Articles 4.1 and 4.2, regard shall be had to all the circumstances,
including
(a) preliminary negotiations
between the parties;
(b) practices which the
parties have established between themselves;
(c) the conduct of the
parties subsequent to the conclusion of the contract;
(d) the nature and purpose
of the contract;
(e) the meaning commonly
given to terms and expressions in the trade concerned;
(f) usages.
Article
4.4 - Reference to Contract or Statement as a Whole
Terms and expressions shall be
interpreted in the light of the whole contract or statement in which they
appear.
Article
4.5 - All Terms to be Given Effect
Contract
terms shall be interpreted so as to give effect to all the terms rather than to
deprive some of them of effect.
Article
4.6 - Contra Proferentem Rule
If
contract terms supplied by one party are unclear, an interpretation against
that party is preferred.
Article
4.7 -
Linguistic Discrepancies
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.
Article
4.8 - Supplying an Omitted Term
(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
(a) the intention of the
parties;
(b) the nature and purpose
of the contract;
(c) good faith and fair
dealing;
(d) reasonableness.
Chapter 5 - Content
Article
5.1 - Express and Implied Obligations
The contractual obligations of the
parties may be express or implied.
Article
5.2 -Implied Obligations
Implied obligations stem from
(a) the nature and purpose
of the contract;
(b) practices established
between the parties and usages;
(c) good faith and fair
dealing;
(d) reasonableness.
Article
5.3 - Co-operation between the Parties
Each
party shall co-operate with the other party when such co-operation may
reasonably be expected for the performance of that partyÕs obligations.
Article
5.4 - Duty to Achieve a Specific Result. Duty of Best Efforts
(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.
Article 5.5 - Determination of Kind of Duty Involved
In determining the extent to which an obligation of a party involves a duty of
best efforts in the performance of an activity or duty to achieve a specific
result, regard shall be had, among other factors, to
(a) the way in which the
obligation is expressed in the contract;
(b) the contractual price
and other terms of the contract;
(c) the degree of risk
normally involved in achieving the expected result;
(d) the ability of the other
party to influence the performance of the obligation.
Article
5.6 - Determination of Quality of Performance
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.
Article
5.7 - Price Determination
(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.
Article
5.8 - Contract for an Indefinite Period
A
contract for an indefinite period may be ended by either party by giving notice
a reasonable time in advance.
Chapter 6 - Performance
Section 1 - Performance in
General
Article
6.1.1 - Time of Performance
A party
must perform its obligations:
(a) if a time is fixed by or
determinable from the contract, at that time;
(b) if a period of time is
fixed by or determinable from the contract, at any time within that period
unless circumstances indicate that the other party is to choose a time;
(c) in any other case,
within a reasonable time after the conclusion of the contract.
Article
6.1.2 - Performance at one Time or in Instalments
In cases
under Article 6.1(b) or (c), a party must perform its obligations at one time
if that performance can be rendered at one time ad the circumstances do not
indicate otherwise.
Article
6.1.3 - Partial Performance
(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.
Article
6.1.4 - Order of Performance
(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.
Article
6.1.5 - Earlier Performance
(1) The
obligee may reject an earlier performance unless it has no legitimate interest
in so doing.
(2) Acceptability 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 partyÕs obligations.
(3) Additional expenses
caused to the obligee by earlier performance are to be borne by the obligor,
without prejudice to any other remedy.
Article
6.1.6 - Place of Performance
(1) If
the place of performance is neither fixed by, nor determinable from the
contract, a party is to perform:
(a) a monetary obligation,
at the obligeeÕs place of business;
(b) 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.
Article
6.1.7 - Payment by Cheque or other Instrument
(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.
Article
6.1.8 - Payment by Funds Transfer
(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 of the obligation of the obligor is discharged when the transfer to
the obligeeÕs financial institution becomes effective.
Article
6.1.9 - Currency of Payment
(1) If a
monetary obligation is expressed in a currency other than that of the place of
payment, it may be paid by the obligor in the currency of the place for payment
unless
(a) the currency is freely
convertible; or
(b) 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.
Article
6.1.10 - Currency Not Expressed
Where a
monetary obligation is not expressed in a particular currency, payment must be
made in the currency of the place where payment is to be made.
Article
6.1.11 - Costs of Performance
Each
party shall bear the costs of performance of its obligations.
Article
6.1.12 - Imputation of Payments
(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 and in the order indicated:
(a) an obligation which is
due or which is the first to fall due;
(b) the obligation for which
the obligee has least security;
(c) the obligation which is
the most burdensome for the obligor;
(d) the obligation which has
arisen first.
If
none of the preceding criteria applies, payment is imputed to all the
obligations proportionally.
Article
6.1.13 - Imputation of Non-Monetary Obligations
Article 6.1.12 applies with appropriate adaptations to the imputation of performance of non-monetary obligations.
Article
6.1.14 - Application for Public Permission
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
(a) if only one party has
its place of business in that State, that party shall take the measures
necessary to obtain the permission;
(b) in any other case the
party whose performance requires permission shall take the necessary measures.
Article
6.1.15 - Procedure in Applying for Permission
(1) The
party required to take the measures necessary to obtain the permission shall do
so without undue delay and shall bear any expenses incurred.
(2) That party shall
whenever appropriate give the other party notice of the grant or refusal of
such permission without undue delay.
Article
6.1.16 - Permission Neither Granted Nor Refused
(1) If,
notwithstanding the fact that the party responsible has taken all measures
required, permission is neither granted nor refused within an agreed period or,
where no period has been agreed, within a reasonable time from the conclusion
of the contract, either party is entitled to terminate the contract.
(2) Where the permission
affects some terms only, paragraph (1) does not apply if, having regard to the
circumstances, it is reasonable to uphold the remaining contract even if the
permission is refused.
Article
6.1.17 - Permission Refused
(1) The
refusal of a permission affecting the validity of the contract renders the
contract void. If the refusal affects the validity of some terms only, only
such terms are void if, having regard to the circumstances, it is reasonable to
uphold the remaining contract.
(2) Where the refusal of a
permission renders the performance of the contract impossible in whole or in
part, the rules on non-performance apply.
Section 2 - Hardship
Article
6.2.1 - Contract to be Observed
Where
the performance of a contract becomes more onerous for one of the parties, that
party is nevertheless bound to perform its obligations subject to the following
provisions on hardship.
Article
6.2.2 - Definition of Hardship
There is
hardship where the occurrence of events fundamentally alters the equilibrium of
the contract either because the cost of a partyÕs performance has increased or
because the value of the performance a party receives has diminished, and
(a) the events occur or
become known to the disadvantaged party after the conclusion of the contract;
(b) the events could not
reasonably have been taken into account by the disadvantaged party at the time
of the conclusion of the contract;
(c) the events are beyond
the control of the disadvantaged party; and
(d) the risk of the events
was not assumed by the disadvantaged party.
Article
6.2.3 - Effects of Hardship
(1) In
case of hardship the disadvantaged party is entitled to request renegotiations.
The request shall be made without undue delay and shall indicate the grounds on
which it is based.
(2) The request for
renegotiation does not itself entitle the disadvantaged party to withhold
performance.
(3) Upon failure to reach
agreement within a reasonable time either party may resort to the court.
(4) If the court finds
hardship it may, if reasonable,
(a) terminate the contract
at a date and on terms to be fixed; or
(b) adapt the contract with
a view to restoring its equilibrium.
Chapter 7 - Non-Performance
Section 1 - Non-Performance in
General
Article
7.1.1 - Non-Performance Defined
Non-performance is failure by a
party to perform any of its obligations under the contract, including defective
performance or late performance.
Article
7.1.2 - Interference by the Other Party
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 partyÕs act or omission or by another
event as to which the first party bears the risk.
Article
7.1.3 - Withholding Performance
(1)
Where the parties are to perform simultaneously, either party may withhold
performance until the other party tenders 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.
Article
7.1.4 - Cure by Non-Performing Party
(1) The
non-performing party may, at its own expense, cure any non-performance,
provided that
(a) without undue delay, it
gives notice indicating the proposed manner and timing of the cure;
(b) cure is appropriate in
the circumstances;
(c) the aggrieved party has
no legitimate interest in refusing cure; and
(d) 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
nonperforming partyÕs performances 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.
Article
7.1.5 - Additional Period for Performance
(1) In a
case of non-performance the aggrieved party may by notice to the other party
allow an additional period of time for performance.
(2) During the additional
period the aggrieved party may withhold performance of its own reciprocal
obligations and may claim damages but may not resort to any other remedy. If it
receives notice from the other party that the latter will not perform within
that period, or if upon expiry of that period due performance has not been
made, the aggrieved party may resort to any of the remedies that may be
available under this Chapter.
(3) Where in a case of delay
in performance which is not fundamental the aggrieved party has given notice
allowing an additional period of time of reasonable length, it may terminate
the contract at the end of that period. If the additional period allowed is not
of reasonable length it shall be extended to a reasonable length. The aggrieved
party may in its notice provide that if the other party fails to perform within
the period allowed by the notice the contract shall automatically terminate.
(4) Paragraph (3) does not
apply where the obligation which has not been performed is only a minor part of
the contractual obligation of the non-performing party.
Article
7.1.6 - Exemption Clauses
A clause
which limits or excludes one partyÕs liability for non-performance or which
permits one party to tender performance substantially different from what the
other party reasonably expected may not be invoked if it would be grossly
unfair to do so, having regard to the purpose of the contract.
Article
7.1.7 - Force Majeure
(1)
Non-performance by a party is excused if that party proves that the
non-performance was due to an impediment beyond its control and that it could
not reasonably be expected to have taken the impediment into account at the
time of the conclusion of the contract or to have avoided or overcome it or its
consequences.
(2) When the impediment is
only temporary, the excuse shall have effect for such period as is reasonable
having regard to the effect of the impediment on performance of the contract.
(3) The party who fails to
perform must give notice to the other party of the impediment and its effect on
its ability to perform. If the notice is not received by the other party within
a reasonable time after the party who fails to perform knew or ought to have
known of the impediment, it is liable for damages resulting from such
non-receipt.
(4) Nothing in this article
prevents a party from exercising a right to terminate the contract or to
withhold performance or request interest on money due.
Section
2 - Right to Performance
Article
7.2.1 - Performance of monetary Obligation
Where
a party who is obliged to pay money does not do so, the other may require
payment.
Article
7.2.2 - Performance of Non-Monetary Obligation
Where a
party who owes an obligation other than one to pay money does not perform, the
other party may require performance, unless
(a) performance is
impossible in law or fact;
(b) performance or, where
relevant, enforcement is unreasonably burdensome or expensive;
(c) the party entitled to
performance may reasonably obtain performance from another source;
(d) performance is of an
exclusively personal character; or
(e) the party entitled to
performance does not require performance within a reasonable time after it has,
or ought to have, become aware of the non-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.
Article
7.2.4 - 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.
(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.
Section
3 - Termination
Article
7.3.1 - Right to Terminate the Contract
(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 performance.
(2) In determining whether a
failure to perform an obligation amounts to a fundamental nonperformance regard
shall be had, in particular, to whether
(a) 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;
(b) strict compliance with
the obligation which has not been performed is of essence under the contract;
(c) the non-performance is
intentional or reckless;
(d) the non-performance
gives the aggrieved party reason to believe that it cannot rely on the other
partyÕs future performance;
(e) 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 under Article 7.1.5 has expired.
Article
7.3.2 - Notice of Termination
(1) The
right of a party to terminate the contract is exercised by notice to the other
party.
(2) If performance has been
offered late or otherwise does not conform to the contract the aggrieved party
will lose its right to terminate the contract unless it gives notice to the
other party within a reasonable time after it has or ought to have become aware
of the non-conforming performance.
Article
7.3.3 - Anticipatory Non-Performance
Where
prior to the date for performance by one of the parties it is clear that there
will be a fundamental non-performance by that party, the other party may
terminate the contract.
Article
7.3.4 - Adequate Assurance of Due Performance
A party
who reasonably believes that there will be a fundamental non-performance by the
other party may demand adequate assurance of due performance and may meanwhile
withhold its own performance. Where this assurance is not provided within a
reasonable time the party demanding it may terminate the contract.
Article
7.3.5 - Effects of Termination in General
(1)
Termination of the contract releases both parties from their obligation to
effect and to receive future performance.
(2) Termination does not
preclude a claim for damages for non-performance.
(3) Termination does not
affect any provision in the contract for the settlement of disputes or any
other term of the contract which is to operate even after termination.
Article
7.3.6 - Restitution
(1) On
termination of contract either party may claim restitution of whatever it has
supplied, provided that such party concurrently makes restitution of whatever
it has received. If restitution in kind is not possible or appropriate
allowance should be made in money whenever reasonable.
(2) However, if performance
of the contract has extended over a period of time and the contract is
divisible, such restitution can only be claimed for the period after
termination has taken effect.
Section
4 - Damages
Article
7.4.1 - Right to Damages
Any
non-performance gives the aggrieved party a right to damages either exclusively
or in conjunction with any other remedies except where the non-performance is
excused under these Principles.
Article
7.4.2 - Full Compensation
(1) The
aggrieved party is entitled to full compensation for harm sustained as a result
of the nonperformance. Such harm includes both any loss which it suffered and
any gain of which it was deprived, taking into account any gain to the
aggrieved party resulting from its avoidance of cost or harm.
(2) Such harm may be
non-pecuniary and includes, for instance, physical suffering or emotional
distress.
Article
7.4.3 - Certainty of Harm
(1)
Compensation is due only for harm, including future harm, that is established
with a reasonable degree of certainty.
(2) Compensation may be due
for the loss of a chance in proportion to the stability of its occurrence.
(3) Where the amount of
damages cannot be established with a sufficient degree of certainty, the
assessment is at the discretion of the court.
Article
7.4.4 - Foreseeability of Harm
The
non-performing party is liable only for harm which it foresaw or could
reasonably have foreseen at the time of the conclusion of the contract as being
likely to result from its non-performance.
Article
7.4.5 - Proof of Harm in case of Replacement Transaction
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.
Article
7.4.6 - Proof of Harm by Current Price
(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
the re is no current price at that place, the current price at such other place
that appears reasonable to take as a reference.
Article
7.4.7 - Harm Due in Part to Aggrieved Party
Where
the harm is due in part to an act or omission of the aggrieved party or to
another event as to which that party bears the risk, the amount of damages
shall be reduced to the extent that these factors have contributed to the harm,
having regard to the conduct of the parties.
Article
7.4.8 - Mitigation of Harm
(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 partyÕs taking
reasonable steps.
(2) The aggrieved party is
entitled to recover any expenses reasonably incurred in attempting to reduce
the harm.
Article
7.4.9 - Interest for Failure to Pay Money
(1) I a
party does not pay a sum of money when it falls due the aggrieved party is
entitled to interest upon that sum from the time when payment is due to the
time of payment whether or not the nonpayment is excused.
(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 l 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.
Article
7.4.10 - Interest on Damages
Unless
otherwise agreed, interest on damages for non-performance of non-monetary
obligations accrues as from the time of non-performance.
Article
7.4.11 - Manner of Monetary Redress
(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.
Article
7.4.12 - Currency in which to Access Damages
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.
Article
7.4.13 - Agreed Payment for Non-Performance
(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
nonperformance and to the other circumstances.