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  1. GENERAL CONTRACT LAW  Topics  Instruments on contract law and their interpretation  Substantive contract law in general; incl. rules on services  Relationship between free movement law & contract law
  2. GENERAL CONTRACT LAW  Conflict rules: see Ch. 3 IPL  Most national legal systems have no specific rules for cross-border transactions or international contracts in general (see Ch. 3 IPL)  Uniform international law (by international instruments) ? - In the EU some harmonisation of general contract law. Esp. Consumer law, but some rules for business contracts, eg Late Payment Directive (now Dir 2011/7), for digital services, etc… - International conventions on specific types of contracts (sales, carriage or transport, factoring, …) - OHADA Uniform Acts (on commercial contracts) and draft general contract law 2004 - OHADAC PICC (Caribbean) 2015 (similar to UPICC) - Soft law and model laws, next slide  Multinational enterprises: sometimes conclude contracts « under international law » (with states or IO’s) instead of under national law. See e.g. investment contracts.
  3. GENERAL CONTRACT LAW  Obligations arising out of other instruments, but relevant for contract law: - National mandatory law - Mandatory rules from international treaties (including also safety regulations and other duties of care ...) - International soft law, eg Principles on business and human rights - Administrative law in case of contracts with public authorities (such as concessions of infrastructure)
  4. GENERAL CONTRACT LAW  « soft law » and model laws on general contract law  Possible optional instruments* : Unidroit « Principles », PECL (Lando-commission). Conflict rule will determine whether accepted as « law » or merely as contract clauses  Other restatements in contract law in general: Draft Common Frame of reference (DCFR)  Model laws on specific questions, e.g. Uncitral model law electronic commerce. - * Examples of existing optional instruments: CISG (opt-out), European trademark, societas europea, international last will, european procedures. - * the 2011 EU Commission Draft optional sales law (« CESL ») was withdrawn later
  5. UNIDROIT PICC  Unidroit Principles for International Commercial contracts - « Principles », i.e. no Convention or Model Law - First edition 1994 (120 art.) - Enlarged edition 2004 (185 art.) - Further enlarged 2010/2011 (211 art.) (endorsed by Uncitral) - Enlarged 2016/2017  Intended scope of application: international commercial contracts  Regulated matters: Formation (incl. Representation), Validity (defects of consent, specific clauses), Interpretation, « Contents », Performance Non- performance and remedies, Set-off, Contractual Assignment of rights and contracts, Transfer of obligations, Limitations of Actions (Prescription)  Additional chapters 2010/2011: conditional obligations, illegality, plurality of debtors or creditors, unwinding of failed contracts (restitution)  Not covered: non-contractual assignment
  6. UPICC PREAMBLE  Preamble: Purpose of the Principles 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. See also 1.4. : applicable insofar as the conflict rule allows it  PICC Reality: not chosen as a system of law, but individual rules are often invoked as customary or background law
  7. UPICC– INTERPRETATION AND GAP-FILLING  Art. 1. 6 (Comp. 7 CISG) – Autonomous (& teleological) interpretation (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.  But also duty to act in good faith: Art. 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.  And art. 1.9 Usages and practices (comp. 9 CISG)
  8. UPICC– FREEDOM OF CONTRACT  Art. 1.1: Freedom of contract But freedom of contract can be limited by non-discrimination rules etc.: - EU: Directive 2000/43/EC prohibits discrimination based on racial or ethnic origin in access to goods and services; … - Universal service obligations (or public service obligations) for operators of e.g. telecom or postal services, energy supply, … (FRAND obligations either for all suppliers or for a supplier of last resort) - EU: special rules on Public procurement (equal treatment & competition) - Marketing regulated by trade practices law, etc…; in EU restriction of geofiltering and geoblocking (Reg. 2018/302) - Essential facilities doctrine (competition law: abuse of dominant position, art. 102 TFEU)
  9. UPICC– FREEDOM OF CONTRACT (Anti-)Boycott rules: o Problem of especially « secondary » santions (applying extraterritorially even without a sufficient link to one’s won territory) o Background: Arab league boycotts Israel and blacklists companies doing business with Israel; USA prohibits companies to take part in boycott or more generally discriminate on the basis of race, national origin etc. (see US Export Administration Act, EAA & Tax Reform Act, administered by the OAC = Office of Anti-boycott compliance). o US boycot of Cuba (1992/1996), Iran & Lybia (1996) o collision of EU and US sanctions with Russian antitrust laws o Eu reaction in Rg. 2271/96 « protecting against the effects of the extra-territorial application » (Blocking Regulation): extraterritorial sacntoons considered against internationa law o See Cour d’Appel Paris 25 Feb 2015 Bio-Rad case (boycott of Iran): A boycott imposed by the US is no excuse if the contract is not under US law and the USA not the place of performance (ex art. 9 Rome-I) … o But judge may take into account foreign supermandatory rules according to art. 9 Rome-I (see Ch. 2) o ECJ in C-124/20 Bank Melli/Deutsche Telekom as to whether DT could terminate its contracts wilth the Iranian Bank: the US snactions cannot e a ground, but freedom of contract allows to terminate contracts within the normal conditions (period, no abuse, etc.)
  10. UPICC– GENERAL PROVISIONS JURIDICAL ACTS  Art. 1.2: No form required (unless ...), see further Ch. Formation  Effects and contents:  Art. 1.3: Binding character of contract  Art. 1.7: Duty to act according to good faith & fair dealing  How intention is determined – interpretation of acts: Art. 4.1 and 4.2 - (4.1. for contracts, 4.2 for unilateral acts) – Quid merger clause (2.1.17) – - No oral modification clause (2.1.18) as in CISG 29 II (binding, but estopple can apply to thet clause), thus differing from most national systems (F, B, D, CH, Austria, US common law but in line with English law and US UCC 2-209)  Usages and practices – Art. 1.9  Rules on notices in 1.10
  11. E-SERVICES, E-COMMERCE  Uncitral model law 1996 (1998) deals i.a. with: - « Data messages » cover EDI, e-mail, telegram, telex and telecopy - Art. 5: Information shall not be denied legal effect merely because it is in the form of a data message - Art. 6: Writing < accessible so as to be usable for subsequent reference - Art. 7: Signature - Art. 8: Whether a data message can be an « original » - Art. 13: Attribution of data messages (who is the sender) - Art. 15: Time of (1) dispatch and (2) of receipt  CISG Advisory Council Opinion No. 1 on e-communication under CISG  UN Convention on the Use of Electronic Communications in International Contracts 2005 (in force but only 14 ratifications, i.a. Russia and Singapore)  EU: next slide
  12. E-SERVICES, E-COMMERCE  EU Reg. 910/2014 regulating ‘electronic identification schemes’ (« eIDAS Regulation ») regulates certain types of « trusted services », namely - electronic signatures (first harmonised by EU Directive 1999/93, replaced by the eIDAS regulation): different degrees of e-signature: simple, avanced, qualified. Qualified signature has the same legal effects as a traditional signature - electronic seals - electronic timestamps - electronic registered delivery services - website authentication - and the certificates required for such services. - (not covering i.a. virtual currencies)  EU Directive 2000/31, framework directive e-commerce - Art. 9 Treatment of contracts: equivalence of e-contracts (some exceptions) - Rules relating to information duties, conclusion of the contract, receipt, ...
  13. UPICC– PRECONTRACTUAL  Going beyond CISG: Art. 2.1.15 on liability for negotiations (or breaking off) in bad faith; 2.1.16 Duty of confidentiality  NB. For other rules on precontractual stage, see Ch. 1.
  14. UPICC– FORMATION  Very similar to CISG  2.1.1.: conclusion of the contract by offer and acceptance or by conduct of the parties that is sufficient to show agreement  Rules on offer and acceptance similar to CISG  Art. 2.1.12 (Writings in confirmation)  Art. 2.1.14 (Contract with terms deliberately left open)  Art. 2.1.17 and 2.1.18 on merger clauses and clauses on modification in a particular form.
  15. UPICC– FORMATION  Incorporation of standard terms: not for surprising terms (2.1.20) (« red hand rule », expression from Denning in 1877 judgment Spurling / Bradshaw) (id. Belgian Cass. 18 June 2021, DSM Keukens)  Specific rule for battle of forms (2.1.22, knock out) (NB. comparative law: usually knock out; Engl = last shot; NL = first shot: art. 6:225 CC)
  16. UPICC– AUTHORITY OF AGENTS  Not in CISG , inspired by Unidroit Convention (1983, not in force)  Deals with « authority », i.e. external relationship  Not internal relationship (eg. agency contract) (2.2.1)  Authority by grant (express or implied) (2.2.2); authority based on belief caused by the principal (2.2.5 (b))  Direct relationship in case of disclosed agency (2.2.3)  In principle no direct relationship in case of undisclosed agency (2.2.4)  Liability if the agent acts outside authority: positive interest (2.2.6)  Art. 2.2.7 on conflicts of interest  Art. 2.2.9 on ratification by the principal  Art. 2.2.10 on effect of internal termination of autority
  17. UPICC– VALIDITY  Not in CISG  Ch. 3.2. UPICC deals with defects of consent giving rise to a right to avoid the contract (4 grounds) (next slide)  « Negative reflex effect » of rules on non-performance in Art. 3.2.4. Esp. important for sales (CISG rules on non-performance not displaced by UPICC rules on e.g. mistake)
  18. UPICC– VALIDITY  The 4 defects of consent (cont.):  (1) Mistake (3.2.2.): 4 cases of mistake (shared, caused, left in error, contract not yet relied upon) + requirement of material difference, no gross negligence, risk not assumed or to be bourne Caused = normally by giving information (« representations »*) turning out to be incorrect * Often a contract will contain explicit representations warranted by a party.  Error in expression or transmission: treated as mistake of the sender (3.2.3)  (2) Fraud (3.2.5.) fraudulent representation or non-disclosure  (3) Threats (3.2.6)  (4) Gross disparity or excessive advantage (with abuse of circumstances) (3.2.7)
  19. UPICC– VALIDITY  Deals with defects of consent (cont.):  General rules on « avoidance » and its effects (in CISG avoidance means termination; here avoidance means annullment)  Attribution of acts or omissions to third parties (3.2.8)  Exercise of the right: – by notice to the other party (3.2.11) – within a reasonable period (3.2.12), – not anymore after confirmation (3.2.9)  Effect = retroactive (3.2.14)  Avoidance gives rise to a right to restitution (a non-contractual obligation) (3.2.15)  Possibly damages for precontractual liability (3.2.16)
  20. UPICC– substantive validity  Ch.3.3. deals with « illegality », or rather with the effect of mandatory rules outside the PICC not specifying their effect on the contract  Eg contract caused by corruption: in principle voidability (3.3.1. UPICC)  Rules on restitution in case of violation of mandatory rules in art. 3.3.2.  NB. Conflicts may arise between contradictory mandatory rules of countries, e.g.Boycott & anti-boycott rules (supra)
  21. EU Primary law and contract law Influence of market law, esp. primary law  Competition law: see Ch. 5  Free movement: below  Non-discrimination: below  Other fundamental rights: below
  22. EU Free movement law & contract law  1. Does free movement law control contracts ? (imposing obligations on contracting parties)  2. Does free movement law have an impact on contract law s.s.  3. impact of free movement law on regulatory contract law
  23. Free movement & contract law  1. Does free movement law control contracts ? (imposing obligations on contracting parties)  A) Free movement of goods can be relevant for  - contracts made/used by public authorities  - quasi-regulatory powers: C-171/11 (Deutscher Verein des Gas- und Wasserfaches): refusal of certification constructed market access  - no impact on purely private contracts: C-159/00 Sapod Audic: as far as an obligation to identify packaging is only imposed by a private contract (and not by law), it does not qualify as a barrier to trade  B) Free movement of persons and services  Possible restriction of private practices restricting free movement, but in case law only for private bodies collectively regulating employment or services: C-451/93 Bosman (sports federations); C-438/05 Viking and C- 341/05 Laval (collective labour action)
  24. Free movement & contract law  2. Does free movement law have an impact on contract law s.s.?  What if rules have a particular effect on cross-border contracts ?  Rules that are not overriding mandatory (can be escaped by choice of law): C-339/89 Alsthom Atlantique (French sales law): no infringement  C-93/92 CMC Motorradcenter (German precontractual information duty as regards warranties in parallel import): applies without distinction as to the origin of the product, too indirect to constitute a barrier to trade  Overriding mandatory rules ? May require justification in cross- border cases.  Are EU standards part of a contract ?  Not as such: C-613/14 James Elliott / Irish Asphalt
  25. Free movement & contract law  3. Impact of free movement law on regulatory contract law  Within the scope and thus only valid if justified:  - all rules that have a different impact on local products and those from other member states (discriminatory)  - other barriers to trade that limit market access (e.g. composition, packaging, advertising, other technical standards, …) ,but not non-discrilminatory regulation of selling arrangements (see for the difference C-267/91 Keck)  Some standard cases for goods: C-120/78 Cassis de Dijon; C-261/81 Rau (margarine); C-178/84 Reinheitsgebot for beer; C-302/86 Danish bottles; C-315/92 Clinique; for services: C-154/89 Tourist Guides  Grounds of justification: if necessary for protection of health, consumers, environment, human dignity (C-208/09 Omega Spielhallen), …  For services rules, see the Services Directive 2006/123. Any authorisation scheme for services must be non-discriminatory, proportionate, transparant etc. (art. 9 & 10 Dir.) (See C-724/18 Cali Apartments / Ville de Paris)  Invalidity of national regulation (e.g. breach of notification duty) may also affect contractual relationship: C-443/98 Unilever  See for personal data the GDPR 2016/679 and for non-personal data Reg. 2018/1807
  26. EU Non-discrimination law & contract law  Primary law contains prohibitions: - nationality etc. - equal pay (157 TFEU)  Question of exact scope of obligation. ECJ gives horizontal effect to equal pay rule, against Treaty text: see C-43/75 Defrenne  ECJ invented an age discrimination principle (before the Charter) in C-144/04 Mangold  But restraint in C-13/05 Chacon Navas as to sickness  Secondary law: specific Directives prohibiting certain forms of unequal treatment  - Dir. 2000/43 racial & ethnic origin wth broad scope  - Dir 2000/78 on many grounds in employment & occupation
  27. Other EU freedoms & contract law  EU Charter of rights applies in matters already affected by EU law. Relevant for contract law are e.g.  Freedom of contract: C-283/11 Sky Osterreich: but restriction was justified in the general interest  Protection of family life & home: C-34/13 Kusionova: to be taken into account when interpreting the unfair terms Directive (unfair term in a mortgage credit contract, as there was no judicial review for selling off the home)
  28. UPICC– CONTENTS OF CONTRACTS IN GENERAL  Ch. 5 contains various rules  Under interpretation: supplying an omitted term (Art. 4.8) where important for the determination of their rights and duties  Art. 5.1.2: 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.  Art. 5.1.3. Duty to co-operate with each other  Art. 5.1.4. Distinction duty result / merely best efforts  Art. 5.1.7. Price determination mechanisms: normal price; unilateral unless manifestly unreasonable; third party decision: exernal factor ceasing to exist  Art. 5.1.8. Contract for an indefinite period: ending by notice with reasonable time  Art. 5.3.1 ff.: rules on conditional obligations
  29. UPICC– CONTENTS  Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences stipulator beneficiary (3rd party) promisor (provision) (original contract) --- resulting relationship
  30. CONTENTS OF CONTRACTS  Typical structure of contract and/or standard terms  Preamble indicating parties and possibly purpose  In standard terms: rules on formation and agency, incorporation of standard terms, etc ….  Indication and description of the main obligations - depending on the type of contract (sale, service contract, …) – Description of the goods or services, quality, etc… – Modalities of performance – Price and modalities of payment – Possible (price) revision clauses  Rules on remedies (including exemption clauses, penalty clauses, clauses on procedures and remedies in case of non-performance, …)  Rules on additional obligations, including e.g. information duties, licenses to be obtained, insurance, relation with third parties (subcontractors), etc.  Non-competition clauses: see limits under competition law
  31. CONTENTS OF CONTRACTS  Non-specific additional obligations and other clauses:« Boilerplate clauses » (see also Ch. 3 IPL)*, eg – «no material adverse change »; – « indemnity » (from and against third party claims); – waiver of copyright; – waiver of privacy (use of personal data); – confidentiality clauses (NB not valid in case of corruption); – non-disparagement clauses - Reaction in national law, esp. consumer law (many clauses will be unfair in at least consumer contracts); YODA (you own your device Act), Consumer Fairness Act, etc. Moreover, sometimes considered as purely stylistic and thus not consented. • Some boilerplate clauses are discussed separately: entire agreement clause (merger clause), no waiver clause, no oral amendment, severability or divisibility clause, clauses on notices, hardship and force majeure, clause specifying essential terms or fundamental breaches, sole remedy clause, clause shortening prescription or limitation  Dispute settlement clauses: applicable law, jurisdiction or arbitration, etc…
  32. CONTENTS OF CONTRACTS – UNFAIR TERMS  Unfair terms in B2B contracts ? - Some national laws have rules invalidating unfair terms also in B2B contracts. E.g. Belgium (2019/2022), Germany (for standard terms (AGB)), France, etc. - EU Directive 2019/633 on unfair trading practices in B2B relationships in the agricultural and food supply chain  Possible approaches in general: « regulatory law » addressing the effects of unfair practices v. « governance rules » trying to strengthen the bargaining power of weaker parties (by collective bargaining …), develop dispute settlement mechanisms, etc.  Effects of unfair terms: not binding. Question whether the clause can be reduced or not (not in consumer contracts)
  33. CONTENTS OF CONTRACTS  Rules linking related contracts: - some rules ‘link’ contracts to protect consumer or small business, whereby termination of one contract entails termination of linked contracts (eg consumer credit; French Loi-Macron 2015)
  34. CONTENTS OF CONTRACTS - Shift from product standards to process standards imposed upon esp. suppliers - found in Suppliers Codes or Vendors Codes - Clauses related to the responsibility that buyer/client may incur in its home country due to behaviour of the supplier (supply chain liability mentioned in Ch. 1) or at least to protect the reputation of the buyer/client: - Eg sustainability clauses imposed on supplier (to protect against unethical behaviour of suppliers) (esp. because certain efforts may be required by law, see Ch.1 e.g. UK Modern Slavery Act 2015) - Incl. clauses against trafficking and slavery stipulated by client/buyer - Anti-corruption clauses (ICC model anti-corruption clause 2012) or more generally compliance clauses; they may also give the client rights to inspect the supplier (right-to-audit-clause); may include also a ‘source-of-funds-clause ’. - Clauses concerning respect for social and environmental standards.  including requirements for subcontractors (required to abide by the same codes)  These Codes may/will contain monitoring / auditing / certification either by the client or by a third party organisation and duties to document compliance. Contractors may be required to obtain certificates of compliance with such standards (incl. ISO Standards)
  35. Rules on SERVICES - Important instruments for international service contracts ? - - International conventions and standard contracts for financial services, see Ch. 9 Financing and Ch. 10. Payments, incl. rules on payment services - - Standard contracts for international construction services, see esp. the FIDIC conditions: « red book » for construction contracts, « yellow book » for building and designing electrical or mechanical plants, « silver book » for process or power plants turnkey projects, « green book » for simple contracts, or the « NEC » (New engineering contracts) of the Institution of Civil Engineers (ICE) - - Uncitral legislative guide for concessions (privately financed public infrastructure projects) - - Model general rules for service contracts in the DCFR Book IV (supplemented by specific rules for construction, processing, storage, design, information/advice and treatment contracts) - - supra EU law on ‘services of the information society’ (e-commerce Directive 2000/31); for digital services to consumers, the rules on conformity and remedies are largely harmonised by a 2019 EU Directive - - Services can be part of distribution contracts (see Ch. 6 Distribution) or technology transfer (Ch. 7) - - Obligations may also arise out of Articles of association rather than contracts s.s.. See e.g. in ch. 7 Standard Setting Organisations.
  36. Rules on services: utilities / network industries - - Universal service obligations for operators of i.a. telecom services (now EU Dir. 2018/1972; US Telecom Act 1996) or postal services (EU Dir. 97/67), electricity (since 2003, now Dir. 2019/944 modified by Dir. 2022/869), etc… - - Supervision of such services is in the EU in the hands of independent regulators (energy, telecommunications, postalservices, rail transport, audiovisual media) - - Global online intermediaries have an increasing influence on which exchanges can take place over their networks (with codes, governance models, etc.)
  37. Chains and platforms - As discussed in sales, service providers may also try to limit liability by using a ‘star’ instead of a ‘chain’, intermediating a contract between the client and a subcontractor on the other side. Thus also platform operators: > Distinction between : - genuine intermediaries (e.g., AirBNB) and - eg Uber - where case law* decided that it offers a transport service and not merely electronic services. - * in the EU as to qualification as service of the information society (No according to CJEU in Uber Spain 2017 and Uber France 2018) - * in the UK, see UKSC 19 Feb 2021 iuncto High Court 6 Dec 2021
  39. Expert group Model rules  Article III - Liability of the platform operator with predominant influence  1. If the customer can reasonably rely on the platform operator having a predominant influence over the supplier, the customer can exercise the rights and remedies for the non-performance available against the supplier under the supplier-customer contract also against the platform operator.   2. When assessing whether the customer can reasonably rely on the platform operator’s predominant influence over the supplier, the following criteria are to be considered in particular:  a) The supplier-customer contract is concluded exclusively through facilities provided on the platform;  b) The platform operator withholds the identity of the supplier or contact details until after the conclusion of the supplier-customer contract;  c) The platform operator uses exclusively payment systems which allow the platform operator to withhold payments made by the customer to the supplier;  d) The terms of the supplier-customer contract are essentially determined by the platform operator;  e) The price to be paid by the customer is set by the platform operator;  f) The platform operator provides a uniform image of suppliers or a trademark;  g) The marketing is focused on the platform operator and not on the suppliers;  h) The platform operator promises to monitor the conduct of suppliers and to enforce compliance with its standards;  i) The platform operator prohibits the supplier to conclude supplier-customer contracts outside of the online platform or under different contractual conditions than used on the online platform;  j) Goods, services or digital content offered by the supplier are presented as being available exclusively on the platform, or as being available on the platform at the lowest price.
  40. RULES ON SERVICES: TRANSPORT - Important instruments for international service contracts ? - International conventions concerning international transport (maritime, road, air, rail, liability of terminal operators, ….) - Duties of carriers also determined by other conventions, for carriage over see especially the IMO Conventions: - - e.g. the SOLAS Convention (International Convention for the Safety of Life at Sea, 1974), specified in additional Codes (such as the International Maritime Solid Bulk Cargoes Code (IMSBC Code 2008), the International Code for the Safe Carriage of Grain in Bulk (1991), the International Code for the Construction and Equipment of Ships carrying Dangerous Chemicals in Bulk (IBC Code), the Code of Practice for the Safe Loading and Unloading of Bulk Carriers (BLU Code), …) - - and EU-rules such as Dir. 2022/1999 on uniform procedures for checks on the transport of dangerous goods by road
  41. UPICC – MODALITIES OF PERFORMANCE  Modalities of (performance) of the obligation:  Time of performance (Art. 6.1.1.). See also Late Payment Dir. Art. 3 & 4: time for payment can only be longer than 60 days if not grossly unfair (in some countries no such exception for big companies, eg Dutch law). Verification period for debtor in principle not more than 30 days  Order of performance (Art. 6.1.4.) in principle simultaneously  Place of performance (Art. 6.1.6) default rules - Monetary obligation: creditor’s place (« obligee ») - Other obligations: debtor’s place (« obligor »)  Monetary obligations: means of payment, currency etc. (6.1.7 ff.). See Topic 10 (International Payments)  Costs of performance (Art. 6.1.11)  Rules where public permission required for performance (6.1.14 ff)
  42. UPICC - PERFORMANCE  Hardship (change of circumstances) Art. 6.2.1 ff. including possible duty to renegotiate (NB. Renegotiation clause in contracts with public authorities may be void because contrary to procurement law)  Performance as extinction of an obligation Art. 6.1.12-13: imputation of performance
  43. UPICC – REMEDIES FOR NON- PERFORMANCE  Overview of remedies for non-performance:  Withholding performance (suspension)  Specific performance  Termination (called « avoidance » in CISG) and price reduction  Damages  General principles: - Free choice, no hierarchy of remedies (« pari passu ») (but sometimes fundamental breach required) - Combinability, esp. of damages and other remedies - Largely self-help (unilateral declaration)  By notification (usually within a reasonable time)  Instruments for restraining termination as a remedy: − Additional period for performance (Art. 7.1.5) − The seller’s right to cure (Art. 7.1.4)
  44. UPICC – NON-PERFORMANCE  « Non-performance » of an obligation as general (unitary) concept) (Art. 7.1.1, shift from «(breach of) contract » to « obligation »)  In view of the available remedies, distinction between: - non-performance caused by the creditor itself (7.1.2): no remedy - non-performance excused under 7.1.7 (force majeure): only withholding performance, termination and interest on money due - non-performance cured without delay (7.1.4): only withholding performance, damages - non-performance not excused: all remedies  Force majeure = default exception. Can be broadened by hardship clauses, market adverse condition clauses, material adverse change clause, etc…, or be restricted by “Hell or High Water Clauses” (no force majeure exception) (and to same extent by clauses such as take-or-pay- clauses)  In case of subcontracting, debtor is liable for performance entrusted to another (chain model, see in Ch. 4 sales)
  45. UPICC – NON-PERFORMANCE  Rule on exemption clauses: only if not grossly unfair (7.1.6)  Some specific types of exemption clauses: knock-for-knock-agreements between the parties (where every party insures itself with a first party insurance) or between their insurers
  46. UPICC – REMEDIES FOR NON- PERFORMANCE  Right to (enforce) (specific) performance - always for monetary obligations (7.2.1) (no exception for cases where you can sell it elsewhere) - in principle for other obligations (7.2.2) unless: - impossible or unlawful - unreasonably burdensome - reasonably available elsewhere - strictly personal character - not requested within a reasonable time
  47. UPICC – REMEDIES FOR NON- PERFORMANCE  Withholding performance (7.1.3.) (the rule on anticipatory breach as in CISG is missing) (but implied in 7.3.3/7.3.4)
  48. UPICC – REMEDIES : TERMINATION (1)  Grounds for termination: - fundamental non-performance (7.3.1. (1) (2)) - after an additional period granted for performance (Nachfrist, 7.1.5. and 7.3.1 (3)) - in case of anticipatory fundamental non-performance: 7.3.3. and 7.3.4.  Mode of termination (7.3.2): - by notice - in case of late or defective performance: within a reasonable time
  49. UPICC – REMEDIES : TERMINATION (2)  Scope of termination: all obligations, unless extended over time and divisible (7.3.6 (2))  ? Price reduction  Effects of termination: - release from (outstanding) obligations (7.3.5 (1)) - restitution of performances (in kind or in money) (7.3.6. (1)) - surviving clauses (7.3.5 (3)) - damages reserved (7.3.5 (2))
  50. UPICC – REMEDIES : DAMAGES  Except where non-performance is excused (7.4.1.)  General measure of damage: - positive interest (see 7.4.2 (1), incl. lost profit) - includes non-pecuniary loss (7.4.2. (2)) - includes loss of a chance (7.4.3.) - limited by foreseeability test (7.4.4) - restriction where due to creditor or non-mitigation of harm by creditor (7.4.7, 7.4.8) - includes costs of mitigation (7.4.8 (2)) UPICC does not allow the judge to impose punitive adamages (traditionally accepted in common law jurisdictions, but much less now than in the past. This, the SCotUS limited them to 1 +1 in Exxon Shipping 2008)
  51. UPICC – REMEDIES : DAMAGES  Calculation of damage: - late payment: next slide - reasonable substitute transaction: price difference (plus further damage) (Art. 7.4.5) - current price (Art. 7.4.6)  Agreed payment for non-performance: clauses binding unless grossly excessive in relation to actual harm (7.4.13) (compare Council of Europe Resolution 1978(3) on penal clauses in civil law; UNCITRAL Uniform Rules on contract clauses for an agreed sum due upon failure of performance 1983)  NB. An ‘indemnity’ is an autonomous obligation to pay an amount (not as compensation for non-performance of another obligation)
  52. UPICC – REMEDIES : DAMAGES  Damages in case late payment: Interest (plus further damage) (Art. 7.4.9); - UPICC interest rate in 7.4.9 (2, place of payment) - see also rates in Late Payment Dir. Art. 7; - dies interpellat pro homine (7.4.10; Late Payment Dir. Art. 3.1 and 4.1) Plus further recovery costs (Late Payment Dir. Art. 6, with a lump sum minimum of 40 euro) Deviating clauses may not be grossly unfair (Art. 7 late Payment Dir.)
  53. UPICC – SET-OFF  Requirements:  Obligations of the same kind between 2 parties – incl. monetary debts in different but freely convertible currencies (8.2.)  Different models in national laws: either automatic if stricter conditions are met, or by unilateral declaration.  Unidroit Principles chooses last model: > Can be set-off by notice (8.3.) by one party where: - its own obligation (« active obligation ») is payable (entitled to perform) (8.1.(1)a) - the obligation of the other party (« passive obligation ») is: (a) due (8.1.(1)b) and (b) ascertained or arising from the same contract ((8.1.(1) b and (2))  In UPICC no « retroactive » effect (8.5 (3)) (but in some cases a partly similar rule, cfr. set-off & prescription; set-off & assignment)  UPICC does not deal with contractual set-off (netting) but does not exclude it
  54. UPICC – ASSIGNMENT OF RIGHTS  Assignment = transfer of a right (property)  Scope of Ch. 9.1: - contractual assignment of contractual rights - not: rights embodied in a negotiable instrument (9.1.2.)  Limits to assignability - where significantly more burdensome (9.1.3.) - partially assignable ? If divisible (9.1.4) - no-assignment clauses have NO effect (1) for rights to payment of money and (2) in case of good faith of assignee (9.1.9) - UPICC have no rule as the lex Anastasiana (right of the debtor to buy the claim against the price paid by the assignee); there may be overriding mandatory rules as e.g. the Belgian Act of July 12, 2015 against ‘vulture funds’ (assignee’s right against debtor State limited to what he paid himself)
  55. UPICC – ASSIGNMENT OF RIGHTS  Requirements for assignment: - existence of the right ? For future rights assignment takes place with retroactive effect as soon as the right comes into existence (9.1.6) - mere agreement assignor / assignee (neither notice nor consent required for the transfer as such) (9.1.7)  Duty to perform of the debtor: - according to (order of) notice (9.1.10 and 9.1.11) - the debtor may demand from the assignee adequate proof of assignment (9.1.12)
  56. UPICC – ASSIGNMENT OF RIGHTS  All defences available + set-off available at time of notice (9.1.13) assignor assignee (substituted creditor) debitor cessus (provision) (original contract) (valuta) + transfer of property resulting relationship (substituted creditor)
  57. UPICC – NEW DEBTORS  Ch. 9.2. Substitution or addition of debtor  3 Types (9.2.5) - substitution: original debtor discharged - subsidiary liability of the original debtor - solidary liability of old & new debtor (« joint and several » in Eng. law)  Several more specific institutions or instruments can be classified in this scheme.  Independent new debtors ? See e.g.: documentary credit, independent guarantees
  58. UPICC – PLURALITY OF PARTIES  Ch. 11.1. Plurality of debtors (2 types): - either separate debtors - or « joint and several » (= solidary debtors) > Art. 11.1.3. ff deal with the availability of defences, effects of performance and set-off, release, etc. for the other debtors. > Art. 11.1.9 ff. deal with the apportionment of shares and the internal relationship between solidary debtors (contributory claim + subrogation) - No category of ‘joint debtors’  Ch. 11.2. Contains rules on plurality of creditors (3 types) - separate - joint and several - joint
  59. UPICC – LIMITATION OF ACTIONS  System of a double period: 3 / 10 years (10.2) - 3 years from (constructive) knowledge (after the creditor knows or ought to know the facts as a result of which the creditor’s right can be exercised) - 10 years from the day the right can be exercised  Renewal of limitation period by acknowledgment (irrespective of 10 years) (10.4)  Suspension in case of proceedings (judicial, arbitral and similar): 10.5 to 10.7 – without a one year extension !?  Prolongation until one year after impediment (force majeure, death or incapacity) ceases: 10.8  Effects of expiration: - « weak effect » (art. 10.9); no restitution because not « undue » (10.11) - set-off possible until assertion of prescription (10.10) - not ex officio by the judge