BUC Broedermann 4812-9 · The commentary analyses the UNIDROIT Principles article-by-article from a practical perspec-tive, while always discussing alternative courses of action,

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UNIDROIT Principles of International Commercial Contracts

Eckart J. Brödermann

An Article-by-Article Commentary

NomosISBN 978-3-8487-4812-9

Eckart J. Brödermann

UNIDROIT Principles of International Commercial ContractsAn Article-by-Article Commentary

The UNIDROIT Principles of International Commercial Contracts provide an excellent tool for cross-border contracts restating an international understanding of global contract law. They can be chosen as a neutral and pragmatic business oriented contractual regime for cross- border contracts, developed under the auspices and fi nally approved by the inter-governmental organization UNIDROIT (Rome). They contain over 50 solutions to typical contractual questions constituting compromises between civil and common law. The United Nations Commission on International Trade Law has endorsed their use “as appropriate, for their intended purposes.”

The commentary analyses the UNIDROIT Principles article-by-article from a practical perspec-tive, while always discussing alternative courses of action, where they apply.

In analysing the UNIDROIT Principles of 2016 in their 4th version, the author navigates the reader through the system of the 211 principles, which provide a sound basis for international contracts.

The author is a German practitioner with international training and familiarity with both common and civil law. He has been admitted to the New York Bar and also teaches at the Uni-versity of Hamburg as a professor of law. He is a regular user and advocate of the UNIDROIT Principles both in arbitrations and in his legal practice.

BUC_Broedermann_4812-9.indd 1 06.03.18 11:30

http://www.nomos-shop.de/36175

UNIDROIT Principles of International

Commercial Contracts

An Article-by-Article Commentary

Eckart J. BrödermannProfessor of Law (University of Hamburg)

Dr. iur (University of Hamburg) | Rechtsanwalt (Hamburg, Germany) Attorney-at-Law (New York)

Licence and Maître en Droit (Paris V René Descartes) LL.M. (Harvard) | FCIArb (London)

BUT_Broedermann_4812-9.indd 3 06.03.18 10:22


The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.d-nb.de

ISBN 978-3-8487-4812-9 (Print)

British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British Library.

ISBN 978-3-8487-4812-9 (Print)

Library of Congress Cataloging-in-Publication DataBrödermann, Eckart J. UNIDROIT Principles of International Commercial ContractsAn Article-by-Article CommentaryEckart J. Brödermann531 p.Includes bibliographic references and index.

ISBN 978-3-8487-4812-9 (Print)

1st Edition 2018 © Nomos Verlagsgesellschaft, Baden-Baden, Germany 2018. Printed and bound in Germany.

This work is subject to copyright. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, in-cluding photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. Under § 54 of the German Copyright Law where copies are made for other than private use a fee is payable to “Verwertungs-gesellschaft Wort”, Munich.

No responsibility for loss caused to any individual or organization acting on or refraining from action as a result of the material in this publication can be accepted by Nomos or the author.

BUT_Broedermann_4812-9.indd 4 06.03.18 10:22


PREFACE

In 1994 the International Institute for the Unification of Private Law (UNIDROIT) – an in-tergovernmental organization with 64 Member States from all five continents – publishedthe first edition of the Unidroit Principles of International Commercial Contracts, which rep-resent an authentic paradigm shift in the field of soft law instruments. Prepared by a groupof independent experts representing all the major legal systems of the world, they representthe first attempt to “codify” the general part of international contract law, covering a widerange of subjects such as contract formation, interpretation, validity, performance, non-per-formance and remedies, agency, limitation periods, etc.Welcomed since their first appearance as “a significant step towards the globalisation of le-gal thinking” (J. M. Perillo), the Unidroit Principles are now in their fourth edition (2016).As amply demonstrated by the extensive body of case law and bibliography collected in theonline database UNILEX (www.unilex.info) over the years the Principles have met withconsiderable success not only among academic circles but also in practice. In fact, partiesand arbitral tribunals worldwide refer to them as rules of law governing the contract or ap-plicable to the substance of the dispute. Moreover, they are increasingly used by both arbi-tral tribunals and domestic courts as means of interpreting or supplementing internationaluniform law instruments such as the U.N. Convention on Contracts for the International Saleof Goods (CISG) or, even more frequently, the applicable domestic laws. Finally, numerousnational legislatures in different parts of the world have chosen them – in their entirety or inpart and alone or together with other legal instruments – as a source of inspiration for theirlaw reform projects.It is with outmost pleasure that I write the Preface to this book. Eckart Brödermann, a stillyoung lawyer though with considerable experience in international contract and dispute res-olution practice, is a great connoisseur of the UNIDROIT Principles. He was one of themost influential observers to the international Working Group entrusted by UNIDROIT withtheir preparation, and his contributions in the Group’s deliberations were always very perti-nent and as such highly appreciated by the Group. In his Commentary the Author aptly com-bines a theoretical explanation of the single articles or “black-letter rules” of the Principleswith an accurate analysis of their possible implications in practice, and in so doing he makesample use of his own rich professional experience. The book will certainly be much appreci-ated by all those – both academics and practitioners – interested in the new perspectives of-fered by the UNIDROIT Principles not only as rules of law governing cross-border businesstransactions but also, more in general, as a sort of global “background law” in the field. Michael Joachim BonellChairman of the Working Group on theInternational Commercial Contracts

IX


FOREWORD BY THE AUTHOR

The UNIDROIT Principles of International Commercial Contracts (“UNIDROIT Princi-ples”) provide an invaluable tool for the drafting, negotiation and risk management of inter-national commercial contracts. They can play an important role in international arbitrationsand even in national litigations. They can be chosen as the applicable legal regime. They canbe used as a resource to interpret (i) contracts of the parties, (ii) general commercial princi-ples and international uniform law such as the Convention on the International Sale ofGoods or (iii) even national law. Since many years they have inspired and continue to in-spire legislators in different parts of the world including Europe (e.g. France 2008, 2016),Asia (e.g. China 1999) and South America (Paraguay 2015). Against this background acces-sible knowledge about the UNIDROIT Principles is essential.I came across the UNIDROIT Principles for the first time in 2001 as counsel in an interna-tional arbitration comprehending five jurisdictions. After an inconclusive fight about the ap-plicable law and the interpretation of conflicting choice of law clauses, the parties agreed toadopt the UNIDROIT Principles (→ Introductory Remarks to Section 7.4, at p. 237). Eversince, I have been attracted by the brilliance with which the UNIDROIT Principles bridgediverse legal cultures: often between common and civil law, on occasion between the Ger-manic and the French approach to civil law, or between different approaches within the com-mon law world. Coming from a traditional public and private international law as well as acomparative (national) legal law background with training in French, U.S. and German law,I saw the charm and the chance to work with transnational soft law on contracts which iscompatible with just about all civil and common laws of the world.The UNIDROIT Principles have become part of my daily professional life, not only in writ-ing and teaching (at the University of Hamburg) or at the Chinese European ArbitrationCentre “CEAC” (whose rules allow the option of the UNIDROIT Principles), but also in mydaily life as an international lawyer and arbitrator.The literature concentrating on the UNIDROIT Principles is abundant. Yet, when it comes toreally applying the UNIDROIT Principles, concrete guidance in an article-by-article mannercan be extremely helpful. This article-by-article approach has a long-standing German tradi-tion to interpret “written” law which can be well transferred to “soft” law like theUNIDROIT Principles. The “Official Comments”, edited by UNIDROIT, provide a startingpoint and constitute a (primary) source of soft law. The discussion in the (secondary) legalliterature can go one step further. It is particularly free to raise questions, to make observa-tions or to give practical hints. The format of article-by-article comments permits specificissues to be addressed and to always point at any alternative option to applying the discussedarticle. The footnotes point at further comments, in particular (i) in the first commentarywhich was written outside the auspices of UNIDROIT by a team around David Morán Bovioin Spanish (2d ed. Pamplona 2003, relating to the initial 1994 edition of the UNIDROITPrinciples) or (ii) in the detailed commentary edited by Stefan Vogenauer and his interna-tional team from 13 different jurisdictions on five continents (2d ed. Oxford 2015, ca. 1528pages).The overall approach of this commentary is rather practical than academic. The goal is toprovide an overview for each of the 211 articles and to assist the practitioner to navigate inthe UNIDROIT Principles system. While they are often self-explanatory, the UNIDROITPrinciples deserve in-depth studying. They are usually not part of the curriculum at universi-ty, at least not at any advanced or applied level. For the same reason, the book includesmany cross references to facilitate the access to interdependent principles.The two years of preparation of the commentary, including 1.5 years on a daily basis duringwork and travel in five continents, have led me to discover and understand in more depth the

XI


multiple compromises and decisions made by the Working Group (with some constant andsome changing participants) in developing the four editions of the UNIDROIT Principles,whereby each edition has essentially added further topics to the previous one. The commentsrelate to the UNIDROIT Principles 2016 which were released in spring 2017.Such a project would be impossible to realize without support. I wish to thank (i) my wifeand family for the tolerance on all weekends and during all holidays and private travels dur-ing those two years, (ii) Professor Michael Joachim Bonell for contributing a preface atshort notice, (iii) UNIDROIT for making available the text and relevant background materi-als, (iv) the publishers at Nomos/C.H. Beck and at Wolters Kluwer for their mental opennessto engage into the joint venture of a co-publication in different formats in the interest of awide distribution of comments on the UNIDROIT Principles around the globe, (v) ProfessorPeter Mankowski (University of Hamburg) for motivating me to write this commentarywhich is a spin-off of a larger book on “Commercial Law” edited by him (→ p. vii), (vi) theteam supporting me in the production of this book: (a) Turkish Avukat Dr. Çiğdem Schlößl,LL.M., ref. iur. (University of Hamburg) for valuable research, especially at UNILEX and atthe library of the Max-Planck-Institute for Comparative and International Private Law, andfor assistance with the index, (b) the Chinese jurist Rong Zheng, LL.M. (Chicago-Kent; Uni-versity of Hamburg) for cite-checking in the Official Comments (including ca. 800 changesafter the issuance of the 2016 edition), proof-reading and assistance with the index, (c) theTurkish Avukat Leyla Orak Çelikboya for support by additional research in the preparatorymaterials, (d) stud. iur. Benedict Said (University of Passau) for research in the Spanishcommentary of Morán Bovio and for numerous workshops discussing Morán Bovio’s com-ments, and (v) the partners in my law firm Brödermann Jahn RA GmbH (Hamburg, Ger-many, www.german-law.com) which has allocated substantial research resources to theproject, as well as (vi) numerous proof readers of parts or all of the manuscript including inalphabetical order (a) Marc Dedman, a partner of Spicer Rudstrom, PLLC (Nashville; Ten-nessee, Chapters 7-11), (b) Justin Hudson, then a student at the Europa-Kolleg Hamburg(Chapters 1 to 7), (c) Jonathan Pearce, a partner of Marriott Harrison LLP (London; Intro-duction), (d) the Armenian jurist Marine Tovmasyan (Europa-Kolleg), (e) Helen Tung, anEnglish barrister (Introduction) and (f) William Turner, a businessman with a background inlaw at Harvard University (he has read it all).The blame for any errors and for the texts’sappearance is alone with the author.As a non-native English speaker it is close to impossible to write proper (legal) English. Yet,this is no excuse not to participate in the international legal discussion and to leave it solelyto common law lawyers speaking and writing a (different) native English as compared tousing a global English as a language of convenience. In today’s global world, many con-tracts written ‘in English’ are drafted by lawyers who come from civil law countries and/orwho do not master the English language like a native. The native language of a lawyer andthe language in which the lawyer studied a subject tends to influence his or her reasoning.This commentary ‘in English’ tries to contribute to the bridge building between the differentworlds of thinking, in particular between common law and civil law trained lawyers, be-cause both can gain similar advantages by using the UNIDROIT Principles as a bridge be-tween nations. The author welcomes any suggestions and criticisms which would contributeto further the worldwide discussion about the UNIDROIT Principles which, in my convic-tion, represent the future of international contracting.

Hamburg, 31 December 2017 Eckart Brödermann

FOREWORD BY THE AUTHOR

XII


Summary of Contents

PREFACE IX

FOREWORD BY THE AUTHOR XI

ABBREVIATIONS XLV

DEFINITIONS IN THE UNIDROIT PRINCIPLES XLVII

GLOSSARY OF LATIN TERMS XLVIII

BIBLIOGRAPHY L

RELEVANT SOURCES OF SOFT LAW, MATERIALS LVIII

RELEVANT WEBSITES LXI

WORKING GROUPS LXII

UNIDROIT PRINCIPLES OF INTERNATIONALCOMMERCIAL CONTRACTS 2016 LXIX

TABLE OF CORRESPONDENCE OF THE ARTICLES OF THE 1994, 2004,2010 and 2016 EDITIONS OF THE UNIDROIT PRINCIPLES XCII

Introduction to the UNIDROIT Principles of International Commercial Contracts(“PICC”) 1

(Purpose of the Principles)Preamble 13

— General ProvisionsChapter 1 21

— Formation and Authority of AgentsChapter 2 39

FormationSection 1: 39Authority of AgentsSection 2: 66

— ValidityChapter 3 79

General ProvisionsSection 1: 79Grounds for AvoidanceSection 2: 82IllegalitySection 3: 104

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— InterpretationChapter 4 109

— Content, Third Party Rights and ConditionsChapter 5 121

ContentSection 1: 121Third Party RightsSection 2: 136ConditionsSection 3: 142

— PerformanceChapter 6 149

Performance in GeneralSection 1: 149HardshipSection 2: 176

— Non-performanceChapter 7 183

Non-performance in GeneralSection 1: 185Right to PerformanceSection 2: 206TerminationSection 3: 217DamagesSection 4: 236

— Set-offChapter 8 265

— Assignment of Rights, Transfer of Obligations, Assignmentof Contracts

Chapter 9283

Assignment of RightsSection 1: 284Transfer of ObligationsSection 2: 312Assignment of ContractsSection 3: 323

— Limitation PeriodsChapter 10 335

— Plurality of Obligors and of ObligeesChapter 11 361

Plurality of ObligorsSection 1: 363Plurality of ObligeesSection 2: 393

INDEX 409

Summary of Contents

XIV


Table of Contents

PREFACE IX

FOREWORD BY THE AUTHOR XI

ABBREVIATIONS XLV

DEFINITIONS IN THE UNIDROIT PRINCIPLES XLVII

GLOSSARY OF LATIN TERMS XLVIII

BIBLIOGRAPHY L

RELEVANT SOURCES OF SOFT LAW, MATERIALS LVIII

RELEVANT WEBSITES LXI

WORKING GROUPS LXII

UNIDROIT PRINCIPLES OF INTERNATIONALCOMMERCIAL CONTRACTS 2016 LXIX

TABLE OF CORRESPONDENCE OF THE ARTICLES OF THE 1994, 2004,2010 and 2016 EDITIONS OF THE UNIDROIT PRINCIPLES XCII

Introduction to the UNIDROIT Principles of International Commercial Contracts(“PICC”) 1

(Purpose of the Principles)Preamble 13

— General ProvisionsChapter 1 21

(Freedom of contract)Article 1.1 21

The First of a Series of Fundamental PrinciplesA. 21Freedom of ContractB. 21LimitsC. 21

(No form required)Article 1.2 22

Principle of InformalityA. 22LimitsB. 22

(Binding character of contract)Article 1.3 22

Pacta sunt servandaA. 23LimitsB. 23

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(Mandatory rules)Article 1.4 23

Priority of Private International Law with Respect to Mandatory LawA. 23Applicability of Different Kinds of Mandatory Law Depending on theDispute Resolution Forum

B.24

Restriction of the Scope of Mandatory Laws in Case of Combinationof the UNIDROIT Principles with an Arbitration Clause

1.24

More Mandatory Law in Case of Combination of the UNIDROITPrinciples with a Choice of Court Clause

2.26

EffectsC. 26

(Exclusion or modification by the parties)Article 1.5 27

Party Autonomy EmphasizedA. 27Limits of Mandatory PrinciplesB. 27

(Interpretation and supplementation of the Principles)Article 1.6 28

A Modern Standard Rule on InterpretationA. 28A Global Approach to Interpretation1. 28On Interpretation2. 29

Supplementation of the UNIDROIT Principles with Due Regard to theUnderlying General Principles

B.29

On Supplementation1. 29The Underlying General Principles2. 30

(Good faith and fair dealing)Article 1.7 30

Good Faith and Fair Dealing as a Mandatory Core of the UNIDROITPrinciples pursuant to Arts. 1.5 and 1.6(2)

A.30

StandardB. 31Practical RelevanceC. 31

(Inconsistent behaviour)Article 1.8 32

Part of the Mandatory Core of UNIDROIT Principles pursuant to Art. 1.5A. 32Priority of More Detailed PrinciplesB. 32ExamplesC. 33RemediesD. 33OptionsE. 33

(Usages and practices)Article 1.9 33

Two Kinds of Usages and a LimitA. 33HierarchyB. 34ProofC. 34

(Notice)Article 1.10 34

Risk Allocation to the SenderA. 35Abusive Prevention of Giving NoticeB. 35Withdrawal of a NoticeC. 35

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(Definitions)Article 1.11 36

A Few Key DefinitionsA. 36Further Definitions in the UNIDROIT PrinciplesB. 37

(Computation of time set by parties)Article 1.12 37

Impact of Holidays etcA. 37Relevant Time ZoneB. 37Deviations and InterpretationC. 37

— Formation and Authority of AgentsChapter 2 39

FormationSection 1: 39

(Manner of formation)Article 2.1.1 39

Beyond the Traditional Approach to Contract FormationA. 39The Classical Offer-and-Acceptance Test1. 39Conduct Sufficient to Show Agreement2. 39

A ‘Relaxed’ Approach towards Contract NegotiationB. 40

(Definition of offer)Article 2.1.2 40

Sufficient ‘Definiteness’ plus ‘Intention’A. 40Interrelationship of the Two CriteriaB. 40

(Withdrawal of offer)Article 2.1.3 41

Para. 1 is DeclaratoryA. 41Any Withdrawal Must be ClearB. 41

(Revocation of offer)Article 2.1.4 42

A Self-Explanatory PrincipleA. 42

(Rejection of offer)Article 2.1.5 42

Interpretation of Possibly Implicit RejectionsA. 42Termination by Other MeansB. 42

(Mode of acceptance)Article 2.1.6 42

Function and Systematic Place of the PrincipleA. 43When Does the Offeree’s Expression of Assent Amount to Acceptance?B. 43

The Basic Principle in Para. 1 Sentence 11. 43Conduct without Notice (Para. 3)2. 43Possible Impact of Silence3. 44

When Does the Offeree’s Expression of Assent Become Effective toEstablish a Binding Contract?

C.44

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XVII


(Time of acceptance)Article 2.1.7 45

Impact of TimeA. 45‘Oral’ OfferB. 45Risk AllocationC. 45

(Acceptance within a fixed period of time)Article 2.1.8 46

Calculation of Relative Time PeriodsA. 46Uncertainty of Time of DispatchB. 46

(Late acceptance. Delay in transmission)Article 2.1.9 46

Principle (Para. 1)A. 47Exception (Para. 2)B. 47

(Withdrawal of acceptance)Article 2.1.10 47

A Self-Explanatory Addendum to 2.1.6(2)A. 47

(Modified acceptance)Article 2.1.11 48

Modifications in the Acceptance Notice Generate a Counter-OfferA. 48But Non Material Alterations Generate a Duty on the Offeror to Speak upB. 48Special Rule for Standard TermsC. 49

(Writings in confirmation)Article 2.1.12 49

Exception: Changes Contained in Written ‘Confirmations of the Contract’Might Alter a Contract

A.49

Burden of Proof and TestB. 50An International CompromiseC. 51

(Conclusion of contract dependent on agreement on specificmatters or in a particular form)

Article 2.1.1351

Freedom to Insist on Substantive or Formal SpecificsA. 51WaiverB. 51

(Contract with terms deliberately left open)Article 2.1.14 52

Possible Contract Conclusion Despite a Term Deliberately Left OpenA. 52Three Requirements for Contract ConclusionB. 52Three Contractual Options (Para. 1)C. 53Alternative Means (Para. 2)D. 54

Alternative Means contained in the UNIDROIT Principles1. 54Special Circumstances (Long-term Contracts)2. 54Contractual Options3. 54Arbitration4. 55

(Negotiations in bad faith)Article 2.1.15 55

Avoiding a Cultural Clash, Functions of Art. 2.1.15A. 55Bad Faith ExamplesB. 56Damage Calculation. Burden of ProofC. 57

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(Duty of confidentiality)Article 2.1.16 57

Implied or Express Duty of Confidentiality (Sentence 1)A. 58Remedies (Sentence 2)B. 58

(Merger clauses)Article 2.1.17 58

Another Contribution to Cross Cultural UnderstandingA. 59LimitsB. 59

(Modification in a particular form)Article 2.1.18 60

‘No Oral Modifications’ ClausesA. 60LimitsB. 60

(Contracting under standard terms)Article 2.1.19 61

A Straightforward Regime on Standard Terms in Four ArticlesA. 61Definition (Para. 2)B. 62Incorporation (Para. 1)C. 62

(Surprising terms)Article 2.1.20 63

Safeguard of Basic FairnessA. 64TestB. 64

(Conflict between standard terms and non-standard terms)Article 2.1.21 64

Priority of the Individual Term 64

(Battle of forms)Article 2.1.22 65

A Favor Contractus Approach to Competing Standard TermsA. 65LimitsB. 66Filling the GapsC. 66

Authority of AgentsSection 2: 66

(Scope of the Section)Article 2.2.1 66

Only Agency in the Contract Formation ProcessA. 66Large Concept of AgencyB. 67

(Establishment and scope of the authority of the agent)Article 2.2.2 67

Authority Granted by the Principal (Para. 1)A. 67Incidental Authority (Para. 2)B. 68

(Agency disclosed)Article 2.2.3 68

‘Actual Disclosed Agency’A. 68‘Classical’ ConsequencesB. 69‘Indirect’ or ‘Commission Agency’C. 69

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(Agency undisclosed)Article 2.2.4 69

Another CompromiseA. 69Only a Relation with the ‘Agent’B. 70One Narrow ExceptionC. 70

(Agent acting without or exceeding its authority)Article 2.2.5 70

Principle: No Direct Legal Consequence for the PrincipalA. 70Exception by the Principal’s Own ActionB. 71Distinction of ‘Appearance’ as a Matter of Non-Contractual LawC. 71

(Liability of agent acting without or exceeding its authority)Article 2.2.6 72

Strict LiabilityA. 72DefencesB. 72

(Conflict of interests)Article 2.2.7 73

Coping with a Range of ConflictsA. 73Distinction to Excess of Authority CasesB. 73Avoidance ExcludedC. 74

(Sub-agency)Article 2.2.8 74

Sub-Agency When ‘Reasonable’A. 74Details and Legal ConsequencesB. 75

(Ratification)Article 2.2.9 75

Ratification With Retroactive EffectA. 75Escape Clause for the Third PartyB. 76

(Termination of authority)Article 2.2.10 76

A ClarificationA. 77Subsisting Actual AuthorityB. 77

— ValidityChapter 3 79

General ProvisionsSection 1: 79

(Matters not covered)Article 3.1.1 79

A Self-Explanatory DistinctionA. 79

(Validity of mere agreement)Article 3.1.2 79

Merely Consensual ContractsA. 80LimitsB. 80

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(Initial impossibility)Article 3.1.3 80

A Compromise following the CISGA. 80

(Mandatory character of the provisions)Article 3.1.4 81

Part of the Mandatory Core of UNIDROIT Principles pursuant to Art. 1.5A. 81LimitsB. 82

By Contract1. 82By Law2. 82

Grounds for AvoidanceSection 2: 82

(Definition of mistake)Article 3.2.1 82

A Broad Concept of Mistake …A. 82… With Numerous Boundaries (Test Scheme)B. 83Legal ConsequencesC. 83

(Relevant mistake)Article 3.2.2 84

Two-Prong ‘Reasonableness-Test’ (Para. 1)A. 84Exception for Gross Negligence and Assumed or Allocated Risks (Para. 2)B. 85Legal ConsequencesC. 86

(Error in expression or transmission)Article 3.2.3 86

Errors in Expression or Transmission as MistakesA. 86Legal ConsequencesB. 86

(Remedies for non-performance)Article 3.2.4 87

Remedies for Non-Performance Trumps Avoidance 87

(Fraud)Article 3.2.5 87

Intended Leading into Error and Thereby Gaining and AdvantageA. 87Legal ConsequencesB. 88

(Threat)Article 3.2.6 88

Two Kinds of Unjustified ThreatsA. 89Legal ConsequencesB. 90

(Gross disparity)Article 3.2.7 90

Avoidance in case of Excessive AdvantageA. 91Legal ConsequencesB. 92

The ‘Triple’ of Consequences (Avoidance, Restitution and RelianceDamages)

1.92

Alternative Option of Adaptation2. 92Liquidated Damages and Penalty ClausesC. 92

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XXI


(Third persons)Article 3.2.8 92

Third Party from the Sphere of a Contracting PartyA. 93Avoidance even without ‘Responsibility’ If the Other Party Needs Noprotection

B.93

(Confirmation)Article 3.2.9 94

A Logical Consequence of Freedom of Contract (and of the Good FaithPrinciple)

A.94

Confirmation requiresB. 94

(Loss of right to avoid)Article 3.2.10 94

Function: Part of the Regime for MistakesA. 95Right of the Other Party to Uphold the Contract in an Amended VersionB. 95RequirementsC. 95

(Notice of avoidance)Article 3.2.11 96

Avoiding a Cultural ClashA. 96RequirementB. 96

(Time limits)Article 3.2.12 96

A ‘Reasonable’ Time LimitA. 97A Special Rule for Avoidance of Individual TermsB. 97

(Partial avoidance)Article 3.2.13 98

(Retroactive effect of avoidance)Article 3.2.14 98

RetroactivityA. 98LimitsB. 99

(Restitution)Article 3.2.15 99

Principle of Concurrent Restitution in Kind (Para. 1)A. 99‘Impossible’ or ‘Inappropriate’ Restitution in Kind (Paras. 2-3)B. 100

First Step: Determination of ‘Impossible’ or ‘Inappropriate’Restitution in Kind

1.100

Second Step: Determination of an Allowance in Money ‘WheneverReasonable’

2.100

Compensation for Expenses (Para. 4)C. 101Application of General RulesD. 101Contractual OptionsE. 102Limits of the Restitution RegimeF. 102

(Damages)Article 3.2.16 102

Compensation of the ‘Reliance Interest’A. 103Supplemental Application of General Rules on DamagesB. 103

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(Unilateral declarations)Article 3.2.17 103

Validity Rules Apply Mutatis Mutandis to All Communications of Intention 103

IllegalitySection 3: 104

(Contracts infringing mandatory rules)Article 3.3.1 104

The Second Leg to Art. 1.4A. 104Priority of Effects Provided For in the Mandatory Rule (Para. 1)B. 104The Supplementary Regime of Paras. 2–3C. 105

(Restitution)Article 3.3.2 106

Art. 3.3.1(1) trumps Art. 3.3.2A. 106A Reasonableness Test for RestitutionB. 106Application of Art. 3.2.15C. 107

— InterpretationChapter 4 109

(Intention of the parties)Article 4.1 109

Chapter 4: One of the Most Important Chapters of the UNIDROITPrinciples

A.109

Overcoming National DistinctionsB. 110Step 1: Determination of a Joint Intention, if PossibleC. 110Step 2 in case of Default: Interpretation under an Individualised andContextualised ‘Reasonable Person’ Test

D.111

(Interpretation of statements and other conduct)Article 4.2 112

A Rule Which is Often Incorporated ImplicitlyA. 112Again a Two Step Approach to InterpretationB. 112

(Relevant circumstances)Article 4.3 113

Two Groups of CriteriaA. 113… Which are Non-ExhaustiveB. 113Long-term ContractsC. 114

(Reference to contract or statement as a whole)Article 4.4 115

A Supplement to Art. 4.3: Reference to the (Contractual) Context of theTerm to be Interpreted

A.115

(All terms to be given effect)Article 4.5 115

Avoiding to Deprive Any Clause of An EffectA. 116Standard Terms (Art. 2.1.19(2))B. 116

(Contra proferentem rule)Article 4.6 116

Interpretation Against the Supplier, as a Rule of Last Resort 116

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(Linguistic discrepancies)Article 4.7 117

A Default Rule to a Missing or to an extreme Equal Language ClauseA. 117

(Supplying an omitted term)Article 4.8 118

At the Edge of ‘Interpretation’A. 118Relationship to ‘Interpretation’B. 120Relationship to Arts. 5.1.1-5.1.2C. 120

— Content, Third Party Rights and ConditionsChapter 5 121

ContentSection 1: 121

(Express and implied obligations)Article 5.1.1 121

A Cultural Bridge to Common LawA. 121The Arbitrator’s PerspectiveB. 122

(Implied obligations)Article 5.1.2 122

List of CriteriaA. 122

(Co-operation between the parties)Article 5.1.3 123

Consequence of a ’Common Project’A. 123LimitsB. 124Legal Consequence of a ViolationC. 124Contractual OptionD. 124

(Duty to achieve a specific result. Duty of best efforts)Article 5.1.4 125

A Cultural Bridge to the French Law FamilyA. 125Legal ConsequencesB. 126Limitation of Liability (contractual option)C. 126

(Determination of kind of duty involved)Article 5.1.5 127

Assistance in the Classification of an Obligation 127

(Determination of quality of performance)Article 5.1.6 127

A System of Default RulesA. 127An Autonomous Standard Characterised by ‘Reasonableness’B. 128LimitsC. 128OptionsD. 128

(Price determination)Article 5.1.7 129

Part of a System of Default RulesA. 129General Default Rule (Para. 1)B. 129Specific Default Rules (Paras. 3-4)C. 130

Paragraph 3 (Non Performance)1. 130

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Paragraph 4 (Non Existing Factors)2. 131A Mandatory Boundary to Unreasonable Unilateral Price DeterminationD. 131

The Rule1. 131Contractual Options2. 131Unreasonable Price Determination by a Third Party3. 132

(Termination of a contract for an indefinite period)Article 5.1.8 132

Contracts for an Indefinite Period of TimeA. 132Function of Art. 5.1.8B. 133Reasonable Time in AdvanceC. 134Legal ConsequencesD. 134Contractual OptionsE. 134

(Release by agreement)Article 5.1.9 135

A Clarification to Avoid Cultural MisunderstandingA. 135Action Required; Silence can Constitute ConsentB. 135DistinctionC. 136

Third Party RightsSection 2: 136

(Contracts in favour of third parties)Article 5.2.1 136

Concentration on Contracts in Favour of Third PartiesA. 136Shaping the ContentB. 137

(Third party identifiable)Article 5.2.2 138

Invalidity in case of Impossibility of IdentificationA. 138Future BeneficiariesB. 138

(Exclusion and limitation clauses)Article 5.2.3 139

Function of Arts. 5.2.3-5.2.5A. 139A ‘Shield’ to the BeneficiaryB. 139

(Defences)Article 5.2.4 139

A ‘Shield’ to the Promisor 139

(Revocation)Article 5.2.5 140

Modification or RevocationA. 140LimitsB. 141OptionsC. 141

(Renunciation)Article 5.2.6 141

Right of RefusalA. 141

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ConditionsSection 3: 142

(Types of condition)Article 5.3.1 142

Avoiding MisunderstandingsA. 142TypesB. 142DistinctionsC. 143

(Effect of conditions)Article 5.3.2 144

A System of Default RulesA. 144Suspensive Condition (lit. a): Special CharactersticsB. 144Resolutive Condition (lit. b): Special CharacteristicsC. 144Joint FeaturesD. 145

(Interference with conditions)Article 5.3.3 145

The Watch-Dog for the ConditionA. 145The Devil lies in the DetailB. 145

(Duty to preserve rights)Article 5.3.4 146

The Watch-Dog for the Conditioned Right 146

(Restitution in case of fulfilment of a resolutive condition)Article 5.3.5 147

Details on the Effects of Resolutive ConditionsA. 147Optional: A Rule of Relevance if Parties Chose RetroactivityB. 147

— PerformanceChapter 6 149

Performance in GeneralSection 1: 149

(Time of performance)Article 6.1.1 149

Notion of and Restrictions on PerformanceA. 150A ‘Fixed’ Time or Period of TimeB. 150A Reasonableness-Test as Default RuleC. 151

(Performance at one time or in instalments)Article 6.1.2 152

Partial Performance is Principally Non-performance 152

(Partial performance)Article 6.1.3 152

Protection of the Obligee against Imposed Partial Performance of theObligor

A.152

LimitsB. 153Further Options for the Obligee If Partial Performance Amounts to Non-Performance

C.154

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(Order of performance)Article 6.1.4 154

Principle of Simultaneous PerformanceA. 155LimitsB. 155

(Earlier performance)Article 6.1.5 156

Protection of the Obligee against Earlier PerformanceA. 156The Good Faith Exception; Additional CostsB. 157Other RemediesC. 158

(Place of performance)Article 6.1.6 158

Expectation ManagementA. 158Default Rule Favouring the Obligor …B. 159… Except for Monetary ObligationsC. 159Change of Place of Business.D. 160

(Payment by cheque or other instrument)Article 6.1.7 160

Core Principles on PaymentA. 161A Choice of the ObligorB. 161Protection of the Obligee in Case of ‘Pull-Orders’C. 162

(Payment by funds transfer)Article 6.1.8 162

A Regime for Push-OrdersA. 162Options of the Obligor as Controlled by the ObligeeB. 163Moment of Discharge of the ObligorC. 163

(Currency of payment)Article 6.1.9 164

Two Articles on Currency IssuesA. 164Importance of the Place of PaymentB. 165Some Protection of the Obligee Against Currency FluctuationC. 165

(Currency not expressed)Article 6.1.10 166

Currancy of Place of Payment as a Default RuleA. 166LimitsB. 166

(Costs of performance)Article 6.1.11 167

Each Party Bears its Own Costs as a Default Rule 167

(Imputation of payments)Article 6.1.12 167

A Balanced International CompromiseA. 168A Three-Layered Order of DecisionB. 168

Layer 1: Decision of the Obligor (Para. 1)1. 168Layer 2: Decision of the Obligee (Para. 2)2. 169Layer 3: Default system of Para. 33. 169

LimitsC. 170

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(Imputation of non-monetary obligations)Article 6.1.13 170

Extension to Non-Monetary Obligations 170

(Application for public permission)Article 6.1.14 171

A Default System to Cope with Public PermissionA. 171Determination of the ‘Who’B. 171

(Procedure in applying for permission)Article 6.1.15 172

Regulating the ‘How’A. 172Information of the Other PartyB. 173

(Permission neither granted nor refused)Article 6.1.16 173

Right of Termination in Case of a ‘Stuck Process’A. 174Exception: Only Part of the Contract is Affected.B. 174

(Permission refused)Article 6.1.17 175

Legal Consequences of a RefusalA. 175A Refusal Affecting the Validity of the Contract1. 175Usually No Damages3. 176

Permission with Extremely Burdensome ConditionsB. 176

HardshipSection 2: 176

(Contract to be observed)Article 6.2.1 176

Inspired by International Contract PracticeA. 176A Reminder to Pacta Sunt Servanda as a ‘Mission Statement’B. 178

(Definition of hardship)Article 6.2.2 178

A Fundamental Alteration for the Equilibrium of the ContractA. 178Plus Four Factors Relating to the Sphere of the Disadvantaged PartyB. 179

Knowledge After Contract Conclusion (lit. a)1. 179Anticipation Reasonably Impossible (lit. b)2. 179Beyond Control (lit. c)3. 179No Risk Allocation to the Disadvantaged Party (lit. d)4. 180

(Effects of hardship)Article 6.2.3 180

RenegotiationA. 180Continued Performance of the ContractB. 181Application to the CourtC. 181

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— Non-performanceChapter 7 183

Introduction 183

OverviewA. 183A Concept Based on ‘Spheres’, not on FaultB. 183Six kinds of rights and remedies in four sectionsC. 183Often a Choice Between Several OptionsD. 184Individual Adaptations PossibleE. 184

Non-performance in GeneralSection 1: 185

(Non-performance defined)Article 7.1.1 185

A Unitary Concept …A. 185… Based on ‘Spheres’ as Defined in the Contract, Not on FaultB. 185Impact on Contract DraftingC. 186

(Interference by the other party)Article 7.1.2 186

A Shield for the ObligorA. 186Partial Relevance of the InterferenceB. 187Most Relevant for Duties to Achieve a Specific ResultC. 187

(Withholding performance)Article 7.1.3 188

A Shield for Both Parties Based on TimingA. 188RequirementsB. 188

Non-performance of the Other Party of an Obligation with SufficientConnection to the Duty Underlying the Withheld Performance

1.188

Anticipatory Suspension2. 189‘Clean Hands’3. 190

Parallel Options to Withholding Performance (subject to meeting theindividual requirements of the other provisions)

C.190

(Cure by non-performing party)Article 7.1.4 190

A Right to Cure for the ObligorA. 191Parallel Options for the Obligee (subject to meeting the individualrequirements of the other provisions)

B.192

(Additional period for performance)Article 7.1.5 193

A Proactive Way for the Obligee to Cope with Non-PerformanceA. 194A Privileged Way to Termination in Case of Delay (Para. 3)B. 194Parallel Options for the Obligee (Para. 2)C. 195

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(Exemption clauses)Article 7.1.6 196

The Importance in PracticeA. 196A Basic Assumption that Exemption Clauses are ValidB. 197A Prohibition to Rely on Grossly Unfair Exemption Clauses is Part of theMandatory Core of UNIDROIT Principles

C.197

A Test of SeverityD. 198Limits and Contractual OptionsE. 199

(Force majeure)Article 7.1.7 200

A Shield for the ObligorA. 201ConditionsB. 201Management of Force Majeure by the ObligorC. 204Options for the Obligee.D. 204Force Majeure ClausesE. 205

General Function1. 205Long-term Contracts2. 205Impact of Practice and Usages3. 205

Right to PerformanceSection 2: 206

(Performance of monetary obligation)Article 7.2.1 206

Action for an Agreed Sum as ‘Specific Performance’A. 206Parallel Options (subject to meeting the individual requirements of theother provisions)

B.206

(Performance of non-monetary obligation)Article 7.2.2 206

A Pragmatic Compromise Between Civil and Common LawA. 207The Exceptions (for the Benefit of the Obligor)B. 208Further Options for the ObligorC. 211Parallel Options for the ObligeeD. 212

(Repair and replacement of defective performance)Article 7.2.3 212

A ReminderA. 213RestitutionB. 214Parallel OptionsC. 214

(Judicial penalty)Article 7.2.4 214

A Contribution to the French Legal Family (para. 1)A. 214Tactical Considerations (Para. 2 Sentence 1)B. 215Refusal to ObeyC. 216Parallel Options (Para. 2 Sentence 2)D. 216

(Change of remedy)Article 7.2.5 216

Limited Freedom to Change the Mind 216

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TerminationSection 3: 217

(Right to terminate the contract)Article 7.3.1 217

Termination as a Last Resort (Para. 1)A. 218Fundamental Non-Performance (Para. 2)B. 218

Factors Focussing on the Contract from the Perspective of the Obligee1. 219Factors Focussing on the Action of the Obligor2. 221One Factor Focussing on the Economic Impact to the Obligor3. 222

Nachfrist-Procedure as an Alternative in Case of Delay (Para. 3)C. 222Parallel Options (depending on the circumstances and subject to meetingthe individual requirements on the other provisions)

D.223

Legal ConsequencesE. 223

(Notice of termination)Article 7.3.2 223

A Concept of Clarity by Notice (Para. 1)A. 224Balanced by a ‘Reasonable Time’ – Constraint (Para. 2)B. 224

(Anticipatory non-performance)Article 7.3.3 225

‘Clear’ Cases of Anticipatory Non-PerformanceA. 225NoticeB. 226EffectsC. 226Alternative OptionsD. 226

(Adequate assurance of due performance)Article 7.3.4 227

Avoiding a ‘Dilemma’ for the ObligeeA. 227Three Tools for the ObligeeB. 227

Tool 1: Request for Adequate Assurance of Due Performance1. 227Tool 2: A Withholding Right3. 228Tool 3 (which may follow the use of tool 1 or 2): An Extra ordinaryRight to Termination

4.229

Possible Alternative OptionsC. 229

(Effects of termination in general)Article 7.3.5 229

A Compromise Between Different ApproachesA. 229Limitation of the Effect of Termination to the FutureB. 230Subsisting Rights and Contract ProvisionsC. 230

In Case of a Lawful Contract Termination1. 230In Case of an Unfounded Contract Termination2. 231

(Restitution with respect to contracts to be performed at onetime)

Article 7.3.6231

Principle of Concurrent Restitution in Kind (Para. 1)A. 231‘Impossible’ or ‘Inappropriate’ Restitution in Kind (Para. 2)B. 232Risk AllocationC. 233Compensation for Expenses (Para. 4) and Other OptionsD. 234General Rules Governing the Obligations under Art. 7.3.6E. 234Long-term ContractsF. 235

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(Restitution with respect to long-term contracts)Article 7.3.7 235

Limitation of Restitution RightsA. 235ConditionsB. 235

Principle Rule1. 235Exception2. 236

Reference to Art. 7.3.6C. 236Other OptionsD. 236

DamagesSection 4: 236

Introductory Remarks 236

(Right to damages)Article 7.4.1 238

Damages for Non-Performance unless ExcusedA. 238Application in Addition to Parallel OptionsB. 238Analogical ApplicationC. 239

(Full compensation)Article 7.4.2 239

Principle of Full CompensationA. 239Adaptation in Cases of Analogical ApplicationB. 241

(Certainty of harm)Article 7.4.3 242

Certainty, Probability or Assessment of the CourtA. 242Harms Established by a Reasonable Degree of Certainty (Para. 1)1. 242Loss of a Chance Depending on Probability of its Occurrence (Para. 2)2. 243Assessment at the Discretion of the Court (Para. 3)3. 243

Contractual OptionsB. 244

(Foreseeability of harm)Article 7.4.4 244

An International Standard Meeting Comparative Legal BenchmarksA. 244Specifics of the UNIDROIT Principles’ Foreseeability TestB. 245Impact on Risk Management at the Contract Drafting StageC. 246

(Proof of harm in case of replacement transaction)Article 7.4.5 246

Function of Art. 7.4.5A. 246Four RequirementsB. 247Legal ConsequencesC. 248

(Proof of harm by current price)Article 7.4.6 248

Function of Art. 7.4.6A. 249Three RequirementsB. 249Legal ConsequencesC. 249

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(Harm due in part to aggrieved party)Article 7.4.7 250

Function of the Concept of Contributory CausationA. 250RequirementsB. 251Legal ConsequencesC. 251

(Mitigation of harm)Article 7.4.8 252

Function of MitigationA. 252Two Forms of ApplicationB. 252

A Partial Shield for the Obligor1. 252A Basis for A Claim by the Aggrieved Party2. 253

(Interest for failure to pay money)Article 7.4.9 253

Function and Practical ImportanceA. 254Two Requirements and One ClarificationB. 256Interest RateC. 256Additional DamagesD. 257Contractual OptionsE. 257

(Interest on damages)Article 7.4.10 257

Scope of Application and FunctionA. 257ApplicationB. 257Avoidance of Double CompensationC. 258

(Manner of monetary redress)Article 7.4.11 258

Flexibility to the CourtA. 258IndexationB. 259

(Currency in which to assess damages)Article 7.4.12 259

An Option for the Aggrieved PartyA. 259

(Agreed payment for non-performance)Article 7.4.13 260

FunctionA. 260Freedom to Negotiate an Agreed Payment for Non-PerformanceB. 260Judicial Control of Grossly Excessive Clauses as Part of the MandatoryCore of UNIDROIT Principles

C.262

Contractual OptionD. 263

— Set-offChapter 8 265

(Conditions of set-off)Article 8.1 265

A Neutral Compromise on Set-OffA. 265A Liberal ApproachB. 266Function of Art. 8.1 within the UNIDROIT Principles-System of Set-OffC. 266

Relation to Arts. 8.2-8.51. 266

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Special Rules with Priority2. 266RequirementsD. 267

Mutuality1. 267Entitlement to Performance ((1) lit. a)3. 268An ‘Ascertained’ Obligation of the Other Party ((1) lit. b)4. 269Exception to the ‘Ascertainability’ Requirement5. 270

Legal Consequences and TerminologyE. 270Contractual Options and/or Restrictions and Other RestrictionsF. 271

Contractual Options and/or Restrictions1. 271Other Restrictions2. 272

(Foreign currency set-off)Article 8.2 273

Function and PrincipleA. 273A Race to become the ‘First Party’B. 274

Currency1. 274Exchange rate2. 275

RestrictionsC. 275No ‘freely convertible currencies’1. 275Currency Imposed by Agreement2. 276

Contractual OptionsD. 276

(Set-off by notice)Article 8.3 277

A Straightforward Instruction to the First PartyA. 277FormB. 277LimitsC. 277

(Content of notice)Article 8.4 278

Specification of the ObligationsA. 278The Basic Rule of Para. 11. 278Further Contents of the Notice2. 278

Multiple ObligationsB. 279The Default Rule for Missing Specifications in Case of MultipleObligations of the Other Party

1.279

Missing Specifications in Case of Multiple Obligations of the FirstParty

2.280

Multiple Obligations on Both Sides3. 280

(Effect of set-off)Article 8.5 280

Defined Substantive Effect for the FutureA. 281Substantive Effect of Set-Off (Para 1)1. 281Different Amounts (Para. 2)2. 281Prospective Effect (Para. 3)3. 281

Practical ConsequencesB. 282

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— Assignment of Rights, Transfer of Obligations, Assignmentof Contracts

Chapter 9283

Introduction 283

Assignment of RightsSection 1: 284

(Definitions)Article 9.1.1 284

Perspective and ScopeA. 284Beyond ‘Definitions’B. 284LimitsC. 285

(Exclusions)Article 9.1.2 286

A Reminder of Priority of Certain LawsA. 286Lit. aB. 286Lit. bC. 287

(Assignability of non-monetary rights)Article 9.1.3 287

PurposeA. 287Requirements for an Effective Assignment of Non-Monetary ObligationsB. 287EffectsC. 288OptionsD. 288

(Partial assignment)Article 9.1.4 289

PrincipleA. 289RequirementsB. 289

Rights to the Payment of a Monetary Sum (Para. 1)1. 289Rights to Other Performance than the Payment of a Monetary Sum(Para. 2)

2.289

OptionsC. 290

(Future rights)Article 9.1.5 290

PrincipleA. 290Identification as RequirementB. 291EffectC. 291OptionsD. 292

(Rights assigned without individual specification)Article 9.1.6 292

Assignment of a Bundle of RightsA. 293RequirementsB. 293

Identifiability at the Relevant Time1. 293Partial Validity2. 293

(Agreement between assignor and assignee sufficient)Article 9.1.7 293

Mere AgreementA. 294Assignment of Rights to Receive Payment of a Sum of Money1. 294

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Assignment of Rights to Non-Monetary Performance2. 294OptionsB. 295

(Obligor’s additional costs)Article 9.1.8 295

An Innovative ConceptA. 295RequirementsB. 295OptionsC. 296

(Non-assignment clauses)Article 9.1.9 296

A Balance Between Conflicting InterestsA. 296The SystemB. 297Limited OptionsC. 298

(Notice to the obligor)Article 9.1.10 298

Function and FunctioningA. 298Until Receipt of Notice1. 299After Receipt of Notice2. 299

NoticeB. 300Silent Assignments1. 300Requirements If Notice is Given2. 300Revocation of Notice3. 300

No OptionC. 300

(Successive assignments)Article 9.1.11 301

Rare RelevanceA. 301Purpose and Functioning of the RuleB. 301Open IssuesC. 302OptionsD. 302

(Adequate proof of assignment)Article 9.1.12 303

Protection of the ObligorA. 303Inadequate Proof Sanctioned by Ineffectiveness of the NoticeB. 303

Request for Proof1. 303Risk Allocation2. 304Consequences of Insufficient Proof and Withholding Right3. 304

OptionsC. 304

(Defences and rights of set-off)Article 9.1.13 305

Scope of ApplicationA. 305‘In the Assignor’s Shoes’ (Para. 1)B. 305

Principle1. 305Examples for Available Defences (including References to theUNIDROIT Principles Which Assume the Applicability of theUNIDROIT Principles to the Initial Transaction)

2.

306Rights of the Assignee Confronted with such an Objection3. 306

Set-Off (Para. 2)C. 307Principle (Until Receipt of a Notice of Assignment)1. 307

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Restrictions2. 307OptionsD. 308

(Rights related to the right assigned)Article 9.1.14 309

Scope of ApplicationA. 309Another Useful Compromise Between Civil and Common LawB. 309LimitsC. 310

(Undertakings of the assignor)Article 9.1.15 310

Self-explanatory UndertakingsA. 311EffectB. 311Limits and OptionsC. 312

Transfer of ObligationsSection 2: 312

(Modes of transfer)Article 9.2.1 312

One Option for Each Contract PartnerA. 312Agreement between the Original Obligor and the New Obligor (lit. a)B. 313

Agreement1. 313Legal Consequence2. 313

Agreement between the Obligee and the New Obligor (lit. b)C. 313LimitsD. 314

(Exclusion)Article 9.2.2 314

PrincipleA. 314ExceptionB. 314

(Requirement of obligee’s consent to transfer)Article 9.2.3 314

A Supplement to Art. 9.2.1(a)A. 314Contents and Communication of the Consent of the ObligeeB. 315

Contents1. 315Communication2. 315

(Advance consent of obligee)Article 9.2.4 315

A Useful Tool in PracticeA. 315Application of the RuleB. 316OptionC. 316

(Discharge of original obligor)Article 9.2.5 316

Options for the Affected Third PartyA. 317Options for the Obligee under Paras. 1 and 2B. 317Default Rule in Para. 3C. 317Additional Option by the ObligeeD. 318Option for the Original ObligorE. 318

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(Third party performance)Article 9.2.6 318

Freedom for the Obligor as a RuleA. 318Extensive InterpretationB. 319LimitsC. 319


Scope of ApplicationA. 320No Cut Off of Obligor’s Defences Through the Transfer (Para. 1)B. 320Restriction regarding Set-Off (Para. 2)C. 321

No Transfer of Set-Off Rights1. 321Limits2. 321

(Rights related to the obligation transferred)Article 9.2.8 321

Scope of ApplicationA. 322Rights to PerformanceB. 322Security RightsC. 322

Securities given by the original obligor1. 322Securities given by a third party2. 323Securities given by the new obligor3. 323

LimitsD. 323

Assignment of ContractsSection 3: 323


A Useful ToolA. 323DefinitionsB. 324OverviewC. 324

(Exclusion)Article 9.3.2 325

Limitation of the Scope of Application 325

(Requirement of consent of the other party)Article 9.3.3 325

Coping with a Need for ConsentA. 325Modalities of ConsentB. 326OptionsC. 326

(Advance consent of the other party)Article 9.3.4 327

A Useful Tool in PracticeA. 327Advance ConsentB. 327Effect Upon the Transfer of ContractC. 328OptionD. 328

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(Discharge of the assignor)Article 9.3.5 328

Three Options for the Other PartyA. 328Modalities of ExecutionB. 329Advance DischargeC. 329


OverviewA. 330Defences and Rights of Set-Off with Respect to Rights Assigned in theContext of Assignment of Contract

B.330

Defences1. 330Set-Off2. 330

Defences and Rights of Set-Off with Respect to Obligations Transferred inthe Context of Assignment of Contract

C.331

Defences1. 331Set-Off2. 331

ReferralD. 332

(Rights transferred with the contract)Article 9.3.7 332

Overview and Distinction to Rights of PerformanceA. 332Rights Related to the Rights Assigned in the Context of Assignment ofContract

B.332

Rights Related to the Obligations Transferred in the Context ofAssignment of Contract

C.333

Security Rights Regarding a Transferred Obligation Given by theOriginal Obligory

1.333

Securities given by a Third Party2. 333Securities Given by the New Obligor3. 334

ReferralD. 334

— Limitation PeriodsChapter 10 335

(Scope of the Chapter)Article 10.1 335

A Useful Compromise between Different SystemsA. 335Scope of Applicability (based on the scrutiny by Wintgen)B. 336

Examples of Applicability1. 337Counter-Examples to Which Limitation Periods under Chapter 10 doNot Apply

2.337

Options3. 338

(Limitation periods)Article 10.2 338

General and Underlying Principles Regarding Limitation Periods.A. 339A Two-Tier System1. 339Starting Point on ‘The Day After’2. 339Gregorian Calendar.3. 339Official holidays or non-business days4. 339

Beginning of the Limitation Period.B. 340General Limitation Period (3 years)1. 340

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Maximum Limitation Period (10 years)2. 341OptionsC. 342

(Modification of limitation periods by the parties)Article 10.3 342

Principle of Party Autonomy as a Starting PointA. 342Modalities.B. 342Limits as Part of the Mandatory Core of UNIDROIT PrinciplesC. 343

Limits for the General Limitation Period1. 343Limits for the Maximum Limitation Period2. 343Violations3. 344

OptionsD. 344Principle: No Deviation1. 344Exception by Dépeçage2. 344Arbitration Clauses3. 345

(New limitation period by acknowledgement)Article 10.4 346

Principle, Timing and EffectA. 346Form of AcknowledgementB. 347

(Suspension by judicial proceedings)Article 10.5 348

A Concept of SuspensionA. 348DetailsB. 349

Reference to the Law of the Court for the Beginning of Suspension1. 349End of Suspension2. 349

Contractual OptionsC. 350Effect of the Judicial Proceedings on Joint and Several ObligorsD. 350

(Suspension by arbitral proceedings)Article 10.6 350

Adaptation of the Concept of Suspension to ArbitrationA. 351DetailsB. 351

Beginning of Suspension1. 351End of Suspension2. 352

Effect of the Arbitral Proceedings on Joint and Several ObligorsC. 352

(Alternative dispute resolution)Article 10.7 352

Formal Mediation and Conciliation as Suspending EventA. 352Legal Consequence: Application of Arts. 10.5 and 10.6B. 353

Commencement of Suspension1. 353End of Suspension2. 353

Effect of the Alternative Dispute Resolution on Joint and Several ObligorsC. 354

(Suspension in case of force majeure, death or incapacity)Article 10.8 354

Force Majeure as an Excuse for the ObligeeA. 354DetailsB. 355

Definition of Force Majeure1. 355Effects of force majeure2. 355Death and Incapacity3. 356

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(Effects of expiration of limitation period)Article 10.9 356

The First of Three Articles on the Effects of the Expiration of theLimitation Period

A.357

Rights for the Obligee and for the ObligorB. 357Introduction1. 357A Requirement to Actually Assert the Right2. 357A Remaining Right to Defend3. 357

No Effect on CollateralsC. 358

(Right of set-off)Article 10.10 358

Supplement to Art. 10.9A. 358Supplement to Art. 8.1 et seq.B. 359Contractual OptionsC. 359

(Restitution)Article 10.11 359

Time-Barred Claims as a Valid Basis for PerformanceA. 359Restitution Based on Other GroundsB. 360

— Plurality of Obligors and of ObligeesChapter 11 361

Introduction 361

OverviewA. 361LanguageB. 361ScopeC. 362

Plurality of ObligorsSection 1: 363


Two Kinds of ObligationsA. 363Joint and Several Obligations (lit. a)B. 363Separate Obligations (lit. b)C. 364OptionsD. 365

(Presumption of joint and several obligations)Article 11.1.2 366

A Default RuleA. 366Contractual InterpretationB. 367

(Obligee’s rights against joint and several obligors)Article 11.1.3 367

A Choice of the ObligeeA. 367Non-PerformanceB. 368Contractual OptionC. 368

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(Availability of defences and rights of set-off)Article 11.1.4 368

A Clear Distinction Between Common and Personal DefencesA. 368Common DefencesB. 369

The Principle and Examples1. 369Assertion2. 369

Personal DefencesC. 370The Principle1. 370Legal Impact on Contributory Action2. 370

Set-OffD. 371CommunicationE. 372Contractual OptionsF. 372

(Effect of performance or set-off)Article 11.1.5 372

A Generally Accepted Rule on Discharge by PerformanceA. 373MergerB. 373Contractual OptionC. 373

(Effect of release or settlement)Article 11.1.6 373

Principle of Partial Discharge of Remaining ObligorsA. 374Impact on Contributory Claim.B. 375

General Impact1. 375Increase of Contributory Shares Subsequent to the Release2. 375

Contractual OptionsC. 375

(Effect of expiration or suspension of limitation period)Article 11.1.7 376

Partial Reduction of the Effect of an Expiration of a Limitation PeriodA. 376Effect of Proceedings against One ObligorB. 377

The Effect of Para. 21. 377Limits2. 377

Contractual OptionsC. 378Regarding the Contract between Obligee and Obligors1. 378Regarding the Relationship between Co-Obligors2. 378

(Effect of judgment)Article 11.1.8 379

PrincipleA. 379No Binding Effect on Co-Obligors1. 379Freedom of the Obligee2. 380

Exception in case of Personal DefencesB. 380

(Apportionment among joint and several obligors)Article 11.1.9 381

The Foundation for Contributory Claims and SubrogationA. 381A Default RuleB. 381

(Extent of contributory claim)Article 11.1.10 382

Contributory Claim of an ObligorA. 382DetailsB. 383

Qualification of Contributory Claims as Separate1. 383

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Extent of the Contributory Claim – Calculation Example2. 383Cost and Interest3. 383Contribution in Money4. 384Prescription5. 384


(Rights of the obligee)Article 11.1.11 385

An Additional Tool for the ObligorA. 385Conditions1. 385Legal Consequences2. 386

Priority for the ObligeeB. 387

(Defences in contributory claims)Article 11.1.12 388

A Straightforward RuleA. 388A Clear Distinction Between Common and Personal DefencesB. 388

Common Defences1. 388Personal Defences in General2. 389Special Personal Defences3. 390Set-Off4. 390

OptionsC. 391

(Inability to recover)Article 11.1.13 392

A Possible Change of the ApportionmentA. 392ConditionsB. 392CalculationC. 393

Plurality of ObligeesSection 2: 393


Three Kinds of Obligation Offered by the UNIDROIT PrinciplesA. 393Separate Claims (lit. a)B. 394

Principle1. 394Selected Advantages or Disadvantages2. 394Contractual Options Within This Kind of Obligation3. 395

Joint and Several Claims (lit. b)C. 395Principle1. 395Selected Advantages or Disadvantages2. 395Contractual Options Within This Kind of Obligation3. 396

Joint Claims (lit. c)D. 396Principle1. 396Selected Advantages or Disadvantages2. 397Contractual Options Within This Kind of Obligation3. 397

Absence of an Explicit ChoiceE. 397Options to Agree on Other ConceptsF. 398

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(Effects of joint and several claims )Article 11.2.2 399

A Supplement to Art. 11.2.1 lit. bA. 399DetailsB. 400

Formal Procedures with One Obligee1. 400Performance in Circumstances Governed by Chapter 72. 400Merger.3. 400


(Availability of defences against joint and several obligees)Article 11.2.3 401

Function and PrincipleA. 401Defences and Set-Off under Para. 1B. 402

Defences Which are Common to the Obligor’s Relationship with AllObligees

1.402

Defences Which are Personal to the Obligor’s Relationship with OneObligee

2.402

Contractual Options3. 403Set-Off4. 403

Defences and Set-Off under Para. 2C. 403Performance and Rights of Set-Off1. 403Effect of Release and Settlement2. 404Effect of Expiration and Suspension of Limitation Period3. 404Special Rules on Effect of Judgement4. 405

(Allocation between joint and several obligees)Article 11.2.4 406

PurposeA. 406ApportionmentB. 406Transfer of Excess Received from the ObligorC. 406

Obligation to Transfer the Excess1. 406Set-Off with Expenses2. 407Contractual Options3. 407

Merger of the Obligor with One ObligeeD. 408

INDEX 409

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Documents

BUC Broedermann 4812-9 · The commentary analyses the UNIDROIT Principles article-by-article from a practical perspec-tive, while always discussing alternative courses of action,