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PRINCIPLES OF EUROPEAN CONTRACT LAW

Meaning of terms: "non-performance"


PECL Article 1:301(4)
(complete and revised version 1998)

In these Principles, except where the context otherwise requires:

()

'non-performance' denotes any failure to perform an obligation under the contract, whether or not excused, and includes delayed performance, defective performance and failure to co-operate in order to give full effect to the contract


Comment and notes on PECL 1:301(4)

Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the meaning of the text. The PECL notes identify civil and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, the comments and notes to this PECL provision are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 123-124, 361-362.


COMMENT

The word "non-performance" is used as a general term covering any failure to perform, for whatever cause. Even a failure in performance which is excused under Article 8:108 falls within the definition of non-performance, for such an excuse deprives the aggrieved party only of the remedies of specific performance and damages, not other remedies set out in Chapter 9 (see Article 8:101(2)). The definition embraces all forms of failure in performance, whether the failure consists of total inactivity (i.e. no step towards performance) or of conduct in or towards performance which in some way fails to conform to the contract, e.g. because it is late, incomplete or otherwise defective. Non-performance also includes failure to fulfil the duty imposed by Article 1:202 to co-operate in order to give full effect to the contract. See Comment and Illustrations to that Article.

A non-conforming tender of performance which is properly rejected results in non-performance but the non-performing party may still have time to make a fresh and conforming tender (Article 8:104). [page 123]

In general the Principles do not distinguish one type of non-performance from another. However, certain Articles are directed to particular kinds of non-performance, in particular:

failure to accept, take or retake property (Article 7:110)

failure to accept money (Article 7:111)

non-conforming tender of performance (Articles 8:104, 9:401)

delay in payment of money (Article 9:508)

Non-performance of a contract is to be distinguished from breach of contract in the common law sense. By a breach of contract is meant a non-performance which is not excused, e.g. under the rules as to frustration. By contrast, the Principles are framed on the basis that any failure in performance, whether or not excused, produces legal effects, so that the term "non-performance" includes a failure in performance which is excused under Article 8:108, though the remedies of the other will typically be more restricted in the case of excused non-performance.

Illustration 3: As the result of an embargo S is unable to perform a contract to ship goods to B. The embargo is likely to continue indefinitely and the circumstances are such that S's failure to perform is excused under Article 8:108. S is not liable for damages for breach of contract but under Article 8:108(2) B may treat the non-performance as fundamental and terminate the contract under Article 9:301(1). [page 124]

NOTES: PECL 1:301(4) [Meaning of "non-performance"] [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

1. Non-performance as a unitary concept

Non-performance as used in the Principles covers failure to perform an obligation under the contract in any way, whether by a complete failure to do anything, late performance or defective performance. Furthermore, it covers both excused and non-excused non-performance. This unitary concept of non-performance is found in some but not all of the legal systems.

Breach of contract in ENGLISH law covers the non-performance of any contractual obligation, and so does the FRENCH "inexécution du contrat". This corresponds to the concept of "tekortkoming" in DUTCH law, see BW arts. 6:74 and 6:265, and in BELGIAN law; non-performance in ITALIAN law, see CC arts. 1218 and 1453 ff.; and "kontraktsbrott" or "misligholdelse" in NORDIC law, see Ussing, Alm. Del. 20, 50 (In FINNISH law, "kontraktsbrott" or "sopismusrikkomus", see Taxell, Avtal och rättsskydd 171). See also on "breach" in CISG arts. 45-52, 61-65 and 75-80 and on "non-performance" Unidroit art. 7.1.1.

In GERMAN law non-performance ("Vertragsverletzung") only covers cases of impossibility, delay in performance, and what is called "positive breach of contract" ("positive Vertragsverletzung") which includes, inter alia, breach of a contractual duty of care in the performance, and to which the rules on delay are applied by analogy, see Zweigert & Kötz 494 ff. Delivery of defective goods is not considered to be a non-performance; the buyer's remedies are governed by specific provisions with respect to warranty (Gewährleistung), cf. BGB 459 ff.

2. Remedies covered - the excused non-performance

Several legal systems use the concept of non-performance both for the excused and the non-excused non-performance. This is true of kontraktsbrott and misligholdelse in NORDIC (or sopimusrikkomus in FINNISH law, of tekortkoming in DUTCH and BELGIAN law and of breach under CISG, see art. 45. Remedies such as termination and price reduction are available to the creditor in both situations. Thus a performance prevented by force majeure is treated as a non-performance.

Some laws follow another system. In the COMMON LAW breach of contract only occurs when the aggrieved party has a right to damages for non-performance, i.e. in the case of a non-excused non-performance. Under the Common Law, however, contract liability is strict liability, and will occur in most cases of non-performance. In the rarer case where the failure to perform is excused, the aggrieved party's remedies will be circumscribed. The most obvious case is if the contract has been discharged by frustration, when the remedies will be of a generally restitutionary [page 361] nature (see Law Reform (Frustrated Contracts) Act 1943, but this Act does not apply in IRELAND; there the common law still applies, see note 8 to Article 9:309). In SCOTLAND, the remedies for frustrated contracts depend upon the general law of unjustified enrichment, see Cantiere San Rocco v. Clyde Shipbuilding & Engineering Co. 1923 S.C. (H.L.) 105. However, under the Common Law a party may be excused from a particular obligation without invalidating the rest of the contract. It appears that the outcome is that the aggrieved party may not claim damages in respect of the portion which is impossible though he may enforce the remainder, H & R Sainsbury Ltd. v. Street [1972] 1 W.L.R. 834 (Q.B.). If the failure to perform deprives him of the substance of what he was contracting for he may terminate the contract (Poussard v. Spiers & Pond (1876) 1 Q.B.D. 410 (C.A.)). It will be seen that the outcome is similar to Article 8:101(2).

In GERMAN law "Vertragsverletzung" presupposes that the debtor's non-performance was attributable to his fault, and the remedies for non-performance are available only in case of a non-excused failure to perform those obligations which are covered by the rules on Vertragsverletzung, see BGB 276. This, however, is not true in the case of warranty (Gewährleistung) or of a failure to deliver generic goods, where the obligor's liability is strict, see BGB 279. In all other cases the debtor's fault is presumed and the burden of disproving fault will be on him. In case of an impossibility which existed at the time of the conclusion of the contract the contract is void. (In contrast GREEK CC art. 362 provides for damages, implying that the contract is valid.) In case of a subsequent impossibility which is excused the creditor has no remedies. If the impossibility is permanent both parties are freed from their obligation; if it is temporary the performance cannot be claimed so long as the impossibility persists. In the case of a subsequent impossibility which is not excused the rules on delay apply. If defective goods are delivered the purchaser may terminate the contract or claim reduction in the price even if the defect is excused. AUSTRIAN law is basically similar, see AGBG 918 ff.; damages may be awarded only if the non-performing party was at fault.

For certain obligations some CIVIL LAW systems will grant remedies for non-performance only if the non-performance was "imputable" to the debtor, and this frequently requires that he has committed a fault. Thus in BELGIAN, DUTCH, FRENCH, AND LUXEMBOURG law there is non-performance of an "inspanningsverbinteris" or "obligation de moyens" only if there has been fault. The creditor must prove that the debtor did not act with the care which he had undertaken to exercise. However, in case of an "resultaatsverbinteris" or "obligation de résultat", the creditor must only prove that the result which the debtor undertook to provide has not been achieved. In either case the debtor is excused by force majeure which extinguishes the obligation. SPANISH law has developed on similar lines, see Diez Picazo II 575; Lacruz-Sancho, Delgado, Rivero II, 1, 25, 194. See also Note 2 to Article 6:102.

3. Non-performance caused by the creditor

There is agreement among the legal systems that a non-performance which is due solely to the other party's wrongful prevention does not give the latter any remedy. In most of the systems the party who has prevented performance will himself be the non-performing party against whom the remedies may be exercised. However, in BELGIAN, DUTCH, GERMAN, GREEK and NORDIC law it is not generally considered to be a tekortkoming, Vertragsverletzung or Kontraktsbrott to prevent performance by the other party. It will depend upon whether the acceptance of the performance is a main obligation (Hauptpflicht) of the creditor.

See generally Mengoni, Contractual responsibility 1072; Zweigert & Kötz, Chapter 36; Treitel, Remedies passim. [page 362]

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