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GUIDE TO ARTICLE 62

Comparison with Principles of European Contract Law (PECL)


Match-up of CISG Article 62 with PECL Articles 9:101 through 9:103

CISG Article 62

The seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.

PECL Article 9:101 [Right to Performance: Monetary Obligations]
(complete and revised version 1998)

(1) The creditor is entitled to recover money which is due.

(2) Where the creditor has not yet performed its obligations and it is clear that the debtor will be unwilling to receive performance, the creditor may nonetheless proceed with its performance and may recover any sum due under the contract unless: (a) it could have made a reasonable substitute transaction without significant effort or expense; or (b) performance would be unreasonable in the circumstances.

PECL Article 9:102 [Right to Performance: Non-Monetary Obligations]

(1) The aggrieved party is entitled to specific performance of an obligation other than one to pay money, including the remedy of a defective performance.

(2) Specific performance cannot, however, be obtained where: (a) performance would be unlawful or impossible; or (b) performance would cause the debtor unreasonable effort or expense; or (c) the performance consists in the provision of services or work of a personal character or depends upon a personal relationship; or (d) the aggrieved party may reasonably obtain performance from another source.

(3) The aggrieved party will lose the right to specific performance if it fails to seek it within a reasonable time after it has or ought to have become aware of the non-performance.

PECL Article 9:103 [Right to Performance: Damages Not Precluded]

The fact that a right to performance is excluded under this Section does not preclude a claim for damages.


Definitions

For the PECL definition of "reasonableness", go to PECL art. 1:302 and the comment and notes that accompany this provision.


Editorial remarks

Remarks on whether the Principles of European Contract Law
may be used to interpret or supplement Articles 28 or 62 CISG

Jarno Vanto [*]
September 2004

a. Article 28 of the CISG does not have a counterpart as such in the Principles of European Contract Law. Article 28 became a part of the Convention because a need was seen to acknowledge the difference in the application of the concept of specific performance in different legal systems.

b. The remedy of specific performance assumes an extensive field of application in civil law countries and its function is primarily in upholding the pacta sunt servanda principle.[1] In common law countries the scope of the remedy of specific performance is more limited and damages are seen as the primary remedy upon a breach of contract.[2] This difference in doctrine led to the adoption of CISG Art. 28, when it was acknowledged that for the Convention to enter into force and for it to become adopted widely, it could not be expected that some of the signatory states would relinquish the fundamental principles of their judicial procedure.[3]

c. Articles 46 and 62 of the CISG give the buyer and the seller, respectively, the right to require the party in breach to perform its duties under the contract or the Convention. CISG Art. 28 provides, however, that if the law of the forum does not require specific performance in similar domestic cases of contract law, the court is not bound to enter a judgment of specific performance.[4]

d. PECL Art. 9:101 provides that even in cases where it is clear that the buyer does not want the goods, the seller may deliver the goods and demand the price unless the seller could have made a reasonable substitute transaction without significant effort or expense or because the circumstances indicate that it would be unreasonable for the seller to perform.

e. PECL Art. 9:102 (2) (a) states that specific performance cannot be obtained where performance would be impossible or unlawful. The Official Comment on PECL Art. 9:102 [5] provides that there is no right to require performance if the performance is prohibited by law, even if this prohibition, or illegality, does not nullify the contract itself. Furthermore, PECL 9:102 (2)(b) provides that performance can not be obtained when it would cause the debtor unreasonable effort or expense or (c) the performance consists in the provision of services or work of a personal character or depends upon a personal relationship; or (d) the aggrieved party may reasonably obtain performance from another source.[6]

f. The language of PECL Art. 9:102 and the commentary to it hint at a different scope of application from that of Art. 28 CISG. The nature of the performance itself is of relevance in the PECL whereas Art. 28 serves as a guideline for the court to uphold the law of the forum with regard to that law allowing, or not allowing, specific performance as a remedy in a domestic sales contract dispute. Article 28 is devoid of a qualitative analysis of the performance as such and serves to exclude specific performance in some jurisdictions as a remedy for a breach of contract governed by the CISG, not because of the circumstances surrounding the claim, but because a jurisdiction does not grant the right to specific performance in similar contracts of sale in the first place. It is a general right under the CISG that the aggrieved party is entitled to specific performance, unless the party has resorted to a remedy which is inconsistent with it. CISG Art. 28 is based on the premise that the party is entitled to specific performance if he fulfills the requirements under the Convention. This right is limited, however, by the rules of the jurisdiction with regard to the remedies available to the aggrieved party. There is no similarity between the approaches of the CISG Art. 28 and the PECL Art. 9:102 because the articles do not serve the same purpose in determining a party's right to specific performance.

g. Articles 9:101 and 9:102 of the PECL lead to largely the same results as other intertwined CISG articles do, but are dissimilar in their effects to Art. 28 of the CISG and consequently the Principles of European Contract Law cannot be used to interpret Art. 28 of the Convention.

h. With regard to Art. 62 CISG, that article provides that the seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.[7]

i. PECL Art. 9:101 [8] may give a hint to the interpreter as to what kind of remedy is of the variety that is inconsistent with the requirement to pay the price. If a seller has entered into a substitute transaction that is reasonable in nature, no right to demand the payment of the price would exist in the meaning of Art. 62. The seller has the right to deliver and demand the payment of the price, albeit limited by the aggrieved party's duty to mitigate her damages. However, the intervening circumstances between the buyer's non-performance and seller's insistence on buyer's performance may warrant the exclusion of the seller's right to demand buyer's performance. Article 62 CISG is one-sided in its approach in that it leaves the application of the remedy of specific performance dependent only on the seller's choice of a remedy and not from extraneous circumstances that might otherwise render the use of that remedy useless. Consequently, Art. 9:102 (2) of the PECL does not provide an interpretive platform to Art. 62 of the Convention.

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 339-341]


FOOTNOTES

* Jarno J. Vanto has a Master of Laws degree from the University of Turku, Finland and also an LL.M. degree from the New York University School of Law, USA.

1. Huber, Ulrich in Schlechtriem Peter, Commentary on the UN Convention on the International Sale of Goods (CISG), Clarendon Press, Oxford, 1998, p. 199.

2. Ibid.

3. See the Secretariat Commentary and Subsequent Comments by Prof. Eric E. Bergsten on Art. 28 of the CISG (and its draft counterpart, article 26 of the 1978 Draft Convention), available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-28.html>.

4. Bernstein, H., Lookofsky, J., Understanding the CISG in Europe, Kluwer 2003, p. 120.

For relevant case law see

     -    United States 7 December 1999 Federal District Court [Illinois] (Magellan International v. Salzgitter Handel), presentation available online at <http://cisgw3.law.pace.edu/cases/991207u1.html>, where the Court stated that the remedy of specific performance is generally available under the Convention (Art. 46(1) CISG), with the exception that a Court is not bound to enter judgment for specific performance unless it would do so under its own law of contracts;
     -    Switzerland 31 May 1996 Zürich Arbitration proceeding, presentation available online at <http://cisgw3.law.pace.edu/cases/960531s1.html>, where the Arbitral Tribunal, dealing with the remedies claimed by the buyers, stated:348. The Arbitral Tribunal believes that this is primarily a question of the applicable law. It sees no basis for claims for specific performance under Russian law. The Vienna Convention does not provide for this. If the law applicable to the procedure (Swiss law? - again the Vienna Convention) applied, the Arbitral Tribunal sees no basis for specific performance either.
349. Apart from that the Arbitral Tribunal fails to see how specific performance could be an appropriate remedy for [buyers] in this case. They can hardly expect to be able, under the New York Convention or otherwise, to have an award enforced in Russia providing that [seller] must specifically perform its obligations under the various contracts for the next eight or ten years, producing the aluminum and delivering it to [buyers]. The Arbitral Tribunal will accordingly grant [buyers'] "alternative" request for relief in the form of damages.

5. The Official Comment to article 9:102 PECL is available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp28.html#9102>.

6. For an analysis of the manner in which Art. 9:102 PECL may be used to interpret or supplement Art. 46 of the CISG see Jarno Vanto, Editorial Remarks, available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp46.html#er>.

7. See the Secretariat Commentary on Article 58 of the 1978 Draft Convention (predecessor to Article 58 of the CISG) [Art. 58 of the 1978 Draft and Art. 62 of the CISG are substantively the same], available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-62.html>, which provides that in order for the seller to exercise the right to require performance of the contract he must not have acted inconsistently with that right, e.g., by avoiding the contract under Art. 64 CISG.

8. See the Official Commentary on PECL Art. 9:101, available online at <http://cisgw3.law.pace.edu/cisg/text/peclcomp62.html#9:101>.


Comment and notes on PECL 9:101, 9:102, 9:103

Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the text. The PECL notes identify civil law and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, these comments and notes 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) 391-403.


COMMENT AND NOTES: PECL Article 9:101: [Right to Performance of] Monetary Obligations

(1) The creditor is entitled to recover money which is due.

(2) Where the creditor has not yet performed its obligation and it is clear that the debtor will be unwilling to receive performance, the creditor may nonetheless proceed with its performance and may recover any sum due under the contract unless: (a) it could have made a reasonable substitute transaction without significant effort or expense; or (b) performance would be unreasonable in the circumstances.

Comment

A. The principle

As a rule it is always possible to enforce monetary obligations.

This is the basis of the rule in paragraph (1). A monetary obligation for the purposes of this rule is every obligation to make a payment of money, regardless of the form of payment or the currency. This includes even a secondary obligation, such as the payment of interest or of a fixed sum of money as damages. But in each case, the monetary obligation must have been earned by the creditor, i.e. it must be due.

B. Money not yet due

The principle that monetary obligations always can be enforced is not quite so certain where the monetary obligation has not yet been earned by the creditor's own performance and it is clear that the debtor will refuse to receive the creditor's future performance. This is the situation regulated by paragraph (2).

(i) Basic approach

The basic approach underlying the rules of paragraph (2) is obvious. Under the principle of pacta sunt servanda the creditor is entitled to make its performance and thereby to earn the price for it. The debtor's unwillingness to receive the creditor's performance is therefore, as a rule, irrelevant.[page 391]

However, according to sub-paragraphs (a) and (b) there are two situations where the above principle does not apply.

(ii) (a) Cover transactions

A creditor which can make a reasonable cover transaction without involving itself in significant trouble or expense is not entitled to continue with performance against the debtor's wishes and cannot demand payment of the price for it (paragraph (2) sub-paragraph (a)). The creditor should terminate the contract and either make a cover transaction, thus becoming entitled to invoke Article 9:506, or simply claim damages without making any cover transaction (see Article 9:507 and Comment thereon). The debtor cannot invoke sub-paragraph (a) of paragraph (2) unless two conditions are satisfied. The first is that the creditor can make a cover transaction on reasonable terms because there is a market for its performance or some other way of arranging a substitute transaction. The second is that the cover transaction does not substantially burden the creditor with effort or expense.

Illustration 1: A sells 10,000 ball bearings to B for DM 50,000,- payment to be made in advance. If B indicates that it will not accept delivery, A cannot sue for the price if there is a ready market for ball bearings or if A can easily find a new customer. In contrast, if A would have to make considerable efforts in finding a new customer and would have to shoulder the costs of transportation to another continent, A would not be obliged to make a cover transaction. It could sue for the price under the contract and, if B maintains its refusal to accept the goods, could proceed under Article 7:110.

In certain situations the creditor may even be bound by commercial usage to effect a cover transaction. Whenever the creditor makes, or would have been obliged to make, a cover transaction, the creditor may claim from the debtor the difference between the contract price and the cover price as damages under Article 9:506.

(iii) (b) Unreasonable performance

A very different situation is dealt with in paragraph 2 sub-paragraph (b): Here performance by the creditor would be unreasonable. A typical example is where, before performance has begun, the debtor makes it clear that it no longer wants it. This situation can arise, for example, in construction contracts, other contracts for work and especially long term contracts.

Illustration 2: H has hired for a period of three years advertising space on litter bins supplied to local councils by C. Before commencement of that period and before preparation of the advertisement plates by C, H purports to cancel the contract. Even though paragraph 2 sub-paragraph (a) does not apply because there is abundance of advertising space available, C may not proceed to perform the contract and then claim the hire charges, for it is unreasonable for it to undertake performance of a contract in which C no longer has an interest.[page 392]

The non-performance may be actual (i.e. the date for performance has passed) or anticipatory.

An instance which would not involve unreasonable expenditure is where the creditor must continue to employ its workforce.

(iv) Common features

The feature common to the two cases dealt with in paragraph (2) is that the debtor is at risk of having forced upon it a performance which it no longer wants.

The burden of proving that the existence of one of the exceptions applies is on the debtor.

However, none of the two exceptions laid down in paragraph (2) affects the right of a beneficiary under a letter of credit to claim payment from the bank. This is because letters of credit are treated as independent of the underlying contract.

(v) Legal consequences of exceptions

One of the consequences that arise if either one of the exceptions applies, is spelt out in paragraph (2): the creditor may not demand the money owed under the contract for the counter-performance, in particular the price (supra Comment A). However, damages for non-performance may be claimed, see Article 9:103.

Notes [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

1. Money due generally recoverable

In accordance with the general principle of pacta sunt servanda, continental law allows a creditor to require performance of a contractual obligation to pay money (cf. Dölle - von Caemmerer 1 KG no. 9; see for DENMARK Gomard, Obligationsret II 33). Also according to COMMON LAW an action for an agreed sum is often available, although it is limited in certain respects: it may be brought only when the price has been "earned" by performance, e.g. the performance of a service or the passing of property in the goods (e.g. U.K. Sale of Goods Act 1979, s. 49(1), IRISH Sale of Goods Act 1893, s. 49(1)).

2. Resale possible without unreasonable effort or expense

The restriction in Article 9:101(2)(a) has a precursor in ULIS art. 61. ULIS art. 61(2) restricts the seller's right to require payment of the price where a resale was in conformity with usage and reasonably possible. CISG art. 62 has dropped this restriction. The seller is bound to the contract; it is therefore obliged to tender performance to the buyer even if the latter is unwilling to receive performance, and may claim the purchase price. This approach expresses the general rule which seems to prevail in most continental European countries.

3. Performance would be unreasonable

Article 9:101(2)(b) is based on considerations to be found in experience gained from ENGLISH, IRISH and SCOTTISH practice. Once an action for the price was available there was no requirement that it must be reasonable to pursue it rather than to enter a cover transaction. This gave rise to difficulties when a party had announced in advance that it no longer required a service but the other performed it nonetheless and then sued for the price: see White & Carter (Councils) Ltd. v. McGregor [1962] A.C. 413 (H.L.) (see Illustration 2 of the Comment). The rule in contracts other than sale of goods now appears to be that if at the date of the repudiation the innocent party has not yet performed his part of the contract, he may complete his performance and claim the price only if he has a legitimate interest in doing so: see Attica Sea Carriers Corp. v. Ferrostaal Poseidon Bulk Reederei GmbH [1976] 1 Lloyds' Rep. 250 (C.A.). If he has no legitimate interest in performing he is confined to an action for damages, and his recovery will be limited by the principle of mitigation. SCOTTISH law is the same - White & Carter (above) is a Scottish case. The guilty party has the onus to show that the innocent party has no legitimate interest in performing (Scotland: Salaried Staff London Loan Co. Ltd. v. Swears & Wells Ltd. 1985 S.L.T. 326, I.H.).[page 393]

Continental European legal systems do not know the general restriction upon a claim for payment provided for in Article 9:101(2)(b). However in BELGIAN law there are a number of situations in which the creditor is obliged to terminate the contract and claim damages, e.g. in a construction contract, CC art. 1794, or more generally in all obligations to be rendered in exchange for work or services. The creditor must also terminate when to insist on performance would be contrary to good faith or an abuse of right, see Cass. 16 Jan. 1986, Arr. Cass. no. 317, R.W. 1987-88, 1470 obs. van Oevelen, R.G.D.C./ T.B.B.R. 1987, 130. The FINNISH and SWEDISH Sale of Goods Acts, 52 provide that, in the case of goods which the seller must procure or produce specifically for the buyer, if the buyer cancels the contract the seller may not procure or produce the goods and claim the price. The seller may only claim damages, including any loss of profit. However, this does not apply if the cancellation would result in substantial inconvenience for the seller or if he would be at risk of not being reimbursed for his losses resulting from the cancellation. See Ramberg, Köplagen 512 ff.[page 394]

Go to PECL Abbreviations || Go to PECL Bibliography || Go to full texts of Parts I & II of Principles of European Contract Law


COMMENT AND NOTES: PECL Article 9:102: [Right to Performance of] Non-Monetary Obligations

(1) The aggrieved party is entitled to specific performance of an obligation other than one to pay money, including the remedying of a defective performance.

(2) Specific performance cannot, however, be obtained where: (a) performance would be unlawful or impossible; or (b) performance would cause the debtor unreasonable effort or expense; or (c) the performance consists in the provision of services or work of a personal character or depends upon a personal relationship, or (d) the aggrieved party may reasonably obtain performance from another source.

(3) The aggrieved party will lose the right to specific performance if it fails to seek it within a reasonable time after it has or ought to have become aware of the non-performance.

Comment

A. General

This Article allows the aggrieved party to require performance of a contractual obligation other than one to pay money by the non-performing party. Due to lack of a better, generally understood term, the common law phrase "specific performance" is used. The aggrieved party has not only a substantive right to demand the other party's performance as spelt out in the contract. The aggrieved party has also a remedy to enforce this right, e.g. by applying for an order or decision of the court.

Article 9:102 covers all obligations which are not covered by Article 9:101, e.g. to do or not to do an act, to make a declaration or to deliver something. In some cases a court order itself will act as a substitute for performance by the non-performing party.

Illustration 1: A who had first rented his immovable to B and later on agreed to sell it to him, refuses to transfer ownership to B. Unless paragraph (2) applies, B is entitled to a court order directing A to transfer ownership to B or, in some countries, the court order itself takes the place of a document of transfer executed by A.[page 394]

Rules on the means and the procedure of enforcement of a judgment for performance must be left to the national legal systems.

The right to require performance of a non-monetary obligation applies to three situations: first, if no performance at all is tendered by the non-performing party; second, where tender of a non-conforming performance has been made but has been validly rejected by the aggrieved party; third, where the performance is defective but has not been rejected (see Comment C. below).

However, the right to performance is subject to four exceptions (paragraph (2), sub-paragraphs (a)-(d)) and a special time limit (paragraph (3)).

B. The principle and exceptions

Whether an aggrieved party should be entitled to require performance of a non-monetary obligation, is very controversial. The common law treats specific performance as an exceptional remedy whilst the civil law regards it as an ordinary remedy. These Principles have sought a compromise: a claim for performance is admitted in general (paragraph 1) but excluded in several special situations (paragraphs (2) and (3)).

A general right to performance has several advantages. Firstly, through specific relief the creditor obtains as far as possible what is due to it under the contract; secondly, difficulties in assessing damages are avoided; thirdly, the binding force of contractual obligations is stressed. A right to performance is particularly useful in cases of unique objects and in times of scarcity.

On the other hand, comparative research of the laws and especially commercial practices demonstrate that even in the Civil Law countries the principle of performance must be limited. The limitations are variously based upon natural, legal and commercial considerations and are set out in paragraphs (2)-(3). In all these cases other remedies, especially damages and, in appropriate cases, termination, are more adequate remedies for the aggrieved party.

C. Right to require remedying of defective performance

If the non-performing party performs, but its performance does not conform to the contract, the aggrieved party may choose to insist upon a conforming performance. This may be advantageous for both parties. The aggrieved party obtains what it has originally contracted for and the non-performing party eventually obtains the full price.

A conforming performance may be achieved in a variety of ways: for example, repair; delivery of missing parts; or delivery of a replacement.

The right to require a conforming performance is, of course, subject to the same exceptions as the general right to performance (laid down in paragraphs (2)-(3), see D-J). Thus a non-performing party cannot be forced by court order to accomplish a performance conforming to the contract if the aggrieved party has failed to demand performance within a reasonable time (paragraph (3)) or if the latter may reasonably be expected to make someone else effect repair of the performance (paragraph (2) sub-paragraph (d)).

Illustration 2: A sells and delivers to B a television set. On delivery B discovers that the colour adjustment of the set is defective. The defect can easily be cured [page 395] by fitting a spare part. If B can easily get someone else to fit the part she cannot require A to fit it.

D. Exceptions, but no judicial discretion

Under these Principles the aggrieved party has a substantive right to demand and to enforce performance of a non-monetary obligation. Granting an order for performance thus is not in the discretion of the court; the court is bound to grant the remedy, unless the exceptions of paragraphs (2) or (3) apply. National courts should grant performance even in cases where they are not accustomed to do so under their national law.

E. Impossibility and illegality

For obvious reasons, there is no right to require performance if it is impossible (paragraph (2) sub-paragraph (a)). This is particularly true in case of factual impossibility, i.e. if some act in fact cannot be done. The same is true if an act is prohibited by law. Even if this prohibition does not nullify the contract, its performance may be illegal. Similarly, specific performance is not available where a third person has acquired priority over the plaintiff to the subject matter of the contract.

If an impossibility is only temporary, enforcement of performance is excluded during that time.

Whether or not the impossibility makes the non-performing party liable in damages is irrelevant in this context.

F. Unreasonable effort or expense

Performance cannot be required if it would involve the non-performing party in unreasonable effort or expense (paragraph (2) sub-paragraph (b)). No precise rule can be stated on when effort or expense is unreasonable. However, considerations as to the reasonableness of the transaction or of the appropriateness of the counter-performance are irrelevant in this context. Nor is paragraph (2) sub-paragraph (b) limited to the kind of supervening event cases covered by Article 6:111. These Articles, as the more specific rule, prevail over the present section.

Illustration 3: A, who has sold his yacht "Eliza" to B, promised to deliver it at B's domicile. On the way "Eliza" is hit by a ship and is sunk in 200 metres of water. The costs of raising her would amount to forty times her value. The cost of forcing A to perform would be unreasonable.

Performance may have become useless for the aggrieved party. In such cases it may then be vexatious to force the non-performing party to stick to its promise, cf. Article 1:201.

Illustration 4: A leased his farm for five years to mining company B for strip mining. In addition to paying rent, B promised to restore the land after completing the mining operation. In the meantime, A decides to lease the land after its return from B to the army for use as a training area for tank crews. If B would have to spend $29,000 in order to restore the land and its value would thereby increase by only $300, the restoration would be unreasonable.[page 396]

G. Provision of services or work of a personal character

Paragraph (2) sub-paragraph (c) covers two different situations: (1) it excludes a right to require performance of services or work of a personal character. This rule is based on three considerations: firstly, a judgment ordering performance of personal services or work would be a severe interference with the non-performing party's personal liberty; secondly, services or work which are rendered under pressure will often not be satisfactory for the aggrieved party; and thirdly, it is difficult for a court to control the proper enforcement of its order.

The term "services or work of a personal character" does not cover services or work which may be delegated. A provision in the contract that work may not be delegated does not necessarily make the work of a personal character. If the contract does not need the personal attention of the contracting party but could be performed by its employees, the clause prohibiting delegation may be interpreted as preventing only delegation to another enterprise, e.g. a sub-contractor.

Services requiring individual scholars of an artistic or scientific nature and services to be rendered in the scope of a confidential and personal relationship are personal services.

Illustration 5: A, a famous artist, contracts with B, a wealthy merchant, to paint a picture for him. If A does not comply with her promise B cannot require performance, because performance of A's obligation requires individual scholars of an artistic nature and thus consists in work of a personal nature.

The signing of a document would not usually constitute service or work within the meaning of this provision. Such an obligation can mostly be enforced since the non-performing party's declaration can be replaced by a court decree (See Comment A.).

Similarly, Paragraph (2) sub-paragraph (c) excludes specific performance where the parties would be forced to enter or to continue a personal relationship.

In case of agreements to enter into a partnership, paragraph 2 sub-paragraph (c) second alternative applies if and insofar as the partnership presupposes a close personal contact. But as in case of a contract to form a public company, the specific personal element is sometimes lacking; in this case this rule does not prevent the promise being enforced.

Illustration 6: The six heirs of a factory-owner conclude a contract in due form to establish a limited company in order to continue the inherited business. Later A, one of the heirs, who was not to assume any management functions in the company, refuses to co-operate in the creation of the company. The other heirs may require performance of the preliminary agreement. The result would be different if the agreement were one to create a partnership in which all the partners were to play an active role.

Paragraph (2) sub-paragraph (c) speaks only of positive acts ("provision, performance"). It is possible to require performance of a negative obligation, e.g. to forebear from rendering services for someone else or from entering into a partnership [page 397] with someone else. If, however, enforcement of a negative obligation concerning services, work or a personal relationship would result in indirect enforcement of a positive act to provide or maintain the same, paragraph (2) sub-paragraph (c) applies.

Illustration 7: A, a specialist in marketing by mail order, has been employed by B on terms that for two years A will not work as a marketing specialist for any other firm. A ceases advising B without notice because C, B's competitor, has offered A a much higher fee. B cannot obtain an injunction to restrain A from working for C or anyone else because A's obligation to provide services for B would be enforced indirectly.

H. Cover transaction

Paragraph (2) sub-paragraph (d), like Article 9:101(2) lit. (a), excludes a right to require performance if the aggrieved party can more easily obtain performance from other sources. Paragraph (2) sub-paragraph (d) does not introduce any kind of a test of adequacy of damages in the sense that performance could only be required if damages were an inadequate remedy. Rather, this rule should encourage the aggrieved party to choose from among the remedies which would fully compensate it the one which can most simply be obtained. According to practical experience, termination and damages will often satisfy its requirements faster and more easily than enforcement of performance.

If the aggrieved party chooses to require performance, this will generally create a presumption that this remedy optimally satisfies its needs. Consequently, the non-performing party will have to prove that the aggrieved party can obtain performance from other sources without any prejudice and that therefore it may reasonably be expected to make a cover transaction.

Illustration 8: A sells to B a certain set of chairs which are of an ordinary kind and without special value. A refuses to deliver. A proves that B may without suffering a prejudice obtain chairs of the kind sold from other sources. B cannot require performance by A.

If, in contrast, the chairs are unique antiques, B may require performance.

An aggrieved party may reasonably be expected to obtain performance from other sources, even if the cost is higher than the contract price, but only if the defaulting party is in a position to pay the damages for the difference. If this is not so, paragraph (2) sub-paragraph (d) does not exclude a request for performance.

I. Reasonable time

A request for performance of a non-monetary obligation must be made within a reasonable time, paragraph (3). This provision is supplementary to provisions on limitation and is intended to protect the non-performing party from hardship that could arise in consequence of a delayed request for performance by the aggrieved party. The latter party's interests are not seriously affected by this limitation because it may still choose another remedy.[page 398]

The length of the reasonable period of time is to be determined in view of the rule's purpose. In certain cases, it may be very short, e.g. if delivery can be made out of the non-performing party's stock in trade, in other cases it may be longer.

It is the non-performing party which has to show that the delay in requesting performance was unreasonably long.

A corresponding rule for termination is embodied in Article 9:303(2).

J. Legal consequences of exceptions

One of the consequences that arise from the exceptions provided for in paragraph (2) and (3) is expressly set out in these rules: performance cannot be demanded by the aggrieved party. The aggrieved party may still claim damages, see Article 9:103.

Notes [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

1. General approaches

With respect to non-monetary obligations, traditionally there are important differences between the common law and civil law, at least in theory.

In the common law specific performance is a discretionary remedy that will only be granted if damages are inadequate (cf. ENGLAND: Chitty 27-003; IRELAND, Keane, 16.01 ff.; USA: Restatement of Contracts 2d 345(b), 357-369). There is also some doubt as to whether specific performance will be given of a continuing obligation, see e.g. Co-operative Insurance Society Ltd. v. Argyll Stores (Holdings) Ltd [1997] 3 All E.R. 297 (H.L.). In SCOTLAND specific implement is usually said to be a remedy available as of right but in fact it is granted only in the court's discretion and it is not granted in the cases set forth in Article 9:102(2) (McBryde Chap. 21), though in Scotland continuing obligations may be enforced more readily than in England, see, Retail Parks Investments Ltd v.Royal Bank of Scotland plc 1996 S.L.T. 669. However, in England injunctions for enforcement of express negative stipulations are sometimes said to be granted as a matter of course (Chitty 27-040).

In the civil law countries the aggrieved party's right to performance is generally recognized. In the German legal family this is "axiomatic" (Zweigert & Kötz 472). The AUSTRIAN ABGB 918, 919, ITALIAN Civil Code (art. 1453 (1)) and the DUTCH BW (art. 3:296(1)) expressly so provide. So do the DANISH Sale of Goods Act, 21 which is expressive of a general principle of contract law, see Gomard, Obligationsret II 33; and the FINNISH and SWEDISH Sale of Goods Acts, 23.

The principle of enforced performance in natura is particularly emphasised in FRENCH law. It follows from CC art. 1184 (2) and from the contemporary interpretation of CC art. 1142 (see Jeandidier Rev. trim. dr. civ. 1976, 700-724). CC art. 1143 empowers the aggrieved party to demand destruction of anything that has been produced contrary to an agreement. And recently, art. 1 of the Law of 9 July 1991 on the reform of civil enforcement proceedings has established the principle that every aggrieved party may force the non-performing party, in accordance with legal provisions, to perform his obligations. Performance in natura is facilitated by the liberal use of judicial penalties (astreinte) (Malaurie and Aynès, Obligations no. 1017-1023). Whether enforced performance in natura is available as a matter of right for the aggrieved party (and therefore the judge must grant it if it is asked for) is, however, unsure. According to traditional case law, the judge holds a sovereign power to choose the mode of reparation that appears to him the most appropriate, and in particular he can reject enforced performance in natura asked for by the aggrieved party, based on art. 1142 (see Cass. Civ. 1, 30 June 1965, B. I no. 437, p. 327, Gaz. Pal. 1965.2.329). But there is a new "courant" to grant specific performance, based on the literal wording of CC art. 1184(2) (Cass.com. 3 December 1985, B. IV No. 286 p. 244; 28 Feb. 1969, motifs, B. III No. 182 p. 139).

In BELGIAN law the pre-eminence of specific performance is acknowledged (Cass. 30 Jan. 1965, Pas. I 58; Cass. 5 Jan. 1968, Pas. I 567) (though subject to the fact that the demand must not be an abuse of right) and the same is true for PORTUGAL (CC art. 817) and SPAIN (CC arts. 1096, 1098; Diez Picazo, II 679; Lacruz-Delgado, 21, 170; Ministerio de Justicia, II art. 1096.

ULIS and CISG give the buyer generally a right to performance (ULIS arts. 24, 26, 30, 42; CISG art. 46). However, courts are not bound to decree performance if they would not do so according to their national law (ULIS art. 16 and art. VII of the convention relating to ULIS; CISG art. 28).[page 399]

2. Practical convergence

The basic differences between common law and civil law are of theoretical rather than practical importance. Even in civil law countries an aggrieved party will pursue an action for performance, in general, only if he has a special interest in performance which would not be satisfied by damages (cf. Zweigert & Kötz 484).

3. Exceptions to specific performance

(a) Judicial discretion and exceptions

In common law countries specific performance is a discretionary remedy. Nevertheless, this discretion will be exercised in accordance with settled principles (cf. Hanbury & Maudsley 651 with refs.), some of which have been followed in drafting the exceptions in Article 9:102(2) litt. (a) to (d) and (3). Also in FRANCE it had been said that in principle the judge was free to grant damages even though performance in natura has been demanded (Derrida, Obligations no. 127 with ref.). However the cases where this has in fact been done seem to fall under Article 9:102(2) litt. (b) (unreasonable effort or expense) or (d) (other sources of supply available). In SPANISH law the courts may refuse specific performance if it would not be reasonable in the circumstances to grant it: Diez Picazo II, 696; Ministero de Justicia, art. 1124; Lacruz-Delgado II, 1, 26, 204; Albaladejo, II, 1, 33.1.B. For BELGIAN law see note 2 to Article 9:101 above.) In GERMAN law the right to performance and its enforcement do not depend upon the judge's discretion (cf. Dawson 57 Mich. L. Rev. 495, 530 (1959)); the same is true of AUSTRIAN law.

Under CISG art. 28 and under ULIS art. 16 in connection with art. VII of the covering convention, restrictions under national laws are preserved even under the uniform sales laws.

(b) Performance impossible

Article 9:102(2)(a) expresses the rule "impossibilium nulla est obligatio". If restricted to the right to performance as such (as distinct from subsidiary remedies), the rule seems to be common to the laws of Europe (cf. ENGLAND: Forrer v. Cash (1865) 35 Beav. 167, 171; 55 E.R. 858, 860; IRELAND, Keane 16.10; FRANCE and BELGIUM: CC art. 1184(2) sent. 2, 1234, 1302; GERMANY: BGB 275; AUSTRIA, ABGB 1447; GREECE: CC art. 336; ITALY: CC arts. 1256, 1463; PORTUGAL: CC art. 828; SPAIN: CC arts. 1182, 1184; NETHERLANDS: BW art. 3:236; DENMARK: Gomard, Obligationsret II 45): FINLAND: Taxell, Avtal och rättsskydd 196 and SGA 23; SWEDEN: Rodhe, Obligationsträtt 348 ff.. CISG art. 79 (5) appears to be to the contrary, but this is controversial (cf. Schlechtriem 51, 96-97 with references; Audit nos. 185 - 186).

(c) Performance unreasonable

Article 9:102(2)(b) corresponds to a view which is widely accepted in NORDIC case law and literature (cf. Ussing, Alm. Del 68, Gomard, op. cit. 57 Taxell, op. cit. 197; Ramberg, Köplagen 313 ff.; FINNISH and SWEDISH SGA 23 and is being discussed in GERMANY (cf. Medicus no. 158) and ITALY (Mengoni, Contractual responsibility 1089-1090). It is a clear rule under AUSTRIAN law, that specific performance is not available if it would be unreasonable: see e.g. OGH 20 March 1963 SZ 36/44. In PORTUGAL, such a rule is expressly provided for in the case of an obligation to demolish a building erected in violation of a duty not to do so (CC art. 829 no. 2). IRISH law achieves this position, Keane 16.12. GREEK courts have refused a claim for performance in natura where that would burden the non-performing party with excessive and disproportionate sacrifices (AP 93/1967, NoB 15 (1967) 791; cf. ATHENS 5917/1976, NoB 25 (1977) 401). In FRANCE, the cases which recognize the judge's sovereign power to refuse performance in natura (see above, note 1) are sometimes based on the excessive cost of the operation (see e.g. Cass. req. 23 March 1909, S. 1909.1.552; Cass. civ.1, 8 June 1964, B. I, No. 297, p. 232). However, the recent "courant" which orders works of reparation (or payment for reparation) is not limited by its cost (e.g. Cass. civ.3, 9 December 1975, B. III, No. 363, p. 275). In BELGIAN law the restrictions mentioned in note 3 to Article 9:101 apply also to the choice between specific performance and damages: Cass. 10 Sept. 1971, Pas. 1972, I, 28 note Ganshof, R.C.J.B. 1976, note van Ommeslaghe. Specific performance will not be ordered if the performance would be quite different to the original obligation, e.g. a lessee which has carelessly burned down the leased premises will not be ordered to re-build them.

Illustration 4 is modelled upon Peevyhouse v. Garland Coal & Mining Co. 382 P. 2d 109, 116 (Okl. 1962).

(d) Performance of a personal character

Article 9:102(2)(c) first alternative is based on considerations common to the laws of Europe (see Remien, (1989) RabelZ 53, 165 ff.).[page 400]

Thus, in ENGLAND, IRELAND, SCOTLAND and the UNITED STATES specific performance is not available for contracts involving personal services (cf. Treitel, Contract 927; Keane 16.05; Restatement of Contracts 2d 367 with 318; cf. ibid. 367 comment b). Similarly in FRENCH law under CC art. 1142 there is no right to enforcement of certain personal obligations to do or not to do (Cass. civ. 20 Jan. 1953, JCP 1953, 7677 note Esmein). In BELGIUM the rule is also applied though only where specific performance would involve physical coercion, (Cass. 23 Dec. 1977, Arr. Cass. & Pas 505) and agency cases (CC art. 2007). In SPAIN it is admitted that there is no right to specific performance of obligations consisting in the provision of services or work of a personal nature (Civ. Proc. Code arts. 924 and 925; CC arts, 1098 and 1911; Diez-Picazo, II 124 and 680). In NORDIC law a claim for performance in kind is excluded for employment contracts and in some other cases (DENMARK Lyngsø 125; and generally when performance consists of work of a personal character, Gomard, op. cit. 6; FINLAND: Taxell, op. cit. 192; SWEDEN: Ramberg, Avtalsrätt 52). While GERMAN law allows a claim for personal services, CCProc. 888 (2) excludes the enforcement of judgments for non-delegable personal services. GREEK CC Proc. art. 946 (2) takes a similar position.

ITALIAN law, however, does not have a rule about specific peformance of contracts involving personal services and difficulties have arisen: Mazzamuto.

The idea underlying the second alternative of Article 9:102(2)(c) is common to many laws, although often differently expressed. In ENGLAND and SCOTLAND specific performance of an agreement for partnership will be granted only in some special situations (Lindley on Partnership 536). FRENCH law, too, excludes a right to performance in natura of a promise to form a "société" (Perrot, J. Cl. Sociétés Fasc. 7 bis, nos. 23 and 37). GERMAN law, however, allows the enforcement of preliminary contracts to form a limited liability company (Schlosser (- Emmerich) 2 No. 81 with references).

Illustration 5 is modelled upon Barrow v. Chappell & Co. Ltd. [1959] Ch.14. Illustration 6 is based on Reichsgericht 8 May 1907, RGZ 66, 116.

(e) Performance from another source

Article 9:102(2)(d) is a compromise between different basic attitudes of the common law and the civil law. It does not directly copy any national legal order. But it links up with ULIS arts. 25, 42(1) (c) (cf. note 1 above) which trace back to considerations of Rabel (I 378).

Under the common law the possibility of a cover transaction is an important consideration for denying specific performance (cf. Restatement of Contracts 2d 360 (b), 359; Treitel, Contract 919). In European continental laws, cover is merely an option for the buyer, but he is not obliged to use it, unless there is a usage to that effect. Some BELGIAN authors have suggested a rule similar to Article 9:102(2)(d) in certain, mainly commercial, contexts, Fredericq, III no. 1432, van Ryn & Heenen III no. 688.

Illustration 9 is based on Cohen v. Roche [1927] 1 K.B. 169 (K.B.).

4. Delay

Article 9:102(3) takes up the COMMON LAW view that an aggrieved party who delays unreasonably in requiring performance in natura may lose his claim (cf. Hanbury & Maudsley 677; Keane 3.10). A similar rule is found in the FINNISH and SWEDISH Sale of Goods Acts, 23. In DENMARK Sale of Goods Act 26 provides that the aggrieved party must give a notice to the non-performing party within a reasonable time that he will continue the contract; otherwise the aggrieved party will lose his right to claim specific performance (see Ussing, Alm. Del. 70). This idea can be found in CISG, too, but it is limited to cases where the buyer claims delivery of substitute goods and repair of non-conforming goods (art. 46 (2) and (3)). No equivalent rule exists in FRANCE, PORTUGAL or SPAIN but in BELGIAN law a similar rule has been accepted: Cass. 5 Dec. 1946, Arr.Cass., 428, Cass. 29 Nov. 1962, Pas. 405; see M.E. Storme, Invloed nos. 394 and 389-391.

5. Defective performance

The rules on performance in natura after a non-conforming ("defective") tender has been made differ very much.

The uniform laws on international sales grant a right to performance in natura in case of "non-conforming" goods (cf. ULIS art. 42, 52; CISG art. 41, 46). However, the right to require delivery of substitute goods in CISG art. 46(2) is limited to cases of fundamental "breach of contract".

Recent European codifications tend to grant a right to demand cure of non-conformities. The DUTCH BW provides for such a right in case of lack of full title (art. 7:20) and in case of "non-conforming" goods (art. 7:21 litt. b) and c)). In DENMARK the Sale of Goods Act, which formerly provided only for a right to delivery of substitute goods in case of sale of generic goods (art. 43(1)), has been amended by the addition of a new 78 which provides for consumer sales in general a right to demand cure of defects. The New Nordic Sale of Goods Act 34 which is now in force in FINLAND [page 401] and SWEDEN provides a right (with certain limitations) to demand cure of defects in commercial sales in general. In PORTUGAL a right to have a defective performance corrected or to receive a new delivery is expressly provided for contracts of sale and for work (CC art. 914, 1221); it can be considered as an application of a general principle relating to defective performances (Jorge 479).

AUSTRIAN law provides in respect of all contracts for consideration a general right to have a defective performance cured: see ABGB 932 (1) granting the aggrieved party the right either to demand reduction of the price, or the repair of the defect or the addition of missing parts of the performance by the party in breach: the exchange or repair of the defective piece may be seen as a type of performance.

In GERMANY a general right to have defects cured already exists for cases of third party claims (BGB 434, 440, and also 515, 523; cf. Larenz II/1, 27 ff.), for lack of quality in contracts for work ( 633) and - limited to a right to delivery of substitute goods - in case of sales of generic goods (BGB 480). And it has been proposed that a rule should be introduced for all sales providing for a right to demand cure of defects consisting of lack of quality or quantity (Huber 765, 874 ff. who proposes a new 461 a). GREEK, ITALIAN and SWISS law (for cases of lack of quality) are similar to the present state of German law (cf. Greek CC arts. 559 and 688; Italian CC art. 1482(2), 1512(2), 1668(1); Swiss CC art. 689, 206, 368(2)). In Greece it is acknowledged that there is, as a rule, no general right of the buyer to demand the remedying of defects (see Spiliopoulos in the Commentary to the Civil Code (Erm. AK) vol. III/1, Introductory remarks to arts. 534-562 no. 46 (1972); Aigaiou 41/1967, NoB 16 (1968) 195, 196 I). In SPANISH law, both writers and the courts accept that a buyer may demand cure in the form of replacement of defective goods (cf. CC arts. 1166, 1484 ff., 1553 and 1591; see Diez Picazo II, 670; Albaladejo II, 1 23.5 and 31.3; Supreme Court 3 March 1979, 14 March 1981 and 28 June 1982.

In FRANCE and BELGIUM it is uncertain whether the non-performing party can be constrained to cure himself or to provide cure of a defective performance (generally, no distinction is made between cases where it is for the obligor or the obligee to have the cure made). Formerly, in such cases the Cour de cassation appeared to deny a duty of performance in natura (Cass.civ. 4 June 1924, S. 1925.1.97 with note Hugueney, D.P. 1927.1.136 with note Josserand; Cass.civ. 15 March 1968, D. 1968.346, S. 1968.1.100) but presently the courts are more flexible (cf. Viney, La responsabilité II nos. 14-36 with references).

In ENGLAND, IRELAND and SCOTLAND there seems to be no right to have non-conformities cured.[page 402]

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COMMENT AND NOTES: PECL Article 9:103: Damages Not Precluded

The fact that a right to performance is excluded under this Section does not preclude a claim for damages.

Comment

A. The basic situation

In the exceptional cases set out in Article 9:101(2) and Article 9:102(2) and (3), an aggrieved party cannot require performance. Article 9:103 makes it clear that even in these cases the aggrieved party may recover damages. Damages are always available according to the rules of Section 9 unless the non-performance is excused under Article 8:108.

B. Other consequences

The provision does not take a stand on the more general issue whether in the cases in which a claim to performance is excluded the contract is terminated. At least in the case of a permanent impossibility or illegality (Article 9:102(2) sub-paragraph (a)) the contract is terminated automatically, see Article 9:303(4).[page 402]

The same may be true in those cases in which the aggrieved party is required to conclude a cover transaction and has in fact done so (see Article 9:101(2) sub-paragraph (a) and Article 9:102(2) sub-paragraph (d)). The non-performing party would therefore no longer be entitled to tender performance.

Notes [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

The rule in Article 9:103 is in accordance with NORDIC, ENGLISH, FRENCH BELGIAN, LUXEMBOURG, ITALIAN, PORTUGUESE and SPANISH law, see e.g. French CC art.1184(2). Generally speaking it also corresponds to GERMAN law and AUSTRIAN law (see ABGB 921). See also the note to Article 8:102.[page 403]

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Pace Law School Institute of International Commercial Law - Last updated January 8, 2007
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