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Principles, Deﬁnitions and Model

Rules of European Private Law

DCFR. Full Edition

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Principles, Deﬁnitions and Model

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GRATIS

Principles, Deﬁ nitions and

Model Rules of

European Private Law

Draft Common Frame of Reference (DCFR)

Outline Edition

Prepared by the

Study Group on a European Civil Code

and the

Research Group on EC Private Law (Acquis Group)

Based in part on a revised version of the Principles of

European Contract Law

Edited by

Christian von Bar, Eric Clive and Hans Schulte-Nölke

and

Hugh Beale, Johnny Herre, Jérôme Huet, Matthias Storme,

Stephen Swann, Paul Varul, Anna Veneziano and Fryderyk Zoll

The print of this edition was supported by the Dieter Fuchs Stiftung

in Dissen (Germany).

ISBN 978-3-86653-097-3

The Deutsche Nationalbibliothek lists this publication in the Deutsche

Nationalbibliograﬁ e; detailed bibliographic data are available on the

Internet at http://dnb.d-nb.de.

lated, stored in a retrieval system or transmitted, in any form or by any means,

electronic, mechanical, photocopying, recording or otherwise, without prior

permission of the publisher.

The Index was prepared by Rechtsanwältin Dr. Martina Schulz, Pohlheim.

Design: Sandra Sellier, Munich. Production: Karina Hack, Munich.

Ty peset ti ng : ﬁ dus Publikations-Service GmbH, Augsburg. Typeface: Goudy

Old Style and Goudy Sans from Linotype. Printing and binding:

Friedrich Pustet KG, Regensburg. Printed on acid-free, non-ageing paper.

Printed in Germany.

More texts by the Study Group and the Acquis Group are available

at www.law-net.eu.

Table of contents

Introduction 1

Academic contributors and funders 47

Principles 57

Table of Destinations 101

Table of Derivations 113

Model Rules 131

Book I General provisions 177

Book II Contracts and other juridical acts 183

Book III Obligations and corresponding rights 229

Book IV Specific contracts and the rights and

obligations arising from them

277

Book V Benevolent intervention in another’s affairs 391

Book VI Non-contractual liability arising out of

damage caused to another

395

Book VII Unjustified enrichment 413

Book VIII Acquisition and loss of ownership of goods 421

Book IX Proprietary security rights in movable assets 447

Book X Trusts 501

Annex Definitions 545

Index 571

Table of contents

Introduction

General

DCFR and CFR distinguished ........................................... 3

2. Revision of the interim outline edition ................................ 4

3. Paperback and hardcover editions of the final

DCFR ................. 5

4. An academic, not a politically authorised text ........................ 6

5. About this outline edition .............................................. 6

The purposes of the

DCFR

6. A possible model for a political CFR ................................... 7

7. Legal science, research and education .................................. 7

8. A possible source of inspiration ........................................ 7

Contents of the

DCFR

9. Principles, definitions and model rules ................................. 9

10. Meaning of ‘principles’ .................................................. 9

11. Fundamental principles ................................................. 10

12. The approach taken to fundamental principles in the

Interim Outline Edition ................................................. 10

13. The approach taken in the Principes directeurs ......................... 11

14. Lessons learned from the Principes directeurs ........................... 13

15. Underlying principles ................................................... 13

16. Overriding principles .................................................... 14

17. Protection of human rights ............................................. 14

18. Promotion of solidarity and social responsibility ....................... 15

19. Preservation of cultural and linguistic diversity ........................ 15

20. Protection and promotion of welfare ................................... 16

21. Promotion of the internal market ...................................... 17

22. Freedom, security, justice and efficiency ............................... 17

23. Definitions ............................................................... 17

24. Model rules .............................................................. 18

25. Comments and notes .................................................... 18

Revision of the interim outline edition

26. Overview ................................................................ 18

27. Book

I .................................................................... 19

28. Book

II ................................................................... 19

29. Book

III .................................................................. 20

30. Book

IV .................................................................. 21

31. Books V-

VII .............................................................. 22

32. Books

VIII-X ............................................................. 22

33. Definitions ............................................................... 22

The coverage of the

DCFR

34. Wider coverage than PECL ............................................. 23

35. Specific contracts ........................................................ 23

36. Non-contractual obligations ............................................ 23

37. Matters of movable property law ....................................... 24

38. Matters excluded ........................................................ 24

39. Reasons for the approach adopted ...................................... 24

40. Contract law as part of private law ..................................... 24

Structure and language of the

DCFR model rules

41. Structure of the model rules ............................................ 25

42. Mode of numbering the model rules .................................... 25

43. Ten books ................................................................ 26

44. Books

II and III .......................................................... 27

45. Contracts and obligations ............................................... 27

46. Contractual and non-contractual obligations .......................... 28

47. Language ................................................................. 29

48. Accessibility and intelligibility ......................................... 29

How the

DCFR relates to PECL, the SGECC PEL series, the Acquis and

the Insurance Contract Group series

49. Based in part on the

PECL .............................................. 30

50. Deviations from the

PECL .............................................. 30

51. Examples . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . .. . . 31

52. Input from stakeholders ................................................. 31

53. Developments since the publication of the

PECL ...................... 32

54. The

PEL series ........................................................... 33

55. Deviations from the

PEL series ......................................... 34

Introduction

56. Improvements ........................................................... 34

57. The Acquis Principles (

ACQP) ........................................ 35

58. Principles of European Insurance Contract Law ....................... 35

How the

DCFR may be used as preparatory work for the CFR

59. Announcements by the Commission ................................... 36

60. Purposes of the

CFR ..................................................... 36

61. Green Paper on the Review of the Consumer Acquis ................. 37

62. Draft proposal for a Directive on consumer contractual rights ........ 37

63. Improving the existing and future acquis: model rules ................ 38

64. Improving the acquis: developing a coherent terminology ............ 39

65. No functional terminology list without rules .......................... 40

66. Coverage of the

CFR .................................................... 40

67. Consumer law ........................................................... 41

68. Revision of the acquis and further harmonisation measures .......... 41

69. Terms and concepts referred to in Directives .......................... 42

70. When in doubt, topics should be included ............................. 42

71. Essential background information ...................................... 42

72. Good faith as an example ............................................... 43

73. Presupposed rules of national law ...................................... 44

74.

DCFR not structured on an ‘everything or nothing’ basis ............. 44

Developments after this edition

75. Full version of the

DCFR ............................................... 45

76. Consumer credit contracts not covered ................................ 45

77. Evaluating the

DCFR ................................................... 45

78.

CFR ...................................................................... 45

79. Square brackets .......................................................... 46

80. The

CFR as the basis for an optional instrument ...................... 46

General

1. DCFR and CFR distinguished. In this volume the Study Group on

a European Civil Code (the ‘Study Group’) and the Research Group

on Existing

EC Private Law (the ‘Acquis Group’) present the revised

and final academic Draft of a Common Frame of Reference (

DCFR).

It contains Principles, Definitions and Model Rules of European

General Intr. 1

Private Law in an outline edition. Among other goals, its completion

fulfils an obligation to the European Commission undertaken in

2005. The Commission’s Research Directorate-General funded part

of the work. One purpose of the text is to serve as a draft for drawing

up a ‘political’ Common Frame of Reference (

CFR) which was first

called for by the European Commission’s ‘Action Plan on A More

Coherent European Contract Law’ of February 2003.

As is explained

more precisely below, the

DCFR and the CFR must be clearly distin-

guished. The

DCFR serves several other important purposes.

2. Revision of the interim outline edition. A year ago, the

DCFR was

published for the first time in an interim outline edition.

This edi-

tion is a revision in three main ways. First, the interim edition did not

contain model rules in Book

IV on loan contracts and contracts for

donation, nor in Books

VIII to X on acquisition and loss of ownership

of goods, on proprietary security rights in movable assets, and on

trusts. They have now been included. Secondly, one of the purposes

of publishing an interim edition was to provide an opportunity for

interested parties to comment on the draft and make suggestions for

improvement. The public discussion of the interim outline edition

prompted the research groups to revise at various places the text

which had already been published. The research groups are grateful

to all who have taken part in that critical evaluation, whether in pub-

lications, at conferences or in personal correspondence, and who

have contributed to the improvement of the text. Naturally, not all

the suggestions we received have been acted upon: some, for exam-

ple, advocated solutions which had already been rejected after full

discussion by the Study Group or the Acquis Group. But many sug-

gestions for improvement have been gratefully adopted. Further revi-

sions resulted from our own further reflections and discussions, the

results of the research conducted by the evaluative teams in the net-

work and the conclusions which we drew from the process of trans-

Intr. 2 Introduction

COM (2003) final, OJ C 63/1 (referred to below as Action Plan).

von Bar/Clive/Schulte-Nölke and Beale/Herre/Huet/Schlechtriem/

Storme/Swann/Varul/Veneziano/Zoll, Principles, Definitions and Mod-

el Rules of European Private Law. Draft Common Frame of Reference

(Munich 2008) (referred to below as

IOE).

lating the first three Books into French.

That applies in particular to

Books I-

III, but is not confined to them. (For more details, see paras

26-33). Thirdly, this revised edition contains an additional self-con-

tained section in which we set out four underlying principles under-

pinning the

DCFR. This draws on the Principes directeurs du droit Eu-

ropéen du contrat, the subject-matter of an independent research pro-

ject, which published its output in 2008.

The conclusions of the

economic impact group, which analysed particular rules of the

DCFR

from an economic perspective, were also made available to us.

3. Paperback and hardcover editions of the final

DCFR. Like the 2008

interim edition this revised edition is only an outline edition because

it appears without comments and notes. The European Commission

received in December 2008 the material published here along with

an explanatory and illustrative commentary on each model rule. The

Commission has also received the extensive comparative legal ma-

terial which has been gathered and digested in the past years. The

entire work will be published in book form later in the year. At the

same time we considered that the publication of a compact and

inexpensive second paperback edition would help promote the wider

dissemination and discussion of these texts. The complete edition

will be voluminous. It will invite study at one’s desk at home or in the

office, but it will be too bulky to pack into luggage taken to meetings

General Intr. 3

By Professor Jacques Ghestin (Paris); published at http://www.fondation-

droitcontinental.org/Documents/Traduc-vBar-livre%20I-

II-III-%2008-

2008.doc.

Fauvarque-Cosson/Mazeaud and Wicker/Racine/Sautonie-Laguionie/

Bujoli (eds.), Principes contractuels commun. Projet de cadre commun

de référence (Paris 2008); Fauvarque-Cosson/Mazeaud and Tenenbaum,

Terminologie contractuelle commune. Projet de cadre commun de référ-

ence (Paris 2008). These studies have also been published in English:

European Contract Law. Materials for a Common Frame of Reference:

Terminology, Guiding Principles, Model Rules. Produced by Association

Henri Capitant des Amis de la Culture Juridique Française and Société

de Législation Comparée. Edited by Fauvarque-Cosson and Denis Ma-

zeaud. Prepared by Racine, Sautonie-Laguionie, Tenenbaum and Wicker

(Munich 2008).

or conferences. That is another reason for also publishing a second

edition in outline form, essentially Articles only.

4. An academic, not a politically authorised text. It must be stressed

that what we refer to today as the

DCFR originates in an initiative of

European legal scholars. It amounts to the compression into rule

form of decades of independent research and co-operation by aca-

demics with expertise in private law, comparative law and European

Community law. The independence of the two Groups and of all the

contributors has been maintained and respected unreservedly at ev-

ery stage of our labours. That in turn has made it possible to take on

board many of the suggestions received in the course of a large num-

ber of meetings with stakeholders and other experts throughout the

continent. The two Groups alone, however, bear responsibility for

the content of this volume. In particular, it does not contain a single

rule or definition or principle which has been approved or mandated

by a politically legitimated body at European or national level (save,

of course, where it coincides with existing

EU or national legisla-

tion). It may be that at a later point in time the

DCFR will be carried

over at least in part into a

CFR, but that is a question for others to

decide. This introduction merely sets out some considerations which

might usefully be taken into account during the possible process of

transformation.

5. About this outline edition. This final outline edition consists of

an introduction, the names of the academic contributors and an

acknowledgement of our funders and donors, an overview of the

guiding principles underlying the model rules, a set of definitions

(referred to in

I. – 1:108 (Definitions in Annex) and listed later in

the Annex to the model rules), tables of derivations and destina-

tions, and the model rules. The introduction explains the purposes

pursued in preparing the

DCFR and outlines its contents, coverage

and structure. It describes the amendments to the 2008 interim edi-

tion and elucidates the relationship between the

DCFR and the pub-

lications which have already appeared or will appear in the course of

the preparatory work. Finally, it sketches out how the

DCFR might

flow into the development of the

CFR.

Intr. 4 Introduction

The purposes of the DCFR

6. A possible model for a political CFR. As already indicated, this

DCFR is (among other things) a possible model for an actual or

‘political’ Common Frame of Reference (

CFR). The DCFR presents

a concrete text, hammered out in all its detail, to those who will be

deciding questions relating to a

CFR. A ‘political’ CFR would not

necessarily, of course, have the same coverage and contents as this

academic

DCFR. The question of which functions the DCFR can

perform in the development of the

CFR is considered under para-

graphs 59-74 of this introduction.

7. Legal science, research and education. However, the

DCFR ought

not to be regarded merely as a building block of a ‘political’ Common

Frame of Reference. The

DCFR will stand on its own and retain its

significance whatever happens in relation to a

CFR. The DCFR is an

academic text. It sets out the results of a large European research

project and invites evaluation from that perspective. The breadth of

that scholarly endeavour will be apparent when the full edition is

published. Independently of the fate of the

CFR, it is hoped that the

DCFR will promote knowledge of private law in the jurisdictions of

the European Union. In particular it will help to show how much

national private laws resemble one another and have provided mu-

tual stimulus for development – and indeed how much those laws

may be regarded as regional manifestations of an overall common

European legacy. The function of the

DCFR is thus separate from

that of the

CFR in that the former serves to sharpen awareness of the

existence of a European private law and also (via the comparative

notes that will appear in the full edition) to demonstrate the rela-

tively small number of cases in which the different legal systems

produce substantially different answers to common problems. The

DCFR may furnish the notion of a European private law with a new

foundation which increases mutual understanding and promotes col-

lective deliberation on private law in Europe.

8. A possible source of inspiration. The drafters of the

DCFR nurture

the hope that it will be seen also outside the academic world as a text

from which inspiration can be gained for suitable solutions for pri-

The purposes of the DCFR Intr. 8

vate law questions. Shortly after their publication the Principles of

European Contract Law (

PECL)

, which the DCFR (in its second and

third Books) incorporates in a partly revised form (see paragraphs 49-

53), received the attention of many higher courts in Europe and of

numerous official bodies charged with preparing the modernisation

of the relevant national law of contract. This development is set to

continue in the context of the

DCFR. It will have repercussions for

reform projects within the European Union, at both national and

Community law levels, and beyond the

EU. If the content of the

Intr. 8 Introduction

Ole Lando and Hugh Beale (eds.), Principles of European Contract Law

Parts

I and II. Prepared by the Commission on European Contract Law

(The Hague 1999); Ole Lando, Eric Clive, André Prüm and Reinhard

Zimmermann (eds.), Principles of European Contract Law Part

III (The

Hague, London and Boston 2003). Translations are available in French

(Principes du droit européen du contract. Version française préparée par

Georges Rouhette, avec le concours de Isabelle de Lamberterie, Denis

Tallon et Claude Witz, Droit privé comparé et europeéen, vol. 2, Paris

2003); German (Grundregeln des Europäischen Vertragsrechts, Teile

und II, Kommission für Europäisches Vertragsrecht. Deutsche Ausgabe

von Christian von Bar und Reinhard Zimmermann, München 2002;

Grundregeln des Europäischen Vertragsrechts Teil

III, Kommission für

Europäisches Vertragsrecht. Deutsche Ausgabe von Christian von Bar

und Reinhard Zimmermann, München 2005); Italian (Commissione per

il Diritto Europeo dei Contratti. Principi di Diritto Europeo dei Contra-

tti, Parte

I & II, Edizione italiana a cura di Carlo Castronovo, Milano

2001; Commissione per il Diritto Europeo dei Contratti. Principi di Di-

ritto Europeo dei Contratti, Parte

III. Edizione italiana a cura di Carlo

Castronovo, Milano 2005) and Spanish (Principios de Derecho Contrac-

tual Europeo, Partes

I y II. Edición española a cargo de Pilar Barres Benn-

loch, José Miguel Embid Irujo, Fernando Martínes Sanz, Madrid 2003).

Matthias Storme translated the articles of Parts

I-III into Dutch (Tijd-

schrift voor privaatrecht 2005, 1181-1241); M.-A. Zachariasiewicz and

J. Bełdowski translated the

PECL articles of Parts I and II (Kwartalnik

Prawa Prywatnego 3/2004, 814-881) and J. Bełdowski and A. Kozioł the

articles of Part

III (Kwartalnik Prawa Prywatnego 3/2006, 847-859) into

the Polish language, Christian Takoff Parts I-

III (Targovsko pravo 1/2005,

15-85) into the Bulgarian language.

DCFR is convincing, it may contribute to a harmonious and informal

Europeanisation of private law.

Contents of the DCFR

9. Principles, definitions and model rules. The DCFR contains ‘prin-

ciples, definitions and model rules’. The title of this book thus fol-

lows the scheme set out in the European Commission’s communica-

tions (referred to below in paragraph 59) and in our contract with

the Commission. The notion of ‘definitions’ is reasonably clear. The

notions of ‘principles’ and ‘model rules’, however, appear to overlap

and require some explanation.

10. Meaning of ‘principles’. The European Commission’s communi-

cations concerning the

CFR do not elaborate on the concept of

‘principles’. The word is susceptible to different interpretations. It

is sometimes used, in the present context, as a synonym for rules

which do not have the force of law. This is how it appears to be used,

for example, in the ‘Principles’ of European Contract Law (

PECL),

which referred to themselves in article 1:101(1) as ‘Principles ...

intended to be applied as general rules of contract law in the Euro-

pean Union’ (italics added). The word appears to be used in a similar

sense in the Unidroit Principles of International Commercial Con-

tracts.

In this sense the DCFR can be said to consist of principles and

definitions. It is essentially of the same nature as those other instru-

ments in relation to which the word ‘principles’ has become familiar.

Alternatively, the word ‘principles’ might be reserved for those rules

which are of a more general nature, such as those on freedom of

contract or good faith. In this sense the

DCFR’s model rules could

be said to include principles. However, in the following paragraphs

we explore a third meaning.

Contents of the DCFR Intr. 10

Unidroit Principles of International Commercial Contracts 2004 (Rome

2004), Preamble (Purpose of the Principles) paragraph (1): “These Prin-

ciples set forth general rules for international commercial contracts”.

11. Fundamental principles. The word ‘principles’ surfaces occasion-

ally in the Commission communications mentioned already, but

with the prefix ‘fundamental’ attached. That suggests that it may

have been meant to denote essentially abstract basic values. The

model rules of course build on such fundamental principles in any

event, whether they are stated or not. There can be no doubt about

their importance. Private law is one of those fields of law which are,

or at least should be, based on and guided by deep-rooted principles.

To some extent such fundamental principles are a matter of inter-

pretation and debate. It is clear that the

DCFR does not perceive

private law, and in particular contract law, as merely the balancing of

private law relations between equally strong natural and legal per-

sons. But different readers may have different interpretations of, and

views on, the extent to which the

DCFR suggests the correction of

market failures or contains elements of ‘social justice’ and protection

for weaker parties.

12. The approach taken to fundamental principles in the Interim Out-

line Edition. In the Introduction to the Interim Outline Edition we

asked readers to consider whether it would be useful to include in the

DCFR a separate part containing a statement of basic principles and

values underlying the model rules. We suggested that this part could

possibly be formulated as recitals, i. e. an introductory list of reasons

for the essential substance of the following text, or in a discursive

preface. To give some idea of what a statement of underlying prin-

ciples might look like, primarily in relation to contract law, some

possible fundamental principles were outlined.

The statement of

principles in the Interim Outline Edition listed no fewer than fifteen

items – justice; freedom; protection of human rights; economic wel-

fare; solidarity and social responsibility; establishing an area of free-

dom, security and justice; promotion of the internal market; protec-

tion of consumers and others in need of protection; preservation of

cultural and linguistic plurality; rationality; legal certainty; predict-

ability; efficiency; protection of reasonable reliance; and the proper

allocation of responsibility for the creation of risks.

These were not

Intr. 11 Introduction

See IOE Introduction at paragraphs 23-36.

See IOE Introduction at paragraphs 22 and 35.

ranked in any order of priority. It was stressed that the principles

would inevitably conflict with each other and that it was the func-

tion of the model rules to find an appropriate balance.

Feedback was

mixed. Some commentators welcomed the express mention of non-

mercantile values like human rights and solidarity and social respon-

sibility. Others expressed doubts as to the practical value of such a

large, diverse and non-prioritised list. There were powerful calls for

full account to be taken of the work done on governing principles by

the Association Henri Capitant and the Société de législation com-

parée

as part of the ‘CoPECL Network of Excellence’ working on

the

CFR project.

To that we now turn.

13. The approach taken by the Principes directeurs. The Association

Henri Capitant and the Société de législation comparée published

their Principes directeurs du droit européen du contrat early in 2008.

We will refer to these as the Principes directeurs to distinguish them

from the principles we later discuss. The evaluative group charged

with this project approached their task by distilling out the main

principles underlying the Principles of European Contract Law, and

comparing them with equivalent principles from a number of na-

tional systems and international and European instruments.

They

identified three main principles – liberté contractuelle, sécurité contrac-

Contents of the DCFR Intr. 13

IOE Introduction paragraph 23.

See note 4 above.

Joint Network on European Private Law (CoPECL: Common Principles

of European Contract Law), Network of Excellence under the 6th

Framework Programme for Research and Technological Development,

Priority 7 –

FP6-2002-CITIZENS- 3, Contract N8 513351 (co-ordinator:

Professor Hans Schulte-Nölke, Osnabrück).

The Principes form part of the book cited in note 4 above.

The national systems used were mainly the Dutch, English, French, Ger-

man, Italian and Spanish. The international instruments used (in addi-

tion to the

PECL) were mainly the UN Convention on Contracts for the

International Sale of Goods (

CISG), the Unidroit Principles on Interna-

tional Commercial Contracts (2004) and the draft European Code of

Contract produced by the Academy of European Private Law based in

Pavia.

tuelle et loyauté contractuelle – contractual freedom, contractual secu-

rity and contractual “loyalty” – each with sub-principles. The word

“loyalty” is within quotation marks because it does not fully capture

the French word loyauté in this context. The key elements are good

faith, fairness and co-operation in the contractual relationship.

Loyauté comprises a duty to act in conformity with the requirements

of good faith and fair dealing, from the negotiation of the contract

until all of its provisions have been given effect, a prohibition on

using contractual rights and terms in a way which does not respect

the objective that justified their inclusion in the contract and a duty

to co-operate so far as necessary for the performance of the contrac-

tual obligations; it also requires a party not to act in contradiction of

prior declarations or conduct on which the other party might have

legitimately relied.

The principles and sub-principles were expres-

sed in eleven draft articles drafted in such a way as to be suitable for

insertion in one block at the beginning of model rules. The approach

adopted by the evaluative group is very attractive. The principles are

expressed in an elegant, resonant and focussed way. They are backed

up by persuasive analysis and discussion. However, we think that the

approach, and to some extent the substance, has to be slightly dif-

ferent for the purposes of the

DCFR. There are two reasons for this.

First, the Principes directeurs relate only to contract law. For the pur-

poses of the

DCFR a statement of underlying principles has to be

wide enough to cover also non-contractual obligations and aspects of

property law. Secondly, it does not seem appropriate to incorporate

the governing principles as a block of actual model rules at the

beginning of the

DCFR. They function at a different level. They are

a distillation from the model rules and have a more descriptive func-

tion. They sometimes overlap and often conflict with each other.

Almost all of the sub-principles, it is true, have direct counterparts in

Articles of the

DCFR but those Articles appear in, and are adapted

to, particular contexts where they may be subject to qualifications

and exceptions. It would weaken the

DCFR to extract them and put

them in one group at the beginning: it would clearly be undesirable

to duplicate them. Moreover those Articles are by no means the only

ones which reflect and illustrate underlying principles. A discursive

Intr. 13 Introduction

Op. cit fn 4 above at p. 198.

approach seems more appropriate for an introductory statement of

principles of this type. This was the clear preference of the Compi-

lation and Redaction Team and the Co-ordinating Committee of the

Study Group when they discussed this matter in April and June

2008.

14. Lessons learned from the Principes directeurs. Nonetheless les-

sons can be learned from the Principes directeurs. The most important

is that the many fundamental principles listed in the introduction to

the Interim Outline Edition can be organised and presented in a

more effective way. A small group of them (corresponding to some

extent to those identified in the Principes directeurs) can be extracted

and discussed at greater length. These are the principles which are

all-pervasive within the

DCFR. They can be detected by looking into

the model rules. They are underlying principles. They furnished

grounds for arguments about the merits of particular rules. The re-

maining principles mentioned in the introduction to the Interim

Outline Edition are generally of a rather high political nature. They

could be said to be overriding rather than underlying. Although

some of them are strongly reflected in parts of the

DCFR, they are

primarily relevant to an assessment from the outside of the

DCFR as a

whole. Before commenting briefly on these two categories of princi-

ples we note only that another lesson to be learned from the Principes

directeurs is that there are different ways of dealing with fundamental

principles in an instrument like the

DCFR. It will be for others to

decide how if at all to deal with fundamental principles in an official

CFR. One obvious technique would be to use recitals, but the form

and content of these would depend on the form and content of the

instrument. It would be premature to adopt that technique here.

15. Underlying principles. For the broader purposes of the

DCFR we

suggest that the underlying principles should be grouped under the

headings of freedom, security, justice and efficiency (rather than lib-

erté contractuelle, sécurité contractuelle et loyauté contractuelle as in the

Principes directeurs). This does not mean that the principle of con-

tractual “loyalty” is lost. To a large extent it is covered by the wider

principle of justice, without which many of the rules in the

DCFR

cannot be satisfactorily explained. To some extent it is simply an as-

Contents of the DCFR Intr. 15

pect of contractual security viewed from the standpoint of the other

party.

One party’s contractual security is increased by the fact that

the other is expected to co-operate and act in accordance with the

requirements of good faith and fair dealing. Nothing is more detri-

mental to contractual security than a contractual partner who does

not do so: a cheating and untrustworthy partner, and even an unco-

operative partner, may be worse than no partner at all. The heading

of efficiency is added because, although this is often an aspect of

freedom (freedom from unnecessary impediments and costs), it can-

not always be accommodated under one of the other headings. These

four principles of freedom, security, justice and efficiency are devel-

oped and illustrated at length in the section on underlying principles

which precedes the model rules.

16. Overriding principles. Into the category of “overriding princi-

ples” of a high political nature we would place the protection of

human rights, the promotion of solidarity and social responsibility,

the preservation of cultural and linguistic diversity, the protection

and promotion of welfare and the promotion of the internal market.

Freedom, security, justice and efficiency also have a role to play as

overriding principles. They have a double role: the two categories

overlap. So they are briefly mentioned here too as well as being

discussed at greater length later.

17. Protection of human rights. The

DCFR itself recognises the over-

riding nature of this principle. One of the very first Articles provides

that the model rules are to be read in the light of any applicable

instruments guaranteeing human rights and fundamental freedoms.

However, this is an overriding principle which is also reflected quite

strongly in the content of the model rules themselves, most notably

in the rules on non-discrimination in Books

II and III

and in many

of the rules in Book

VI on non-contractual liability arising out of

damage caused to another.

These rules could also be seen, of course,

Intr. 16 Introduction

This overlap is recognised by the Principes directeurs themselves. See ar-

ticle 0:201, alinea 2.

I. – 1:102(2).

See II. – 2:101 to II. – 2:105 and III. – 1:105.

as examples of rules which foster justice and preserve and promote

security. Principles overlap as well as conflict.

18. Promotion of solidarity and social responsibility. The promotion

of solidarity and social responsibility is generally regarded as primar-

ily the function of public law (using, for example, criminal law, tax

law and social welfare law) rather than private law. However, the

promotion of solidarity and social responsibility is not absent from

the private law rules in the

DCFR. In the contractual context the

word “solidarity” is often used to mean loyalty or security. It is of

great importance to the

DCFR. The principle of solidarity and social

responsibility is also strongly reflected, for example, in the rules on

benevolent intervention in another’s affairs, which try to minimise

disincentives to acting out of neighbourly solidarity.

It is also re-

flected in the rules on donation, which try to minimise disincentives

to charitable giving (an expression of solidarity and social responsi-

bility which was at one time all-important and is still extremely

important).

Moreover some of the rules in Book VI on non-con-

tractual liability for damage caused to another protect against types

of behaviour which are harmful for society in general.

Many of

these rules could also be regarded as examples of rules which promote

security.

19. Preservation of cultural and linguistic diversity. Nothing could

illustrate better the point that fundamental principles conflict than

the juxtaposition of this item with the preceding one and the two

following ones. In a pluralistic society like Europe it is manifest that

the preservation of cultural and linguistic diversity is an all-impor-

tant principle, vital to the very existence of the Union. But where a

particular aspect of human life has not only a cultural content but

also a strong functional content, this principle may conflict with the

Contents of the DCFR Intr. 19

See, in particular, VI. – 2:201 (Personal injury and consequential loss);

VI. – 2:203 (Infringement of dignity, liberty and privacy) and VI. – 2:206

(Loss upon infringement of property and lawful possession).

Book V.

Book IV, Part H.

VI. – 2:209; see also VI-3:202, VI-3:206 and VI. – 5:103.

principles of solidarity, the protection and promotion of welfare and

the promotion of the internal market. Private law is a prime exam-

ple. Within the rules of the

DCFR itself there are some reflections of

the principle of respect for cultural and linguistic diversity.

How-

ever, the impetus for the

DCFR in its present form and for its present

purposes came from, on the one hand, recognition of cultural and

linguistic diversity and, on the other, concerns about the harmful

effects for the internal market (and consequently for the welfare of

European citizens and businesses) of an excessive diversity of con-

tract law systems. The

CFR project is not an attempt to create a

single law of the whole of Europe. Rather, the purpose of the

CFR

as a legislator’s guide or toolbox is to enable the meaning of European

legislation to be clear to people from diverse legal backgrounds.

Moreover, existing cultural diversity was respected by the participa-

tion on an equal footing of lawyers from all European legal cultures

in the preparation of the

DCFR and by the serious attempt to reflect,

as far as possible, all legal systems of the

EU Member States in the

Notes. This resulted in unity out of diversity, at a soft-law level.

Linguistic diversity will be respected by ensuring that the

DCFR is

translated into as many European languages as possible.

20. Protection and promotion of welfare. The Interim Outline Edi-

tion referred to “economic welfare” but there is no reason to confine

this principle to only one aspect of welfare. This principle embraces

all or almost all the others. The whole purpose and raison d’être of

the

DCFR could be said to derive from this principle. If it does not

help to promote the welfare of the citizens and businesses of Europe –

however indirectly, however slowly, however slightly – it will have

Intr. 20 Introduction

See e. g. II. – 1:104(2) (potential applicability of local usages); II.–

3:102(2)(c) and (3) (language used for communication when business is

marketing to consumers);

II. – 9:109 (language to be used for communi-

cations relating to the contract);

IV. A. – 6:103(1)(e) (language for con-

sumer guarantee document);

IX. – 3:310(1)(d) (language to be used for

declaration to proposed European register of proprietary security);

IX.–

3:319(2) (language to be used for request to secured creditor for informa-

tion about entry in register) and

IX. – 7:210(3) (language to be used for a

type of notice by secured creditor).

failed. Although all-embracing, this principle is too general to be

useful on its own.

21. Promotion of the internal market. This principle is really a sub-

head of the last. The most obvious way in which the welfare of the

citizens and businesses of Europe can be promoted by the

DCFR is by

the promotion of the smooth functioning of the internal market.

Whether this is just by improving the quality, and hence the acces-

sibility and usability, of present and future

EU legislation or whether

it is by the development of one or more optional instruments are

political decisions.

22. Freedom, security, justice and efficiency. As underlying princi-

ples within the

DCFR, these will be discussed and developed later.

They also have a role to play as overriding principles for the purposes

of assessment from the outside. The

DCFR as a whole falls to be

assessed very largely by the criterion of how well it embodies and

balances these principles. At the level of overriding political princi-

ples, reference may also be made to the

EU specific aims of estab-

lishing an area of freedom, security and justice and promoting the

free movement of goods, persons, services and capital between the

Member States. If the political will were there, the

DCFR could make

a contribution to the achievement of these aims.

23. Definitions. ‘Definitions’ have the function of suggestions for

the development of a uniform European legal terminology. Some

particularly important concepts are defined for these purposes at the

outset in Book I. For other defined terms

DCFR I. – 1:108 provides

that ‘The definitions in the Annex apply for all the purposes of these

rules unless the context otherwise requires.’ This expressly incorpo-

rates the list of terminology in the Annex as part of the

DCFR. This

drafting technique, by which the definitions are set out in an appen-

dage to the main text, was chosen in order to keep the first chapter

short and to enable the list of terminology to be extended at any time

without great editorial labour. The substance is partly distilled from

the acquis, but predominantly derived from the model rules of the

DCFR. If the definitions are essential for the model rules, it is also

true that the model rules are essential for the definitions. There

Contents of the DCFR Intr. 23

would be little value in a set of definitions which was internally

incoherent. The definitions can be seen as components which can

be used in the making of rules and sets of rules, but there is no point

in having components which are incompatible with each other and

cannot fit together. In contrast to a dictionary of terms assembled

from disparate sources, the definitions in the Annex have been test-

ed in the model rules and revised and refined as the model rules have

developed. Ultimately, useful definitions cannot be composed with-

out model rules and useful model rules can hardly be drafted without

definitions.

24. Model rules. The greatest part of the

DCFR consists of ‘model

rules’. The adjective ‘model’ indicates that the rules are not put for-

ward as having any normative force but are soft law rules of the kind

contained in the Principles of European Contract Law and similar

publications. Whether particular rules might be used as a model for

legislation, for example, for the improvement of the internal coher-

ence of the acquis communautaire is for others to decide.

25. Comments and notes. In the full edition the model rules will be

supplemented by comments and notes. The comments will elucidate

each rule, will often illustrate its application by means of examples,

and will outline the critical policy considerations at stake. The notes

will reflect the legal position in the national legal systems and, where

relevant, the current Community law. International instruments

such as the

UN Convention on Contracts for the International Sale

of Goods (

CISG) and the Unidroit Principles of International Com-

mercial Contracts 2004 are also mentioned where appropriate. How

the notes were assembled is described in the section on the academic

contributors and our funders.

Revision of the interim outline edition

26. Overview. This final edition of the DCFR deviates in a number

of respects from the Interim Outline Edition of 2008. We referred

earlier to the new Books that are included and to the statement of

principles which underlie the model rules, now placed in a separate

Intr. 24 Introduction

section between this introduction and the model rules. Here we

mention some of the more detailed changes to the Articles published

in the Interim Outline Edition. One general change has been the

elimination of a number of redundant provisions. Another general

change has been the expansion of the expression “goods and servi-

ces” in a number of acquis-based provisions to include assets other

than “goods” in the narrow sense of corporeal movables in which the

word is defined in the

DCFR. Finally, the catalogue of definitions has

been revised and added to, with material which was misplaced there

either expunged or, on occasion, upgraded to the model rules. Here

we have frequently taken up points made in public discussion of the

text. Although it would be excessive to give details of every drafting

or editing change made since the publication of the Interim Outline

Edition, a few of the more significant changes will now be men-

tioned.

27. Book I. The main changes here are the inclusion of some provi-

sions taken from elsewhere in the Interim Outline Edition. Of par-

ticular note is

I. – 1:103 (Good faith and fair dealing). Paragraph (1)

is a more developed version of a definition which formerly appeared

only in the Annex of definitions. It is included here because of its

importance. Paragraph (2), on inconsistent actings, has been insert-

ed following a recommendation by the evaluative group formed by

the Association Henri Capitant and the Société de Législation Com-

parée. The text of the former Annex 2 (Computation of time) has

been integrated into Book I: see

I. – 1:110.

28. Book

II. The definition of “contract” in II. – 1:101(1) has been

shortened. It now refers to “an agreement which is intended to give

rise to a binding legal relationship or to have some other legal effect.”

The definition formerly contained additional words designed to cater

for the case where there was no subjective intention but an agree-

ment was carved out of what the parties said or did. However, that

point is sufficiently provided for by a later Article (

II. – 4:102) and

does not need to be repeated here. There is a similar change in the

definition of “juridical act” in

II. – 1:101(2). The earlier definition

had been criticised by commentators on the ground that it did not

make the element of intention necessary and was therefore too wide.

Revision of the interim outline edition Intr. 28

Again, the point that intention may have to be objectively ascer-

tained is sufficiently covered by a later Article (

II. – 4:302). A re-

ference to the rules on good faith and fair dealing in

II. – 1:102 (Party

autonomy) gave rise to confusion and has been deleted. The words

“promise or undertaking” formerly in

II. – 1:103 (Binding effect) were

criticised as unnecessary duplication. “Undertaking” alone is now

used. A new paragraph (3) has been added to

II. – 1:106 (Form). This

generalises a rule which originally appeared in the Chapter on dona-

tion. There are numerous changes in Chapter 3 in particular with

regard to information duties, which reflect further work done by the

Acquis Group and also react to many comments received. Of par-

ticular note is the provision on specific duties for businesses market-

ing to consumers (

II. – 3:102), where paragraph (1) has been refor-

mulated in order to reflect the underlying acquis more closely. The

provisions on sanctions for breach of information duties have been

refined and a new Article (

II. – 3:501) on liability for damages for

breach of a duty imposed by Chapter 3 has been included. The contra

proferentem rule in

II. – 8:103 has been modified and expanded, fol-

lowing a suggestion by the evaluative group formed by the Associa-

tion Henri Capitant and the Société de Législation Comparée.

29. Book

III. A new generalised provision on tacit prolongation

(

III. – 1:111) has been inserted, again following a suggestion by the

evaluative group formed by the Association Henri Capitant and the

Société de Législation Comparée. A new paragraph (3) has been

inserted in

III. – 2:102 (Time of performance) on the recommenda-

tion of the Acquis Group, and a new Article has been inserted (

III.–

3:205) to make it clear that when a supplier replaces a defective item

the supplier has a right and an obligation to take back the replaced

item. Some minor adjustments have been made to the rules on the

effects of termination for non-performance of contractual obliga-

tions (Chapter 3, Section 5, Sub-section 3). New rules on interest

in commercial contracts have been inserted on the recommendation

of the Acquis Group (

III. – 3:710 and III. – 3:711). In Chapter 5 the

rule on the requirements for an assignment (

III. – 5:104) has been

modified to bring it into line with the equivalent rule in the Book on

the transfer of ownership of corporeal movables and, for the same

reason, a new Article has been added on the effects on an assignment

Intr. 29 Introduction

of initial invalidity, subsequent avoidance, withdrawal, termination

and revocation (

III. – 5:118). The rule on the effect of a contractual

prohibition of assignment (

III. – 5:108) has been firmed up and part

of it removed and generalised in a new rule on competition between

an assignee and an assignor receiving the proceeds of performance

(

III. – 5:122). Chapter 5 has been expanded by the inclusion of Ar-

ticles on the substitution or addition of a new debtor in such a way

that the original debtor is not discharged (Chapter 5, Section 2). A

new Article has been added to enable a principal to take over the

rights of an agent against a third party if the agent becomes insolvent

(

III. – 5:401) and to give the third party, in such a case, an option to

hold the principal liable for the agent’s obligations under the con-

tract ((

III. – 5:402). These rules will be particularly relevant in cases

of so-called indirect representation where the agent contracts in the

agent’s own name. As a consequence of some of these changes Chap-

ter 5 has been renamed “Change of parties”. The Article on the

requirements for set-off (

III. – 6:102) has been redrafted after it was

drawn to our attention that there was a difference in substance be-

tween the English and French texts in the

PECL, and it has been

expanded to make it clear that the rights being set off against each

other must both be available for that purpose, and not for example

frozen on the application of an arresting creditor. And, finally, two of

the Articles on prescription (

III. – 7:302 and III. – 7:303) have been

slightly expanded partly to take account of developments in relation

to mediation.

30. Book

IV. The main change in Book IV has been the elimination

of redundant or overlapping provisions, including some provisions

which repeated the substance of rules already found in Books

II or III.

The presence of these redundant provisions had been rightly criti-

cised by commentators on the Interim Outline Edition. Most of

these provisions had a proper role to play in the self-standing

PEL

Books in order to complete the picture but are unnecessary in the

DCFR. In a few cases, new or revised rules in earlier Books (e. g. on

tacit prolongation and interpretation against the dominant party)

enabled provisions in Book

IV which were formerly necessary to be

now deleted. A slight adjustment has been made in

IV. A. – 2:305

(Third party rights or claims in general) in order to bring the text

Revision of the interim outline edition Intr. 30

into line with the agreed policy as expressed in the comments. Sev-

eral changes have been made in the Chapter on mandate. These

were made partly to make it more clear that the chapter applies not

only to contracts for the conclusion of a contract for the principal

but also to contracts, for example with estate agents or brokers of

various kinds, for the negotiation or facilitation of a contract to be

concluded by the principal and, given that scope, partly in the inter-

ests of more precise terminology. For example, an estate agent with

authority to negotiate but not conclude a contract for the principal is

more accurately described as an “agent” than as a “representative”,

which was the word used in the Interim Outline Edition.

31. Books V-

VII. Only minor drafting changes have been made in

these Books.

32. Books

VIII-X. Books VIII, IX and X were prepared in the same

manner as the other books of the

DCFR on the basis of deliberation

in working teams, advisory councils and plenary meetings. However,

for reasons primarily of time, the Compilation and Redaction Team

was not able to give these Books the same complete scrutiny as it was

able to bestow on the others.

33. Definitions. Some helpful comments were received on the An-

nex of definitions. As a result, some definitions which had been

inserted primarily as drafting aids rather than to elucidate the mean-

ing of a term or concept have been deleted. This has sometimes

meant using a few more words than before in some Articles. A few

definitions have been changed in the interests of greater clarity or

precision. A few terms which were defined only in the Annex in the

Interim Outline Edition have now, because of their importance, been

moved to the text of the model rules. The list of definitions still

contains definitions taken from, or derived from, the model rules as

well as some definitions which, because of their generality, do not

have a natural home in any one model rule. This makes for a mixed

list but the purpose is simply the convenience of the reader. Where a

definition is taken or derived from an Article in the model rules a

cross-reference to that Article has been added. Again this responds

to a useful suggestion made by commentators.

Intr. 31 Introduction

The coverage of the DCFR

34. Wider coverage than PECL. The coverage of the PECL was al-

ready quite wide. They had rules not only on the formation, validity,

interpretation and contents of contracts and, by analogy, other jur-

idical acts, but also on the performance of obligations resulting from

them and on the remedies for non-performance of such obligations.

Indeed the later Chapters had many rules applying to private law

rights and obligations in general – for example, rules on a plurality of

parties, on the assignment of rights to performance, on set-off and on

prescription. To this extent the Principles went well beyond the law

on contracts as such. The

DCFR continues this coverage but it goes

further.

35. Specific contracts. The

DCFR also covers (in Book IV) a series

of model rules on so-called ‘specific contracts’ and the rights and

obligations arising from them. For their field of application these

latter rules expand and make more specific the general provisions

(in Books

I-III), deviate from them where the context so requires, or

address matters not covered by them.

36. Non-contractual obligations. The

DCFR also covers other pri-

vate law rights and obligations within its scope even if they do not

arise from a contract. It covers, for example, those arising as the

result of an unjustified enrichment, of damage caused to another and

of benevolent intervention in another’s affairs. It also covers obliga-

tions which a person might have, for example, by virtue of being in

possession of assets subject to proprietary security or by virtue of

being a trustee. It thus embraces non-contractual obligations to a

far greater extent than the

PECL. It is noted below (paragraphs 44-

46) that Book

III contains some general rules which are applicable to

all obligation within the scope of the

DCFR, whether contractual or

not. The advantage of this approach is that the rules in Book

III can

be taken for granted, or slightly modified where appropriate, in the

later Books on non-contractual matters. The alternative would be an

unacceptable amount of unnecessary repetition.

The coverage of the DCFR Intr. 36

37. Matters of movable property law. The DCFR also covers some

matters of movable property law, namely acquisition and loss of own-

ership, proprietary security, and trust law. They form the content of

Books

VIII, IX and X and are published here for the first time.

38. Matters excluded.

DCFR I. – 1:101(2) lists all matters which are

excluded from its intended field of application. These are in particu-

lar: the status or legal capacity of natural persons, wills and succes-

sion, family relationships, negotiable instruments, employment rela-

tionships, immovable property law, company law, and the law of civil

procedure and enforcement of claims.

39. Reasons for the approach adopted. The coverage of the

DCFR is

thus considerably broader than what the European Commission

seems to have in mind for the coverage of the

CFR (see paragraph

59 below). The ‘academic’ frame of reference is not subject to the

constraints of the ‘political’ frame of reference. While the

DCFR is

linked to the

CFR, it is conceived as an independent text. The

research teams began in the tradition of the Commission on Euro-

pean Contract Law but with the aim of extending its coverage.

When this work started there were no political discussions underway

on the creation of a

CFR of any kind, neither for contract law nor for

any other part of the law. Our contract with the Research Directo-

rate-General to receive funding under the sixth European Frame-

work Programme on Research reflects this; it obliges us to address all

the matters listed above. The relatively broad coverage of the

DCFR

may be seen as advantageous also from a political perspective. Only a

comprehensive

DCFR creates a concrete basis for the discussion of

the coverage of the political

CFR and thereby allows for an informed

decision of the responsible political institutions.

40. Contract law as part of private law. There are good reasons for

including more than rules on general contract law in the

DCFR.

These general rules need to be tested to see whether or in what

respect they have to be adjusted, amended and revised within the

framework of the most important of the specific contracts. Nor can

the

DCFR contain only rules dealing with consumer contracts. The

two Groups concur in the view that consumer law is not a self-stand-

Intr. 37 Introduction

ing area of private law. It consists of some deviations from the general

principles of private law, but it is built on them and cannot be de-

veloped without them. And ‘private law’ for this purpose is not con-

fined to the law on contract and contractual obligations. The correct

dividing line between contract law (in this wide sense) and some

other areas of law is in any event difficult to determine precisely.

The DCFR therefore approaches the whole of the law of obligations

as an organic entity or unit. Some areas of property law with regard

to movable property are dealt with for more or less identical reasons

and because some aspects of property law are of great relevance to

the good functioning of the internal market.

Structure and language of the DCFR model rules

41. Structure of the model rules. The structure of the model rules

was discussed on many occasions by the Study Group and the joint

Compilation and Redaction Team. It was accepted from an early

stage that the whole text would be divided into Books and that each

Book would be subdivided into Chapters, Sections, Sub-sections

(where appropriate) and Articles. In addition the Book on specific

contracts and the rights and obligations arising from them was to be

divided, because of its size, into Parts, each dealing with a particular

type of contract (e. g. Book

IV.A: Sale). All of this was relatively

uncontroversial.

42. Mode of numbering the model rules. The mode of numbering

the model rules corresponds in its basic approach to the technique

used in many of the newer European codifications. This too was

chosen in order to enable necessary changes to be made later without

more than minor editorial labour. Books are numbered by capitalised

Roman numerals, i. e., Book

I (General provisions), Book II (Con-

tracts and other juridical acts), etc. Only one Book (Book

IV (Spe-

cific contracts and rights and obligations arising from them)) is di-

Structure and language of the DCFR model rules Intr. 42

See, in more detail, von Bar and Drobnig (eds.), The Interaction of

Contract Law and Tort and Property Law in Europe (Munich 2004). This

study was conducted on behalf of the European Commission.

vided into Parts: Part A (Sale), Part B (Lease of goods), etc. Chap-

ters, sections (and also sub-sections) are numbered using Arabic

numerals, e. g. chapter 5, section 2, sub-section 4, etc. Articles are

then numbered sequentially within each Book (or Part) using Arabic

numerals. The first Arabic digit, preceding the colon, is the number

of the relevant chapter. The digit immediately following the colon is

the number of the relevant section of that chapter. The remaining

digits give the number of the Article within the section; sub-sections

do not affect the numbering. For example,

III. – 3:509 (Effect on

obligations under the contract) is the ninth Article in section 5

(Termination) of the third chapter (Remedies for non-performance)

of the third book (Obligations and corresponding rights). It was not

possible, however, to devise a numbering system that would indicate

every subdivision of the text without the system becoming too com-

plicated to be workable. One cannot see from the numbering that

III. – 3:509 is the first Article within sub-section 3 (Effects of termi-

nation).

43. Ten books. To a large extent the allocation of the subject mat-

ter to the different Books was also uncontroversial. It was readily

agreed that Book

I should be a short and general guide for the reader

on how to use the whole text – dealing, for example, with its intend-

ed scope of application, how it should be interpreted and developed

and where to find definitions of key terms. The later Books, from

Book

IV on, also gave rise to little difficulty so far as structure was

concerned. There was discussion about the best order, but eventually

it was settled that this would be: Specific contracts and rights and

obligations arising from them (Book

IV); Benevolent intervention in

another’s affairs (Book

V); Non-contractual liability arising out of

damage caused to another (Book

VI); Unjustified enrichment (Book

VII); Acquisition and loss of ownership of goods (Book VIII); Pro-

prietary security rights in movable assets (Book

IX) and Trust (Book

X). An important argument for putting the rules on specific con-

tracts and their obligational effects in a Book of their own (subdi-

vided into Parts) rather than in separate Books is that it would be

easier in the future to add new Parts dealing with other specific

contracts without affecting the numbering of later Books and their

contents.

Intr. 43 Introduction

44. Books II and III. The difficult decisions concerned Books II and

III. There was never much doubt that these Books should cover the

material in the existing Principles of European Contract Law (

PECL,

see paragraph 8 above and paragraphs 49-53 below) – general rules

on contracts and other juridical acts, and general rules on contrac-

tual and (in most cases) other obligations – but there was consider-

able difficulty in deciding how this material should be divided up be-

tween and within them, and what they should be called. It was only

after decisions were taken by the Co-ordinating Group on how the

key terms ‘contract’ and ‘obligation’ would be used in the model

rules, and after a special Structure Group was set up, that the way

forward became clear. Book

II would deal with contracts and other

juridical acts (how they are formed, how they are interpreted, when

they are invalid, how their content is determined and so on) while

Book

III would deal with obligations within the scope of the DCFR –

both contractual and non-contractual – and corresponding rights.

45. Contracts and obligations. A feature of this division of material

is a clear distinction between a contract seen as a type of agreement –

a type of juridical act – and the legal relationship, usually involving

reciprocal sets of obligations and rights, which results from it. Book

deals with contracts as juridical acts; Book III deals with the obliga-

tions and rights resulting from contracts seen as juridical acts, as well

as with non-contractual obligations and rights. To this extent a

structural division which in the

PECL was only implicit is made

explicit in the

DCFR. Some commentators on the Interim Outline

Edition called for a simpler structure more like that of the

PECL, one

which, at least in relation to contracts and contractual obligations,

would follow a natural “chronological” order. However, it has to be

noted that the

DCFR does in fact follow such an order. It begins with

the pre-contractual stage and then proceeds to formation, right of

withdrawal, representation (i. e. how a contract can be concluded for

a principal by a representative), grounds of invalidity, interpretation,

contents and effects, performance, remedies for non-performance,

plurality of debtors and creditors, change of parties, set-off and mer-

ger, and prescription. This is essentially the same order as is followed

in the

PECL. The only difference is that the DCFR inserts a break at

the point where the rules cease to talk about contracts as agreements

Structure and language of the DCFR model rules Intr. 45

(formation, interpretation, invalidity, contents and effects etc.) and

start to talk about the rights and obligations arising from them. At

this point a new Book is begun and a new Chapter on obligations and

corresponding rights in general is inserted. It is not an enormous

change. It hardly affects the order or content of the model rules.

And it is justified not only because there is a difference between a

contract and the rights and obligations arising out of it, and it is an

aid to clarity of thought to recognise this, but also because it is useful

to have the opening Chapter of Book

III as a home for some Articles

which are otherwise difficult to place, such as those on conditional

and time-limited rights and obligations. To eliminate the break be-

tween Books

II and III would be a regrettable step backwards for

which it is difficult to see any justification.

46. Contractual and non-contractual obligations. A further problem

was how best to deal with contractual and non-contractual obliga-

tions within Book

III. One technique which was tried was to deal

first with contractual obligations and then to have a separate part on

non-contractual obligations. However, this proved cumbersome and

unsatisfactory. It involved either unnecessary repetition or extensive

and detailed cross-references to earlier Articles. Either way the text

was unattractive and heavy for the reader to use. In the end it was

found that the best technique was to frame the Articles in Book

III so

far as possible in general terms so that they could apply to both

contractual and non-contractual obligations. Where a particular Ar-

ticle applied only to contractual obligations this could be clearly

stated, see

III. – 1:101 (“This Book applies, except as otherwise pro-

vided, to all obligations within the scope of these rules, whether they

are contractual or not ...”). For example, the rules on termination

can only apply to contractual obligations (see

III. – 3:501(1) (Scope

and definition)); the same is true for

III. – 3:601 (Right to reduce

price) (the restriction on the scope of application follows from the

word “price”) and

III. – 3:203 (When creditor need not allow debtor

an opportunity to cure) paragraph (a), the wording of which limits its

application to contractual obligations. It need hardly be added that if

CFR were to be confined to contracts and contractual obligations it

would be a very easy matter to use the model rules in Book

III for that

purpose. Most of them would need no alteration.

Intr. 46 Introduction

47. Language. The DCFR is being published first in English. This

has been the working language for all the Groups responsible for for-

mulating the model rules. However, for a substantial portion of the

Books (or, in the case of Book

IV, its Parts), teams have already com-

posed a large number of translations into other languages. These will

be published successively, first in the

PEL series (see paragraphs 54-

56 below) and later separately for the

DCFR. In the course of these

translations the English formulation of the model rules has often it-

self been revised. In autumn 2008 the Fondation pour le droit continen-

tal (Paris) published a translation of the first three Books of the

DCFR (in the version of the interim outline edition).

A Czech

translation of the interim outline addition appeared shortly after-

wards.

The research teams are intent on publishing the model rules

of the

DCFR as quickly and in as many languages as is possible. How-

ever, the English version is the only version of the

DCFR which has

been discussed and adopted by the responsible bodies of the partici-

pating groups and by the Compilation and Redaction Team.

48. Accessibility and intelligibility. In the preparation of the

DCFR

every attempt was made to achieve not only a clear and coherent

structure, but also a plain and clear wording. Whether the model

rules and definitions are seen as a tool for better lawmaking or as the

possible basis for one or more optional instruments it is important

that they should be fit for their purpose. The terminology should be

precise and should be used consistently. The word “contract” for

example should be used in one sense, not three or more. The termi-

nology should be as suitable as possible for use across a large number

of translations. It should therefore try to avoid legalese and techni-

calities drawn from any one legal system. An attempt has been made

to find, wherever possible, descriptive language which can be readily

translated without carrying unwanted baggage with it. It is for this

reason that words like “rescission”, “tort” and “delict” have been

avoided. The concepts used should be capable of fitting together

coherently in model rules, whatever the content of those model

Structure and language of the DCFR model rules Intr. 48

By Professor Jacques Ghestin, see fn. 3 above.

By a team led by Professor Pr

emysl Raban, published in Karlovarská

Právní Revuei 2/2008, 1-222.

rules. The text should be well-organised, accessible and readable.

Being designed for the Europe of the 21

century, it should be ex-

pressed in gender neutral terms. It should be as simple as is consistent

with the need to convey accurately the intended meaning. It should

not contain irrational, redundant, or conflicting provisions. Wheth-

er the

DCFR achieves these aims is for others to judge. Certainly,

considerable efforts were made to try to achieve them.

How the DCFR relates to PECL, the SGECC PEL series, the

Acquis and the Insurance Contract Group series

49. Based in part on the PECL. In Books II and III the DCFR contains

many rules derived from the Principles of European Contract Law

(

PECL). These rules have been adopted with the express agreement

of the Commission on European Contract Law, whose successor

group is the Study Group. Tables of derivations and destinations will

help the reader to trace

PECL articles within the DCFR. However,

the

PECL could not simply be incorporated as they stood. Deviations

were unavoidable in part due to the different purpose, structure and

coverage of the

DCFR and in part because the scope of the PECL

needed to be broadened so as to embrace matters of consumer pro-

tection.

50. Deviations from the

PECL. A primary purpose of the DCFR is to

try to develop clear and consistent concepts and terminology. In

pursuit of this aim the Study Group gave much consideration to the

most appropriate way of using terms like ‘contract’ and ‘obligation’,

taking into account not only national systems, but also prevailing

usage in European and international instruments dealing with pri-

vate law topics. One reason for many of the drafting changes from

the

PECL is the clearer distinction now drawn (as noted above) be-

tween a contract (seen as a type of agreement or juridical act) and

the relationship (usually consisting of reciprocal rights and obliga-

tions) to which it gives rise. This has a number of consequences

throughout the text.

Intr. 49 Introduction

51. Examples. For example, under the DCFR it is not the contract

which is performed. A contract is concluded; obligations are per-

formed. Similarly, a contract is not terminated. It is the contractual

relationship, or particular rights and obligations arising from it,

which will be terminated. The new focus on rights and obligations

in Book

III also made possible the consistent use of ‘creditor’ and

‘debtor’ rather than terms like ‘aggrieved party’ and ‘other party’,

which were commonly used in the

PECL. The decision to use ‘ob-

ligation’ consistently as the counterpart of a right to performance

also meant some drafting changes. The

PECL sometimes used ‘duty’

in this sense and sometimes ‘obligation’. The need for clear concepts

and terminology also meant more frequent references than in the

PECL to juridical acts other than contracts. A juridical act is defined

II. – 1:101 as a statement or agreement which is intended to have

legal effect as such. All legal systems have to deal with various types

of juridical act other than contracts, but not all use such a term and

not all have generalised rules. Examples of such juridical acts might

be offers, acceptances, notices of termination, authorisations, guar-

antees, acts of assignment, unilateral promises and so on. The

PECL

dealt with these by an article (1:107) which applied the Principles to

them ‘with appropriate modifications’. However, this technique is a

short-cut which should only be used with great care and only when

the appropriate modifications will be slight and fairly obvious. In this

instance what modifications would be appropriate was not always

apparent. It was therefore decided, as far back as 2004, to deal sepa-

rately with other juridical acts. Some commentators on the Interim

Outline Edition have ascribed a significance to this modest func-

tional decision which it certainly did not have in the eyes of the

drafters.

52. Input from stakeholders. Other changes in

PECL articles resul-

ted from the input from stakeholders to the workshops held by the

European Commission on selected topics. For example, the rules on

representation were changed in several significant respects for this

reason, as were the rules on pre-contractual statements forming part

of a contract, the rules on variation by a court of contractual rights

and obligations on a change of circumstances and the rules on so-

called ‘implied terms’ of a contract. Sometimes even the process of

How the DCFR relates to PECL, the SGECC PEL series Intr. 52

preparing for stakeholder meetings which did not, in the end, take

place led to proposals for changes in

PECL which were eventually

adopted. This was the case, for example, with the chapter on plur-

ality of debtors and creditors, where academic criticism on one or

two specific points also played a role.

53. Developments since the publication of the

PECL. Finally, there

were some specific articles or groups of articles from the

PECL which,

in the light of recent developments or further work and thought,

seemed to merit improvement. For example, the

PECL rules on sti-

pulations in favour of third parties, although a considerable achieve-

ment at the time, seemed in need of some expansion in the light of

recent developments in national systems and international instru-

ments. The detailed work which was done on the specific contracts

in Book

IV, and the rights and obligations resulting from them, some-

times suggested a need for some additions to, and changes in, the

general rules in Books

II and III. For example, it was found that it

would be advantageous to have a general rule on ‘mixed contracts’ in

Book

II and a general rule on notifications of non-conformities in

Book

III. It was also found that the rules on ‘cure’ by a seller which

were developed in the Part of Book

IV on sale could usefully be

generalised and placed in Book

III. The work done on other later

Books also sometimes fed back into Books

II and III. For example, the

work done on unjustified enrichment showed that rather more de-

veloped rules were needed on the restitutionary effects of terminated

contractual relationships, while the work on the acquisition and loss

of ownership of goods (and also on proprietary security rights in

movable assets) fed back into the treatment of assignment in Book

III. Although the general approach was to follow the PECL as much

as possible there were, inevitably, a number of cases where it was

found that small drafting changes could increase clarity or consis-

tency. For example, the

PECL sometimes used the word “claim” in

the sense of a demand based on the assertion of a right and some-

times in the sense of a right to performance. The

DCFR uses “claim”

only in the first sense and uses a “right to performance” where this is

what is meant. Again, the

PECL referred sometimes to contract

“terms” and sometimes to contract “clauses”. The

DCFR prefers

Intr. 53 Introduction

“terms”, which has the advantage of applying with equal facility to

written and non-written contracts.

54. The

PEL series. The Study Group began its work in 1998. From

the outset it was envisaged that at the appropriate time its results

would be presented in an integrated complete edition, but it was only

gradually that its structure took shape (see paragraphs 41-46 above).

As a first step the tasks in the component parts of the project had to

be organised and deliberated. The results are being published in a

separate series, the ‘Principles of European Law’ (

PEL). To date six

volumes have appeared. They cover sales,

leases,

services,

com-

mercial agency, franchise and distribution,

personal security con-

tracts,

and benevolent interventions in another’s affairs.

Further

books will follow (in 2009 and 2010) on the law regarding non-

How the DCFR relates to PECL, the SGECC PEL series Intr. 54

Principles of European Law. Study Group on a European Civil Code.

Sales (

PEL S). Prepared by Ewoud Hondius, Viola Heutger, Christoph

Jeloschek, Hanna Sivesand, Aneta Wiewiorowska (Sellier, Bruylant,

Staempfli, Oxford University Press 2008).

Principles of European Law. Study Group on a European Civil Code.

Lease of Goods (

PEL LG). Prepared by Kåre Lilleholt, Anders Victorin†,

Andreas Fötschl, Berte-Elen R. Konow, Andreas Meidell, Amund Bjør-

anger Tørum (Sellier, Bruylant, Staempfli, Oxford University Press

2007).

Principles of European Law. Study Group on a European Civil Code.

Service Contracts (

PEL SC). Prepared by Maurits Barendrecht, Chris

Jansen, Marco Loos, Andrea Pinna, Rui Cascão, Stéphanie van Gulijk

(Sellier, Bruylant, Staempfli, Oxford University Press 2006).

Principles of European Law. Study Group on a European Civil Code.

Commercial Agency, Franchise and Distribution Contracts (

PEL

CAFDC

). Prepared by Martijn W. Hesselink, Jacobien W. Rutgers, Oda-

via Bueno Díaz, Manola Scotton, Muriel Veldmann (Sellier, Bruylant,

Staempfli, Oxford University Press 2006).

Principles of European Law. Study Group on a European Civil Code.

Personal Security (

PEL Pers.Sec.). Prepared by Ulrich Drobnig (Sellier,

Bruylant, Staempfli, Oxford University Press 2007).

Principles of European Law. Study Group on a European Civil Code.

Benevolent Intervention in Another’s Affairs (

PEL Ben.Int.). Prepared

contractual liability arising out of damage caused to another, on

unjustified enrichment law, on mandate contracts, and all the sub-

jects related to property law. The volumes published within the

PEL

series contain additional material which will not be reproduced in

the full

DCFR, namely the comparative introductions to the various

Books, Parts and Chapters and the translations of the model rules

published within the

PEL series. The continuation of the PEL series

will also enable the publication of the full edition of the

DCFR in-

dependently of whether all gaps in the compilation and editing of

the comparative legal material can actually be filled in time.

55. Deviations from the

PEL series. In some cases, however, the mod-

el rules which the reader encounters in this

DCFR deviate from their

equivalent published in the

PEL series. There are several reasons for

such changes. First, in drafting a self-standing set of model rules for a

given subject (such as e. g. service contracts) it proved necessary to

have much more repetition of rules which were already part of the

PECL. Such repetitions became superfluous in an integrated DCFR

text which states these rules at a more general level (i. e. in Books II

and III). The DCFR is therefore considerably shorter than it would

have been had all

PEL model rules been included as they stood.

56. Improvements. The second reason for changing some already

published

PEL model rules is that, at the stage of revising and editing

for

DCFR purposes, the Compilation and Redaction Team saw room

for some improvements. After consulting the authors of the relevant

PEL book, the CRT submitted the redrafted rules to the Study

Group’s Co-ordinating Committee for approval, amendment or re-

jection. Resulting changes are in part limited to mere drafting, but

occasionally go to substance. They are a consequence of the syste-

matic revision of the model rules which commenced in 2006, the

integration of ideas from others (including stakeholders) and the

compilation of the list of terminology, which revealed some incon-

Intr. 55 Introduction

by Christian von Bar (Sellier, Bruylant, Staempfli, Oxford University

Press 2006).

sistencies in the earlier texts. The DCFR in turn, in its full edition,

reflects yet further refinements as compared with the interim outline

edition.

57. The Acquis Principles (

ACQP). The Research Group on the Ex-

isting

EC Private Law, commonly called the Acquis Group, is also

publishing its findings in a separate series.

The Acquis Principles

are an attempt to present and structure the bulky and rather incoher-

ent patchwork of

EC private law in a way that should allow the cur-

rent state of its development to be made clear and relevant legisla-

tion and case law to be found easily. This also permits identification

of shared features, contradictions and gaps in the acquis. Thus, the

ACQP may have a function for themselves, namely as a source for

the drafting, transposition and interpretation of

EC law. Within the

process of elaborating the

DCFR, the Acquis Group and its output

contribute to the task of ensuring that the existing

EC law is appro-

priately reflected. The

ACQP are consequently one of the sources

from which the Compilation and Redaction Team has drawn.

58. Principles of European Insurance Contract Law. The Co

PECL

network of researchers established under the sixth framework pro-

gramme for research (see below: academic contributors and funders)

also includes the ‘Project Group Restatement of European Insurance

Contract Law (Insurance Group)’. That body is expected to deliver

its ‘Principles of European Insurance Contract Law’ to the European

Commission contemporaneously with our submission of the

DCFR.

How the DCFR relates to PECL, the SGECC PEL series Intr. 58

Principles of the Existing EC Contract Law (Acquis Principles). Con-

tract I – Pre-Contractual Obligations, Conclusion of Contract, Unfair

Terms. Prepared by the Research Group on the Existing

EC Private Law

(Acquis Group) (Munich 2007); in print: Contract

II (Munich 2009),

which includes general provisions, delivery of goods, package travel and

payment services. Further volumes on specific contracts and extra-con-

tractual matters in preparation.

How the DCFR may be used as preparatory work for the CFR

59. Announcements by the Commission. The European Commis-

sion’s ‘Action Plan on A More Coherent European Contract Law’

of January 2003

called for comments on three proposed measures:

increasing the coherence of the acquis communautaire, the promotion

of the elaboration of

EU-wide standard contract terms,

and further

examination of whether there is a need for a measure that is not

limited to particular sectors, such as an ‘optional instrument.’ Its

principal proposal for improvement was to develop a Common

Frame of Reference (

CFR) which could then be used by the Com-

mission in reviewing the existing acquis and drafting new legisla-

tion.

In October 2004 the Commission published a further paper,

‘European Contract Law and the revision of the acquis: the way

forward’.

This proposed that the CFR should provide ‘fundamental

principles, definitions and model rules’ which could assist in the

improvement of the existing acquis communautaire, and which might

form the basis of an optional instrument if it were decided to create

one. Model rules would form the bulk of the

CFR,

its main purpose

being to serve as a kind of legislators’ guide or ‘tool box’. This

DCFR

responds to these announcements by the Commission and contains

proposals for the principles, definitions and model rules mentioned

in them.

60. Purposes of the

CFR. It remains to be seen what purposes the

CFR may be called upon to serve. Some indication may be obtained

from the expression ‘principles, definitions and model rules’ itself.

Other indications can be obtained from the Commission’s papers on

Intr. 59 Introduction

See fn. 1 above.

This aspect of the plan is not being taken forward. See Commission of the

European Communities. First Progress Report on The Common Frame of

Reference,

COM (2005), 456 final, p. 10.

Action Plan para. 72.

Communication from the Commission to the European Parliament and

the Council,

COM (2004) 651 final, 11 October 2004 (referred to as Way

Forward).

Way Forward para. 3.1.3, p. 11.

this subject. These, and their implications for the coverage of the

DCFR, will now be explored.

61. Green Paper on the Review of the Consumer Acquis. The ‘Way

Forward’ communication had announced that parallel to the pre-

paration of the

DCFR a review of eight consumer Directives

would

be carried out. Members of the Acquis Group were involved in this

review.

In 2007 the European Commission published a Green Pa-

per on the review of the consumer acquis.

It asked questions at a

number of different levels: for example, whether full harmonisation

is desirable,

whether there should be a horizontal instrument,

(as

to which see paragraph 62 below) and whether various additional

matters should be dealt with by the Consumer Sales Directive.

It is

possible that other Directives will also be revised, for example those

relating to the provision of information to recipients of financial

services. In the longer term, there may be proposals for further har-

monisation measures in sectors where there still appears to be a need

for consumer protection (e. g. contracts for services and for personal

security) or where the differences between the laws of the Member

States appear to cause difficulties for the internal market (e. g. in-

surance and security over movable property).

62. Draft proposal for a Directive on consumer contractual rights. The

Green Paper on the review of the consumer acquis has now been

followed by the publication of a draft proposal for a ‘horizontal’

How the DCFR may be used as preparatory work for the CFR Intr. 62

Directives 85/577, 90/314, 93/13, 94/47, 97/7, 98/6; 98/27, 99/44. See

Way Forward para. 2.1.1.

See Schulte-Nölke/Twigg-Flesner/Ebers (eds), EC Consumer Law Com-

pendium. The Consumer Acquis and its transposition in the Member

States (Munich 2008).

Green Paper on the Review of the Consumer Acquis, COM(2006) 744

final of 8 February 2007 (http://ec.europa.eu/consumers/cons_int/safe_sh

op/acquis/green-paper_cons_acquis_en.pdf).

Question A3, p. 15.

Question A2, p. 14.

Directive 1999/44 /EC. See questions H1-M3, pp. 24-32.

directive.

In its present form, however, and perhaps for reasons of

timing, the latter does not make any explicit use of the

DCFR.

Whereas terminology and drafting style are rather different, there

are nevertheless some characteristic similarities with regard to sub-

stance. For instance, both the

DCFR and the draft horizontal direc-

tive propose general rules on pre-contractual information duties or

withdrawal rights, which are different in detail but follow the same

basic ideas. One such idea is that, in general, a right of withdrawal

and the corresponding information duties should apply to all types of

contracts negotiated away from business premises (the draft horizon-

tal directive calls them “distance and off-premises contracts”), ex-

cept under clearly defined circumstances, which can be easily

proved. It will have to be seen what use will be made of the

DCFR

or a possible political CFR in later stages of the elaboration of the

directive.

63. Improving the existing and future acquis: model rules. The

DCFR

is intended to help in this process of improving the existing acquis

and in drafting any future

EU legislation in the field of private law.

By teasing out and stating clearly the principles that underlie the

acquis, the

DCFR can show how the existing Directives can be made

more consistent and how various sectoral provisions might be given a

wider application, so as to eliminate current gaps and overlaps – the

‘horizontal approach’ referred to in the draft proposal. (For instance

the

DCFR provides for general model rules on pre-contractual infor-

mation duties and withdrawal rights, which are also the subject of

the draft horizontal directive, though this, unlike the

DCFR, mainly

leaves it to the national laws to determine the consequences of any

breach of information duties. The

DCFR offers both the EC legislator

and the national legislators a model set of sanctions for breach of

information duties.) The

DCFR also seeks to identify improvements

in substance that might be considered. The research preparing the

DCFR ‘will aim to identify best solutions, taking into account na-

tional contract laws (both case law and established practice), the

acquis and relevant international instruments, particularly the UN

Intr. 63 Introduction

Proposal for a Directive of the European Parliament and of the Council

on consumer rights,

COM(2008) 614.

Convention on Contracts for the International Sale of Goods of

1980’.

The DCFR therefore provides recommendations, based on

extensive comparative research and careful analysis, of what should

be considered if legislators are minded to alter or add to

EU legisla-

tion within the broad framework of existing basic assumptions. The

DCFR does not challenge these basic assumptions of the acquis (such

as the efficacy of information duties or the value of the notion of the

consumer as a basis for providing necessary protection) any more

than shared propositions of national law. It would not have been

appropriate for a group of academic lawyers in an exercise of this

nature to do so: these are fundamental and politically sensitive ques-

tions which are not primarily of a legal nature. The

DCFR simply

makes proposals as to how, given the present policy assumptions, the

relevant rules might with advantage be modified and made more

coherent. In a very few cases it is proposed that, as has been done

in some Member States, particular acquis rules applying to consumers

should be applied more generally. We do not of course suggest that

even those proposals should simply be adopted without further de-

bate. They are no more than model rules from which the legislator

and other interested parties may draw inspiration.

64. Improving the acquis: developing a coherent terminology. Direc-

tives frequently employ legal terminology and concepts which they

do not define.

The classic example, seemingly referred to in the

Commission’s papers, is the Simone Leitner case,

but there are many

How the DCFR may be used as preparatory work for the CFR Intr. 64

Way Forward para. 3.1.3.

In the CFR workshops on the consumer acquis, texts providing definitions

of concepts used or pre-supposed in the

EU acquis were referred to as

‘directly relevant’ material. See Second Progress Report on the Common

Frame of Reference,

COM (2007) 447 final, p. 2.

Case C-168/00 Simone Leitner v TUI Deutschland

[

2002

]

ECR I-2631.

The

ECJ had to decide whether the damages to which a consumer was

entitled under the provisions of the Package Travel Directive must in-

clude compensation for non-economic loss suffered when the holiday was

not as promised. This head of damages is recognised by many national

laws, but was not recognised by Austrian law. The

ECJ held that ‘damage’

in the Directive must be given an autonomous, ‘European’ legal mean-

others. A CFR which provides definitions of these legal terms and

concepts would be useful for questions of interpretation of this kind,

particularly if it were adopted by the European institutions – for

example, as a guide for legislative drafting.

It would be presumed

that the word or concept contained in a Directive was used in the

sense in which it is used in the

CFR unless the Directive stated

otherwise.

National legislators seeking to implement the Directive,

and national courts faced with interpreting the implementing legis-

lation, would be able to consult the

CFR to see what was meant.

Moreover, if comparative notes on the Articles are included, as they

will be in the full version of the

DCFR, the notes will often provide

useful background information on how national laws currently deal

with the relevant questions.

65. No functional terminology list without rules. As said before, it is

impossible to draft a functional list of terminology without a set of

model rules behind it, and vice versa. That in turn makes it desirable

to consider a rather wide coverage of the

CFR. For example, it would

be very difficult to develop a list of key notions of the law on contract

and contractual obligations (such as “conduct”, “creditor”, “dam-

age”, “indemnify”, “loss”, “negligence”, “property” etc.), without a

sufficient awareness of the fact that many of these notions also play a

role in the area of non-contractual obligations.

66. Coverage of the

CFR. The purposes to be served by the DCFR

have a direct bearing on its coverage. As explained in paragraphs 34-

39 above, the coverage of the

DCFR goes well beyond the coverage

Intr. 65 Introduction

ing – and in this context ‘damage’ is to be interpreted as including non-

economic loss.

In the absence of any formal arrangement, legislators could achieve much

the same result for individual legislative measures by stating in the reci-

tals that the measure should be interpreted in accordance with the

CFR.

We note that the draft Directive on consumer rights (fn. 44 above) at

present often adopts the words of the existing Directives, even where

these are known not to be very clear. We hope that before the Directive is

adopted, its drafting will be checked against the

DCFR and brought into

line with it, save where a different outcome is intended.

of the CFR as contemplated by the Commission in its communica-

tions (whereas the European Parliament in several resolutions envi-

sages for the

CFR more or less the same coverage as this DCFR).

Today, the coverage of the CFR still seems to be an open question.

How far should it reach if it is to be effective as a legislators’ guide or

‘tool box’? How may this

DCFR be used if it is decided that the

coverage of the

CFR will be narrower (or even much narrower) than

the coverage of the

DCFR? The following aspects would seem to be

worthy of being taken into consideration when making the relevant

political decisions.

67. Consumer law and e-commerce. It seems clear that the

CFR

must at any rate cover the fields of application of the existing Di-

rectives that are under review, and any others likely to be reviewed in

the foreseeable future. Thus all consumer law and questions of e-

commerce should be included, and probably all contracts and con-

tractual relationships that are the subject of existing Directives af-

fecting questions of private law, since these may also be reviewed at

some stage.

68. Revision of the acquis and further harmonisation measures. Se-

condly, the

CFR should cover any field in which revision of the acquis

or further harmonisation measures is being considered. This includes

both areas currently under review (e. g. sales, and also leasing which

is discussed in the Green Paper on revision of the consumer acquis

)

and also areas where harmonisation is being considered, even if there

are no immediate proposals for new legislation. Thus contracts for

services should be covered, and also security over movable property,

where divergences of laws cause serious problems.

How the DCFR may be used as preparatory work for the CFR Intr. 68

European Parliament, Resolution of 15 November 2001, OJ C 140E of 13

June 2002, p. 538; Resolution of 23 March 2006,

OJ C 292E of 1 De-

cember 2006, p. 109; Resolution of 7 September 2007,

OJ C 305E of 14

December 2006, p. 247; Resolution of 12 December 2007,

OJ C 323E of

18 December 2008, p. 364; Resolution of 3 September 2008, Texts adopt-

ed, P6_

TA(2008)0397.

See fn. 40 above.

69. Terms and concepts referred to in Directives. Thirdly, in order to

provide the definitions that are wanted, the

CFR must cover many

terms and concepts that are referred to in Directives without being

defined. In practice this includes almost all of the general law on

contract and contractual obligations. There are so few topics that are

not at some point referred to in the acquis, or at least presupposed by

it, that it is simpler to include all of this general law than to work out

what few topics can be omitted. It is not only contract law terminol-

ogy in the strict sense which is referred to, however, and certainly not

just contract law which is presupposed in

EU instruments. For ex-

ample, consumer Directives frequently presuppose rules on unjusti-

fied enrichment law; and Directives on pre-contractual information

refer to or presuppose rules that in many systems are classified as rules

of non-contractual liability for damage, i. e. delict or tort. It is thus

useful to provide definitions of terms and model rules in these fields –

not because they are likely to be subjected to regulation or harmo-

nisation by European legislation in the foreseeable future, but be-

cause existing European legislation already builds on assumptions

that the laws of the Member States have relevant rules and provide

appropriate remedies. Whether they do so in ways that fit well with

the European legislation, actual or proposed, is another matter. It is

for the European institutions to decide what might be needed or

might be useful. What seems clear is that it is not easy to identify

in advance topics which will never be wanted.

70. When in doubt, topics should be included. There are good argu-

ments for the view that in case of doubt, topics should be included.

Excluding too many topics will result in the

CFR being a fragmented

patchwork, thus replicating a major fault in existing

EU legislation

on a larger scale. Nor can there be any harm in a broad

CFR. It is not

legislation, nor even a proposal for legislation. It merely provides

language and definitions for use, when needed, in the closely target-

ed legislation that is, and will probably remain, characteristic of Eu-

ropean Union private law.

71. Essential background information. There is a further way in

which the

CFR would be valuable as a legislators’ guide, and it has

been prepared with a view to that possible purpose. If

EU legislation

Intr. 69 Introduction

is to fit harmoniously with the laws of the Member States, and in

particular if it is neither to leave unintended gaps nor to be more in-

vasive than is necessary, the legislator needs to have accurate infor-

mation about the different laws in the various Member States. The

national notes to be included in the full version of the

DCFR will be

very useful in this respect. They would, of course, have to be fre-

quently updated if this purpose is to be served on a continuing basis.

72. Good faith as an example. The principle of good faith can serve

as an example. In many laws the principle is accepted as fundamen-

tal, but it is not accorded the same recognition in the laws of all the

Member States. In some systems it is not recognised as a general rule

of direct application. It is true that such systems contain many par-

ticular rules which perform the same function as a requirement of

good faith, in the sense that they are aimed at preventing the parties

from acting in ways that are incompatible with good faith, but there

is no general rule. So the European legislator cannot assume that

whatever requirements it chooses to impose on consumer contracts

in order to protect consumers will always be supplemented by a

general requirement that the parties act in good faith. If it wants a

general requirement to apply in the particular context, in all juris-

dictions, the legislator will have to incorporate the requirement into

the Directive in express words – as of course it did with the Directive

on Unfair Terms in Consumer Contracts.

Alternatively, it will

need to insert into the Directive specific provisions to achieve the

results that in some jurisdictions would be reached by the application

of the principle of good faith. To take another example, in drafting or

revising a Directive dealing with pre-contractual information, legis-

lators will want to know what they need to deal with and what is

already covered adequately, and in a reasonably harmonious way, by

the law of all Member States. Thus general principles on mistake,

fraud and provision of incorrect information form essential back-

ground to the consumer acquis on pre-contractual information. In

this sense, even a ‘legislators’ guide’ needs statements of the common

principles found in the different laws, and a note of the variations. It

needs information about what is in the existing laws and what can be

How the DCFR may be used as preparatory work for the CFR Intr. 72

Council Directive 93/13/EEC, art. 3(1).

omitted from the acquis because, in one form or another, all Member

States already have it.

73. Presupposed rules of national law. Further, a Directive normally

presupposes the existence of certain rules in national law. For exam-

ple, when a consumer exercises a right to withdraw from a contract,

questions of liability in restitution are mainly left to national law. It

may be argued that information about the law that is presupposed is

more than ‘essential background’. The Commission’s Second Pro-

gress Report describes it as ‘directly relevant’.

Whatever the correct

classification, this information is clearly important. Put simply, Eu-

ropean legislators need to know what is a problem in terms of na-

tional laws and what is not. This is a further reason why the

DCFR

has a wide coverage and why the full DCFR will contain extensive

notes, comparing the model rules to the various national laws.

74.

DCFR not structured on an ‘everything or nothing’ basis. The

DCFR is, so far as possible, structured in such a way that the political

institutions, if they wish to proceed with an official Common Frame

of Reference on the basis of some of its proposals, can sever certain

parts of it and leave them to a later stage of deliberation or just to

general discussion amongst academics. In other words, the

DCFR is

carefully not structured on an ‘everything or nothing’ basis. Perhaps

not every detail can be cherry-picked intact, but in any event larger

areas could be taken up without any need to accept the entirety. For

example, the reader will soon see that the provisions of Book

III are

directly applicable to contractual rights and obligations; it is simply

that they also apply to non-contractual rights and obligations. Were

the Commission to decide that the

CFR should deal only with the

former, it would be a quick and simple task to adjust the draft to ap-

ply only to contractual rights and obligations. We would not advise

this, for reasons explained earlier. It would create the appearance of a

gulf between contractual and other obligations that does not in fact

exist in the laws of Member States, and it would put the coherence

of the structure at risk. But it could be done if required.

Intr. 73 Introduction

See fn. 46 above, p. 2.

Developments after this edition

75. Full version of the DCFR. The full version of the DCFR was sub-

mitted to the European Commission at the end of December 2008. It

will soon be reproduced in book form as a larger publication. The

outline and full editions will differ in that the latter will contain the

comments and the comparative notes supplemented by an index and

bibliographic tables.

76. Consumer credit contracts not covered. The

DCFR does not con-

tain any model rules on consumer credit law. This is the subject-

matter of a Directive which was only adopted during the concluding

phase of the work on the

DCFR.

The DCFR could not be revised in

time to take account of it.

77. Evaluating the

DCFR. The research teams which combined their

endeavours under the 6th Framework Programme for Research will

have concluded their work with the publication of the

DCFR. The

network will continue to exist only until the end of April 2009. The

discussion about the

DCFR and about the CFR which will possibly

develop from it will, however, go on. The researchers offer to be a

part of that development and the implementation of new forms of

cooperation between the various legal professional groups, but must

point out that fresh funding would have to be found to make that

possible.

78.

CFR. The creation of a CFR is a question for the European In-

stitutions. We suggest that they make decisions about the questions

of legal policy which arise in this context only after consultation

with the various groups involved. If desired, the researchers remain

willing to participate.

Developments after this edition Intr. 78

We would strongly urge that if anything like this were done, the Com-

ments should be re-written to explain that in most systems the rules apply

also to non-contractual obligations.

Directive 2008/48 /EC of the European Parliament and of the Council of

23 April 2008 on Consumer Credit Contracts and abrogating Directive

87/102 /

EEC, OJ L 133/66 of 22 May 2008

79. Square brackets. The square brackets in Interim Outline Edition

II. – 9:404 (Meaning of “unfair” in contracts between a business and a

consumer) (now

II. – 9:403) remain. The question here is whether

the control on unfair terms in a contract between a business and a

consumer should apply (a) only to terms which have not been in-

dividually negotiated or (b) to any terms which have been supplied

by the business. The practical consequences of keeping or removing

the words “which has not been individually negotiated” would prob-

ably not be great in this context (given that most terms supplied by

the business would in any event not be individually negotiated) but

the question is a delicate one and better left to a political decision.

The square brackets in Interim Outline Edition

III. – 5:108 (Assig-

nability: effect of contractual prohibition) have been deleted as it

proved possible to reach a decision in favour of a less complicated

solution than that formerly presented in paragraph (5).

80. The

CFR as the basis for an optional instrument. What has been

said about the purposes of the

CFR relates to its function as a legis-

lators’ guide or toolbox. It is still unclear whether or not the

CFR,or

parts of it, might at a later stage be used as the basis for one or more

optional instruments, i. e. as the basis for an additional set of legal

rules which parties might choose to govern their mutual rights and

obligations. In the view of the two Groups such an optional instru-

ment would open attractive perspectives, not least for consumer

transactions. A more detailed discussion of this issue, however, seems

premature at this stage. It suffices to say that this

DCFR is consciously

drafted in a way that, given the political will, would allow progress to

be made towards the creation of such an optional instrument.

January 2009 Christian von Bar,

Hugh Beale,

Eric Clive,

Hans Schulte-Nölke

Intr. 79 Introduction

Academic contributors and funders

The pan-European teams . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . .. 47

The Study Group on a European Civil Code . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . 47

Its Co-ordinating Group . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . 48

The Study Group’s Working Teams . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . 49

The Study Group’s Advisory Councils . . . . .. . .. . .. . . . . .. . . . . . . . . . . . . . . . . . . . . 50

The Acquis Group . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . 51

The former Commission on European Contract Law . .. . . . . . . . . . . . . . . . . . . . . 53

The Compilation and Redaction Team .. . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . 54

Funding . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . 55

The pan-European teams

As indicated already, the DCFR is the result of more than 25 years’

collaboration of jurists from all jurisdictions of the present Member

States within the European Union. It began in 1982 with the con-

stitution of the Commission on European Contract Law (

CECL) and

was furthered by the establishment of the Study Group in 1998 and

the Acquis Group in 2002. From 2005 the Study Group, Acquis

Group and Insurance Contract Group formed the so-called ‘drafting

teams’ of the Co

PECL network. The following DCFR is the result of

the work of the Study Group, Acquis Group and

CECL.

The Study Group on a European Civil Code

The Study Group has had the benefit of Working (or Research)

Teams – groups of younger legal scholars under the supervision of

a senior member of the Group (a Team Leader). The Teams under-

took the basic comparative legal research, developed the drafts for

discussion and assembled the extensive material required for the

notes. To each Working Team was allocated a consultative body –

an Advisory Council. These bodies – deliberately kept small in the

interests of efficiency – were formed from leading experts in the

relevant field of law, who represented the major European legal sys-

tems. The proposals drafted by the Working Teams and critically

scrutinised and improved in a series of meetings by the respective

Advisory Council were submitted for discussion on a revolving basis

to the actual decision-making body of the Study Group on a Euro-

pean Civil Code, the Co-ordinating Group. Until June 2004 the Co-

ordinating Group consisted of representatives from all the jurisdic-

tions belonging to the

EU immediately prior to its enlargement in

Spring 2004 and in addition legal scholars from Estonia, Hungary,

Norway, Poland, Slovenia and Switzerland. Representatives from the

Czech Republic, Malta, Latvia, Lithuania and Slovakia joined us

after the June 2004 meeting in Warsaw and representatives from

Bulgaria and Romania after the December 2006 meeting in Lucerne.

Besides its permanent members, other participants in the Co-ordi-

nating Group with voting rights included all the Team Leaders and –

when the relevant material was up for discussion – the members of

the Advisory Council concerned. The results of the deliberations

during the week-long sittings of the Co-ordinating Group were in-

corporated into the text of the Articles and the commentaries which

returned to the agenda for the next meeting of the Co-ordinating

Group (or the next but one depending on the work load of the Group

and the Team affected). Each part of the project was the subject of

debate on manifold occasions, some stretching over many years.

Where a unanimous opinion could not be achieved, majority votes

were taken.

Its Co-ordinating Group

The Study Group’s Co-ordinating Group has (or had) the following

members: Professor Guido Alpa (Genoa/Rome, until May 2005),

Professor Christian von Bar (Osnabrück, chairman), Professor Maurits

Barendrecht (Tilburg, until May 2005), Professor Hugh Beale (War-

wick), Dr. Mircea-Dan Bob (Cluj, since June 2007), Professor Michael

Joachim Bonell (Rome), Professor Mifsud G. Bonnici (Valetta, since

December 2004), Professor Carlo Castronovo (Milan), Professor Eric

Its Co-ordinating Group

Clive (Edinburgh), Professor Eugenia Dacoronia (Athens), Professor

Ulrich Drobnig (Hamburg), Professor Bénédicte Fauvarque-Cosson

(Paris), Professor Marcel Fontaine (Louvain, until December 2003),

Professor Andreas Furrer (Lucerne, since December 2003), Professor

Júlio Manuel Vieira Gomes (Oporto), Professor Viggo Hagstrøm (Oslo,

since June 2002), Supreme Court Judge Torgny Håstad (Stockholm),

Professor Johnny Herre (Stockholm), Professor Martijn Hesselink

(Amsterdam), Professor Ewoud Hondius (Utrecht, until May

2005), Professor Jérôme Huet (Paris), Professor Giovanni Iudica (Mi-

lan, since June 2004), Dr. Monika Jurc

ova (Trnava, since June 2006),

Professor Konstantinos Kerameus (Athens), Professor Ole Lando (Co-

penhagen), Professor Kåre Lilleholt (Bergen/Oslo, since June 2003),

Professor Marco Loos (Amsterdam); Professor Brigitta Lurger (Graz),

Professor Hector MacQueen (Edinburgh), Professor Ewan McKendrick

(Oxford), Professor Valentinas Mikelenas (Vilnius, since December

2004), Professor Eoin O’Dell (Dublin, until June 2006), Professor

Edgar du Perron (Amsterdam), Professor Denis Philippe (Louvain,

since June 2004), Professor Jerzy Rajski (Warsaw), Professor Christina

Ramberg (Gothenburg), Supreme Court Judge Professor Encarna

Roca y Trias (Madrid/Barcelona), Professor Peter Schlechtriem† (Frei-

burg i. Br.), Professor Martin Schmidt-Kessel (Osnabrück, since De-

cember 2004), Professor Jorge Sinde Monteiro (Coimbra, until De-

cember 2004), Professor Lena Sisula-Tulokas (Helsinki), Professor

Sophie Stijns (Leuven), Professor Matthias Storme (Leuven), Dr. Ste-

phen Swann (Osnabrück), Professor Christian Takoff (Sofia, since

June 2007), Professor Lubos

Tichy

(Prague, since June 2005), Profes-

sor Verica Trstenjak (Maribor, until December 2006), Professor Vibe

Ulfbeck (Copenhagen,

since

June 2006), Professor Paul Varul (Tartu,

since June 2003), Professor Lajos Vékás (Budapest), Professor Anna

Veneziano (Teramo).

The Study Group’s Working Teams

Permanent working teams were based in various European universi-

ties and research institutions. The teams’ former and present ‘junior

members’ conducted research into basically three main areas of pri-

vate law: the law of specific contracts, the law of extra-contractual

The Study Group’s Working Teams

obligations, and property law. They sometimes stayed for one or two

years only, but often considerably longer in order additionally to

pursue their own research projects. The meetings of the Co-ordinat-

ing Group and of numerous Advisory Councils were organised from

Osnabrück, in conjunction with the relevant host, by Ina El Kobbia.

The members of the Working Teams were: Begoña Alfonso de la Riva,

Georgios Arnokouros, Dr. Erwin Beysen, Christopher Bisping, Ole Böger,

Michael Bosse, Manuel Braga, Dr. Odavia Bueno Díaz, Sandie Calme,

Dr. Rui Cascão, Cristiana Cicoria, Martine Costa, Inês Couto Guedes,

Dr. John Dickie, Tobias Dierks, Dr. Evlalia Eleftheriadou,Dr. Wolfgang

Faber, Silvia Fedrizzi,Dr.Francesca Fiorentini, Dr. Andreas Fötschl,

Laetitia Franck, Dr. Caterina Gozzi, Alessio Greco, Lodewijk Gualthérie

van Weezel, Stéphanie van Gulijk, Judith Hauck, Dr. Lars Haverkamp,

Dr. Annamaria Herpai,Dr.Viola Heutger, Dr. Matthias Hünert, Pro-

fessor Chris Jansen,Dr.Christoph Jeloschek, Menelaos Karpathakis, Dr.

Stefan Kettler, Ina El Kobbia,Dr.Berte-Elen R. Konow, Rosalie Kool-

hoven, Caroline Lebon, Jacek Lehmann, Martin Lilja, Roland Lohnert,

Birte Lorenzen, Dr. María Ángeles Martín Vida, Almudena de la Mata

Muñoz, Pádraic McCannon,Dr.Mary-Rose McGuire, Paul McKane,

José Carlos de Medeiros Nóbrega,Dr.Andreas Meidell, Philip Mielnicki,

Anastasios Moraitis, Sandra Müller, Franz Nieper, Teresa Pereira, Dr.

Andrea Pinna, Sandra Rohlfing,Dr.Jacobien W. Rutgers, Johan Sand-

stedt, Marta Lívia dos Santos Silva,Dr.Mårten Schultz, Manola Scot-

ton†, Frank Seidel, Anna von Seht, Susan Singleton, Dr. Hanna Sive-

sand, Daniel Smith,Dr.Malene Stein Poulsen, Dimitar Stoimenov,Dr.

Stephen

Swann,

Ferenc Szilágyi, Dr. Amund Bjøranger Tørum, Pia Ul-

rich, Muriel Veldman, Carles Vendrell Cervantes, Ernest Weiker, Aneta

Wiewiorowska, Bastian Willers.

The Study Group’s Advisory Councils

The members of the Advisory Councils to the permanent working

teams (who not infrequently served more than one team or per-

formed other functions besides) were: Professor Hugh Beale (War-

wick), Professor John W. Blackie (Strathclyde), Professor Michael

G. Bridge (London), Professor Angel Carrasco (Toledo), Professor

The Study Group’s Advisory Councils

Carlo Castronovo (Milan), Professor Eric Clive (Edinburgh), Professor

Pierre Crocq (Paris); Professor Eugenia Dacoronia (Athens), Professor

Bénédicte Fauvarque-Cosson (Paris), Professor Jacques Ghestin (Paris),

Professor Júlio Manuel Vieira Gomes (Oporto), Professor Helmut

Grothe (Berlin), Supreme Court Judge Torgny Håstad (Stockholm),

Professor Johnny Herre (Stockholm), Professor Jérôme Huet (Paris),

Professor Giovanni Iudica (Milan), Dr. Monika Jurc

ova (Trnava), Pro-

fessor Jan Kleineman (Stockholm), Professor Irene Kull (Tartu), Pro-

fessor Marco Loos (Amsterdam), Professor Denis Mazeaud (Paris),

Professor Hector MacQueen (Edinburgh), Professor Ewan McKendrick

(Oxford), Professor Graham Moffat (Warwick), Professor Andrea Ni-

colussi (Milan), Professor Eoin O’Dell (Dublin), Professor Guillermo

Palao Moreno (Valencia), Professor Edgar du Perron (Amsterdam),

Professor Maria A. L. Puelinckx-van Coene (Antwerp), Professor Phi-

lippe Rémy (Poitiers), Professor Peter Schlechtriem† (Freiburg i. Br.),

Professor Martin Schmidt-Kessel (Osnabrück), Dr. Kristina Siig (Ar-

hus), Professor Reinhard Steennot (Ghent), Professor Matthias Storme

(Leuven), Dr. Stephen Swann (Osnabrück), Professor Lubos

Tichy

(Prague), Professor Stefano Troiano (Verona), Professor Antoni Vaquer

Aloy (Lleida), Professor Anna Veneziano (Teramo), Professor Alain

Verbeke (Leuven and Tilburg), Professor Anders Victorin† (Stock-

holm), Professor Sarah Worthington (London).

The Acquis Group

The Acquis Group texts result from a drafting process which in-

volved individual Drafting Teams, the Redaction Committee, the

Terminology Group, and the Plenary Meeting. The Drafting Teams

produced a first draft of rules with comments for their topic or area

on the basis of a survey of existing

EC law. The drafts were then

passed on to the Redaction Committee and to the Terminology

Group which formulated proposals for making the various drafts by

different teams dovetail with each other, also with a view towards

harmonising the use of terminology and improving the language and

consistency of drafts. All draft rules were debated several times at,

and finally adopted by, Plenary Meetings of the Acquis Group, which

convened twice a year. Several drafts which were adopted by Plenary

The Acquis Group

Meetings (in particular those on pre-contractual information duties,

unfair terms and withdrawal) were subsequently presented and dis-

cussed at

CFR-net stakeholder meetings. Their comments were con-

sidered within a second cycle of drafting and consolidation of the

Acquis Principles.

The following members of the Acquis Group took part in the Plenary

Meetings: Professor Gianmaria Ajani (Torino, speaker), Professor Es-

ther Arroyo i Amayuelas (Barcelona), Professor Carole Aubert de Vin-

celles (Lyon), Dr. Guillaume Busseuil (Paris), Dr. Simon Chardenoux

(Paris), Professor Giuditta Cordero Moss (Oslo), Professor Gerhard

Dannemann (Berlin), Professor Silvia Ferreri (Torino), Professor Lars

Gorton (Lund), Professor Michele Graziadei (Torino), Professor Hans

Christoph Grigoleit (Regensburg), Professor Luc Grynbaum (Paris),

Professor Geraint Howells (Manchester), Professor Jan Hurdik (Brno),

Professor Tsvetana Kamenova (Sofia), Professor Konstantinos Kera-

meus (Athens), Professor Stefan Leible (Bayreuth), Professor Eva Lin-

dell-Frantz (Lund), Dr. hab. Piotr Machnikowski (Wrocław), Professor

Ulrich Magnus (Hamburg), Professor Peter Møgelvang-Hansen (Co-

penhagen), Professor Susana Navas Navarro (Barcelona), Dr. Paolisa

Nebbia (Leicester), Professor Anders Ørgaard (Aalborg), Dr. Barbara

Pasa (Torino), Professor Thomas Pfeiffer (Heidelberg), Professor An-

tónio Pinto Monteiro (Coimbra), Professor Jerzy Pisulinski (Kraków),

Professor Elise Poillot (Lyon), Professor Judith Rochfeld (Paris), Profes-

sor Ewa Rott-Pietrzyk (Katowice), Professor Søren Sandfeld Jakobsen

(Copenhagen), Dr. Markéta Selucká (Brno), Professor Hans Schulte-

Nölke (Osnabrück, co-ordinator), Professor Reiner Schulze (Münster),

Professor Carla Sieburgh (Nijmegen), Dr. Sophie Stalla-Bourdillon

(Florence), Professor Matthias Storme (Antwerp and Leuven), Pro-

fessor Gert Straetmans (Antwerp), Dr. hab. Maciej

Szpunar (Kato-

wice),

Professor Evelyne Terryn (Leuven), Dr. Christian Twigg-Flesner

(Hull), Professor Antoni Vaquer Aloy (Lleida), Professor Thomas Wil-

helmsson (Helsinki), Professor Fryderyk Zoll (Kraków).

The members of the Redaction Committee were, besides the speaker

(Gianmaria Ajani) and the co-ordinator (Hans Schulte-Nölke) of the

Acquis Group, Gerhard Dannemann (chair), Luc Grynbaum, Reiner

Schulze, Matthias Storme, Christian Twigg-Flesner and Fryderyk Zoll.

The Acquis Group

The Terminology Group consisted of Gerhard Dannemann (Chair),

Silvia Ferreri and Michele Graziadei.

Members of the individual Acquis Group Drafting Teams are: ‘Con-

tract I’ (originally organised in the subteams Definition of Consumer

and Business, Form, Good Faith, Pre-contractual Information Du-

ties, Formation, Withdrawal, Non-negotiated Terms): Esther Arroyo i

Amayuelas, Christoph Grigoleit, Peter Møgelvang-Hansen, Barbara Pasa,

Thomas Pfeiffer, Hans Schulte-Nölke, Reiner Schulze, Evelyne Terryn,

Christian Twigg-Flesner, Antoni Vaquer Aloy; ‘Contract

II’ (responsible

for Performance, Non-Performance, Remedies): Carole Aubert de

Vincelles, Piotr Machnikowski, Ulrich Magnus, Jerzy Pisuliłski, Judith

Rochfeld, Ewa Rott-Pietrzyk, Reiner Schulze, Matthias Storme, Maciej

Szpunar, Fryderyk Zoll; ‘E-Commerce’: Stefan Leible, Jerzy Pisulinski,

Fryderyk Zoll; ‘Non-discrimination’: Stefan Leible, Susana Navas Na-

varro, Jerzy Pisulinski, Fryderyk Zoll; ‘Specific Performance’: Lars Gor-

ton, Geraint Howells. Numerous further colleagues supported the

Plenary and the Drafting Teams or contributed to the Comments,

among them Dr. Christoph Busch,Dr.Martin Ebers,Dr.Krzysztof

Korus, Professor Matthias Lehmann and Dr. Filip Wejman.

The former Commission on European Contract Law

The members of the three consecutive commissions of the Commis-

sion on European Contract Law which met under the chairmanship

of Professor Ole Lando (Copenhagen) from 1982 to 1999 were: Pro-

fessor Christian von Bar (Osnabrück), Professor Hugh Beale (War-

wick); Professor Alberto Berchovitz (Madrid), Professor Brigitte Ber-

lioz-Houin (Paris), Professor Massimo Bianca (Rome), Professor Mi-

chael Joachim Bonell (Rome), Professor Michael Bridge (London), Pro-

fessor Carlo Castronovo (Milan), Professor Eric Clive (Edinburgh),

Professor Isabel de Magalhães Collaço† (Lisbon), Professor Ulrich

Drobnig (Hamburg), Bâtonnier Dr. André Elvinger (Luxembourg),

Maître Marc Elvinger (Luxembourg), Professor Dimitri Evrigenis†

(Thessaloniki), Professor Carlos Ferreira de Almeida (Lisbon), Profes-

sor Sir Roy M. Goode (Oxford), Professor Arthur Hartkamp (The

Hague), Professor Ewoud Hondius (Utrecht), Professor Guy Hors-

The former Commission on European Contract Law

mans (Louvain la Neuve), Professor Roger Houin† (Paris), Professor

Konstantinos Kerameus (Athens), Professor Bryan MacMahon (Cork),

Professor Hector MacQueen (Edinburgh), Professor Willibald Posch

(Graz), Professor André Prum (Nancy), Professor Jan Ramberg

(Stockholm), Professor Georges Rouhette (Clermont-Ferrand), Pro-

fessor Pablo Salvador Coderch (Barcelona), Professor Fernando Marti-

nez Sanz (Castellon), Professor Matthias E. Storme (Leuven), Profes-

sor Denis Tallon (Paris), Dr. Frans J. A. van der Velden (Utrecht),

Dr. J. A. Wade (The Hague), Professor William A. Wilson†(Edin-

burgh), Professor Thomas Wilhelmsson (Helsinki), Professor Claude

Witz (Saarbrücken), Professor Reinhard Zimmermann (Regensburg).

The Compilation and Redaction Team

To co-ordinate between the Study and Acquis Groups, to integrate

the

PECL material revised for the purposes of the DCFR, and for re-

vision and assimilation of the drafts from the sub-projects we estab-

lished a “Compilation and Redaction Team” (

CRT) at the beginning

of 2006. The

CRT members were Professors Christian von Bar (Osnab-

rück), Hugh Beale (Warwick), Eric Clive (Edinburgh), Johnny Herre

(Stockholm), Jérôme Huet (Paris), Peter Schlechtriem† (Freiburg i. Br.),

Hans Schulte-Nölke (Osnabrück), Matthias Storme (Leuven), Stephen

Swann (Osnabrück), Paul Varul (Tartu), Anna Veneziano (Teramo)

and Fryderyk Zoll (Cracow); it was chaired by Eric Clive and Christian

von Bar. Professor Clive carried the main drafting and editorial burden

at the later (

CRT) stages; he is also the main drafter of the list of

terminology in the Annex of the

DCFR. Professor Gerhard Danne-

mann (Berlin), Chair of the Acquis Group’s redaction committee, at-

tended several of the later meetings of the

CRT by invitation and

made important drafting contributions.

Professor Clive was assisted by Ashley Theunissen (Edinburgh), Pro-

fessor von Bar by Daniel Smith (Osnabrück). Over the course of sev-

eral years Johan Sandstedt (Bergen) and Daniel Smith (Osnabrück)

took care of the Master copy of the

DCFR.

The Compilation and Redaction Team

Funding

The DCFR is the result of years of work by many pan-European teams

of jurists. They have been financed from diverse sources which can-

not all be named here.

Before we came together with other teams in

May 2005 to form the ‘Co

PECL Network of Excellence’

under the

European Commission’s sixth framework programme for research,

from which funds our research has since been supported, the mem-

bers of the Study Group on a European Civil Code had the benefit of

funding from national research councils. Among others the Deutsche

Forschungsgemeinschaft (

DFG) provided over several years the lion’s

share of the financing including the salaries of the Working Teams

based in Germany and the direct travel costs for the meetings of the

Co-ordinating Group and the numerous Advisory Councils. The

work of the Dutch Working Teams was financed by the Nederlandse

Organisatie voor Wetenschappelijk Onderzoek (

NWO). Further person-

nel costs were met by the Flemish Fonds voor Wetenschappelijk On-

derzoek-Vlaanderen (

FWO), the Greek Onassis-Foundation, the Aus-

trian Fonds zur Förderung der wissenschaftlichen Forschung, the

Portuguese Fundação Calouste Gulbenkian and the Norges forsknings-

råd (the Research Council of Norway). The Acquis Group received

substantial support from its preceding Training and Mobility Net-

works on ‘Common Principles of European Private Law’ (1997-

2002) under the fourth

EU Research Framework Programme

and

A complete survey of the donors of the Study Group on a European Civil

Code will be found in the opening pages of the most recent volume of the

Study Group’s “Principles of European Law (

PEL)” series (as to which see

para. 54 of the introduction). The donors of the Commission on Euro-

pean Contract Law are mentioned in the preface of both volumes of the

Principles of European Contract Law.

Joint Network on European Private Law (CoPECL: Common Principles

of European Contract Law), Network of Excellence under the 6th

Framework Programme for Research and Technological Development,

Priority 7 –

FP6-2002-CITIZENS- 3, Contract N8 513351 (co-ordinator:

Professor Hans Schulte-Nölke, Osnabrück).

TMR (Training and Mobility) Network ‘Common Principles of European

Private Law’ of the Universities of Barcelona, Berlin (Humboldt), Lyon

on ‘Uniform Terminology for European Private Law’ (2002-2006)

under the fifth Research Framework Programme.

We are extremely

indebted to all who in this way have made our work possible.

Funding

III, Münster (co-ordinator of the Network: Professor Reiner Schulze), Nij-

megen, Oxford and Turin, funded under the 4th

EU Research Framework

Programme 1997-2002.

TMR (Training and Mobility) Network ‘Uniform Terminology for Euro-

pean Private Law’ of the Universities of Barcelona, Lyon

III, Münster,

Nijmegen, Oxford, Turin (co-ordinator of the Network: Professor Gian-

maria Ajani), Warsaw, funded under the 5th

EU Research Framework

Programme 2002-2006.

Principles

The underlying principles of freedom, security,

justice and efficiency

1. The four principles ...................................................... 60

Freedom

2. General remarks ......................................................... 61

Contractual freedom

3. Freedom of contract the starting point ................................. 62

4. Limitations with regard to third parties ................................ 63

5. Contracts harmful to third persons and society in general ............ 64

6. Interventions when consent defective ................................. 65

7. Restrictions on freedom to choose contracting party .................. 65

8. Restrictions on freedom to withhold information at

pre-contractual stage .................................................... 66

9. Information as to the terms of the contract ............................ 67

10. Correcting inequality of bargaining power ............................. 67

11. Minimum intervention ................................................. 68

Non-contractual obligations

12. Emphasis on obligations rather than freedom .......................... 69

13. Freedom respected so far as consistent with policy objectives ........ 69

Property

14. Limited scope for party autonomy ...................................... 70

15. Recognition and enhancement of freedom in some respects .......... 70

Security

16. General remarks ......................................................... 71

Contractual security

17. The main ingredients ................................................... 72

18. Third party respect and reliance ........................................ 73

19. Protection of reasonable reliance and expectations .................... 73

20. The principle of binding force .......................................... 74

21. Exceptional change of circumstances ................................... 75

22. Certainty or flexibility .................................................. 75

23. Good faith and fair dealing ............................................. 76

24. Co-operation ............................................................ 77

25. Inconsistent behaviour .................................................. 77

26. Enforcement of performance ............................................ 77

27. Other remedies .......................................................... 78

28. Maintaining the contractual relationship .............................. 79

29. Other rules promoting security ......................................... 79

Non-contractual obligations

30. Security a core aim and value in the law on

non-contractual obligations ............................................. 80

31. Protection of the status quo: non-contractual liability

arising out of damage caused to another ............................... 80

32. Protection of the person ................................................ 81

33. Protection of human rights ............................................. 81

34. Protection of other rights and interests ................................. 81

35. Protection of security by the law on unjustified enrichment .......... 82

Property

36. Security a core aim ...................................................... 82

37. Protection of reasonable reliance and expectations .................... 83

38. The provision of effective remedies .................................... 84

39. Protection of the status quo ............................................. 84

Justice

40. General remarks ......................................................... 84

Principles

Contract

41. Treating like alike ....................................................... 85

42. Not allowing people to rely on their own unlawful,

dishonest or unreasonable conduct ..................................... 85

43. No taking of undue advantage .......................................... 87

44. No grossly excessive demands .......................................... 87

45. Responsibility for consequences ........................................ 88

46. Protecting the vulnerable ............................................... 88

Non-contractual obligations

47. General .................................................................. 90

48. Not allowing people to gain an advantage from their own

unlawful, dishonest or unreasonable conduct .......................... 90

49. No taking of undue advantage .......................................... 90

50. No grossly excessive demands .......................................... 91

51. Responsibility for consequences ........................................ 91

52. Protecting the vulnerable ............................................... 92

Property

53. Importance of certainty ................................................. 92

Efficiency

54. General remarks ......................................................... 94

Efficiency for the purposes of the parties

55. Minimal formal and procedural restrictions ............................ 94

56. Minimal substantive restrictions ........................................ 95

57. Provision of efficient default rules ...................................... 95

Efficiency for wider public purposes

58. General .................................................................. 96

59. Information duties ....................................................... 96

60. Remedies for non-performance ......................................... 97

61. Other rules .............................................................. 98

Conclusion

62. Stability . . . . . . . . . . . . .. . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . .. . .. . . . . . 99

Principles

The underlying principles of freedom,

security, justice and efficiency

1. The four principles. The four principles of freedom, security, jus-

tice and efficiency underlie the whole of the

DCFR. Each has several

aspects. Freedom is, for obvious reasons, comparatively more impor-

tant in relation to contracts and unilateral undertakings and the

obligations arising from them, but is not absent elsewhere. Security,

justice and efficiency are equally important in all areas. The fact that

four principles are identified does not mean that all have equal value.

Efficiency is more mundane and less fundamental than the others. It

is not at the same level but it is nonetheless important and has to be

included. Law is a practical science. The idea of efficiency underlies

a number of the model rules and they cannot be fully explained

without reference to it.

At one level, freedom, security, and justice are ends in themselves.

People have fought and died for them. Efficiency is less dramatic. In

the context of private law, however, these values are best regarded

not as ends in themselves but as means to other ends – the promotion

of welfare, the empowering of people to pursue their legitimate aims

and fulfil their potential.

In preparing the first part of this account of the role played by these

underlying principles in the

DCFR, we have drawn heavily on the Prin-

cipes directeurs du droit européen du contrat

and we refer the reader to

the analytical and comparative work done in their elaboration. How-

ever, we have had to take a slightly different approach for the purposes

of the

DCFR, which is not confined to traditional contract law.

It is characteristic of principles such as those discussed here that they

conflict with each other. For example, on occasion, justice in a par-

ticular case may have to make way for legal security or efficiency, as

happens under the rules of prescription. Sometimes, on the other

hand, rules designed to promote security have to be balanced by

considerations of justice, as happens under the rules in Books V and

Princ. 1 Principles

See Introduction p. 5, note 4.

VI which allow for a reduction of liability on equitable grounds.

Freedom, in particular freedom of contract, may be limited for the

sake of an aspect of justice – for instance, to prevent some forms of

discrimination or to prevent the abuse of a dominant position. Prin-

ciples can even conflict with themselves, depending on the stand-

point from which a situation is viewed: freedom from discrimination

restricts another’s freedom to discriminate. One aspect of justice

(e. g. equality of treatment) may conflict with another (e. g. protec-

tion of the weak). Therefore the principles can never be applied in a

pure and rigid way.

The principles also overlap. As will be seen below, there are many

examples of rules which can be explained on the basis of more than

one principle. In particular, many of the rules which are designed to

ensure genuine freedom of contract can also be explained in terms of

contractual justice.

Freedom

2. General remarks. There are several aspects to freedom as an un-

derlying principle in private law. Freedom can be protected by not

laying down mandatory rules or other controls and by not imposing

unnecessary restrictions of a formal or procedural nature on peoples’

legal transactions. It can be promoted by enhancing the capabilities

of people to do things. Both aspects are present throughout the

DCFR. The first is illustrated by the general approach to party au-

tonomy, particularly but not exclusively in the rules on contracts and

contractual obligations. The assumption is that party autonomy

should be respected unless there is a good reason to intervene. Often,

of course, there is a good reason to intervene – for example, in order

to ensure that a party can escape from a contract concluded in the

absence of genuine freedom to contract. The assumption is also that

formal and procedural hurdles should be kept to a minimum. The

second aspect – enhancing capabilities – is also present throughout

the

DCFR. People are provided with default rules (including default

rules for a wide variety of specific contracts) which make it easier and

less costly for them to enter into well-regulated legal relationships.

Freedom Princ. 2

They are provided with efficient and flexible ways of transferring

rights and goods, of securing rights to the performance of obligations

and of managing their property. The promotion of freedom overlaps

with the promotion of efficiency and some of these examples are

discussed more fully below under that heading.

Contractual freedom

3. Freedom of contract the starting point. As a rule, natural and legal

persons should be free to decide whether or not to contract and with

whom to contract. They should also be free to agree on the terms of

their contract. This basic idea is recognised in the

DCFR.

It is also

expressed in the first article of the Principes directeurs.

In both cases

the freedom is subject to any applicable mandatory rules. Parties

should also be free to agree at any time to modify the terms of their

contract or to put an end to their relationship. These ideas are also

expressed in the

DCFR

and in the Principes directeurs.

In normal

situations there is no incompatibility between contractual freedom

Princ. 3 Principles

II. – 1:102(1). “Parties are free to make a contract or other juridical act and

to determine its contents, subject to any applicable mandatory rules.” It

follows from the general rules on the formation of contracts that the parties

can agree not to be contractually bound unless the contract is in a particular

form. See

II. – 4:101. Also in the Book on Proprietary Security the principle

of party autonomy is fully recognised in the freedom of the parties to reg-

ulate their mutual relationship at the predefault stage,

IX. – 5:101.

Art. 0:101 of the Principes directeurs: “Each party is free to contract and to

choose who will be the other party. The parties are free to determine the

content of the contract and the rules of form which apply to it. Freedom

of contract operates subject to compliance with mandatory rules”.

II. – 1:103 (3). See also III. – 1:108(1) “A right, obligation or contractual

relationship may be varied or terminated by agreement at any time.”

Art. 0:103. The second paragraph of this Article adds that unilateral

revocation is effective only in the case of contracts of indeterminate

duration. The same idea is expressed in the

DCFR in II. – 1:103(1) read

with

III. – 1:109(2) but there are some special rules for contracts for ser-

vices (including mandate contracts).

and justice. Indeed it has been claimed that, in some situations,

freedom of contract, without more, leads to justice. If, for instance,

the parties to a contract are fully informed and in an equal bargain-

ing position when concluding it, the content of their agreement can

be presumed to be in their interest and to be just as between them-

selves. “Qui dit contractuel, dit juste.”

In normal situations there is

also no incompatibility between contractual freedom and efficiency.

In general terms it can be assumed that agreements made by parties

who are both fully informed and of equal bargaining power will be

profit-maximising in the sense of bringing gains to each party (the

exact division of the gain is a distributive question of little concern

to economic analysis.) The only caveat is that the agreement should

not impose costs on third parties (externalities). This is why in most

systems certain contracts which are likely to have detrimental effects

on third persons are rendered void as a matter of public policy.

4. Limitations with regard to third parties. There is one principle in

the section on contractual freedom in the Principes directeurs which is

not expressly stated in the

DCFR. It provides that “Parties can con-

tract only for themselves, unless otherwise provided. A contract can

produce an effect only in so far as it does not result in an infringement

or unlawful modification of third party rights”.

The DCFR does not

contain explicit provisions at such a general level on the relation of

contracts to third parties. It takes it as self-evident that parties can

contract only for themselves, unless otherwise provided, and that

contracts, as a rule, regulate only the rights and obligations between

the parties who conclude them. The

DCFR merely spells out the

exceptions, principally the rules on representation

and the rules on

stipulations in favour of a third party.

So far as the attempted inva-

Freedom Princ. 4

Alfred Fouillée, La science sociale contemporaine. Paris (Hachette)

1880, p. 410.

Art. 0-102 (Respect for the freedom and rights of third parties).

Book II, Chapter 6. Under these rules one party (the representative) can

contract for another (the principal).

See II. – 9:301 to II. – 9:303. The rules in Book III, Chapter 5 on change of

parties (assignment and substitution of new debtor) and the rule in

III.–

5:401 on indirect representation (under which, when the representative

sion of third party rights is concerned the DCFR takes the view that

this will often be simply impossible to achieve by a contract, because

of the content of other rules. The parties to a contract could not, for

example, effectively deprive another person of his or her property by

simply contracting to this effect. There is no need for a special rule to

achieve that result. In so far as such invasions or infringements are

possible they are dealt with partly by the rules on illegal contracts

and partly by the rules in Book VI on non-contractual liability for

damage caused to another. An example of the latter is the induce-

ment of a contract party to breach the contract. The

DCFR qualifies

such conduct as a ground for non-contractual liability under Book

VI.

A rather different case is when the purpose of a contract is to

disadvantage creditors, usually by putting property beyond their

reach. Classical systems based on Roman law tried to respond to such

contracts by the so called actio pauliana, which gave the affected

creditor an action against the contract party holding the property in

question. The

DCFR does not contain explicit provisions on this

issue. The reason is that – although an actio pauliana can be brought

before the opening of insolvency proceedings – the issue is closely

linked to insolvency law, with which the

DCFR does not deal. But it

would be possible to deal with fraudulent conveyances which aim at

the disadvantage of creditors under the rules of Book

VI.

5. Contracts harmful to third persons and society in general. A

ground on which a contract may be invalidated, even though it was

freely agreed between two equal parties, is that it (or more often the

performance of the obligation under it) would have a seriously harm-

ful effect on third persons or society. Thus contracts which are illegal

or contrary to public policy in this sense are invalid. (Within the

Princ. 5 Principles

has become insolvent, the principal and the third party may acquire

rights against each other) can also be seen as exceptions to the rule that

a contract can produce effects only for the contracting parties.

II. – 7:301 to II. – 7:304. A contract to injure, or steal from, another per-

son would, for example, be void. This topic is further explored in the

following paragraph.

VI. – 2:211.

Cf. in particular VI. – 2:101 paragraph (3).

framework of the EU a common example is contracts which infringe

the competition articles of the Treaty.) The

DCFR does not spell out

when a contract is contrary to public policy in this sense, because

that is a matter for law outside the scope of the

DCFR – the law of

competition or the criminal law of the Member State where the

relevant performance takes place. However the fact that a contract

might harm particular third persons or society at large is clearly a

ground on which the legislator should consider invalidating it.

6. Interventions when consent defective. Even classical contract law

recognises that it may not be just to enforce a contract if one party to

it was in a weaker position, typically because when giving consent

the party was not free or was misinformed. For example, a contract

concluded as the result of mistake or fraud, or which was the result of

duress or unfair exploitation, can be set aside by the aggrieved party.

These grounds for invalidity are often explained in terms of justice

but equally it can be said that they are designed to ensure that con-

tractual freedom was genuine freedom; and in the

DCFR, as in the

laws of the Member States, they are grounds for the invalidity of a

contract. Moreover, at least where the contract has been made only

as the result of deliberate conduct by one party that infringed the

other party’s freedom or misled the other party, the right to set it

aside should be inalienable, i. e. mandatory. The remedies given by

the

DCFR in cases of fraud and duress cannot be excluded or restric-

ted.

In contrast, remedies provided in cases of mistake and similar

cases which do not involve deliberate wrongdoing may be excluded

or restricted.

7. Restrictions on freedom to choose contracting party. While in

general persons should remain free to contract or to refuse to contract

with anyone else, this freedom may need to be qualified where it

might result in unacceptable discrimination, for example discrimina-

tion on the grounds of gender, race or ethnic origin. Discrimination

Freedom Princ. 7

II. – 7:215 paragraph (1).

II. – 7:215 paragraph (2). However, any attempt to exclude or restrict

remedies for mistake will itself be subject to the controls over unfair

terms that have not been negotiated. See

II. – 9:401 et seq.

on those grounds is a particularly anti-social form of denying the con-

tractual freedom, and indeed the human dignity, of the other party.

EU law and the DCFR therefore prohibit these forms of discrimina-

tion and provide appropriate remedies.

The DCFR is drafted in such

a way that it easily allows the addition of further grounds for discri-

mination, as they exist – for general contract law – in some Member

States and as they may be enacted in

EC law in the future.

8. Restrictions on freedom to withhold information at pre-contractual

stage. Similarly, restrictions on the parties’ freedom to contract as

they choose may be justified even outside the classic cases of proce-

dural unfairness such as mistake, fraud, duress and the exploitation of

a party’s circumstances to obtain an excessive advantage. A particu-

lar concern is to ensure that parties were fully informed. The classical

grounds for invalidity because of mistake, which are reflected in the

provisions of the

DCFR mentioned above, were quite limited: for

example, in many laws the mistake had to be as to the substance of

the thing sold. This notion was developed when the goods or services

which were to be supplied were usually very much simpler than they

are today. In today’s conditions parties often need much more infor-

mation before it can be said that they were fully informed. Thus the

law needs to deal not only with cases of inequality of information

about the basic characteristics of the goods or services to be supplied

but also as to other relevant circumstances. It may also need to go

beyond the general contract law of some Member States and impose

positive duties to give information to the uninformed party. In the

DCFR, the classical defence of mistake has been supplemented by

duties to give the other party the information which is essential to

enable that party to make a properly informed decision. These rules

apply particularly to consumer contracts, but the problem may arise

also in contracts between businesses. Normally a business can be

expected to make full enquiries before concluding a contract, but if

good commercial practice dictates that certain information be pro-

vided by one of the parties, the other party is likely to assume that it

has been provided. If in fact full information has not been provided,

Princ. 8 Principles

See, for the DCFR, II. – 2:101 to II. – 2:105 and III. – 1:105.

and as a result the party concludes a contract which would not have

been concluded, or would have been concluded only on fundamen-

tally different terms, the party has a remedy.

9. Information as to the terms of the contract. Modern law must also

deal with lack of information as to the terms of the contract. The

classical defences were developed at a time when most contracts

were of a simple kind that the parties could understand readily. This

too has changed, particularly with the development of longer-term

(and therefore more complex) contracts and the use of standard

terms. Standard terms are very useful but there is the risk that the

parties may not be aware of their contents or may not fully under-

stand them. Existing

EC law addresses this problem and gives pro-

tection to consumers when the term in question is in a consumer

contract and was not individually negotiated.

However, as the laws

of many Member States recognise, the problem may occur also in

contracts between businesses. Particularly when one party is a small

business that lacks expertise or where the relevant term is contained

in a standard form contract document prepared by the party seeking

to rely on the term, the other party may not be aware of the existence

or extent of the term. The

DCFR contains controls which deal with

similar problems in contracts between businesses, though the con-

trols are of a more restricted kind than for consumer contracts.

10. Correcting inequality of bargaining power. The classical grounds

for avoidance deal with some simple cases of lack of bargaining

power, for example when one party takes advantage of the other

party’s urgent needs and lack of choice to extort an unfairly high

price for goods or services.

But modern conditions, and particularly

the use of standard contract terms, lead to new forms of inequality

that need to be addressed. A party who is offered a standard form

contract and who knows what it contains and understands its mean-

ing, and is unhappy with the terms offered, may find that it is im-

possible to get the other party, or any other possible contracting

Freedom Princ. 10

Directive on Unfair Terms in Consumer Contracts, 1993/13/EEC.

See the illustrations to II. – 7:207.

party, to offer better terms: the party may be told to “take it or leave

it.” Such problems are most common when a consumer is dealing

with a business, but can also occur in contracts between businesses,

particularly when one party is a small business that lacks bargaining

power. The provisions on unfair terms are thus also based on notions

of preserving freedom of contract, but – just as in the existing

EC law

– in a more extended sense than in classical law. The laws of some

Member States apply these provisions to contracts of all types, not

just to contracts between businesses and consumers. Again the

DCFR

takes a balanced view, suggesting a cautious extension beyond the

existing acquis.

11. Minimum intervention. Even when some intervention can be

justified on one of the grounds just mentioned, thought must be

given to the form of intervention. Is the problem one that can be

solved adequately by requiring one party to provide the other with

information before the contract is made, with perhaps a right in the

other party to withdraw from the contract if the information was not

given? In general terms we are concerned, as explained above, to

ensure that when parties conclude contracts they should be ade-

quately informed. This suggests that if they were provided with the

relevant information, they should be bound by the contract to which

they agreed. But in some cases problems will persist even if consu-

mers (for example) are ‘informed’, possibly because they will not be

able to make effective use of the information. In such a case a man-

datory rule giving the consumer certain minimum rights (for exam-

ple, to withdraw from a timeshare contract, as such contracts are

typically concluded without sufficient reflection) may be justified. In

general terms, the interference with freedom of contract should be

the minimum that will solve the problem while providing the other

party (e. g. the business seller) with sufficient guidance to be able to

arrange its affairs efficiently. Similarly with contract terms: it must be

asked whether it is necessary to make a particular term mandatory or

whether a flexible test such as ‘fairness’ would suffice to protect the

weaker party. A fairness test may allow certain terms to be used

providing these are clearly brought home to the consumer or other

party before the contract is made. The fairness test thus interferes

less with the parties’ freedom of contract than making a particular

Princ. 11 Principles

term mandatory would do. Usually it will be sufficient that a term is

not binding on the aggrieved party if in the particular circumstances

it is unfair. This leaves parties who are fully informed and dealing at

arms’ length free (when the term will normally be fair: see above) to

arrange their affairs as they wish. However, sometimes it may be

easier to have a simple rule rather than a standard that varies ac-

cording to the circumstances of each case.

Non-contractual obligations

12. Emphasis on obligations rather than freedom. The purpose of the

law on benevolent intervention in another’s affairs, on non-contrac-

tual liability for damage caused to another and on unjustified enrich-

ment is not to promote freedom but rather to limit it by imposing

obligations. Here we see the principle of freedom being counteracted

by the competing principles of security and justice.

13. Freedom respected so far as consistent with policy objectives.

Nonetheless the underlying principle of freedom is recognised in

that the model rules impose these non-contractual obligations only

where that is clearly justified. So, a benevolent intervener has rights

as such only if there was a reasonable ground for acting; and there

will be no such ground if the intervener had a reasonable opportunity

to discover the principal’s wishes but failed to do so or if the inter-

vener knew or could be expected to know that the intervention was

against the principal’s wishes.

To the maximum extent possible the

principal’s freedom of action and control is respected. In the rules on

non-contractual liability for damage caused to another, the imposi-

tion of an obligation of reparation is carefully limited to cases where

it is justified. It is this concern which explains why this Book does

not simply adopt some sweeping statement to the effect that people

are liable for damage they cause. Respect for freedom (not to men-

tion security and justice viewed from the point of view of the person

causing the damage) requires careful and detailed formulation of

rules imposing liability. Again, in the law on unjustified enrichment

Freedom Princ. 13

V. – 1:101(2).

the underlying principle is that people are free to hold what they

have. An obligation to redress an enrichment is imposed only in

carefully regulated circumstances. In particular, rules ensure that one

person cannot force another to pay for an enrichment resulting from

a disadvantage to which the first person has consented freely and

without error.

That would be an unwarranted infringement of free-

dom. Rules also ensure that those who are enriched by receiving a

non-transferable benefit without their consent (such as receiving an

unwanted service) are not compelled to reverse that enrichment by

paying for its value, since this would in substance require the reci-

pient of an enrichment to perform a bargain not voluntarily con-

cluded. If they are liable at all, their liability is therefore not allowed

to exceed any sum which they would have spent in any case in order

to enjoy the benefit which they have unwittingly or unwillingly

received.

Property

14. Limited scope for party autonomy. The principle of party auton-

omy has to be considerably modified in property law. Because pro-

prietary rights affect third parties generally, the parties to a transac-

tion are not free to create their own basic rules as they wish. They

cannot, for example, define for themselves basic concepts like “pos-

session”. Nor are they free to modify the basic rules on how ownership

can be acquired, transferred or lost. Under the

DCFR they cannot

even agree to an effective contractual prohibition on alienation.

The free alienability of goods is important not only to the persons

concerned but also to society at large. One type of freedom is re-

stricted in order to promote another – and efficiency.

15. Recognition and enhancement of freedom in some respects. Within

the essential limits just noted, the principle of party autonomy is

reflected in Book

VIII. It can be seen in the rule that the parties to a

Princ. 14 Principles

VII. – 2:101(1)(b).

VII. – 5:102(2).

VIII. – 1:301.

transfer of goods can generally determine by agreement the point in

time when ownership passes,

and in the rule that the consequences

of the production of new goods out of another’s goods or of the

combination or commingling of goods belonging to different persons

can be regulated by party agreement.

The rules on proprietary se-

curity in Book

IX can be seen as enhancing freedom (and efficiency)

by opening up wide possibilities for the provision of non-possessory

security, something which has not traditionally been possible in

many legal systems. Similarly, the rules on trusts in Book X could

enhance freedom by opening up possibilities for setting property

aside for particular purposes (commercial, familial or charitable) in

a flexible way which has been much used and much valued in some

systems for a very long time and is gradually spreading to others.

Security

16. General remarks. The importance of the principle of security in

private law can be understood by considering some of the ways in

which the security of natural and legal persons in the normal con-

ducting of their lives and affairs can be threatened. The most obvious

way is by unlawful invasions of their rights and interests or indeed by

any unwanted disturbance of the status quo. Security, particularly in

forward planning, is also threatened by uncertainty of outcomes.

This can be caused by inaccessible or confusing or badly drafted laws.

It can also be caused by the unpredictability of others. Will they

perform their obligations? Will they do so properly? Will they give

good value or attempt to cut corners and get away with the minimum

possible? Will they be uncooperative and difficult to work with? Will

they be able to pay? Are there effective remedies if things go wrong?

Security Princ. 16

VIII. – 2:103.

VIII. – 5:101(1).

Contractual security

17. The main ingredients. The Principes directeurs identify as the

main ingredients in contractual security:

(1) the obligatory force of contracts (but subject to the possibility

of challenge where an unforeseeable change of circumstances

gravely prejudices the utility of the contract for one of the par-

ties);

(2) the fact that each party has duties flowing from contractual

loyalty (i. e. to behave in accordance with the requirements of

good faith; to co-operate when that is necessary for perform-

ance of the obligations; not to act inconsistently with prior

declarations or conduct on which the other party has relied);

(3) the right to enforce performance of the contractual obligations

in accordance with the terms of the contract;

(4) the fact that third parties must respect the situation created by

the contract and may rely on that situation; and

(5) the approach of “favouring the contract” (faveur pour le contrat)

(whereby, in questions relating to interpretation, invalidity or

performance, an approach which gives effect to the contract is

preferred to one which does not, if the latter is harmful to the

legitimate interests of one of the parties).

Almost all of these ingredients of contractual security are clearly

recognised and expressed in the

DCFR. A most important further

ingredient of contractual security is the availability of adequate re-

medies (in addition to enforcement of performance) for non-per-

formance of the contractual obligations. This too is addressed by the

DCFR and will be considered below immediately after the topic of

enforcement of performance at no. 27. Another ingredient of con-

tractual security is the protection of reasonable reliance and expec-

tations in situations not covered by the doctrine of contractual loy-

alty.

Princ. 17 Principles

See arts. 0:201 to 0:204.

18. Third party respect and reliance. The only aspect of contractual

security which is mentioned in the Principes directeurs but which does

not appear explicitly in the

DCFR is the fourth one – that third

parties must respect the situation created by the contract and may

rely on that situation. It was not thought necessary to provide for this

as it is not precluded by any rule in the

DCFR and, if understood in a

reasonable way, seems to follow sufficiently from other rules and

essential assumptions. One case of practical importance is where a

person not being a party to a contract or an intended beneficiary of it

nonetheless relies on the proper performance of a contractual obli-

gation (e. g. a tenant’s visitor claims damages from the landlord as

the tenant could do under the contract, because the visitor falls

down the stairs as a result of a broken handrail the landlord was

obliged to repair under the contract). In the

DCFR such cases fall

under the rules on non-contractual liability of Book

VI.

19. Protection of reasonable reliance and expectations. This is an

aspect of security which appears in different parts of the

DCFR.It

first appears in relation to contract formation. It may happen that

one party does not intend to undertake an obligation when that

party’s actions suggest to the other party that an obligation is being

undertaken. A typical case is where an apparent offer is made by

mistake. If the other party reasonably believed that the first party was

undertaking the obligation as apparently stated, the other party’s

reliance will be protected in most legal systems. This may be

achieved either by using the law on non-contractual liability for

damage caused to another or, more simply, by holding the mistaken

party to the outward appearance of what was said. The protection of

reasonable reliance and expectations is a core aim of the

DCFR, just

as it was in

PECL. Usually this protection is achieved by holding the

mistaken party to the obligation which the other party reasonably

assumed was being undertaken. Examples are the objective rules on

interpretation

, the restriction of avoidance for mistake to cases in

which the non-mistaken party contributed to the mistake, should

have known of it or shared it

and the rule that imposes on a busi-

Security Princ. 19

See II. – 8:101.

See II. – 7:201.

ness which has failed to comply with a pre-contractual information

duty such obligations under a contract as the other party has reason-

ably expected as the consequence of the absence or incorrectness of

the information.

20. The principle of binding force. If the parties have concluded a

contract freely and with adequate information, then the contract

should normally be treated as binding on them unless they (again

freely) agree to modification or termination or, where the contract is

for an indefinite period, one has given the other notice of a wish to

end the relationship.

These rules are set out clearly in the DCFR.

It also sets out rules on the termination of a contractual relationship

in more detail. Examples are – besides the rules on termination for

non-performance – the right to terminate by notice where that is

provided for by the contract terms and the right to terminate where

the contract is for an indefinite duration. In the latter case the party

wishing to terminate must give a reasonable period of notice.

The

principle of binding force (often expressed still by the Latin tag, pacta

sunt servanda) was qualified classically only when without the fault of

either party performance of the contractual obligations became im-

possible for reasons that could not have been foreseen. A more mod-

ern development is the right of withdrawal granted to consumers in

certain situations. The reasons for this exception vary, but can be

seen in the specific situations where such withdrawal rights exist.

One example is the right to withdraw from contracts negotiated

away from business premises (e. g. at the doorstep or at a distance).

Princ. 20 Principles

See II. – 3:107(3).

The Principes directeurs state in art. 0-201 (Principle of binding force)

paragraph (1): “A contract which is lawfully concluded has binding force

between the parties”. Art. 0-103 (Freedom of the parties to modify or

terminate the contract) provides that: “By their mutual agreement, the

parties are free, at any moment, to terminate the contract or to modify it.

Unilateral revocation is only effective in respect of contracts for an in-

definite period.”

II. – 1:103 read with III. – 1:108 and III. – 1:109.

See III. – 1:109.

See II. – 5:201.

In such situations the consumer may have been taken by surprise or

have been less attentive than he or she would have been in a shop. A

further example is provided by some complex contracts (e. g. time-

share contracts)

, where consumers may need an additional period

for reflection. The right to withdraw gives the consumer who con-

cluded a contract in such situations a ‘cooling off period’ for acquir-

ing additional information and for further consideration whether he

or she wants to continue with the contract. For reasons of simplicity

and legal certainty, withdrawal rights are granted to consumers, ir-

respective of whether they individually need protection, as a con-

siderable number of consumers are considered to be typically in need

of protection in such situations.

21. Exceptional change of circumstances. Many modern laws have

recognised that in extreme circumstances it may be unjust to enforce

the performance of contractual obligations that can literally still be

performed according to the original contract terms if the circum-

stances in which the obligations were assumed were completely dif-

ferent to those in which they fall to be enforced. As noted above, this

qualification is stated in general terms in the Principes directeurs.

is also recognised in the

DCFR but the parties remain free, if they

wish, to exclude any possibility of adjustment without the consent of

all the parties.

22. Certainty or flexibility. A more general question is whether con-

tractual security is better promoted by rigid rules or by rules which,

by using open terms like “reasonable” or by other means, leave room

for flexibility. The answer probably turns on the nature of the con-

tract. In contracts for the purchase of certain commodities or types of

incorporeal assets where prices fluctuate rapidly and where one deal

is likely to be followed rapidly by another which relies on the first

Security Princ. 22

See II. – 5:202.

Art. 0-201(3): “In the course of performance, the binding force of the

contract can be called into question if an unforeseeable change in cir-

cumstances seriously compromises the usefulness of the contract for one

of the parties.”

II. – 1:102. See also III. – 1:110(3)(c).

and so on within a short space of time, certainty is all important.

Nobody wants a link in a chain of transactions to be broken by an

appeal to some vague criterion. Certainty means security. However,

in long term contracts for the provision of services of various kinds

(including construction services), where the contractual relationship

may last for years and where the background situation may change

dramatically in the course of it, the reverse is true. Here true security

comes from the knowledge that there are fair mechanisms in place to

deal with changes in circumstances. It is for this reason that the

default rules in the part of the

DCFR on service contracts have spe-

cial provisions on the giving of warnings of impending changes

known to one party, on co-operation, on directions by the client and

on variation of the contract.

The general rules on contractual and

other obligations in Book

III have to cater for all types of contract.

So their provisions on changes of circumstances are much more re-

stricted. However, even in the general rules it is arguable that it does

more good than harm to build in a considerable measure of flexibility

because open criteria will either be disapplied by highly specific

standard terms devised for fields of commercial activity where cer-

tainty is particularly important or will disapply themselves automa-

tically in cases where they are inappropriate. The effects of terms

such as “reasonable” and “fair dealing” depend entirely on the cir-

cumstances. Rigid rules (e. g. “within 5 days” instead of “within a

reasonable time”) would be liable to increase insecurity by applying

in circumstances where they were totally unexpected and unsuitable.

23. Good faith and fair dealing. As the Principes directeurs recognise,

one party’s contractual security is enhanced by the other’s duty to act

in accordance with the requirements of good faith. However, the

converse of that is that there may be some uncertainty and insecurity

for the person who is required to act in accordance with good faith

and fair dealing, which are rather open-ended concepts. Moreover,

the role of good faith and fair dealing in the

DCFR goes beyond the

provision of contractual security. These concepts are therefore dis-

cussed later under the heading of justice.

Princ. 23 Principles

See e. g. IV. C. – 2:102, IV. C. – 2:103, IV. C. – 2:107, IV. C. – 2:108,

IV. C. – 2:109, IV. C. – 2:110.

24. Co-operation. Contractual security is also enhanced by the im-

position of an obligation to co-operate. The Principes directeurs put it

this way: “The parties are bound to cooperate with each other when

this is necessary for the performance of their contract”.

The DCFR

provision goes a little further than the case where co-operation is

necessary: the debtor and the creditor are obliged to co-operate with

each other when and to the extent that this can reasonably be expected

for the performance of the debtor’s obligation.

25. Inconsistent behaviour. A particular aspect of the protection of

reasonable reliance and expectations is to prevent a party, on whose

conduct another party has reasonably acted in reliance, from adopting

an inconsistent position and thereby frustrating the reliance of the

other party. This principle is often expressed in the Latin formula venire

contra factum proprium. The Principes directeurs express it as follows:

“No party shall act inconsistently with any prior statements made by

the party or behaviour on the part of the party, upon which the other

party may legitimately have relied.”

The Interim Outline Edition of

the

DCFR did not contain an express rule of this nature; it was thought

that it could be arrived at by applying the general principles of good

faith and fair dealing. Inspired by the Principes directeurs, the

DCFR

now incorporates an express provision which qualifies inconsistent

behaviour as being contrary to good faith and fair dealing.

26. Enforcement of performance. If one party fails to perform con-

tractual obligations, the other should have an effective remedy. One

of the main remedies under the

DCFR is the right to enforce actual

performance, whether the obligation which has not been performed

is to pay money or is non-monetary, e. g. to do or to transfer some-

thing else. This basic idea is also expressed in the Principes direc-

teurs.

The DCFR slightly modifies and supplements this principle

Security Princ. 26

Art. 0-303 (Duty to cooperate)

III. – 1:104.

Art. 0-304 (Duty of consistency).

See I. – 1:103 paragraph (2).

Art. 0-202: “Each party can demand from the other party the perform-

ance of the other party’s obligation as provided in the contract”.

by some exceptions as the right to enforce performance should not

apply in various cases in which literal performance is impossible or

would be inappropriate.

However, in a change from the PECL,

under the DCFR the right to enforce performance is less of a “sec-

ondary” remedy, reflecting the underlying principle that obligations

should be performed unless there are good reasons to the contrary.

27. Other remedies. In addition to the right to enforcement, the

DCFR contains a full set of other remedies to protect the creditor

in a contractual obligation: withholding of performance, termina-

tion, reduction of price and damages. The creditor faced with a non-

performance which is not excused may normally exercise any of

these remedies, and may use more than one remedy provided that

the remedies sought are not incompatible.

If the non-performance

is excused because of impossibility, the creditor may not enforce the

obligation or claim damages, but the other remedies are available.

The remedy of termination provided in the DCFR is a powerful

remedy which adds to the contractual security of the creditor faced

with a fundamental non-performance by the debtor. The creditor

knows that if the expected counter-performance is not forthcoming

it is possible to escape from the relationship and obtain what is

wanted elsewhere. However the powerful nature of the remedy is

also a threat to the debtor’s contractual security and, potentially at

least, contrary to the idea of maintaining contractual relationships

whenever possible. Termination will often leave the debtor with a

loss (for example, wasted costs incurred in preparing to perform; or

loss caused by a change in the market). The creditor should not be

entitled to use some minor non-performance, or a non-performance

that can readily be put right, by the debtor as a justification for

termination. The rules governing termination therefore restrict ter-

mination to cases in which the creditor’s interests will be seriously

affected by the non-performance, while leaving the parties free to

agree on termination in other circumstances.

Princ. 27 Principles

See III. – 3:301 and 3:302

Compare PECL art 9:102, esp. (2)(d).

III. – 3:102.

III. – 3:101.

28. Maintaining the contractual relationship. This aim, recognised in

the Principes directeurs under the heading of faveur pour le contrat,

also recognised in various provisions in the

DCFR – for example

those on interpretation,

and on the power of the court to adapt a

contract which is affected by invalidity.

Also, the debtor’s right to

cure a non-conforming performance

can be seen as being aimed at

the preservation of the contractual relationship, as this right may

avoid the execution of remedies, including termination. The same

aim underlies the provisions which supplement the parties’ agree-

ment when there are points which the parties appear to have over-

looked. In a sense, many rules of contract law – for example, the

remedies available for non-performance – are “default rules” that fill

gaps in what the parties had agreed, thus helping to maintain an

effective working relationship. But there are a number of rules deal-

ing specifically with points which in some systems of law have led

the courts to hold that there can be no obligation, even though it

seems clear that the parties, despite the incompleteness of their

agreement, wished to be bound. These include provisions on deter-

mination of the price and other terms.

Further, the DCFR provides

a more general mechanism to supplement the agreement in order to

make it workable when it is necessary to provide for a matter which

the parties have not foreseen or provided for, thus “favouring the

contract” and increasing contractual security.

29. Other rules promoting security. The rules on personal security in

Book

IV.G obviously promote contractual security by giving the

Security Princ. 29

Art. 0:204. “When the contract is subject to interpretation, or when its

validity or performance is threatened, the effectiveness of the contract

should be preferred if its destruction would harm the legitimate interests

of one of the parties”.

See II. – 8:106. “An interpretation which renders the terms of the con-

tract lawful, or effective, is to be preferred to one which would not.”

See II. – 7:203.

III. – 3:202 to III. – 3:204.

See II. – 9:104 ff.

II. – 9:101. The relevant provisions of PECL were slightly less restrictive.

They were changed in the light of representations by stakeholders.

creditor an extra person from whom to seek performance if the debt-

or defaults. In a different way, the rules on prescription can be seen as

promoting security by preventing disturbance of the status quo by the

making of stale claims. This example shows that even in the area

covered by the

PECL the underlying principle of security is not con-

fined to contractual security for the creditor. Security is also impor-

tant for the debtor.

Non-contractual obligations

30. Security a core aim and value in the law on non-contractual ob-

ligations. The protection and promotion of security is a core aim

and value in the law on non-contractual obligations. These branches

of the law can be regarded as supplementing contract law. Under

contract law parties typically acquire assets. The protection of assets

once acquired and the protection from infringement of innate rights

of personality is not something which contract law is able to provide.

That is the task of the law on non-contractual liability for damage

(Book

VI). A person who has parted with something without a legal

basis, e. g. because the contract which prompted the performance is

void, must be able to recover it. That is provided for in the law on

unjustified enrichment (Book

VII). In cases in which one party

would have wanted action to be taken, in particular where help is

rendered, but due to the pressure of circumstances or in a case of

emergency it is not possible to obtain that party’s consent, the situa-

tion has a resemblance to contract. But the security which would

normally be provided for both parties by the conclusion of a contract

for necessary services has to be provided by the rules on benevolent

intervention in another’s affairs (Book V).

31. Protection of the status quo: non-contractual liability arising out of

damage caused to another. The notion of contract would be mean-

ingless if it were not flanked by a notion of compensation for loss

involuntarily sustained. Contracts are aimed at a voluntary change

in relationships. That presupposes, however, a regime for the protec-

tion of the status quo against involuntary changes. The law on non-

contractual liability for damage caused to another is thus directed at

Princ. 30 Principles

reinstating the person suffering such damage in the position that

person would have been in had the damage not occurred.

It does

not seek to punish anybody, neither does it aspire to enrich the

injured party. Nor does it aim at a social redistribution of wealth or

at integrating an individual in a community founded on the principle

of social solidarity. Rather it is aimed at protection.

32. Protection of the person. A particular concern of non-contrac-

tual liability law is the protection of the person. The individual

stands at the focus of the legal system. A person’s rights to physical

wellbeing (health, physical integrity, freedom) are of fundamental

importance, as are other personality rights, in particular that of dig-

nity and with it protection against discrimination and exposure. In-

juries to the person give rise to non-economic loss besides economic

loss; the former also deserves compensation.

33. Protection of human rights. The non-contractual liability law of

the

DCFR has the function primarily (albeit not exclusively) of pro-

viding “horizontal” protection of human rights – that is to say, a

protection not vis-à-vis the state, but in relation to fellow citizens

and others subject to private law. This protection is provided in the

first instance by the claim to reparation for loss suffered, but is not

confined to that. Prevention of damage is better than making good

the damage; hence Book

VI confers on a person who would suffer it a

right to prevent an impending damage.

34. Protection of other rights and interests. Book VI contains speci-

fic provisions on various kinds of legally relevant damage (including

loss upon infringement of property or lawful possession) which may

give rise to liability. However, it is not confined to providing security

in such listed cases. Loss or injury can, subject to certain controlling

provisions, also be legally relevant damage for the purposes of Book

VI if it results from a violation of a right otherwise conferred by the

law or of an interest worthy of legal protection.

Security Princ. 34

VI. – 6:101(1).

VI. – 1:102.

VI. – 2:101.

35. Protection of security by the law on unjustified enrichment. The

rules on unjustified enrichment respect the binding force of con-

tracts in that a valid contract between the parties will provide a jus-

tifying basis for an enrichment conferred by one party on the other

within the terms of that contract.

The rules on unjustified enrich-

ment buttress the protection of rights within private law by the prin-

ciple that a wrongdoer is not permitted to profit from the exploita-

tion of another’s rights. A non-innocent use of another’s assets as a

rule creates an obligation to pay for the value of that use,

so helping

to remove any incentive to make improper use of another’s property.

Protection of reasonable reliance and expectations as a value and

aim is relevant to both the elements of the claim and the grounds of

defence within the rules on unjustified enrichment. A person who

confers an enrichment on another in circumstances where it is rea-

sonable to expect a counter-benefit, or the return of the benefit if

events do not turn out as expected, is protected by being entitled to

a reversal of the enrichment if the agreement on which reliance was

placed turns out not to be valid or if the mutually anticipated out-

come does not occur.

Equally, the interests of the recipient of a

benefit are protected if the recipient relies on the apparent entitle-

ment to the benefit received. Such protection is conferred by the de-

fence of disenrichment, where the recipient disposes of the benefit in

a bona fide assumption that there is a right to do so,

or by a defence,

protecting faith in the market, where an acquirer has given value to a

third party in good faith for the benefit received.

Property

36. Security a core aim. Security is a paramount value in relation

to property law and pervades the whole of Book

VIII. The rules in

Chapter 6 on the protection of ownership and possession provide a

Princ. 35 Principles

VII. – 2:101(1)(a).

See in particular VII. – 4:101(c) and VII. – 5:102(1).

Cf. VII. – 2:101(4).

VII. – 6:101.

VII. – 6:102.

particularly clear example. Indeed, in relation to the acquisition

and loss of ownership in movables, certainty and predictability of

outcome may sometimes be more important that the actual content

of the rules. Different approaches, even fundamentally different ap-

proaches, can all lead to acceptable results. Again, however, differ-

ent values have to be balanced against each other. Some methods

of increasing security might, for example, inhibit easy transferabil-

ity. And certainty has to be balanced against fairness, as can be

seen very clearly in the rules in Book

VIII on production, combina-

tion and commingling.

It almost goes without saying that security

is also a core aim of the Book on proprietary security. The whole

objective is to enable parties to provide and obtain security for the

proper performance of obligations. The rules are comprehensive

and cover all types of proprietary security over moveable assets, in-

cluding retention of ownership devices. They aim at maximum cer-

tainty by recommending a registration system for the effectiveness

of a proprietary security against third parties.

A large part of Book

IX is concerned with the detailed regulation of this system. Its rules

provide effective remedies for creditors wishing to enforce their se-

curity.

37. Protection of reasonable reliance and expectations. This value is

strongly reflected in Book

VIII. It can be seen most obviously in the

rules on good faith acquisition from a person who has no right or

authority to transfer ownership

and in the rules on the acquisition

of ownership by continuous possession.

In the Book on proprietary

security this value is most obviously reflected in rules protecting the

good faith acquisition of assets, or of security rights in assets, free

from a prior security right.

Security Princ. 37

VIII.–5:101 to VIII.–5:105.

Chapter 3.

Chapter 7.

VIII. – 3:101 and VIII. – 3:102.

VIII. – 4:101 to 4:302.

IX. – 2:108, IX. – 2:109 and IX. – 6:102.

38. The provision of effective remedies. This is just as important as

in contract law but the remedies are different. They are designed to

enable ownership and possession to be protected.

So the owner is

given a right to obtain or recover possession of the goods from any

person exercising physical control over them.

The possessor of

goods is also given protective remedies against those who interfere

unlawfully with the possession.

39. Protection of the status quo. This value lies behind some of the

rules in Book

VIII designed to protect possession, particularly those

for the protection of “better possession”.

Justice

40. General remarks. Justice is an all-pervading principle within the

DCFR. It can conflict with other principles, such as efficiency, but is

not lightly to be displaced. Justice is hard to define, impossible to

measure and subjective at the edges, but clear cases of injustice are

universally recognised and universally abhorred.

As with the other principles discussed above, there are several as-

pects to justice in the present context. Within the

DCFR, promoting

justice can refer to: ensuring that like are treated alike; not allowing

people to rely on their own unlawful, dishonest or unreasonable

conduct; not allowing people to take undue advantage of the weak-

ness, misfortune or kindness of others; not making grossly excessive

demands; and holding people responsible for the consequences of

their own actions or their own creation of risks. Justice can also refer

to protective justice – where protection is afforded, sometimes in a

generalised preventative way, to those in a weak or vulnerable posi-

tion.

Princ. 38 Principles

See Book VIII, Chapter 6.

VIII. – 6:101.

VIII. – 6:201 to VIII. – 6:204.

VIII. – 6:301 and VIII. – 6:302.

Contract

41. Treating like alike. The most obvious manifestation of this as-

pect of justice in the

DCFR is in the rules against discrimination

but

it is an implicit assumption behind most of the rules on contracts and

contractual obligations that parties should be treated equally by the

law unless there is a good reason to the contrary. The big exception

to the rule of equal treatment is that there are situations where

businesses and consumers are not treated alike. This has been men-

tioned already and is discussed further below. The “equality” aspect

of justice also surfaces in a rather different way in the notion that if

both parties have obligations under a contract what goes for one

party also goes for the other. This idea – sometimes called the prin-

ciple of mutuality in contractual relations. – appears, for example, in

the rule on the order of performance of reciprocal obligations: in the

absence of any provision or indication to the contrary one party need

not perform before the other.

It also appears in the rules on with-

holding performance until the other party performs

and in the rules

allowing one party to terminate the relationship if there is a funda-

mental non-performance by the other,

although the primary expla-

nation for these rules is the need to provide effective remedies to

enhance contractual security. A further example of the “equality”

aspect of justice can be seen in the rules on a plurality of debtors or

creditors: the default rule is that as between themselves solidary

debtors and creditors are liable or entitled in equal shares.

42. Not allowing people to rely on their own unlawful, dishonest or

unreasonable conduct. There are several examples of this aspect of

justice in the

DCFR provisions on contract law. A recurring and

important idea is that parties are expected to act in accordance with

good faith and fair dealing. For example, a party engaged in negotia-

tions has a duty to negotiate in accordance with good faith and fair

Justice Princ. 42

II. – 2:101 to II. – 2:105 and III. – 1:105.

III. – 2:104.

III. – 3:401.

III. – 3:502.

III. – 4:106 and III. – 4:204.

dealing and is liable for loss caused by a breach of the duty.

For later

stages in the relationship it is provided that:

A person has a duty to act in accordance with good faith and fair

dealing in performing an obligation, in exercising a right to perform-

ance, in pursuing or defending a remedy for non-performance, or in

exercising a right to terminate an obligation or contractual relation-

ship.

A breach of this duty does not in itself give rise to a liability to pay

damages but may prevent a party from exercising or relying on a

right, remedy or defence. The Principes directeurs say that “Each party

is bound to act in conformity with the requirements of good faith and

fair dealing, from the negotiation of the contract until all of its

provisions have been given effect”.

They also have an additional

provision on performance: “Every contract must be performed in

good faith. The parties may avail themselves of the contractual rights

and terms only in accordance with the objective that justified their

inclusion in the contract.”

Taken together, these provisions are

slightly wider than those of the

DCFR but whether there would be

much difference in practical effect may be doubted.

There are many specific provisions in the

DCFR which can be re-

garded as concretisations of the idea that people should not be al-

lowed to rely on their own unlawful, dishonest or unreasonable con-

duct. An example is the rule that the debtor is not liable for loss

suffered by the creditor to the extent that the creditor could have

reduced the loss by taking reasonable steps.

Another recurring ex-

ample is in the requirements to give reasonable notice before certain

steps are taken which would be harmful to the other party’s interest.

And there are several rules which allow a person to rely on an ap-

parent situation only if that person is in good faith.

The rules on

Princ. 42 Principles

II. – 3:301 (2) and (3).

III. – 1:103.

Art. 0-301 (General duty of good faith and fair dealing).

Art. 0-302 (Performance in good faith).

III. – 3:705.

voidable contracts, even if their primary purpose is to ensure that a

party can escape from a contract concluded in the absence of gen-

uine freedom to contract, often have the incidental effect of pre-

venting the other party from gaining an advantage from conduct

such as fraud,

coercion or threats.

43. No taking of undue advantage. This aspect overlaps with the last

one. The most explicit recognition of this aspect of justice in con-

tract law is the rule which allows a party, in carefully specified cir-

cumstances, to avoid a contract on the ground of unfair exploitation

if the party was dependent on or had a relationship of trust with the

other party, was in economic distress or had urgent needs, or was

improvident, ignorant, inexperienced or lacking in bargaining skill.

It is necessary that the other party knew or could reasonably be

expected to have known of the vulnerability and exploited the first

party’s situation by taking an excessive benefit or grossly unfair ad-

vantage.

Again, it is clear that the rule also has the function of

ensuring that the victim of the exploitation can escape from a con-

tract concluded in the absence of genuine freedom to contract.

44. No grossly excessive demands. This aspect of justice is reflected

in a number of rules which qualify the binding effect of contracts. It

is recognised in the rule which regards non-performance of an ob-

ligation as excused (so that performance cannot be enforced and

damages cannot be recovered) if the non-performance is due to an

impediment beyond the debtor’s control and if the debtor could not

reasonably be expected to have avoided or overcome the impedi-

ment or its consequences.

It lies behind the rule allowing contrac-

tual obligations to be varied or terminated by a court if they have

become so onerous as a result of an exceptional change of circum-

stances that it would be “manifestly unjust to hold the debtor to the

Justice Princ. 44

See e. g. II. – 6:103(3) (Apparent authority of representative); II.–

9:201(Effect of simulation) paragraph (2).

II. – 7:205.

II. – 7:206.

II. – 7:207.

III. – 3:104.

obligation”.

It is the basis of the rule that performance of an ob-

ligation cannot be specifically enforced if it would be unreasonably

burdensome or expensive.

And it appears in the rule that a stipu-

lated payment for non-performance can be reduced to a reasonable

amount where it is “grossly excessive” in the circumstances.

It is

clear, however, that this aspect of justice has to be kept within strict

limits. The emphasis is on “grossly”, and the oft-repeated warning

that principles conflict and have to be balanced against each other is

particularly apposite here. There is nothing against people profiting

from a good bargain or losing from a bad one. The

DCFR does not

have any general notion that contracts can be challenged on the

ground of lesion. This is explicitly illustrated in the rule excluding

the adequacy of the price from the unfairness test in the part of the

DCFR dealing with unfair contract terms.

45. Responsibility for consequences. This aspect is most prominent

in Book

VI on non-contractual liability arising out of damage caused

to another but it also surfaces in Book

III. For example, a person

cannot resort to a remedy for non-performance of an obligation to

the extent that that person has caused the non-performance.

46. Protecting the vulnerable. Many of the qualifications on freedom

of contract mentioned above can also be explained as rules designed

to protect the vulnerable. Here we consider some other examples.

Within the

DCFR the main example of this aspect of justice is the

special protection afforded to consumers. This appears prominently

in the rules on marketing and pre-contractual duties in Book

II,

Chapter 3; on the right of withdrawal in Book

II, Chapter 5; and on

unfair contract terms in Book

II, Chapter 9, Section 4. It also appears

prominently in the parts of Book

IV dealing with sale, the lease of

goods and personal security.

Often the protection takes the form of

Princ. 45 Principles

III. – 1:110.

III. – 3:302.

III. – 3:710.

II. – 9:407(2). The exclusion applies only if the terms are drafted in plain

and intelligible language.

III. – 3:101(3).

recommending that, in a contract between a business and a consum-

er, it should not be possible for the parties to derogate from particular

rules to the detriment of the consumer. Most of the consumer pro-

tection rules in the

DCFR come from the acquis. They are, in sub-

stance if not in actual wording, part of

EU law and of the laws of

Member States and seem likely to remain so. The “consumer” is

defined as “any natural person who is acting primarily for purposes

which are not related to his or her trade, business or profession”.

Whether the notion of the consumer is necessarily the best way of

identifying those in need of special protection is a question which

has been raised and will no doubt be raised again. Some argue that

small businesses or “non-repeat players” of any kind may be equally

in need of protection. However this question may be answered in the

future, the point remains that the protection of those in a weak or

vulnerable position can be considered an aspect of the underlying

principle of justice within the

DCFR. Another example in the DCFR

is that some of the rules on contracts for the provision of treatment

services (medical and other) afford special protection to patients.

And yet other examples are the protections afforded to the debtor

when a right to performance is assigned

and the protections afford-

ed to non-professional providers of personal security.

Both are in an

inherently exposed position. People presented with standard terms

prepared by the other party are also in a vulnerable position in prac-

tice, whether or not they are consumers, and there are rules in the

DCFR to protect them.

Of a rather similar nature is the rule that in

cases of doubt an ambiguous term which has not been individually

negotiated will be interpreted against the person who supplied it.

Justice Princ. 46

See e. g. (for sale) IV. A. – 2:304, IV. A. – 2:309, IV. A. – 4:102, IV.A.–

5:103,

IV. A. – 6:101 to IV. A. – 6:106; (for the lease of goods) IV.B.–

1:102 to

IV. B. – 1:104, IV. B. – 3:105; IV. B. – 6:102; and (for personal se-

curity)

IV. G. – 4:101 to IV. G. – 4:107.

I. – 1:105(1).

IV. C. – 8:103; IV. C. – 8:104; IV. C. – 8:106; IV. C. – 8:108; IV. C. – 8:109(5);

IV. C. – 8:111.

III. – 5:118 and III. – 5:119.

See in particular IV. G. – 4:101 to IV. G. – 4:107.

II. – 9:103, II. – 9:405 and II. – 9:406.

Non-contractual obligations

47. General. Most of the rules on obligations and corresponding

rights in Book

III apply to non-contractual as well as contractual

obligations. Many of the points made above for contractual obliga-

tions therefore apply equally to non-contractual obligations. More-

over, most of the aspects of justice mentioned above feature strongly

in the rules in Books V to

VII.

48. Not allowing people to gain an advantage from their own unlawful,

dishonest or unreasonable conduct. An example of this aspect of

justice in Book

VI is the rule denying reparation (where to allow it

would be contrary to public policy) for damage caused unintention-

ally by one criminal collaborator to another in the course of com-

mitting an offence.

It has already been noted that the law on un-

justified enrichment recognises the principle that a wrongdoer is not

permitted to profit from the exploitation of another’s rights. A non-

innocent use of another’s assets as a rule creates an obligation to pay

for the value of that use.

There are also several rules in the Book in

unjustified enrichment from which a person can benefit only if in

good faith.

49. No taking of undue advantage. The rules on benevolent inter-

vention reflect the idea that it would be unfair to allow a person who

has been assisted in an emergency by the kindness of a stranger to

take advantage of that kindness. The assisted person is therefore

obliged to pay at least the necessary expenses incurred. This idea is

also at the root of the law on unjustified enrichment. The rules on

unjustified enrichment primarily give effect to a deep-rooted princi-

ple of justice that one person should not be permitted unfairly to

profit at another’s expense. Where one person, due to mistake, fraud

or some equivalent reason, has conferred a benefit on another which

Princ. 47 Principles

II. – 8:103.

VI. – 5:103.

See in particular VII. – 4:101(c) and VII. – 5:102(1).

See e. g. VII. – 4:103, VII. – 5:101(4), VII. – 5:102(2), VII. – 5:104(2),

VII. – 6:101(2) and VII. – 6:102.

would not have been conferred if the true circumstances had been

known and the recipient has no countervailing reason to retain that

benefit, other than that they have fortuitously received it, the reci-

pient should not be permitted to retain the benefit to the prejudice of

the person who was disadvantaged by conferring it.

50. No grossly excessive demands. This aspect of justice is also

found in Books V to

VII. For example, it is at the root of rules which

enable the normal entitlements of a benevolent intervener to be

reduced in certain cases on grounds of fairness.

100

There are similar

rules allowing for an equitable reduction in Book

VI.

101

These reflect

the fact that there may be a gross disproportion between the amount

of blameworthiness and the amount of the damage caused: a very

slight degree of negligence may cause enormous damage. This aspect

of justice is also represented, as a countervailing consideration to the

normal rules on liability, in the rules on unjustified enrichment. It is

most relevant to the defence of disenrichment, where a person who

has disposed of a benefit in good faith is protected.

102

It would be

unfair in such circumstances to burden an innocent recipient, who

no longer has the benefit received, with the expense of the claimant’s

mistake.

51. Responsibility for consequences. This aspect of justice features

prominently in the rules of Book

VI on non-contractual liability

arising out of damage caused to another. It is the very basis of this

branch of the law. Responsibility for damage caused does not rest on

a contractual undertaking; it rests instead on intention, negligence

or a special responsibility for the source of the damage. Everyone is

entitled to rely on neighbours observing the law and behaving as can

be expected from a reasonably careful person in the circumstances of

the case. It is a requirement of fairness that an employer should be

responsible for damage which an employee has caused in the course

Justice Princ. 51

VII. – 1:101.

100

V. – 3:104. Paragraph (2) allows regard to be had to “whether the liability

of the principal would be excessive”.

101

VI. – 6:202.

102

VII. – 6:101.

of the employment. For the same reason the keeper of a motor ve-

hicle, the owner of premises and the producer of goods must all

answer for the personal injuries and damage to property which are

caused by their things. In the other direction, a person may be unable

to recover reparation, if that person consented to the damage suf-

fered or knowingly accepted the risk.

103

Similarly, reparation may be

reduced if there was contributory fault on the part of the person

suffering the damage.

104

52. Protecting the vulnerable. Although the law on non-contractual

liability aims at protection, it is framed by reference to types of dam-

age and not by reference to the need for protection of particular

groups. There are, however, some recognitions of this aspect of the

principle of justice. One is indirect: in the definition of negligence

reference is made to failure to come up to the standard of care pro-

vided by a statutory provision whose purpose is the protection of the

injured person (the assumption being that the statute protects a

vulnerable group of which the injured person is a member).

105

The

others are more direct but operate in the other direction, by protect-

ing the people in the categories concerned from full liability for

damage caused where it would be unfair to expose them to such

liability. Children under 7, young persons under 18 and mentally

incompetent persons are all given some protection in this way.

106

Property

53. Importance of certainty. Certainty is so important in property

law that there are fewer rules which rely overtly on justice than in

the other branches of the law already discussed. However, the idea of

treating like alike (specifically, treating all the creditors of the trans-

feror alike) played an important part in the debates on the question

of whether ownership should as a rule pass on the conclusion of the

Princ. 52 Principles

103

VI. – 5:101.

104

VI. – 5:102.

105

VI. – 3:102.

106

VI. – 3:103 and VI.–5:301.

relevant contract (e. g. a contract for the sale of goods) or only on

delivery of the goods or in accordance with another system.

107

More-

over the notion of good faith plays a crucial role in the rules of Book

VIII which deal with the acquisition of goods. Chapter 3 deals with

good faith acquisition from a person who is not the owner. The main

objective of those rules is the promotion of security by favouring the

status quo but they are heavily qualified by notions of justice. The

acquirer will get ownership only if the acquisition was in good

faith.

108

The position is the same in the rules on the acquisition of

ownership by continuous possession.

109

Justice is also an important

element in the rules on the consequences of production, combina-

tion or commingling. It is not enough to produce an answer to the

question of who owns the resulting goods. The result must also be

fair. Where, for example, one person acquires ownership by produ-

cing something out of material owned by another, a fair result is

achieved by giving the person who loses ownership a right to pay-

ment of an amount equal to the value of the material at the moment

of production, secured by a proprietary security right in the new

goods.

110

This prevents the taking of an undue advantage at the

expense of another. The only example of consumer protection in

Book

VIII is the rule on the ownership of unsolicited goods sent by

a business to a consumer.

111

Justice lies behind many of the rules in

Book

IX on proprietary security and particularly the rules on prior-

ity

112

and enforcement.

113

In this context it means not only fairness

as between the security provider and the secured creditor but also

fairness between different secured creditors and indeed others having

a proprietary right in the encumbered assets. The emphasis is on the

protective aspect of justice and it is the security provider who often

requires protection. There are provisions designed to afford particu-

Justice Princ. 53

107

For the outcome, see VIII. – 2:101.

108

VIII. – 3:101. See also VIII. – 3:101 on acquisition free of limited proprie-

tary rights.

109

VIII. – 4:101.

110

VIII. – 5:201.

111

VIII. – 2:304.

112

Chapter 4.

113

Chapter 7.

lar protection to consumer security providers.

114

Another aspect of

justice is reflected in the rules on good faith acquisition of assets, or

of security rights in assets, free from a prior security right.

115

Efficiency

54. General remarks. The principle of efficiency lay behind many of

the debates and decisions made in the course of preparing the

DCFR.

There are two overlapping aspects – efficiency for the purposes of the

parties who might use the rules; and efficiency for wider public pur-

poses.

Efficiency for the purposes of the parties

55. Minimal formal and procedural restrictions. The DCFR tries to

keep formalities to a minimum. For example, neither writing nor any

other formality is generally required for a contract or other juridical

act.

116

There are exceptions for a few cases where protection seems to

be specially required,

117

and it is recognised that in areas beyond the

scope of the

DCFR (such as conveyances of land or testaments) na-

tional laws may require writing or other formalities, but the general

approach is informality. Where the parties to a transaction want

writing or some formality for their own purposes they can stipulate

for that. Another recurring example of this aspect of the principle of

efficiency is that unnecessary procedural steps are kept to a mini-

mum. Voidable contracts can be avoided by simple notice, without

any need for court procedures.

118

Contractual relationships can be

terminated in the same way if there has been a fundamental non-

Princ. 54 Principles

114

IX. – 2:107, IX. – 7:103(2), IX. – 7:105(3), IX. – 7:107, IX. – 7:201(2),

IX. – 7:204, IX. – 7:207(2).

115

IX. – 2:108, IX. – 2:109 and IX. – 6:102.

116

II. – 1:106.

117

E. g. personal security provided by a consumer (IV. G. – 4:104) and dona-

tions (

IV. H. – 2:101).

118

II. – 7:209.

performance of the other party’s obligations.

119

A right to perform-

ance can be assigned without the need for notification to the debt-

or.

120

The ownership of goods can be transferred without delivery.

121

Non-possessory proprietary security can be readily created. To be

effective against third parties registration will often be necessary but,

again, the formalities are kept to a minimum in the interests of ef-

ficiency.

122

The rules on set-off can be seen as based on the principle

of efficiency. There is no reason for X to pay Y and then for Y to pay

X, if the cross-payments can simply be set off against each other.

123

Again, in the DCFR set-off is not limited to court proceedings and

can be effected by simple notice.

124

56. Minimal substantive restrictions. The absence of any need for

consideration or causa for the conclusion of an effective contract,

125

the recognition that there can be binding unilateral undertakings

126

and the recognition that contracts can confer rights on third par-

ties

127

all promote efficiency (and freedom!) by making it easier for

parties to achieve the legal results they want in the way they want

without the need to resort to legal devices or distortions.

57. Provision of efficient default rules. It is an aid to efficiency to pro-

vide extensive default rules for common types of contract and common

types of contractual problem. This is particularly useful for individuals

and small businesses who do not have the same legal resources as big

businesses. If matters which experience shows are likely to cause diffi-

culty can be regulated in advance, in a fair and reasonable manner, that

is much more efficient than having to litigate about them later. It is

hoped that the content of the default rules will also promote efficiency.

Efficiency Princ. 57

119

III. – 3:507.

120

III. – 5:104(2).

121

VIII. – 2:101

122

See Book IX generally.

123

II. – 6:102.

124

III. – 6:105.

125

II. – 4:101.

126

II. – 1:103(2).

127

II. – 9:301 to II. – 9:303.

The DCFR does not take the view (occasionally heard but rarely sup-

ported and never adopted) that default rules should be so unreasonable

that the parties are pushed to negotiate and think things out for them-

selves. In cases involving only the parties to a transaction, it tries to

base the default rules on what the parties would probably have agreed

but for the costs of trying to do so. Such rules should produce efficient

outcomes since that is presumablywhat the parties would have wanted.

Efficiency for wider public purposes

58. General. The rules in the DCFR are in general intended to be

such as will promote economic welfare; and this is a criterion against

which any legislative intervention should be checked. The promo-

tion of market efficiency could be a useful outcome of the

CFR

project as a whole but that is not the aspect with which we are here

concerned. The question here is the extent to which market effi-

ciency is reflected in and promoted by the model rules within the

DCFR. It is a matter of regret that the condensed timescale for the

preparation and evaluation of the

DCFR did not allow the evaluative

work of the Economic Impact Group within the Co

PECL project to

be taken into account in the formulation of the model rules from the

earliest stages. However, that evaluative work will form a valuable

part of the corona of evaluation which will surround the

DCFR and

will be available to those taking the project further. What follows is a

very brief note of a few areas in which it could be said that this aspect

of efficiency is exemplified in the

DCFR.

59. Information duties. Rules which might be said to promote mar-

ket efficiency (at least when compared to some more traditional

approaches) are those on information duties in Book

II.

128

There is

Princ. 58 Principles

128

II. – 3:101 to II. – 3:107. In De Geest and Kovac, “The Formation of Con-

tracts in the

DCFR – A Law and Economics Perspective” (publication

forthcoming in Chirico/Larouche (eds.), Economic analysis of the

DCFR

– The work of the Economic Impact Group within the CoPECL network

of excellence (Munich 2009)) the authors cast doubt on the continued

value of rights to avoid contracts on the basis of defects of consent and on

a public value in better-informed decision making across the board.

Interferences with freedom of contract may be justified on the

ground that they can serve to promote economic welfare if there is

reason to think that because of some market failure (such as that

caused by inequality of information) the agreement is less than fully

efficient. Consumer protection rules, for example, can be seen not

only as protective for the benefit of typically weaker parties but also

as favourable to general welfare because they may lead to more com-

petition and thus to a better functioning of markets. This holds true

in particular for information duties, where consumers’ lack of infor-

mation about either the characteristics of the goods sold or the terms

being offered leads to forms of market failure. Rules that, in relation

to the making of a contract of a particular type or in a particular

situation, require one party (typically a business) to provide the

other (typically a consumer) with specified information about its

nature, terms and effect, where such information is needed for a

well-informed decision and is not otherwise readily available to that

other party, can be justified as promoting efficiency in the relevant

market. Indeed a legislator should consider whether this is the jus-

tification for the proposed intervention, or whether it is based on a

protective notion that consumers simply should have the right in

question. The answer to that question may influence the choice of

the extent and form of intervention.

60. Remedies for non-performance. The Article on stipulated pay-

ments for non-performance

129

could be said to be more favourable to

market efficiency than rules which regard penalty clauses as com-

pletely unenforceable.

130

Questions might be asked about the second

Efficiency Princ. 60

the way in which the rules on invalidity for mistake etc are formulated in

the

DCFR.

129

III. – 3:712.

130

See Schweizer, “Obligations and Remedies for non-Performance: Book III

of the DCFR from an Economist’s Perspective” http://www.wipol.uni-bonn.

de/fileadmin/Fachbereich_Wirtschaft/Einrichtungen/Wirtschaftspolitik/

Mitarbeiter/Prof._Dr._Urs_Schweizer/

DCFRSchweizerRev.pdf; Ogus,

“Measure of Damages, Expectation, Reliance and Opportunity Cost”

(publication forthcoming in the work cited in fn. 128).

paragraph of the Article which allows a stipulated payment to be

reduced to a reasonable amount when it is grossly excessive in rela-

tion to the loss resulting from the non-performance,

131

but here there

are considerations of justice to weigh in the balance. The allowance

of damages for pure economic loss seems to be preferable from the

point of view of efficiency to the denial of such recovery, as happens

under some systems.

132

It is difficult to see any justification for dis-

tinguishing between pure economic loss and loss caused by damage

to property or injury to the person. The question of whether the

other rules on damages are optimal from the point of view of general

efficiency seems to be a matter of debate.

133

61. Other rules. The rules on prescription in Book III, Chapter 7 are

designed to promote efficiency by encouraging the prompt making of

claims before evidence becomes stale and expensive to provide and

by freeing assets which might otherwise be held against the possibi-

lity of old claims being made. The rules on withholding performance

and terminating the contractual relationship in cases of anticipated

non-performance

134

are designed to promote efficiency by not requir-

ing the creditor to wait until non-performance actually happens.

There are also rules which promote efficiency by discouraging the

providing of unwanted performance.

135

The rules denying effect to

contractual prohibitions on the alienation of assets are also designed

to promote general efficiency by favouring the free circulation of

goods and other assets.

136

The same applies to the rules on acquisi-

tion in good faith or by continuous possession.

137

A core aim of the

rules in Book

IX on proprietary security in movable assets is the

facilitation of economic activity and economic welfare by enabling

credit to be obtained on favourable terms against the provision of

proprietary security.

Princ. 61 Principles

131

Ibid.

132

Schweizer, cited above, at p.9.

133

See e. g. the differing views of Schweizer and Ogus cited above.

134

III. – 3:401 and III. – 3:504.

135

See III. – 3:301(2), IV. C. – 2:111 and IV. D. – 6:101.

136

See III. – 5:108 and VIII. – 1:301.

137

See VIII. – 3:101 and VIII. – 4:101.

Conclusion

62. Stability. There is one aspect of efficiency and security which

deserves separate mention because it lay, consciously or subcon-

sciously, behind many of the debates on the model rules and because

it accounts for an overwhelming part of the actual shape and content

of the

DCFR. It is stability. People feel more secure with solutions

which are familiar, tried, tested and traditional. Other things being

more or less equal, such solutions also promote efficiency because

there is no need to understand new rules and work out all their

possible implications. A valuable store of knowledge and experience

is not wasted. This aspect of security and efficiency seems to be

particularly valued in the legal sphere. There is a story of a famous

judge of a former era who addressed a large and distinguished audi-

ence for a full hour and then said at the end, with perfect sincerity, “I

hope I have said nothing new.” We would not go quite so far. But we

hope and believe that there is much in the

DCFR which will indeed

be perfectly familiar to private lawyers from every part of Europe. We

hope that no lawyer from any part of Europe will see it as an alien

product but that all will see it as growing out of a shared tradition and

a shared legal culture. It is our great good fortune that that legal

culture, thanks to the work of many legal thinkers from many coun-

tries over many centuries, is strongly imbued with the principles of

freedom, security, justice and efficiency.

Christian von Bar,

Hugh Beale,

Eric Clive,

Hans Schulte-Nölke

Efficiency Princ. 62

Table of Destinations

An entry in this table indicates a model rule which addresses the

same legal issue as that dealt with in the relevant article of the

PECL.

It does not imply that the corresponding model rule is in the same

terms or to the same effect. Relocations of Model Rules since the

publication of the Interim Outline Edition (

IOE) are indicated in

italics in square brackets. Reference should be made to the

IOE to

ascertain changes in wording.

PECL DCFR Model Rules

Chapter 1 1:101

(1)

I. – 1:101(1)

(2) –

(3) –

(4) –

1:102

(1)

II. – 1:102(1)

(2)

II. – 1:102(2)

1:103 –

1:104 –

1:105

II. – 1:104(1), (2)

1:106

I. – 1:102(1), (3), (4)

1:107 –

1:201

(1)

II. – 3:301(2); III. – 1:103(1)

(2)

III. – 1:103(2)

1:202

III. – 1:104

101

* This and the following table were compiled by Daniel Smith (Osnabrück)

with assistance from Dr. Stephen Swann (Osnabrück).

PECL DCFR Model Rules

1:301

(1)

I. – 1:108(1) (with the Annex)

[

ex IOE I. – 1:103(1)

(with Annex 1: “Conduct”)

]

(2) I. – 1:108(1) (with the Annex)

[

ex IOE I. – 1:103(1)

(with Annex 1: “Court”)

]

(3) –

(4)

I. – 1:108(1) (with the Annex)

[

ex IOE I. – 1:103(1) (with

Annex 1: “Non-performance”)

]

;

III. – 1:102(3)

[

ex IOE III.–1:101

]

(5) –

(6)

I. – 1:106

[

ex IOE I. – 1:105

]

1:302 I. – 1:104

[

ex IOE I. – 1:103(1) (with

Annex 1: “Reasonable”)

]

1:303

(1)

I. – 1:109(2)

[

ex IOE II.–1:106(2)

]

(2) I. – 1:109(3)

[

ex IOE II.–1:106(3)

]

(3) I. – 1:109(4)

[

ex IOE II.–1:106(4)

]

(4) III. – 3:106

(5)

I. – 1:109(5)

[

ex IOE II.–1:106(5)

]

(6) I. – 1:109(1)

[

ex IOE II.–1:106(1)

]

1:304 I. – 1:110

[

ex IOE I. – 1:104

(with Annex 2)

]

1:305 II. – 1:105

Chapter 2 2:101

(1)

II. – 4:101

(2)

II. – 1:106(1)

[

ex IOE II.–1:107

]

Table of Destinations

102

PECL DCFR Model Rules

2:102

II. – 4:102

2:103

II. – 4:103

2:104

(1)

II. – 9:103(1)

(2)

II. – 9:103(3)(b)

2:105

II. – 4:104

2:106

II. – 4:105

2:107

II. – 1:103(2)

2:201

II. – 4:201

2:202

II. – 4:202(1)-(3)

2:203

II. – 4:203

2:204

II. – 4:204

2:205

II. – 4:205

2:206

II. – 4:206

2:207

II. – 4:207

2:208

II. – 4:208

2:209

(1)

II. – 4:209(1)

(2)

II. – 4:209(2)

(3)

I. – 1:108(1) (with the Annex)

[

ex IOE I. – 1:103(1) (with

Annex 1: “Standard terms”)

]

2:210 II. – 4:210

2:211

II. – 4:211

2:301

(1)

II. – 3:301(1)

(2)

II. – 3:301(3)

(3)

II. – 3:301(4)

2:302

II. – 3:302(1), (4)

Chapter 3 3:101

(1)

II. – 6:101(1)

(2) –

(3)

II. – 6:101(3)

3:102 –

Table of Destinations

103

PECL DCFR Model Rules

3:201

(1)

II. – 6:103(2)

(2)

II. – 6:104(2)

(3)

II. – 6:103(3)

3:202

II. – 6:105

3:203

II. – 6:108

3:204

(1)

II. – 6:107(1)

(2)

II. – 6:107(2), (3)

3:205

II. – 6:109

3:206

II. – 6:104(3)

3:207

II. – 6:111(1), (2)

3:208 –

3:209

(1)

II. – 6:112(1)

(2)

II. – 6:112(3)

(3)

II. – 6:112(4)

3:301

II. – 6:106

3:302 –

3:303 –

3:304 –

Chapter 4 4:101

II. – 7:101(2)

4:102

II. – 7:102

4:103

II. – 7:201

4:104

II. – 7:202

4:105

II. – 7:203

4:106

II. – 7:204

4:107

II. – 7:205

4:108

II. – 7:206

4:109

II. – 7:207

4:110

(1)

II. – 9:403-9:405

[

ex IOE II.–9:404-9:406

]

;

II. – 9:407(1)

[

ex IOE II.–9:408(1)

]

;

Table of Destinations

104

PECL DCFR Model Rules

II. – 9:408

[

ex IOE II.–9:409

]

(2)

II. – 9:406(2)

[

ex IOE II.–9:407(2)

]

4:111 II. – 7:208

4:112

II. – 7:209

4:113

(1)

II.–7:210

(2) –

4:114

II.–7:211

4:115

II. – 7:212(2)

4:116

II.–7:213

4:117

II.–7:214

4:118

II.–7:215

4:119

II.–7:216

Chapter 5 5:101

II. – 8:101

5:102

II. – 8:102(1)

5:103

II. – 8:103(1)

5:104

II. – 8:104

5:105

II. – 8:105

5:106

II. – 8:106

5:107

II. – 8:107

Chapter 6 6:101

(1)

II. – 9:102(1)

(2)

II. – 9:102(2)

(3)

II. – 9:102(3), (4)

6:102

II. – 9:101(2)

6:103

II. – 9:201(1)

6:104

II. – 9:104

6:105

II. – 9:105

6:106

II. – 9:106

6:107

II. – 9:107

6:108

II. – 9:108

6:109

III. – 1:109(2)

Table of Destinations

105

PECL DCFR Model Rules

6:110

(1)

II. – 9:301(1)

(2)

II. – 9:303(1), 2nd. sent.

(3)

II. – 9:303(2), (3)

6:111

III. – 1:110

Chapter 7 7:101

III. – 2:101(1), (2)

7:102

(1)

III. – 2:102(1)

(2)

III. – 2:102(2)

(3)

III. – 2:102(1)

7:103

III. – 2:103

7:104

III. – 2:104

7:105

III. – 2:105

7:106

III. – 2:107(1), (2)

7:107

III. – 2:108

7:108

III. – 2:109(1)–(3)

7:109

(1)

III. – 2:110(1)

(2)

III. – 2:110(2), (3)

(3)

III. – 2:110(4)

(4)

III. – 2:110(5)

7:110

III. – 2:111

7:111

III. – 2:112(1)

7:112

III. – 2:113(1)

Chapter 8 8:101

III. – 3:101

8:102

III. – 3:102

8:103

III. – 3:502(2)

8:104

III. – 3:202; III. – 3:203(a)

8:105

(1)

III. – 3:401(2)

(2)

III. – 3:505

8:106

(1)

III. – 3:103(1)

(2)

III. – 3:103(2), (3)

(3)

III. – 3:503; III. – 3:507(2)

Table of Destinations

106

PECL DCFR Model Rules

8:107

III. – 2:106

8:108

III. – 3:104(1), (3), (5)

8:109

III. – 3:105(2)

Chapter 9 9:101

III. – 3:301

9:102

(1)

III. – 3:302(1), (2)

(2)

III. – 3:302(3), (5)

(3)

III. – 3:302(4)

9:103

III. – 3:303

9:201

(1)

III. – 3:401(1), (4)

(2)

III. – 3:401(2)

9:301

(1)

III. – 3:502(1)

(2) –

9:302

III. – 3:506(2)

9:303

(1)

III. – 3:507(1)

(2)

III. – 3:508

(3)

III. – 3:508

(4)

III. – 3:104(4)

9:304

III. – 3:504

9:305

III. – 3:509(1), (2)

9:306

III. – 3:511(2)

[

ex IOE III.–3:510 and

III. – 3:512(2)

]

9:307 III. – 3:510

[

ex IOE III.–3:511

]

9:308 III. – 3:510

[

ex IOE III.–3:511

]

9:309 III. – 3:510

[

ex IOE III.–3:511

]

III. – 3:512

[

ex IOE III.–3:513

]

9:401 III. – 3:601

9:501

III. – 3:701

Table of Destinations

107

PECL DCFR Model Rules

9:502

III. – 3:702

9:503

III. – 3:703

9:504

III. – 3:704

9:505

III. – 3:705

9:506

III. – 3:706

9:507

III. – 3:707

9:508

III. – 3:708

9:509

III. – 3:712

[

ex IOE III.–3:710

]

9:510 III. – 3:713

[

ex IOE III.–3:711

]

Chapter 10 10:101 III. – 4:102

10:102

III. – 4:103

10:103

III. – 4:104

10:104

III. – 4:105

10:105

III. – 4:106

10:106

III. – 4:107

10:107

III. – 4:108

10:108

(1)

III. – 4:109(1)

(2) –

(3)

III. – 4:109(2)

10:109

III. – 4:110

10:110

III. – 4:111

10:111

III. – 4:112

10:201

III. – 4:202

10:202

III. – 4:204

10:203

III. – 4:205

10:204

III. – 4:206

10:205

III. – 4:207

Chapter 11 11:101

(1)

III. – 5:101(1)

(2)

III. – 5:101(1)

(3)

III. – 5:101(2)

Table of Destinations

108

PECL DCFR Model Rules

Chapter 11 (4)

III. – 5:103(1)

(5) –

11:102

(1)

III. – 5:105(1)

(2)

III. – 5:106(1)

11:103

III. – 5:107

11:104

III. – 5:110

11:201

III. – 5:115

11:202

III. – 5:114(1), (2)

11:203

III. – 5:108(1);

III. – 5:122

[

ex IOE III. – 5:108(3)

]

11:204 III. – 5:112(2), (4), (6)

11:301

(1)

III. – 5:108(2),

III. – 5:108(3)

[

ex IOE III. – 5:108(4), (5)

]

(2) III. – 5:108(4)

[

ex IOE III. – 5:108(6)

11:302

III. – 5:109

11:303

(1)

III. – 5:119(1)

[

ex IOE III. – 5:118(1)

]

;

III. – 5:120(2)

[

ex IOE III. – 5:119(2)

]

(2) III. – 5:120(3), (4)

[

ex IOE III. – 5:119(3), (4)

]

(3) III. – 5:120(1)

[

ex IOE III. – 5:119(1)

]

(4) III. – 5:119(1)

[

ex IOE III. – 5:118(1)

]

11:304 III. – 5:119(2)

[

ex IOE III. – 5:118(2)

]

11:305 –

11:306

III. – 5:117

11:307

III. – 5:116(1), (3)

11:308 –

Table of Destinations

109

PECL DCFR Model Rules

11:401

(1)

III. – 5:121(1)

[

ex IOE III. – 5:120(1)

]

(2) III. – 5:114(3)

(3)

III. – 5:122

[

ex IOE III. – 5:108(3)

]

(4) III. – 5:122

[

ex IOE III. – 5:108(3)

]

Chapter 12 12:101

(1)

III. – 5:202(1)(a)

[

ex IOE III. – 5:201(1)

]

III. – 5:203(1)

[

ex IOE III. – 5:201(1)

]

(2) III. – 5:203(2)

[

ex IOE III. – 5:201(2)

]

12:102

(1)

III. – 5:205(3)

[

ex IOE III. – 5:202(1)

]

(2) III. – 5:205(4)

[

ex IOE III. – 5:202(2)

]

(3) III. – 5:205(5)

[

ex IOE III. – 5:202(3)

]

(4) III. – 5:205(1)

[

ex IOE III. – 5:202(4)

]

12:201

(1)

III. – 5:302(1)

[

ex IOE III. – 5:301(1)

]

(2) III. – 5:302(2)

[

ex IOE III. – 5:301(2)

]

Chapter 13 13:101 III. – 6:102(a), (b)

13:102

III. – 6:103

13:103

III. – 6:104

13:104

III. – 6:105

13:105

III. – 6:106

13:106

III. – 6:107

13:107

III. – 6:108

Chapter 14 14:101

III. – 7:101

14:201

III. – 7:201

Table of Destinations

110

PECL DCFR Model Rules

14:202

III. – 7:202

14:203

III. – 7:203

14:301

III. – 7:301

14:302

III. – 7:302(1)-(3)

14:303

III. – 7:303(1), (2)

14:304

III. – 7:304

14:305

III. – 7:305

14:306

III. – 7:306

14:307

III. – 7:307

14:401

III. – 7:401

14:402

III. – 7:402

14:501

III. – 7:501

14:502

III. – 7:502

14:503

III. – 7:503

14:601

III. – 7:601

Chapter 15 15:101

II. – 7:301

15:102

II. – 7:302

15:103 –

15:104

II. – 7:303

15:105

II. – 7:304

Chapter 16 16:101

III. – 1:106(1)

16:102

III. – 1:106(4)

16:103

(1)

III. – 1:106(2)

(2)

III. – 1:106(3)

Chapter 17 17:101

III. – 3:709

Table of Destinations

111

Table of Derivations

An entry in this table indicates an article of the PECL which ad-

dresses the same legal issue as that dealt with in the relevant model

rule. It does not imply that the article of the

PECL is in the same

terms or to the same effect.

Relocations of Model Rules since the publication of the Interim

Outline Edition (

IOE) are indicated in italics in square brackets;

newly inserted Articles or Paragraphs are pointed out by an asterisk.

Reference should be made to the

IOE to ascertain changes in word-

ing.

DCFR Model Rules PECL

Book I I. – 1:101

(1) 1:101(1)

(2) –

(3) –

I. – 1:102

(1) 1:106(1), 1st sent.

(2) –

(3) 1:106(1), 2nd sent.

(4) 1:106(2), 1st sent.

(5) –

I. – 1:103*

[

ex IOE Annex 1: “Good faith

and fair dealing”

]

–

I. – 1:104*

[

ex IOE Annex 1: “Reasonable”

]

1:302

I. – 1:105*

[

ex IOE Annex 1: “Consumer”

and “Business”

]

–

I. – 1:106

[

ex IOE I. – 1:105

]

1:301(6)

113

DCFR Model Rules PECL

Book I I. – 1:107

[

ex IOE I. – 1:106

]

–

I. – 1:108

(1) (with Annex:

“Conduct”; “Court”;

“Non-performance”;

“Standard terms”)

[

ex IOE I. – 1:103(1) (with

Annex 1: “Conduct”;

“Court”; “Non-perform-

ance”; “Standard terms”)

]

1:301(1), (2), (4); 2:209(3)

(2)

[

ex IOE I. – 1:103(2)

]

–

I. – 1:109

[

ex IOE II.–1:106

]

(1) 1:303(6)

(2) 1:303(1)

(3) 1:303(2)

(4) 1:303(3)

(5) 1:303(5)

(6) –

(7) –

I. – 1:110*

[

ex IOE I. – 1:104 (with Annex 2)

]

1:304

Book

II II. – 1:101 –

II. – 1:102

(1) 1:102(1)

(2) 1:102(2)

(3) –

II. – 1:103

(1) –

(2) 2:107

(3) –

II. – 1:104

(1) 1:105(1)

(2) 1:105(2)

(3) –

Table of Derivations

114

DCFR Model Rules PECL

Book II II. – 1:105 1:305

II. – 1:106

[

ex IOE II.–1:107

]

(1) 2:101(2)

(2)* –

II. – 1:107

[

ex IOE II.–1:108

]

–

II. – 1:108

[

ex IOE II.–1:109

]

–

II. – 1:109*

[

ex IOE Annex 1: “Standard

terms”

]

–

II. – 1:110

[

ex IOE II.–9:403

]

–

II. – 2:101 –

II. – 2:102 –

II. – 2:103 –

II. – 2:104 –

II. – 2:105 –

II. – 3:101 –

II. – 3:102

(1) –

(2) –

(3)* –

II. – 3:103 –

II. – 3:104 –

(1) –

(2) –

(3) –

(4)* –

(5)* –

II. – 3:105 –

(1) –

(2) –

(3)* –

(4)* –

Table of Derivations

115

DCFR Model Rules PECL

Book II II. – 3:106 –

(1) –

(2)* –

(3) –

II. – 3:107* –

II. – 3:108* –

II. – 3:109

[

ex IOE II.–3:107

]

–

II. – 3:201 –

II. – 3:202* –

II. – 3:301

(1) 2:301(1)

(2) 1:201(1)

(3) 2:301(2)

(4) 2:301(3)

II. – 3:302

(1) 2:302, 1st sent.

(2) –

(3) –

(4) 2:302, 2nd sent.

II. – 3:401 –

II. – 3:501* –

II. – 4:101 2:101(1)

II. – 4:102 2:102

II. – 4:103 2:103

II. – 4:104 2:105

II. – 4:105 2:106

II. – 4:201 2:201

II. – 4:202

(1) 2:202(1)

(2) 2:202(2)

(3) 2:202(3)

(4)* –

Table of Derivations

116

DCFR Model Rules PECL

Book II II. – 4:203 2:203

II. – 4:204 2:204

II. – 4:205 2:205

II. – 4:206 2:206

II. – 4:207 2:207

II. – 4:208 2:208

II. – 4:209 2:209(1), (2)

II. – 4:210 2:210

II. – 4:211 2:211

II. – 4:301 –

II. – 4:302 –

II. – 4:303 –

II. – 5:101 –

II. – 5:102 –

II. – 5:103 –

II. – 5:104 –

II. – 5:105 –

(1) –

(2) –

(3)* –

(4) –

(5) –

(6) –

(7)* –

II. – 5:106 –

II. – 5:201 –

II. – 5:202 –

II. – 6:101

(1) 3:101(1)

(2) –

(3) 3:101(3)

II. – 6:102 –

Table of Derivations

117

DCFR Model Rules PECL

Book II II. – 6:103

(1) –

(2) 3:201(1)

(3) 3:201(3)

II. – 6:104

(1) –

(2) 3:201(2)

(3) 3:206

II. – 6:105 3:202

II. – 6:106 3:301

II. – 6:107

(1) 3:204(1)

(2) 3:204(2), 1st sent.

(3) 3:204(2), 2nd sent.

II. – 6:108 3:203

II. – 6:109 3:205

II. – 6:110 –

II. – 6:111

(1) 3:207(1)

(2) 3:207(2)

(3) –

II. – 6:112

(1) 3:209(1)

(2) –

(3) 3:209(2)

(4) 3:209(3)

II. – 7:101

(1) –

(2) 4:101

(3) –

II. – 7:102 4:102

II. – 7:201 4:103

II. – 7:202 4:104

Table of Derivations

118

DCFR Model Rules PECL

Book II II. – 7:203 4:105

II. – 7:204 4:106

II. – 7:205 4:107

II. – 7:206 4:108

II. – 7:207 4:109

II. – 7:208 4:111

II. – 7:209 4:112

II. – 7:210 4:113(1)

II. – 7:211 4:114

II.–7:212

(1) –

(2) 4:115

(3) –

II. – 7:213 4:116

II. – 7:214 4:117

II. – 7:215 4:118

II. – 7:216 4:119

II. – 7:301 15:101

II. – 7:302 15:102

II. – 7:303 15:104

II. – 7:304 15:105

II. – 8:101 5:101

II. – 8:102

(1) 5:102

(2) –

II. – 8:103

(1) 5:103

(2)* –

II. – 8:104 5:104

II. – 8:105 5:105

II. – 8:106 5:106

II. – 8:107 5:107

II. – 8:201 –

II. – 8:202 –

Table of Derivations

119

DCFR Model Rules PECL

Book II II. – 9:101

(1) –

(2) 6:102

(3) –

(4) –

II. – 9:102

(1) 6:101(1)

(2) 6:101(2)

(3) 6:101(3)

(4) 6:101(3)

(5) –

(6)* –

II. – 9:103

(1) 2:104(1)

(2) –

(3)(a) –

(3)(b) 2:104(2)

II. – 9:104 6:104

II. – 9:105 6:105

II. – 9:106 6:106

II. – 9:107 6:107

II. – 9:108 6:108

II. – 9:109* –

II. – 9:201

(1) 6:103

(2) –

II. – 9:301

(1) 6:110(1)

(2) –

(3) –

II. – 9:302 –

II. – 9:303 6:110(2), (3)

II. – 9:401 –

II. – 9:402 –

Table of Derivations

120

DCFR Model Rules PECL

Book II II. – 9:403

[

ex IOE II.–9:404

]

4:110(1)

II. – 9:404

[

ex IOE II.–9:405

]

4:110(1)

II. – 9:405

[

ex IOE II.–9:406

]

4:110(1)

II. – 9:406

[

ex IOE II.–9:407

]

(1) –

(2) 4:110(2)

II. – 9:407

[

ex IOE II.–9:408

]

(1) 4:110(1)

(2) –

II. – 9:408

[

ex IOE II.–9:409

]

4:110(1)

II. – 9:409

[

ex IOE II.–9:410

]

–

II. – 9:410

[

ex IOE II.–9:411

]

–

Book

III III. – 1:101

[

ex IOE III.–1:102

]

–

III. – 1:102

[

ex IOE III.–1:101

]

(1) –

(2) –

(3) 1:301(4)

(4) –

(5) –

III. – 1:103

(1) 1:201(1)

(2) 1:201(2)

(3) –

III. – 1:104 1:202

III. – 1:105 –

Table of Derivations

121

DCFR Model Rules PECL

Book III III. – 1:106

(1) 16:101

(2) 16:103(1)

(3) 16:103(2)

(4) 16:102

(5) –

III. – 1:107 –

III. – 1:108 –

III. – 1:109

(1) –

(2) 6:109

(3) –

III. – 1:110 6:111

III. – 1:111* –

III. – 2:101

(1) 7:101(1)

(2) 7:101(2), (3)

(3) –

III. – 2:102

(1) 7:102(1), (3)

(2) 7:102(2)

(3)* –

(4)* –

III. – 2:103 7:103

III. – 2:104 7:104

III. – 2:105 7:105

III. – 2:106 8:107

III. – 2:107

(1) 7:106(1)

(2) 7:106(2)

(3) –

III. – 2:108 7:107

Table of Derivations

122

DCFR Model Rules PECL

Book III III. – 2:109

(1) 7:108(1)

(2) 7:108(2)

(3) 7:108(3)

(4) –

III. – 2:110

(1) 7:109(1)

(2) 7:109(2)

(3) 7:109(2)

(4) 7:109(3)

(5) 7:109(4)

III. – 2:111 7:110

III. – 2:112

(1) 7:111

(2) –

III. – 2:113

(1) 7:112

(2) –

III. – 2:114 –

III. – 3:101 8:101

III. – 3:102 8:102

III. – 3:103

(1) 8:106(1)

(2) 8:106(2), 1st sent.

(3) 8:106(2), 2nd sent.

III. – 3:104

(1) 8:108(1)

(2) –

(3) 8:108(2)

(4) 9:303(4)

(5) 8:108(3)

III. – 3:105

(1) –

(2) 8:109

Table of Derivations

123

DCFR Model Rules PECL

Book III III. – 3:106

(1) 1:303(4), 1st sent.

(2) 1:303(4), 2nd sent.

III. – 3:107 –

III. – 3:108* –

III. – 3:201 –

III. – 3:202 8:104

III. – 3:203

(a) 8:104

(b) –

(d) –

III. – 3:204 –

III. – 3:205* –

III. – 3:301 9:101

III. – 3:302

(1) 9:102(1)

(2) 9:102(1)

(3) 9:102(2)(a)-(c)

(4) 9:102(3)

(5) 9:102(2)(d)

III. – 3:303 9:103

III. – 3:401

(1) 9:201(1), 1st sent.

(2) 8:105(1); 9:201(2)

(3) –

(4) 9:201(1), 2nd sent.

III. – 3:501 –

III. – 3:502

(1) 9:301(1)

(2) 8:103

III. – 3:503 8:106(3)

III. – 3:504 9:304

III. – 3:505 8:105(2)

Table of Derivations

124

DCFR Model Rules PECL

Book III III. – 3:506

(1)* –

(2) 9:302

III. – 3:507

(1) 9:303(1)

(2) 8:106(3)

III. – 3:508 9:303(2), (3)

III. – 3:509

(1) 9:305(1)

(2) 9:305(2)

(3) –

III. – 3:510

[

ex IOE III.–3:511

]

9:307; 9:308; 9:309

III. – 3:511

[

ex IOE III.–3:512

]

(1) –

(2)

[

ex IOE III.–3:510

]

9:306

(3)* –

III. – 3:512

[

ex IOE III.–3:513

]

9:309

III. – 3:513

[

ex IOE III.–3:514

]

–

III. – 3:514

[

ex IOE III.–3:515

]

–

III. – 3:601 9:401

III. – 3:701 9:501

III. – 3:702 9:502

III. – 3:703 9:503

III. – 3:704 9:504

III. – 3:705 9:505

III. – 3:706 9:506

III. – 3:707 9:507

III. – 3:708 9:508

III. – 3:709 17:101

III. – 3:710* –

Table of Derivations

125

DCFR Model Rules PECL

Book III III. – 3:711* –

III. – 3:712

[

ex IOE III.–3:710

]

9:509

III. – 3:713

[

ex IOE III.–3:711

]

9:510

III. – 4:101 –

III. – 4:102 10:101

III. – 4:103 10:102

III. – 4:104 10:103

III. – 4:105 10:104

III. – 4:106 10:105

III. – 4:107 10:106

III. – 4:108 10:107

III. – 4:109

(1) 10:108(1)

(2) 10:108(3)

(3) –

III. – 4:110 10:109

III. – 4:111 10:110

III. – 4:112 10:111

III. – 4:201 –

III. – 4:202 10:201

III. – 4:203 –

III. – 4:204 10:202

III. – 4:205 10:203

III. – 4:206 10:204

III. – 4:207 10:205

III. – 5:101

(1) 11:101(1), (2)

(2) 11:101(3)

III. – 5:102 –

III. – 5:103

(1) 11:101(4)

(2) –

Table of Derivations

126

DCFR Model Rules PECL

Book III III. – 5:104

(1) –

(2)* –

(3)* –

(4) –

III. – 5:105

(1) 11:102(1)

(2) –

III. – 5:106

(1) 11:102(2)

(2) –

III. – 5:107 11:103

III. – 5:108

(1) 11:203

(2) 11:301(1)

(3)

[

ex IOE III.–5:108(4), (5)

]

11:301(1)

(4)

[

ex IOE III.–5:108(6)

]

11:301(2)

III. – 5:109 11:302

III. – 5:110 11:104

III. – 5:111 –

III. – 5:112

(1) –

(2) 11:204(a)

(3) –

(4) 11:204(b)

(5) –

(6) 11:204(c)

(7) –

III. – 5:113 –

III. – 5:114

(1) 11:202(1)

(2) 11:202(2)

(3) 11:401(2)

Table of Derivations

127

DCFR Model Rules PECL

Book III III. – 5:115 11:201

III. – 5:116

(1) 11:307(1)

(2) –

(3) 11:307(2)

III. – 5:117 11:306

III. – 5:118* –

III. – 5:119

[

ex IOE III.–5:118

]

(1) 11:303(1), (4)

(2) 11:304

(3)* –

III. – 5:120

[

ex IOE III.–5:119

]

(1) 11:303(3)

(2) 11:303(1)

(3) 11:303(2)

(4) 11:303(2)

III. – 5:121

[

ex IOE III.–5:120

]

(1) 11:401(1)

(2) –

III. – 5:122*

[

ex IOE III.–5:108(3)

]

11:203; 11:401(3), (4)

III. – 5:201* –

III. – 5:202

(1)

(a)

[

ex IOE III.–5:201(1)

]

12:101(1)

(b)* –

(c)* –

(2)* –

Table of Derivations

128

DCFR Model Rules PECL

Book III III. – 5:203

(1)

[

ex IOE III.–5:201(1)

]

12:101(1)

(2)

[

ex IOE III.–5:201(2)

]

12:101(2)

(3)* –

III. – 5:204* –

III. – 5:205

(1)

[

ex IOE III.–5:202(4)

]

12:102(4)

(2)* –

(3)

[

ex IOE III.–5:202(1)

]

12:102(1)

(4)

[

ex IOE III.–5:202(2)

]

12:102(2)

(5)

[

ex IOE III.–5:202(3)

]

12:102(3)

III. – 5:206*

III. – 5:207*

III. – 5:208*

III. – 5:209*

III. – 5:301*

III. – 5:302

(1)

[

ex IOE III.–5:301(1)

]

12:201(1), 1st sent.

(2)

[

ex IOE III.–5:301(1)

]

12:201(1), 2nd sent.

(3)

[

ex IOE III.–5:301(2)

]

12:201(2)

III. – 5:401* –

III. – 5:402* –

III. – 6:101

(1) –

(2)* –

III. – 6:102

(a), (b) 13:101

(c)* –

Table of Derivations

129

DCFR Model Rules PECL

Book III III. – 6:103 13:102

III. – 6:104 13:103

III. – 6:105 13:104

III. – 6:106 13:105

III. – 6:107 13:106

III. – 6:108 13:107

III. – 6:201 –

III. – 7:101 14:101

III. – 7:201 14:201

III. – 7:202 14:202

III. – 7:203 14:203

III. – 7:301 14:301

III. – 7:302

(1) 14:302(1)

(2) 14:302(2)

(3) 14:302(3)

(4)* –

III. – 7:303

(1) 14:303(1)

(2) 14:303(2)

(3)* –

(4) –

III. – 7:304 14:304

III. – 7:305 14:305

III. – 7:306 14:306

III. – 7:307 14:307

III. – 7:401 14:401

III. – 7:402 14:402

III. – 7:501 14:501

III. – 7:502 14:502

III. – 7:503 14:503

III. – 7:601 14:601

Table of Derivations

130

Model Rules

Book I

General provisions

I. – 1:101: Intended field of application 177

I. – 1:102: Interpretation and development 177

I. – 1:103: Good faith and fair dealing 178

I. – 1:104: Reasonableness 178

I. – 1:105: “Consumer” and “business” 178

I. – 1:106: “In writing” and similar expressions 179

I. – 1:107: “Signature” and similar expressions 179

I. – 1:108: Definitions in Annex 180

I. – 1:109: Notice 180

I. – 1:110: Computation of time 181

Book II

Contracts and other juridical acts

Chapter 1: General provisions

II. – 1:101: Meaning of “contract” and “juridical act” 183

II. – 1:102: Party autonomy 183

II. – 1:103: Binding effect 183

II. – 1:104: Usages and practices 184

II. – 1:105: Imputed knowledge etc. 184

II. – 1:106: Form 184

II. – 1:107: Mixed contracts 184

II. – 1:108: Partial invalidity or ineffectiveness 185

II. – 1:109: Standard terms 185

II. – 1:110: Terms “not individually negotiated” 185

131

Chapter 2: Non-discrimination

II. – 2:101: Right not to be discriminated against 186

II. – 2:102: Meaning of discrimination 186

II. – 2:103: Exception 187

II. – 2:104: Remedies 187

II. – 2:105: Burden of proof 187

Chapter 3: Marketing and pre-contractual duties

Section 1: Information duties

187

II. – 3:101: Duty to disclose information about goods,

other assets and services

187

II. – 3:102: Specific duties for businesses marketing to

consumers

188

II. – 3:103: Duty to provide information when

concluding contract with a consumer who is

at a particular disadvantage

189

II. – 3:104: Information duties in real time distance

communication

189

II. – 3:105: Formation by electronic means 190

II. – 3:106: Clarity and form of information 190

II. – 3:107: Information about price and additional

charges

191

II. – 3:108: Information about address and identity

of business

191

II. – 3:109: Remedies for breach of information duties 192

Section 2: Duty to prevent input errors and

acknowledge receipt

192

II. – 3:201: Correction of input errors 192

II. – 3:202: Acknowledgement of receipt 193

Section 3: Negotiation and confidentiality duties 193

II. – 3:301: Negotiations contrary to good faith and

fair dealing

193

II. – 3:302: Breach of confidentiality 194

Section 4: Unsolicited goods or services 194

II. – 3:401: No obligation arising from failure to respond 194

Section 5: Damages for breach of duty under this Chapter 195

II. – 3:501: Liability for damages 195

Book II Model Rules

132

Chapter 4: Formation

Section 1: General provisions

195

II. – 4:101: Requirements for the conclusion of a contract 195

II. – 4:102: How intention is determined 195

II. – 4:103: Sufficient agreement 196

II. – 4:104: Merger clause 196

II. – 4:105: Modification in certain form only 196

Section 2: Offer and acceptance 197

II. – 4:201: Offer 197

II. – 4:202: Revocation of offer 197

II. – 4:203: Rejection of offer 197

II. – 4:204: Acceptance 198

II. – 4:205: Time of conclusion of the contract 198

II. – 4:206: Time limit for acceptance 198

II. – 4:207: Late acceptance 198

II. – 4:208: Modified acceptance 199

II. – 4:209: Conflicting standard terms 199

II. – 4:210: Formal confirmation of contract

between businesses

199

II. – 4:211: Contracts not concluded through offer and

acceptance

200

Section 3: Other juridical acts 200

II. – 4:301: Requirements for a unilateral juridical act 200

II. – 4:302: How intention is determined 200

II. – 4:303: Right or benefit may be rejected 200

Chapter 5: Right of withdrawal

Section 1: Exercise and effect

201

II. – 5:101: Scope and mandatory nature 201

II. – 5:102: Exercise of right to withdraw 201

II. – 5:103: Withdrawal period 201

II. – 5:104: Adequate information on the right to withdraw 202

II. – 5:105: Effects of withdrawal 202

II. – 5:106: Linked contracts 203

Section 2: Particular rights of withdrawal 203

II. – 5:201: Contracts negotiated away from

business premises

203

II. – 5:202: Timeshare contracts 205

Model Rules Book II

133

Chapter 6: Representation

II. – 6:101: Scope 205

II. – 6:102: Definitions 206

II. – 6:103: Authorisation 206

II. – 6:104: Scope of authority 206

II. – 6:105: When representative’s act affects

principal’s legal position

206

II. – 6:106: Representative acting in own name 207

II. – 6:107: Person purporting to act as representative

but not having authority

207

II. – 6:108: Unidentified principal 207

II. – 6:109: Conflict of interest 207

II. – 6:110: Several representatives 208

II. – 6:111: Ratification 208

II. – 6:112: Effect of ending or restriction of authorisation 208

Chapter 7: Grounds of invalidity

Section 1: General provisions

209

II. – 7:101: Scope 209

II. – 7:102: Initial impossibility or lack of right or

authority to dispose

209

Section 2: Vitiated consent or intention 209

II. – 7:201: Mistake 209

II. – 7:202: Inaccuracy in communication may be

treated as mistake

210

II. – 7:203: Adaptation of contract in case of mistake 210

II. – 7:204: Liability for loss caused by reliance on

incorrect information

211

II. – 7:205: Fraud 211

II. – 7:206: Coercion or threats 211

II. – 7:207: Unfair exploitation 212

II. – 7:208: Third persons 212

II. – 7:209: Notice of avoidance 213

II. – 7:210: Time 213

II. – 7:211: Confirmation 213

II. – 7:212: Effects of avoidance 213

II. – 7:213: Partial avoidance 213

II. – 7:214: Damages for loss 213

Book II Model Rules

134

II. – 7:215: Exclusion or restriction of remedies 214

II. – 7:216: Overlapping remedies 214

Section 3: Infringement of fundamental principles or

mandatory rules

214

II. – 7:301: Contracts infringing fundamental principles 214

II. – 7:302: Contracts infringing mandatory rules 214

II. – 7:303: Effects of nullity or avoidance 215

II. – 7:304: Damages for loss 215

Chapter 8: Interpretation

Section 1: Interpretation of contracts

216

II. – 8:101: General rules 216

II. – 8:102: Relevant matters 216

II. – 8:103: Interpretation against supplier of term

or dominant party

217

II. – 8:104: Preference for negotiated terms 217

II. – 8:105: Reference to contract as a whole 217

II. – 8:106: Preference for interpretation which gives

terms effect

217

II. – 8:107: Linguistic discrepancies 218

Section 2: Interpretation of other juridical acts 218

II. – 8:201: General rules 218

II. – 8:202: Application of other rules by analogy 218

Chapter 9: Contents and effects of contracts

Section 1: Contents

219

II. – 9:101: Terms of a contract 219

II. – 9:102: Certain pre-contractual statements

regarded as contract terms

219

II. – 9:103: Terms not individually negotiated 220

II. – 9:104: Determination of price 22 1

II. – 9:105: Unilateral determination by a party 221

II. – 9:106: Determination by a third person 221

II. – 9:107: Reference to a non-existent factor 221

II. – 9:108: Quality 222

II. – 9:109: Language 222

Section 2: Simulation 222

II. – 9:201: Effect of simulation 222

Model Rules Book II

135

Section 3: Effect of stipulation in favour of a third party 222

II. – 9:301: Basic rules 222

II. – 9:302: Rights, remedies and defences 223

II. – 9:303: Rejection or revocation of benefit 223

Section 4: Unfair terms 224

II. – 9:401: Mandatory nature of following provisions 224

II. – 9:402: Duty of transparency in terms not individually

negotiated

224

II. – 9:403: Meaning of “unfair” in contracts between

a business and a consumer

224

II. – 9:404: Meaning of “unfair” in contracts between

non-business parties

224

II. – 9:405: Meaning of “unfair” in contracts between

businesses

224

II. – 9:406: Exclusions from unfairness test 225

II. – 9:407: Factors to be taken into account in assessing

unfairness

225

II. – 9:408: Effects of unfair terms 225

II. – 9:409: Exclusive jurisdiction clauses 225

II. – 9:410: Terms which are presumed to be unfair in

contracts between a business and a consumer

226

Book III

Obligations and corresponding rights

Chapter 1: General

III. – 1:101: Scope of Book 229

III. – 1:102: Definitions 229

III. – 1:103: Good faith and fair dealing 230

III. – 1:104: Co-operation 230

III. – 1:105: Non-discrimination 230

III. – 1:106: Conditional rights and obligations 230

III. – 1:107: Time-limited rights and obligations 231

III. – 1:108: Variation or termination by agreement 231

III. – 1:109: Variation or termination by notice 232

Book III Model Rules

136

III. – 1:110: Variation or termination by court on a

change of circumstances

232

III. – 1:111: Tacit prolongation 233

Chapter 2: Performance

III. – 2:101: Place of performance 233

III. – 2:102: Time of performance 234

III. – 2:103: Early performance 234

III. – 2:104: Order of performance 234

III. – 2:105: Alternative obligations or methods of

performance

234

III. – 2:106: Performance entrusted to another 235

III. – 2:107: Performance by a third person 235

III. – 2:108: Method of payment 235

III. – 2:109: Currency of payment 236

III. – 2:110: Imputation of performance 236

III. – 2:111: Property not accepted 237

III. – 2:112: Money not accepted 237

III. – 2:113: Costs and formalities of performance 238

III. – 2:114: Extinctive effect of performance 238

Chapter 3: Remedies for non-performance

Section 1: General

238

III. – 3:101: Remedies available 238

III. – 3:102: Cumulation of remedies 238

III. – 3:103: Notice fixing additional period for

performance

238

III. – 3:104: Excuse due to an impediment 239

III. – 3:105: Term excluding or restricting remedies 239

III. – 3:106: Notices relating to non-performance 240

III. – 3:107: Failure to notify non-conformity 240

III. – 3:108: Business unable to fulfil consumer’s order by

distance communication

240

Section 2: Cure by debtor of non-conforming performance 241

III. – 3:201: Scope 241

III. – 3:202: Cure by debtor: general rules 241

III. – 3:203: When creditor need not allow debtor an

opportunity to cure

241

Model Rules Book III

137

III. – 3:204: Consequences of allowing debtor

opportunity to cure

242

III. – 3:205: Return of replaced item 242

Section 3: Right to enforce performance 242

III. – 3:301: Enforcement of monetary obligations 242

III. – 3:302: Enforcement of non-monetary obligations 242

III. – 3:303: Damages not precluded 243

Section 4: Withholding performance 243

III. – 3:401: Right to withhold performance of reciprocal

obligation

243

Section 5: Termination 244

III. – 3:501: Scope and definition 244

Sub-section 1: Grounds for termination 244

III. – 3:502: Termination for fundamental

non-performance

244

III. – 3:503: Termination after notice fixing additional

time for performance

245

III. – 3:504: Termination for anticipated non-performance 245

III. – 3:505: Termination for inadequate assurance of

performance

245

Sub-section 2: Scope, exercise and loss of right to terminate 245

III. – 3:506: Scope of right to terminate 245

III. – 3:507: Notice of termination 246

III. – 3:508: Loss of right to terminate 246

Sub-section 3: Effects of termination 246

III. – 3:509: Effect on obligations under the contract 246

Sub-section 4: Restitution 247

III. – 3:510: Restitution of benefits received by

performance

247

III. – 3:511: When restitution not required 247

III. – 3:512: Payment of value of benefit 248

III. – 3:513: Use and improvements 248

III. – 3:514: Liabilities arising after time when return due 249

Section 6: Price reduction 249

III. – 3:601: Right to reduce price 249

Section 7: Damages and interest 250

III. – 3:701: Right to damages 250

III. – 3:702: General measure of damages 250

Book III Model Rules

138

III. – 3:703: Foreseeability 250

III. – 3:704: Loss attributable to creditor 250

III. – 3:705: Reduction of loss 251

III. – 3:706: Substitute transaction 251

III. – 3:707: Current price 251

III. – 3:708: Interest on late payments 251

III. – 3:709: When interest to be added to capital 251

III. – 3:710: Interest in commercial contracts 252

III. – 3:711: Unfair terms relating to interest 252

III. – 3:712: Stipulated payment for non-performance 253

III. – 3:713: Currency by which damages to be measured 253

Chapter 4: Plurality of debtors and creditors

Section 1: Plurality of debtors

253

III. – 4:101: Scope of Section 253

III. – 4:102: Solidary, divided and joint obligations 253

III. – 4:103: When different types of obligation arise 253

III. – 4:104: Liability under divided obligations 254

III. – 4:105: Joint obligations: special rule when money

claimed for non-performance

254

III. – 4:106: Apportionment between solidary debtors 254

III. – 4:107: Recourse between solidary debtors 254

III. – 4:108: Performance, set-off and merger in solidary

obligations

255

III. – 4:109: Release or settlement in solidary obligations 255

III. – 4:110: Effect of judgment in solidary obligations 255

III. – 4:111: Prescription in solidary obligations 255

III. – 4:112: Opposability of other defences in solidary

obligations

256

Section 2: Plurality of creditors 256

III. – 4:201: Scope of section 256

III. – 4:202: Solidary, divided and joint rights 256

III. – 4:203: When different types of right arise 256

III. – 4:204: Apportionment in cases of divided rights 256

III. – 4:205: Difficulties of performing in cases

of joint rights

257

III. – 4:206: Apportionment in cases of solidary rights 257

III. – 4:207: Regime of solidary rights 257

Model Rules Book III

139

Chapter 5: Change of parties

Section 1: Assignment of rights

257

Sub-section 1: General 257

III. – 5:101: Scope of Section 257

III. – 5:102: Definitions 258

III. – 5:103: Priority of provisions on proprietary

securities and trusts

258

Sub-section 2: Requirements for assignment 258

III. – 5:104: Basic requirements 258

III. – 5:105: Assignability: general rule 259

III. – 5:106: Future and unspecified rights 259

III. – 5:107: Assignability in part 259

III. – 5:108: Assignability: effect of contractual

prohibition

259

III. – 5:109: Assignability: rights personal to the creditor 260

III. – 5:110: Act of assignment: formation and validity 260

III. – 5:111: Right or authority to assign 260

Sub-section 3: Undertakings by assignor 260

III. – 5:112: Undertakings by assignor 260

Sub-section 4: Effects of assignment 262

III. – 5:113: New creditor 262

III. – 5:114: When assignment takes place 262

III. – 5:115: Rights transferred to assignee 262

III. – 5:116: Effect on defences and rights of set-off 262

III. – 5:117: Effect on place of performance 263

III. – 5:118: Effect of initial invalidity, subsequent

avoidance, withdrawal, termination and

revocation

263

Sub-section 5: Protection of debtor 264

III. – 5:119: Performance to person who is not the

creditor

264

III. – 5:120: Adequate proof of assignment 264

Sub-section 6: Priority rules 265

III. – 5:121: Competition between successive assignees 265

III. – 5:122: Competition between assignee and assignor

receiving proceeds

265

Section 2: Substitution and addition of debtors 265

III. – 5:201: Scope 265

Book III Model Rules

140

III. – 5:202: Types of substitution or addition 265

III. – 5:203: Consent of creditor 266

III. – 5:204: Complete substitution 266

III. – 5:205: Effects of complete substitution on defences,

set-off and security rights

266

III. – 5:206: Incomplete substitution 267

III. – 5:207: Effects of incomplete substitution 267

III. – 5:208: Addition of new debtor 267

III. – 5:209: Effects of addition of new debtor 267

Section 3: Transfer of contractual position 268

III. – 5:301: Scope 268

III. – 5:302: Transfer of contractual position 268

Section 4: Transfer of rights and obligations on agent’s

insolvency

268

III. – 5:401: Principal’s option to take over rights in

case of agent’s insolvency

268

III. – 5:402: Third party’s counter-option 269

Chapter 6: Set-off and merger

Section 1: Set-off

269

III. – 6:101: Definition and scope 269

III. – 6:102: Requirements for set-off 269

III. – 6:103: Unascertained rights 269

III. – 6:104: Foreign currency set-off 270

III. – 6:105: Set-off by notice 270

III. – 6:106: Two or more rights and obligations 270

III. – 6:107: Effect of set-off 270

III. – 6:108: Exclusion of right of set-off 270

Section 2: Merger of debts 270

III. – 6:201: Extinction of obligations by merger 270

Chapter 7: Prescription

Section 1: General provision

271

III. – 7:101: Rights subject to prescription 271

Section 2: Periods of prescription and their commencement 271

III. – 7:201: General period 271

Model Rules Book III

141

III. – 7:202: Period for a right established by legal

proceedings

271

III. – 7:203: Commencement 271

Section 3: Extension of period 272

III. – 7:301: Suspension in case of ignorance 272

III. – 7:302: Suspension in case of judicial and other

proceedings

272

III. – 7:303: Suspension in case of impediment beyond

creditor’s control

272

III. – 7:304: Postponement of expiry in case of

negotiations

273

III. – 7:305: Postponement of expiry in case of incapacity 273

III. – 7:306: Postponement of expiry: deceased’s estate 273

III. – 7:307: Maximum length of period 273

Section 4: Renewal of period 274

III. – 7:401: Renewal by acknowledgement 274

III. – 7:402: Renewal by attempted execution 274

Section 5: Effects of prescription 274

III. – 7:501: General effect 274

III. – 7:502: Effect on ancillary rights 274

III. – 7:503: Effect on set-off 275

Section 6: Modification by agreement 275

III. – 7:601: Agreements concerning prescription 275

Book IV

Specific contracts and the rights and

obligations arising from them

Part A. Sales

Chapter 1: Scope and definitions

Section 1: Scope

277

IV. A. – 1:101: Contracts covered 277

IV. A. – 1:102: Goods to be manufactured or produced 278

Section 2: Definitions 278

IV. A. – 1:201: Goods 278

IV. A. – 1:202: Contract for sale 278

Book IV.A Model Rules

142

IV. A. – 1:203: Contract for barter 278

IV. A. – 1:204: Consumer contract for sale 278

Chapter 2: Obligations of the seller

Section 1: Overview

279

IV. A. – 2:101: Overview of obligations of the seller 279

Section 2: Delivery of the goods 279

IV. A. – 2:201: Delivery 279

IV. A. – 2:202: Place and time for delivery 279

IV. A. – 2:203: Cure in case of early delivery 280

IV. A. – 2:204: Carriage of the goods 280

Section 3: Conformity of the goods 281

IV. A. – 2:301: Conformity with the contract 281

IV. A. – 2:302: Fitness for purpose, qualities, packaging 281

IV. A. – 2:303: Statements by third persons 281

IV. A. – 2:304: Incorrect installation under a consumer

contract for sale

282

IV. A. – 2:305: Third party rights or claims in general 282

IV. A. – 2:306: Third party rights or claims based on

industrial property or other intellectual

property

282

IV. A. – 2:307: Buyer’s knowledge of lack of conformity 282

IV. A. – 2:308: Relevant time for establishing conformity 283

IV. A. – 2:309: Limits on derogation from conformity

rights in a consumer contract for sale

283

Chapter 3: Obligations of the buyer

IV. A. – 3:101: Main obligations of the buyer 283

IV. A. – 3:102: Determination of form, measurement or

other features

284

IV. A. – 3:103: Price fixed by weight 284

IV. A. – 3:104: Taking delivery 284

IV. A. – 3:105: Early delivery and delivery of excess

quantity

284

Model Rules Book IV.A

143

Chapter 4: Remedies

Section 1: Limits on derogation

285

IV. A. – 4:101: Limits on derogation from remedies

for non-conformity in a consumer

contract for sale

285

Section 2: Modifications of buyer’s remedies for lack of

conformity

285

IV. A. – 4:201: Termination by consumer for lack of

conformity.

285

IV. A. – 4:202: Limitation of liability for damages of

non-business sellers

285

Section 3: Requirements of examination and notification 286

IV. A. – 4:301: Examination of the goods 286

IV. A. – 4:302: Notification of lack of conformity 286

IV. A. – 4:303: Notification of partial delivery 287

IV. A. – 4:304: Seller’s knowledge of lack of conformity 287

Chapter 5: Passing of risk

Section 1: General provisions

287

IV. A. – 5:101: Effect of passing of risk 287

IV. A. – 5:102: Time when risk passes 287

IV. A. – 5:103: Passing of risk in a consumer contract

for sale

287

Section 2: Special rules 288

IV. A. – 5:201: Goods placed at buyer’s disposal 288

IV. A. – 5:202: Carriage of the goods 288

IV. A. – 5:203: Goods sold in transit 288

Chapter 6: Consumer goods guarantees

IV. A. – 6:101: Definition of a consumer goods guarantee 289

IV. A. – 6:102: Binding nature of the guarantee 289

IV. A. – 6:103: Guarantee document 290

IV. A. – 6:104: Coverage of the guarantee 291

IV. A. – 6:105: Guarantee limited to specific parts 291

IV. A. – 6:106: Exclusion or limitation of the guarantor’s

liability

291

IV. A. – 6:107: Burden of proof 291

IV. A. – 6:108: Prolongation of the guarantee period 292

Book IV.A Model Rules

144

Part B. Lease of goods

Chapter 1: Scope of application and general provisions

IV. B. – 1:101: Lease of goods 292

IV. B. – 1:102: Consumer contract for the lease of goods 292

IV. B. – 1:103: Limits on derogation from conformity

rights in a consumer contract for lease

293

IV. B. – 1:104: Limits on derogation from rules on

remedies in a consumer contract for lease

293

Chapter 2: Lease period

IV. B. – 2:101: Start of lease period 293

IV. B. – 2:102: End of lease period 294

IV. B. – 2:103: Tacit prolongation 294

Chapter 3: Obligations of the lessor

IV. B. – 3:101: Availability of the goods 294

IV. B. – 3:102: Conformity with the contract at the start

of the lease period

295

IV. B. – 3:103: Fitness for purpose, qualities, packaging etc. 295

IV. B. – 3:104: Conformity of the goods during the

lease period

296

IV. B. – 3:105: Incorrect installation under a consumer

contract for the lease of goods

296

IV. B. – 3:106: Obligations on return of the goods 296

Chapter 4: Remedies of the lessee: modifications of normal rules

IV. B. – 4:101: Lessee’s right to have lack of conformity

remedied

296

IV. B. – 4:102: Rent reduction 297

IV. B. – 4:103: Notification of lack of conformity 297

IV. B. – 4:104: Remedies to be directed towards supplier

of the goods

297

Chapter 5: Obligations of the lessee

IV. B. – 5:101: Obligation to pay rent 298

IV. B. – 5:102: Time for payment 299

IV. B. – 5:103: Acceptance of goods 299

Model Rules Book IV.B

145

IV. B. – 5:104: Handling the goods in accordance with

the contract

299

IV. B. – 5:105: Intervention to avoid danger or damage

to the goods

299

IV. B. – 5:106: Compensation for maintenance and

improvements

300

IV. B. – 5:107: Obligation to inform 300

IV. B. – 5:108: Repairs and inspections of the lessor 300

IV. B. – 5:109: Obligation to return the goods 301

Chapter 6: Remedies of the lessor: modifications of normal rules

IV. B. – 6:101: Limitation of right to enforce payment

of future rent

301

IV. B. – 6:102: Reduction of liability in consumer

contract for the lease of goods

301

Chapter 7: New parties and sublease

IV. B. – 7:101: Change in ownership and substitution

of lessor

301

IV. B. – 7:102: Assignment of lessee’s rights

to performance

302

IV. B. – 7:103: Sublease 302

Part C. Services

Chapter 1: General provisions

IV. C. – 1:101: Scope 302

IV. C. – 1:102: Exclusions 303

IV. C. – 1:103: Priority rules 303

Chapter 2: Rules applying to service contracts in general

IV. C. – 2:101: Price 303

IV. C. – 2:102: Pre-contractual duties to warn 303

IV. C. – 2:103: Obligation to co-operate 304

IV. C. – 2:104: Subcontractors, tools and materials 305

IV. C. – 2:105: Obligation of skill and care 306

IV. C. – 2:106: Obligation to achieve result 306

Book IV.C Model Rules

146

IV. C. – 2:107: Directions of the client 307

IV. C. – 2:108: Contractual obligation of the service

provider to warn

307

IV. C. – 2:109: Unilateral variation of the service contract 308

IV. C. – 2:110: Client’s obligation to notify anticipated

non-conformity

309

IV. C. – 2:111: Client’s right to terminate 310

Chapter 3: Construction

IV. C. – 3:101: Scope 310

IV. C. – 3:102: Obligation of client to co-operate 311

IV. C. – 3:103: Obligation to prevent damage to structure 311

IV. C. – 3:104: Conformity 311

IV. C. – 3:105: Inspection, supervision and acceptance 311

IV. C. – 3:106: Handing-over of the structure 312

IV. C. – 3:107: Payment of the price 312

IV. C. – 3:108: Risks 313

Chapter 4: Processing

IV. C. – 4:101: Scope 314

IV. C. – 4:102: Obligation of client to co-operate 314

IV. C. – 4:103: Obligation to prevent damage to thing

being processed

314

IV. C. – 4:104: Inspection and supervision 314

IV. C. – 4:105: Return of the thing processed 315

IV. C. – 4:106: Payment of the price 315

IV. C. – 4:107: Risks 316

IV. C. – 4:108: Limitation of liability 317

Chapter 5: Storage

IV. C. – 5:101: Scope 317

IV. C. – 5:102: Storage place and subcontractors 318

IV. C. – 5:103: Protection and use of the thing stored 318

IV. C. – 5:104: Return of the thing stored 318

IV. C. – 5:105: Conformity 319

IV. C. – 5:106: Payment of the price 319

IV. C. – 5:107: Post-storage obligation to inform 319

IV. C. – 5:108: Risks 319

Model Rules Book IV.C

147

IV. C. – 5:109: Limitation of liability 320

IV. C. – 5:110: Liability of the hotel-keeper 320

Chapter 6: Design

IV. C. – 6:101: Scope 322

IV. C. – 6:102: Pre-contractual duty to warn 322

IV. C. – 6:103: Obligation of skill and care 322

IV. C. – 6:104: Conformity 323

IV. C. – 6:105: Handing over of the design 323

IV. C. – 6:106: Records 323

IV. C. – 6:107: Limitation of liability 323

Chapter 7: Information and advice

IV. C. – 7:101: Scope 324

IV. C. – 7:102: Obligation to collect preliminary data 324

IV. C. – 7:103: Obligation to acquire and use expert

knowledge

324

IV. C. – 7:104: Obligation of skill and care 325

IV. C. – 7:105: Conformity 325

IV. C. – 7:106: Records 325

IV. C. – 7:107: Conflict of interest 326

IV. C. – 7:108: Influence of ability of the client 326

IV. C. – 7:109: Causation 326

Chapter 8: Treatment

IV. C. – 8:101: Scope 326

IV. C. – 8:102: Preliminary assessment 327

IV. C. – 8:103: Obligations regarding instruments,

medicines, materials, installations and

premises

327

IV. C. – 8:104: Obligation of skill and care 327

IV. C. – 8:105: Obligation to inform 328

IV. C. – 8:106: Obligation to inform in case of unnecessary

or experimental treatment

328

IV. C. – 8:107: Exceptions to the obligation to inform 328

IV. C. – 8:108: Obligation not to treat without consent 329

IV. C. – 8:109: Records 329

Book IV.C Model Rules

148

IV. C. – 8:110: Remedies for non-performance 330

IV. C. – 8:111: Obligations of treatment-providing

organisations

331

Part D. Mandate contracts

Chapter 1: General provisions

IV. D. – 1:101: Scope 331

IV. D. – 1:102: Definitions 332

IV. D. – 1:103: Duration of the mandate contract 333

IV. D. – 1:104: Revocation of the mandate 333

IV. D. – 1:105: Irrevocable mandate 333

Chapter 2: Main obligations of the principal

IV. D. – 2:101: Obligation to co-operate 335

IV. D. – 2:102: Price 335

IV. D. – 2:103: Expenses incurred by agent 336

Chapter 3: Performance by the agent

Section 1: Main obligations of agent

336

IV. D. – 3:101: Obligation to act in accordance with

mandate

336

IV. D. – 3:102: Obligation to act in interests of principal 337

IV. D. – 3:103: Obligation of skill and care 337

Section 2: Consequences of acting beyond mandate 337

IV. D. – 3:201: Acting beyond mandate 337

IV. D. – 3:202: Consequences of ratification 338

Section 3: Mandate normally not exclusive 338

IV. D. – 3:301: Exclusivity not presumed 338

IV. D. – 3:302: Subcontracting 338

Section 4: Obligation to inform principal 339

IV. D. – 3:401: Information about progress of performance 339

IV. D. – 3:402: Accounting to the principal 339

IV. D. – 3:403: Communication of identity of third party 339

Model Rules Book IV.D

149

Chapter 4: Directions and changes

Section 1: Directions

340

IV. D. – 4:101: Directions given by principal 340

IV. D. – 4:102: Request for a direction 340

IV. D. – 4:103: Consequences of failure to give a direction 340

IV. D. – 4:104: No time to ask or wait for direction 341

Section 2: Changes of the mandate contract 341

IV. D. – 4:201: Changes of the mandate contract 341

Chapter 5: Conflicts of interests

IV. D. – 5:101: Self-contracting 342

IV. D. – 5:102: Double mandate 343

Chapter 6: Termination by notice other than for non-performance

IV. D. – 6:101: Termination by notice in general 344

IV. D. – 6:102: Termination by principal when

relationship is to last for indefinite period

or when mandate is for a particular task

345

IV. D. – 6:103: Termination by principal for extraordinary

and serious reason

345

IV. D. – 6:104: Termination by agent when relationship

is to last for indefinite period or when

it is gratuitous

345

IV. D. – 6:105: Termination by agent for extraordinary

and serious reason

346

Chapter 7: Other grounds for termination

IV. D. – 7:101: Conclusion of prospective contract by

principal or other agent

346

IV. D. – 7:102: Death of the principal 346

IV. D. – 7:103: Death of the agent 347

Part E. Commercial agency , franchise and distributorship

Chapter 1: General provisions

Section 1: Scope

347

IV. E. – 1:101: Contracts covered 347

Book IV.E Model Rules

150

Section 2: Other general provisions 347

IV. E. – 1:201: Priority rules 347

Chapter 2: Rules applying to all contracts within the scope

of this part

Section 1: Pre-contractual

348

IV. E. – 2:101: Pre-contractual information duty 348

Section 2: Obligations of the parties 348

IV. E. – 2:201: Co-operation 348

IV. E. – 2:202: Information during the performance 348

IV. E. – 2:203: Confidentiality 348

Section 3: Termination of contractual relationship 349

IV. E. – 2:301: Contract for a definite period 349

IV. E. – 2:302: Contract for an indefinite period 349

IV. E. – 2:303: Damages for termination with inadequate

notice

350

IV. E. – 2:304: Termination for non-performance 350

IV. E. – 2:305: Indemnity for goodwill 350

IV. E. – 2:306: Stock, spare parts and materials 351

Section 4: Other general provisions 351

IV. E. – 2:401: Right of retention 351

IV. E. – 2:402: Signed document available on request 351

Chapter 3: Commercial agency

Section 1: General

352

IV. E. – 3:101: Scope 352

Section 2: Obligations of the commercial agent 352

IV. E. – 3:201: Negotiate and conclude contracts 352

IV. E. – 3:202: Instructions 352

IV. E. – 3:203: Information by agent during

the performance

352

IV. E. – 3:204: Accounting 352

Section 3: Obligations of the principal 353

IV. E. – 3:301: Commission during the agency 353

IV. E. – 3:302: Commission after the agency has ended 353

IV. E. – 3:303: Conflicting entitlements of successive

agents

354

IV. E. – 3:304: When commission is to be paid 354

Model Rules Book IV.E

151

IV. E. – 3:305: Entitlement to commission extinguished 354

IV. E. – 3:306: Remuneration 355

IV. E. – 3:307: Information by principal during the

performance

355

IV. E. – 3:308: Information on acceptance, rejection

and non-performance

355

IV. E. – 3:309: Warning of decreased volume of contracts 355

IV. E. – 3:310: Information on commission 355

IV. E. – 3:311: Accounting 356

IV. E. – 3:312: Amount of indemnity 356

IV. E. – 3:313: Del credere clause 357

Chapter 4: Franchise

Section 1: General

357

IV. E. – 4:101: Scope 357

IV. E. – 4:102: Pre-contractual information 357

IV. E. – 4:103: Co-operation 358

Section 2: Obligations of the franchisor 358

IV. E. – 4:201: Intellectual property rights 358

IV. E. – 4:202: Know-how 358

IV. E. – 4:203: Assistance 359

IV. E. – 4:204: Supply 359

IV. E. – 4:205: Information by franchisor during the

performance

359

IV. E. – 4:206: Warning of decreased supply capacity 360

IV. E. – 4:207: Reputation of network and advertising 360

Section 3: Obligations of the franchisee 360

IV. E. – 4:301: Fees, royalties and other periodical

payments

360

IV. E. – 4:302: Information by franchisee during the

performance

361

IV. E. – 4:303: Business method and instructions 361

IV. E. – 4:304: Inspection 361

Chapter 5: Distributorship

Section 1: General

361

IV. E. – 5:101: Scope and definitions 361

Book IV.E Model Rules

152

Section 2: Obligations of the supplier 362

IV. E. – 5:201: Obligation to supply 362

IV. E. – 5:202: Information by supplier during

the performance

362

IV. E. – 5:203: Warning by supplier of decreased

supply capacity

362

IV. E. – 5:204: Advertising materials 363

IV. E. – 5:205: The reputation of the products 363

Section 3: Obligations of the distributor 363

IV. E. – 5:301: Obligation to distribute 363

IV. E. – 5:302: Information by distributor during the

performance

363

IV. E. – 5:303: Warning by distributor of decreased

requirements

363

IV. E. – 5:304: Instructions 364

IV. E. – 5:305: Inspection 364

IV. E. – 5:306: The reputation of the products 364

Part F. Loan contracts

IV. F. – 1:101: Scope 364

IV. F. – 1:102: Main obligation of the lender 365

IV. F. – 1:103: Obligation of the borrower to take up loan 365

IV. F. – 1:104: Interest 365

IV. F. – 1:105: Purpose of the credit 366

IV. F. – 1:106: Repayment and termination 366

Part G. Personal security

Chapter 1: Common rules

IV. G. – 1:101: Definitions 367

IV. G. – 1:102: Scope 368

IV. G. – 1:103: Creditor’s acceptance 368

IV. G. – 1:104: Co-debtorship for security purposes 368

IV. G. – 1:105: Several security providers:

solidary liability towards creditor

368

Model Rules Book IV.G

153

IV. G. – 1:106: Several security providers: internal recourse 369

IV. G. – 1:107: Several security providers:

recourse against debtor

370

IV. G. – 1:108: Subsidiary application of rules on

solidary debtors

370

Chapter 2: Dependent personal security

IV. G. – 2:101: Presumption for dependent personal

security

370

IV. G. – 2:102: Dependence of security provider’s

obligation

371

IV. G. – 2:103: Debtor’s defences available to the security

provider

371

IV. G. – 2:104: Coverage of security 372

IV. G. – 2:105: Solidary liability of security provider 372

IV. G. – 2:106: Subsidiary liability of security provider 372

IV. G. – 2:107: Requirement of notification by creditor 373

IV. G. – 2:108: Time limit for resort to security 374

IV. G. – 2:109: Limiting security without time limit 375

IV. G. – 2:110: Reduction of creditor’s rights 375

IV. G. – 2:111: Debtor’s relief for the security provider 375

IV. G. – 2:112: Notification and request by security

provider before performance

376

IV. G. – 2:113: Security provider’s rights after performance 376

Chapter 3: Independent personal security

IV. G. – 3:101: Scope 377

IV. G. – 3:102: Notification to debtor by security provider 377

IV. G. – 3:103: Performance by security provider 377

IV. G. – 3:104: Independent personal security on

first demand

378

IV. G. – 3:105: Manifestly abusive or fraudulent demand 378

IV. G. – 3:106: Security provider’s right to reclaim 378

IV. G. – 3:107: Security with or without time limits 378

IV. G. – 3:108: Transfer of security right 379

IV. G. – 3:109: Security provider’s rights after performance 379

Book IV.G Model Rules

154

Chapter 4: Special rules for personal security of consumers

IV. G. – 4:101: Scope of application 379

IV. G. – 4:102: Applicable rules 380

IV. G. – 4:103: Creditor’s pre-contractual duties 380

IV. G. – 4:104: Form 380

IV. G. – 4:105: Nature of security provider’s liability 381

IV. G. – 4:106: Creditor’s obligations of annual information 381

IV. G. – 4:107: Limiting security with time limit 381

Part H. Donation

Chapter 1: Scope and general provisions

Section 1: Scope and definitions

382

IV. H. – 1:101: Contracts covered 382

IV. H. – 1:102: Future goods and goods to be manufactured

or produced

382

IV. H. – 1:103: Application to other assets 382

IV. H. – 1:104: Application to unilateral undertakings and

immediate donations

383

IV. H. – 1:105: Donations due or conditional on death 383

Section 2: Gratuitousness and intention to benefit 383

IV. H. – 1:201: Gratuitousness 383

IV. H. – 1:202: Transactions which are not entirely

gratuitous

383

IV. H. – 1:203: Intention to benefit 384

Chapter 2: Formation and validity

IV. H. – 2:101: Form requirements 384

IV. H. – 2:102: Exceptions to the form requirements 384

IV. H. – 2:103: Mistake 385

IV. H. – 2:104: Unfair exploitation 385

Chapter 3: Obligations and remedies

Section 1: Obligations of the donor

385

IV. H. – 3:101: Obligations in general 385

IV. H. – 3:102: Conformity of the goods 385

IV. H. – 3:103: Third party rights or claims 386

Model Rules Book IV.H

155

Section 2: Remedies of the donee 386

IV. H. – 3:201: Application of general rules 386

IV. H. – 3:202: Restricted right to enforce performance 386

IV. H. – 3:203: Restitution in case of termination 386

IV. H. – 3:204: Exclusion of the right to damages in

case of impediment

386

IV. H. – 3:205: Measure of damages 387

IV. H. – 3:206: Delay in payment of money 387

Section 3: Obligations of the donee 388

IV. H. – 3:301: Obligations to take delivery and

accept transfer

388

Section 4: Remedies of the donor 388

IV. H. – 3:401: Application of general rules 388

Chapter 4: Revocation by the donor

Section 1: Revocation in general

388

IV. H. – 4:101: Irrevocability and its exceptions 388

IV. H. – 4:102: Exercise and scope of the right to revoke 388

IV. H. – 4:103: Consequences of revocation 389

IV. H. – 4:104: Time limits 389

Section 2: Rights of the donor to revoke 389

IV. H. – 4:201: Ingratitude of the donee 389

IV. H. – 4:202: Impoverishment of the donor 390

IV. H. – 4:203: Residual right to revoke 390

Book V

Benevolent intervention in another’s affairs

Chapter 1: Scope of application

V. – 1:101: Intervention to benefit another 391

V. – 1:102: Intervention to perform another’s duty 391

V. – 1:103: Exclusions 391

Chapter 2: Duties of intervener

V. – 2:101: Duties during intervention 392

Book V Model Rules

156

V. – 2:102: Reparation for damage caused by breach

of duty

392

V. – 2:103: Obligations after intervention 392

Chapter 3: Rights and authority of intervener

V. – 3:101: Right to indemnification or reimbursement 393

V. – 3:102: Right to remuneration 393

V. – 3:103: Right to reparation 393

V. – 3:104: Reduction or exclusion of intervener’s

rights

394

V. – 3:105: Obligation of third person to indemnify or

reimburse the principal

394

V. – 3:106: Authority of intervener to act as

representative of the principal

394

Book VI

Non-contractual liability arising out of damage caused

to another

Chapter 1: Fundamental provisions

VI. – 1:101: Basic rule 395

VI. – 1:102: Prevention 395

VI. – 1:103: Scope of application 395

Chapter 2: Legally relevant damage

Section 1: General

396

VI. – 2:101: Meaning of legally relevant damage 396

Section 2: Particular instances of legally relevant damage 396

VI. – 2:201: Personal injury and consequential loss 396

VI. – 2:202: Loss suffered by third persons as a result of

another’s personal injury or death

397

VI. – 2:203: Infringement of dignity, liberty and privacy 397

VI. – 2:204: Loss upon communication of incorrect

information about another

397

VI. – 2:205: Loss upon breach of confidence 398

VI. – 2:206: Loss upon infringement of property or

lawful possession

398

Model Rules Book VI

157

VI. – 2:207: Loss upon reliance on incorrect advice or

information

398

VI. – 2:208: Loss upon unlawful impairment of business 398

VI. – 2:209: Burdens incurred by the state upon

environmental impairment

399

VI. – 2:210: Loss upon fraudulent misrepresentation 399

VI. – 2:211: Loss upon inducement of non-performance

of obligation

399

Chapter 3: Accountability

Section 1: Intention and negligence

399

VI. – 3:101: Intention 399

VI. – 3:102: Negligence 400

VI. – 3:103: Persons under eighteen 400

VI. – 3:104: Accountability for damage caused by

children or supervised persons

400

Section 2: Accountability without intention or negligence 401

VI. – 3:201: Accountability for damage caused by

employees and representatives

401

VI. – 3:202: Accountability for damage caused by

the unsafe state of an immovable

401

VI. – 3:203: Accountability for damage caused by

animals

402

VI. – 3:204: Accountability for damage caused by

defective products

402

VI. – 3:205: Accountability for damage caused by

motor vehicles

403

VI. – 3:206: Accountability for damage caused

by dangerous substances or emissions

404

VI. – 3:207: Other accountability for the causation

of legally relevant damage

405

VI. – 3:208: Abandonment 405

Chapter 4: Causation

VI. – 4:101: General rule 405

VI. – 4:102: Collaboration 405

VI. – 4:103: Alternative causes 405

Book VI Model Rules

158

Chapter 5: Defences

Section 1: Consent or conduct of the person suffering

the damage

406

VI. – 5:101: Consent and acting at own risk 406

VI. – 5:102: Contributory fault and accountability 406

VI. – 5:103: Damage caused by a criminal to a

collaborator

407

Section 2: Interests of accountable persons or third parties 407

VI. – 5:201: Authority conferred by law 407

VI. – 5:202: Self-defence, benevolent intervention

and necessity

407

VI. – 5:203: Protection of public interest 407

Section 3: Inability to control 408

VI. – 5:301: Mental incompetence 408

VI. – 5:302: Event beyond control 408

Section 4: Contractual exclusion and restriction of liability 408

VI. – 5:401: Contractual exclusion and restriction of

liability

408

Section 5: Loss within VI. – 2:202 (Loss suffered by third

persons as a result of another’s personal injury or death)

409

VI. – 5:501: Extension of defences against the injured

person to third persons

409

Chapter 6: Remedies

Section 1: Reparation in general

409

VI. – 6:101: Aim and forms of reparation 409

VI. – 6:102: De minimis rule 410

VI. – 6:103: Equalisation of benefits 410

VI. – 6:104: Multiple persons suffering damage 410

VI. – 6:105: Solidary liability 410

VI. – 6:106: Assignment of right to reparation 410

Section 2: Compensation 410

VI. – 6:201: Right of election 410

VI. – 6:202: Reduction of liability 411

VI. – 6:203: Capitalisation and quantification 411

VI. – 6:204: Compensation for injury as such 411

Model Rules Book VI

159

Section 3: Prevention 411

VI. – 6:301: Right to prevention 411

VI. – 6:302: Liability for loss in preventing damage 411

Chapter 7: Ancillary rules

VI. – 7:101: National constitutional laws 412

VI. – 7:102: Statutory provisions 412

VI. – 7:103: Public law functions and court proceedings 412

VI. – 7:104: Liability of employees, employers,

trade unions and employers’ associations

412

VI. – 7:105: Reduction or exclusion of liability to

indemnified persons

412

Book VII

Unjustified enrichment

Chapter 1: General

VII. – 1:101: Basic rule 413

Chapter 2: When enrichment unjustified

VII. – 2:101: Circumstances in which an enrichment is

unjustified

413

VII. – 2:102: Performance of obligation to third person 414

VII. – 2:103: Consenting or performing freely 414

Chapter 3: Enrichment and disadvantage

VII. – 3:101: Enrichment 414

VII. – 3:102: Disadvantage 415

Chapter 4: Attribution

VII. – 4:101: Instances of attribution 415

VII. – 4:102: Intermediaries 415

VII. – 4:103: Debtor’s performance to a non-creditor;

onward transfer in good faith

416

VII. – 4:104: Ratification of debtor’s performance

to a non-creditor

416

Book VII Model Rules

160

VII. – 4:105: Attribution resulting from an act of

an intervener

416

VII. – 4:106: Ratification of intervener’s acts 417

VII. – 4:107: Where type or value not identical 417

Chapter 5: Reversal of enrichment

VII. – 5:101: Transferable enrichment 417

VII. – 5:102: Non-transferable enrichment 418

VII. – 5:103: Monetary value of an enrichment; saving 418

VII. – 5:104: Fruits and use of an enrichment 418

Chapter 6: Defences

VII. – 6:101: Disenrichment 419

VII. – 6:102: Juridical acts in good faith with third parties 419

VII. – 6:103: Illegality 419

Chapter 7: Relation to other legal rules

VII. – 7:101: Other private law rights to recover 420

VII. – 7:102: Concurrent obligations 420

VII. – 7:103: Public law claims 420

Book VIII

Acquisition and loss of ownership of goods

Chapter 1: General provisions

Section 1: Scope of application and relation to other

provisions

421

VIII. – 1:101: Scope of application 421

VIII. – 1:102 Registration of goods 422

VIII. – 1:103: Priority of other provisions 422

VIII. – 1:104: Application of rules of Books I to III 422

Section 2: Definitions 422

VIII. – 1:201: Goods 422

VIII. – 1:202: Ownership 422

VIII. – 1:203: Co-ownership 423

VIII. – 1:204: Limited proprietary rights 423

VIII. – 1:205: Possession 423

Model Rules Book VIII

161

VIII. – 1:206: Possession by owner-possessor 423

VIII. – 1:207: Possession by limited-right-possessor 423

VIII. – 1:208: Possession through a possession-agent 424

Section 3: Further general rules 424

VIII. – 1:301: Transferability 424

Chapter 2: Transfer of ownership based on the transferor’s

right or authority

Section 1: Requirements for transfer under this chapter

425

VIII. – 2:101: Requirements for the transfer of ownership

in general

425

VIII. – 2:102: Transferor’s right or authority 425

VIII. – 2:103: Agreement as to the time ownership is to pass 426

VIII. – 2:104: Delivery 426

VIII. – 2:105: Equivalents to delivery 426

Section 2: Effects 427

VIII. – 2:201: Effects of the transfer of ownership 427

VIII. – 2:202: Effect of initial invalidity, subsequent

avoidance, withdrawal, termination and

revocation

427

VIII. – 2:203: Transfer subject to condition 428

Section 3: Special constellations 428

VIII. – 2:301: Multiple transfers 428

VIII. – 2:302: Indirect representation 428

VIII. – 2:303: Passing of ownership in case of direct

delivery in a chain of transactions

429

VIII. – 2:304: Passing of ownership of unsolicited goods 429

VIII. – 2:305: Transfer of goods forming part of a bulk 430

VIII. – 2:306: Delivery out of the bulk 430

VIII. – 2:307: Contingent right of transferee under

retention of ownership

431

Chapter 3: Good faith acquisition of ownership

VIII. – 3:101: Good faith acquisition through a

person without right or authority to

transfer ownership

431

VIII. – 3:102: Good faith acquisition of ownership

free of limited proprietary rights

432

Book VIII Model Rules

162

Chapter 4: Acquisition of ownership by continuous possession

Section 1: Requirements for acquisition of ownership

by continuous possession

433

VIII. – 4:101: Basic rule 433

VIII. – 4:102: Cultural objects 433

VIII. – 4:103: Continuous possession 433

Section 2: Additional provisions as to the period required

for acquisition of ownership

434

VIII. – 4:201: Extension in case of incapacity 434

VIII. – 4:202: Extension in case of impediment beyond

owner’s control

434

VIII. – 4:203: Extension and renewal in case of judicial

and other proceedings

435

VIII. – 4:204: Postponement of expiry in case

of negotiations

435

VIII. – 4:205: Ending of period in case of

acknowledgement

436

VIII. – 4:206: Period of a predecessor to be taken

into account

436

Section 3: Effects of acquisition of ownership by

continuous possession

436

VIII. – 4:301: Acquisition of ownership 436

VIII. – 4:302: Extinction of rights under rules on

unjustified enrichment and

non-contractual liability for damage

436

Chapter 5: Production, combination and commingling

Section 1: General provisions

437

VIII. – 5:101: Party autonomy and relation to other

provisions

437

Section 2: Default rules and supplementary provisions 438

VIII. – 5:201: Production 438

VIII. – 5:202: Commingling 438

VIII. – 5:203: Combination 439

VIII. – 5:204: Additional provisions as to proprietary

security rights

439

Model Rules Book VIII

163

Chapter 6: Protection of ownership and protection of possession

Section 1: Protection of ownership

440

VIII. – 6:101: Protection of ownership 440

VIII. – 6:102: Recovery of goods after transfer based

on invalid or avoided contract or other

juridical act

440

Section 2: Protection of mere possession 441

VIII. – 6:201: Definition of unlawful dispossession and

interference

441

VIII. – 6:202: Self-help of possessor 441

VIII. – 6:203: Entitlement to recover as protection

of mere possession

442

VIII. – 6:204: Entitlement to protection order to protect

mere possession

442

Section 3: Protection of better possession 443

VIII. – 6:301: Entitlement to recover in case of better

possession

443

VIII. – 6:302: Entitlement to protection order in case

of better possession

444

Section 4: Other remedies 44 4

VIII. – 6:401: Non-contractual liability 444

Chapter 7: Consequential questions on restitution of goods

VIII. – 7:101: Scope 444

VIII. – 7:102: Loss of, or damage to, the goods during

possession

445

VIII. – 7:103: Fruits from, use of, and other benefits

derived from the goods during possession

445

VIII. – 7:104: Expenditure on, or parts added to,

the goods during possession

445

Book IX

Proprietary security in movable assets

Chapter 1: General rules

Section 1: Scope

447

IX. – 1:101: General rule 447

Book IX Model Rules

164

IX. – 1:102: Security right in movable asset 447

IX. – 1:103: Retention of ownership devices: scope 448

IX. – 1:104: Retention of ownership devices:

applicable rules

448

IX. – 1:105: Exclusions 449

Section 2: Definitions 449

IX. – 1:201: Definitions 449

Chapter 2: Creation and coverage

Section 1: Creation of security rights

451

Subsection 1: General provisions 451

IX. – 2:101: Methods of creation of security rights 451

IX. – 2:102: Requirements for creation of security

rights in general

452

IX. – 2:103: Possessory and non-possessory

security rights

452

IX. – 2:104: Specific issues of transferability,

existence and specification

452

Subsection 2: Granting of security right 453

IX. – 2:105: Requirements for granting of

security right

453

IX. – 2:106: Time when security right is created

by granting

453

IX. – 2:107: Granting of security right by consumer 453

IX. – 2:108: Good faith acquisition of security right 453

IX. – 2:109: Good faith acquisition of security right in

encumbered corporeal asset

454

IX. – 2:110: Delayed creation 455

IX. – 2:111: Security right in cash, negotiable

instruments and documents

455

IX. – 2:112: General matters of property law 455

Subsection 3: Retention of security right 455

IX. – 2:113: Requirements for retention

of security right

455

Subsection 4: Right of retention of possession 456

IX. – 2:114: Right of retention of possession 456

Section 2: Creation of retention of ownership devices 456

IX. – 2:201: Retention of ownership devices 456

Model Rules Book IX

165

Section 3: Creation of security rights in specific types

of assets

456

IX. – 2:301: Encumbrance of right to payment of money 456

IX. – 2:302: Security rights in shares of a company 457

IX. – 2:303: Security rights in bonds 457

IX. – 2:304: Negotiable documents of title and

negotiable instruments

457

IX. – 2:305: Security right in an accessory 457

IX. – 2:306: Proceeds of the originally encumbered

assets

458

IX. – 2:307: Use of encumbered goods for production

or combination

458

IX. – 2:308: Use of goods subject to a retention

of ownership device for production

or combination

459

IX. – 2:309: Commingling of assets subject to

proprietary security

459

Section 4: Coverage of security 460

IX. – 2:401: Secured rights 460

Chapter 3: Effectiveness as against third persons

Section 1: General rules

461

IX. – 3:101: Effectiveness as against third persons 461

IX. – 3:102: Methods of achieving effectiveness 461

IX. – 3:103: Security right made effective by

several methods

462

IX. – 3:104: Change of method 462

IX. – 3:105: Security right in an accessory to an

immovable

462

IX. – 3:106: Security right in commingled assets 462

IX. – 3:107: Registration of acquisition finance devices 462

IX. – 3:108: Importation of encumbered asset 463

Section 2: Possession or control by creditor 463

IX. – 3:201: Possession 463

IX. – 3:202: Negotiable documents of title and

negotiable instruments

463

IX. – 3:203: Certificated shares and bonds 464

IX. – 3:204: Control over financial assets 464

Book IX Model Rules

166

Section 3: Registration 465

Subsection 1: Operation of the register of proprietary security 465

IX. – 3:301: European register of proprietary security;

other systems of registration or notation

465

IX. – 3:302: Structure and operation of the register 465

IX. – 3:303: Retention of ownership devices and

security rights

465

IX. – 3:304: Authentication as requirement for

declarations to the register

466

Subsection 2: Entries in the register 466

IX. – 3:305: Entries to be made by secured creditor

and advance filing

466

IX. – 3:306: Minimum content of the entry in

the register

466

IX. – 3:307: Additional content of the entry 467

IX. – 3:308: Information appearing on the register 467

IX. – 3:309: Required consent of the security provider 467

IX. – 3:310: Identity of security provider, description

of encumbered assets and effectiveness of

registration

468

IX. – 3:311: Amendments of entries 468

IX. – 3:312: Transitional provision in relation to entries

in other systems of registration or notation

under national law

469

IX. – 3:313: Automated certification of entry to creditor

and security provider

469

IX. – 3:314: Third person acting as agent of the creditor 469

Subsection 3: Protection of the security provider 470

IX. – 3:315: Security provider’s right to deletion or

amendment of entry

470

IX. – 3:316: Review of contested entries by

registration office

470

Subsection 4: Accessing and searching the register 471

IX. – 3:317: Access to the register for searching purposes 471

IX. – 3:318: Searching the register 471

Subsection 5: Registered creditors’ duty to answer

requests for information

471

IX. – 3:319: Duty to give information 471

Model Rules Book IX

167

IX. – 3:320: Content of the information 472

IX. – 3:321: Consequences of correct information

given by secured creditor

472

IX. – 3:322: Consequences of incorrect information

given by secured creditor

473

IX. – 3:323: Consequences of failure to give information 473

IX. – 3:324: Form of requests and information 474

Subsection 6: Duration, renewal and deletion of entries 474

IX. – 3:325: Duration 474

IX. – 3:326: Renewal 474

IX. – 3:327: Deletion 474

Subsection 7: Transfer of the security right or of the

encumbered asset

475

IX. – 3:328: Transfer of the security right: general rules 475

IX. – 3:329: Transfer of the security right: declaration

indicating the transfer

475

IX. – 3:330: Transfer of the encumbered asset:

general rules

476

IX. – 3:331: Transfer of the encumbered asset:

declaration of transfer

476

Subsection 8: Costs 477

IX. – 3:332: Distribution of costs 477

Subsection 9: Security rights created before

establishment of register

478

IX. – 3:333: Security rights created before establishment

of register

478

Chapter 4: Priority

IX. – 4:101: Priority: general rules 478

IX. – 4:102: Superpriority 479

IX. – 4:103: Continuation of priority 479

IX. – 4:104: Fruits and proceeds: general rules 479

IX. – 4:105: Fruits and proceeds: exceptions 480

IX. – 4:106: Importation of encumbered asset 480

IX. – 4:107: Priority of execution creditor 480

IX. – 4:108: Change of ranking 480

Book IX Model Rules

168

Chapter 5: Predefault rules

Section 1: General principles

481

IX. – 5:101: General principles 481

Section 2: Encumbered assets 481

IX. – 5:201: Care and insurance of the encumbered

assets

481

Subsection 1: Security provider’s rights and obligations 482

IX. – 5:202: Rights in general 482

IX. – 5:203: Use of encumbered industrial material 482

IX. – 5:204: Dispositions of encumbered assets by

traders and manufacturers

482

IX. – 5:205: Unauthorised use or disposition 482

Subsection 2: Secured creditor’s rights and obligations 483

IX. – 5:206: Limited right of use 483

IX. – 5:207: Banks entitled to dispose of financial assets 483

IX. – 5:208: Appropriation of civil fruits 483

Section 3: Change of parties 483

IX. – 5:301: Transfer of the secured right 483

IX. – 5:302: Partial transfer of the secured right 484

IX. – 5:303: Transfer of encumbered asset 484

Section 4: Secured creditor’s obligation to give information

about secured right

485

IX. – 5:401: Secured creditor’s obligation to give

information about secured right

485

Chapter 6: Termination

IX. – 6:101: Instances of termination of proprietary

security

485

IX. – 6:102: Loss of proprietary security due to good

faith acquisition of ownership

486

IX. – 6:103: Prescription of the secured right 486

IX. – 6:104: Consequences of termination 486

IX. – 6:105: Secured creditor liable to account

for proceeds

487

IX. – 6:106: Recourse of third party security provider 487

Model Rules Book IX

169

Chapter 7: Default and enforcement

Section 1: General rules

488

IX. – 7:101: Secured creditor’s rights after default 488

IX. – 7:102: Mandatory rules 488

IX. – 7:103: Extra-judicial and judicial enforcement 488

IX. – 7:104: Right to seek court assistance and damages 488

IX. – 7:105: Predefault agreement on appropriation of

encumbered assets

489

IX. – 7:106: Security provider’s right of redemption 489

IX. – 7:107: Enforcement notice to consumer 490

IX. – 7:108: Solidary liability of several security

providers

490

IX. – 7:109: Rights of recourse of third party security

provider

490

Section 2: Enforcement of security rights 491

Subsection 1: Extra-judicial enforcement: rules preparatory

to realisation

491

IX. – 7:201: Creditor’s right to possession of corporeal

asset

491

IX. – 7:202: Creditor’s right to immobilise and to

preserve encumbered asset

491

IX. – 7:203: Intervention of court or other authority 492

IX. – 7:204: Encumbrance of a right to payment 492

IX. – 7:205: Negotiable instrument 492

IX. – 7:206: Negotiable document of title 492

Subsection 2: Extra-judicial enforcement: realisation of

encumbered asset

493

IX. – 7:207: General rule on realisation 493

IX. – 7:208: Notice of extra-judicial disposition 493

IX. – 7:209: Addressees of the notice 493

IX. – 7:210: Time and contents of notice 494

IX. – 7:211: Sale by public or private auction or by

private sale

494

IX. – 7:212: Commercially reasonable price 495

IX. – 7:213: Buyer’s rights in the assets after realisation

by sale

495

IX. – 7:214: Realisation of security in right to payment

or in negotiable instrument

496

Book IX Model Rules

170

IX. – 7:215: Distribution of proceeds 496

IX. – 7:216: Appropriation of encumbered asset by

secured creditor

497

Subsection 3: Judicial enforcement 498

IX. – 7:217: Applicable rules 498

Section 3: Rules for retention of ownership devices 498

IX. – 7:301: Consequences of default under retention

of ownership devices

498

IX. – 7:302: Possession, immobilisation and preservation 499

Book X

Trusts

Chapter 1: Fundamental provisions

Section 1: Scope and relation to other rules

501

X. – 1:101: Trusts to which this Book applies 501

X. – 1:102: Priority of the law of proprietary securities 501

Section 2: Definition, special legal effects and parties 501

X. – 1:201: Definition of a trust 501

X. – 1:202: Special legal effects of a trust 502

X. – 1:203: Parties to a trust 502

X. – 1:204: Plurality of trustees 503

X. – 1:205: Persons entitled to enforce performance

of trustee’s obligations

503

X. – 1:206: Right to benefit and eligibility for benefit 503

Section 3: Modifications of and additions to general rules 504

X. – 1:301: Extended meaning of gratuitous 504

X. – 1:302: Notice 504

X. – 1:303: Mandatory nature of rules 504

Chapter 2: Constitution of trusts

Section 1: Basic rules on constitution by juridical act

504

X. – 2:101: Requirements for constitution 504

X. – 2:102: Constitution by transfer 505

X. – 2:103: Constitution without transfer 505

Section 2: Declaration 505

X. – 2:201: Requirements for a declaration 505

Model Rules Book X

171

X. – 2:202: Mode of declaration 506

X. – 2:203: Formal requirements for declaration 506

X. – 2:204: Revocation or variation of declaration 506

X. – 2:205: Effects when declaration does not satisfy

requirements

506

Section 3: Refusal of trust and rejection of right to benefit 507

X. – 2:301: Right of trustee to refuse the trust 507

X. – 2:302: Rejection of right to benefit or eligibility

for benefit

507

Section 4: Additional rules for particular instances 507

X. – 2:401: Whether donation or trust 507

X. – 2:402: Priority of rules of succession law 508

X. – 2:403: Trust in respect of right to legacy pending

transfer of legacy

508

Chapter 3: Trust fund

Section 1: Requirements for the initial trust fund

509

X. – 3:101: Trust fund 509

X. – 3:102: Permissible trust assets 509

X. – 3:103: Ascertainability and segregation of the

trust fund

509

Section 2: Changes to the trust fund 510

X. – 3:201: Additions to the trust fund 510

X. – 3:202: Subtractions from the trust fund 510

X. – 3:203: Mixing of the trust fund with other assets 510

X. – 3:204: Loss or exhaustion of trust fund 511

Chapter 4: Trust terms and invalidity

Section 1: Trust terms

511

X. – 4:101: Interpretation 511

X. – 4:102: Incomplete disposal of the trust fund 511

X. – 4:103: Ascertainability of beneficiaries 512

X. – 4:104: Ascertainability of right to benefit or

eligibility for benefit

512

X. – 4:105: Trusts to pay creditors 512

Section 2: Invalidity 512

X. – 4:201: Avoidance by the truster 512

Book X Model Rules

172

X. – 4:202: Protection of trustees and third parties after

avoidance

513

X. – 4:203: Unenforceable trust purposes 514

Chapter 5: Trustee decision-making and powers

Section 1: Trustee decision–making

514

X. – 5:101: Trustee discretion 514

X. – 5:102: Decision-making by several trustees 514

X. – 5:103: Conflict of interest in exercise of power or

discretion

515

Section 2: Powers of a trustee 515

Sub-section 1: General rules 515

X. – 5:201: Powers in general 515

X. – 5:202: Restriction in case of minimum number

of trustees

515

Sub-section 2: Particular powers of a trustee 516

X. – 5:203: Power to authorise agent 516

X. – 5:204: Power to transfer title to person undertaking

to be a trustee

516

X. – 5:205: Power to transfer physical control to

a storer

517

X. – 5:206: Power to delegate 517

X. – 5:207: Power to select investments 517

X. – 5:208: Power to submit trust accounts for audit 517

Chapter 6: Obligations and rights of trustees and trust auxiliaries

Section 1: Obligations of a trustee

518

Sub-section 1: General rules 518

X. – 6:101: General obligation of a trustee 518

X. – 6:102: Required care and skill 518

Sub-section 2: Particular obligations of a trustee 518

X. – 6:103: Obligations to segregate, safeguard and

insure

518

X. – 6:104: Obligation to inform and report 519

X. – 6:105: Obligation to keep trust accounts 519

X. – 6:106: Obligation to permit inspection and

copying of trust documents

519

X. – 6:107: Obligation to invest 520

Model Rules Book X

173

X. – 6:108: Obligation not to acquire trust assets or

trust creditors’ rights

521

X. – 6:109: Obligation not to obtain unauthorised

enrichment or advantage

522

X. – 6:110: Obligations regarding co-trustees 522

Section 2: Rights of a trustee 522

X. – 6:201: Right to reimbursement and

indemnification out of the trust fund

522

X. – 6:202: Right to remuneration out of the trust fund 522

X. – 6:203: Rights in respect of unauthorised

acquisitions

523

X. – 6:204: Corresponding rights against beneficiaries 524

X. – 6:205: Right to insure against personal liability

at trust fund’s expense

524

Section 3: Obligations of a trust auxiliary 524

X. – 6:301: Obligations of a trust auxiliary 524

Chapter 7: Remedies for non-performance

Section 1: Specific performance, judicial review and

ancillary remedies

525

X. – 7:101: Specific performance 525

X. – 7:102: Judicial review 525

X. – 7:103: Further remedies 525

Section 2: Reparation and disgorgement of unauthorised

enrichment

526

X. – 7:201: Liability of trustee to reinstate the

trust fund

526

X. – 7:202: Liability of trustee to compensate a

beneficiary

527

X. – 7:203: Disgorgement of unauthorised enrichment 527

Section 3: Defences 527

X. – 7:301: Consent of beneficiary to non-performance 527

X. – 7:302: Prescription 528

X. – 7:303 Protection of the trustee 528

Section 4: Solidary liability and forfeiture 528

X. – 7:401: Solidary liability 528

X. – 7:402: Forfeiture of collaborating beneficiary’s

right to benefit

528

Book X Model Rules

174

Chapter 8: Change of trustees or trust auxiliary

Section 1: General rules on change of trustees

529

X. – 8:101: Powers to change trustees in general 529

X. – 8:102: Powers to change trustees conferred on

trustees

529

Section 2: Appointment of trustees 530

X. – 8:201: General restrictions on appointments 530

X. – 8:202: Appointment by trust auxiliary or trustees 530

X. – 8:203: Appointment by court order 530

Section 3: Resignation of trustees 531

X. – 8:301: Resignation with consent of trust auxiliary

or co-trustees

531

X. – 8:302: Resignation with approval of court 531

Section 4: Removal of trustees 531

X. – 8:401: Removal by trust auxiliary or co-trustees 531

X. – 8:402: Removal by court order 532

Section 5: Effect of change of trustees 532

X. – 8:501: Effect on trustees’ obligations and rights 532

X. – 8:502: Vesting and divesting of trust assets 532

X. – 8:503: Transmission of trust documents 533

X. – 8:504: Effect of death or dissolution of trustee 533

Section 6: Death or dissolution of trust auxiliary 534

X. – 8:601: Effect of death or dissolution of trust

auxiliary

534

Chapter 9: Termination and variation of trusts and

transfer of rights to benefit

Section 1: Termination

534

Sub-section 1: General rules on termination 534

X. – 9:101: Modes of termination 534

X. – 9:102: Effect of termination on trustee’s liabilities 534

Sub-section 2: Termination by truster or beneficiaries 535

X. – 9:103: Right of truster to terminate a gratuitous

trust

535

X. – 9:104: Right of beneficiaries to terminate 535

X. – 9:105: Meaning of “exclusive benefit” 535

X. – 9:106: Notice of termination and its effects 536

X. – 9:107: Trustee’s right to withhold 536

Model Rules Book X

175

Sub-section 3: Other modes of termination 537

X. – 9:108: Termination by trustee 537

X. – 9:109: Merger of right and obligation 537

Section 2: Variation 537

X. – 9:201: Variation by truster or beneficiary 537

X. – 9:202: Variation by court order of administrative

trust terms

538

X. – 9:203: Variation by court order of trusts for

beneficiaries

538

X. – 9:204: Variation by court order of trusts for public

benefit purposes

538

Section 3: Transfer of right to benefit 539

X. – 9:301: Transfer by juridical act of right to benefit 539

Chapter 10: Relations to third parties

Section 1: General provisions on creditors

539

X. – 10:101: Basic rule on creditors 539

X. – 10:102: Definition of trust debt 539

Section 2: Trust creditors 540

X. – 10:201: Rights of trust creditors against the trustee 540

X. – 10:202: Rights of trust creditors in relation to

the trust fund

540

X. – 10:203: Protection of the truster and beneficiaries 540

Section 3: Trust debtors 541

X. – 10:301: Right to enforce performance of trust

debtor’s obligation

541

X. – 10:302: Set-off 541

X. – 10:303: Discharge of trust debtor 541

Section 4: Acquirers of trust assets and rights encumbering

trust assets

541

X. – 10:401: Liability of donees and bad faith acquirers 541

Section 5: Other rules on liability and protection of

third parties

542

X. – 10:501: Liability for inducing or assisting

misapplication of the trust fund

542

X. – 10:502: Protection of third parties dealing with

trustees

543

Book X Model Rules

176

Book I

General provisions

I. – 1:101: Intended field of application

(1) These rules are intended to be used primarily in relation to contracts

and o ther juridical acts, contractual and non-contractual rights and

obligations and related proper ty matters.

(2) They are not intended to be used, or used without modification or

supplementation, in relation to rights and obligations of a public law

nature or, except where otherwise provided, in relation to:

(a) the status or legal capacity of natural persons;

(b) wills and succession;

(d) bills of exchange, cheques and promissory notes and other nego-

tiable instruments;

(e) employment relationships;

(f) the ownership of, or rights in security over, immovable property;

(g) the creation, capacity, internal organisation, regulation or dissolution

of companies and other bodies corporate or unincorporated;

(h) matters relating primarily to procedure or enforcement.

(3) Further restrictions on intended fields of application are contained in

later Books.

I. – 1:102: Interpretation and development

(1) These rules are to be interpreted and developed autonomously and in

accordance with their objectives and the principles underlying them.

(2) They are to be read in the light of any applicable instruments guaran-

teeing human rights and fundamental freedoms and any applicabl e

constitutional laws.

(3) In their interpretation and development regard should be had to the

need to promote:

(a) uniformity of application;

(b) good faith and fair dealing; and

177

(4) Issues within the scope of the rules but not expressly settled by them

are so far as possible to be settled in accordance with the principles

underlying them.

(5) Where there is a general rule and a special rule applying to a particular

situation within the scope of the general rule, the special rule prevails

in any case of confl ict.

I. – 1:103: Good faith and fair dealing

(1) The expression “good faith and fair dealing” refers to a standard of

conduct characterised by honesty, openness and consideration for the

interests of the other party to the transaction or relationship in ques-

tion.

(2) It is, in particular, contrary to good faith and fair dealing for a party to

act inconsistently with that party’s prior statements or conduct when

the o ther party has reasonably relied on them to that other party’s

detriment.

I. – 1:104: Reasonableness

Reasonableness is to be objectively ascertained, having regard to the nature

and purpose of what is being done, to the circumstances of the case and to

any relevant usages and practices.

I. – 1:105: “Consumer” and “business”

(1) A “consumer” means any natural person who is acting primarily for

purposes which are not related to his or her trade, business or profes-

sion.

(2) A “business” means any natural or legal person, irrespective of whether

publicly or privately owned, who is acting for purposes relating to the

person’s self-employed trade, work or profession, even if the person

does not intend to make a profit in the course of the activity.

(3) A person who is within both of the preceding paragraphs is regarded as

falling exclusively within paragraph (1) in relation to a rule which

would provide protection for that person if that person were a consum-

er, and otherwise as falling exclusively within paragraph (2).

I. – 1:103 Book I

178

I. – 1:106: “In writing” and similar expressions

(1) For the purposes of these rules, a statement is “in writing” if it is in

textual form and in characters which are directly legible from paper or

another tangible durable medium.

(2) “Textual form” means a text which is expressed in alphabetical or other

intelligible characters by means of any support which permits reading,

recording of the information contained in the text and its reproduction

in tangible form.

(3) “Durable medium” means any material on which information is stored

so that it is accessible for future reference for a period of time adequate

to the purposes of the information, and which allows the unchanged

reproduction of this information.

I. – 1:107: “Signature” and similar expressions

(1) A reference to a person’s signature includes a reference to that person’s

handwritten signature, electronic signature or advanced electronic sig-

nature, and references to anything being signed by a person are to be

construed accordingly.

(2) A “handwritten signature” means the name of, or sign representing, a

person written by that person’s own hand for the purpose of authen-

tication.

(3) An “electronic signature” means data in electronic form which are at-

tached to or logically associated with other electronic data, and which

serve as a method of authentication.

(4) An “advanced electronic signature” means an electron ic signature

which is:

(a) uniquely linked to the signatory;

(b) capable of identifying the signatory;

tory’s sole control; and

(d) linked to the data to which it relates in such a manner that any

subsequent change of the data is detectable.

(5) In this Article, “electronic” means relating to technology with electri-

cal, digital, magnetic, wireless, optical, electromagnetic, or similar cap-

abilities.

General provisions I. – 1:107

179

I. – 1:108: Definitions in Annex

(1) The definitions in the Annex apply for all the purposes of these rules

unless the context otherwise requires.

(2) Where a word is defined, other grammatical forms of the word have a

corresponding meaning.

I. – 1:109: Notice

(1) This Article applies in relation to the giving of notice for any purpose

under these rules. “Notice” includes the communication of informa-

tion or of a juridical act.

(2) The notice may be given by any means appropriate to the circumstan-

ces.

(3) The notice becomes effective when it reaches the addressee, unless it

provides for a delayed effect.

(4) The notice reaches the addressee:

(a) when it is delivered to the addressee;

(b) when it is delivered to the addressee’s place of business or, where

there is no such place of business or the notice does not relate to a

business matter, to the addressee’s habitual residence;

can be accessed by the addressee; or

(d) when it is otherwise made available to the addressee at such a

place and in such a way that the addressee could reasonably be

expected to obtain access to it without undue delay.

(5) The notice has no effec t if a revocation of it reaches the addressee

before or at the same time as the notice.

(6) Any reference in these rules to a notice given by or to a person includes

a notice given by or to an agent of that person who has authority to

give or receive it.

(7) In relations between a business and a consumer the parties may not, to

the detriment of the consumer, exclude the rule in paragraph (4)(c) or

derogate from or vary its effects.

I. – 1:108 Book I

180

I. – 1:110: Computation of time

(1) The provisions of this Article apply in relation to the computation of

time for any purpose under these rules.

(2) Subject to the following provisions of this Article:

(a) a period expressed in hours starts at the beginning of the first hour

and ends with the expiry of the last hour of the period;

(b) a period expressed in days starts at the beginning of the first hour

of the first day and ends with the expiry of the last hour of the last

day of the period;

ning of the first hour of the first day of the period, and ends with

the expiry of the last hour of wh ichever day in the last week,

month or year is the same day of the week, or falls on the same

date, as the day from which the period runs; with the qualification

that if, in a period expressed in months or in years, the day on

which the period should expire does not occur in the last month,

it ends with the expiry of the last hour of the last day of that

month;

(d) if a period includes part of a month, the month is considered to

have thirty days for the purpose of calculating the length of the

part.

(3) Where a period is to be calculated from a specified event or action,

then:

(a) if the period is expressed in hours, the hour during which the event

occurs or the action takes place is not considered to fall within the

period in question; and

(b) if the period is expressed in days, weeks, months or years, the day

during wh ich the event occurs or the action takes place is not

considered to fall within the period in question.

(4) Where a period is to be calculated from a specified time, then:

(a) if the period is expressed in hours, the first hour of the period is

considered to begin at the specified time; and

(b) if the period is expressed in days, weeks, months or years, the day

during which the specified time arrives is not considered to fall

within the period in question.

(5) The periods concerned include Saturdays, Sundays and public holi-

days, save where these are expressly excepted or where the periods

are expressed in working days.

General provisions I. – 1:110

181

(6) Where the last day of a period expressed otherwise than in hours is a

Saturday, Sunday or public holiday at the place where a prescribed act

is to be done, the period ends with the expiry of the last hour of the

following working day. This provision does not apply to periods cal-

culated retroactively from a given date or event.

(7) Any period of two days or more is regarded as including at least two

working days.

(8) Where a person sends another person a document which sets a period

of time within which the addressee has to reply or take other action but

does not state when the period is to begin, then, in the absence of

indications to the contrary, the period is calculated from the date stated

as the date of the document or, if no date is st ated, from the moment

the document reaches the addressee.

(9) In this Article:

(a) “public ho liday” with reference to a member state, or part of a

member state, of the European Union means any day designated

as such for that state or part in a list published in the official jour-

nal; and

(b) “working days” means all days other than Saturdays, Sundays and

public holidays.

I. – 1:110 Book I

182

Book II

Contracts and other juridical acts

Chapter 1:

General provisions

II. – 1:101: Meaning of “contract” and “juridical act”

(1) A contract is an agreement which is intended to give rise to a binding

legal relationship or to have some other legal effect. It is a bilateral or

multilateral juridical act.

(2) A juridical act is any statement or agreement, whether express or im-

plied from conduct, which is intended to have legal effect as such. It

may be unilateral, bilateral or multilateral.

II. – 1:102: Party autonomy

(1) Parties are free to make a contract or other juridical act and to deter-

mine its contents, subject to any applicable mandatory rules.

(2) Parties may exclude the application of any of the following rules relat-

ing to contracts or other juridical acts, or the rights and obligations

arising from them, or derogate from or vary their effects, except as

otherwise provided.

(3) A provision to the effect that parties may not exclude the application of

a rule or derogate from or vary its effects does not prevent a party from

waiving a right which has already arisen and of which that par ty is

aware.

II. – 1:103: Binding effect

(1) A valid contract is binding on the parties.

(2) A valid unilateral undertaking is binding on the person giving it if it is

intended to be legally binding without acceptance.

(3) This Article does not prevent modification or termination of any result-

ing right or obligation by agreement between the debtor and creditor or

as provided by law.

183

II. – 1:104: Usages and practices

(1) The parties to a contract are bound by any usage to which they have

agreed and by any practice they have established between themselves.

(2) The parties are bound by a usage which would be considered generally

applicable by persons in the same situation as the parties, except where

the application of such usage would be unreasonable.

(3) This Article applies to other juridical acts with any necessary adapta-

tions.

II. – 1:105: Imputed knowledge etc.

If a person who with a party’s assent was involved in making a contract or

other juridical act or in exercising a right or performing an obligation under

it:

(a) knew or foresaw a fact, or is treated as having knowledge or foresight of

a fact; or

(b) acted intentionally or with any other relevant state of mind

this knowledge, foresight or st ate of mind is imputed to the party.

II. – 1:106: Form

(1) A contract or other juridical act need not be concluded, made or evi-

denced in writing nor is it subject to any other requirement as to form.

(2) Where a contract or other juridical act is invalid only by reason of non-

compliance with a particular requirement as to form, one party (the

first party) is liable for any loss suffered by the other (the second party)

by acting in the mistaken, but reasonable, belief that it was valid if the

first party:

(a) knew it was invalid;

(b) knew or could reasonably be expected to know that the second

party was acting to that party’s potential prejudice in the mistaken

belief that it was valid; and

continue so acting.

II. – 1:107: Mixed contracts

(1) For the purposes of this Article a mixed contract is a contract which

contains:

(a) parts falling within two or more of the categories of contracts regu-

lated specifically in these rules; or

II. – 1:104 Book II

184

(b) a part fal ling within one such category and another part falling

within the category of contracts governed only by the rules applic-

able to contracts generally.

(2) Where a contract is a mixed contract then, unless this is contrary to the

nature and purpose of the contract, the rules applicable to each relevant

category apply, with any appropriate adaptations, to the corresponding

part of the contract and the rights and obligations arising from it.

(3) Paragraph (2) does not apply where:

(a) a rule provides that a mixed contract is to be regarded as falling

primarily within one category; or

(b) in a case not covered by the preceding sub-paragraph, one part of a

mixed contract is in fact so predominant that it would be unrea-

sonable not to regard the contract as falling primarily within one

category.

(4) In cases covered by paragraph (3) the rules applicable to the category

into which the contract primarily falls (the primary category) apply to

the contract and the rights and obligations arising from it. However,

rules applicable to any elements of the contract falling within another

category apply with any appropriate adaptations so far as is necessary

to regulate those elements and provided that they do not conflict with

the rules applicable to the primary category.

(5) Nothi ng in t his Article prevents the application of any mandatory

rules.

II. – 1:108: Partial invalidity or ineffectiveness

Where only part of a contract or other juridical act is invalid or ineffective,

the remaining part continues in effect if it can reasonably be maintained

without the invalid or ineffective part.

II. – 1:109: Standard terms

A “standard term” is a term which has been formul ated in advance for

several transactions involving different par ties and which has not been in-

dividually negotiated by the parties.

II. – 1:110: Terms “not individually negotiated”

(1) A term supplied by one party is not individually negotiated if the other

party has not been able to influence its content, in particular because it

has been drafted in advance, whether or not as part of standard terms.

Chapter 1:General provisions II. – 1:110

185

(2) If one party supplies a selection of terms to the other party, a term will

not be regarded as individually negotiated merely because the other

party chooses that term from that selection.

(3) If it is disputed whether a term supplied by one party as part of stan-

dard terms has since been individually negotiated, that party bears the

burden of proving that it has been.

(4) In a contract between a business and a consumer, the business bears

the burden of proving that a term supplied by the business has been

individually negotiated.

(5) In contracts between a business and a consumer, terms drafted by a

third person are considered to have been supplied by the business,

unless the consumer introduced them to the contract.

Chapter 2:

Non-discrimination

II. – 2:101: Right not to be discriminated against

A person has a right not to be discriminated against on the grounds of sex

or ethnic or racial origin in relation to a contract or other juridical act the

object of which is to provide access to, or supply, goods, other assets or

services which are available to the public.

II. – 2:102: Meaning of discrimination

(1) “Discrimination” means any conduct whereby, or situation where, on

grounds such as those mentioned in the preceding Article:

(a) one person is treated less favourably than another person is, has

been or would be treated in a comparable situation; or

(b) an apparently neutral provision, criterion or practice would place

one group of persons at a particular disadvantage when compared

to a different group of persons.

(2) Discr imination also includes hara ssment on grounds such as those

mentioned in the preceding Article. “Harassment” means unwanted

conduct (including conduct of a sexual nature) which violates a per-

son’s dignity, particularly when such conduct creates an intimidating,

hostile, degrading, hu miliating or offensive environment, or which

aims to do so.

(3) Any instruction to discriminate also amounts to discrimination.

II. – 2:101 Book II

186

II. – 2:103: Exception

Unequal treatment which is justified by a legitimate aim does not amount

to discrimination if the means used to achieve that aim are appropriate and

necessary.

II. – 2:104: Remedies

(1) If a person is discriminated against contrary to II. – 2:101 (Right not to

be discriminated against) then, without prejudice to any remedy which

may be available under Book

VI (Non-contractual liability for damage

caused to another), the remedies for non-performance of an obligation

under Book

III, Chapter 3 (including damages for economic and non-

economic loss) are available.

(2) Any remedy granted should be proportionate to the injury or antici-

pated injury; the dissuasive effect of remedies may be taken into ac-

count.

II. – 2:105: Burden of proof

(1) If a person who considers himself or herself discriminated against on

one of the grounds mentioned in

II. – 2:101 (Right not to be discrimi-

nated against) establishes, before a court or another competent author-

ity, facts from which it may be presumed that there has been such

discrimination, it falls on the other party to prove that there has been

no such discrimination.

(2) Paragraph (1) does not apply to proceedings in which it is for the court

or another competent authority to investigate the facts of the case.

Chapter 3:

Marketing and pre-contractual duties

Section 1:

Information duties

II. – 3:101: Duty to disclose information about goods,

other assets and services

(1) Before the conclusion of a contract for the supply of goods, other as-

sets or services by a business to another person, the business has a

duty to disclose to the other person such information concerning the

goods, other assets or services to be supplied as the other person can

Chapter 3:Marketing and pre-contractual duties II. – 3:101

187

reasonably expect, taking into account the standards of quality and

performance which would be normal under the circumstances.

(2) In assessing what information the other person can reasonably expect

to be disclosed, the test to be applied, if the other person is also a

business, is whether the failure to provide the information would de-

viate from good commercial practice.

II. – 3:102: Specific duties for bus inesses marketing

to consumers

(1) Where a business is marketing goods, other assets or services to a

consumer, the business has a duty not to give misleading information.

Information is misleading if it misrepresents o r omits material facts

which the average consumer could expect to be given for an informed

decision on whether to take steps towards the conclusion of a contract.

In assessing what an average consumer could expect to be given, ac-

count is to be taken of all the circumstances and of the limitations of

the communication medium employed.

(2) Where a business uses a commercial communication which gives the

impression to consumers that it contains all the relevant information

necessary to make a decision about concluding a contract, the busi-

ness has a duty to ensure that the communication in fact contains all

the relevant information. Where it is not already apparent from the

context of the commercial communication, the information to be pro-

vided comprises:

(a) the main characteristics of the goods, other assets or services, the

identity and address, if relevant, of the business, the price, and any

available right of withdrawal;

(b) peculiarities related to payment, delivery, performance and com-

plaint handling, if they depart from the requirements of profession-

al diligence; and

after the conclusion of the contract, if this differs from the lan-

guage of the commercial communication.

(3) A duty to provide information under this Article is not fulfilled unless

all the information to be provided is provided in the same language.

II. – 3:102 Book II

188

II. – 3:103: Duty to provide informat ion when concluding

contract with a consumer who is at a particular disadvantage

(1) In the case of transactions that place the consumer at a significant

informational disadvantage because of the technical medium used for

contracting, the physical distance between business and consumer, or

the nature of the transaction, the business has a duty, as appropriate in

the circumstances, to provide clear information about the main char-

acteristics of any goods, other assets or services to be supplied, the

price, the address and identity of the business with which the consum-

er is transacting, the terms of the contract, the rights and obligations of

both contracting parties, and any available right of withdrawal or re-

dress procedures. This information must be provided a reasonable time

before the conclusion of the contract. The information on the right of

withdrawal must, as appropriate in the circumstances, also be ade-

quate in the sense of

II. – 5:104 (Adequate information on the right

to withdraw).

(2) Where more specific information duties are provided for specific situa-

tions, these take precedence over the general information duty under

paragraph (1).

(3) The business bears the burden of proof that it has provided the infor-

mation required by this Article.

II. – 3:104: Information duties in real time distance

communication

(1) When initiating real time distance communication with a consumer, a

business has a duty to provide at the outset explicit information on its

name and the commercial purpose of the contact.

(2) Real time distance communication means direct and immediate dis-

tance communication of such a type that one party can interrupt the

other in the course of the communication. It includes telephone and

electronic means such as voice over internet protocol and internet re-

lated chat, but does not include communication by electronic mail.

(3) The business bears the burden of proof that the consumer has received

the information required under paragraph (1).

(4) If a business has failed to comply with the duty under paragraph (1)

and a contract has been concluded as a result of the communication,

Chapter 3:Marketing and pre-contractual duties II. – 3:104

189

the other party has a right to withdraw from the contract by giving

notice to the business within the period specified in

II. – 5:103 (With-

drawal period).

(5) A business is liable to the consumer for any loss caused by a breach of

the duty under paragraph (1).

II. – 3:105: Formation by electronic means

(1) If a contract is to be concluded by electronic means and without in-

dividual communication, a business has a duty to provide information

about the following matters before the other party makes or accepts an

offer:

(a) the technical steps to be taken in order to conclude the contract;

(b) whether or not a contract document will be f iled by the business

and whether it will be accessible;

fore the other party makes or accepts an offer;

(d) the languages offered for the conclusion of the contract;

(e) any contract terms used.

(2) The business has a duty to ensure that the contract terms referred to in

paragraph (1)(e) are available in textual form.

(3) If a business has failed to comply with the duty under paragraph (1)

and a contract has been concluded in the circumstances there stated,

the other party has a right to withdraw from the contract by giving

notice to the business within the period specified in

II. – 5:103 (With-

drawal period).

(4) A business is liable to the consumer for any loss caused by a breach of

the duty under paragraph (1).

II. – 3:106: Clarity and form of information

(1) A duty to provide information imposed on a business under this Chap-

ter is not fulfilled unless the requirements of this Article are satisfied.

(2) The information must be clear and precise, and expressed in plain and

intelligible language.

(3) Where rules for specific contracts require information to be provided

on a durable medium or in another particular form it must be provided

in that way.

(4) In the case of contracts between a business and a consumer concluded

at a distance, information about the main characteristics of any goods,

II. – 3:105 Book II

190

other assets or services to be supplied, the price, the address and iden-

tity of the business with which the consumer is transacting, the terms

of the contract, the rights and obligations of both contracting parties,

and any available redress procedures, as may be appropriate in the par-

ticular case, must be confirmed in textual form on a durable medium at

the time of conclusion of the contract. The information on the right of

withdrawal must also be adequate in the sense of

II. – 5:104 (Adequate

information on the right to withdraw).

II. – 3:107: Information about price and additional charges

Where under this Chapter a business has a duty to provide information

about price, the duty is not fulfilled unless what is provided:

(a) includes information about any deposits payable, delivery charges and

any additional taxes and duties where these may be indicated separate-

ly;

(b) if an exact price cannot be indicated, gives such information on the

basis for the calculation as will enable the consumer to verify the price;

and

payment schedule.

II. – 3:108: Information about address and identity of business

(1) Where under this Chapter a business has a duty to provide information

about its address and identity, the duty is not fulfilled unless the in-

formation includes:

(a) the name of the business;

(b) any trading names relevant to the contract in question;

that register;

(d) the geographical address of the business;

(e) contact details;

(f) where the business has a representative in the consumer’s state of

residence, the address and identity of that representative;

(g) where the activity of the business is subject to an authorisation

scheme, the particulars of the relevant supervisory authority; and

(h) where the business exercises an activity which is subject to

VAT,

the relevant

VAT identifi cation number.

Chapter 3:Marketing and pre-contractual duties II. – 3:108

191

(2) For the purpose of II. – 3:103 (Duty to provide information when con-

cluding contract with a consumer who is at a par ticular disadvantage),

the address and identity of the business include only the information

indicated in paragraph (1)(a), (c), (d) and (e).

II. – 3:109: Remedies for breach of information duties

(1) If a business has a duty under II. – 3:103 (Duty to provide information

when concluding contract with a consumer who is at a particular dis-

advantage) to provide information to a consumer before the conclusion

of a contract from which the consumer has the right to withdraw, the

withdrawal period does not commence until all this information has

been provided. Regardless of this, the right of withdrawal lapses after

one year from the time of the conclusion of the contract.

(2) If a business has failed to comply with any duty imposed by the pre-

ceding Articles of this Section and a contract has been concluded, the

business has such obligations under the contract as the other party has

reasonably expected as a consequence of the absence or incorrectness

of the information. Remedies provided under Book

III, Chapter 3 apply

to non-performance of these obligations.

(3) Whether or not a contract is concluded, a business which has failed to

comply with any duty imposed by the preceding Articles of this Section

is liable for any loss caused to the other party to the transaction by such

failure. This paragraph does not apply to the extent that a remedy is

available for non-performance of a contractual obligation under the

preceding paragraph.

(4) The remedies provided under this Article are without prejudice to any

remedy which may be available under

II. – 7:201 (Mistake).

(5) In relations between a business and a consumer the parties may not, to

the detriment of the consumer, exclude the application of this Article

or derogate from or vary its effects.

Section 2:

Duty to prevent input errors and acknowledge receipt

II. – 3:201: Correction of input errors

(1) A business which intends to conclude a contract by making available

electronic means without individual communication for concluding it

II. – 3:109 Book II

192

has a duty to make available to the other party appropriate, effective

and accessible technical means for identifying and correcting input

errors before the other party makes or accepts an offer.

(2) Where a person concludes a contract in error because of a failure by a

business to comply with the duty under paragraph (1) the business is

liable for any loss caused to that person by such failure. This is without

prejudice to any remedy which may be available under

II. – 7:201 (Mis-

take).

(3) In relations between a business and a consumer the parties may not, to

the detriment of the consumer, exclude the application of this Article

or derogate from or vary its effects.

II. – 3:202: Acknowledgement of receipt

(1) A business which offers the facility to conclude a contract by electronic

means and without individual communication has a duty to acknowl-

edge by electronic means the receipt of an offer or an acceptance by the

other party.

(2) If the other party does not receive the acknowledgement without un-

due delay, that other party may revoke the offer or withdraw from the

contract.

(3) The business is liable for any loss caused to the other par ty by a breach

of the duty under paragraph (1).

(4) In relations between a business and a consumer the parties may not, to

the detriment of the consumer, exclude the application of this Article

or derogate from or vary its effects.

Section 3:

Negotiation and confidentiality duties

II. – 3:301: Negotiations contrary to good faith and fair dealing

(1) A person is free to negotiate and is not liable for failure to reach an

agreement.

(2) A person who is engaged in negotiations has a duty to negotiate in

accordance with good faith and fair dealing and not to break off ne-

gotiations contrary to good faith and fair dealing. This duty may not be

excluded or limited by contract.

Chapter 3:Marketing and pre-contractual duties II. – 3:301

193

(3) A person who is in breach of the duty is liable for any loss caused to the

other party by the breach.

(4) It is contrary to good faith and fair dealing, in particular, for a person to

enter into or continue negotiations with no real intention of reaching

an agreement with the other party.

II. – 3:302: Breach of confidentiality

(1) If confidential information is given by one party in the course of ne-

gotiations, the other party is under a duty not to disclose that infor-

mation or use it for that party’s own purposes whether or not a con-

tract is subsequently concluded.

(2) In this Article, “confidential information” means information which,

either from its nature or the circumstances in which it was obtained,

the party receiving the information knows or could reasonably be ex-

pected to know is conf idential to the other party.

(3) A party who reasonably anticipates a breach of the duty may obtain a

court order prohibiting it.

(4) A party who is in breach of the duty is liable for any loss caused to the

other party by the breach and may be ordered to pay over to the other

party any benefit obtained by the breach.

Section 4:

Unsolicited goods or services

II. – 3:401: No obligation arising from failure to respond

(1) If a business delivers unsolicited goods to, or performs unsolicited ser-

vices for, a consumer:

(a) no contract arises from the consumer’s failure to respond or from

any other action or inaction by the consumer in relation to the

goods and services; and

(b) no non-contractual obligation arises from the consumer’s acquisi-

tion, retention, rejection or use of the goods or receipt of benefit

from the services.

(2) Sub-paragraph (b) of the preceding paragraph does not apply if the

goods or services were supplied:

II. – 3:302 Book II

194

(a) by way of benevolent intervention in another’s affairs; or

(b) in error or in such other circumstances that there is a right to re-

versal of an unjustified enrichment.

(3) This Article is subject to the rules on delivery of excess quantity under a

contract for the sale of goods.

(4) For the purposes of paragraph (1) delivery occurs when the consumer

obtains physical control over the goods.

Section 5:

Damages for breach of duty under this Chapter

II. – 3:501: Liability for damages

(1) Where any rule in this Chapter makes a person liable for loss caused to

another person by a breach of a duty, the other person has a right to

damages for that loss.

(2) The rules on

III. – 3:704 (Loss attributable to creditor) and III. – 3:705

(Reduction of loss) apply with the adaptation that the reference to

non-performance of the o bligation is to be taken as a reference to

breach of the duty.

Chapter 4:

Formation

Section 1:

General provisions

II. – 4:101: Requirements for the concl usion of a contract

A contract is concluded, without any further requirement, if the parties:

(a) intend to enter into a binding legal relationship or bring about some

other legal effect; and

(b) reach a sufficient agreement.

II. – 4:102: How intention is determined

The intention of a party to enter into a binding legal relationship or bring

about some other legal effect is to be determined from the party’s state-

ments or conduct as they were reasonably understood by the other party.

Chapter 4:Formation II. – 4:102

195

II. – 4:103: Sufficient agreement

(1) Agreement is suff icient if:

(a) the terms of the contract have been sufficie ntly defined by the

parties for the contract to be given effect; or

(b) the terms of the contract, or the rights and obligations of the par-

ties under it, can be otherwise suff iciently determined for the con-

tract to be given effect.

(2) If one of the parties refuses to conclude a contract unless the parties

have agreed on some specific matter, there is no contract unless agree-

ment on that matter has been reached.

II. – 4:104: Merger clause

(1) If a contract document contains an individually negotiated term stating

that the document embodies all the terms of the contract (a merger

clause), any prior statements, undertakings or agreements which are

not embodied in the document do not form part of the contract.

(2) If the merger clause is not individually negotiated it establishes only a

presumption that the parties intended that their prior statements, un-

dertakings or agreements were not to form part of the contract. This

rule may not be excluded or restricted.

(3) The parties’ prior st atements may be used to interpret the contract.

This rule may not be excluded or restricted except by an individually

negotiated term.

(4) A party may by statements or conduct be precluded from asserting a

merger clause to the extent that the other party has reasonably relied

on such statements or conduct.

II. – 4:105: Modification in certain form only

(1) A term in a contract requiring any agreement to modify its terms, or to

termi nate the relationship resulting from it, to be in a certain form

establishes only a presumption that any such agreement is not intend-

ed to be legally binding unless it is in that form.

(2) A party may by statements or conduct b e precluded from assertin g

such a term to the extent that the other party has reasonably relied on

such statements or conduct.

II. – 4:103 Book II

196

Section 2:

Offer and acceptance

II. – 4:201: Offer

(1) A proposal amounts to an offer if:

(a) it is intended to result in a contract if the other party accepts it; and

(b) it contains sufficiently definite terms to form a contract.

(2) An offer may be made to one or more specific persons or to the pub-

lic.

(3) A proposal to supply goods from stock, or a service, at a stated price

made by a business in a public advertisement or a catalogue, or by a

display of goods, is treated, unless the circumstances indicate other-

wise, as an offer to supply at that price until the stock of goods, or the

business’s capacity to supply the service, is exhausted.

II. – 4:202: Revocation of offer

(1) An offer may be revoked if the revocation reaches the offeree before the

offeree has dispatched an acceptance or, in cases of acceptance by

conduct, before the contract has been concluded.

(2) An offer made to the public can be revoked by the same means as were

used to make the offer.

(3) However, a revocation of an offer is ineffective if:

(a) the offer indicates that it is irrevocable;

(b) the offer states a fixed time for its acceptance; or

vocable and the offeree has acted in reliance on the offer.

(4) Paragraph (3) does not apply to an offer if the offeror would have a

right under any rule in Books

II to IV to withdraw from a contract

resulting from its acceptance. The parties may not, to the detriment

of the offeror, exclude the application of this rule or derogate from or

vary its effects.

II. – 4:203: Rejection of offer

When a rejection of an offer reaches the offeror, the offer lapses.

Chapter 4:Formation II. – 4:203

197

II. – 4:204: Acceptance

(1) Any form of statement or conduct by the offeree is an acceptance if it

indicates assent to the offer.

(2) Silence or inactivity does not in itself amount to acceptance.

II. – 4:205: Time of conclusion of the contract

(1) If an accepta nce has been dispatched by the offeree the contract is

concluded when the acceptance reaches the offeror.

(2) In the case of acceptance by conduct, the contract is concluded when

notice of the conduct reaches the offeror.

(3) If by virtue of the offer, of practices which the parties have established

between themselves, or of a usage, the offeree may accept the offer by

doing an act without notice to the offeror, the contract is concluded

when the offeree begins to do the act.

II. – 4:206: Time limit for acceptance

(1) An acceptance of an offer is effective only if it reaches the offeror with-

in the time fixed by the offeror.

(2) If no time has been fixed by the offeror the acceptance is effective only

if it reaches the offeror within a reasonable time.

(3) Where an offer may be accepted by performing an act without notice to

the offeror, the acceptance is effective only if the act is performed with-

in the time for acceptance fixed by the offeror or, if no such time is

fixed, within a reasonable time.

II. – 4:207: Late acceptance

(1) A late acceptance is nonetheless effective as an acceptance if without

undue delay the offeror informs the offeree that it is treated as an ef-

fective acceptance.

(2) If a letter or other communication containing a late acceptance shows

that it has been dispatched in such circumstances that if its transmis-

sion had been normal it would have reached the offeror in due time, the

late acceptance is effective as an acceptance unless, without undue

delay, the offeror informs the offeree that the offer is considered to

have lapsed.

II. – 4:204 Book II

198

II. – 4:208: Modified acceptance

(1) A reply by the offeree which states or implies additional or different

terms which materially alter the terms of the offer is a rejection and a

new offer.

(2) A reply which gives a definite assent to an offer operates as an accept-

ance even if it states or implies additional or different terms, provided

these do not materially alter the terms of the offer. The additional or

different terms then become part of the contract.

(3) However, such a reply is treated as a rejection of the offer if:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) the offeror objects to the additional or different terms without un-

due delay; or

assent to the additional or different terms, and the assent does not

reach the offeree within a reasonable time.

II. – 4:209: Conflicting standard terms

(1) If the parties have reached agreement except that the offer and accept-

ance re fer to conflicting standard terms, a contract is nonetheless

formed. The standard terms form part of the contract to the extent that

they are common in substance.

(2) However, no contract is formed if one party:

(a) has indicated in advance, explicitly, and not by way of standard

terms, an intention not to be bound by a contract on the basis of

paragraph (1); or

(b) without undue delay, informs the other party of such an intention.

II. – 4:210: Formal confirmation of contr act between businesses

If businesses have concluded a contract but have not embodied it in a final

document, and one without undue delay sends the other a notice in textual

form on a durable medium which purports to be a confirmation of the

contract but which contains additional or different terms, such terms be-

come part of the contract unless:

(a) the terms materially alter the terms of the contract; or

(b) the addressee objects to them without undue delay.

Chapter 4:Formation II. – 4:210

199

II. – 4:211: Contracts not concluded through offer and acceptance

The rules in this Section apply with appropriate adaptations even though

the process of conclusion of a contract cannot be analysed into offer and

acceptance.

Section 3:

Other juridical acts

II. – 4:301: Requirements for a unilateral juridical act

The requirements for a unilateral juridical act are:

(a) that the party doing the act intends to be legally bound or to achieve

the relevant legal effect;

(b) that the act is sufficiently certain; and

the act is addressed to the public, the act is made public by advertise-

ment, public notice or otherwise.

II. – 4:302: How intention is determined

The intention of a party to be legally bound or to achieve the relevant legal

effect is to be determined from the party’s statements or conduct as they

were reasonably understood by the person to whom the act is addressed.

II. – 4:303: Right or benefit may be rejected

Where a unilateral juridical act confers a right or benefit on the person to

whom it is addressed, that person may reject it by notice to the maker of the

act, provided that is done without und ue delay and before the right or

benefit has been expressly or impliedly accepted. On such rejection, the

right or benefit is treated as never having accrued.

II. – 4:211 Book II

200

Chapter 5:

Right of withdrawal

Section 1:

Exercise and effect

II. – 5:101: Scope and mandatory nature

(1) The provisions in this Section apply where under any rule in Books II to

IV a part y has a right to withdraw from a contract within a certain

period.

(2) The parties may not, to the detriment of the entitled party, exclude the

application of the rules in this Chapter or derogate from or vary their

effects.

II. – 5:102: Exercise of right to withdraw

(1) A right to withdraw is exercised by notice to the other party. No rea-

sons need to be given.

(2) Returning the subject matter of the contract is considered a notice of

withdrawal unless the circumstances indicate otherwise.

II. – 5:103: Withdrawal period

(1) A right to withdraw may be exercised at any time after the conclusion

of the contract and before the end of the withdrawal period.

(2) The withdrawal period ends fourteen days after the latest of the fol-

lowing times;

(a) the time of conclusion of the contract;

(b) the time when the entitled party receives from the other par ty ade-

quate information on the right to withdraw; or

time when the goods are received.

(3) The withdrawal period ends no later than one year after the time of

conclusion of the contract.

(4) A notice of withdrawal is timely if dispatched before the end of the

withdrawal period.

Chapter 5:Right of withdrawal II. – 5:103

201

II. – 5:104: Adequate information on the right to withdraw

Adequate information on the right to withdraw requires that the right is

appropriately brought to the entitled party’s attention, and that the infor-

mation provides, in textual form on a durable medium and in clear and

comprehensible language, information about how the right may be exer-

cised, the withdrawal period, and the name and address of the person to

whom the withdrawal is to be communicated.

II. – 5:105: Effects of withdrawal

(1) Withdrawal terminates the contractual relationship and the obligations

of both parties under the contract.

(2) The restitutionary effects of such termination are governed by the rules

in Book

III, Chapter 3, Section 5, Sub-section 4 (Restitution) as mod-

ified by this Article, unless the contract provides otherwise in favour of

the withdrawing party.

(3) Where the withdrawing party has made a payment under the contract,

the business has an obligation to return the payment without undue

delay, and in any case not later than thirty days after the withdrawal

becomes effective.

(4) The withdrawing party is not liable to pay:

(a) for any diminution in the value of anything received under the

contract caused by inspection and testing;

(b) for any destruction or loss of, or damage to, anything received

under the contract, provided the withdrawing party used reason-

able care to prevent such destruction, loss or damage.

(5) The withdrawing party is liable for any diminution in value caused by

normal use, unless that party had not received adequate notice of the

right of withdrawal.

(6) Except as provided in this Article, the withdrawing party does not incur

any liability through the exercise of the right of withdrawal.

(7) If a consumer exercises a right to withdraw fro m a contract after a

business has made use of a contractual right to supply something of

equivalent quality and price in case what was ordered is unavailable,

the business must bear the cost of returning what the consumer has

received under the contract.

II. – 5:104 Book II

202

II. – 5:106: Linked contracts

(1) If a consumer exercises a right of withdrawal from a contract for the

supply of goods, other assets or services by a business, the effects of

withdrawal extend to any linked contract.

(2) Where a contract is partially or exclusively financed by a credit con-

tract, they form linked contracts, in particular:

(a) if the business supplying goods, other assets or services finances

the consumer’s performance;

(b) if a third party which finances the consumer’s performance uses

the services of the business for preparing or concluding the credit

contract;

be financed with this credit, and if this link between both contracts

was suggested by the supplier of the goods, other assets or servi-

ces, or by the supplier of credit; or

(d) if there is a similar economic link.

(3) The provisions of

II. – 5:105 (Effects of withdrawal) apply accordingly

to the linked contract.

(4) Paragraph (1) does not apply to credit contracts financing the con-

tracts mentioned in paragraph (2)(f) of the following Article.

Section 2:

Particular rights of withdrawal

II. – 5:201: Contracts negotiated away from business premises

(1) A consumer is entitled to withdraw from a contract under which a

business supplies goods, other assets or services, including financial

services, to the consumer, or is granted a personal security by the con-

sumer, if the consumer’s offer or acceptance was expressed away from

the business premises.

(2) Paragraph (1) does not apply to:

(a) a contract concluded by means of an automatic vending machine

or automated commercial premises;

(b) a contract concluded with telecommunications operators through

the use of public payphones;

relating to other immovable property rights, except for rental;

Chapter 5:Right of withdrawal II. – 5:201

203

(d) a contract for the supply of foodstuffs, beverages or other goods

intended for everyday consumption supplied to the home, resi-

dence or workplace of the consumer by regular roundsmen;

(e) a contract concluded by means of distance communication, but

outside of an organised distance sales or service-provision scheme

run by the supplier;

(f) a contract for the supply of goods, other assets or services whose

price depends on fluctuations in the financial market outside the

supplier’s control, which may occur during the withdrawal peri-

od;

(g) a contract concluded at an auction;

(h) travel and baggage insurance policies or similar short-term insur-

ance policies of less than one month’s duration.

(3) If the business has exclusively used means of distance communication

for concluding the contract, paragraph (1) also does not apply if the

contract is for:

(a) the supply of accommodation, transport, catering or leisure servi-

ces, where the business undertakes, when the contract is conclud-

ed, to supply these services on a specific date or within a specific

period;

(b) the supply of services other than financial services if performance

has begun, at the consumer’s express and informed request, before

the end of the withdrawal period referred to in

II. – 5:103 (With-

drawal period) paragraph (1);

clearly personalised or which, by reason of their nature, cannot be

returned or are liable to deteriorate or expire rapidly;

(d) the supply of audio or video recordings or computer software

(i) which were unsealed by the consumer, or

(ii) which can be downloaded or reproduced for permanent use, in

case of supply by electronic means;

(e) the supply of newspapers, periodicals and magazines;

(f) gaming and lottery services.

(4) With regard to financial services, paragraph (1) also does not apply to

contracts that have been fully performed by both parties, at the con-

sumer’s express request, before the consumer exercises his or her right

of withdrawal.

II. – 5:201 Book II

204

II. – 5:202: Timeshare contracts

(1) A consumer who acquires a right to use immovable property under a

timeshare contract with a business is entitled to withdraw from the

contract.

(2) Where a consumer exercises the right of withdrawal under paragraph

(1), the contract may require the consumer to reimburse those expen-

ses which:

(a) have been incurred as a result of the conclusion of and withdrawal

from the contract;

(b) correspond to legal formalities which must be completed before

the end of the period referred to in

II. – 5:103 (Withdrawal period)

paragraph (1);

(d) are expressly mentioned in the contract; and

(e) are in conformity with any applicable rules on such expenses.

The consumer is not obliged to reimburse any expenses when exercis-

ing the right of withdrawal in the situation covered by paragraph (1) of

II. – 3:109 (Remedies for breach of information duties).

(3) The business must not demand or accept any advance payment by the

consumer during the period in which the latter may exercise the right of

withdrawal. The business is obliged to return any such payment re-

ceived.

Chapter 6:

Representation

II. – 6:101: Scope

(1) This Chapter applies to the external relationships created by acts of

representation – that is to say, the relationships between:

(a) the principal and the third party; and

(b) the representative and the third party.

(2) It applies also to situations where a person purports to be a represen-

tative without actually being a representative.

(3) It does not apply to the internal relationship between the representative

and the principal.

Chapter 6:Representation II. – 6:101

205

II. – 6:102: Definitions

(1) A “representative” is a person who has authority to affect directly the

legal position of another person, the principal, in relation to a third

party by acting on behalf of the principal.

(2) The “authority” of a representative is the power to affect the principal’s

legal position.

(3) The “authorisation” of the representative is the granting or maintaining

of the authority.

(4) “Acting without authority” includes acting beyond the scope of the

authority granted.

(5) A “third party”, in this Chapter, includes the representative who, when

acting for the principal, also acts in a personal capacity as the other

party to the transaction.

II. – 6:103: Authorisation

(1) The authority of a representative may be granted by the principal or by

the law.

(2) The principal’s authorisation may be express or implied.

(3) If a person causes a third party reasonably and in good faith to believe

that the person has authorised a representative to perform certain acts,

the person is treated as a principal who has so authorised the apparent

representative.

II. – 6:104: Scope of authority

(1) The scope of the representative’s authority is determined by the grant.

(2) The representative has authority to perform all incidental acts neces-

sary to achieve the purposes for which the authority was granted.

(3) A representative has authority to delegate authority to another person

(the delegate) to do acts on behalf of the principal which it is not

reasonable to expect the representative to do personally. The rules of

this Chapter apply to acts done by the delegate.

II. – 6:105: When representative’s act affects principal’s legal

position

When the representative acts:

(a) in the name of a principal or otherwise in such a way as to indicate to the

third party an intention to affect the legal position of a principal; and

(b) within the scope of the representative’s authority,

II. – 6:102 Book II

206

the act affects the legal position of the principal in relation to the third party

as if it had been done by the principal. It does not as such give rise to any

legal relation between the representative and the third party.

II. – 6:106: Representative acting in own name

When the representative, despite having authority, does an act in the re-

presentative’s own name or otherwise in such a way as not to indicate to

the third party an intention to affect the legal position of a principal, the act

affects the legal position of the representative in relation to the third party

as if done by the representative in a personal capacity. It does not as such

affect the legal position of the principal in relation to the third party unless

this is specifically provided for by any rule of law.

II. – 6:107: Person purporting to act as representative but not

having authority

(1) When a person acts in the name of a principal or otherwise in such a

way as to indicate to the third party an intention to affect the legal

position of a principal but acts without authority, the act does not

affect the legal position of the purported principal or, save as provided

in paragraph (2), give rise to legal relations between the unauthorised

person and the third party.

(2) Failing ratification by the purported principal, the person is liable to pay

the third party such damages as will place the third par ty in the same

position as if the person had acted with authority.

(3) Paragraph (2) does not apply if the third party knew or could reason-

ably be expected to have known of the lack of authority.

II. – 6:108: Unidentified principal

If a representative acts for a principal whose identity is to be revealed later,

but fails to reveal that identity within a reasonable time after a request by

the third party, the representative is treated as having acted in a personal

capacity.

II. – 6:109: Conflict of interest

(1) If an act done by a representative involves the representative in a conflict

of interest of which the third party knew or could reasonably be expected

to have known, the principal may avoid the act according to the provi-

sions of

II. – 7:209 (Notice of avoidance) to II. – 7:213 (Partial avoidance).

Chapter 6:Representation II. – 6:109

207

(2) There is presumed to be a conflict of interest where:

(a) the representative also acted as representative for the third party; or

(b) the transaction was with the representative in a personal capacity.

(3) However, the principal may not avoid the act:

(a) if the representative acted with the principal’s prior consent; or

(b) if the representative had disclosed the conflict of interest to the

principal and the principal did not object within a reasonable time;

have known, of the representative’s involvement in the conflict of

interest and did not object within a reasonable time; or

(d) if, for any other reason, the representative was entitled as against

the principal to do the act by virtue of

IV. D. – 5:101 (Self-contract-

ing) or

IV. D. – 5:102 (Double mandate).

II. – 6:110: Several representatives

Where several representatives have authority to act for the same principal,

each of them may act separately.

II. – 6:111: Ratification

(1) Where a person purports to act as a representative but acts without

authority, the purported principal may ratify the act.

(2) Upon ratification, the act is considered as having been done with au-

thority, without prejudice to the rights of other persons.

(3) The third party who knows that an act was done without authority may

by notice to the purported principal specify a reasonable period of time

for ratification. If the act is not ratified within that period ratification is

no longer possible.

II. – 6:112: Effect of ending or restriction of authorisation

(1) The authority of a representative continues in relation to a third party

who knew of the authority notwithstanding the ending or restriction of

the representative’s authorisati on until the third party knows or can

reasonably be expected to know of the ending or restriction.

(2) Where the principal is under an obligation to the third party not to end

or restrict the representative’s authorisation, the authority of a repre-

sentative continues notwithstanding an ending or restriction of the

authorisation even if the third party knows of the ending or restriction.

II. – 6:110 Book II

208

(3) The third party can reasonably be expected to know of the ending or

restriction if, in particular, it has been communicated or publicised in

the same way as the granting of the authority was originally commu-

nicated or publicised.

(4) Notwithstanding the ending of authorisation, the representative con-

tinues to have authority for a reasonable time to perform those acts

which are necessary to protect the interests of the principal or the

principal’s successors.

Chapter 7:

Grounds of invalidity

Section 1:

General provisions

II. – 7:101: Scope

(1) This Chapter deals with the effects of:

(a) mistake, fraud, threats, or unfair exploitation; and

(b) infringement of fundamental principles or mandatory rules.

(2) It does not deal with lack of capacity.

(3) It applies in relation to contracts and, with any necessary adaptations,

other juridical acts.

II. – 7:102: Initial impossibility or lack of right or

authority to dispose

A contract is not invalid, in whole or in part, merely because at the time it is

concluded performance of any obligation assumed is impossible, or be-

cause a party has no right or authority to dispose of any assets to which

the contract relates.

Section 2:

Vitiated consent or intention

II. – 7:201: Mistake

(1) A party may avoid a contract for mistake of fact or law existing when

the contract was concluded if:

Chapter 7:Grounds of invalidity II. – 7:201

209

(a) the party, but for the mistake, would not have concluded the con-

tract or would have done so only on fundament ally different terms

and the other party knew or could reasonably be expected to have

known this; and

(b) the other party;

(i) caused the mistake;

(ii) caused the contract to be concluded in mistake by leaving the

mistaken party in error, contrary to good faith and fair dealing,

when the other par ty knew or could reasonably be expected to

have known of the mistake;

(iii) caused the contract to be concluded in mistake by failing to

comply with a pre-contractual information duty or a duty to

make available a means of correcting input errors; or

(iv) made the same mistake.

(2) However a party may not avoid the contract for mistake if:

(a) the mistake was inexcusable in the circumstances; or

(b) the risk of the mistake was assumed, or in the circumstances

should be borne, by that party.

II. – 7:202: Inaccuracy in communication may be treated

as mistake

An inaccuracy in the expression or transmission of a statement is treated as

a mistake of the person who made or sent the statement.

II. – 7:203: Adaptation of contract in case of mistake

(1) If a party is entitled to avoid the contract for mistake but the other party

performs, or indicates a willingness to perform, the obligations under

the contract as it was understood by the party entitled to avoid it, the

contract is treated as having been concluded as that party understood

it. This applies only if the other party performs, or indicates a willing-

ness to perform, without undue delay after being informed of the man-

ner in which the party entitled to avoid it understood the contract and

before that party acts in reliance on any notice of avoidance.

(2) After such performance or indication the right to avoid is lost and any

earlier notice of avoidance is ineffective.

(3) Where both parties have made the same mistake, the court may at the

request of either party bring the contract into accordance with what

might reasonably have been agreed had the mistake not occurred.

II. – 7:202 Book II

210

II. – 7:204: Liability for loss caused by reliance

on incorrect information

(1) A party who has concluded a contract in reasonable reliance on incor-

rect information given by the other party in the course of negotiations

has a right to damages for loss suffered as a result if the provider of the

information:

(a) believed the inform ation to be incorrect or had no reasonable

grounds for believing it to be correct; and

(b) knew or cou ld reasonably be expected to have known that the

recipient would rely on the information in deciding whether or not

to conclude the contract on the agreed terms.

(2) This Article applies even if there is no right to avoid the contract.

II. – 7:205: Fraud

(1) A party may avoid a contract when the other party has induced the

conclusion of the contract by fraudulent misrepresentation, whether

by words or conduct, or fraudulent non-disclosure of any information

which good faith and fair dealing, or any pre-contractual information

duty, required that party to disclose.

(2) A misrepresentation is fraudulent if it is made with knowledge or belief

that the representation is false and is intended to induce the recipient

to make a mistake. A non-disclosure is fraudulent if it is intended to

induce the person from whom the information is withheld to make a

mistake.

(3) In determining whether good faith and fair dealing required a party to

disclose particular information, regard should be had to all the circum-

stances, including:

(a) whether the party had special expertise;

(b) the cost to the party of acquiring the relevant information;

by other means; and

(d) the apparent importance of the information to the other party.

II. – 7:206: Coercion or threats

(1) A party may avoid a contract when the other party has induced the

conclusion of the contract by coercion or by the threat of an imminent

and serious harm which it is wrongful to inflict, or wrongful to use as a

means to obtain the conclusion of the contract.

Chapter 7:Grounds of invalidity II. – 7:206

211

(2) A threat is not regarded as inducing the contract if in the circumstances

the threatened party had a reasonable alternative.

II. – 7:207: Unfair exploitation

(1) A party may avoid a contract if, at the time of the conclusion of the

contract:

(a) the party was dependent on or had a relationship of trust with the

other party, was in economic distress or had urgent needs, was

improvident, ignorant, inexperienced or lacking in bargaining skill;

and

(b) the other party knew or could reas onably be expected to have

known this and, given the circumstances and purpose of the con-

tract, exploited the first p arty’s situation by t aking an excessive

benefit or grossly unfair advantage.

(2) Upon the request of the party entitled to avoidance, a court may if it is

appropriate adapt the contract in order to bring it into accordance with

what might have been agreed had the requirements of good faith and

fair dealing been observed.

(3) A court may similarly adapt the contract upon the request of a party

receiving notice of avoidance for unfair exploitation, provided that this

party informs the party who gave the notice without undue delay after

receiving it and before that party has acted in reliance on it.

II. – 7:208: Third persons

(1) Where a third person for whose acts a party is responsible or who with

a party’s assent is involved in the making of a contract:

(a) causes a mistake, or knows of or could reasonably be expected to

know of a mistake; or

(b) is guilty of fraud, coercion, threats or unfair exploitation,

remedies under this Section are available as if the behaviour or knowl-

edge had been that of the party.

(2) Where a third person for whose acts a party is not responsible and who

does not have the p arty’s assent to be involved in the making of a

contract is guilty of fraud, coercion, threats or unfair exploitation, re-

medies under this Section are available if the par ty knew or could rea-

sonably be expected to have known of the relevant facts, or at the time

of avoidance has not acted in reliance on the contract.

II. – 7:207 Book II

212

II. – 7:209: Notice of avoidance

Avoidance under this Section is effected by notice to the other party.

II. – 7:210: Time

A notice of avoidance under this Section is ineffective unless given within a

reasonable time, with due regard to the circumstances, after the avoiding

party knew or could reasonably be expected to have known of the relevant

facts or became capable of acting freely.

II. – 7:211: Confirmation

If a party who is entitled to avoid a contract under this Section confirms it,

expressly or impliedly, after the period of time for giving notice of avoid-

ance has begun to run, avoidance is excluded.

II. – 7:212: Effects of avoidance

(1) A contract which may be avoided under this Section is valid until avoi-

ded but, once avoided, is retrospectively invalid from the beginning.

(2) The question whether either party has a right to the return of whatever

has been transferred or supplied under a contract which has been avoi-

ded under this Section, or a monetary equivalent, is regulated by the

rules on unjustified enrichment.

(3) The effect of avoidance under this Section on the ownership of prop-

erty which has been transferred under the avoided contract is governed

by the rules on the transfer of property.

II. – 7:213: Partial avoidance

If a ground of avoidance under this Section affects only particular terms of a

contract, the effect of an avoidance is limited to those terms unless, giving

due consideration to all the circumstances of the case, it is unreasonable to

uphold the remaining contract.

II. – 7:214: Damages for loss

(1) A party who has the right to avoid a contract under this Section (or

who had such a right before it was lost by the effect of time limits or

confirmation) is entitled, whether or not the contract is avoided, to

damages from the other party for any loss suffered as a result of the

mistake, fraud, coercion, threats or unfair exploitation, provided that

Chapter 7:Grounds of invalidity II. – 7:214

213

the other party knew or could reasonably be expected to have known of

the ground for avoidance.

(2) The damages recoverable are such as to place the aggrieved party as

nearly as possible in the position in which that party would have been

if the contract had not been concluded, with the further limitation that,

if the party does not avoid the contract, the damages are not to exceed

the loss caused by the mistake, fraud, coercion, threats or unfair ex-

ploitation.

(3) In other respects the rules on damages for non-performance of a con-

tractual obligation apply with any appropriate adaptation.

II. – 7:215: Exclusion or restriction of remedies

(1) Remedies for fraud, coercion, threats and unfair exploitation cannot be

excluded or restricted.

(2) Remedies for mistake may be excluded or restricted unless the exclu-

sion or restriction is contrar y to good faith and fair dealing.

II. – 7:216: Overlapping remedies

A party who is entitled to a remedy under this Section in circumstances

which afford that party a remedy for non-performance may pursue either

remedy.

Section 3:

Infringement of fundamental principles or mandatory rules

II. – 7:301: Contracts infringing fundamental principles

A contract is void to the extent that:

(a) it infringes a principle recognised as fundamental in the laws of the

Member States of the European Union; and

(b) nullity is required to give effect to that principle.

II. – 7:302: Contracts infringing mandatory rules

(1) Where a contract is not void under the preceding Article but infringes a

mandatory rule of law, the effects of that infringement on the validity

of the contract are the effects, if any, expressly prescribed by that man-

datory rule.

II. – 7:215 Book II

214

(2) Where the mandatory rule does not expressly prescribe the effects of

an infringement on the validity of a contract, a court may:

(a) declare the contract to be valid;

(b) avoid the contract, with retrospective effect, in whole or in part; or

(3) A decision reached under paragraph (2) should be an appropriate and

proportional response to the infringement, having regard to all relevant

circumstances, including:

(a) the purpose of the rule which has been infringed;

(b) the category of persons for whose protection the rule exists;

(d) the seriousness of the infringement;

(e) whether the infringement was intentional; and

(f) the closeness of the relationship between the infringement and the

contract.

II. – 7:303: Effects of nullity or avoidance

(1) The question whether either party has a right to the return of whatever

has been transferred or supplied under a contract, or part of a contract,

which is void or has been avoided under this Section, or a monetary

equivalent, is regulated by the rules on unjustified enrichment.

(2) The effect of nullity or avoidance under this Section on the ownership

of property which has been transferred under the void or avoided con-

tract, or part of a contract, is governed by the rules on the transfer of

property.

(3) This Article is subject to the powers of the court to modify the contract

or its effects.

II. – 7:304: Damages for loss

(1) A party to a contract which is void or avoided, in whole or in part,

under this Section is entitled to damages from the other party for any

loss suffered as a result of the invalidity, provided that the first party did

not know and could not reasonably be expected to have known, and

the other party knew or could reasonably be expected to have known,

of the infringement.

Chapter 7:Grounds of invalidity II. – 7:304

215

(2) The damages recoverable are such as to place the aggrieved party as

nearly as possible in the position in which that party would have been

if the contract had not been concluded or the infringing term had not

been included.

Chapter 8:

Interpretation

Section 1:

Interpretation of contracts

II. – 8:101: General rules

(1) A contract is to be interpreted according to the common intention of

the parties even if this differs from the literal meaning of the words.

(2) If one party intended the contract, or a term or expression used in it, to

have a par ticular meaning, and at the time of the conclusion of the

contract the other party was aware, or could reasonably be expected to

have been aware, of the first party’s intention, the contract is to be

interpreted in the way intended by the first party.

(3) The contract is, however, to be interpreted according to the meaning

which a reasonable person would give to it:

(a) if an intention cannot be established under the preceding para-

graphs; or

(b) if the question arises with a person, not being a party to the con-

tract or a person who by law has no better rights than such a party,

who has reasonably and in good faith relied on the contract’s ap-

parent meaning.

II. – 8:102: Relevant matters

(1) In interpreting the contract, regard may be had, in particular, to:

(a) the circumstances in which it was concluded, including the pre-

liminary negotiations;

(b) the conduct of the parties, even subsequent to the conclusion of

the contract;

terms or expressions which are the same as, or similar to, those

used in the contract and the practices they have established be-

tween themselves;

II. – 8:101 Book II

216

(d) the meaning commonly given to such terms or expressions in the

branch of activity concerned and the interpretation such terms or

expressions may already have received;

(e) the nature and purpose of the contract;

(f) usages; and

(g) good faith and fair dealing.

(2) In a question with a person, not be ing a party to the contract or a

person such as an assignee who by law has no better rights than such

a party, who has reasonably and in good faith relied on the contract’s

apparent meaning, regard may be had to the circumstances mentioned

in sub-paragraphs (a) to (c) above only to the extent that those cir-

cumstances were known to, or could reasonably be expected to have

been known to, that person.

II. – 8:103: Interpretation against supplier of term or

dominant party

(1) Where there is doubt about the meaning of a term not individually

negotiated, an interpretation of the term against the party who sup-

plied it is to be preferred.

(2) Where there is doubt about the meaning of any other term, and that

term has been established under the dominant influence of one party,

an interpretation of the term against that party is to be preferred.

II. – 8:104: Preference for negotiated terms

Terms which have been individually negotiated take preference over those

which have not.

II. – 8:105: Reference to contract as a whole

Terms and expressions are to be interpreted in the light of the whole con-

tract in which they appear.

II. – 8:106: Preference for interpretation which gives terms effect

An interpretation which renders the terms of the contract lawful, or effec-

tive, is to be preferred to one which would not.

Chapter 8:Interpretation II. – 8:106

217

II. – 8:107: Linguistic discrepancies

Where a contract document is in two or more language versions none of

which is stated to be authoritative, there is, in case of discrepancy between

the versions, a preference for the interpretation according to the version in

which the contract was originally drawn up.

Section 2:

Interpretation of other juridical acts

II. – 8:201: General rules

(1) A unilateral juridical act is to be interpreted in the way in which it could

reasonably be expected to be understood by the person to whom it is

addressed.

(2) If the person making the juridical act intended the act, or a term or

expression used in it, to have a particular meaning, and at the time of

the act the person to whom it was addressed was aware, or could rea-

sonably be expected to have been aware, of the first person’s intention,

the act is to be interpreted in the way intended by the first person.

(3) The act is, however, to be interpreted according to the meaning which

a reasonable person would give to it:

(a) if neither paragraph (1) nor paragraph (2) applies; or

(b) if the question arises with a person, not being the addressee or a

person who by law has no better rights than the addressee, who

has reasonably and in good faith relied on the contract’s apparent

meaning.

II. – 8:202: Application of other rules by analogy

The provisions of Section 1, apart from its first Article, apply with appro-

priate adaptations to the interpretation of a juridical act other than a con-

tract.

II. – 8:107 Book II

218

Chapter 9:

Contents and effects of contracts

Section 1:

Contents

II. – 9:101: Terms of a contract

(1) The terms of a contract may be derived from the express or tacit agree-

ment of the parties, from rules of law or from practices established

between the parties or usages.

(2) Where it is necessary to provide for a matter which the parties have not

foreseen or provided for, a court may imply an additional term, having

regard in particular to:

(a) the nature and purpose of the contract;

(b) the circumstances in which the contract was concluded; and

(3) Any term implied under paragraph (2) should, where possible, be such

as to give effect to what the parties, had they provided for the matter,

would probably have agreed.

(4) Paragraph (2) does not apply if the parties have deliberately left a mat-

ter unprovided for, accepting the consequences of so doing.

II. – 9:102: Certain pre-contractual statements regarded

as contract terms

(1) A statement made by one party before a contract is concluded is re-

garded as a term of the contract if the other party reasonably under-

stood it as bein g made on the basis that it would form part of the

contract terms if a contract were concluded. In assessing whether the

other party was reasonable in understanding the statement in that way

account may be taken of:

(a) the apparent importance of the statement to the other party;

(b) whether the party was making the statement in the course of busi-

ness; and

(2) If one of the parties to a contract is a business and before the contract is

conclu ded makes a statement, either t o the other party or publicly,

Chapter 9:Contents and effects of contracts II. – 9:102

219

about the specific char acteristics of what is to be supplied by that

business under the contract, the statement is regarded as a term of

the contract unless:

(a) the other party was aware when the contract was concluded, or

could reasonably be expected to have been so aware, that the

stat ement was incorrect or could not otherwise be relied on as

such a term; or

(b) the other party’s decision to conclude the contract was not influ-

enced by the statement.

(3) For the purposes of paragraph (2), a statement made by a person en-

gaged in advertising or marketing on behalf of the business is treated as

being made by the business.

(4) Where the other party is a consumer then, for the purposes of para-

graph (2), a public statement made by or on behalf of a producer or

other person in earlier links of the business chain between the producer

and the consumer is treated as being made by the business unless the

business, at the time of conclusion of the contract, did not know and

could not reasonably be expected to have known of it.

(5) In the circumstances covered by paragraph (4) a business which at the

time of conclusion of the contract did not know and could not reason-

ably be expected to have known that the statement was incorrect has a

right to be indemnified by the person making the statement for any

liability incurred as a result of that paragraph.

(6) In relations between a business and a consumer the parties may not, to

the detriment of the consumer, exclude the application of this Article

or derogate from or vary its effects.

II. – 9:103: Terms not individually negotiated

(1) Terms supplied by one party and not individually negotiated may be

invoked against the other party only if the other party was aware of

them, or if the party supplying the terms took reasonable steps to draw

the other party’s attention to them, before or when the contract was

concluded.

(2) If a contract is to be concluded by electronic means, the party supply-

ing any terms which have not been individually negotiated may invoke

them against the other party only if they are made available to the other

party in textual form.

II. – 9:103 Book II

220

(3) For the purposes of this Article

(a) “not individually negotiated” has the meaning given by

II. – 1:110

(Terms “not individually negotiated”); and

(b) terms are not sufficiently brought to the other party’s attention by

a mere reference to them in a contract document, even if that party

signs the document.

II. – 9:104: Determination of price

Where the amount of the price payable under a contract cannot be deter-

mined from the terms agreed by the parties, from any other applicable rule

of law or from usages or practices, the price payable is the price normally

charged in comparable circumstances at the time of the conclusion of the

contract or, if no such price is available, a reasonable price.

II. – 9:105: Unilateral determination by a party

Where the price or any other contractual term is to be determined by one

party and that party’s determination is grossly unreasonable then, notwith-

standing any provision in the contract to the contrary, a reasonable price or

other term is substituted.

II. – 9:106: Determination by a third person

(1) Where a third person is to determine the price or any other contractual

term and cannot or will not do so, a court may, unless this is incon-

sistent with the terms of the contract, appoint another person to de-

termine it.

(2) If a price or other term determined by a third person is grossly unrea-

sonable, a reasonable price or term is substituted.

II. – 9:107: Reference to a non-existent factor

Where the price or any other contractual term is to be determined by re-

ference to a factor which does not exist or has ceased to exist or to be

accessible, the nearest equivalent factor is substituted unless this would be

unreasonable in the circumst ances, in which case a reasonable price or

other term is substituted.

Chapter 9:Contents and effects of contracts II. – 9:107

221

II. – 9:108: Quality

Where the quality of anything to be supplied or provided under the con-

tract cannot be determined from the terms agreed by the parties, from any

other applicable rule of law or from usages or practices, the quality required

is the quality which the recipient could reasonably expect in the circum-

stances.

II. – 9:109: Language

Where the language to be used for communications relating to the contract

or the rights or obligations arising from it cannot be determined from the

terms agreed by the parties, from any other applicable rule of law or from

usages or practices, the language to be used is that used for the conclusion

of the contract.

Section 2:

Simulation

II. – 9:201: Effect of simulation

(1) When the parties have concluded a contract or an apparent contract

and have deliberately done so in such a way that it has an apparent

effect different from the effect which the parties intend it to have, the

parties’ true intention prevails.

(2) However, the apparent effect prevails in relation to a person, not being

a party to the contract or apparent contract or a person who by law has

no better rights than such a party, who has reasonably and in good

faith relied on the apparent effect.

Section 3:

Effect of stipulation in favour of a third party

II. – 9:301: Basic rules

(1) The parties to a contract may, by the contract, confer a right or other

benefit on a third party. The third party need not be in existence or

identified at the time the contract is concluded.

II. – 9:108 Book II

222

(2) The nature and content of the third party’s right or benefit are deter-

mined by the contract and are subject to any conditions or other lim-

itations under the contract.

(3) The benefit conferred may t ake the form of an exclusion or limitation of

the third party’s liability to one of the contracting parties.

II. – 9:302: Rights, remedies and defences

Where one of the contracting parties is bound to render a performance to

the third party under the contract, then, in the absence of provision to the

contrary in the contract:

(a) the third party has the same rights to performance and remedies for

non-performance as if the contracting party was bound to render the

performance under a binding unilateral undertaking in favour of the

third party; and

(b) the contracting party may assert against the third party all defences

which the contracting party could assert against the other party to the

contract.

II. – 9:303: Rejection or revocation of benefit

(1) The third party may reject the right or benefit by notice to either of the

contracting parties, if that is done without undue delay after being

notified of the right or benefit and before it has been expressly or im-

pliedly accepted. On such rejection, the right or benefit is treated as

never having accrued to the third party.

(2) The contracting parties may remove or modify the contractual term

conferring the right or benefit if this is done before either of them has

given the third party notice that the right or benefit has been conferred.

The contract determines whether and by whom and in what circum-

stances the right or benefit can be revoked or modified after that time.

(3) Even if the right or benefit conferred is by virtue of the contract revoc-

able or subject to modification, the right to revoke or modify is lost if

the parties have, or the party having the right to revoke or modify has,

led the third party to believe that it is not revocable or subject to mod-

ification and if the third party has reasonably acted in reliance on it.

Chapter 9:Contents and effects of contracts II. – 9:303

223

Section 4:

Unfair terms

II. – 9:401: Mandatory nature of following provisions

The parties may not exclude the application of the provisions in this Sec-

tion or derogate from or vary their effects.

II. – 9:402: Duty of transparency in terms not

individually negotiated

(1) A person who supplies terms which have not been individually nego-

tiated has a duty to ensure that they are drafted and communicated in

plain, intelligible language.

(2) In a contract between a business and a consumer a term which has

been supplied by the business in breach of the duty of transparency

imposed by paragraph (1) may on that ground alone be considered

unfair.

II. – 9:403: Meaning of “unfair” in contracts between

a business and a consumer

In a contract between a business and a consumer, a term

[

which has not

been individually negotiated

]

is unfair for the purposes of this Section if it is

supplied by the business and if it significantly disadvantages the consumer,

contrary to good faith and fair dealing.

II. – 9:404: Meaning of “unfair” in contracts between

non-business parties

In a contract between parties neither of whom is a business, a term is unfair

for the purposes of this Section only if it is a term forming part of standard

terms supplied by one party and significantly disadvantages the other party,

contrary to good faith and fair dealing.

II. – 9:405: Meaning of “unfair” in contracts between businesses

A term in a contract between businesses is unfair for the purposes of this

Section only if it is a term forming part of standard terms supplied by one

party and of such a nature that its use grossly deviates from good com-

mercial practice, contrary to good faith and fair dealing.

II. – 9:401 Book II

224

II. – 9:406: Exclusions from unfairness test

(1) Contract terms are not subjected to an unfairness test under this Sec-

tion if they are based on:

(a) provisions of the applicable law;

(b) international conventions to which the Member States are par ties,

or to which the European Union is a party; or

(2) For contract terms which are drafted in plain and intelligible language,

the unfairness test extends neither to the definition of the main subject

matter of the contract, nor to the adequacy of the price to be paid.

II. – 9:407: Factors to be taken into account in

assessing unfairness

(1) When assessing the unfairness of a contractual term for the purposes

of this Section, regard is to be had to the duty of transparency under

II. – 9:402 (Duty of transparency in terms not individually negotiated),

to the nature of what is to be provided under the contract, to the cir-

cumstances prevailing during the conclusion of the contract, to the

other terms of the contract and to the terms of any other contract on

which the contract depends.

(2) For the purposes of

II. – 9:403 (Meaning of “unfair” in contracts be-

tween a business and a consumer) the circumstances prevailing during

the conclusion of the contract include the extent to which the con-

sumer was given a real opportunity to become acquainted with the

term before the conclusion of the contract.

II. – 9:408: Effects of unfair terms

(1) A term which is unfair under this Section is not binding on the party

who did not supply it.

(2) If the contract can reasonably be maintained without the unfair term,

the other terms remain binding on the parties.

II. – 9:409: Exclusive jurisdiction clauses

(1) A term in a contract between a business and a consumer is unfair for

the purposes of this Section if it is supplied by the business and if it

confers exclusive jurisdiction for all disputes arising under the contract

on the court for the place where the business is domiciled.

Chapter 9:Contents and effects of contracts II. – 9:409

225

(2) Paragraph (1) does not apply if the chosen court is also the court for

the place where the consumer is domiciled.

II. – 9:410: Terms which are presumed to be unfair in

contracts between a business and a consumer

(1) A term in a contract between a business and a consumer is presumed

to be unfair for the purposes of this Section if it is supplied by the

business and if it:

(a) excludes or limits the liability of a business for death or personal

injury caused to a consumer through an act or omission of that

business;

(b) inappropriately excludes or limits the remedies, including any right

to set-off, available to the consumer against the business or a third

party for non-performance by the business of obligations under the

contract;

condition the fulfilment of which depends solely on the intention

of the business;

(d) permits a business to keep money paid by a consumer if the latter

decides not to conclude the contract, or perform obligations under

it, without providing for the consumer to receive compensation of

an equivalent amount from the business in the reverse situation;

(e) requires a consumer who fails to perform his or her obligations to

pay a disproportionately high amount of damages;

(f) entitles a business to withdraw from or terminate the contractual

relationship on a discretionary basis without giving the same right

to the consumer, or entitles a business to keep money paid for

services not yet supplied in the case where the business withdraws

from or terminates the contractual relationship;

(g) enables a business to terminate a contractual relationship of inde-

terminate duration without reasonable notice, except where there

are serious grounds for doing so; this does not affect terms in fi-

nancial ser vices contracts where there is a valid reason, provided

that the supplier is required to inform the other contracting party

thereof immediately;

(h) automatically extends a contract of fixed duration unless the con-

sumer indicates otherwise, in cases where such terms provide for

an unreasonably early deadline;

II. – 9:410 Book II

226

(i) enables a business to alter the terms of the contract unilaterally

without a valid reason which is specified in the contract; this does

not affect terms under which a supplier of financial services re-

serves the right to change the rate of interest to be paid by, or to,

the consumer, or the amount of other charges for financial services

without notic e where there is a va lid rea son, provided that the

supplier is required to inform the consumer at the earliest oppor-

tunity and that the consumer is free to terminate the contractual

relationship with immediate effect; neither does it affect terms un-

der which a business reserves the right to alter unilaterally the con-

ditions of a contract of indeterminate duration, provided that the

business is required to inform the consumer with reasonable no-

tice, and that the consumer is free to terminate the contractual

relationship;

(j) enables a business to alter unilaterally without a valid reason any

characteristics of the goods, other assets or services to be provid-

ed;

(k) provides that the price of goods or other assets is to be determined

at the time of delivery or supply, or allows a business to increase

the price without giving the consumer the right to withdraw if the

increased price is too high in relation to the price agreed at the

conclusion of the contract; this does not affect price-indexation

clauses, where lawful, provided that the method by which prices

vary is explicitly described;

(l) gives a business the right to determine whether the goods, other

assets or services supplied are in conformity with the contract, or

gives the business the exclusive right to interpret any term of the

contract;

(m) limits the obligation of a business to respect commitments under-

taken by its agents, or makes its commitments subject to compli-

ance with a particular formality;

(n) obliges a consumer to fulfil all his or her obligations where the

business fails to fulfil its own;

(o) allows a business to transfer its rights and obligations under the

contract without the consumer’s consent, if this could reduce the

guarantees available to the consumer;

(p) excludes or restricts a consumer’s right to take legal action or to

exercise any other remedy, in particular by referring the consumer

Chapter 9:Contents and effects of contracts II. – 9:410

227

to arbitration proceedings which are not covered by legal provi-

sions, by unduly restricting the evidence available to the consumer,

or by shifting a burden of proof on to the consumer;

(q) allows a business, where what has been ordered is unavailable, to

supply an equivalent without having expressly informed the con-

sumer of this possibility and of the fact that the business must bear

the cost of returning what the consumer has received under the

contract if the consumer exercises a right to withdraw.

(2) Subparagraphs (g), (i) and (k) do not apply to:

(a) transactions in transferable securities, financial instruments and

other products or services where the price is linked to fluctuations

in a stock exchange quotation or index or a financial market rate

beyond the control of the business;

(b) contracts for the purchase or sale of foreign currency, traveller’s

cheques or international money orders denominated in foreign cur-

rency.

II. – 9:410 Book II

Book III

Obligations and corresponding rights

Chapter 1:

General

III. – 1:101: Scope of Book

This Book applies, except as otherwise provided, to all obligations within

the scope of these rules, whether they are contractual or not, and to cor-

responding rights to performance.

III. – 1:102: Definitions

(1) An obligation is a duty to perform which one par ty to a legal relation-

ship, the debtor, owes to another party, the creditor.

(2) Performance of an obligation is the doing by the debtor of what is to be

done under the obligation or the not doing by the debtor of what is not

to be done.

(3) Non-performance of an obligation is any failure to perform the obliga-

tion, whether or not excused, and includes delayed per formance and

any other performance which is not in accordance with the terms reg-

ulating the obligation.

(4) An obligation is reciprocal in relation to another obligation if:

(a) performance of the obligation is due in exchange for performance

of the other obligation;

(b) it is an obligation to facilitate or accept performance of the other

obligation; or

ter that performance of the one can reasonably be regarded as de-

pendent on performance of the other.

(5) The terms regulating an obligation may be derived from a contract or

other juridical act, the law or a legally binding usage or practice, or a

court order; and similarly for the terms regulating a right.

229

III. – 1:103: Good faith and fair dealing

(1) A person has a duty to act in accordance with good faith and fair deal-

ing in performing an obligation, in exercising a right to performance, in

pursuing or defending a remedy for non-performance, or in exercising a

right to terminate an obligation or contractual relationship.

(2) The duty may not be excluded or limited by contract or other juridical

act.

(3) Breach of the duty does not give rise directly to the remedies for non-

performance of an obligation but may preclude the person in breach

from exercising or relying on a right, rem edy or defence which that

person would otherwise have.

III. – 1:104: Co-operation

The debtor and creditor are obliged to co-operate with each other when and

to the extent that this can reasonably be expected for the performance of

the debtor’s obligation.

III. – 1:105: Non-discrimination

Chapter 2 (Non-discrimination) of Book II applies with appropriate adap-

tations to:

(a) the performance of any obligat ion to provide access to, or supply,

goods, other assets or services which are available to members of the

public;

(b) the exercise of a right to performance of any such obligation or the

pursuing or defending of any remedy for non-performance of any such

obligation; and

III. – 1:106: Conditional rights and obligations

(1) The terms regulating a right, obligation or contractual relationship may

provide that it is conditional upon the occurrence of an uncertain fu-

ture event, so that it takes effect only if the event occurs (suspensive

condition) or comes to an end if the event occurs (resolutive condi-

tion).

(2) Upon fulfilment of a suspensive condition, the relevant right, obliga-

tion or relationship takes effect.

(3) Upon fulfilment of a resolutive condition, the relevant right, obligation

or relationship comes to an end.

III. – 1:103 Book III

230

(4) When a party, contrary to the duty of good faith and fair dealing or the

obligation to co-operate, interferes with events so as to bring about the

fulfilment or non-fulfilment of a condition to that party’s advantage,

the other party may treat the condition as not having been fulfilled or

as having been fulfilled as the case may be.

(5) When a contractual obligation or relationship comes to an end on the

fulfilment of a resolutive condition any restitutionary effects are regu-

lated by the rules in Chapter 3, Section 5, Sub-section 4 (Restitution)

with appropriate adaptations.

III. – 1:107: Time-limited rights and obligations

(1) The terms regulating a right, obligation or contractual relationship may

provide that it is to take effect from or end at a specif ied time, after a

specified period of time or on the occurrence of an event which i s

certain to occur.

(2) It will take effect or come to an end at the time or on the event without

further steps having to be taken.

(3) When a contractual obligation or relationship comes to an end under

this Article any restitutionary effects are regulated by the rules in Chap-

ter 3, Section 5, Sub-section 4 (Restitution) with appropriate adapta-

tions.

III. – 1:108: Variation or termination by agreement

(1) A right, obligation or contractual relationship may be varied or termi-

nated by agreement at any time.

(2) Where the parties d o not regulate the effects of termination, then:

(a) it has prospective effect only and does not affect any right to dam-

ages, or a stipulated payment, for non-performance of any obliga-

tion performance of which was due before termination;

(b) it does not affect any provision for the settlement of disputes or

any other provision which is to operate even after termination;

and

tionary effects are regulated by the rules in Chapter 3, Section 5,

Sub-section 4 (Restitution) with appropriate adaptations.

Chapter 1:General III. – 1:108

231

III. – 1:109: Variation or termination by notice

(1) A right, obligation or contractual relationship may be varied or termi-

nated by notice by either party where this is provided for by the terms

regulating it.

(2) Where, in a case involving continuous or periodic performance of a

contractual obligation, the terms of the contract do not say when the

contractual relationship is to end or say that it will never end, it may be

terminated by either party by giving a reasonable period of notice. In

assessing whether a period of notice is reasonable, regard may be had

to the interval between performances or counter-performances.

(3) Where the parties d o not regulate the effects of termination, then:

(a) it has prospective effect only and does not affect any right to dam-

ages, or a stipulated payment, for non-performance of any obliga-

tion performance of which was due before termination;

(b) it does not affect any provision for the settlement of disputes or

any other provision which is to operate even after termination; and

tionary effects are regulated by the rules in Chapter 3, Section 5,

Sub-section 4 (Restitution) with appropriate adaptations.

III. – 1:110: Variation or termination by court on

a change of circumstances

(1) An obligation must be performed even if performance has become more

onerous, whether because the cost of performance has increased or be-

cause the value of what is to be received in return has diminished.

(2) If, however, performance of a contractual obligation or of an obligation

arising from a unilateral juridical act becomes so onerous because of an

exceptional change of circumstances that it would be manifestly unjust

to hold the debtor to the obligation a court may:

(a) vary the obligation in order to make it reasonable and equitable in

the new circumstances; or

(b) terminate the obligation at a date and on terms to be determined

by the court.

(3) Paragraph (2) applies only if:

(a) the change of circumstances occurred after the time when the ob-

ligation was incurred;

III. – 1:109 Book III

232

(b) the debtor did not at that time take into account, and could not

reasonably be expected to have taken into account, the possibility

or scale of that change of circumstances;

having assumed, the risk of that change of circumstances; and

(d) the debtor has attempted, reasonably and in good faith, to achieve

by negotiation a reasonable and equitable adjustment of the terms

regulating the obligation.

III. – 1:111: Tacit prolongation

Where a contract provides for continuous or repeated performance of ob-

ligations for a definite period and the obligations continue to be performed

by both parties after that period has expired, the contract becomes a con-

tract for an indefinite period, unless the ci rcumstances are inconsistent

with the tacit consent of the parties to such prolongation.

Chapter 2:

Performance

III. – 2:101: Place of performance

(1) If the place of performance of an obligation cannot be otherwise de-

termined from the terms regulating the obligation it is:

(a) in the case of a monetary obligation, the creditor’s place of busi-

ness;

(b) in the case of any other obligation, the debtor’s place of business.

(2) For the purposes of the preceding paragraph:

(a) if a party has more than one place of business, the place of busi-

ness is that which has the closest relationship to the obligation;

and

(b) if a party does not have a place of business, or the obligation does

not relate to a business matter, the habitual residence is substitut-

ed.

(3) If, in a case to which paragraph (1) applies, a party causes any increase

in the expenses incidental to performance by a change in place of busi-

ness or habitual residence subsequent to the time when the obligation

was incurred, that party is obliged to bear the increase.

Chapter 2:Performance III. – 2:101

233

III. – 2:102: Time of performance

(1) If the time at which, or a period of time within which, an obligation is

to be performed cannot otherwise be determined from the terms reg-

ulating the obligation it must be performed within a reasonable time

after it arises.

(2) If a period of time within which the obligation is to be performed can

be determined from the terms regulating the obligation, the obligation

may be performed at any time within that period chosen by the debtor

unless the circumstances of the case indicate that the creditor is to

choose the time.

(3) Unless the parties have agreed otherwise, a business must perform the

obligations incurred under a contract concluded at a distance for the

supply of goods, other assets or services to a consumer no later than

30 days after the contract was concluded.

(4) If a business has an obligation to reimburse money received from a

consumer for goods, other assets or services supplied, the reimburse-

ment must be made as soon as possible and in any case no later than

30 days after the obligation arose.

III. – 2:103: Early performance

(1) A creditor may reject an offer to perform before performance is due

unless the early performance would not cause the creditor unreason-

able prejudice.

(2) A creditor’s acceptance of early performance does not affect the time

fixed for the performance by the creditor of any reciprocal obligation.

III. – 2:104: Order of performance

If the order of performance of reciprocal obligations cannot be otherwise

determined from the terms regulating the obligations then, to the extent

that the obligations can be performed simultaneously, the part ies are

bound to perform simultaneously unless the circumstances indicate other-

wise.

III. – 2:105: Alternative obligations or methods of performance

(1) Where a debtor is bound to perform one of two or more obligations, or

to perform an obligation in one of two or more ways, the choice be-

longs to the debtor, unless the terms regulating the obligations or ob-

ligation provide otherwise.

III. – 2:102 Book III

234

(2) If the party who is to make the choice fails to choose by the time when

performance is due, then:

(a) if the delay amounts to a fundamental non-performance, the right

to choose passes to the other party;

(b) if the delay does not amount to a fundamental non-performance,

the other party may give a notice fixing an additional period of

reasonable length within which the party to choose is required to

do so. If the latter still fails to do so, the right to choose passes to

the other party.

III. – 2:106: Performance entrusted to another

A debtor who entrusts performance of an obligation to another person

remains responsible for per formance.

III. – 2:107: Performance by a third person

(1) Where personal performance by the debtor is not required by the terms

regulating the obligation, the creditor cannot refuse performance by a

third person if:

(a) the third person acts with the assent of the debtor; or

(b) the third person has a legitimate interest in performing and the

debtor has failed to perform or it is clear that the debtor will not

perform at the time performance is due.

(2) Performance by a third person in accordance with paragraph (1) dis-

charges the debtor except to the extent that the third person takes over

the creditor’s right by assignment or subrogation.

(3) Where personal per formance by the debtor is not required and the

creditor accepts performance of the debtor’s obligation by a third party

in circumstances not covered by paragraph (1) the debtor is discharged

but the creditor is liable to the debtor for any loss caused by that ac-

ceptance.

III. – 2:108: Method of payment

(1) Payment of money due may be made by any method used in the or-

dinary course of business.

(2) A creditor who accepts a cheque or other order to pay or a promise to

pay is presumed to do so only on condition that it will be honoured.

The creditor may not enforce the original obligation to pay unless the

order or promise is not honoured.

Chapter 2:Performance III. – 2:108

235

III. – 2:109: Currency of payment

(1) The debtor and the creditor may agree that payment is to be made only

in a specified currency.

(2) In the absence of such agreement, a sum of money exp ressed in a

currency other than that of the place where payment is due may be

paid in the currency of that place according to the rate of exchange

prevailing there at the time when payment is due.

(3) If, in a case falling within the preceding paragraph, the debtor has not

paid at the time when payment is due, the creditor may require pay-

ment in the currency of the place where payment is due according to

the rate of exchange prevailing there either at the time when payment is

due or at the time of actual payment.

(4) Where a monetary obligation is not expressed in a particular currency,

payment must be made in the currency of the place where payment is

to be made.

III. – 2:110: Imputation of performance

(1) Where a debtor has to perform several obligations of the same nature

and makes a performance which does not suffice to extinguish all of

the obligations, then subject to paragraph (5), the debtor may at the

time of per formance notify the creditor of the obligation to which the

performance is to be imputed.

(2) If the debtor does not make such a notification the creditor may, within

a reasonable time and by notifying the debtor, impute the per formance

to one of the obligations.

(3) An imputation under paragraph (2) is not effective if it is to an obliga-

tion which is not yet due, or is illegal, or is disputed.

(4) In the absence of an effective imputation by either party, and subject to

the following paragraph, the performance is imputed to that obligation

which satisfies one of the following criteria in the sequence indicated:

(a) the obligation which is due or is the first to fall due;

(b) the obligation for which the creditor has the least security;

(d) the obligation which has arisen first.

If none of the preceding criteria applies, the performance is imputed

proportionately to all the obligations.

III. – 2:109 Book III

236

(5) In the case of a monetary obligation, a payment by the debtor is to be

imputed, first, to expenses, secondly, to interest, and thirdly, to prin-

cipal, unless the creditor makes a different imputation.

III. – 2:111: Property not accepted

(1) A person who has an obligation to deliver or return corporeal property

other than money and who is left in possession of the property be-

cause of the creditor’s failure to accept or retake the property, has an

ancillary obligation to take reasonable steps to protect and preserve it.

(2) The debtor may obtain discharge from the obligation to deliver or re-

turn and from the ancillary obligation mentioned in the preceding para-

graph:

(a) by depositing the property on reasonable terms with a third person

to be held to the order of the creditor, and notifying the creditor of

this; or

(b) by selling the property on reasonable terms after notice to the cred-

itor, and paying the net proceeds to the creditor.

(3) Where, however, the property is liable to rapid deterioration or its pre-

servation is unreasonably expensive, the debtor has an obligation to

take reasonable steps to dispose of it. The debtor may obtain discharge

from the obligation to deliver or return by paying the net proceeds to

the creditor.

(4) The debtor left in possession is entitled to be reimbursed or to retain

out of the proceeds of sale any costs reasonably incurred.

III. – 2:112: Money not accepted

(1) Where a creditor fails to accept money properly tendered by the debtor,

the debtor may after notice to the creditor obtain discharge from the

obligation to pay by depositing the money to the order of the creditor

in accordance with the law of the place where payment is due.

(2) Paragraph (1) applies, with appropriate adaptations, to money properly

tendered by a third party in circumstances where the creditor is not

entitled to refuse such performance.

Chapter 2:Performance III. – 2:112

237

III. – 2:113: Costs and formalities of performance

(1) The costs of performing an obligation are borne by the debtor.

(2) In the case of a monetary obligation the debtor’s obligation to pay

includes taking such steps and complying with such formalities as may

be necessary to enable payment to be made.

III. – 2:114: Extinctive effect of performance

Full performance extinguishes the obligation if it is:

(a) in accordance with the terms regulating the obligation; or

(b) of such a type as by law to afford the debtor a good discharge.

Chapter 3:

Remedies for non-performance

Section 1:

General

III. – 3:101: Remedies available

(1) If an obligation is not performed by the debtor and the non-perform-

ance is not excused, the creditor may resort to any of the remedies set

out in this Chapter.

(2) If the debtor’s non-performance is excused, the creditor may resort to

any of those remedies except enforcing specific performance and dam-

ages.

(3) The creditor may not resort to any of those remedies to the extent that

the creditor caused the debtor’s non-performance

III. – 3:102: Cumulation of remedies

Remedies which are not incompatible may be cumulated. In particular, a

creditor is not deprived of the right to damages by resorting to any other

remedy.

III. – 3:103: Notice fixing additional period for performance

(1) In any case of non-performance of an obligation the creditor may by no-

tice to the debtor allow an additional period of time for performance.

(2) During the additional period the creditor may withhold performance of

the creditor’s reciprocal obligations and may claim damages, but may

not resort to any other remedy.

III. – 2:113 Book III

238

(3) If the creditor receives notice from the debtor that the debtor will not

perform within that period, or if upon expiry of that period due per-

formance has not been made, the creditor may resort to any available

remedy.

III. – 3:104: Excuse due to an impediment

(1) A debtor’s non-performance of an obligation is excused if it is due to an

impediment beyond the debtor’s control and if the debtor could not

reasonably be expected to have avoided or overcome the impediment

or its consequences.

(2) Where the obligation arose out of a contract or other juridical act, non-

performance is not excused if the debtor could reasonably be expected

to have taken the impediment into account at the time when the ob-

ligation was incurred.

(3) Where the excusing impediment is only temporary the excuse has ef-

fect for the period during which the impediment exists. However, if the

delay amounts to a fundamental non-performance, the creditor may

treat it as such.

(4) Where the excusing impediment is permanent the obligation is extin-

guished. Any reciprocal obligation is also extinguished. In the case of

contractual obligations any restitutionary effects of extinction are regu-

lated by the rules in Chapter 3, Section 5, Sub-section 4 (Restitution)

with appropriate adaptations.

(5) The debtor has a duty to ensure that notice of the impediment and of

its effect on the ability to perform reaches the creditor within a reason-

able time after the debtor knew or could reasonably be expected to

have known of these circumstances. The creditor is entitled to damages

for any loss resulting from the non-receipt of such notice.

III. – 3:105: Term excluding or restricting remedies

(1) A term of a contract or other juridical act which purports to exclude or

restrict liability to pay damages for personal injury (including fatal in-

jury) caused intentionally or by gross negligence is void.

(2) A term excluding or restricting a remedy for non-performance of an

obligation, even if valid and otherwise effective, having regard in par-

ticular to the rules on unfair contract terms in Book

II, Chapter 9, Sec-

tion 4, may nevertheless not be invoked if it would be contrary to good

faith and fair dealing to do so.

Chapter 3:Remedies for non-performance III. – 3:105

239

III. – 3:106: Notices relating to non-performance

(1) If the creditor gives notice to the debtor because of the debtor’s non-

performance of an obligation or because such non-performance is an-

ticipated, and the notice is properly dispatched or given, a delay or

inaccuracy in the transmission of the notice or its failure to arrive does

not prevent it from having effect.

(2) The notice has effect from the time at which it would have arrived in

normal circumstances.

III. – 3:107: Failure to notify non-conformity

(1) If, in the case of an obligation to supply goods, other assets or services,

the debtor supplies goods, other assets or services which are not in

conformity with the terms regulating the obligation, the creditor may

not rely on the lack of conformity unless the creditor gives notice to the

debtor within a reasonable time specifying the nature of the lack of

conformity.

(2) The reasonable time runs from the time when the goods or other assets

are supplied or the service is completed or from the time, if it is later,

when the creditor discovered or could reasonably be expected to have

discovered the non-conformity.

(3) The debtor is not entitled to rely on paragraph (1) if the failure relates

to facts which the debtor knew or could reasonabl y be expected to

have known and which the debtor did not disclose to the creditor.

(4) This Article does not apply where the creditor is a consumer.

III. – 3:108: Business unable to fulfil consumer’s order

by distance communication

(1) Where a business is unable to perform its obligations under a contract

concluded with a consumer by means of distance communication, it is

obliged to inform the consumer immediately and refund any sums paid

by the consumer without undue delay and in any case within 30 days.

The consumer’s remedies for non-performance remain unaffected.

(2) The parties may not, to the detriment of the consumer, exclude the

application of this Article or derogate from or vary its effects.

III. – 3:106 Book III

240

Section 2:

Cure by debtor of non-conforming performance

III. – 3:201: Scope

This Section applies where a debtor’s performance does not conform to the

terms regulating the obligation.

III. – 3:202: Cure by debtor: general rules

(1) The debtor may make a new and conforming tender if that can be done

within the time allowed for performance.

(2) If the debtor cannot make a new and conforming tender within the

time allowed for performance but, promptly after being notified of the

lack of conformity, offers to cure it within a reasonable time and at the

debtor’s own expense, the creditor may not pursue any remedy for

non-performance, other than withholding performance, before allow-

ing the debtor a reasonable period in which to attempt to cure the non-

conformity.

(3) Paragraph (2) is subject to the provisions of the following Article.

III. – 3:203: When creditor need not allow debtor

an opportunity to cure

The creditor need not, under paragraph (2) of the preceding Article, allow

the debtor a period in which to attempt cure if:

(a) failure to perform a contractual obligation within the time allowed for

performance amounts to a fundamental non-performance;

(b) the creditor has reason to believe that the debtor’s performance was

made with knowledge of the non-conformity and was not in accord-

ance with good faith and fair dealing;

effect the cure within a reasonable time and without significant incon-

venience to the creditor or other prejudice to the creditor’s legitimate

interests; or

(d) cure would be inappropriate in the circumstances.

Chapter 3:Remedies for non-performance III. – 3:203

241

III. – 3:204: Consequences of allowin g debtor opportunity to cure

(1) During the period allowed for cure the creditor may withhold perform-

ance of the creditor’s reciprocal obligations, but may not resort to any

other remedy.

(2) If the debtor fails to effect cure within the time allowed, the creditor

may resort to any available remedy.

(3) Notwithstanding cure, the creditor retains the right to damages for any

loss caused by the debtor’s initial or subsequent non-performance or

by the process of effecting cure.

III. – 3:205: Return of replaced item

(1) Where the debtor has, whether voluntarily or in compliance with an

order under

III. – 3:302 (Enforcement of non-monetary obligations),

remedied a non-conforming performance by replacement, the debtor

has a right and an obligation to take back the replaced item at the

debtor’s expense.

(2) The creditor is not liable to pay for any use made of the replaced item in

the period prior to the replacement.

Section 3:

Right to enforce performance

III. – 3:301: Enforcement of monetary obligations

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

(2) Where the creditor has not yet per formed the reciprocal obligation for

which payment will be due and it is clear that the debtor in the mone-

tary obligation will be unwilling to receive performance, the creditor

may nonetheless proceed with performance and may recover payment

unless:

(a) the creditor could have made a reasonable substitute transaction

without significant effort or expense; or

(b) performance would be unreasonable in the circumstances.

III. – 3:302: Enforcement of non-monetary obligations

(1) The creditor is entitled to enforce specific performance of an obligation

other than one to pay money.

III. – 3:204 Book III

242

(2) Specific performance includes the remedying free of charge of a per-

formance which is not in conformity with the terms regu lating the

obligation.

(3) Specific performance cannot, however, be enforced where:

(a) performance would be unlawful or impossible;

(b) performance would be unreasonably burdensome or expensive; or

unreasonable to enforce it.

(4) The creditor loses the right to enforce specific performance if perform-

ance is not requested within a reasonable time after the creditor has

become, or could reasonably be expected to have become, aware of the

non-performance.

(5) The creditor cannot recover damages for loss or a stipulated payment

for non-performance to the extent that the creditor has increased the

loss or the amount of the payment by insisting unreasonably on spe-

cific performance in circumstances where the creditor could have made

a reasonable substitute transac tion without significant effort or ex-

pense.

III. – 3:303: Damages not precluded

The fact that a right to enforce specific performance is excluded under the

preceding Article does not preclude a claim for damages.

Section 4:

Withholding performance

III. – 3:401: Right to withhold performance of reciprocal obligation

(1) A creditor who is to perform a reciprocal obligation at the same time as,

or after, the debtor performs has a right to withhold performance of the

reciprocal obligation until the debtor has tendered performance or has

performed.

(2) A creditor who is to perform a reciprocal obligation before the debtor

performs and who reasonably believes that there will be non-perform-

ance by the debtor when the debtor’s performance becomes due may

withhold performance of the reciprocal obligation for as long as the

Chapter 3:Remedies for non-performance III. – 3:401

243

reasonable belief continues. However, the right to withhold perform-

ance is lost if the debtor gives an adequate assurance of due perform-

ance.

(3) A creditor who withholds per formance in the situation mentioned in

paragraph (2) has a duty to give notice of that fact to the debtor as

soon as is reasonably practicable and is liable for any loss caused to the

debtor by a breach of that duty.

(4) The performance which may be withheld under this Article is the

whole or part of the performance as may be reasonable in the circum-

stances.

Section 5:

Termination

III. – 3:501: Scope and definition

(1) This Section applies only to contractual obligations and contractual

relationships.

(2) In this Section “termination” means the termination of the contractual

relationship in whole or in part and “terminate” has a corresponding

meaning.

Sub-section 1:

Grounds for termination

III. – 3:502: Termination for fundamental non-performance

(1) A creditor may terminate if the debtor’s non-performance of a contrac-

tual obligation is fundamental.

(2) A non-performance of a contractual obligation is fundamental if:

(a) it substantially deprives the creditor of what the creditor was en-

titled to expect under the contract, as applied to the whole or rele-

vant part of the performance, unless at the time of conclusion of

the contract the debtor did not foresee and could not reasonably be

expected to have foreseen that result; or

(b) it is intentional or reckless and gives the creditor reason to believe

that the debtor’s future performance cannot be relied on.

III. – 3:501 Book III

244

III. – 3:503: Termination after notice fixing additional time

for performance

(1) A creditor may terminate in a case of delay in performance of a con-

tractual obligation which is not in itself fundamental if the creditor

gives a notice fixing an additional period of time of reasonable length

for performance and the debtor does not perform within that period.

(2) If the period fixed is unreasonably short, the creditor may terminate

only after a reasonable period from the time of the notice.

III. – 3:504: Termination for anticipated non-performance

A creditor may terminate before performance of a contractual obligation is

due if the debtor has declared that there will be a non-performance of the

obligation, or it is otherwise clear that there will be such a non-perform-

ance, and if the non-performance would have been fundamental.

III. – 3:505: Termination for inadequate assurance of performance

A creditor who reasonably believes that there will be a fundamental non-

performance of a contractual obligation by the debtor may terminate if the

creditor demands an adequate assurance of due performance and no such

assurance is provided within a reasonable time.

Sub-section 2:

Scope, exercise and loss of right to terminate

III. – 3:506: Scope of right to terminate

(1) Where the debtor’s obligations under the contract are not divisible the

creditor may only terminate the contractual relationship as a whole.

(2) Where the debtor’s obligations under the contract are to be performed

in separate parts or are otherwise divisible, then:

(a) if there is a ground for termination under this Section of a part to

which a counter-performance can be apportioned, the creditor may

terminate the contractual relationship so far as it relates to that

part;

(b) the creditor may terminate the contractual relationship as a whole

only if the creditor cannot reasonably be expected to accept per-

formance of the other parts or there is a ground for termination in

relation to the contractual relationship as a whole.

Chapter 3:Remedies for non-performance III. – 3:506

245

III. – 3:507: Notice of termination

(1) A right to terminate under this Section is exercised by notice to the

debtor.

(2) Where a notice under

III. – 3:503 (Termination after notice fixing ad-

ditional time for performance) provides for automatic termination if the

debtor does not perform within the period fixed by the notice, termi-

nation takes effect after that period or a reasonable length of time from

the giving of notice (whichever is longer) without further notice.

III. – 3:508: Loss of right to terminate

(1) If performance has been tendered late or a tendered performance other-

wise does not conform to the contract the creditor loses the right to

terminate under this Section unless notice of termination is given with-

in a reasonable time.

(2) Where the creditor has given the debtor a period of time to cure the

non-performance under

III. – 3:202 (Cure by debtor: general rules) the

time mentioned in paragraph (1) begins to run from the expiry of that

period. In other cases that time begins to run from the time when the

creditor has become, or could reasonably be expected to have become,

aware of the tender or the non-conformity.

(3) A creditor loses a right to terminate by notice under

III. – 3:503 (Ter-

mination after notic e fixing additional time for performance),

III.–

3:504 (Termination for anticipated non-performance) or

III. – 3: 505

(Termination for inadequate assurance of performance) unless t he

creditor gives notice of termination within a reasonable time after the

right has arisen.

Sub-section 3:

Effects of termination

III. – 3:509: Effect on obligations under the contract

(1) On termination under this Section, the outstanding obligations or rele-

vant part of the outstanding obligations of the parties under the con-

tract come to an end.

(2) Termination does not, however, affect any provision of the contract for

the settlement of disputes or other provision which is to operate even

after termination.

III. – 3:507 Book III

246

(3) A creditor who terminates under this Section retains existing rights to

damages or a stipulated payment for non-performance and in addition

has the same right to damages or a stipulated payment for non-per-

formance as the creditor would have had if there had been non-per-

formance of the now extinguished obligations of the debtor. In relation

to such extinguished obligations the creditor is not regarded as having

caused or contributed to the loss merely by exercising the right to ter-

minate.

Sub-section 4:

Restitution

III. – 3:510: Restitution of benefits received by performance

(1) On termination under this Section a party (the recipient) who has re-

ceived any benefit by the other’s performance of obligations under the

terminated contractual relationship or terminated part of the contrac-

tual relationship is obliged to return it. Where both parties have ob-

ligations to return, the obligations are reciprocal.

(2) If the performance was a payment of money, the amount received is to

be repaid.

(3) To the extent that the benefit (not being money) is transferable, it is to

be returned by transferring it. However, if a transfer would cause un-

reasonable effort or expense, the benefit may be returned by paying its

value.

(4) To the extent that the benefit is not transferable it is to be returned by

paying its value in accordance with

III. – 3:512 (Payment of value of

benefit).

(5) The obligation to return a benefit extends to any natural or legal fruits

received from the benefit.

III. – 3:511: When restitution not required

(1) There is no obligation to make restitution under this Sub-section to the

extent that conforming performance by one part y has been met by

conforming performance by the other.

Chapter 3:Remedies for non-performance III. – 3:511

247

(2) The terminating party may elect to treat performance as non-conform-

ing if what was received by that party is of no, or fundamentally re-

duced, value to that party because of the other party’s non-perform-

ance.

(3) Restitution under this Sub-section is not required where the contract

was gratuitous.

III. – 3:512: Payment of value of benefit

(1) The recipient is obliged to:

(a) pay the value (at the time of performance) of a benefit which is not

transferable or which ceases to be transferable before the tim e

when it is to be returned; and

(b) pay recompense for any reduction in the value of a returnable ben-

efit as a result of a change in the condition of the benefit between

the time of receipt and the time when it is to be returned.

(2) Where there was an agreed price the value of the benefit is that pro-

portion of the price which the value of the actual performance bears to

the value of the promised performance. Where no price was agreed the

value of the benefit is the sum of money which a willing and capable

provider and a willing and capable recipient, knowing of any non-con-

formity, would lawfully have agreed.

(3) The recipient’s liability to pay the value of a benefit is reduced to the

extent that as a result of a non-performance of an obligation owed by

the other party to the recipient:

(a) the benefit cannot be returned in essentially the same condition as

when it was received; or

(b) the recipient is compelled without compensation either to dispose

of it or to sustain a disadvantage in order to preserve it.

(4) The recipient’s liability to pay the value of a benefit is likewise reduced

to the extent that it cannot be returned in the same condition as when

it was received as a result of conduct of the recipient in the reasonable,

but mistaken, belief that there was no non-conformity.

III. – 3:513: Use and improvements

(1) The recipient is obliged to pay a reasonable amount for any use which

the recipient makes of the benefit except in so far as the recipient is

liable under

III. – 3:512 (Payment of value of benefit) paragraph (1) in

respect of that use.

III. – 3:512 Book III

248

(2) A recipient who has improved a benefit which the recipient is obliged

under this Section to return has a right to payment of the value of

improvements if the other party can readily obtain that value by dealing

with the benefit unless:

(a) the improvement was a non-performance of an obligation owed by

the recipient to the other party; or

(b) the recipient made the improvement when the recipient knew or

could reasonably be expected to know that the benefit would have

to be returned.

III. – 3:514: Liabilities arising after time when return due

(1) The recipient is obliged to:

(a) pay the value (at the time of performance) of a benefit which cea-

ses to be transferable after the time when its return was due; and

(b) pay recompense for any reduction in the value of a returnable ben-

efit as a result of a change in the condition of the benefit after the

time when its return was due.

(2) If the benefit is disposed of after the time when return was due, the

value to be paid is the value of any proceeds, if this is greater.

(3) Other liabilities arising from non-performance of an obligation to re-

turn a benefit are unaffected.

Section 6:

Price reduction

III. – 3:601: Right to reduce price

(1) A creditor who accepts a performance not conforming to the terms

regulating the obligation may reduce the price. The reduction is to be

proportionate to the decrease in the value of what was received by

virtue of the performance at the time it was made compared to the

value of what would have been received by virtue of a conforming

performance.

(2) A creditor who is entitled to reduce the price under the preceding para-

graph and who has already paid a sum exceeding the reduced price may

recover the excess from the debtor.

Chapter 3:Remedies for non-performance III. – 3:601

249

(3) A creditor who reduces the price cannot also recover damages for the

loss thereby compensated but remains entitled to damages for any

further loss suffered.

(4) This Article applies with appropriate adaptations to a reciprocal obliga-

tion of the creditor other than an obligation to pay a price.

Section 7:

Damages and interest

III. – 3:701: Right to damages

(1) The creditor is entitled to damages for loss caused by the debtor’s non-

performance of an obligation, unless the non-performance is excused.

(2) The loss for which damages are recoverable includes future loss which

is reasonably likely to occur.

(3) “Loss” includes economic and non-economic loss. “Economic loss”

includes loss of income or profit, burdens incurred and a reduction in

the value of property. “Non-economic loss” includes pain and suffer-

ing and impairment of the quality of life.

III. – 3:702: General measure of damages

The general measure of damages for loss caused by non-performance of an

obligation is such sum as will put the creditor as nearly as possible into the

position in which the creditor would have been if the obligation had been

duly performed. Such damages cover loss which the creditor has suffered

and gain of which the creditor has been deprived.

III. – 3:703: Foreseeability

The debtor in an obligation which arises from a contract or other juridical

act is liable only for loss which the debtor foresaw or could reasonably be

expected to have foreseen at the time when the obligation was incurred as a

likely result of the non-performance, unless the non-performance was in-

tentional, reckless or grossly negligent.

III. – 3:704: Loss attributable to creditor

The debtor is not liable for loss suffered by the creditor to the extent that

the creditor contributed to the non-performance or its effects.

III. – 3:701 Book III

250

III. – 3:705: Reduction of loss

(1) The debtor is not liable for loss suffered by the creditor to the extent

that the creditor could have reduced the l oss by taking reasonable

steps.

(2) The creditor is entitled to recover any expenses reasonably incurred in

attempting to reduce the loss.

III. – 3:706: Substitute transaction

A creditor who has terminated a contractual relationship in whole or in part

under Section 5 and has made a substitute transaction within a reasonable

time and in a reasonable manner may, in so far as entitled to damages,

recover the difference between the value of what would have been payable

under the terminated relationship and the value of what is payable under

the substitute transaction, as well as damages for any further loss.

III. – 3:707: Current price

Where the creditor has terminated a contractual relationship in whole or in

part under Section 5 and has not made a substitute transaction but there is

a current price for the performance, the creditor may, in so far as entitled to

damages, recover the difference between the contract price and the price

current at the time of terminatio n as well as damages for any further

loss.

III. – 3:708: Interest on late payments

(1) If payment of a sum of money is delayed, whether or not the non-

performance is excused, the creditor is entitled to interest on that sum

from the time when payment is due to the time of payment at the

average commercial bank short-term lending rate to prime borrowers

prevailing for the currency of payment at the place where payment is

due.

(2) The creditor may in addition recover damages for any further loss.

III. – 3:709: When interest to be added to capital

(1) Interest payable according to the preceding Article is added to the out-

standing capital every 12 months.

(2) Paragraph (1) of this Article does not apply if the parties have provided

for interest upon delay in payment.

Chapter 3:Remedies for non-performance III. – 3:709

251

III. – 3:710: Interest in commercial contracts

(1) If a business delays the payment of a price due under a contract for the

supply of goods, other assets or services without being excused under

III. – 3:104 (Excuse due to an impediment), interest is due at the rate

specified in paragraph (4), unless a higher interest rate is applicable.

(2) Interest at the rate specified in paragraph (4) starts to run on the day

which follows the date or the end of the period for payment provided in

the contract. If there is no such date or period, interest at that rate

starts to run:

(a) 30 days after the date when the debtor receives the invoice or an

equivalent request for payment; or

(b) 30 days after the date of receipt of the goods or services, if the date

under (a) is earlier or uncertain, or if it is uncertain whether the

debtor has received an invoice or equivalent request for payment.

(3) If conformity of goods or services to the contract is to be ascertained by

way of acceptance or verification, the 30 day period under paragraph

(2)(b) starts to run on the date of acceptance or verification.

(4) The interest rate for delayed payment is the interest rate applied by the

European Central Bank to its most recent main refinancing operation

carried out before the first calendar day of the half-year in question

(“the reference rate”), plus seven percentage points. For the currency

of a Member State which is not participating in the third stage of eco-

nomic and monetary union, the reference rate is the equivalent rate set

by its national central bank.

(5) The creditor may in addition recover damages for any further loss.

III. – 3:711: Unfair terms relating to interest

(1) A term whereby a business pays interest from a date later than that

specified in the preceding Article paragraph (2) (a) and (b) and para-

graph (3), or at a rate lower than that specified in paragraph (4), is not

binding to the extent that this would be unfair.

(2) A term whereby a debtor is allowed to pay the price for goods, other

assets or services later than the time when interest starts to run under

the preceding Article paragraph (2)(a) and (b) and paragraph (3) does

not deprive the creditor of interest to the extent that this would be

unfair.

(3) Something is unfair for the purposes of this Article if it grossly deviates

from good commercial practice, contrary to good faith and fair dealing.

III. – 3:710 Book III

252

III. – 3:712: Stipulated payment for non-performance

(1) Where the terms regulating an obligation provide that a debtor who

fails to per form the obligation is to pay a specified sum to the creditor

for such non-performance, the creditor is entitled to that sum irrespec-

tive of the actual loss.

(2) However, despite any provision to the contrary, the sum so specified in

a contract or other juridical act may be reduced to a reasonable amount

where it is grossly excessive in relation to the loss resulting from the

non-performance and the other circumstances.

III. – 3:713: Currency by which damages to be measured

Damages are to be measured by the currency which most appropriately

reflects the creditor’s loss.

Chapter 4:

Plurality of debtors and creditors

Section 1:

Plurality of debtors

III. – 4:101: Scope of Section

This Section applies where two or more debtors are bound to perform one

obligation.

III. – 4:102: Solidary, divided and joint obligations

(1) An obligation is solidary when each debtor is bound to perform the

obligation in full and the creditor may require per formance from any of

them until full performance has been received.

(2) An obligation is divided when each debtor is bound to perform only

part of the obligation and the creditor may claim from each debtor only

performance of that debtor’s part.

(3) An obligation is joint when the debtors are bound to perform the ob-

ligation together and the creditor may require performance only from

all of them together.

III. – 4:103: When different types of obligation arise

(1) Whether an obligation is solidary, divided or joint depends on the

terms regulating the obligation.

Chapter 4:Plurality of debtors and creditors III. – 4:103

253

(2) If the terms do not determine the question, the liability of two or more

debtors to perform the same obligation is solidary. Liability is solidary in

particular where two or more persons are liable for the same damage.

(3) The fact that the debtors are not liable on the same terms or grounds

does not prevent solidarity.

III. – 4:104: Liability under divided obligations

Debtors bound by a divided obligation are liable in equal shares.

III. – 4:105: Joint obligations: special rule when money claimed

for non-performance

Notwithstanding III. – 4:102 (Solidary, divided and joint obligations) para-

graph (3), when money is claimed for non-performance of a joint obliga-

tion, the debtors have solidary liability for payment to the creditor.

III. – 4:106: Apportionment between solidary debtors

(1) As be tween themselves, solid ary debtors are liab le in equal shares.

(2) If two or more debtors have solidary liability for the same damage, their

share of liability as between themselves is equal unless different shares

of liability are more appropriate having regard to all the circumstances

of the case and in particular to fault or to the extent to which a source

of danger for which one of them was responsible contributed to the

occurrence or extent of the damage.

III. – 4:107: Recourse between solidary debtors

(1) A solidary debtor who has performed more than that debtor’s share has

a right to recover the excess from any of the other debtors to the extent

of each debtor’s unperformed share, together with a share of any costs

reasonably incurred.

(2) A solidary debtor to whom paragraph (1) applies may also, subject to

any prior right and interest of the creditor, exercise the rights and ac-

tions of the creditor, including any supporting security rights, to re-

cover the excess from any of the other debtors to the extent of each

debtor’s unper formed share.

(3) If a solidary debtor who has performed more than that debtor’s share is

unable, despite all reasonable efforts, to recover contribution from an-

other solidary debtor, the share of the others, including the one who

has performed, is increased proportionally.

III. – 4:104 Book III

254

III. – 4:108: Performance , set-off and merger in

solidary obligations

(1) Performance or set-off by a solidary debtor or set-off by the creditor

against one solidary debtor discharges the other debtors in relation to

the creditor to the extent of the performance or set-off.

(2) Merger of debts between a solidary debtor and the creditor discharges

the other debtors only for the share of the debtor concerned.

III. – 4:109: Release or settlement in solidary obligations

(1) When the creditor releases, or reaches a settlement with, one solidary

debtor, the other debtors are discharged of liability for the share of that

debtor.

(2) As between solidary debtors, the debtor who is discharged from that

debtor’s share is discharged only to the extent of the share at the time

of the discharge and not from any supplementary share for which that

debtor may subsequently become liable under

III. – 4:107 (Recourse

between solidary debtors) paragraph (3).

(3) When the debtors have solidary liability for the same damage the dis-

charge under paragraph (1) extends only so far as is necessary to pre-

vent the creditor from recovering more than full reparation and the

other debtors retain their rights of recourse against the released or set-

tling debtor to the extent of that debtor’s unperformed share.

III. – 4:110: Effect of judgment in solidary obligations

A decision by a court as to the liability to the creditor of one solidary debtor

does not affect:

(a) the liability to the creditor of the other solidary debtors; or

(b) the rights of recourse between the solidary debtors under

III. – 4:107

(Recourse between solidary debtors).

III. – 4:111: Prescription in solidary obligations

Prescription of the creditor’s right to performance against one solidary debt-

or does not affect:

(a) the liability to the creditor of the other solidary debtors; or

(b) the rights of recourse between the solidary debtors under

III. – 4:107

(Recourse between solidary debtors).

Chapter 4:Plurality of debtors and creditors III. – 4:111

255

III. – 4:112: Oppos ability of other defences in solidary obligations

(1) A solidary debtor may invoke against the creditor any defence which

another solidary debtor can invoke, other than a defence personal to

that other debtor. Invoking the defence has no effect with regard to the

other solidary debtors.

(2) A debtor from whom contribution is claimed may invoke against the

claimant any personal defence that that debtor could have i nvoked

against the creditor.

Section 2:

Plurality of creditors

III. – 4:201: Scope of section

This Section applies where two or more creditors have a right to perform-

ance under one obligation.

III. – 4:202: Solidary, divided and joint rights

(1) A right to performance is solidary when any of the creditors may re-

quire full performance from the debtor and the debtor may perform to

any of the creditors.

(2) A right to performance is divided when each creditor may require per-

formance only of that creditor’s share and the debtor owes each cred-

itor only that creditor’s share.

(3) A right to performance is joint when any creditor may require perform-

ance only for the benefit of all the creditors and the debtor must per-

form to all the creditors.

III. – 4:203: When different types of right arise

(1) Whether a right to performance is solidary, divided or communal de-

pends on the terms regulating the right.

(2) If the terms do not determine the question, the right of co-creditors is

divided.

III. – 4:204: Apportionment in cases of divided rights

In the case of divided rights the creditors have equal shares.

III. – 4:112 Book III

256

III. – 4:205: Difficulties of performing in cases of joint rights

If one of th e creditors who have joint rights to performance refuses to

accept, or is unable to receive, the performance, the debtor may obtain

discharge from the obligation by depositing the property or money with

a third party according to

III. – 2:111 (Proper ty not accepted) or III. – 2:112

(Money not accepted).

III. – 4:206: Apportionment in cases of solidary rights

(1) In the case of solidary rights the creditors have equal shares.

(2) A creditor who has received more than that creditor’s share has an

obligation to transfer the excess to the other creditors to the extent of

their respective shares.

III. – 4:207: Regi me of solidary rights

(1) A release granted to the debtor by one of the solidary creditors has no

effect on the other solidary creditors.

(2) The rules of

III. – 4:108 (Performance, set-off and merger in solidary

obligations),

III. – 4:110 (Effect of judgment in solidary obligations),

III. – 4:111 (Prescription in solidary obligations) and III. – 4:112 (Op-

posability of other defences in solidary obligations) paragraph (1) ap-

ply, with appropriate adaptations, to solidary rights to performance.

Chapter 5:

Change of parties

Section 1:

Assignment of rights

Sub-section 1:

General

III. – 5:101: Scope of Section

(1) This Section applies to the assignment, by a contract or other juridical

act, of a right to per formance of an obligation.

(2) It does not apply to the transfer of a financial instrument or investment

security where such transfer is required to be by entry in a register

maintained by or for the issuer or where there are other requirements

for transfer or restrictions on transfer.

Chapter 5:Change of parties III. – 5:101

257

III. – 5:102: Definitions

(1) An “assignment” of a right is the transfer of the right from one person

(the “assignor”) to another person (the “assignee”).

(2) An “act of assignment” is a contract or other juridical act which is

intended to effect a transfer of the right.

(3) Where part of a right is assigned, any reference in this Section to a right

includes a reference to the assigned part of the right.

III. – 5:103: Priority of provisions on proprietary securities

and trusts

(1) In relation to assignments for purposes of security, the provisions of

Book

IX apply and have priority over the provisions in this Chapter.

(2) In relation to assignments for purposes of a trust, or to or from a trust,

the provisions of Book X apply and have priority over the provisions in

this Chapter.

Sub-section 2:

Requirements for assignment

III. – 5:104: Basic requirements

(1) The requirements for an assignment of a right to performance are that:

(a) the right exists;

(b) the right is assignable;

to transfer it;

(d) the assignee is entitled as against the assignor to the transfer by

virtue of a contract or other juridical act, a court order or a rule of

law; and

(e) there is a valid act of assignment of the right.

(2) The entitlement referred to in paragraph (1)(d) need not precede the

act of assignment.

(3) The same contract or other juridical act may operate as the conferment

of an entitlement and as the act of assignment.

(4) Neither notice to the debtor nor the consent of the debtor to the as-

signment is required.

III. – 5:102 Book III

258

III. – 5:105: Assignability: general rule

(1) All rights to performance are assignable except where otherwise pro-

vided by law.

(2) A right to performance which is by law accessory to another right is not

assignable separately from that right.

III. – 5:106: Future and unspecified rights

(1) A future right to performance may be the subject of an act of assign-

ment but the transfer of the right depends on its coming into existence

and being identifiable as the right to which the act of assignment re-

lates.

(2) A number of rights to performance may be assigned without individual

specification if, at the time when the assignment is to take place in

relation to them, they are identifiab le as rights to which the act of

assignment relates.

III. – 5:107: Assignability in part

(1) A right to performance of a monetary obligation may be assigned in

part.

(2) A right to performance of a non-monetary obligation may be assigned

in part only if:

(a) the debtor consents to the assignment; or

(b) the right is divisible and the assignment does not render the ob-

ligation significantly more burdensome.

(3) Where a right is assigned in part the assignor is liable to the debtor for

any increased costs which the debtor thereby incurs.

III. – 5:108: Assignability: effect of contractual prohibition

(1) A contractual prohibition of, or restriction on, the assignment of a right

does not affect the assignability of the right.

(2) However, where a right is assigned in breach of such a prohibition or

restriction:

(a) the debtor may perform in favour of the assignor and is discharged

by so doing; and

(b) the debtor retains all rights of set-off against the assignor as if the

right had not been assigned.

(3) Paragraph (2) does not apply if:

(a) the debtor has consented to the assignment;

Chapter 5:Change of parties III. – 5:108: Assignability

259

(b) the debtor has caused the assignee to believe on reasonable

grounds that there was no such prohibition or restriction; or

or services.

(4) The fact that a right is assignable notwithstanding a contractual pro-

hibition or restriction does not affect the assignor’s liability to the debt-

or for any breach of the prohibition or restriction.

III. – 5:109: Assignability: rights personal to the creditor

(1) A right is not assignable if it is a right to a performance which the

debtor, by reason of the nature of the performance or the relationship

between the debtor and the creditor, could not reasonably be required

to render to anyone except that creditor.

(2) Paragraph (1) does not apply if the debtor has consented to the assign-

ment.

III. – 5:110: Act of assignment: formation and validity

(1) Subject to paragraphs (2) and (3), the rules of Book II on the formation

and validity of contracts and other juridical acts apply to acts of assign-

ment.

(2) The rules of Book

IV.H on the formation and validity of contracts of

donation apply to gratuitous acts of assignment.

(3) The rules of Book

IX on the formation and validity of security agree-

ments apply to acts of assignment for purposes of security.

III. – 5:111: Right or authority to assign

The requirement of right or authority in III. – 5:104 (Basic requirements)

paragraph (1)(c) need not be satisfied at the time of the act of assignment

but has to be satisfied at the time the assignment is to take place.

Sub-section 3:

Undertakings by assignor

III. – 5:112: Undertakings by assignor

(1) The undertakings in paragraphs (2) to (6) are included in the act of

assignment unless the act of assignment or the circumstances indicate

otherwise.

III. – 5:109: Assignability Book III

260

(2) The assignor undertakes that:

(a) the assigned right exists or will exist at the time when the assign-

ment is to take effect;

(b) the assignor is entitled to assign the right or will be so entitled at

the time when the assignment is to take effect.

(d) the right will not be affected by any right of set-off available as

between the assignor and the debtor; and

(e) the right has not been the subject of a prior assignment to another

assignee and is not subject to any right in security in favour of any

other person or to any other incumbrance.

(3) The assignor undertakes that any terms of a contract or other juridical

act which have been disclosed to the assignee as terms regulating the

right have not been modified and are not affected by any undisclosed

agreement as to their meaning or effect which would be prejudicial to

the assignee.

(4) The assignor undertakes that the terms of any contract or other juridical

act from which the right arises will not be modif ied without the con-

sent of the assignee unless the modification is provided for in the act of

assignment or is one which is made in good faith and is of a nature to

which the assignee could not reasonably object.

(5) The assignor undertakes not to conclude or grant any subsequent act

of assignment of the same right which could lead to another person

obtaining priority over the assignee.

(6) The assignor undertakes to transfer to the assignee, or to take such

steps as are necessary to complete the transfer of, all transferable rights

intended to secure the performance which are not already transferred

by the assignment, and to transfer the proceeds of any non-transferable

rights intended to secure the per formance.

(7) The assignor does not represent that the debtor has, or will have, the

ability to pay.

Chapter 5:Change of parties III. – 5:112

261

Sub-section 4:

Effects of assignment

III. – 5:113: New creditor

As soon as the assignment takes place the assignor ceases to be the creditor

and the assignee becomes the creditor in relation to the right assigned.

III. – 5:114: When assignment takes place

(1) An assignment takes place when the requirements of III. – 5:104 (Basic

requirements) are satisfied, or at such later time as the act of assign-

ment may provide.

(2) However, an assignment of a right which was a future right at the time

of the act of assignment is regarded as having taken place when all

requirements other than those dependent on the existence of the right

were satisfied.

(3) Where the requirements of

III. – 5:104 (Basic requirements) are satis-

fied in relation to successive acts of assignment at the same time, the

earliest act of assignment takes effect unless it provides otherwise.

III. – 5:115: Rights transferred to assignee

(1) The assignment of a right to performance transfers to the assignee not

only the primary right but also all accessory rights and transferable

supporting security rights.

(2) Where the assignment of a right to performance of a contractual ob-

ligation is associated with the substitution of the assignee as debtor in

respect of any obligation owed by the assignor under the same con-

tract, this Article takes effect subject to

III. – 5:302 (Transfer of con-

tractual position).

III. – 5:116: Effect on defences and rights of set-off

(1) The debtor may invoke against the assignee all substantive and proce-

dural defences to a claim based on the assigned right which the debtor

could have invoked against the assignor.

(2) The debtor may not, however, invoke a defence against the assignee:

(a) if the debtor has caused the assignee to believe that there was no

such defence; or

(b) if the defence is based on breach by the assignor of a prohibition or

restriction on assignment.

III. – 5:113 Book III

262

(3) The debtor may invoke against the assignee all rights of set-off which

would have been available against the assignor in respect of rights

against the assignor:

(a) existing at the time when the debtor could no longer obtain a dis-

charge by performing to the assignor; or

(b) closely connected with the assigned right.

III. – 5:117: Effect on place of performance

(1) Where the assigned right relates to an obligation to pay money at a

particular place, the assignee may require payment at any place within

the same country or, if that country is a Member State of the European

Union, at any place within the European Union, but the assignor is

liable to the debtor for any increased costs which the debtor incurs by

reason of any change in the place of performance.

(2) Where the assigned right relates to a non-monetary obligation to be

performed at a par ticular place, the assignee may not require perform-

ance at any other place.

III. – 5:118: Effect of initial invalidity, subsequent avoidance,

withdrawal, termination and revocation

(1) This Article applies where the assignee’s entitlement for the purposes

III. – 5:104 (Basic requirements) paragraph (1)(d) arises from a con-

tract or other juridical act (the underlying contract or other juridical act)

whether or not it is followed by a separate act of assignment for the

purposes of paragraph (1)(e) of that Article.

(2) Where the underlying contract or other juridical act is void from the

beginning, no assignment takes place.

(3) Where, after an assignment has taken place, the underlying contract or

other juridical act is avoided under Book

II, Chapter 7, the right is trea-

ted as never having passed to the assignee (retroactive effect on assign-

ment).

(4) Where, after an assignment has taken place, the underlying contract or

other juridical act is withdrawn in the sense of Book

II, Chapter 5, or

the contractual relationship is terminated under any rule of Book

III,or

a donation is revoked in the sense of Book

IV. H Chapter 4, there is no

retroactive effect on the assignment.

(5) This Article does not affect any right to recover based on other provi-

sions of these model rules.

Chapter 5:Change of parties III. – 5:118

263

Sub-section 5:

Protection of debtor

III. – 5:119: Performance to person who is not the creditor

(1) The debtor is discharged by per forming to the assignor so long as the

debtor has not received a notice of assignment from either the assignor

or the assignee and does not know that the assignor is no longer en-

titled to receive performance.

(2) Notwithstanding that the person identified as the assignee in a notice

of assignment received from the assignor is not the creditor, the debtor

is discharged by performing in good faith to that person.

(3) Notwithstanding that the person identified as the assignee in a notice

of assignment received from a person claiming to be the assignee is not

the creditor, the debtor is discharged by performing to that person if the

creditor has caused the debtor reasonably and in good faith to believe

that the right has been assigned to that person.

III. – 5:120: Adequate proof of assignment

(1) A debtor who believes on reasonable grounds that the right has been

assigned but who has not received a notice of assignment, may request

the person who is believed to have assigned the right to provide a

notice of assignment or a confirmation that the right has not been

assigned or that the assignor is still entitled to receive payment.

(2) A debtor who has received a notice of ass ignment which is not in

textual form on a durable medium or which does not give adequate

information about the assigned right or the name and address of the

assignee may request the person giving the notice to provide a new

notice which satisfies these requirements.

(3) A debtor who has received a notice of assignment from the assignee

but not from the assignor may request the assignee to provide reliable

evidence of the assignment. Reliable evidence includes, but is not lim-

ited to, any statement in textual form on a durable medium emanating

from the assignor indicating that the right has been assigned.

(4) A debtor who has made a reques t under this Article may withhold

performance until the request is met.

III. – 5:119 Book III

264

Sub-section 6:

Priority rules

III. – 5:121: Competition between successive assignees

(1) Where there are successive purported assignments by the same person

of the same right to performance the purported assignee whose assign-

ment is first notified to the debtor has priority over any earlier assignee

if at the time of the later assignment the assignee under that assign-

ment neither knew nor could reasonably be expected to have known of

the earlier assignment.

(2) The debtor is discharged by paying the first to notify even if aware of

competing demands.

III. – 5:122: Competition between assignee and

assignor receiving proceeds

Where the debtor is discharged under III. – 5:108 (Assignability: effect of

contractual prohibition) paragraph (2)(a) or

III. – 5:119 (Performance to

person who is not the creditor) paragraph (1), the assignee’s right against

the assignor to the proceeds has priority over the right of a competing

claimant so long as the proceeds are held by the assignor and are reason-

ably identifiable from the other assets of the assignor.

Section 2:

Substitution and addition of debtors

III. – 5:201: Scope

This Section applies only to the substitution or addition of a new debtor by

agreement.

III. – 5:202: Types of substitution or addition

(1) A new debtor may be substituted or added:

(a) in such a way that the original debtor is discharged (complete sub-

stitution of new debtor);

(b) in such a way that the original debtor is retained as a debtor in case

the new debtor does not perform properly (incomplete substitu-

tion of new debtor); or

Chapter 5:Change of parties III. – 5:202

265

solidary liability (addition of new debtor).

(2) If it is clear that there is a new debtor but not clear what type of sub-

stitution or addition was intended, the origi nal debtor and the new

debtor have solidary liability.

III. – 5:203: Consent of creditor

(1) The consent of the creditor is required for the substitution of a new

debtor, whether complete or incomplete.

(2) The consent of the creditor to the substitution of a new debtor may be

given in advance. In such a case the substitution takes effect only when

the creditor is given notice by the new debtor of the agreement be-

tween the new and the original debtor.

(3) The consent of the creditor is not required for the addition of a new

debtor but the creditor, by notice to the new debtor, can reject the right

conferred against the new debtor if that is done without undue delay

after being informed of the right and before it has been expressly or

impliedly accepted. On such rejection the right is treated as never hav-

ing been conferred.

III. – 5:204: Complete substitution

A third person may undertake with the agreement of the creditor and the

original debtor to be completely substituted as debtor, with the effect that

the original debtor is discharged.

III. – 5:205: Effects of complete substitution on defences,

set-off and security rights

(1) The new debtor may invoke against the creditor all defences which the

original debtor could have invoked against the creditor.

(2) The new debtor may not exercise against the creditor any right of set-

off available to the original debtor against the creditor.

(3) The new debtor cannot invoke against the creditor any rights or de-

fences arising from the relationship between the new debtor and the

original debtor.

(4) The discharge of the original debtor also extends to any personal or

proprietary security provided by the original debtor to the creditor for

the performance of the obligation, unless the security is over an asset

III. – 5:203 Book III

266

which is transferred to the new debtor as part of a transaction between

the original and the new debtor.

(5) Upon discharge of the original debtor, a security granted by any person

other than the new debtor for the performance of the obligation is

released, unless that other person agrees that it should continue to be

available to the creditor.

III. – 5:206: Incomplete substitution

A third person may agree with the creditor and with the original debtor to

be incompletely substituted as debtor, with the effect that the original debt-

or is retained as a debtor in case the original debtor does not perform prop-

erly.

III. – 5:207: Effects of incomplete substitution

(1) The effects of an incomplete substitution on defences and set-off are

the same as the effects of a complete substitution.

(2) To the extent that the original debtor is not discharged, any personal or

proprietary security provided for the performance of that debtor’s ob-

ligations is unaffected by the substitution.

(3) So far as not inconsistent with paragraphs (1) and (2) the liability of

the original debtor is governed by the rules on the liability of a provider

of dependent personal security with subsidiary liability.

III. – 5:208: Addition of new debtor

A third person may agree with the debtor to be added as a debtor, with the

effect that the original debtor and the new debtor have solidary liability.

III. – 5:209: Effects of addition of new debtor

(1) Where there is a contract between the new debtor and the creditor, or a

separate unilateral juridical act by the new debtor in favour of the cred-

itor, whereby the new debtor is added as a debtor, the new debtor

cannot invoke against the creditor any rights or defences arising from

the relationship between the new debtor and the original debtor.

Where there is no such contract or unilateral juridical act the new debt-

or can invoke against the creditor any ground of invalidity affecting the

agreement with the original debtor.

(2) So far as not inconsistent with p aragraph (1), the rules of Book

III,

Chapter 4, Section 1 (Plurality of debtors) apply.

Chapter 5:Change of parties III. – 5:209

267

Section 3:

Transfer of contractual position

III. – 5:301: Scope

This Section applies only to transfers by agreement.

III. – 5:302: Transfer of contractual position

(1) A party to a contractual relationship may agree with a third person,

with the consent of the other party to the contractual relationship, that

that person is to be substituted as a party to the relationship.

(2) The consent of the other party may be given in advance. In such a case

the transfer takes effect only when that party is given notice of it.

(3) To the extent that the substitution of the third person involves a trans-

fer of rights, the provisions of Section 1 of this Chapter on the assign-

ment of rights apply; to the extent that obligations are transferred, the

provisions of Section 2 of this Chapter on the substitution of a new

debtor apply.

Section 4:

Transfer of rights and obligations on agent’s insolvency

III. – 5:401: Principal’s option to take over rights

in case of agent’s insolvency

(1) This Article applies where an agent has concluded a contract with a

third party on the instructions of and on behalf of a principal but has

done so in such a way that the agent, and not the principal, is a party to

the contract.

(2) If the agent becomes insolvent the principal may by notice to the third

party and to the agent take over the rights of the agent under the con-

tract in relation to the third party.

(3) The third party may invoke against the principal any defence which the

third party could have invoked against the agent and has all the other

protections which would be available if the rights had been voluntarily

assigned by the agent to the principal.

III. – 5:301 Book III

268

III. – 5:402: Third party’s counter-option

Where the principal has taken over the rights of the agent under the pre-

ceding Article, the third party may by notice to the principal and the agent

opt to exercise against the principal the rights which the third party has

against the agent, subject to any defences which the agent has against the

third party.

Chapter 6:

Set-off and merger

Section 1:

Set-off

III. – 6:101: Definition and scope

(1) “Set-off” is the process by which a person may use a right to perform-

ance held against another person to extinguish in whole or in part an

obligation owed to that person.

(2) This Chapter does not apply to set-off in insolvency.

III. – 6:102: Requirements for set-off

If two parties owe each other obligations of the same kind, either party may

set off that par ty’s right against the other party’s right, if and to the extent

that, at the time of set-off:

(a) the performance of the first party is due or, even if it is not due, the first

party can oblige the other party to accept performance;

(b) the performance of the other party is due; and

of the set-off.

III. – 6:103: Unascertained rights

(1) A debtor may not set off a right which is unascertained as to its ex-

istence or value unless the set-off will not prejudice the interests of the

creditor.

(2) Where the rights of both parties arise from the same legal relationship

it is presumed that the creditor’s interests will not be prejudiced.

Chapter 6:Set-off and merger III. – 6:103

269

III. – 6:104: Foreign currency set-off

Where parties owe each other money in different currencies, each party

may set off that party’s right against the other party’s right, unless the

parties have agreed that the party declaring set-off is to pay exclusively in

a specified currency.

III. – 6:105: Set-off by notice

Set-off is effected by notice to the other party.

III. – 6:106: Two or more rights and obligations

(1) Where the party giving notice of set-off has two or more rights against

the other party, the notice is effective only if it identifies the right to

which it relates.

(2) Where the party giving notice of set-off has to perform two or more

obligations towards the other party, the rules on imputation of per-

formance apply with appropriate adaptations.

III. – 6:107: Effect of set-off

Set-off extinguishes the obligations, as far as they are coextensive, as from

the time of notice.

III. – 6:108: Exclusion of right of set-off

Set-off cannot be effected:

(a) where it is excluded by agreement;

(b) against a right to the extent that that right is not capable of attachment;

and

Section 2:

Merger of debts

III. – 6:201: Extinction of obligations by merger

(1) An obligation is extinguished if the same person becomes debtor and

creditor in the same capacity.

(2) Paragraph (1) does not, however, apply if the effect would be to de-

prive a third person of a right.

III. – 6:104 Book III

270

Chapter 7:

Prescription

Section 1:

General provision

III. – 7:101: Rights subject to prescription

A right to performance of an obligation is subject to prescription by the

expiry of a period of time in accordance with the rules in this Chapter.

Section 2:

Periods of prescription and their commencement

III. – 7:201: General period

The general period of prescription is three years.

III. – 7:202: Period for a right established by legal proceedings

(1) The period of prescription for a right established by judgment is ten

years.

(2) The same applies to a right established by an arbitral award or other

instrument which is enforceable as if it were a judgment.

III. – 7:203: Commencement

(1) The general period of prescription begins to run from the time when

the debtor has to effect performance or, in the case of a right to dam-

ages, from the time of the act which gives rise to the right.

(2) Where the debtor is under a continuing obligation to do or refrain from

doing something, the general period of prescription begins to run with

each breach of the obligation.

(3) The period of prescription set out in

III. – 7:202 (Period for a right es-

tablished by legal proceedings) begins to run from the time when the

judgment or arbitral award obtains the effect of res judicata, or the

other instrument becomes enforceable, though not before the debtor

has to effect per formance.

Chapter 7:Prescription III. – 7:203

271

Section 3:

Extension of period

III. – 7:301: Suspension in case of ignorance

The running of the period of prescription is suspended as long as the cred-

itor does not know of, and could not reasonably be expected to know of:

(a) the identity of the debtor; or

(b) the facts giving rise to the right including, in the case of a right to

damages, the type of damage.

III. – 7:302: Suspension in case of judicial and other proceedings

(1) The running of the period of prescription is suspended from the time

when judicial proceedings to assert the right are begun.

(2) Suspension lasts until a decision has been made which has the effect of

res judicata, or until the case has been otherwise disposed of. Where

the proceedings end within the last six months of the prescription

period without a decision on the merits, the period of prescription does

not expire before six months have passed after the time when the pro-

ceedings ended.

(3) These provisions apply, with appropriate adaptations, to arbitratio n

proceedings, to mediation proceedings, to proceedings whereby an

issue between two parties is referred to a third party for a binding de-

cision and to all other proceedings initiated with the aim of obtaining a

decision relating to the right.

(4) Mediation proceedings mean structured proceedings whereby two or

more parties to a dispute attempt to reach an agreement on the settle-

ment of their dispute with the assistance of a mediator.

III. – 7:303: Suspension in case of impediment beyond

creditor’s control

(1) The running of the period of prescription is suspended as long as the

creditor is prevented from pursuing proceedings to assert the right by

an impediment which is beyond the creditor’s control and which the

creditor could not reasonably have been expected to avoid o r over-

come.

(2) Paragraph (1) applies only if the impediment arises, or subsists, within

the last six months of the prescription period.

III. – 7:301 Book III

272

(3) Where the duration or nature of the impediment is such that it would

be unreasonable to expect the creditor to take proceedings to assert the

right within the part of the period of prescription which has still to run

after the suspension comes to an end, the period of prescription does

not expire before six months have passed after the time when the im-

pediment was removed.

(4) In this Article an impediment includes a psychological impediment.

III. – 7:304: Postponement of expiry in case of negotiations

If the parties negotiate about the right, or about circumstances from which

a claim relating to the right might arise, the period of prescription does not

expire before one year has passed since the last communication made in

the negotiations.

III. – 7:305: Postponement of expiry in case of incapacity

(1) If a person subject to an incapacity is without a representative, the

period of prescription of a right held by or against that person does

not expire before one year has passed after either the incapacity has

ended or a representative has been appointed.

(2) The period of prescription of rights between a person subject to an

incapacity and that person’s representative does not expire before one

year has passed after either the incapacity has ended or a new repre-

sentative has been appointed.

III. – 7:306: Postponement of expiry: deceased’s estate

Where the creditor or debtor has died, the period of prescription of a right

held by or against the deceased’s estate does not expire before one year has

passed after the right can be enforced by or against an heir, or by or against

a representative of the estate.

III. – 7:307: Maximum length of period

The period of prescription cannot be extended, by suspension of its run-

ning or postponement of its expiry under this Chapter, to more than ten

years or, in case of rights to damages for personal injuries, to more than

thirty years. This does not apply to suspension under

III. – 7:302 (Suspen-

sion in case of judicial and other proceedings).

Chapter 7:Prescription III. – 7:307

273

Section 4:

Renewal of period

III. – 7:401: Renewal by acknowledgement

(1) If the debtor acknowledges the right, vis-à-vis the creditor, by part pay-

ment, payment of interest, giving of security, or in any other manner, a

new period of prescription begins to run.

(2) The new period is the general p eriod of prescription , regardless of

whether the right was originally subject to the general period of pre-

scription or the ten year period under

III. – 7:202 (Period for a right

established by legal proceedings). In the latter case, however, this Ar-

ticle does not operate so as to shorten the ten year period.

III. – 7:402: Renewal by attempted execution

The ten year period of prescription laid down in III. – 7:202 (Period for a

right established by legal proceedings) begins to run again with each rea-

sonable attempt at execution undertaken by the creditor.

Section 5:

Effects of prescription

III. – 7:501: General effect

(1) After expiry of the period of prescription the debtor is entitled to refuse

performance.

(2) Whatever has been paid or transferred by the debtor in performance of

the obligation may not be reclaimed merely because the period of pre-

scription had expired.

III. – 7:502: Effect on ancillary rights

The period of prescription for a right to payment of interest, and other

rights of an ancillary nature, expires not later than the period for the prin-

cipal right.

III. – 7:401 Book III

274

III. – 7:503: Effect on set-off

A right in relation to which the period of prescription has expired may

nonetheless be set off, unless the debtor has invoked prescription previous-

ly or does so within two months of notification of set-off.

Section 6:

Modification by agreement

III. – 7:601: Agreements concerning prescription

(1) The requirements for prescription may be modified by agreement be-

tween the parties, in particular by either shor tening or lengthening the

periods of prescription.

(2) The period of prescription may not, however, be reduced to less than

one year or extended to more than thirty years after the time of com-

mencement set out in

III. – 7:203 (Commencement)

Chapter 7:Prescription III. – 7:601

Book IV

Specific contracts and the rights and

obligations arising from them

Part A.

Sales

Chapter 1:

Scope and definitions

Section 1:

Scope

IV. A. – 1:101: Contracts covered

(1) This Part of Book IV applies to contra cts for the sale of goods and

associated consumer guarantees.

(2) It applies with appropriate adaptations to:

(a) contracts for the sale of electricity;

(b) contracts for the sale of stocks, shares, investment securities and

negotiable instruments;

cluding rights to the performance of obligations, industrial and

intellectual property rights and other transferable rights;

(d) contracts conferring, in exchange for a price, rights in information

or data, including software and databases;

(e) contracts for the barter of goods or any of the other assets men-

tioned above.

(3) It does not apply to contracts for the sale or barter of immovable prop-

erty or rights in immovable property.

277

IV. A. – 1:102: Goods to be manufactured or produced

A contract under which one party undertakes, for a price, to manufacture or

produce goods for the other party and to transfer their ownership to the

other party is to be considered as primarily a contract for the sale of the

goods.

Section 2:

Definitions

IV. A. – 1:201: Goods

In this Part of Book IV:

(a) the word “goods” includes goods which at the time of the conclusion

of the contract do not yet exist; and

(b) references to goods, other than in

IV. A. – 1:101 (Contracts covered)

itself, are to be taken as referring also to the other assets mentioned in

paragraph (2) of that Article.

IV. A. – 1:202: Contract for sale

A contract for the “sale” of goods is a contract under which one party, the

seller, undertakes to another party, the buyer, to transfer the ownership of

the goods to the buyer, or to a third person, either immediately on con-

clusion of the contract or at some future time, and the buyer undertakes to

pay the price.

IV. A. – 1:203: Contract for barter

(1) A contract for the “barter” of goods is a contract under which each

party undertakes to transfer the ownership of goods, either immediate-

ly on conclusion of the contract or at some future time, in return for the

transfer of ownership of other goods.

(2) Each party is considered to be the buyer with respect to the goods to be

received and the seller with respect to the goods or assets to be trans-

ferred.

IV. A. – 1:204: Consumer contract for sale

For the purpose of this Part of Book IV, a consumer contract for sale is a

contract for sale in which the seller is a business and the buyer is a con-

sumer.

IV. A. – 1:102 Book IV

278

Chapter 2:

Obligations of the seller

Section 1:

Overview

IV. A. – 2:101: Overview of obligations of the seller

The seller must:

(a) transfer the ownership of the goods;

(b) deliver the goods;

be required by the contract; and

(d) ensure that the goods conform to the contract.

Section 2:

Delivery of the goods

IV. A. – 2:201: Delivery

(1) The seller fulf ils the obligation to deliver by making the goods, or

where it is agreed that the seller need only deliver documents repre-

senting the goods, the documents, available to the buyer.

(2) If the contract involves carriage of the goods by a carrier or series of

carriers, the seller fulfils the obligation to deliver by handing over the

goods to the first carrier for transmission to the buyer and by transfer-

ring to the buyer any document necessary to enable the buyer to t ake

over the goods from the carrier holding the goods.

(3) In this Article, any reference to the buyer includes a third person to

whom delivery is to be made in accordance with the contract.

IV. A. – 2:202: Place and time for delivery

(1) The place and time for delivery are determined by III. – 2:101 (Place of

performance) and

III. – 2:102 (Time of performance) as modified by

this Article.

(2) If the performance of the obligation to deliver requires the transfer of

documents representing the goods, the seller must transfer them at

such a time and place and in such a form as is required by the contract.

Part A.Sales IV. A. – 2:202

279

(3) If in a consumer contract for sale the contract involves carriage of

goods by a carrier or a series of carriers and the consumer is given a

time for delivery, the goods must be received from the last carrier or

made available for collection from that carrier by that time.

IV. A. – 2:203: Cure in case of early delivery

(1) If the seller has delivered goods before the time for delivery, the seller

may, up to that time, deliver any missing part or make up any deficien-

cy in the quantity of the goods delivered, or deliver goods in replace-

ment of any non-conforming goods delivered or otherwise remedy any

lack of conformity in the goods delivered, provided that the exercise of

this right does not cause the buyer unreasonable inconvenience or un-

reasonable expense.

(2) If the seller has transferred documents before the time required by the

contract, the seller may, up to that time, cure any lack of conformity in

the documents, provided that the exercise of this right does not cause

the buyer unreasonable inconvenience or unreasonable expense.

(3) This Article does not preclude the buyer from claiming damages, in

accordance with Book

III, Chapter 3, Section 7 (Damages and interest),

for any loss not remedied by the seller’s cure.

IV. A. – 2:204: Carriage of the goods

(1) If the contract requires the seller to arrange for carriage of the goods,

the seller must make such contracts as are necessary for carriage to the

place fixed by means of transportation appropriate in the circumstan-

ces and according to the usual terms for such transportation.

(2) If the seller, in accordance with the contract, hands over the goods to a

carrier and if the goods are not clearly identified to the contract by

markings on the goods, by shipping documents or otherwise, the seller

must give the buyer notice of the consignment specifying the goods.

(3) If the contract does not require the seller to effect insurance in respect

of the carriage of the goods, the seller must, at the buyer’s request,

provide the buyer with all available information necessary to enable the

buyer to effect such insurance.

IV. A. – 2:203 Book IV

280

Section 3:

Conformity of the goods

IV. A. – 2:301: Conformity with the contract

The goods do not conform with the contract unless they:

(a) are of the quantity, quality and description required by the contract;

(b) are contained or packaged in the manner required by the contract;

other instructions required by the contract; and

(d) comply with the remaining Articles of this Section.

IV. A. – 2:302: Fitness for purpose, quali ties, packaging

The goods must:

(a) be fit for any particular purpose made known to the seller at the time of

the conclusion of the contract, except where the circumstances show

that the buyer did not rely, or that it was unreasonable for the buyer to

rely, on the seller’s skill and judgement;

(b) be fit for the purposes for which goods of the same description would

ordinarily be used;

a sample or model;

(d) be contained or packaged in the manner usual for such goods or, where

there is no such manner, in a manner adequate to preserve and protect

the goods;

(e) be supplied along with such accessories, installation instructions or

other instructions as the buyer may reasonably expect to receive; and

(f) possess such qualities and performance capabilities as the buyer may

reasonably expect.

IV. A. – 2:303: Statements by third persons

The goods must possess the qualities and performance capabilities held out

in any statement on the specific characteristics of the goods made about

them by a person in earlier links of the business chain, the producer or the

producer’s representative which forms part of the terms of the contract by

virtue of

II. – 9:102 (Certain pre-contractual statements regarded as con-

tract terms).

Part A.Sales IV. A. – 2:303

281

IV. A. – 2:304: Incorrect installation under a consumer

contract for sale

Where goods supplied under a consumer contract for sale are incorrectly

installed, any lack of conformity resulting from the incorrect installation is

regarded as a lack of conformity of the goods if:

(a) the goods were installed by the seller or under the seller’s responsibil-

ity; or

(b) the goods were intended to be installed by the consumer and the in-

correct in stallation was due to a shortcoming in the installation in-

structions.

IV. A. – 2:305: Third party rights or claims in general

The goods must be free from any right or reasonably well founded claim of

a third party. However, if such a right or claim is based on industrial prop-

erty or other intellectual property, the seller’s obligation is governed by the

following Article.

IV. A. – 2:306: Third party rights or claims based on

industrial property or other intellectual property

(1) The goods must be free from any right or claim of a third party which is

based on industrial property or other intellectual property and of which

at the time of the conclusion of the contract the seller knew or could

reasonably be expected to have known.

(2) However, paragraph (1) does not apply where the right or claim results

from the seller’s compliance with technical drawings, designs, formu-

lae or other such specifications furnished by the buyer.

IV. A. – 2:307: Buyer’s knowledge of lack of conformity

(1) The seller is not liable under IV. A. – 2:302 (Fitness for purpose, quali-

ties, packaging),

IV. A. – 2:305 (Third party rights or claims in general)

IV. A. – 2:306 (Third party rights or claims based on industrial prop-

erty or other intellectual property) if, at the time of the conclusion of

the contract, the buyer knew or could reasonably be assumed to have

known of the lack of conformity.

(2) The seller is not liable under

IV. A. – 2:304 (Incorrect installation under

a consumer contract for sale) sub-paragraph (b) if, at the time of the

IV. A. – 2:304 Book IV

282

concl usion of the contract, the buyer knew or could reasonably be

assumed to have known of the shortcoming in the installation instruc-

tions.

IV. A. – 2:308: Relevant time for establishing conformity

(1) The seller is liable for any lack of conformity which exists at the time

when the risk passes to the buyer, even if the lack of conformity be-

comes apparent only after that time.

(2) In a consumer contract for sale, any lack of conformity which becomes

apparent within six months of the time when risk passes to the buyer is

presumed to have existed at that time unless this is incompatible with

the nature of the goods or the nature of the lack of conformity.

(3) In a case governed by

IV. A. – 2:304 (Incorrect installation under a con-

sumer contract for sale) any reference in paragraphs (1) or (2) to the

time when risk passes to the buyer is to be read as a reference to the

time when the installation is complete.

IV. A. – 2:309: Limits on derogation from conformity rights

in a consumer contract for sale

In a consumer contract for sale, any contractual term or agreement con-

cluded with the seller before a lack of conformity is brought to the seller’s

attention which directly or indirectly waives or restricts the rights resulting

from the seller’s obligation to ensure that the goods conform to the con-

tract is not binding on the consumer.

Chapter 3:

Obligations of the buyer

IV. A. – 3:101: Main obligatio ns of the buyer

The buyer must:

(a) pay the price;

(b) take delivery of the goods; and

required by the contract.

Part A.Sales IV. A. – 3:101

283

IV. A. – 3:102: Determination of form, measurement or

other features

(1) If under the contract the buyer is to specify the form, measurement or

other features of the goods, or the time or manner of their delivery, and

fails to make such specification either within the time agreed upon or

within a reasonable time after receipt of a request from the seller, the

seller may, without prejudice to any other rights, make the specification

in accordance with any requirements of the buyer that may be known

to the seller.

(2) A seller who makes such a specification must inform the buyer of the

details of the specification and must fix a reasonable time within which

the buyer may make a different specification. If, after receipt of such a

communication, the buyer fails to do so within the time so fixed, the

specification made by the seller is binding.

IV. A. – 3:103: Price fixed by weight

If the price is fixed according to the weight of the goods, in case of doubt it

is to be determined by the net weight.

IV. A. – 3:104: Taking delivery

The buyer fulfils the obligation to take delivery by:

(a) doing all the acts which could reasonably be expected in order to en-

able the seller to perform the obligation to deliver; and

(b) taking over the goods, or the documents representing the goods, as

required by the contract.

IV. A. – 3:105: Early delivery and delivery of excess quantity

(1) If the seller delivers all or part of the goods before the time fixed, the

buyer may take delivery or, except where acceptance of the tender would

not unreasonably prejudice the buyer’s interests, refuse to take delivery.

(2) If the seller delivers a quantity of goods greater than that provided for

by the contract, the buyer may retain or refuse the excess quantity.

(3) If the buyer retains the excess quantity it is regarded as having been

supplied under the contract and must be paid for at the contractual rate.

(4) In a consumer contract for sale paragraph (3) does not ap ply if the

buyer believes on reasonable grounds that the seller has delivered the

excess quantity intentionally and without error, knowing that it had not

been ordered. In such a case the rules on unsolicited goods apply.

IV. A. – 3:102 Book IV

284

Chapter 4:

Remedies

Section 1:

Limits on derogation

IV. A. – 4:101: Limits on derogation from remedies for

non-conformity in a consumer contract for sale

In a consumer contract for sale, any contractual term or agreement con-

cluded with the seller before a lack of conformity is brought to the seller’s

attention which directly or indirectly waives or restricts the remedies of the

buyer provided in Book

III, Chapter 3 (Remedies for Non-performance), as

modified in this Chapter, in respect of the lack of conformity is not binding

on the consumer.

Section 2:

Modifications of buyer’s remedies for lack of conformity

IV. A. – 4:201: Termination by consumer for lack of conformity.

In a consumer contract for sale, the buyer may terminate the contractual

relationship for non-performance under Book

III, Chapter 3, Section 5 (Ter-

mination) in the case of any lack of conformity, unless the lack of confor-

mity is minor.

IV. A. – 4:202: Limitation of liability for damages of

non-business sellers

(1) If the seller is a natural person acting for purposes not related to that

person’s trade, business or profession, the buyer is not entitled to dam-

ages for lack of conformity exceeding the contract price.

(2) The seller is not entitled to rely on paragraph (1) if the lack of confor-

mity relates to facts of which the seller, at the time when the risk pas-

sed to the buyer, knew or could reasonably be expected to have known

and which the seller did not disclose to the buyer before that time.

Part A.Sales IV. A. – 4:202

285

Section 3:

Requirements of examination and notification

IV. A. – 4:301: Examination of the goods

(1) The buyer should examine the goods, or cause them to be examined,

within as short a period as is reasonable in the circumstances. Failure to

do so may result in the buyer losing, under

III. – 3:107 (Failure to notify

non-conformity) as supplemented by

IV. A. – 4:302 (Notification of

lack of conformity), the right to rely on the lack of conformity.

(2) If the contract involves carriage of the goods, examination may be de-

ferred until after the goods have arrived at their destination.

(3) If the goods are redirected in transit, or redispatched by the buyer be-

fore the buyer has had a reasonable opportunity to examine them, and

at the time of the conclusion of the contract the seller knew or could

reasonably be expected to have known of the possibility of such redir-

ection or redispatch, examination may be deferred until after the goods

have arrived at the new destination.

(4) This Article does not apply to a consumer contract for sale.

IV. A. – 4:302: Notification of lack of conformity

(1) In a contract between two businesses the rule in III. – 3:107 (Failure to

notify non-conformity) requiring notification of a lack of conformity

within a reasonable time is supplemented by the following rules.

(2) The buyer in any event loses the right to rely on a lack of conformity if

the buyer does not give the seller notice of the lack of conformity at the

latest within two years from the time at which the goods were actually

handed over to the buyer in accordance with the contract.

(3) If the parties have agreed that the goods must remain fit for a particular

purpose or for their ordinary purpose during a fixed period of time, the

period for giving notice under paragraph (2) does not expire before the

end of the agreed period.

(4) Paragraph (2) does not apply in respect of third party claims or rights

pursuant to

IV. A. – 2:305 (Third party rights or claims in general) and

IV. A. – 2:306 (Third party rights or claims based on industrial property

or other intellectual property) .

IV. A. – 4:301 Book IV

286

IV. A. – 4:303: Notification of partial delivery

The buyer does not have to notify the seller that not all the goods have

been delivered, if the buyer has reason to believe that the remaining goods

will be delivered.

IV. A. – 4:304: Seller’s knowledge of lack of conformity

The seller is not entitled to rely on the provisions of IV. A. – 4:301 (Exam-

ination of the goods) or

IV. A. – 4:302 (Notification of lack of conformity)

if the lack of conformity relates to facts of which the seller knew or could

reasonably be expected to have known and which the seller did not dis-

close to the buyer.

Chapter 5:

Passing of risk

Section 1:

General provisions

IV. A. – 5:101: Effect of passing of risk

Loss of, or damage to, the goods after the risk has passed to the buyer does

not discharge the buyer from the obligation to pay the price, unless the loss

or damage is due to an act or omission of the seller.

IV. A. – 5:102: Time when risk passes

(1) The risk passes when the buyer takes over the goods or the documents

representing them.

(2) However, if the contract relates to goods not then identified, the risk

does not pass to the buyer until the goods are clearly identified to the

contract, whether by markings on the goods, by shipping documents,

by notice given to the buyer or otherwise.

(3) The rule in paragraph (1) is subject to the Articles in Section 2 of this

Chapter.

IV. A. – 5:103: Passing of risk in a consumer contract for sale

(1) In a consumer contract for sale, the risk does not pass until the buyer

takes over the goods.

(2) Paragraph (1) does not apply if the buyer has failed to perform the

obligation to take over the goods and the non-performance is not ex-

Part A.Sales IV. A. – 5:103

287

cused under III. – 3:104 (Excuse due to an impediment) in which case

IV. A. – 5:201 (Goods placed at buyer’s disposal) applies.

(3) Except in so far as provided in the preceding paragraph, Section 2 of

this Chapter does not apply to a consumer contract for sale.

(4) The parties may not, to the detriment of the consumer, exclude the

application of this Article or derogate from or vary its effects.

Section 2:

Special rules

IV. A. – 5:201: Goods placed at buyer’s disposal

(1) If the goods are placed at the buyer’s disposal and the buyer is aware of

this, the risk passes to the buyer from the time when the goods should

have been taken over, unless the buyer was entitled to withhold taking

of delivery under

III. – 3:401 (Right to withhold performance of reci-

procal obligation).

(2) If the goods are placed at the buyer’s disposal at a place other than a

place of business of the seller, the risk passes when delivery is due and

the buyer is aware of the fact that the goods are placed at the buyer’s

disposal at that place.

IV. A. – 5:202: Carriage of the goods

(1) This Article applies to any contract of sale which involves carriage of

goods.

(2) If the seller is not bound to hand over the goods at a particular place,

the risk passes to the buyer when the goods are handed over to the first

carrier for transmission to the buyer in accordance with the contract.

(3) If the seller is bound to hand over the goods to a carrier at a particular

place, the risk does not pass to the buyer until the goods are handed

over to the carrier at that place.

(4) The fact that the seller is authorised to retain documents controlling

the disposition of the goods does not affect the passing of the risk.

IV. A. – 5:203: Goods sold in transit

(1) This Article applies to any contract of sale which involves goods sold in

transit.

IV. A. – 5:201 Book IV

288

(2) The risk passes to the buyer at the time the goods are handed over to

the first carrier. However, if the circumstances so indicate, the risk pas-

ses to the buyer as from the time of the conclusion of the contract.

(3) If at the time of the conclusion of the contract the seller knew or could

reasonably be expected to have known that the goods had been lost or

damaged and did not disclose this to the buyer, the loss or damage is at

the risk of the seller.

Chapter 6:

Consumer goods guarantees

IV. A. – 6:101: Definition of a consumer goods guarantee

(1) A consumer goods guarantee means any undertaking of a type men-

tioned in the following paragraph given to a consumer in connection

with a consumer contract for the sale of goods:

(a) by a producer or a person in later links of the business chain; or

(b) by the seller in addition to the seller’s obligations as seller of the

goods.

(2) The undertaking may be that:

(a) apart from misuse, mistreatment or accident the goods will remain

fit for their ordinary purpose for a specif ied period of time, or other-

wise;

(b) the good s will meet the specifications set out in the guarantee

document or in associated advertising; or

(i) the goods will be repaired or replaced;

(ii) the price paid for the goods will be reimbursed in whole or in

part; or

(iii) some other remedy will be provided.

IV. A. – 6:102: Binding nature of the guarantee

(1) A consumer goods guarantee, whether contractual or in the form of a

unilateral undertaking, is binding in favour of the first buyer, and in the

case of a unilateral undertaking is so binding without acceptance not-

withstanding any provision to the contrary in the guarantee document

or the associated advertising.

Part A.Sales IV. A. – 6:102

289

(2) If not otherwise provided in the guarantee document, the guarantee is

also binding without acceptance in favour of every owner of the goods

within the duration of the guarantee.

(3) Any requirement in the guarantee whereby it is conditional on the fulfil-

ment by the guarantee holder of any formal requirement, such as regis-

tration or notification of purchase, is not binding on the consumer.

IV. A. – 6:103: Guarantee document

(1) A person who gives a consumer goods guarantee must (unless such a

document has already been provided to the buyer) provide the buyer

with a guarantee document which:

(a) states that the buyer has legal rights which are not affected by the

guarantee;

(b) points out the advantages of the guarantee for the buyer in com-

parison with the conformity rules;

the guarantee, notably:

– the name and address of the guarantor;

– the name and address of the person to whom any notification is

to be made and the procedure by which the notification is to be

made;

– any territorial limitations to the guarantee;

(d) is drafted in plain, intelligible language; and

(e) is drafted in the same language as that in which the goods were

offered.

(2) The guarantee document must be in textual form on a durable medium

and be available and accessible to the buyer.

(3) The validity of the guarantee is not affected by any failure to comply

with paragraphs (1) and (2), and accordingly the guarantee holder can

still rely on the guarantee and require it to be honoured.

(4) If the obligations under paragraphs (1) and (2) are not observed the

guarantee holder may, without prejudice to any right to damages which

may be available, require the guarantor to provide a guarantee docu-

ment which conforms to those requirements.

(5) The parties may not, to the detriment of the consumer, exclude the

application of this Article or derogate from or vary its effects.

IV. A. – 6:103 Book IV

290

IV. A. – 6:104: Coverage of the guarantee

If the guarantee document does not specify otherwise:

(a) the period of the guarantee is 5 years or the estimated life-span of the

goods, whichever is shorter;

(b) the guarantor’s obligations become effective if, for a reason other than

misuse, mistreatment or accident, the goods at any time during the

period of the guarantee become unfit for their ordinary purpose or

cease to possess such qualities and performance capabilities as the

guarantee holder may reasonably expect;

to repair or replace the goods; and

(d) all costs involved in invoking and performing the guarantee are to be

borne by the guarantor.

IV. A. – 6:105: Guarantee limited to specific parts

A consumer goods guarantee relating only to a specific part or specific parts

of the goods must clearly indicate this limitation in the guarantee docu-

ment; otherwise the limitation is not binding on the consumer.

IV. A. – 6:106: Exclusion or limitation of the guarantor’s liability

The guarantee may exclude or limit the guarantor’s liability under the guar-

antee for any failure of or damage to the goods caused by failure to maintain

the goods in accordance with instructions, provided that the exclusion or

limitation is clearly set out in the guarantee document.

IV. A. – 6:107: Burden of proof

(1) Where the guarantee holder invokes a consumer goods guarantee with-

in the period covered by the guarantee the burden of proof is on the

guarantor that:

(a) the goods met the specifications set out in the guarantee docu-

ment or in associated advertisements; and

(b) any failure of or damage to the goods is due to misuse, mistreat-

ment, accident, failure to maintain, or other cause for which the

guarantor is not responsible.

(2) The parties may not, to the detriment of the consumer, exclude the

application of this Article or derogate from or vary its effects.

Part A.Sales IV. A. – 6:107

291

IV. A. – 6:108: Prolongation of the guarantee period

(1) If any defect or failure in the goods is remedied under the guarantee

then the guarantee is prolonged for a period equal to the period during

which the guarantee holder could not use the goods due to the defect

or failure.

(2) The parties may not, to the detriment of the consumer, exclude the

application of this Article or derogate from or vary its effects.

Part B.

Lease of goods

Chapter 1:

Scope of application and general provisions

IV. B. – 1:101: Lease of goods

(1) This Part of Book IV applies to contracts for the lease of goods.

(2) A contract for the lease of goods is a contract under which one party,

the lessor, undertakes to provide the other party, the lessee, with a

temporary right of use of goods in exchange for rent. The rent may

be in the form of money or other value.

(3) This Part of Book

IV does not apply to contracts where the parties have

agreed that ownership will be transferred after a period with right of use

even if the parties have described the contract as a lease.

(4) The application of this Part of Book

IV is not excluded by the fact that

the contract has a financing purpose, the lessor has the role as a finan-

cing party, or the lessee has an option to become owner of the goods.

(5) This Part of Book

IV regulates only the contractual relationship arising

from a contract for lease.

IV. B. – 1:102: Consumer contract for the lease of goods

For the purpose of this Part of Book IV, a consumer contract for the lease of

goods is a contract for the lease of goods in which the lessor is a business

and the lessee is a consumer

IV. A. – 6:108 Book IV

292

IV. B. – 1:103: Limits on derogation from conformity rights

in a consumer contract for lease

In the case of a consumer contract for the lease of goods, any contractual

term or agreement concluded with the lessor before a lack of conformity is

brought to the lessor’s attention which directly or indirectly waives or re-

stricts the rights resulting from the lessor’s obligation to ensure that the

goods conform to the contract is not binding on the consumer.

IV. B. – 1:104: Limits on derogation from rules on remedies

in a consumer contract for lease

(1) In the case of a consumer contract for the lease of goods the parties

may not, to the detriment of the consumer, exclude the application of

the rules on remedies in Book

III, Chapter 3, as modified in Chapters 3

and 6 of this Part, or derogate from or vary their effects.

(2) Notwithstanding paragraph (1), the parties may agree on a limitation

of the lessor’s liability for loss related to the lessee’s trade, business or

profession. Such a term may not, however, be invoked if it would be

contrary to good faith and fair dealing to do so.

Chapter 2:

Lease period

IV. B. – 2:101: Start of lease period

(1) The lease period starts:

(a) at the time determinable from the terms agreed by the par ties;

(b) if a time frame within which the lease period is to star t can be

deter mined, at any time chosen by the lessor within that time

frame unless the circumstances of the case indicate that the lessee

is to choose the time;

contract, at the request of either party.

(2) The lease period starts at the time when the lessee takes control of the

goods if this is earlier than the starting time under paragraph (1).

Part B.Lease of goods IV. B. – 2:101

293

IV. B. – 2:102: End of lease period

(1) A definite lease period ends at the time determinable from the terms

agreed by the parties. A definite lease period cannot be terminated

unilaterally beforehand by giving notice.

(2) An indefinite leas e period ends at the time specified in a notice of

termination given by either party.

(3) A notice under paragraph (2) is effective only if the time specified in

the notice of termination is in compliance with the terms agreed by the

parties or, if no period of notice can be determined from such terms, a

reasonable time after the notice has reached the other party.

IV. B. – 2:103: Tacit prolongation

(1) Where a contract for the lease of goods for a definite period is tacitly

prolonged under

III. – 1:111 (Tacit prolongation) and where the rent

prior to prolongation was calculated so as to take into account amor-

tisation of the cost of the goods by the lessee, the rent payable follow-

ing prolongation is limited to what is reasonable having regard to the

amount already paid.

(2) In the case of a consumer contract for the lease of goods the parties

may not, to the detriment of the consumer, exclude the application of

paragraph (1) or derogate from or vary its effects.

Chapter 3:

Obligations of the lessor

IV. B. – 3:101: Availability of the goods

(1) The lessor must make the goods available for the lessee’s use at the

start o f the lease period and at the place det ermined by

III. – 2: 101

(Place of performance).

(2) Notwithstanding the rule in the previous paragraph, the lessor must

make the goods available for the lessee’s use at the lessee’s place of

business or, as the case may be, at the lessee’s habitual residence if the

lessor, on the specifications of the lessee, acquires the goods from a

supplier selected by the lessee.

(3) The lessor must ensure that the goods remain available for the lessee’s

use throughout the lease period, free from any right or reasonably

based claim of a third party which prevents or is otherwise likely to

IV. B. – 2:102 Book IV

294

interfere with the lessee’s use of the goods in accordance wi th the

contract.

(4) The lessor’s obligations when the goods are lost or damaged during the

lease period are regulated by

IV. B. – 3:104 (Conformity of the goods

during the lease period).

IV. B. – 3:102: Conformity with the contract at the

start of the lease period

(1) The lessor must ensure that the goods conform with the contract at the

start of the lease period.

(2) The goods do not conform with the contract unless they:

(a) are of the quantity, quality and description required by the terms

agreed by the parties;

(b) are contained or packaged in the manner required by the terms

agreed by the parties;

other instructions required by the terms agreed by the parties; and

(d) comply with the following Article .

IV. B. – 3:103: Fitness for purpose, quali ties, packaging etc.

The goods do not conform with the contract unless they:

(a) are fit for any particular purpose made known to the lessor at the time

of the conclusion of the contract, except where the circumstances

show that the lessee did not rely, or that it was unreasonable for the

lessee to rely, on the lessor’s skill and judgement;

(b) are fit for the purposes for which goods of the same description would

ordinarily be used;

a sample or model;

(d) are contained or packaged in the manner usu al for such goods or,

where there is no such manner, in a manner adequate to preserve and

protect the goods;

(e) are supplied along with such accessories, installation instructions or

other instructions as the lessee could reasonably expect to receive; and

(f) possess such qualities and performance capabilities as the lessee may

reasonably expect.

Part B.Lease of goods IV. B. – 3:103

295

IV. B. – 3:104: Conformity of the goods during the lease period

(1) The lessor must ensure that throughout the lease period, and subject to

normal wear and tear, the goods:

(a) remain of the quantity, quality and description required by the con-

tract; and

(b) remain fit for the purposes of the lease, even where this requires

modifications to the goods.

(2) Paragraph (1) does not apply where the rent is calculated so as to take

into account the amortisation of the cost of the goods by the lessee.

(3) Nothing in paragraph (1) affects the lessee’s obligations under

IV.B.–

5:104 (Handling the goods in accordance with the contract) paragraph

(1)(c).

IV. B. – 3:105: Incorrect installation under a consumer contract

for the lease of goods

Where, under a consumer contract for the lease of goods, the goods are

incorrectly installed, any lack of conformity resulting from the incorrect

installation is regarded as a lack of conformity of the goods if:

(a) the goods were installed by the lessor or under the lessor’s responsi-

bility; or

(b) the goods were intended to be installed by the consumer and the in-

correct installation was due to shortcomings in the installation instruc-

tions.

IV. B. – 3:106: Obligations on return of the goods

The lessor must:

(a) take all the steps which may reasonably be expected in order to enable

the lessee to perform the obligation to return the goods; and

(b) accept return of the goods as required by the contract.

Chapter 4:

Remedies of the lessee: modifications of normal rules

IV. B. – 4:101: Lessee’s right to have lack of conformity remedied

(1) The lessee may have any lack of conformity of the goods remedied, and

recover any expenses reasonably incurred, to the extent that the lessee

IV. B. – 3:104 Book IV

296

is entitled to enforce specific performance according to III. – 3:302 (En-

forcement of non-monetary obligations).

(2) Nothing in the preceding paragraph affects the lessor’s right to cure the

lack of conformity according to Book

III, Chapter 3, Section 2.

IV. B. – 4:102: Rent reduction

(1) The lessee may reduce the rent for a period in which the value of the

lessor’s performance is decreased due to delay or lack of conformity, to

the extent that the reduction in value is not caused by the lessee.

(2) The rent may be reduced even for periods in which the lessor retains

the right to perform or cure according to

III. – 3:103 (Notice fixing ad-

ditional time for performance),

III. – 3: 202 (Cure by debtor: general

rules) paragraph (2) and

III. – 3:204 (Consequences of allowing debtor

opportunity to cure)).

(3) Notwithstandin g the rule in paragraph (1), the lessee may lose the

right to reduce the rent for a period according to

IV. B. – 4:103 (Noti-

fication of lack of conformity).

IV. B. – 4:103: Notification of lack of conformity

(1) The lessee cannot resort to remedies for lack of conformity unless no-

tification is given to the lessor. Where notification is not timely, the

lack of conformity is disregarded for a period corresponding to the un-

reasonable delay. Notification is always considered timely where it is

given within a reasonable time after the lessee has become, or could

reasonably be expected to have become, aware of the lack of confor-

mity.

(2) When the lease period has ended the rules in

III. – 3:107 (Failure to

notify non-conformity) apply.

(3) The lessor is not entitled to rely on the provisions of paragraphs (1)

and (2) if the lack of conformity relates to facts of which the lessor

knew or could reasonably be expected to have known and which the

lessor did not disclose to the lessee.

IV. B. – 4:104: Remedies to be directed towards

supplier of the goods

(1) This Article applies where:

(a) the lessor, on the specifications of the lessee, acquires the goods

from a supplier selected by the lessee;

Part B.Lease of goods IV. B. – 4:104

297

(b) the lessee, in providing the specifications for the goods and select-

ing the supplier, does not rely primarily on the skill and judgement

of the lessor;

(d) the supplier’s obligations under the supply contract are owed, by

law or by contract, to the lessee as a party to the supply contract or

as if the lessee were a party to that contract; and

(e) the supplier’s obligations owed to the lessee cannot be varied with-

out the consent of the lessee.

(2) The lessee has no right to enforce performance by the lessor, to reduce

the rent or to damages or interest from the lessor, for late delivery or for

lack of conformity, unless non-performance results from an act or omis-

sion of the lessor.

(3) The provision in paragraph (2) does not preclude:

(a) any right of the lessee to reject the goods, to terminate the lease

under Book

III, Chapter 3, Section 5 (Termination) or, prior to ac-

ceptance of the goods, to withhold rent to the extent that t he

lessee could have resorted to these remedies as a party to the sup-

ply contract; or

(b) any remedy of the lessee where a third party right or reasonably

based claim prevents, or is otherwise likely to interfere with, the

lessee’s continuous use of the goods in accordance with the con-

tract.

(4) The lessee cannot terminate the lessee’s contractual relationship with

the supplier under the supply contract without the consent of the les-

sor.

Chapter 5:

Obligations of the lessee

IV. B. – 5:101: Obligation to pay rent

(1) The lessee must pay the rent.

(2) Where the rent cannot be determined from the terms agreed by the

parties, from any other applicable rule of law or from usages or prac-

tices, it is a monetary sum determined in accordance with

II. – 9:104

(Determination of price).

(3) The rent accrues from the start of the lease period.

IV. B. – 5:101 Book IV

298

IV. B. – 5:102: Time for payment

Rent is payable:

(a) at the end of each period for which the rent is agreed;

(b) if the rent is not agreed for certain periods, at the expiry of a definite

lease period; or

periods, at the end of reasonable intervals.

IV. B. – 5:103: Acceptance of goods

The lessee must:

(a) take all steps reasonably to be expected in order to enable the lessor to

perform the obligation to make the goods available at the start of the

lease period; and

(b) take control of the goods as required by the contract.

IV. B. – 5:104: Handling the goods in accordance with the contract

(1) The lessee must:

(a) observe the requirements and restrictions which follow from the

terms agreed by the parties;

(b) handle the goods with the care which can reasonably be expected

in the circumstances, taking into account the duration of the lease

period, the purpose of the lease and the character of the goods;

and

necessary in order to preserve the normal standard and functioning

of the goods, in so far as is reasonable, taking into account the

duration of the lease period, the purpose of the lease and the char-

acter of the goods.

(2) Where the rent is calculated so as to take into account the amortisation

of the cost of the goods by the lessee, the lessee must, during the lease

period, keep the goods in the condition they were in at the start of the

lease period, subject to any wear and tear which is normal for that kind

of goods.

IV. B. – 5:105: Intervention to avoid danger or

damage to the goods

(1) The lessee must take such measures for the maintenance and repair of

the goods as would ordinarily be carried out by the lessor, if the mea-

Part B.Lease of goods IV. B. – 5:105

299

sures are necessary to avoid danger or damage to the goods, and it is

impossible or impracticable for the lessor, but not for the lessee, to

ensure these measures are taken.

(2) The lessee has a right against the lessor to indemnification or, as the

case may be, reimbursement in respect of an obligation or expenditure

(whether of money or other assets) in so far as reasonably incurred for

the purposes of the measures.

IV. B. – 5:106: Compensation for maintenance and improvements

(1) The lessee has no righ t to compensation for maintenance of or im-

provements to the goods.

(2) Paragraph (1) does not exclude or restrict any right the lessee may have

to damages or any right the lessee may have under

IV. B. – 4:101 (Les-

see’s right to have lack of conformity remedied),

IV. B. – 5:105 (Inter-

vention to avoid danger or damage to the goods) or Book

VIII (Acqui-

sition and loss of ownership of goods).

IV. B. – 5:107: Obligation to inform

(1) The lessee must inform the lessor of any damage or danger to the goods,

and of any right or claim of a third party, if these circumstances would

normally give rise to a need for action on the part of the lessor.

(2) The lessee must inform the lessor under paragraph (1) within a reason-

able time after the lessee first becomes aware of the circumstances and

their character.

(3) The lessee is presumed to be aware of the circumstances and their

character if the lessee could reasonably be expected to be so aware.

IV. B. – 5:108: Repairs and inspections of the lessor

(1) The lessee, if given reasonable notice where possible, must tolerate the

carrying out by the lessor of repair work and other work on the goods

which is necessary in order to preserve the goods, remove defects and

prevent danger. This obligation does not preclude the lessee from re-

ducing the rent in accordance with

IV. B. – 4:102 (Rent reduction).

(2) The lessee must tolerate the carrying out of work on the goods which

does not fall under paragraph (1), unless there is good reason to object.

IV. B. – 5:106 Book IV

300

(3) The lessee must tolerate inspection of the goods for the purposes in-

dicated in paragraph (1). The lessee must also accept inspection of the

goods by a prospective lessee during a reasonable period prior to expiry

of the lease.

IV. B. – 5:109: Obligation to return the goods

At the end of the lease period the lessee must return the goods to the place

where they were made available for the lessee.

Chapter 6:

Remedies of the lessor: modifications of normal rules

IV. B. – 6:101: Limitation of right to enforce payment of future rent

(1) Where the lessee has taken control of the goods, the lessor may not

enforce payment of future rent if the lessee wishes to return the goods

and it would be reasonable for the lessor to accept their return.

(2) The fact that a right to enforce specific performance is excluded under

paragraph (1) does not preclude a claim for damages.

IV. B. – 6:102: Reduction of liability in consumer contract

for the lease of goods

(1) In the case of a consumer contract for the lease of goods, the lessor’s

right to damages may be reduced to the extent that the loss is mitigated

by insurance covering the goods, or to the extent that loss would have

been mitigated by insurance, in circumstances where it is reasonable to

expect the lessor to take out such insurance.

(2) The rule in paragraph (1) applies in addition to the rules in Book

III,

Chapter 3, Section 7.

Chapter 7:

New parties and sublease

IV. B. – 7:101: Change in ownership and substitution of lessor

(1) Where ownership passes from the lessor to a new owner, the new

owner of the goods is substituted as a party to the lease if the lessee

has possession of the goods at the time ownership passes. The former

Part B.Lease of goods IV. B. – 7:101

301

owner remains subsidiarily liable for the non-performance of the ob-

ligations under the contract for lease as a personal security provider.

(2) A reversal of the passing of ownership puts the par ties back in their

original positions except as regards performance already rendered at the

time of reversal.

(3) The rules in the preceding paragraphs apply accordingly where the les-

sor has acted as holder of a right other than ownership.

IV. B. – 7:102: Assignment of lessee’s rights to performance

The lessee’s rig hts to performance of the les sor’s obligations under the

contract for lease cannot be assigned without the lessor’s consent.

IV. B. – 7:103: Sublease

(1) The lessee may not sublease the goods without the lessor’s consent.

(2) If consent to a sublease is withheld without good reason, the lessee

may terminate the lease by giving a reasonable period of notice.

(3) In the case of a sublease, the lessee remains liable for the performance

of the lessee’s obligations under the contract for lease.

Part C.

Services

Chapter 1:

General provisions

IV. C. – 1:101: Scope

(1) This Part of Book IV applies:

(a) to contracts under which one party, the service provider, under-

takes to supply a service to the other party, the client, in exchange

for a price; and

(b) with appropriate adaptations, to contracts under which the service

provider undertakes to supply a service to the client otherwise than

in exchange for a price.

(2) It applies in particular to contracts for construction, processing, sto-

rage, design, information or advice, and treatment.

IV. B. – 7:102 Book IV

302

IV. C. – 1:102: Exclusions

This Part does not apply to contracts in so far as they are for transport,

insurance, the provision of a security or the supply of a financial product or

a financial service.

IV. C. – 1:103: Priority rules

In the case of any conflict:

(a) the rules in Part

IV. D. (Mandate) and Part IV. E. (Commercial agency,

franchise and distributorship) prevail over the rules in this Part; and

(b) the rules in Chapters 3 to 8 of this Part prevail over the rules in Chapter

2 of this Part.

Chapter 2:

Rules applying to service contracts in general

IV. C. – 2:101: Price

Where the service provider is a business, a price is payable unless the cir-

cumstances indicate otherwise.

IV. C. – 2:102: Pre-contractual duties to warn

(1) The service provider is under a pre-contractual duty to warn the client if

the service provider becomes aware of a risk that the service requested:

(a) may not achieve the result stated or envisaged by the client;

(b) may damage other interests of the client; or

expected by the client.

(2) The duty to warn in paragraph (1) does not apply if the client:

(a) already knows of the risks referred to in paragraph (1); or

(b) could reasonably be expected to know of them.

(3) If a risk referred to in paragraph (1) materialises and the service provider

was in breach of the duty to warn of it, a subsequent change of the

service by the service provider under

IV. C. – 2:109 (Unilateral variation

of the service contract) which is based on the materialisation of the risk

is of no effect unless the service provider proves that the client, if duly

warned, would have entered into a contract anyway. This is without

prejudice to any other remedies, including remedies for mistake, which

the client may have.

Part C.Services IV. C. – 2:102

303

(4) The client is under a pre-contractual duty to warn the service provider if

the client becomes aware of unusual facts which are likely to cause the

service to become more expensive or time-consuming than expected

by the service provider or to cause any danger to the service provider or

others when performing the service.

(5) If the facts referred to under paragraph (4) occur and the service pro-

vider was not duly warned, the service provider is entitled to:

(a) damages for th e loss the service provider sustained as a conse-

quence of the failure to warn; and

(b) an adjustment of the time allowed for performance of the service.

(6) For the purpose of paragraph (1), the service provider is presumed to be

aware of the risks mentioned if they should be obvious from all the

facts and circumstances known to the service provider, considering the

information which the service provider must collect about the result

stated or envisaged by the client and the circumstances in which the

service is to be carried out.

(7) For the purpose of paragraph (2)(b) the client cannot reasonably be

expected to know of a risk merely because the client was competent, or

was advised by others who were competent, in the relevant field, un-

less such other person acted as the agent of the client, in which case

II. – 1:105 (Imputed knowledge etc.) applies.

(8) For the purpose of paragraph (4), the client is presumed to be aware of

the facts mentioned if they should be obvious from all the facts and

circumstances known to the client without investigation.

IV. C. – 2:103: Obligation to co-operate

(1) The obligation of co-operation requires in particular:

(a) the client to answer reasonable requests by the service provider for

information in so far as this may reasonably be considered neces-

sary to enable the service provider to perform the obligations under

the contract;

(b) the client to give directions regarding the performance of the ser-

vice in so far as this may reasonably be considered necessary to

enable the service provider to perform the obligations under the

contract;

IV. C. – 2:103 Book IV

304

obtain these at such time as may reasonably be considered neces-

sary to enable the service provider to perform the obligations under

the contract;

(d) the service provider to give the client a reasonable opportunity to

determine whether the service provider is performing the obliga-

tions under the contract; and

(e) the parties to co-ordinate their respective efforts in so far as this

may reasonably be considered necessary to perform their respec-

tive obligations under the contract.

(2) If the client fails to perform the obligations under paragraph (1)(a) or

(b), the service provider may either withhold performance or base per-

formance on the expectations, preferences and pri orities the client

could reasonably be expected to have, given the information and di-

rections which have been gathered, provided that the client is warned

in accordance with

IV. C. – 2:108 (Contractual obligation of the service

provider to warn).

(3) If the client fails to perform the obligations under paragraph (1) caus-

ing the service to become more expensive or to take more time than

agreed on in the contract, the service provider is entitled to:

(a) damages for th e loss the service provider sustained as a conse-

quence of the non-performance; and

(b) an adjustment of the time allowed for supplying the service.

IV. C. – 2:104: Subcontractors, tools and materials

(1) The service provider may subcontract the performance of the service in

whole or in part without the client’s consent, unless personal perform-

ance is required by the contract.

(2) Any subcontractor so engaged by the service provider must be of ade-

quate competence.

(3) The service provider must ensure that any tools and materials used for

the performance of the service are in conformity with the contract and

the applicable statutory rules, and fit to achieve the particular purpose

for which they are to be used.

(4) In so far as subcontractors are nominated by the client or tools and

materials are provided by the client, the responsibility of the service

provider is governed by

IV. C. – 2:107 (Directions of the client) and

IV. C. – 2:108 (Contractual obligation of the service provider to warn).

Part C.Services IV. C. – 2:104

305

IV. C. – 2:105: Obligation of skill and care

(1) The service provider must perform the service:

(a) with the care and skill which a reasonable service provider would

exercise under the circumstances; and

(b) in conformity with any statutory or other binding legal rules which

are applicable to the service.

(2) If the service provider professes a higher standard of care and skill the

provider must exercise that care and skill.

(3) If the service provider is, or purports to be, a member of a group of

professional service providers for which standards have been set by a

relevant authority or by that group itself, the service provider must

exercise the care and skill expressed in those standards.

(4) In determining the care and skill the client is entitled to expect, regard

is to be had, among other things, to:

(a) the nature, the magnitude, the frequency and the foreseeability of

the risks involved in the performance of the service for the client;

(b) if damage has occurred, the costs of any precautions which would

have prevented that damage or similar damage from occurring;

(d) whether a price is payable and, if one is payable, its amount; and

(e) the time reasonably available for the performance of the service.

(5) The obligations under this Article require in particular the service pro-

vider to take reasonable precautions in order to prevent the occurrence

of damage as a consequence of the performance of the service.

IV. C. – 2:106: Obligation to achieve result

(1) The supplier of a service must achieve the specific result stated or en-

visaged by the client at the time of th e conclusion of the contract,

provided that in the case of a result envisaged but not stated:

(a) the result envisaged was one which the client could reasonably be

expected to have envisaged; and

(b) the client had no reason to believe that there was a substantial risk

that the result would not be achieved by the service.

(2) In so far as ownership of anything is transferred to the client under the

service contract, it must be transferred free from any right or reasonably

based claim of a third party.

IV. A. – 2:305 (Third party rights or claims

in general) and

IV. A. – 2:306 (Third party rights or claims based on

IV. C. – 2:105 Book IV

306

industrial property or other intellectual property) apply with any appro-

priate adaptations.

IV. C. – 2:107: Directions of the client

(1) The service provider must follow all timely directions of the client re-

garding the performance of the service, provided that the directions:

(a) are part of the contract itself or are specified in any document to

which the contract refers; or

(b) result from the realisation of choices left to the client by the con-

tract; or

ties.

(2) If non-performance of one or more of the obligations of the service

provider under

IV. C. – 2:105 (Obligation of skill and care) or IV.C.–

2:106 (Obligation to achieve result) is the consequence of following a

direction which the service provider is obliged to follow under para-

graph (1), the service provider is not liable under those Articles, pro-

vided that the client was duly warned under

IV. C. – 2:108 (Contractual

obligation of the service provider to warn).

(3) If the service provider perceives a direction falling under paragraph (1)

to be a variation of the contract under

IV. C. – 2:109 (Unilateral varia-

tion of the service contract) the service provider must warn the client

accordingly. Unless the client then revokes the direction without un-

due delay, the service provider must follow the direction and the direc-

tion has effect as a variation of the contract.

IV. C. – 2:108: Contractual obligation of the

service provider to warn

(1) The service provider must warn the client if the service provider be-

comes aware of a risk that the service requested:

(a) may not achieve the result stated or envisaged by the client at the

time of conclusion of the contract;

(b) may damage other interests of the client; or

the contract

either as a result of following information or directions given by the

client or collected in preparation for performance, or as a result of the

occurrence of any other risk.

Part C.Services IV. C. – 2:108

307

(2) The service provider must take reasonable measures to ensure that the

client understands the content of the warning.

(3) The obligation to warn in paragraph (1) does not apply if the client:

(a) already knows of the risks referred to in paragraph (1); or

(b) could reasonably be expected to know of them.

(4) If a risk referred to in paragraph (1) materialises and the service provider

did not perform the obligation to warn the client of it, a notice of

variation by the service provider under

IV. C. – 2:109 (Unilateral varia-

tion of the service contract) based on the materialisation of that risk is

without effect.

(5) For the purpose of paragraph (1), the service provider is presumed to be

aware of the risks mentioned if they should be obvious from all the

facts and circumstances known to the service provider without inves-

tigation.

(6) For the purpose of paragraph (3)(b), the client cannot reasonably be

expected to know of a risk merely because the client was competent, or

was advised by others who were competent, in the relevant field, un-

less such other person acted as the agent of the client, in which case

II. – 1:105 (Imputed knowledge etc.) applies.

IV. C. – 2:109: Unilateral variation of the service contract

(1) Without prejudice to the client’s right to terminate under IV. C. – 2:111

(Client’s right to terminate), either party may, by notice to the other

party, change the service to be provided, if such a change is reasonable

taking into account:

(a) the result to be achieved;

(b) the interests of the client;

(d) the circumstances at the time of the change.

(2) A change is regarded as reasonable only if it is:

(a) necessary in order to enable the service provider to act in accord-

ance with

IV. C. – 2:105 (Obligation of skill and care) or, as th e

case may be,

IV. C. – 2:106 (Obligation to achieve result);

(b) the consequence of a direction given in accordance with paragraph

(1) of

IV. C. – 2:107 (Directions of the client) and not revoked

without undue delay after receipt of a warning in accordance with

paragraph (3) of that Article;

IV. C. – 2:109 Book IV

308

IV. C. – 2:108 (Contractual obligation of the service provider to

warn); or

(d) required by a change of circumstances which would justify a var-

iation of the service provider’s obligations under

III. – 1:110 (Var-

iation or termination by court on a change of circumstances).

(3) Any additional price due as a result of the change has to be reasonable

and is to be determined using the same methods of calculation as were

used to establish the original price for the service.

(4) In so far as the service is reduced, the loss of profit, the expenses saved

and any possibility that the service provider may be able to use the

released capacity for other purposes are to be taken into account in the

calculation of the price due as a result of the change.

(5) A change of the service may lead to an adjustment of the time of per-

formance proportionate to the extra work required in relation to the

work originally required for the performance of the service and the time

span determined for per formance of the service.

IV. C. – 2:110: Client’s obligation to notify anticipated

non-conformity

(1) The client must notify the service provider if the client becomes aware

during the period for performance of the service that the service pro-

vider will fail to perform the obligation under

IV. C. – 2:106 (Obligation

to achieve result).

(2) The client is presumed to be so aware if from all the facts and circum-

stances known to the client without investigation the client has reason

to be so aware.

(3) If a non-performance of the obligation under paragraph (1) causes the

service to become more expensive or to take more time than agreed on

in the contract, the ser vice provider is entitled to:

(a) damages for the loss the service provider sustains as a conse-

quence of that failure; and

(b) an adjustment of the time allowed for performance of the service.

Part C.Services IV. C. – 2:110

309

IV. C. – 2:111: Client’s right to terminate

(1) The client may terminate the contractual relationship at any time by

giving notice to the service provider.

(2) The effects of termination are governed by

III. – 1:109 (Variation or

termination by notice) paragraph (3).

(3) When the client was justified in terminating the relationship no dam-

ages are payable for so doing.

(4) When the client was not justified in terminating the relationship, the

termi nation is nevertheless effective but, the service provider has a

right to damages in accordance with the rules in Book

III.

(5) For the purposes of this Article, the client is justified in terminating the

relationship if the client:

(a) was entitled to terminate the relationship under the express terms

of the contract and observed any requirements laid down in the

contract for doing so;

(b) was entitled to terminate the relationship under Book

III, Chapter 3,

Section 5 (Termination); or

III. – 1:109 (Var-

iation or termination by notice) paragraph (2) and gave a reason-

able period of notice as required by that provision.

Chapter 3:

Construction

IV. C. – 3:101: Scope

(1) This Chapter applies to contracts under which one party, the construc-

tor, undertakes to construct a building or other immovable structure, or

to materially alter an existing building or other immovable structure,

following a design provided by the client.

(2) It applies with appropriate adaptations to contracts under which the

constructor undertakes:

(a) to construct a movable or incorporeal thing, following a design

provided by the client; or

(b) to construct a building or other immovable structure, to materially

alter an existing building or other immovable structure, or to con-

struct a movable or incorporeal thing, following a design provided

by the constructor.

IV. C. – 2:111 Book IV

310

IV. C. – 3:102: Obligation of client to co-operate

The obligation of co-operation requires in particular the client to:

(a) provide access to the site where the construction has to take place in so

far as this may reasonably be considered necessary to enable the con-

structor to perform the obligations under the contract; and

(b) provide the components, materials and tools, in so far as they must be

provided by the client, at such time as may reasonably be considered

necessary to enable the constructor to perform the obligations under

the contract.

IV. C. – 3:103: Obligation to prevent damage to structure

The constructor must take reasonable precautions in order to prevent any

damage to the structure.

IV. C. – 3:104: Conformity

(1) The constructor must ensure that the structure is of the quality and

description required by the contract. Where more than one structure is

to be made, the quantity also must be in conformity with the contract.

(2) The structure does not conform to the contract unless it is:

(a) fit for any particular purpose expressly or impliedly made known to

the constructor at the time of the conclusion of the contract or at

the time of any variation in accordance with

IV. C. – 2:109 (Uni-

lateral variation of the service contract) per taining to the issue in

question; and

(b) fit for the particular purpose or purposes for which a structure of

the same description would ordinarily be used.

(3) The client is not entitled to invoke a remedy for non-conformity if a

direction provided by the client under

IV. C. – 2:107 (Directions of the

client) is the cause of the non-conformity and the constructor per-

formed the obligation to warn pursuant to

IV. C. – 2:108 (Contractual

obligation of the service provider to warn).

IV. C. – 3:105: Inspection, supervision and acceptance

(1) The client may inspect or supervise the tools and materials used in the

construction process, the process o f construction and the resulting

structure in a reasonable manner and at any reasonable time, but is

not bound to do so.

Part C.Services IV. C. – 3:105

311

(2) If the parties agree that the cons tructor has to present certain ele-

ments of the tools and materials used, the p rocess or the resulting

structure to the client for acceptance, the constructor may not pro-

ceed with the construction before having been allowed by the client

to do so.

(3) Absence of, or inadequate, inspection, supervision or acceptance does

not relieve the constructor wholly or partially from liability. This rule

also applies when the client is under a contractual obligation to in-

spect, supervise or accept the structure or the construction of it.

IV. C. – 3:106: Handing-over of the structure

(1) If the constructor regards the structure, or any part of it which is fit for

independent use, as sufficiently completed and wishes to transfer con-

trol over it to the client, the client must accept such control within a

reasonable time after being notified. The client may refuse to accept the

control when the structure, or the relevant part of it, does not conform

to the contract and such non-conformity makes it unfit for use.

(2) Acceptance by the client of the control over the structure does not

relieve the constructor wholly or partially from liability. This rule also

applies when the client is under a contractual obligation to inspect,

supervise or accept the structure or the construction of it.

(3) This Article does not apply if, under the contract, control is not to be

transferred to the client.

IV. C. – 3:107: Payment of the price

(1) The price or a proportionate part of it is payable when the constructor

transfers the control of the structure or a part of it to the client in ac-

cordance with the preceding Article.

(2) However, where work remains to be done under the contract on the

structure or relevant part of it after such transfer the client may with-

hold such part of the price as is reasonable until the work is completed.

(3) If, under the contract, control is not to be transferred to the client, the

price is payable when the work has been completed, the constructor

has so informed the client and the client has had a chance to inspect

the structure.

IV. C. – 3:106 Book IV

312

IV. C. – 3:108: Risks

(1) This Article applies if the structure is destroyed or damaged due to an

event which the constructor could not have avoided or overcome and

the constructor cannot be held accountable for the destruction or dam-

age.

(2) In this Article the “relevant time” is:

(a) where the control of the structure is to be transferred to the client,

the time when such control has been, or should have been, trans-

ferred in accordance with

IV. C. – 3:106 (Handing-over of the struc-

ture);

(b) in other cases, the time when the work has been completed and

the constructor has so informed the client.

(3) When the situation mentioned in paragraph (1) has been caused by an

event occurring before the relevant time and it is still possible to per-

form:

(a) the constructor still has to perform or, as the case may be, perform

again;

(b) the client is only obliged to pay for the constructor’s performance

under (a);

(6) of

IV. C. – 2:109 (Unilateral variation of the service contract);

(d) the rules of

III. – 3:104 (Excuse due to an impediment) may apply

to the constructor’s original performance; and

(e) the constructor is not obliged to compensate the client for losses

to materials provided by the client.

(4) When the situation mentioned in paragraph (1) has been caused by an

event occurring before the relevant time, and it is no longer possible to

perform:

(a) the client does not have to pay for the service rendered;

(b) the rules of

III. – 3:104 (Excuse due to an impediment) may apply

to the constructor’s performance; and

to materials provided by the client, but is obliged to return the

structure or what remains of it to the client.

(5) When the situation mentioned in paragraph (1) has been caused by an

event occurring after the relevant time:

(a) the constructor does not have to perform again; and

(b) the client remains obliged to pay the price.

Part C.Services IV. C. – 3:108

313

Chapter 4:

Processing

IV. C. – 4:101: Scope

(1) This Chapter applies to contracts under which one party, the processor,

undertakes to perform a service on an existing movable or incorporeal

thing or to an immovable structure for another par ty, the client. It does

not, however, apply to construction work on an existing building or

other immovable structure.

(2) This Chapter applies in particular to contracts under which the proces-

sor undertakes to repair, maintain or clean an existing movable or in-

corporeal thing or immovable structure.

IV. C. – 4:102: Obligation of client to co-operate

The obligation to co-operate requires in particular the client to:

(a) hand over the thing or to give the control of it to the processor, or to

give access to the site where the service is to be performed in so far as

may reasonably be considered necessary to enable the pr ocessor to

perform the obligations under the contract; and

(b) in so far as they must be provided by the client, provide the compo-

nents, materials and tools in time to enable the processor to perform

the obligations under the contract.

IV. C. – 4:103: Obligation to prevent damage to

thing being processed

The processor must take reasonable precautions in order to prevent any

damage to the thing being processed.

IV. C. – 4:104: Inspection and supervision

(1) If the service is to be performed at a site provided by the client, the

client may inspect or supervise the tools and material used, the per-

formance of the service and the thing on which the service is per-

formed in a reasonable manner and at any reasonable time, but is not

bound to do so.

(2) Absence of, or inadequate inspection or supervision does not relieve

the processor wholly or partially from liability. This rule also applies

IV. C. – 4:101 Book IV

314

when the client is under a contractual obligation to accept, inspect or

supervise the processing of the thing.

IV. C. – 4:105: Return of the thing processed

(1) If the processor regards the service as sufficiently co mpleted and

wishes to return the thing or the control of it to the client, the client

must accept such return or control within a reasonable time after being

notified. The client may refuse to accept the return or control when the

thing is not fit for use in accordance with the particular purpose for

which the client had the service performed, provided that such purpose

was made known to the processor or that the processor otherwise has

reason to know of it.

(2) The processor must return the thing or the control of it within a reason-

able time after being so requested by the client.

(3) Acceptance by the client of the return of the thing or the control of it

does not relieve the processor wholly or partially from liability for non-

performance.

(4) If, by virtue of the rules on the acquisition of property, the processor

has become the owner of the thing, or a share in it, as a consequence

of the per formance of the obligations under the contract, the processor

must transfer ownership of the thing or share when the thing is re-

turned.

IV. C. – 4:106: Payment of the price

(1) The price is payable when the processor transfers the thing or the con-

trol of it to the client in accordance with

IV. C. – 4:105 (Return of the

thing processed) or the client, without being entitled to do so, refuses

to accept the return of the thing.

(2) However, where work remains to be done under the contract on the

thing after such transfer or refusal the client may withhold such part of

the price as is reasonable until the work is completed.

(3) If, under the contract, the thing or the control of it is not to be trans-

ferred to the client, the price is payable when the work has been com-

pleted and the processor has so informed the client.

Part C.Services IV. C. – 4:106

315

IV. C. – 4:107: Risks

(1) This Article applies if the thing is destroyed or damaged due to an

event which the processor could not have avoided or overcome and

the processor cannot be held accountable for the destruction or dam-

age.

(2) If, prior to the event mentioned in paragraph (1), the processor had

indicated that the processor regarded the service as sufficiently com-

pleted and that the processor wished to return the thing or the control

of it to the client:

(a) the processor is not required to per form again; and

(b) the client must pay the price.

The price is due when the processor returns the remains of the thing, if

any, or the client indicates that the client does not want the remains. In

the latter case, the processor may dispose of the remains at the client’s

expense. This provision does not apply if the client was entitled to

refuse the return of the thing under paragraph (1) of

IV. C. – 4:105

(Return of the thing processed).

(3) If the parties had agreed that the processor would be paid for each

period which has elapsed, the client is obliged to pay the price for each

period which has elapsed before the event mentioned in paragraph (1)

occurred.

(4) If, after the event mentioned in paragraph (1), performance of the ob-

ligations under the contract is still possible for the processor:

(a) the processor still has to perform or, as the case may be, perform

again;

(b) the client is only obliged to pay for the processor’s performance

under (a); the processor’s entitlement to a price under paragraph

(3) is not affected by this provision;

processor has to incur in order to acquire materials replacing the

materials supplied by the client, unless the client on being so re-

quested by the processor supplies these materials; and

(d) if need be, the time for performance is extended in accordance with

paragraph (6) of

IV. C. – 2:109 (Unilateral variation of the service

contract).

This paragraph is without prejudice to the client’s right to terminate the

contractual relationship under

IV. C. – 2:111 (Client’s right to termi-

nate).

IV. C. – 4:107 Book IV

316

(5) If, in the situation mentioned in paragraph (1), performance of the

obligations under the contract is no longer possible for the processor:

(a) the client does not have to pay for the service rendered; the pro-

cessor’s entitlement to a price under paragraph (3) is not affected

by this provision; and

(b) the processor is obliged to return to the client the thing and the

materials supplied by the client or what remains of them, unless

the client indicates that the client does not want the remains. In

the latter case, the processor may dispose of the remains at the

client’s expense.

IV. C. – 4:108: Limitation of liability

In a contract between two businesses, a term restricting the processor’s

liability for non-performance to the value of the thing, had the service been

performed correctly, is presumed to be fair for the purposes of

II. – 9:405

(Meaning of “unfair” in contracts between businesses) except to the extent

that it restricts liability for damage caused intentionally or by way of grossly

negligent behaviour on the part of the processor or any person for whose

actions the processor is responsible.

Chapter 5:

Storage

IV. C. – 5:101: Scope

(1) This Chapter applies to contracts under which one party, the storer,

undertakes to store a movable or incorporeal thing for another party,

the client.

(2) This Chapter does not apply to the storage of:

(a) immovable structures;

(b) movable or incorporeal things during transportation; and

paragraph (7) of

IV. C. – 5:110 (L iability of the hotel-keeper)) or

rights.

Part C.Services IV. C. – 5:101

317

IV. C. – 5:102: Storage place and subcontractors

(1) The storer, in so far as the storer provides the storage place, must pro-

vide a place fit for storing the thing in such a manner that the thing can

be returned in the condition the client may expect.

(2) The storer may not subcontract the performance of the service without

the client’s consent.

IV. C. – 5:103: Protection and use of the thing stored

(1) The storer must take reasonable precautions in order to prevent unne-

cessary deterioration, decay or depreciation of the thing stored.

(2) The storer may use the thing handed over for storage only if the client

has agreed to such use.

IV. C. – 5:104: Return of the thing stored

(1) Without prejudice to any other obligation to return the thing, the storer

must return the thing at the agreed time or, where the contractual re-

lationship is terminated before th e agreed time, within a reasonable

time after being so requested by the client.

(2) The client must accept the return of the thing when the storage ob-

ligation comes to an end and when acceptance of return is properly

requested by the storer.

(3) Acceptance by the client of the return of the thing does not relieve the

storer wholly or partially from liability for non-performance.

(4) If the client fails to accept the return of the thing at the time provided

under paragraph (2), the storer has the right to sell the thing in accord-

ance with

III. – 2:111 (Property not accepted), provided that the storer

has given the client reasonable warning of the storer’s intention to do

so.

(5) If, during storage, the thing bears fruit, the storer must hand this fruit

over when the thing is returned to the client.

(6) If, by virtue of the rules on the acquisition of ownership, the storer has

become the owner of the thing, the storer must return a thing of the

same kind and the same quality and quantity and transfer ownership of

that thing. This Article applies with appropri ate ad aptations to the

substituted thing.

(7) This Article applies with appropriate adaptations if a third party who

has the right or authority to receive the thing requests its return.

IV. C. – 5:102 Book IV

318

IV. C. – 5:105: Conformity

(1) The storage of the thing does not conform with the contract unless the

thing is returned in the same condition as it was in when handed over

to the storer.

(2) If, given the nature of the thing or the contract, it cannot reasonably be

expected that the thing is returned in the same condition, the storage

of the thing does not conform with the contract if the thing is not

returned in such condition as the client could reasonably expect.

(3) If, given the nature of the thing or the contract, it cannot reasonably be

expected that the same thing is returned, the storage of the thing does

not conform with the contract if the thing which is returned is not in

the same condition as the thing which was handed over for storage, or

if it is not of the same kind, quality and quantity, or if ownership of the

thing is not transferred in accordance with paragraph (6) of

IV.C.–

5:104 (Return of the thing stored).

IV. C. – 5:106: Payment of the price

(1) The price is payable at the time when the thing is returned to the client

in accordance with

IV. C. – 5:104 (Return of the thing stored) or the

client, without being entitled to do so, refuses to accept the return of

the thing.

(2) The storer may withhold the thing until the client pays the price.

III.–

3:401 (Right to withhold performance of reciprocal obligation) applies

accordingly.

IV. C. – 5:107: Post-storage obligation to inform

After the ending of the storage, th e storer must inform the client of:

(a) any damage which has occurred to the thing during storage; and

(b) the necessary precautions which the client must take before using or

transporting the thing, unless the client could reasonably be expected

to be aware of the need for such precautions.

IV. C. – 5:108: Risks

(1) This Article applies if the thing is destroyed or damaged due to an event

which the storer could not have avoided or overcome and if the storer

cannot be held accountable for the destruction or damage.

(2) If, prior to the event, the storer had notified the client that the client

was required to accept the return of the thing, the client must pay the

Part C.Services IV. C. – 5:108

319

price. The price is due when the storer returns the remains of the thing,

if any, or the client indicates to the storer that the client does not want

those remains.

(3) If, prior to the event, the storer had not notified the client that the

client was required to accept the return of the thing:

(a) if the parties had agreed that the storer would be paid for each

period of time which has elapsed, the client must pay the price

for each period which has elapsed before the event occurred;

(b) if further performance of the obligations under the contract is still

possible for the storer, the storer is required to continue perform-

ance, without prejudice to the client’s right to terminate the con-

tractual relationship under

IV. C. – 2:111 (Client’s right to termi-

nate);

possible for the storer the client does not have to pay for the ser-

vice rendered except to the extent that the storer is entitled to a

price under subparagraph (a); and the storer must return to the

client the remains of the thing unless the client indicates that the

client does not want those remains.

(4) If the client indicates to the storer that the client does not want the

remains of the thing, the storer may dispose of the remains at the

client’s expense.

IV. C. – 5:109: Limitation of liability

In a contract between two businesses, a term restricting the storer’s liability

for non-performance to the value of the thing is presumed to be fair for the

purposes of

II. – 9:405 (Meaning of “unfair” in contracts between busines-

ses), except to the extent that it restricts liability for damage caused inten-

tionally or by way of grossly negligent conduct on the part of the storer or

any person for whose actions the storer is responsible.

IV. C. – 5:110: Liability of the hotel-keeper

(1) A hotel-keeper is liable as a storer for any damage to, or destruction or

loss of, a thing brought to the hotel by any guest who stays at the hotel

and has sleeping accommodation there.

(2) For the purposes of paragraph (1) a thing is regarded as brought to the

hotel:

IV. C. – 5:109 Book IV

320

(a) if it is at the hotel during the time when the guest has the use of

sleeping accommodation there;

(b) if the hotel-keeper or a person for whose actions the hotel-keeper is

responsible takes charge of it outside the hotel during the period

for which the guest has the use of the sleeping accommodation at

the hotel; or

responsible takes charge of it whether at the hotel or outside it

during a reasonable period preceding or following the time when

the guest has the use of sleeping accommodation at the hotel.

(3) The hotel-keeper is not liable in so far as the damage, destruction or

loss is caused by:

(a) a guest or any person accompanying, employed by or visiting the

guest;

(b) an impediment beyond the hotel-keeper’s control; or

(4) A term excluding or limiting the liability of the hotel-keeper is unfair for

the purposes of Book

II, Chapter 9, Section 4 if it excludes or limits

liability in a case where the hotel-keeper, or a person for whose actions

the hotel-keeper is responsible, causes the damage, destruction or loss

intentionally or by way of grossly negligent conduct.

(5) Except where the damage, destruction or loss is caused intentionally or

by way of grossly negligent conduct of the hotel-keeper or a person for

whose actions the hotel-keeper is responsible, the guest is required to

inform the hotel-keeper of the dama ge, destruction or loss without

undue delay. If the guest fails to inform the hotel-keeper without undue

delay, the hotel-keeper is not liable.

(6) The hotel-keeper ha s the right to withhold any thing referred to in

paragraph (1) until the guest has satisfied any right the hotel-keeper

has against the guest with respect to accommodation, food, drink and

solicited services performed for the guest in the hotel-keeper’s profes-

sional capacity.

(7) This Article does not apply if and to the extent that a separate storage

contract is concluded between the hotel-keeper and any guest for any

thing brought to the hotel. A separate storage contract is concluded if a

thing is handed over for storage to, and accepted for storage by, the

hotel-keeper.

Part C.Services IV. C. – 5:110

321

Chapter 6:

Design

IV. C. – 6:101: Scope

(1) This Chapter applies to contracts under which one party, the designer,

undertakes to design for another party, the client:

(a) an immovable structure which is to be constructed by or on behalf

of the client; or

(b) a movable or incorporeal thing or service which is to be construc-

ted or per formed by or on behalf of the client.

(2) A contract under which one party undertakes to design and to supply a

service which consists of carrying out the design is to be considered as

primarily a contract for the supply of the subsequent service.

IV. C. – 6:102: Pre-contractual duty to warn

The designer’s pre-contractual duty to warn requires in particular the de-

signer to warn the client in so far as the designer lacks special exper tise in

specific problems which require the involvement of specialists.

IV. C. – 6:103: Obligation of skill and care

The designer’s obligation of skill and care requires in particular the designer

to:

(a) attune the design work to the work of other designers who contracted

with the client, to enable there to be an efficient performance of all

services involved;

(b) integrate the work of other designers which is necessary to ensure that

the design will conform to the contract;

necessary for a user of the design of average competence (or a specific

user made known to the designer at the conclusion of the contract) to

give effect to the design;

(d) enable the user of the design to give effect to the design without vio-

lation of public law rules or interference based on justified third-party

rights of which the designer knows or could reasonably be expected to

know; and

(e) provide a design which allows economic and technically efficient rea-

lisation.

IV. C. – 6:101 Book IV

322

IV. C. – 6:104: Conformity

(1) The design does not conform to the contract unless it enables the user

of the design to achieve a specific result by carrying out the design with

the skill and care which could reasonably be expected.

(2) The client is not entitled to invoke a remedy for non-conformity if a

direction provided by the client under

IV. C. – 2:107 (Directions of the

client) is the cause of the non-conformity and the designer performed

the obligation to warn under

IV. C. – 2:108 (Contractual obligation of

the service provider to warn).

IV. C. – 6:105: Handing over of the design

(1) In so far as the designer regards the design, or a part of it which is fit for

carrying out independently from the completion of the rest of the de-

sign, as sufficiently completed and wishes to transfer the design to the

client, the client must accept it within a reasonable time after being

notified.

(2) The client may refuse to accept the design when it, or the relevant part

of it, does not conform to the contract and such non-conformity

amounts to a fundamental non-performance.

IV. C. – 6:106: Records

(1) After performance of both parties’ other contractual obligations, the

designer must, on request by the client, hand over all relevant docu-

ments or copies of them.

(2) The designer must store, for a reasonable time, relevant doc uments

which are not handed over. Before destroying the documents, the de-

signer must offer them again to the client.

IV. C. – 6:107: Limitation of liability

In contracts between two businesses, a term restricting the designer’s li-

ability for non-performance to the value of the structure, thing or service

which is to be constructed or performed by or on behalf of the client fol-

lowing the design, is presumed to be fair for the purposes of

II. – 9:405

(Meaning of “unfair” in contracts between businesses) except to the extent

that it restricts liability for damage caused intentionally or by grossly neg-

ligent conduct on the part of the designer or any person for whose actions

the designer is responsible.

Part C.Services IV. C. – 6:107

323

Chapter 7:

Information and advice

IV. C. – 7:101: Scope

(1) This Chapter applies to contracts under which one party, the provider,

undertakes to provide information or advice to another party, the client.

(2) This Chapter does not apply in relation to treatment in so far as Chap-

ter 8 (Treatment) contains more specific rules on the obligation to in-

form.

(3) In the remainder of this Chapter any reference to information includes a

reference to advice.

IV. C. – 7:102: Obligation to collect preliminary data

(1) The provider must, in so far as this may reasonably be considered ne-

cessary for the performance of the service, collect data about:

(a) the particular purpose for which the client requires the informati-

on;

(b) the client’s preferences and priorities in relation to the information;

information; and

(d) the personal situation of the client.

(2) In case the information is intended to be passed on to a group of per-

sons, the data to be collected must relate to the purposes, preferences,

priorities and personal situations that can reasonably be expected from

individuals within such a group.

(3) In so far as the provider must obtain data from the client, the provider

must explain what the client is required to supply.

IV. C. – 7:103: Obligation to acquire and use expert knowledge

The provider must acquire and use the expert knowledge to which the

provider has or should have access as a professional information provider

or adviser, in so far as this may reasonably be considered necessary for the

performance of the service.

IV. C. – 7:101 Book IV

324

IV. C. – 7:104: Obligation of skill and care

(1) The provider’s obligation of skill and care requires in particular the pro-

vider to:

(a) take reasonable measures to ensure that the client understands the

content of the information;

(b) act with the care and skill that a reasonable information provider

would demonstrate under the circumstances when providing eva-

luative information; and

basis of the information, inform the client of the risks involved, in

so far as such risks could reasonably be expected to influence the

client’s decision.

(2) When the provider expressly or impliedly undertakes to provide the

client with a recommendation to enable the client to make a subse-

quent decision, the provider must:

(a) base the recommendation on a skilful analysis of the expert knowl-

edge to be collected in relation to the purposes, priorities, prefer-

ences and personal situation of the client;

(b) inform the client of alternatives the provider can personally provide

relating to the subsequent decision and of their advantages and

risks, as compared with those of the recommended decision; and

ally provide, unless the provider expressly informs the client that

only a limited range of alternatives is offered or this is apparent

from the situation.

IV. C. – 7:105: Conformity

(1) The provider must provide information which is of the quantity, quality

and description required by the contract.

(2) The factual information provided by the information provider to the

client must be a correct description of the actual situation described.

IV. C. – 7:106: Records

In so far as this may reasonably be considered necessary, having regard to

the interest of the client, the provider must keep records regarding the in-

formation provided in accordance with this Chapter and make such records

or excerpts from them available to the client on reasonable request.

Part C.Services IV. C. – 7:106

325

IV. C. – 7:107: Conflict of interest

(1) When the provider expressly or impliedly undertakes to provide the

client with a recommendation to enable the client to make a subsequent

decision, the provider must dis close any poss ible conflict of interest

which might influence the performance of the provider’s obligations.

(2) So long as the contractual obligations have not been completely per-

formed, the provider may not enter into a relationship with another

party which may give rise to a possible conflict with the interests of

the client, without full disclosure to the client and the client’s explicit

or implicit consent.

IV. C. – 7:108: Influence of ability of the client

(1) The involvement in the supply of the service of other persons on the

client’s behalf or the mere competence of the client does not relieve the

provider of any obligation under this Chapter.

(2) The provider is relieved of those obligations if the client already has

knowledge of the information or if the client has reason to know of the

information.

(3) For the purpose of paragraph (2), the client has reason to know if the

information should be obvious to the client without investigation.

IV. C. – 7:109: Causation

If the provider knows or could reasonably be expected to know that a sub-

sequent decision will be based on the information to be provided, and if the

client makes such a decision and suffers loss as a result, any non-perform-

ance of an obligation under the contract by the provider is presumed to

have caused the loss if the client proves that, if the provider had provided all

information required, it would have been reasonable for the client to have

seriously considered making an alternative decision.

Chapter 8:

Treatment

IV. C. – 8:101: Scope

(1) This Chapter applies to contracts under which one party, the treatment

provider, undertakes to provide medical treatment for another party, the

patient.

IV. C. – 7:107 Book IV

326

(2) It applies with appropriate adaptations to contracts under which the

treatment provider undertakes to provide any other service in order to

change the physical or mental condition of a person.

(3) Where the patient is not the contracting party, the patient is regarded

as a third party on whom the contract confers rights corresponding to

the obligations of the treatment provider imposed by this Chapter.

IV. C. – 8:102: Preliminary assessment

The treatment provider must, in so far as this may reasonably be considered

necessary for the performance of the service:

(a) interview the patient about the patient’s health condition, symptoms,

previous illnesses, allergies, previous or other current treatment and the

patient’s preferences and priorities in relation to the treatment;

(b) carry out the examinations necessary to diagnose the health condition

of the patient; and

the patient.

IV. C. – 8:103: Obligations regarding instruments, medicines,

materials, installations and premises

(1) The treatment provider must use instrumen ts, medicines, materials,

installations and premises which are of at least the quality demanded

by accepted and sound professional practice, which conform to applic-

able statutory rules, and which are fit to achieve the particular purpose

for which they are to be used.

(2) The parties may not, to the detriment of the patient, exclude the ap-

plication of this Article or derogate from or vary its effects.

IV. C. – 8:104: Obligation of skill and care

(1) The treatment provider’s obligation of skill and care requires in particu-

lar the treatment provider to provide the patient with the care and skill

which a reasonable treatment provider exercising and professing care

and skill would demonstrate under the given circumstances.

(2) If the treatment provider lacks the experience or skill to treat the patient

with the required degree of skill and care, the treatment provider must

refer the patient to a treatment provider who can.

(3) The parties may not, to the detriment of the patient, exclude the ap-

plication of this Article or derogate from or vary its effects.

Part C.Services IV. C. – 8:104

327

IV. C. – 8:105: Obligation to inform

(1) The treatment provider must, in order to give the patient a free choice

regarding treatment, inform the patient about, in particular:

(a) the patient’s existing state of health;

(b) the nature of the proposed treatment;

(d) the risks of the proposed treatment;

(e) the alternatives to the proposed treatment, and their advantages

and risk s as compared to those of the proposed treatment; and

(f) the consequences of not having treatment.

(2) The treatment provider must, in any case, inform the patient about any

risk or alternative which might reasonably inf luence the patient’s de-

cision on whether to give consent to the proposed treatment or not. It

is presumed that a risk might reasonably influence that decision if its

materialisation would lead to serious detriment to the patient. Unless

otherwise provided, the obligation to inform is subject to the provi-

sions of Chapter 7 (Information and Advice).

(3) The information must be provided in a way underst andable to the pa-

tient.

IV. C. – 8:106: Obligation to inform in case of

unnecessary or experimental treatment

(1) If the treatment is not necessary for the preservation or improvement of

the patient’s health, the treatment provider must disclose all known

risks.

(2) If the treatment is experimental, the treatment provider must disclose

all information regarding the objectives of the experiment, the nature of

the treatment, its advantages and risks and the alternatives, even if only

potential.

(3) The parties may not, to the detriment of the patient, exclude the ap-

plication of this Article or derogate from or vary its effects.

IV. C. – 8:107: Exceptions to the obligation to inform

(1) Information which would normally have to be provided by virtue of the

obligation to inform may be withheld from the patient:

(a) if there are objective reasons to believe that it would seriously and

negatively influence the patient’s health or life; or

IV. C. – 8:105 Book IV

328

(b) if the patient expressly states a wish not to be informed, provided

that the non-disclosure of the information does not endanger the

health or safety of third parties.

(2) The obligation to inform need not be performed where treatment must

be provided in an emergency. In such a case the treatment provider

must, so far as possible, provide the information later.

IV. C. – 8:108: Obligation not to treat without consent

(1) The treatment provider must not carry out treatment unless the patient

has given prior informed consent to it.

(2) The patient may revoke consent at any time.

(3) In so far as the patient is incapable of giving consent, the treatment

provider must not carr y out treatment unless:

(a) informed consent has been obtained from a person or institution

legally entitled to take decisions regarding the treatment on behalf

of the patient; or

(b) any rules or procedures enablin g treatment to be lawfully given

without such consent have been complied with; or

(4) In the situation described in paragraph (3), the treatment provider must

not carry out treatment without considering, so far as possible, the

opinion of the incapable patient with regard to the treatment and any

such opinion expressed by the patient before becoming incapable.

(5) In the situation described in paragraph (3), the treatment provider may

carry out only su ch treatment as is intended to improve the health

condition of the patient.

(6) In the situation described in paragraph (2) of

IV. C. – 8:106 (Obligation

to inform in case of unnecessary or experimental treatment), consent

must be given in an express and specific way.

(7) The parties may not, to the detriment of the patient, exclude the ap-

plication of this Article or derogate from or vary its effects.

IV. C. – 8:109: Records

(1) The treatment provider must create adequate records of the treatment.

Such records must include, in particular, information collected in any

preliminary interviews, examinations or consultations, information re-

garding the consent of the patient and information regarding the treat-

ment performed.

Part C.Services IV. C. – 8:109

329

(2) The treatment provider must, on reasonable request:

(a) give the patient, or if the patient is incapable of giving consent, the

person or institution legally entitled to take decisions on behalf of

the patient, access to the records; and

(b) answer, in so far as reasonable, questions regarding the interpreta-

tion of the records.

(3) If the patient has suffered injury and claims that it is a result of non-

performance by the treatment provider of the obligation of skill and

care and the treatment provider fails to comply with paragraph (2),

non-performance of the obligation of skill and care and a causal link

between such non-performance and the injury are presumed.

(4) The treatment provider must keep the records, and give information

about their interpretation, during a reasonable time of at least 10 years

after the treatment has ended, depending on the usefulness of these

records for the patient or the patient’s heirs or representatives and for

future treatments. Records which can reasonably be expected to be

important after the reasonable time must be kept by the treatment pro-

vider after that time. If for any reason the treatment provider ceases

activity, the records must be deposited or delivered to the patient for

future consultation.

(5) The parties may not, to the detriment of the patient, exclude the ap-

plication of paragraphs (1) to (4) or derogate from or vary their ef-

fects.

(6) The treatment provider may not disclose information about the patient

or other persons involved in the patient’s treatment to third parties

unless disclosure is necessary in order to protect third parties or the

public interest. The treatment provider may use the records in an an-

onymous way for statistical, educational or scientific purposes.

IV. C. – 8:110: Remedies for non-performance

With regard to any non-performance of an obligation under a contract for

treatment, Book

III, Chapter 3 (Remedies for Non-performance) and

IV. C. – 2:111 (Client’s right to terminate) apply with the following adapta-

tions:

(a) the treatment provider may not withhold performance or terminate the

contractual relationship under that Chapter if this would seriously en-

danger the health of the patient; and

IV. C. – 8:110 Book IV

330

(b) in so far as the treatment provider has the right to withhold perform-

ance or to terminate the contractual relationship and is planning to

exercise that right, the treatment provider must refer the patient to

another treatment provider.

IV. C. – 8:111: Obligations of treatment-providing organisations

(1) If, in the process of performance of the obligations under the treatment

contract, activities take place in a hospital or on the premises of an-

other treatment-providing organisation, and the hospital or that other

treatment-providing organisation is not a party to the treatment con-

tract, it must make clear to the patient that it is not the contracting

party.

(2) Where the treatment provider cannot be identified, the ho spital or

treatment-providing organisation in which the treatment took place is

treated as the treatment provider unless the hospital or treatment-pro-

viding organisation informs the patient, within a reasonable time, of

the identity of the treatment provider.

(3) The parties may not, to the detriment of the patient, exclude the ap-

plication of this Article or derogate from or vary its effects.

Part D.

Mandate contracts

Chapter 1:

General provisions

IV. D. – 1:101: Scope

(1) This Part of Book IV applies to contracts and other juridical acts under

which a person, the agent, is authorised and instructed (mandated) by

another person, the principal:

(a) to conclude a contract between the principal and a third party or

otherwise directly affect the legal position of the principal in rela-

tion to a third party;

(b) to conclude a contract with a third party, or do another juridical act

in relation to a third party, on behalf of the principal but in such a

Part D.Mandate contracts IV. D. – 1:101

331

way that the agent and not the principal is a party to the contract

or other juridical act; or

sion of a contract between the principal and a third party or the

doing of another juridical act which would affect the legal position

of the principal in relation to a third party.

(2) It applies where the agent undertakes to act on behalf of, and in ac-

cordance with the instructions of, the principal and, with appropriate

adaptations, where the agent is merely authorised but does not under-

take to act, but nevertheless does act.

(3) It applies where the agent is to be paid a price and, with appropriate

adaptations, where the agent is not to be paid a price.

(4) It applies only to the internal relationship between the principal and

the agent (the mandate relationship). It does not apply to the relation-

ship between the principal and the third par ty or the relationship (if

any) between the agent and the third party.

(5) Contracts to which this Part applies and to which Part C (Services) also

applies are to be regarded as falling primarily under this Part.

(6) This Part does not apply to contracts pertaining to investment services

and activities as defined by Directive 2004/39 /

EC, OJ L 145/1, as sub-

sequently amended or replaced.

IV. D. – 1:102: Definitions

In this Part;

(a) the ‘mandate’ of the agent is the authorisation and instruction given by

the principal as modified by any subsequent direction;

(b) the ‘mandate contract’ is the contract under which the agent is author-

ised and instructed to act, and any reference to the mandate contract

includes a reference to any other juridical act by which the agent is

authorised and instructed to act;

instructed to conclude, negotiate or facilitate, and any reference to the

prosp ective contract includes a reference to any other j uridical act

which the agent is authorised and instructed to do, negotiate or facil-

itate;

(d) a mandate for direct representation is a mandate under which the agent

is to act in the name of the principal, or otherwise in such a way as to

indicate an intention to affect the principal’s legal position;

IV. D. – 1:102 Book IV

332

(e) a mandate for indirect representation is a mandate under which the

agent is to act in the agent’s own name or otherwise in such a way as

not to indicate an intention to affect the principal’s legal position;

(f) a “direction” is a decision by the principal pertaining to the perform-

ance of the obligations under the mandate contract or to the contents

of the prospective contract that is given at the time the mandate

contract is concluded or, in accordance with the mandate, at a later

moment;

(g) the “third party” is the party with whom the prospective contract is to

be concluded, negotiated or facilitated by the agent;

(h) the “revocation” of the mandate of the agent is the recall by the prin-

cipal of the mandate, so that it no longer has effect.

IV. D. – 1:103: Duration of the mandate contract

A mandate contract may be concluded:

(a) for an indefinite period of time;

(b) for a fixed period; or

IV. D. – 1:104: Revocation of the mandate

(1) Unless the following Article applies, the mandate of the agent can be

revoked by the principal at any time by giving notice to the agent.

(2) The termination of the mandate relationship has the effect of a revo-

cation of the mandate of the agent.

(3) The parties may not, to the detriment of the principal, exclude the ap-

plication of this Article or derogate from or vary its effects, unless the

requirements of the following Article are met.

IV. D. – 1:105: Irrevocable mandate

(1) In derogation of the preceding Article, the mandate of the agent cannot

be revoked by the principal if the mandate is given:

(a) in order to safeguard a legitimate interest of the agent other than

the interest in the payment of the price; or

(b) in the common interest of the parties to another legal relationship,

whether or not these parties are all parties to the mandate contract,

and the irrevocability of the mandate of the agent is meant to prop-

erly safeguard the interest of one or more of these parties.

Part D.Mandate contracts IV. D. – 1:105

333

(2) The mandate may nevertheless be revoked if:

(a) the mandate is irrevocable under paragraph (1)(a) and:

(i) the contractual relationship from which the legitimate interest

of the agent originates is terminated for non-performance by

the agent; or

(ii) there is a fundamental non-performance by the agent of the

obligations under the mandate contract; or

(iii) there is an extraordinary and serious reason for the principal to

terminate under

IV. D. – 6:103 (Termination by principal for ex-

traordinary and serious reason); or

(b) the mandate is irrevocable under paragraph (1)(b) and:

(i) the parties in whose interest the mandate is irrevocable have

agreed to the revocation of the mandate;

(ii) the relationship referred to in paragraph (1)(b) is terminated;

(iii) the agent commits a fundamental non-performance of the ob-

ligations under the mandate contract, provided that the agent

is replaced without undue delay by another agent in confor-

mity with the terms regulating the legal relationship between

the principal and the other party or parties; or

(iv) there is an extraordinary and serious reason for the principal to

terminate under

IV. D. – 6:103 (Termination by principal for ex-

traordinary and serious reason), provided that the agent is re-

placed without undue delay by another agent in conformity

with the terms regulating the legal relationship between the

principal and the other party or parties.

(3) Where the revocation of the mandate is not allowed under this Article,

a notice of revocation is without effect.

(4) This Article does not apply if the mandate relationship is terminated

under Chapter 7 of this Par t.

IV. D. – 1:105 Book IV

334

Chapter 2:

Main obligations of the principal

IV. D. – 2:101: Obligation to co-operate

The obligation to co-operate under III. – 1:104 (Co-operation) requires the

principal in particular to:

(a) answer requests by the agent for information in so far as such infor-

mation is needed to allow the agent to perform the obligations under

the mandate contract;

(b) give a direction regarding the performance of the obligations under the

mandate contract in so far as this is required under the mandate con-

tract or follows from a request for a direction under

IV. D. – 4:102 (Re-

quest for a direction).

IV. D. – 2:102: Price

(1) The principal must pay a price if the agent performs the obligations

under the mandate contract in the course of a business, unless the

principal expected and could reasonably have expected the agent to

perform the obligations otherwise than in exchange for a price.

(2) The price is payable when the mandated task has been completed and

the agent has given account of that to the principal.

(3) If the par ties had agreed on payment of a price for services rendered,

the mandate relationship has terminated and the mandated task has

not been completed, the price is payable as of the moment the agent

has g iven account of the performance of the obligations under the

mandate contract.

(4) When the mandate is for the conclusion of a prospective contract and

the principal has concluded the prospective contract directly or another

person appointed by the principal has concluded the prospective con-

tract on the principal’s behalf, the agent is entitled to the price or a

proportionate part of it if the conclusion of the prospective contract

can be attributed in full or in part to the agent’s performance of the

obligations under the mandate contract.

(5) When the mandate is for the conclusion of a prospective contract and

the prospective contract is concluded after the mandate relationship

has terminated, the principal must pay the price if payment of a price

Part D.Mandate contracts IV. D. – 2:102

335

based solely on the conclusion of the prospective contract was agreed

and:

(a) the conclusion of the prospective contract is mainly the result of

the agent’s efforts; and

(b) the prospective contract is concluded within a reasonable period

after the mandate relationship has terminated.

IV. D. – 2:103: Expenses incurred by agent

(1) When the agent is entitled to a price, the price is presumed to include

the reimbursement of the expenses the agent has incurred in the per-

formance of the obligations under the mandate contract.

(2) When the agent is not entitled to a price or when the parties have

agreed that the expenses will be paid separately, the principal must

reimburse the agent for the expenses the agent has incurred in the

performance of the obligations under the mandate contract, when and

in so far as the agent acted reasonably when incurring the expenses.

(3) The agent is entitled to reimbursement of expenses under paragraph

(2) as from the time when the expenses are incurred and the agent has

given account of the expenses.

(4) If the mandate relationship has terminated and the result on which the

agent’s remuneration is dependent is not achieved, the agent is entitled

to reimbursement of reasonable expenses the agent has incurred in the

performance of the obligations under the mandate contract. Paragraph

(3) applies accordingly.

Chapter 3:

Performance by the agent

Section 1:

Main obligations of agent

IV. D. – 3:101: Obligation to act in accordance with mandate

At all stages of the mandate relationship the agent must act in accordance

with the mandate.

IV. D. – 2:103 Book IV

336

IV. D. – 3:102: Obligation to act in interests of principal

(1) The agent must act in accordance with the interests of the principal, in

so far as these have been commun icated t o the agent or t he agent

could reasonably be expected to be aware of them.

(2) Where the agent is not sufficiently aware of the principal’s interests to

enable the agent to properly perform the obligations under the mandate

contract, the agent must request information from the principal.

IV. D. – 3:103: Obligation of skill and care

(1) The agent has an obligation to perform the obligations under the man-

date contract with the care and skill that the principal is entitled to

expect under the circumstances.

(2) If the agent professes a higher standard of care and skill the agent has

an obligation to exercise that care and skill.

(3) If the agent is, or purports to be, a member of a group of professional

agents for which standards exist that have been set by a relevant au-

thority or by that group itself, the agent must exercise the care and skill

expressed in these standards.

(4) In determining the care and skill the principal is en titled to expect,

regard is to be had, among other things, to:

(a) the nature, the magnitude, the frequency and the foreseeability of

the risks involved in the performance of the obligations;

(b) whether the obligations are performed by a non-professional or

gratuitously;

gations; and

(d) the time reaso nably available for the performance of the obliga-

tions.

Section 2:

Consequences of acting beyond mandate

IV. D. – 3:201: Acting beyond mandate

(1) The agent may act in a way not covered by the mandate if:

(a) the agent has reasonable ground for so acting on behalf of the

principal;

Part D.Mandate contracts IV. D. – 3:201

337

(b) the agent does not have a reasonable opportunity to discover the

principal’s wishes in the particular circumstances; and

know that the act in the particular circumstances is against the

principal’s wishes.

(2) An act within paragraph (1) has the same consequences as between

the agent and the principal as an act covered by the mandate.

IV. D. – 3:202: Consequences of ratification

Where, in circumstances not covered by the preceding Article, an agent has

acted beyond the mandate in concluding a contract on behalf of the prin-

cipal, ratification of that contract by the principal absolves the agent from

liability to the principal, unless the principal without undue delay after

ratification notifies the agent that the principal reserves remedies for the

non-performance by the agent.

Section 3:

Mandate normally not exclusive

IV. D. – 3:301: Exclusivity not presumed

The principal is free to conclude, negotiate or facilitate the prospective con-

tract directly or to appoint another agent to do so.

IV. D. – 3:302: Subcontracting

(1) The agent may subcontract the performance of the obligations under

the mandate contract in whole or in part without the principal’s con-

sent, unless personal performance is required by the contract.

(2) Any subcontractor so engaged by the agent must be of adequate com-

petence.

(3) In accordance with

III. – 2:106 (Performance entrusted to another) the

agent remains responsible for performance.

IV. D. – 3:202 Book IV

338

Section 4:

Obligation to inform principal

IV. D. – 3:401: Information about progress of performance

During the performance of the obligations under the mandate contract the

agent must in so far as is reasonable under the circumstances inform the

principal of the existence of, and the progress in, the negotiations or other

steps leading to the possible conclusion or facilitation of the prospective

contract.

IV. D. – 3:402: Accounting to the principal

(1) The agent must without undue delay inform the principal of the com-

pletion of the mandated task.

(2) The agent must give an account to the principal:

(a) of the manner in which the obligations under the mandate con-

tract have been performed; and

(b) of money spent or received or expenses incurred by the agent in

performing those obligations.

(3) Paragraph (2) applies with appropriate modifications if the mandate

relationship is terminated in accordance with Chapters 6 and 7 and

the obligations under the mandate contract have not been fully per-

formed.

IV. D. – 3:403: Communication of identity of third party

(1) An agent who concludes the prospective contract with a third party

must communicate the name and address of the third party to the

principal on the principal’s demand.

(2) In the case of a mandate for indirect representation paragraph (1) ap-

plies only if the agent has become insolvent.

Part D.Mandate contracts IV. D. – 3:403

339

Chapter 4:

Directions and changes

Section 1:

Directions

IV. D. – 4:101: Directions given by principal

(1) The principal is entitled to give directions to the agent.

(2) The agent must follow directions by the principal.

(3) The agent must warn the principal if the direction:

(a) has the effect that the performance of the obligations under the

mandate contract would become significantly more expensive or

take significantly more time than agreed upon in the mandate con-

tract; or

(b) is inconsistent with the purpose of the mandate contract or may

otherwise be detrimental to the interests of the principal.

(4) Unless the principal revokes the direction without undue delay after

having been so warned by the agent, the direction is to be regarded as a

change of the mandate contract under

IV. D. – 4:201 (Changes of the

mandate contract).

IV. D. – 4:102: Request for a direction

(1) The agent must ask for a direction on obtaining information which

requires the principal to make a decision pertaining to the performance

of the obligations under the mandate contract or the content of the

prospective contract.

(2) The agent must ask for a direction if the mandated task is the conclu-

sion of a prospective contract and the mandate contract does not de-

termine wheth er the mandate is for direct represent ation or indirect

representation.

IV. D. – 4:103: Consequences of failure to give a direction

(1) If the principal fails to give a direction when required to do so under the

mandate contract or under paragraph (1) of

IV. D. – 4:102 (Request for

a direction), the agent may, in so far as relevant, resort to any of the

remedies under Book

III, Chapter 3 (Remedies for Non-performance) or

base performance upon the expectations, preferences and priorities the

IV. D. – 4:101 Book IV

340

principal might reasonably be expected to have, given the information

and directions that have been gathered.

(2) Where the agent bases performance upon the expectations, preferen-

ces and priorities the principal might reasonably be expected to have,

the agent has a right to a proportionate adjustment of the price and of

the time allowed or required for the conclusion of the prospective con-

tract.

(3) If the principal fails to give a direction under paragraph (2) of

IV.D.–

4:102 (Request for a direction), the agent may choose direct represen-

tation or indirect representation or may withhold performance under

III. – 3:401 (Right to withhold performance of reciprocal obligation).

(4) The adjusted price that is to be paid under paragraph (2) must be rea-

sonable and is to be determined using the same methods of calculation

as were used to establish the original price for the performance of the

obligations under the mandate contract.

IV. D. – 4:104: No time to ask or wait for direction

(1) If the agent is required to ask for a direction under IV. D. – 4:102 (Re-

quest for a direction) but needs to act before being able to contact the

principal and to ask for a direction, or needs to act before the direction

is given, the agent may base performance upon the expectations, pre-

ferences and priorities the principal might reasonably be expected to

have, given the information and directions that have been gathered.

(2) In the situation referred to in paragraph (1), the agent has a right to a

proportionate adjustment of the price and of the time allowed or re-

quired for the performance of the obligations under the mandate con-

tract in so far as such an adjustment is reasonable given the circum-

stances of the case.

Section 2:

Changes of the mandate contract

IV. D. – 4:201: Changes of the mandate contract

(1) The mandate contract is changed if the principal:

(a) significantly changes the mandate of the agent;

Part D.Mandate contracts IV. D. – 4:201

341

(b) does not revoke a direction without undue delay after having been

warned in accordance with paragraph (3) of

IV. D. – 4:101 (Direc-

tions given by principal).

(2) In the case of a change of the mandate contract under paragraph (1)

the agent is entitled:

(a) to a proportionate adjustment of the price and of the time allowed

or required for the performance of the obligations under the man-

date contract; or

(b) to damages in accordance with

III. – 3: 702 (General meas ure of

damages) to put the agent as nearly as possible into the position

in which the agent would have been if the mandate contract had

not been changed.

(3) In the case of a change of the mandate contract under paragraph (1)

the agent may also terminate the mandate relationship by giving notice

of termination for an extraordinary and serious reason under

IV.D.–

6:105 (Termination by agent for extraordinary and serious reason), un-

less the change is minor or is to the agent’s advantage.

(4) The adjusted price that is to be paid under paragraph (2)(a) must be

reasonable and is to be determined using the same methods of calcu-

lation as were used to establish the original price for the per formance of

the obligations under the mandate contract.

Chapter 5:

Conflicts of interests

IV. D. – 5:101: Self-contracting

(1) The agent may not become the principal’s counterparty to the prospec-

tive contract.

(2) The agent may nevertheless become the counterparty if:

(a) this is agreed by the parties in the mandate contract;

(b) the agent has disclosed an intention to become the counterparty

and:

(i) the principal subsequently expresses consent; or

(ii) the principal does not object to the agent becoming the coun-

terparty after having been requested to indicate consent or a

refusal of consent;

IV. D. – 5:101 Book IV

342

have known, of the agent becoming the counterparty and the prin-

cipal did not object within a reasonable time; or

(d) the content of the prospective contract is so precisely determined

in the mandate contract that there is no risk that the interests of

the principal may be disregarded.

(3) If the principal is a consumer, the agent may only become the counter-

party if:

(a) the agent has disclosed that information and the principal has gi-

ven express consent to the agent becoming the counterparty to the

particular prospective contract; or

(b) the content of the prospective contract is so precisely determined

in the mandate contract that there is no risk that the interests of

the principal may be disregarded.

(4) The parties may not, to the detriment of the principal, exclude the ap-

plication of paragraph (3) or derogate from or vary its effects.

(5) If the agent has become the counterparty, the agent is not entitled to a

price for services rendered as an agent.

IV. D. – 5:102: Double mandate

(1) The agent may not act as the agent of both the principal and the prin-

cipal’s counterparty to the prospective contract.

(2) The agent may nevertheless act as the agent of both the principal and

the counterparty if:

(a) this is agreed by the parties in the mandate contract;

(b) the agent has disclosed an intention to act as the agent of the

counterparty and the principal:

(i) subsequently expresses consent; or

(ii) does not object to the agent acting as the agent of the counter-

party after having been requested to indicate consent or a re-

fusal of consent;

have known, of the agent acting as the agent of the counterparty

and the principal did not object within a reasonable time; or

(d) the content of the prospective contract is so precisely determined

in the mandate contract that there is no risk that the interests of

the principal may be disregarded.

Part D.Mandate contracts IV. D. – 5:102

343

(3) If the principal is a consumer, the agent may only act as the agent of

both the principal and of the counterparty if:

(a) the agent has disclosed that information and the principal has gi-

ven express consent to the agent acting also as the agent of the

counterparty to the particular prospective contract; or

(b) the content of the prospective contract is so precisely determined

in the mandate contract that there is no risk that the interests of

the principal may be disregarded.

(4) The parties may not, to the detriment of the principal, exclude the ap-

plication of paragraph (3) or derogate from or vary its effects.

(5) If and in so far as the agent has acted in accordance with the previous

paragraphs, the agent is entitled to the price.

Chapter 6:

Termination by notice other than for non-performance

IV. D. – 6:101: Termination by notice in general

(1) Either party may terminate the mandate relationship at any time by

giving notice to the other.

(2) For the purposes of paragraph (1), a revocation of the mandate of the

agent is treated as termination.

(3) Termination of the mandate relationship is not effective if the mandate

of the agent is irrevocable under

IV. D. – 1:105 (Irrevocable mandate).

(4) The effects of termination are governed by

III. – 1:109 (Variation or

termination by notice) paragraph (3).

(5) When the party giving the notice was justified in terminating the re-

lationship no damages are payable for so doing.

(6) When the party giving the notice was not justified in terminating the

relationship, the termination is nevertheless effective but the other par-

ty is entitled to damages in accordance with the rules in Book

III.

(7) For the purposes of this Article the party giving the notice is justified in

terminating the relationship if that party:

(a) was entitled to terminate the relationship under the express terms

of the contract and observed any requirements laid down in the

contract for doing so;

(b) was entitled to terminate the relationship under Book

III, Chapter 3,

Section 5 (Termination); or

IV. D. – 6:101 Book IV

344

of the present Chapter and observed any requirements laid down

in such Article for doing so.

IV. D. – 6:102: Termination by principal when relationship is to

last for indefinite period or when mandate is for a particular task

(1) The principal may terminate the mandate relationship at any time by

giving notice of reasonable length if the mandate contract has been

concluded for an indefinite period or for a particular task.

(2) Paragraph (1) does not apply if the mandate is irrevocable.

(3) The parties may not, to the detriment of the principal, exclude the ap-

plication of this Article or derogate from or vary its effects, unless the

conditions set out under

IV. D. – 1:105 (Irrevocable mandate) are met.

IV. D. – 6:103: Termination by principal for extraordinary

and serious reason

(1) The principal may terminate the mandate relationship by giving notice

for extraordinary and serious reason.

(2) No period of notice is required.

(3) For the purposes of this Article, the death or incapacity of the person

who, at the time of conclusion of the mandate contract, the parties had

intended to perform the agent’s obligations under the mandate con-

tract, constitutes an extraordinar y and serious reason.

(4) This Article applies with appropriate adaptations if the successors of

the principal terminate the mandate relationship in accordance with

IV. D. – 7:102 (Death of the principal).

(5) The parties may not, to the detriment of the principal or the principal’s

successors, exclude the application of this Article or derogate from or

vary its effects.

IV. D. – 6:104: Termination by agent when relationship is

to last for indefinite period or when it is gratuitous

(1) The agent may terminate the mandate relationship at any time by giv-

ing notice of reasonable length if the mandate contract has been con-

cluded for an indefinite period.

(2) The agent may terminate the mandate relationship by giving notice of

reasonable length if the agent is to represent the principal otherwise

than in exchange for a price.

Part D.Mandate contracts IV. D. – 6:104

345

(3) The parties may not, to the detriment of the agent, exclude the appli-

cation of paragraph (1) of this Article or derogate from or vary its ef-

fects.

IV. D. – 6:105: Termination by agent for extraordinary and

serious reason

(1) The agent may terminate the mandate relationship by giving notice for

extraordinary and serious reason.

(2) No period of notice is required.

(3) For the purposes of this Article an extraordinary and serious reason

includes:

(a) a change of the mandate contract under

IV. D. – 4:201 (Changes of

the mandate contract);

(b) the death or incapacity of the principal; and

sion of the mandate contract, the parties had intended to perform

the agent’s obligations under the mandate contract.

(4) The parties may not, to the detriment of the agent, exclude the appli-

cation of this Article or derogate from or vary its effects.

Chapter 7:

Other grounds for termination

IV. D. – 7:101: Conclusion of prospective contract by

principal or other agent

(1) If the mandate contract was concluded solely for the conclusion of a

specific prospective contract the mandate relationship terminates

when the principal or another agent ap pointed by the principal has

concluded the prospective contract.

(2) In such a case, the conclusion of the prospective contract is treated as a

notice under

IV. D. – 6:101 (Termination by notice in general).

IV. D. – 7:102: Death of the principal

(1) The death of the principal does not end the mandate relationship.

(2) Both the agent and the successors of the principal may terminate the

mandate relationship by giving notice of termination for extraordinary

and serious reason under

IV. D. – 6:103 (Termination by principal for

IV. D. – 6:105 Book IV

346

extraordinary and serious reason) or IV. D. – 6:105 (Termination by

agent for extraordinary and serious reason).

IV. D. – 7:103: Death of the agent

(1) The death of the agent ends the mandate relationship.

(2) The expenses and any other payments due at the time of death remain

payable.

Part E.

Commercial agency, franchise and distributorshi p

Chapter 1:

General provisions

Section 1:

Scope

IV. E. – 1:101: Contracts covered

(1) This Part of Book IV applies to contracts for the establishment and

regulation of a commercial agency, franchise or distributorship and

with appropriate adaptations to other contracts under which a party

engaged in business independently is to use skills and efforts to bring

another party’s products on to the market.

(2) In this Part, “products” includes goods and services.

Section 2:

Other general provisions

IV. E. – 1:201: Priority rules

In the case of any conflict:

(a) the rules in this Part prevail over the rules in Part D (Mandate); and

(b) the rules in Chapters 3 to 5 of this Part prevail over the rules in Chap-

ter 2 of this Part.

Part E.Commercial agency, franchise and distributorship IV. E. – 1:201

347

Chapter 2:

Rules applying to all contracts within the

scope of this part

Section 1:

Pre-contractual

IV. E. – 2:101: Pre-contractual information duty

A party who is engaged in negotiations for a contract within the scope of

this Part has a duty to provide the other par ty, a reasonable time before the

contract is concluded and so far as required by good commercial practice,

with such information as is sufficient to enable the other party to decide on

a reasonably informed basis whether or not to enter into a contract of the

type and on the terms under consideration.

Section 2:

Obligations of the parties

IV. E. – 2:201: Co-operation

The parties to a contract within the scope of this Part of Book IV must

collaborate actively and loyally and co-ordinate their respective efforts in

order to achieve the objectives of the contract.

IV. E. – 2:202: Information during the performance

During the period of the contractual relationship each party must provide

the other in due time with all the information which the first party has and

the second party needs in order to achieve the objectives of the contract.

IV. E. – 2:203: Confidentiality

(1) A party who receives confidential information from the other must

keep such information confidential and must not disclose the informa-

tion to third parties either during or after the period of the contractual

relationship.

(2) A party who receives confidential information from the other must not

use s uch informat ion for purposes other than the objectives of the

contract.

IV. E. – 2:101 Book IV

348

(3) Any information which a party already possessed or which has been

disclosed to the general public, and any information which must nec-

essarily be disclosed to customers as a result of the operation of the

business is not regarded as confidential information for this purpose.

Section 3:

Termination of contractual relationship

IV. E. – 2:301: Contract for a definite period

A party is free not to renew a contract for a definite period. If a party has

given notice in due time that it wishes to renew the contract, the contract

will be renewed for an indefinite period unless the other party gives that

party notice, not later than a reasonable time before the expiry of the con-

tract period, that it is not to be renewed.

IV. E. – 2:302: Contract for an indefinite period

(1) Either party to a contract for an indefinite period may terminate the

contractual relationship by giving notice to the other.

(2) If the notice provides for termination after a period of reasonable length

no damages are payable under

IV. E. – 2:303 (Damages for termination

with inadequate notice). If the notice provides for immediate termina-

tion or termination after a period which is not of reasonable length

damages are payable under that Article.

(3) Whether a period of notice is of reasonable length depends, among

other factors, on:

(a) the time the contractual relationship has lasted;

(b) reasonable investments made;

(d) usages.

(4) A period of notice of one month for each year during which the con-

tractual relationship has lasted, with a maximum of 36 months, is pre-

sumed to be reasonable.

(5) The period of notice for the principal, the franchisor or the supplier is to

be no shorter than one month for the first year, two months for the

second, three months for the third, four months for the fourth, five

months for the fifth and six months for the sixth and subsequent years

during which the contractual relationship has lasted. Parties may not

Part E.Commercial agency, franchise and distributorship IV. E. – 2:302

349

exclude the application of this provision or derogate from or vary its

effects.

(6) Agreements on longer periods than those laid down in paragraphs (4)

and (5) are valid provided that the agreed period to be observed by the

principal, franchisor or supplier is no shorter than that to be observed

by the commercial agent, the franchisee or the distributor.

(7) In relation to contracts within the scope of this Part, the rules in this

Article replace those in paragraph (2) of

III. – 1:109 (Variation or ter-

mination by notice). Paragraph (3) of that Ar ticle governs the effects of

termination.

IV. E. – 2:303: Damages for termination wi th inadequate notice

(1) Where a party terminates a contractual relationship under IV. E. – 2:302

(Contract for an indefinite period) but does not give a reasonable per-

iod of notice the other party is entitled to damages.

(2) The general measure of damages is such sum as corresponds to the

benefit which the other party would have obtained during the extra

period for which the relationship would have lasted if a reasonable

period of notice had been given.

(3) The yearly benefit is presumed to be equal to the average benef it which

the aggrieved party has obtained from the contract during the previous

3 years or, if the contractual relationship has lasted for a shorter period,

during that period.

(4) The general rules on damages for non-performance in Book

III, Chapter

3, Section 7 apply with any appropriate adaptations.

IV. E. – 2:304: Termination for non-performance

(1) Any term of a contract within the scope of this Part whereby a party

may terminate the contractual relationship for non-performance which

is not fundamental is without effect.

(2) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 2:305: Indemnity for goodwill

(1) When the contractual relationship come s to an end for any reason

(including termination by either party for fundamental non-perform-

ance), a party is entitled to an indemnity from the other party for good-

will if and to the extent that:

IV. E. – 2:303 Book IV

350

(a) the first party has significantly increased the other party’s volume

of business and the other party continues to derive substantial

benefits from that business; and

(b) the payment of the indemnity is reasonable.

(2) The grant of an indemnity does not prevent a party from seeking dam-

ages under

IV. E. – 2:303 (Damages for termination with inadequate

notice).

IV. E. – 2:306: Stock, spare parts and materials

If the contract is avoided, or the contractual relationship terminated, by

either party, the party whose products are being brought on to the market

must repurchase the other party’s remaining stock, spare parts and materi-

als at a reasonable price, unless the other party can reasonably resell

them.

Section 4:

Other general provisions

IV. E. – 2:401: Right of retention

In order to secure its rights to remuneration, compensation, damages and

indemnity the party who is bringing the products on to the market has a

right of ret ention over the movables of the other party which are in its

possession as a result of the contract, until the other party has performed

its obligations.

IV. E. – 2:402: Signed document available on request

(1) Each party is entitled to receive from the other, on request, a signed

statement in textual form on a durable medium setting out the terms of

the contract.

(2) The parties may not exclude the application of this Article or derogate

from or vary its effects.

Part E.Commercial agency, franchise and distributorship IV. E. – 2:402

351

Chapter 3:

Commercial agency

Section 1:

General

IV. E. – 3:101: Scope

This Chapter applies to contracts under which one party, the commercial

agent, agrees to act on a continuing basis as a self-employed intermediary

to negotiate or to conclude contracts on behalf of another party, the prin-

cipal, and the principal agrees to remunerate the agent for those activities.

Section 2:

Obligations of the commercial agent

IV. E. – 3:201: Negotiate and conclude contracts

The commercial agent must make reasonable efforts to negotiate contracts

on behalf of the principal and to conclude the contracts which the agent

was instructed to conclude.

IV. E. – 3:202: Instructions

The commercial agent must follow the principal’s reasonable instructions,

provided they do not substantially affect the agent’s independence.

IV. E. – 3:203: Information by agent dur ing the performance

The obligation to inform requires the commercial agent in particular to

provide the principal with information concerning:

(a) contracts negotiated or concluded;

(b) market conditions;

IV. E. – 3:204: Accounting

(1) The commercial agent must maintai n proper accounts relating to the

contracts negotiated or concluded on behalf of the principal.

(2) If the agent represents more than one principal, the agent must main-

tain independent accounts for each principal.

IV. E. – 3:101 Book IV

352

(3) If the principal has important reasons to doubt that the agent main-

tains proper accounts, the agent must allow an independent accoun-

tant to have reasonable access to the agent’s books upon the princi-

pal’s request. The principal must pay for the services of the indepen-

dent accountant.

Section 3:

Obligations of the principal

IV. E. – 3:301: Commission during the agency

(1) The commercial agent is entitled to commission on any contract con-

cluded with a client during the period covered by the agency, if:

(a) the contract has been concluded

(i) as a result of the commercial agent’s efforts;

(ii) with a third party whom the commercial agent has previously

acquired as a client for contracts of the same kind; or

(iii) with a client belonging to a certain geographical area or group

of clients with which the commercial agent was entrusted; and

(b) either

(i) the principal has or should have performed the principal’s ob-

ligations under the contract; or

(ii) the client has performed the client’s obligations under the con-

tract or justifiably withholds performance.

(2) The parties may not, to the detriment of the commercial agent, exclude

the application of paragraph (1)(b)(ii) or derogate from or vary its ef-

fects.

IV. E. – 3:302: Commission after the agency has ended

(1) The commercial agent is entitled to commission on any contract con-

cluded with a client after the agency has ended, if:

(a) either

(i) the contract with the client is mainly the result of the com-

mercial agent’s efforts during the period covered by the agency

contract, and the contract with the client was concluded with-

in a reasonable period after the agency ended; or

(ii) the requirements of paragraph (1) of

IV. E. – 3:301 (Commis-

sion during the agency) would have been satisfied except that

Part E.Commercial agency, franchise and distributorship IV. E. – 3:302

353

the contract with the client was not concluded during the per-

iod of the agency, and the client’s offer reached the principal or

the commercial agent before the agency ended; and

(b) either

(i) the principal has or should have performed the principal’s ob-

ligations under the contract; or

(ii) the client has performed the client’s obligations under the con-

tract or justifiably withholds the client’s performance.

(2) The parties may not, to the detriment of the commercial agent, exclude

the application of paragraph (1)(b)(ii) or derogate from or vary its ef-

fects.

IV. E. – 3:303: Conflicting entitlements of successive agents

The commercial agent is not entitled to the commissi on referred to in

IV. E. – 3:301 (Commission during the agency) if a previous commercial

agent is entitled to that commission under

IV.E–3:302 (Commission after

the agency has ended), unless it is reasonable that the commission is

shared between the two commercial agents.

IV. E. – 3:304: When commission is to be paid

(1) The principal must pay the commercial agent’s commission not later

than the last day of the month following the quarter in which the agent

became entitled to it.

(2) The parties may not, to the detriment of the commercial agent, exclude

the application of this Article or derogate from or vary its effects.

IV. E. – 3:305: Entitlement to commission extinguished

(1) A contract term whereby the commercial agent’s entitlement to com-

mission on a contract concluded with a client is extinguished is valid

only if and to the extent that it provides for extinction on the basis that

the client’s contractual obligations are not performed for a reason for

which the principal is not accountable.

(2) Upon the extinguishing of the commercial agent’s entitlement to com-

mission, the commercial agent must refund any commission already

received.

(3) The parties may not, to the detriment of the commercial agent, exclude

the application of paragraph (1) or derogate from or vary its effects.

IV. E. – 3:303 Book IV

354

IV. E. – 3:306: Remuneration

Any remuneration which wholly or partially depends upon the number or

value of contracts is presumed to be commission within the meaning of

this Chapter.

IV. E. – 3:307: Information by principal during the performance

The obligation to inform requires the principal in particular to provide the

commercial agent with information concerning:

(a) characteristics of the goods or services; and

(b) prices and conditions of sale or purchase.

IV. E. – 3:308: Information on acceptance, rejection

and non-performance

(1) The principal must inform the commercial agent, within a reasonable

period, of:

(a) the principal’s acceptance or rejection of a contract which the com-

mercial agent has negotiated on the principal’s behalf; and

(b) any non-performance of obligations under a contract which the

commercial agent has negotiated or concluded on the principal’s

behalf.

(2) The parties may not, to the detriment of the commercial agent, exclude

the application of this Article or derogate from or vary its effects.

IV. E. – 3:309: Warning of decreased volume of contracts

(1) The principal must warn the commercial agent within a reasonable

time when the principal foresees that the volume of contracts that the

principal will be able to conclude will be significantly lower than the

commercial agent could reasonably have expected.

(2) For the purpose of paragraph (1) the principal is presumed to foresee

what the principal could reasonably be expected to foresee.

(3) The parties may not, to the detriment of the commercial agent, exclude

the application of this Article or derogate from or vary its effects.

IV. E. – 3:310: Information on commission

(1) The princi pal must supply the commercial agent in reasonable time

with a statement of the commission to which the commercial agent

is entitled. This st atement must set out how the amount of the com-

mission has been calculated.

Part E.Commercial agency, franchise and distributorship IV. E. – 3:310

355

(2) For the purpose of calculating commission, the principal must provide

the commercial agent upon request with an extract from the principal’s

books.

(3) The parties may not, to the detriment of the commercial agent, exclude

the application of this Article or derogate from or vary its effects.

IV. E. – 3:311: Accounting

(1) The principal must maintain proper accounts relating to the contracts

negotiated or concluded by the commercial agent.

(2) If the principal has more than one commercial agent, the principal must

maintain independent accounts for each commercial agent.

(3) The principal must allow an independent account ant to have reason-

able access to the principal’s books upon the commercial agent’s re-

quest, if:

(a) the principal does not comply with the principal’s obligations un-

der paragraphs (1) or (2) of

IV. E. – 3:310 (Information on commis-

sion); or

(b) the commercial agent has important reasons to doubt that the

principal maintains proper accounts.

IV. E. – 3:312: Amount of indemnity

(1) The commercial agent is entitled to an indemnity for goodwill on the

basis of

IV. E. – 2:305 (Indemnity for goodwill) amounting to:

(a) the average commission on contracts with new clients and on the

increased volume of business with existing clients calculated for

the last 12 months, multiplied by:

(b) the number of years the principal is likely to continue to derive

benefits from these contracts in the future.

(2) The resulting indemnity must be amended to take account of:

(a) the probable attrition of clients, based on the average rate of mi-

gration in the commercial agent’s territory; and

(b) the discount required for early payment, based on average interest

rates.

(3) In any case, the indemnity must not exceed one year’s remuneration,

calculated from the commercial agent’s average annual remuneration

over the preceding five years or, if the contractual relationship has been

in existence for less than five years, from the average during the period

in question.

IV. E. – 3:311 Book IV

356

(4) The parties may not, to the detriment of the commercial agent, exclude

the application of this Article or derogate from or vary its effects.

IV. E. – 3:313: Del credere clause

(1) An agreement whereby the commercial agent guarantees that a client

will pay the price of the products forming the subject-matter of the

contract which the commercial agent has negotiated or concluded (del

credere clause) is valid only if and to the extent that the agreement:

(a) is in textual form on a durable medium;

(b) covers particular contracts which were negotiated or concluded by

the commercial agent or such contracts with particular clients who

are specified in the agreement; and

(2) The commercial agent is entitled to be paid a commission of a reason-

able amount on contracts to which the del credere guarantee applies

(del credere commission).

Chapter 4:

Franchise

Section 1:

General

IV. E. – 4:101: Scope

This Chapter applies to contracts under which one party (the franchisor)

grants the other party (the franchisee), in exchange for remuneration, the

right to conduct a busin ess (franchise business) within the franchisor’s

network for the purposes of supplying certain products on the franchisee’s

behalf and in the franchisee’s name, and under which the franchisee has

the right and the obligation to use the franchisor’s tradename or trademark

or other in tellectual property rights, know-how and business method.

IV. E. – 4:102: Pre-contractual information

(1) The duty under IV. E. – 2:101 (Pre- contractual information duty) re-

quires the franchisor in particular to provide the franchisee with ade-

quate and timely information concerning:

(a) the franchisor’s company and experience;

(b) the relevant intellectual property rights;

Part E.Commercial agency, franchise and distributorship IV. E. – 4:102

357

(d) the commercial sector and the market conditions;

(e) the particular franchise method and its operation;

(f) the structure and extent of the franchise network;

(g) the fees, royalties or any other periodical payments; and

(h) the terms of the contract.

(2) Even if the franchisor’s non-compliance with paragraph (1) does not

give rise to a mistake for which the contract could be avoided under

II. – 7:201 (Mistake), the franchisee may recover damages in accord-

ance with paragraphs (2) and (3) of

II. – 7:214 (Dama ges for loss),

unless the franchisor had reason to believe that the information was

adequate or had been given in reasonable time.

(3) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 4:103: Co-operation

The parties to a contract within the scope of this Chapter may not exclude

the application of

IV. E. – 2:201 (Co-operation) or derogate from or vary its

effects.

Section 2:

Obligations of the franchisor

IV. E. – 4:201: Intellectual property rights

(1) The franchisor must grant the franchisee a right to use the intellectual

property rights to the extent necessary to operate the franchise busi-

ness.

(2) The franchisor must make reasonable efforts to ensure the undisturbed

and continuous use of the intellectual property rights.

(3) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 4:202: Know-how

(1) Throughout the duration of the contractual relationship the franchisor

must provide the franchisee with the know-how which is necessary to

operate the franchise business.

IV. E. – 4:103 Book IV

358

(2) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 4:203: Assistance

(1) The franchisor must provide the franchisee with assistance in the form

of training courses, guidance and advice, in so far as necessary for the

operation of the franchise business, without additional charge for the

franchisee.

(2) The franchisor must provide further assistance, in so far as reasonably

requested by the franchisee, at a reasonable cost.

IV. E. – 4:204: Supply

(1) When the franchisee is obliged to obtain the products from the fran-

chisor, or from a supplier designated by the franchisor, the franchisor

must ensure that the products ordered by the franchisee are supplied

within a reasonable time, in so far as practicable and provided that the

order is reasonable.

(2) Paragraph (1) also applies to cases where the franchisee, although not

legally obliged to obtain the products from the franchisor or from a

supplier designated by the franchisor, is in fact required to do so.

(3) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 4:205: Information by franchisor during the perform ance

The obligation to inform requires the franchisor in particular to provide the

franchisee with information concerning:

(a) market conditions;

(b) commercial results of the franchise network;

(d) prices and terms for the supply of products;

(e) any recommended prices and terms for the re-supply of products to

customers;

(f) relevant communication between the franchisor and customers in the

territory; and

(g) advertising campaigns.

Part E.Commercial agency, franchise and distributorship IV. E. – 4:205

359

IV. E. – 4:206: Warning of decreased supply capacity

(1) When the franchisee is obliged to obtain the products from the fran-

chisor, or from a supplier designated by the franchisor, the franchisor

must warn the franchisee within a reasonable time when the franchisor

foresees that the franchisor’s supply capacity or the supply capacity of

the designated suppliers will be significantly less than the franchisee

had reason to expect.

(2) For the purpose of paragraph (1) the franchisor is presumed to foresee

what the franchisor could reasonably be expected to foresee.

(3) Paragraph (1) also applies to cases where the franchisee, although not

legally obliged to obtain the products from the franchisor or from a

supplier designated by the franchisor, is in fact required to do so.

(4) The parties may not, to the detriment of the franchisee, exclude the

application of this Article or derogate from or vary its effects.

IV. E. – 4:207: Reputation of network and advertising

(1) The franchisor must make reasonable efforts to promote and maintain

the reputation of the franchise network.

(2) In particular, the franchisor must design and co-ordinate the appropri-

ate advertising camp aigns aiming at the promotion of the franchise

network.

(3) The activities of promotion and maintenance of the reputation of the

franchise network are to be carried out without additional charge to the

franchisee.

Section 3:

Obligations of the franchisee

IV. E. – 4:301: Fees, royalties and other periodical payments

(1) The franchisee must pay to the franchisor fees, royalties or other per-

iodical payments agreed upon in the contract.

(2) If fees, royalties or any other periodical payments are to be determined

unilaterally by the franchisor,

II. – 9:105 (Unilateral determination by a

party) applies.

IV. E. – 4:206 Book IV

360

IV. E. – 4:302: Information by franchisee during the performance

The obligation under IV. E. – 2:202 ((Information during the performance)

requires the franchisee in particular to provide the franchisor with informa-

tion concerning:

(a) claims brought or threatened by third parties in relation to the franchi-

sor’s intellectual property rights; and

(b) infringements by third parties of the franchisor’s intellectual property

rights.

IV. E. – 4:303: Business method and instructions

(1) The franchisee must make reasonable efforts to operate the franchise

business according to the business method of the franchisor.

(2) The franchisee must follow the franchisor’s reasonable instructions in

relation to the business method and the maintenance of the reputation

of the network.

(3) The franchisee must take reasonable care not to harm the franchise

network.

(4) The parties may not exclude the application of this Article or derogate

from or vary its effects.

IV. E. – 4:304: Inspection

(1) The franchisee must grant the franchisor reasonable access to the franchi-

see’s premises to enable the franchisor to check that the franchisee is

complying with the franchisor’s business method and instructions.

(2) The franchise must grant the franchisor reasonable access to the ac-

counting books of the franchisee.

Chapter 5:

Distributorship

Section 1:

General

IV. E. – 5:101: Scope and definitions

(1) This Chapter applies to contracts (distribution contracts) under which

one party, the supplier, agrees to supply the other party, the distributor,

with products on a continuing basis and the distributor agrees to pur-

Part E.Commercial agency, franchise and distributorship IV. E. – 5:101

361

chase them, or to take and pay for them, and to supply them to others

in the distributor’s name and on the distributor’s behalf.

(2) An exclusive distribution contract is a distribution contract under

which the supplier agrees to supply products to only one distributor

within a certain territory or to a certain group of customers.

(3) A selective distribution contract is a distribution contract under which

the supplier agrees to supply products, either directly or indirectly, only

to distributors selected on the basis of specified criteria.

(4) An exclusive purchasing contract is a distribution contract under which

the distributor agrees to purchase, or to take and pay for, products only

from the supplier or from a party designated by the supplier.

Section 2:

Obligations of the supplier

IV. E. – 5:201: Obligation to supply

The supplier must supply the products ordered by the distributor in so far as

it is practicable and provided that the order is reasonable.

IV. E. – 5:202: Information by supplier during the performance

The obligation under IV. E. – 2:202 (Information during the performance)

requires the supplier to provide the distributor with information concern-

ing:

(a) the characteristics of the products;

(b) the prices and terms for the supply of the products;

customers;

(d) any relevant communication between the supplier and customers; and

(e) any advertising campaigns relevant to the operation of the business.

IV. E. – 5:203: Warning by supplier of decreased supply capacity

(1) The supplier must warn the distributor within a reasonable time when

the supplier foresees that the supplier’s supply capacity will be signif-

icantly less than the distributor had reason to expect.

(2) For the purpose of paragraph (1) the supplier is presumed to foresee

what the supplier could reasonably be expected to foresee.

IV. E. – 5:201 Book IV

362

(3) In exclusive purchasing contracts, the parties may not exclude the ap-

plication of this Article or derogate from or vary its effects.

IV. E. – 5:204: Advertising materials

The supplier must provide the distributor at a reasonable price with all the

advertising materials the supplier has which are needed for the proper dis-

tribution and promotion of the products.

IV. E. – 5:205: The reputation of the products

The supplier must make reasonable efforts not to damage the reputation of

the products.

Section 3:

Obligations of the distributor

IV. E. – 5:301: Obligation to distribute

In exclusive distribution contracts and selective distribution contracts the

distributor must, so far as practicable, make reasonable efforts to promote

the products.

IV. E. – 5:302: Information by distributor during the performance

In exclusive distribution contracts and selective distribution contracts, the

obligation under

IV. E. – 2:202 (Information during the performance) re-

quires the distributor to provide the supplier with information concern-

ing:

(a) claims brought or threatened by third parties in relation to the suppli-

er’s intellectual property rights; and

(b) infringements by third parties of the suppl ier’s intellectual p roperty

rights.

IV. E. – 5:303: Warning by distributor of decreased requirements

(1) In exclusive distribution contracts and selective distribution contracts,

the distributor must warn the supplier within a reasonable time when

the distributor foresees that the distributor’s requirements will be sig-

nificantly less than the supplier had reason to expect.

(2) For the purpose of paragraph (1) the distributor is presumed to foresee

what the distributor could reasonably be expected to foresee.

Part E.Commercial agency, franchise and distributorship IV. E. – 5:303

363

IV. E. – 5:304: Instructions

In exclusive distribution contracts and selective distribution contracts, the

distributor must follow reasonable instructions from the supplier which are

designed to secure the proper distribution of the products or to maintain

the reputation or the distinctiveness of the products.

IV. E. – 5:305: Inspection

In exclusive distribution contracts and selective distribution contracts, the

distributor must provide the supplier with reasonable access to the distri-

butor’s premises to enable the supplier to check that the distributor is com-

plying with the standards agreed upon in the contract and with reasonable

instructions given.

IV. E. – 5:306: The reputation of the products

In exclusive distribution contracts and selective distribution contracts, the

distributor must make reasonable efforts not to damage the reputation of

the products.

Part F.

Loan contracts

IV.F. – 1:101: Scope

(1) This Part of Book IV applies to loan contracts other than:

(a) those under which a business lends to a consumer; and

(b) those where the loan is made for the purchase or maintenance of

immovable property.

(2) A loan contract is a contract by which one party, the lender, is obliged

to provide the other party, the borrower, with credit of any amount for a

definite or indefinite period (the loan period), in the form of a mone-

tary loan or of an overdraft facility and by which the borrower is obliged

to repay the money obtained under the credit, whether or not the bor-

rower is obliged to pay interest or any other kind of remuneration the

parties have agreed upon.

IV. E. – 5:304 Book IV

364

(3) A monetary loan is a fixed sum of money which is lent to the borrower

and which the borrower agrees to repay either by fixed instalments or

by paying the whole sum at the end of the loan period.

(4) An overdraft facility is an option for the borrower to withdraw funds on

a fluctuating, limited basis from the borrower’s current account in ex-

cess of the current balance in the account. Unless otherwise deter-

mined, an overdraft facility has a revolving character meaning that the

borrower has the possibility to use this facility over and over again.

(5) A contract is not a loan contract merely because it provides for the time

of payment of an obligation to pay money to be deferred, unless it

requires the borrower to pay interest or any other charge in addition

to the price.

(6) The parties may however agree that money due under an existing ob-

ligation to pay money will in future be due under a loan contract.

IV.F. – 1:102: Main obligation of the lender

(1) The lender is obliged to provide t he borrower with credit for the

amount, in the manner and for the period determinable from the con-

tract.

(2) If a period of time within which the obligation is to be performed can-

not be determined from the terms regulating the obligation, the lender

is obliged to make the credit available a reasonable time after the bor-

rower’s demand.

IV.F. – 1:103: Obligation of the borrower to take up loan

(1) Where the credit takes the form of a monetary loan, the borrower is

obliged to take up the loan in the manner and for the period determin-

able from the contract.

(2) If the time the borrower is to take up the loan is not determinable from

the contract, the borrower is obliged to take up the loan a reasonable

time after the lender’s demand.

IV.F. – 1:104: Interest

(1) The borrower is obliged to pay interest or any other kind of remunera-

tion according to the terms of the contract.

(2) If the contract does not specify the interest payable, interest is payable

unless both parties are consumers.

Part F.Loan contracts IV.F. – 1:104

365

(3) Interest accrues day by day from the date the borrower takes up the

monetary loan or makes use of the overdraft facility but is payable at

the end of the loan period or annually, whichever occurs earlier.

(4) Interest payable according to the preceding paragraph is added to the

outstanding capital every 12 months.

IV.F. – 1:105: Purpose of the credit

If the contract restricts use of the credit to a specific purpose, the borrower

is obliged, within a reasonable time after the lender’s demand, to provide

information necessary to enable the lender to verify its use.

IV.F. – 1:106: Repayment and termination

(1) The borrower is obliged to repay the money obtained under the credit

in the manner and at the time determinable from the loan contract. If

the time the borrower is to repay the money is not determinable from

the contract, the borrower is obliged to repay it a reasonable time after

the lender’s demand.

(2) The borrower can, by repayment, terminate an overdraft at will.

(3) The borrower can, by repayment, terminate a loan at any time if under

the loan contract the borrower does not have to pay interest or any

other kind of remuneration which depends on t he duration of the

credit.

(4) The borrower can, by repayment, terminate at any time the loan under

any other type of loan contract with a specified duration. Parties can-

not exclude the application of this rule or derogate from or vary its

effects.

(5) Where the loan contract has a specified duration of more than 1 year

and provides for a fixed interest rate the borrower can terminate by early

repayment under paragraph (4) only on giving the lender three months

notice.

(6) On early termination under paragraphs (4) or (5) the borrower is ob-

liged to pay all interest due up to the date of repayment and to indem-

nify the lender for any loss caused by the early termination.

(7) If the loan contract has an unspecified duration then, without prejudice

to the borrower’s rights under paragraphs (2) and (3), either party can

terminate the relationship by giving the other a reasonable period of

notice.

II. – 1:109 (Variation or termination by notice) applies.

IV.F. – 1:105 Book IV

366

Part G.

Personal security

Chapter 1:

Common rules

IV. G. – 1:101: Definitions

For the purposes of this Part:

(a) a “dependent personal security” is an obligation by a security provider

which is assumed in favour of a creditor in order to secure a right to

performance of a present or future obligation of the debtor owed to the

creditor and performance of which is due only if, and to the extent that,

performance of the latter obligation is due;

(b) an “independent personal security” is an obligation by a security pro-

vider which is assumed in favour of a creditor for the purposes of se-

curity and which is expressly or impliedly declared not to depend upon

another person’s obligation owed to the creditor;

wards the creditor for the purposes of security;

(d) the “debtor” is the person who owes the secured obligation, if any, to

the creditor, and, in provisions relating to purported obligations, in-

cludes an apparent debtor;

(e) a “co-debtorship for security purposes” is an obligation owed by two or

more debtors in which one of the debtors, the security provider, as-

sumes the obligation primarily for purposes of security towards the

creditor;

(f) a “global security” is a dependent personal security which is assumed

in order to secure a right to performance of all the debtor’s obligations

towards the creditor or a right to payment of the debit balance of a

current account or a security of a similar extent;

(g) “proprietary security” covers security rights in all kinds of assets,

whether movable or immovable, corporeal or incorporeal; and

(h) the “secured obligation” is the obligation the right to the performance

of which is secured.

Part G.Personal security IV. G. – 1:101

367

IV. G. – 1:102: Scope

(1) This Part applies to any type of voluntarily assumed personal security

and, in particular, to:

(a) dependent personal securities, including those assumed by bind-

ing comfor t letters;

(b) independent personal securities, including those assu med by

stand-by letters of credit; and

(2) This Part does not apply to insurance contracts. In the case of a guar-

antee insurance, this Part applies only if and in so far as the insurer has

issued a document containing a personal security in favour of the cred-

itor.

(3) This Part does not affect the rules on the aval and the security endor-

sement of negotiable instruments, but does apply to security for ob-

ligations resulting from such an aval or security endorsement.

IV. G. – 1:103: Creditor’s acceptance

(1) If the parties intend to create the security by contract, the creditor is

regarded as accepting an offer of security as soon as the offer reaches

the creditor, unless the offer requires express acceptance, or the cred-

itor without undue delay rejects it or reserves time for consideration.

(2) A personal security can also be assumed by a unilateral undertaking

intended to be legally binding without acceptance. The rules of this

Part apply with any appropriate adaptations.

IV. G. – 1:104: Co-debtorship for security purposes

A co-debtorship for security purposes is subject to the rules of Chapters 1

and 4 and, subsidiarily, to the rules in Book

III, Chapter 4, Section 1 (Plur-

ality of debtors).

IV. G. – 1:105: Several security providers: solidary liability

towards creditor

(1) To the extent that several providers of personal security have secured

the right to performance of the same obligation or the same part of

an obligation or have assumed their undertakings for the same secu-

rity purpose, each security provider assumes within the limits of that

security provider’s undertaking to the creditor solidary liability toge-

ther with the other security providers. This rule also applies if these

IV. G. – 1:102 Book IV

368

security providers in assuming their securities have acted indepen-

dently.

(2) Paragraph (1) applies with appropriate adaptations if proprietary secu-

rity has been provided by the debtor or a third person in addition to the

personal security.

IV. G. – 1:106: Several security providers: internal recourse

(1) In the cases covered by the preceding Article recourse between several

providers of personal security or between providers of personal security

and of proprietary security is governed by

III. – 4:107 (Recourse be-

tween solidary debtors), subject to the following paragraphs.

(2) Subject to paragraph (8), the proportionate share of each security pro-

vider for the purposes of that Article is determined according to the

rules in paragraphs (3) to (7).

(3) Unless the security providers have otherwise agreed, as between them-

selves each security provider is liable in the same proportion that the

maximum risk assumed by that security provider bore to the total of the

maximum risks assumed by all the security providers. The relevant time

is that of the creation of the last security.

(4) For personal security, the maximum risk is determined by the agreed

maximum amount of the security. In the absence of an agreed max-

imum amount, the value of the secured right or, if a current account

has been secured, the credit limit is decisive. If a secured current ac-

count does not have a credit limit, its final balance is decisive.

(5) For proprietary security, the maximum risk is determined by the agreed

maximum amount of the security. In the absence of an agreed max-

imum amount, the value of the assets serving as security is decisive.

(6) If the maximum amount in the case of paragraph (4) first sentence or

the maximum amount or the value, respectively, in the case of para-

graph (5) is higher than the value of the secured right at the time of

creation of the last security, the latter determines the maximum risk.

(7) In the case of an unlimited personal security securing an unlimited

credit the maximum risk of other limited personal or proprietary secu-

rity rights which exceed the final balance of the secured credit is limited

to the latter.

(8) The rules in paragraphs (3) to (7) do not apply to proprietary security

provided by the debtor and to security providers who, at the time when

the creditor was satisfied, were not liable towards the latter.

Part G.Personal security IV. G. – 1:106

369

IV. G. – 1:107: Several security providers: recourse against debtor

(1) Any security provider who has satisfied a right of recourse of another

security provider is subrogated to this extent to the other security pro-

vider’s rights against the debtor as acquired under

IV. G. – 2:113 (Se-

curity provider’s rights after performance) paragraphs (1) and (3), in-

cluding proprietary security rights granted by the debtor.

IV. G. – 2:110

(Reduction of creditor’s rights) applies with appropriate adaptations.

(2) Where a security provider has recourse against the debtor by virtue of

the rights acquired under

IV. G. – 2:113 (Security provider’s rights after

performance) paragraphs (1) and (3) or under the precedin g para-

graph, including proprietary security rights granted by the debtor, every

security provider is entitled to a proportionate share, as defined in

IV. G. – 1:106 (Several security providers: internal recourse) paragraph

(2) and

III. – 4:107 (Recourse between solidary debtors), of the ben-

efits recovered from the debtor.

IV. G. – 2:110 (Reduction of creditor’s

rights) applies with appropriate adaptations.

(3) Unless expressly stated to the contrary, th e preceding rules do not

apply to proprietary security provided by the debtor.

IV. G. – 1:108: Subsidiary application of rules on

solidary de btors

If and in so far as the provisions of this Part do not apply, the rules on

plurality of debtors in

III. – 4:107 (Recourse between solidary debtors) to

III. – 4:112 (Opposability of other defences in solidary obligations) are sub-

sidiarily applicable.

Chapter 2:

Dependent personal security

IV. G. – 2:101: Presumption for dependent personal security

(1) Any undertaking to pay, to render any other performance or to pay

damages to the creditor by way of security is presumed to give rise to

a dependent personal security, unless the creditor shows that it was

agreed otherwise.

(2) A binding comfort letter is presumed to give rise to a dependent per-

sonal security.

IV. G. – 1:107 Book IV

370

IV. G. – 2:102: Dependence of security provider’s obligation

(1) Whether and to what extent performance of the obligation of the pro-

vider of a dependent personal security is due, depends upon whether

and to what extent performance of the debtor’s obligation to the cred-

itor is due.

(2) The security provider’s obligation does not exceed the debtor’s obliga-

tion. This rule does not apply if the debtor’s obligations are reduced or

discharged:

(a) in an insolvency proceeding;

(b) in any other way caused by the debtor’s inability to perform be-

cause of insolvency; or

(3) Except in the case of a global security, if an amount has not been fixed

for the security and cannot be determined from the agreement of the

parties, the security provider’s obligation is limited to the value of the

secured right at the time the security became effective.

(4) Except in the case of a global security, any agreement between the

creditor and the debtor to make performance of the secured obligation

due earlier, or to make the obligation more onerous by changing the

conditions on which performance is due, or to increase its amount,

does not affect the security provider’s obligation if the agreement was

concluded after the security provider’s obligation became effective.

IV. G. – 2:103: Debtor’s defences available to

the securit y provider

(1) As against the creditor, the security provider may invoke any defence of

the debtor with respect to the secured obligation, even if the defence is

no longer available to the debtor due to acts or omissions of the debtor

occurring after the security became effective.

(2) The security provider is entitled to refuse to perform the security ob-

ligation if:

(a) the debtor is entitled to withdraw from the contract with the cred-

itor under Book

II, Chapter 5 (Right of withdrawal).

(b) the debtor has a right to withhold performance under

III. – 3:401

(Right to withhold performance of reciprocal obligation); or

ship with the creditor under Book

III, Chapter 3, Section 5 (Termi-

nation).

Part G.Personal security IV. G. – 2:103

371

(3) The security provider may not invoke the lack of capacity of the debtor,

whether a natural person or a legal entity, or the non-existence of the

debtor, if a legal entity, if the relevant facts were known to the security

provider at the time when the security became effective.

(4) As long as the debtor is entitled to avoid the contract from which the

secured obligation arises on a ground other than those mentioned in

the preceding paragraph and has not exercised that right, the security

provider is entitled to refuse performance.

(5) The preceding paragraph applies with appropriate adaptations if the

secured obligation is subject to set-off.

IV. G. – 2:104: Coverage of security

(1) The security covers, within its maximum amount, if any, not only the

principal secured obligation, but also the debtor’s ancillary obligations

towards the creditor, especially:

(a) contractual interest and interest due by law on delay in payment;

(b) damages, a penalty or an agreed payment for non-performance by

the debtor; and

(2) The costs of legal proceedings and enforcement proceedings against

the debtor are covered , provided the secu rity provider had been in-

formed about the creditor’s intention to undertake such proceedings

in sufficient time to enable the security provider to avert those costs.

(3) A global security covers only obligations which originated in contracts

between the debtor and the creditor.

IV. G. – 2:105: Solidary liability of security provider

Unless otherwise agreed, the liability of the debtor and the security pro-

vider is solidary and, accordingly, the creditor has the choice of claiming

solidary performance from the debtor or, within the limits of the security,

from the security provider.

IV. G. – 2:106: Subsidiary liability of security provider

(1) If so agreed, the security provider may invoke as against the creditor the

subsidiary character of the security provider’s liability. A binding com-

fort letter is presumed to establish only subsidiary liability.

(2) Subject to paragraph (3), before demanding performance from the se-

curity provider, the creditor must have undertaken appropriate attempts

IV. G. – 2:104 Book IV

372

to obtain satisfaction from the debtor and other security providers, if

any, securing the same obligation under a personal or proprietary se-

curity establishing solidary liability.

(3) The creditor is not required to attempt to obtain satisfaction from the

debtor and any other security provider according to the preceding para-

graph if and in so far as it is obviously impossible or exceedingly dif-

ficult to obtain satisfaction from the person concerned. This exception

applies, in particular, if and in so far as an insolvency or equivalent

proceeding has been opened against the person concerned or opening

of such a proceeding has failed due to insufficient asse ts, unless a

proprietary security provided by that person and for the same obliga-

tion is available.

IV. G. – 2:107: Requirement of notification by creditor

(1) The creditor is required to notify the security provider without undue

delay in case of a non-performance by, or inability to pay of, the debtor

as well as of an extension of maturity; this notification must include

information about the secured amounts of the principal oblig ation,

interest and other ancillary obligations owed by the debtor on the date

of the notification. An additional notification of a new event of non-

performance need not be given before three months have expired since

the previous notification. No notification is required if an event of non-

performance merely relates to ancillary obligations of the debtor, unless

the total amount of all non-performed secured obligations has reached

five percent of the outstanding amount of the secured obligation.

(2) In addition, in the case of a global security, the creditor is required to

notify the security provider of any agreed increase:

(a) whenever such increase, starting from the creation of the security,

reaches 20 percent of the amount that was so secured at that time;

and

(b) whenever the secured amount is further increased by 20 percent

compared with the secured amount at the date when the last in-

formation according to this paragraph was or should have been

given.

(3) Paragraphs (1) and (2) do not apply, if and in so far as the security

provider knows or could reasonably be expected to know the required

information.

Part G.Personal security IV. G. – 2:107

373

(4) If the creditor omits or delays any notification required by this Article

the creditor’s rights against the security provider are reduced by the

extent necessary to prevent the latter from suffering any loss as a result

of the omission or delay.

IV. G. – 2:108: Time limit for resort to security

(1) If a time limit has been agreed, directly or indirectly, for resort to a

security establishing solidary liability for the security provider, the latter

is no longer liable after expiration of the agreed time limit. However, the

security provider remains liable if the creditor had requested perform-

ance from the security provider after maturity of the secured obligation

but before expiration of the time limit for the security.

(2) If a time limit has been agreed, directly or indirectly, for resort to a

security establishing subsidiary liability for the security provider, the

latter is no longer liable after the expiration of the agreed time limit.

However, the security provider remains liable if the creditor:

(a) after maturity of the secured obligation, but before expiration of

the time limit, has informed the security provider of an intention to

demand performance of the security and of the commencement of

appropriate attempts to obtain satisfaction as required according to

IV. G. – 2:106 (Subsidiary liability of security provider) paragraphs

(2) and (3); and

(b) informs the security provider every six months about the status of

these attempts, if so demanded by the security provider.

(3) If performance of the secured obligations falls due upon, or within 14

days before, expiration of the time limit of the security, the request for

performance or the information according to paragraphs (1) and (2)

may be given earlier than provided for in paragraphs (1) and (2), but no

more than 14 days before expiration of the time limit of the security.

(4) If the creditor has taken due measures according to the preceding para-

graphs, the security provider’s maximum liability is restricted to the

amount of the secured obligations as defined in

IV. G. – 2:104 (Cover-

age of security) paragraphs (1) and (2). The relevant time is that at

which the agreed time limit expires.

IV. G. – 2:108 Book IV

374

IV. G. – 2:109: Limiting security without time limit

(1) Where the scope of a security is not limited to obligations arising, or

obligations performance of which falls due, within an agreed time lim-

it, the scope of the security may be limited by any party giving notice of

at least three months to the other party. The preceding sentence does

not apply if the security is restricted to cover specific obligations or

obligations arising from specific contracts.

(2) By virtue of the notice, the scope of the security is limited to the se-

cured principal obligations performance of which is due at the date at

which the limitation becomes effective and any secured ancillary ob-

ligations as defined in

IV. G. – 2:104 (Coverage of security) paragraphs

(1) and (2).

IV. G. – 2:110: Reduction of creditor’s rights

(1) If and in so far as due to the creditor’s conduct the security provider

cannot be subrogated to the creditor’s rights against the debtor and to

the creditor’s personal and proprietary security rights granted by third

persons, or cannot be fully reimbursed from the debtor or from third

party security providers, if any, the creditor’s rights against the security

provider are reduced by the extent necessary to prevent the latter from

suffering any loss as a result of the creditor’s conduct. The security

provider has a corresponding right to recover from the creditor if the

security provider has already performed.

(2) Paragraph (1) applies only if the creditor’s conduct falls short of the

standard of care which could be expected of persons managing their

affairs with reasonable prudence.

IV. G. – 2:111: Debtor’s relief for the security provider

(1) A security provider who has provided a security at the debtor’s request

or with the debtor’s express or presumed consent may request relief by

the debtor:

(a) if the debtor has not performed the secured obligation when per-

formance became due;

(b) if the debtor is unable to pay or has suffered a substantial diminu-

tion of assets; or

security provider.

(2) Relief may be granted by furnishing adequate security.

Part G.Personal security IV. G. – 2:111

375

IV. G. – 2:112: Notification and request by security provider

before perfo rmance

(1) Before performance to the creditor, the security provider is required to

notify the debtor and reques t information about the outstanding

amount of the secured obligation and any defences or counterclaims

against it.

(2) If the security provider fails to comply with the requirements in para-

graph (1) or neglects to raise defences communicated by the debtor or

known to the security provider from other sources, the security provid-

er’s rights to recover from the debtor under

IV. G. – 2:113 (Security pro-

vider’s rights after performance) are reduced by the extent necessary to

prevent loss to the debtor as a result of such failure or neglect.

(3) The security provider’s rights against the creditor remain unaffected.

IV. G. – 2:113: Security provider’s rights after performance

(1) The security provider has a right to reimbursement from the debtor if

and in so far as the security provider has performed the security ob-

ligation. In addition the security provider is subrogated to the extent

indicated in the preceding sentence to the creditor’s rights against the

debtor. The right to reimbursement and rights acquired by subrogation

are concurrent.

(2) In case of part performance, the creditor’s remaini ng partial rights

against the debtor have priority over the rights to which the security

provider has been subrogated.

(3) By virtue of the subrogation under paragraph (1), dependent and in-

dependent personal and proprietary security rights are transferred by

operation of law to the security provider notwithstanding any contrac-

tual restriction or excl usion of transferability agreed by th e debtor.

Rights against other security providers can be exercised only within

the limits of

IV. G. – 1:106 (Several securit y providers: internal re-

course).

(4) Where the debtor due to incapacity is not liable to the creditor but the

security provider is nonetheless bound by, and performs, the security

obligation, the security provider’s right to reimbursement fro m the

debtor is limited to the extent of the debtor’s enrichment by the trans-

action with the creditor. This rule applies also if a debtor legal entity

has not come into existence.

IV. G. – 2:112 Book IV

376

Chapter 3:

Independent personal security

IV. G. – 3:101: Scope

(1) The independence of a security is not prejudiced by a mere general

reference to an underlying obligation (including a personal security).

(2) The provisions of this Chapter also apply to standby letters of credit.

IV. G. – 3:102: Notification to debtor by security provider

(1) The security provider is required:

(a) to notify the debtor immediately if a demand for performance is

received and to state whether or not, in the view of the security

provider, performance falls to be made;

(b) to notify the debtor immediately if performance has been made in

accordance with a demand; and

withstanding a demand and to state the reasons for the refusal.

(2) If the security provider fails to comply with the requirements in para-

graph (1) the security provider’s rights against the deb tor under

IV. G. – 3:109 (Security provider’s rights after performance) are reduced

by the extent necessary to prevent loss to the debtor as a result of such

failure.

IV. G. – 3:103: Performance by security provider

(1) The security provider is obliged to perform only if there is, in textual

form, a demand for per formance which complies exactly with the terms

set out in the contract or other juridical act creating the security.

(2) Unless otherwise agreed, the security provider may invoke defences

which the security provider has against the creditor.

(3) The security provider must without undue delay and at the latest within

seven days of receipt, in textual form, of a demand for performance:

(a) perform in accordance with the demand; or

(b) inform the creditor of a refusal to perform, stating the reasons for

the refusal.

Part G.Personal security IV. G. – 3:103

377

IV. G. – 3:104: Independent personal security on first demand

(1) An independent personal security which is expressed as being due

upon first demand or which is in such terms that this can unequivo-

cally be inferred, is governed by the rules in the preceding Article, ex-

cept as provided in the two following paragraphs.

(2) The security provider is obliged to perform only if the creditor’s de-

mand is supported by a declaration in textual form by the creditor

which expressly confirms that any condition upon which performance

of the security becomes due is fulfilled.

(3) Paragraph (2) of the preceding Article does not apply.

IV. G. – 3:105: Manifestly abusive or fraudulent demand

(1) A security provider is not obliged to comply with a demand for per-

formance if it is proved by present evidence that the demand is mani-

festly abusive or fraudulent.

(2) If the requirements of the preceding paragraph are fulfilled, the debtor

may prohibit:

(a) performance by the security provider; and

(b) issuance or utilisation of a demand for performance by the creditor.

IV. G. – 3:106: Security provider’s right to reclaim

(1) The security provider has the right to reclaim the benefits received by

the creditor if:

(a) the conditions for the creditor’s demand were not or subsequently

ceased to be fulfilled; or

(b) the creditor’s demand was manifestly abusive or fraudulent.

(2) The security provider’s right to reclaim benefits is subject to the rules in

Book

VII (Unjustified Enrichment).

IV. G. – 3:107: Security with or without time limits

(1) If a time limit has been agreed, directly or indirectly, for the resort to a

security, the security provider exceptionally remains liable even after

expiration of the time limit, provided the creditor had demanded per-

formance according to

IV. G. – 3:103 (Performance by security provid-

er) paragraph (1) or

IV. G. – 3:104 (Independent personal security on

first demand) at a time when the creditor was entitled to do so and

before expiration of the time limit for the security.

IV. G. – 2:108 (Time

limit for resort to security) paragraph (3) applies with appropriate adap-

IV. G. – 3:104 Book IV

378

tations. The security provider’s maximum liability is restricted to the

amount which the creditor could have demanded as of the date when

the time limit expired.

(2) Where a security does not have an agreed time limit, the security pro-

vider may set such a time limit by giving notice of at least three months

to the other party. The security provider’s liability is restricted to the

amount which the creditor could have demanded as of the date set by

the security provider. The preceding sentences do not apply if the se-

curity is given for specific purposes.

IV. G. – 3:108: Transfer of security right

(1) The creditor’s right to performance by the security provider can be as-

signed or otherwise transferred.

(2) However, in the case of an independent personal security on first de-

mand, the right to performance cannot be assigned or otherwise trans-

ferred and the demand for performance can be made only by the ori-

ginal creditor, unless the security provides otherwise. This does not

prevent transfer of the proceeds of the security.

IV. G. – 3:109: Security provider’s rights after performance

IV. G. – 2:113 (Security provider’s rights after performance) applies with

appropriate adaptations to the rights which the security provider may ex-

ercise after performance.

Chapter 4:

Special rules for personal security of consumers

IV. G. – 4:101: Scope of application

(1) Subject to paragraph (2), this Chapter applies when a security is pro-

vided by a consumer.

(2) This Chapter is not applicable if:

(a) the creditor is also a consumer; or

(b) the consumer security provider is able to exercise substantial in-

fluence upon the debtor where the debtor is not a natural person.

Part G.Personal security IV. G. – 4:101

379

IV. G. – 4:102: Applicable rules

(1) A personal security subject to this Chapter is governed by the rules of

Chapters 1 and 2, except as otherwise provided in this Chapter.

(2) The parties may not, to the detriment of a security provider, exclude the

application of the rules of this Chapter or derogate from or vary their

effects.

IV. G. – 4:103: Creditor’s pre-contractual duties

(1) Before a security is granted, the creditor has a duty to explain to the

intending security provider:

(a) the general effect of the intended security; and

(b) the special risks to which the security provider may according to

the information accessible to the creditor be exposed in view of the

financial situation of the debtor.

(2) If the creditor knows or has reason to know that due to a relationship of

trust and confidence between the debtor and the securi ty provider

there is a signifi cant risk that the security provider is not acting freely

or with adequate information, the creditor has a duty to ascertain that

the security provider has received independent advice.

(3) If the information or independent advice required by the precedin g

paragraphs is not given at least five days before the security provider

signs the offer of security or the contract creating the security, the offer

can be revoked or the contract avoided by the security provider within a

reasonable time after receipt of the information or th e independent

advice. For this purpose f ive days is regarded as a reasonable time un-

less the circumstances suggest otherwise.

(4) If contrary to paragraph (1) or (2) no information or independent ad-

vice is given, the offer can be revoked or the contract avoided by the

security provider at any time.

(5) If the security provider revokes the offer or avoids the contract accord-

ing to the preceding paragraphs, the return of benefits received by the

parties is governed by Book

VII (Unjustified Enrichment).

IV. G. – 4:104: Form

The contract of security must be in textual form on a durable medium and

must be signed by the security provider. A contract of security which does

not comply with the req uirements of the preceding sentence is void.

IV. G. – 4:102 Book IV

380

IV. G. – 4:105: Nature of security provider’s liability

Where this Chapter applies:

(a) an agreement purpor ting to create a security without a maximum

amount, whether a global security or not, is considered as creating a

dependent security with a fixed amount to be determined according to

IV. G. – 2:102 (Dependence of security provider’s obligation) paragraph

(3);

(b) the liability of a provider of dependent security is subsidiary within the

meaning of

IV. G. – 2:106 (Subsidiary liability of security provider), un-

less expressly agreed otherwise; and

claration that it does not de pend upon another person’s obligation

owed to the creditor is disregarded, and accordingly a dependent se-

curity is considered as having been created, provided the other require-

ments of such a security are met.

IV. G. – 4:106: Creditor’s obligations of annual information

(1) Subject to the debtor’s consent, the creditor has to inform the security

provider annually about the secured amounts of the principal obliga-

tion, interest and other ancillary obligations owed by the debtor on the

date of the information. The debtor’s consent, once given, is irrevoc-

able.

(2)

IV. G. – 2:107 (Requirement of notification by creditor) paragraphs (3)

and (4) apply with appropriate adaptations.

IV. G. – 4:107: Limiting security with time limit

(1) A security provider who has provided a security whose scope is limited

to obligations arising, or obligations performance of which falls due,

within an agreed time limit may three years after the security became

effective limit its effects by giving notice of at least three months to the

creditor. The preceding sentence does not apply if the security is re-

stricted to cover specific obligations or obligations arising from specific

contracts. The creditor has to inform the debtor immediately on receipt

of a notice of limitation of the security by the security provider.

(2) By virtue of the notice, the scope of the security is limited according to

IV. G. – 2:109 (Limiting security without time limit) paragraph (2).

Part G.Personal security IV. G. – 4:107

381

Part H.

Donation

Chapter 1:

Scope and general provisions

Section 1:

Scope and definitions

IV. H. – 1:101: Contracts covered

(1) This Part of Book IV applies to contracts for the donation of goods.

(2) A contract for the donation of goods is a contract under which one

party, the donor, gratuitously under takes to transfer the ownership of

goods to another party, the donee, and does so with an intention to

benefit the donee.

IV. H. – 1:102: Future goods and goods to be

manufactured or produced

(1) In this Part of Book IV the word “goods” includes goods which at the

time of the conclusion of the contract do not yet exist or are to be

acquired by the donor.

(2) A contract under which one party undertakes gratuitously, and with an

intention to benefit the other par ty, to manufacture or produce goods

for the other party and to transfer their ownership to the other party is

to be regarded as primarily a contract for the donation of the goods.

IV. H. – 1:103: Application to other assets

(1) This Part applies with appropriate adaptations to:

(a) contracts for the donation of money;

(b) contracts for the donation of electricity;

and negotiable instruments;

(d) contracts for the donation of other forms of incorporeal property,

including rights to the performance of obligations, industrial and

intellectual property rights and other transferable rights;

(e) contracts gratuitously conferring rights in information or data, in-

cluding software and databases.

IV. H. – 1:101 Book IV

382

(2) This Part does not apply to contracts for the donation of immovable

property or rights in immovable property.

IV. H. – 1:104: Application to unilateral undertakings

and immediate donations

This Part applies with appropriate adaptations where the donor gratuitous-

ly, with an intention to benefit the donee:

(a) unilaterally undertakes to transfer the ownership of goods to the do-

nee; or

(b) immediately transfers the ownership of goods to the donee.

IV. H. – 1:105: Donations due or conditional on death

(1) This Part does not apply where:

(a) performance of the obligation to transfer is due only on the donor’s

death;

(b) the transfer or obligation to transfer is subject to the suspensive

condition of the donor’s death; or

tive condition of the donee predeceasing the donor.

(2) Parag raph (1) does not apply if the donor renders performance or

waives the condition before the donor’s death.

Section 2:

Gratuitousness and intention to benefit

IV. H. – 1:201: Gratuitousness

An undertaking to transfer is gratuitous if it is done without reward.

IV. H. – 1:202: Transactions which are not entirely gratuitous

(1) If the party undertaking to transfer receives or is entitled to some re-

ward and the transaction is thereby not entirely gratuitous the contract

is regarded primarily as a contract for the donation of goods if:

(a) this party undertakes to transfer with an intention inter alia to

benefit the other party; and

(b) the values to be conferred by the performances are regarded by

both parties as not substantially equivalent.

Part H.Donation IV. H. – 1:202

383

(2) If the contract coming under paragraph (1) is void or avoided under

these rules but would not be under general rules,

III. – 1:110 (Variation

or termination by court on a change of circumstances) applies with

appropriate adaptations.

(3) If in a case within paragraph (1) a party exercises a right to revoke

under th is Part,

IV. H. – 4:103 (Consequences of revocation) applies

to the whole contractual relationship. The other party may prevent the

effects of revocation by offering a reasonable reward within a reason-

able time after revocation.

IV. H. – 1:203: Intention to benefit

A donor may be regarded as intending to benefit the donee notwithstand-

ing that the donor:

(a) is under a moral obligation to transfer; or

(b) has a promotional purpose.

Chapter 2:

Formation and validity

IV. H. – 2:101: Form requirements

A contract for the donation of goods is not valid unless the under taking of

the donor is in textual form on a durable medium signed by the donor. An

electronic signature which is not an advanced signature in the sense of

I.–

1:107 (“Signature” and similar expressions) paragraph 4, does not suffice

in this regard.

IV. H. – 2:102: Exceptions to the form requirements

The preceding Article does not apply:

(a) in the case of an immediate delivery of the goods to the donee or an

equivalent to such delivery, regardless of whether ownership is trans-

ferred;

(b) if the donation is made by a business;

cast in the radio or television or published in print and is not excessive

in the circumstances.

IV. H. – 1:203 Book IV

384

IV. H. – 2:103: Mistake

A donor may avoid the contract if it was concluded because of a mistake of

fact or law although the req uirements of

II. – 7:201 (Mistake) parag raph

(1)(b) are not satisfied.

IV. H. – 2:104: Unfair expl oitation

A donor, who was dependent on, or was the more vulnerable party in a

relationship of trust with, the donee, may avoid the contract under

II.–

7:207 (Unfair exploitation) unless the donee proves that the donee did not

exploit the donor’s situation by taking an excessive benefit or grossly unfair

advantage.

Chapter 3:

Obligations and remedies

Section 1:

Obligations of the donor

IV. H. – 3:101: Obligations in general

(1) The donor must:

(a) deliver goods which conform with the contract; and

(b) transfer the ownership in the goods as required by the contract.

(2) This Section applie s with appropriate adaptations to fruits acqu ired

from the time when the obligation to deliver is due.

IV. H. – 3:102: Conformity of the goods

(1) The goods do not conform with the contract if they do not possess the

qualities which the donee could reasonably expect unless the donee

knew of the lack of quality or could reasonably be expected to have

known of it when the contract was concluded.

(2) In determining what qualities the donee could reasonably expect, re-

gard is to be had, among other things, to:

(a) the gratuitous nature of the contract;

(b) the purpose of the contract of donation known by, or obvious to,

the donee;

(d) the value of the goods; and

(e) whether the donor was a business.

Part H.Donation IV. H. – 3:102

385

(3) The goods do not conform to the contract if they are not of a quantity,

quality or description provided for by the terms of the contract.

IV. H. – 3:103: Third party rights or claims

The goods do not conform with the contract if they are not free from any

right or reasonably well founded claim of a third party unless the donee

knew or could reasonably expected to have known of the third par ty’s right

or claim.

Section 2:

Remedies of the donee

IV. H. – 3:201: Application of general rules

If the donor fails to perform any of the donor’s obligations under the con-

tract, the donee has the remedies provided for in Book

III, Chapter 3 (Re-

medies for non-performance) unless otherwise provided in this Section.

IV. H. – 3:202: Restricted right to enforce performance

(1) If the goods do not conform with the contract, the donee may not

require replacement or repair under

III. – 3:302 (Enforcement of non-

monetary obligations).

(2) The donee may not enforce performance under

III. – 3:302 (Enforce-

ment of non-monetary obligations) in the case of goods which are to

be acquired by the donor.

IV. H. – 3:203: Restitution in case of termination

If the donee terminates the contract under Book III, Chapter 3, Section 5

(Termination),

III. – 3:511 (When restitution not required) paragraph (3)

does not apply.

IV. H. – 3:204: Exclusion of the right to damages

in case of impediment

(1) A donee’s right to damages is excluded if the donor’s non-performance

is due to an impediment an d if the donor could not reasonably be

expected to have avoided or overcome the impediment or its conse-

quences.

IV. H. – 3:103 Book IV

386

(2) III. – 3:104 (Excuse due to an impediment) paragraphs (3) and (5) ap-

ply correspondingly.

(3) In determinin g what impediment or consequences the donor could

reasonably be expected to have avoided or overcome regard is to be

had to the gratuitous nature of the contract.

(4) This Article does not affect liability under Book

VI (Non-contractual

liability arising out of damage caused to another).

IV. H. – 3:205: Measure of damages

(1) Damages cover loss suffered by the donee acting in the reasonable

belief that the donor would fulfil the obligations.

(2) A supplementary sum of damages may be awarded by the court if it is

seen as just and reasonable in the circumstances.

(3) In determining what is just and reasonable under paragraph (2), regard

is to be had, among other things and apart from the gratuitous nature

of the contract:

(a) the declarations and acts of the parties;

(b) the donor’s purpose in making the donation; and

(4) The total amount of damages under this Article may not exceed such a

sum as will put the aggrieved party as nearly as possible into the posi-

tion in which it would have been if the donor’s obligations under the

contract had been duly performed.

(5) This Article does not affect liability under Book

VI (Non-contractual

liability arising out of damage caused to another).

IV. H. – 3:206: Delay in payment of money

If payment of a sum of money is delayed, the donee is entitled to interest

under

III. – 3:708 (Interest on late payments) unless the non-performance

is excused under

III. – 3:104 (Excuse due to an impediment) or the donee’s

right to damages is excluded under

IV. H. – 3:204 (Exclusion of the right to

damages in case of impediment).

Part H.Donation IV. H. – 3:206

387

Section 3:

Obligations of the donee

IV. H. – 3:301: Obligations to take delivery and accept transfer

(1) The donee must take delivery and accept the transfer of ownership.

(2) The donee performs the obligation to take delivery and accept transfer

by carrying out all the acts which could reasonably be expected of the

donee in order to enable the donor to perform the obligations to deliver

and transfer.

Section 4:

Remedies of the donor

IV. H. – 3:401: Application of general rules

If the donee fails to perform any of the donee’s obligations under the con-

tract, the donor has the remedies provided for in

III. – 2:111 (Property not

accepted),

III. – 2:112 (Money not accepted) and Book III, Chapter 3 (Re-

medies for non-performance).

Chapter 4:

Revocation by the donor

Section 1:

Revocation in general

IV. H. – 4:101: Irrevocability and its exceptions

Contracts for the donation of goods are revocable only if a right to revoke

(a) conferred by the terms of the contract; or

(b) provided for under the rules in this Chapter.

IV. H. – 4:102: Exercise and scope of the right to revoke

(1) The donor’s right to revoke is to be exercised by giving notice to the

donee.

(2) A declaration of partial revocation is to be understood as a revocation

of the whole contract for the donation of goods, if, giving due con-

IV. H. – 3:301 Book IV

388

sideration to all the circumstances of the case, it is unreasonable to

uphold the remaining parts.

IV. H. – 4:103: Consequences of revocation

(1) On revocation under this Chapter, the outstanding obligations of the

parties under the contract come to an end. In the case of a partial

revocation, the relevant part of the outstanding obligations comes to

an end.

(2) On revocation under this Chapter, the donee is obliged to return the

goods. Chapters 5 and 6 of Book

VII (Unjustified enrichment) apply

with appropriate adaptations, unless otherwise provided in this Chap-

ter.

IV. H. – 4:104: Time limits

The right to revoke under this Chapter expires if notice of revocation is not

given within a reasonable time, with due regard to the circumstances, after

the donor knew or could reasonably be expected to have known of the

relevant facts.

Section 2:

Rights of the donor to revoke

IV. H. – 4:201: Ingratitude of the donee

(1) A contract for the donation of goods may be revoked if the donee is

guilty of gross ingratitude by intentionally committing a serious wrong

against the donor.

(2) Revocation under this Article is excluded if the donor knowing the

relevant facts forgives the donee.

(3) For the purpose of paragraph (1) a reasonable time under

IV.H–4:104

(Time limits) is at least one year. If the donor dies before the reasonable

time has expired, the running of the period is suspended until the per-

son entitled to revoke knows or can reasonably be expected to know of

the relevant facts.

(4) For the purpose of paragraph (1) the defence of disenrichment under

VII. – 6:101 (Disenrichment) does not apply.

Part H.Donation IV. H. – 4:201

389

IV. H. – 4:202: Impoverishment of the donor

(1) A contract for the donation of goods may be revoked if the donor is not

in a position to maintain himself or herself out of his or her own patri-

mony or income.

(2) The donor is not in a position to maintain himself or herself if:

(a) he or she would be entitled to maintenance from another if that

other were in a position to provide the maintenance; or

(b) he or she is entitled to social assistance.

(3) The right to revoke is suspended if the donee maintains the donor to

the extent that the latter is or would be entitled to under paragraph (2).

(4) A donor who is not in a position to maintain himself or herself in the

sense of paragraph (1) or who will imminently be in that situation may

withhold performance of any obligations under the contract which

have not yet been performed. Paragraph (3) applies correspondingly

to the right to withhold performance. If the donor withholds perform-

ance, the donee may terminate the contractual relationship.

(5) This Article applies also when the donor’s ability to meet maintenance

obligations established by rule of law or by cour t order, or the existence

of those obligations, is dependent on effective revocation of a dona-

tion.

(6) The right to revoke under this Article may not be restricted or excluded

by the parties.

IV. H. – 4:203: Residual right to revoke

(1) A contract for the donation of goods may also be revoked to the extent

that other essential circumstances upon which it was based have ma-

terially changed after the conclusion of the contract, provided that as a

result of that change:

(a) the benefit to the donee is manifestly inappropriate or excessive; or

(b) it is manifestly unjust to hold the donor to the donation.

(2) Paragraph (1) applies only if:

(a) the change of circumstances was not so foreseeable at the time of

the conclusion of the contract that the donor could re asonably

have been expected to provide for it; and

(b) the risk of that change of circumstances was not assumed by the

donor.

IV. H. – 4:202 Book IV

390

Book V

Benevolent intervention in another’s affairs

Chapter 1:

Scope

V. – 1:101: Intervention to benefit another

(1) This Book applies where a person, the inter vener, acts with the pre-

dominant intention of benefiting another, the principal, and:

(a) the intervener has a reasonable ground for acting; or

(b) the principal approves the act without such undue delay as would

adversely affect the intervener.

(2) The intervener does not have a reasonable grou nd for acting if the

intervener:

(a) has a reasonable opportunity to discover the principal’s wishes but

does not do so; or

(b) knows or can reasonably be expected to know that the interven-

tion is against the principal’s wishes.

V. – 1:102: Intervention to perform another’s duty

Where an intervener acts to perform another person’s duty, the perform-

ance of which is due and urgently required as a matter of overriding public

interest, and the intervener acts with the predominant intention of bene-

fiting the recipient of the performance, the person whose duty the inter-

vener acts to perform is a principal to whom this Book applies.

V. – 1:103: Exclusions

This Book does not apply where the intervener:

(a) is authorised to act under a contractual or other obligation to the prin-

cipal;

(b) is authorised, other than under this Book, to act independently of the

principal’s consent; or

391

Chapter 2:

Duties of intervener

V. – 2:101: Duties during intervention

(1) During the intervention, the intervener must:

(a) act with reasonable care;

(b) except in relation to a principal within V. – 1:102 (Intervention to

perform another’s duty), act in a manner which the intervener

knows or can reasonably be expected to assume accords with the

principal’s wishes; and

intervention and seek the principal’s consent to further acts.

(2) The intervention may not be discontinued without good reason.

V. – 2:102: Reparation for damage caused by breach of duty

(1) The intervener is liable to make reparation to the principal for damage

caused by breach of a duty set out in this Chapter if the damage re-

sulted from a risk which the intervener created, increased or intention-

ally perpetuated.

(2) The intervener’s liability is reduced or excluded in so far as this is fair

and reasonable, having regard to, among other things, the intervener’s

reasons for acting.

(3) An intervener who at the time of intervening lacks full legal capacity is

liable to make reparation only in so far as that intervener is also liable to

make reparation under Book

VI (Non-contractual liability arising out of

damage caused to another).

V. – 2:103: Obligations after intervention

(1) After intervening the intervener must without undue delay report and

account to the principal and hand over anything obtained as a result of

the intervention.

(2) If at the time of intervening the intervener lacks full legal capacity, the

obligation to hand over is subject to the defence which would be avail-

able under

VII. – 6:101 (Disenrichment).

V. – 2:101 Book V

392

(3) The remedies for non-performance in Book III, Chapter 3 apply but

with the modification that any liability to pay damages or interest is

subject to the qualifications in paragraphs (2) and (3) of the preceding

Article.

Chapter 3:

Rights and authority of intervener

V. – 3:101: Right to indemnification or reimbursement

The intervener has a right against the principal for indemnification or, as

the case may be, reimbursement in respect of an obligation or expenditure

(whether of money or other assets) in so far as reasonably incurred for the

purposes of the intervention.

V. – 3:102: Right to remuneration

(1) The intervener has a right to remuneration in so far as the intervention

is reasonable and undertaken in the course of the intervener’s profes-

sion or trade.

(2) The remuneration due is the amount, so far as reasonable, which is

ordinarily paid at the time and place of intervention in order to obtain a

performance of the kind undertaken. If there is no such amount a rea-

sonable remuneration is due.

V. – 3:103: Right to reparation

An intervener who acts to protect the principal, or the principal’s property

or interests, against danger has a right against the principal for reparation

for loss caused as a result of personal injury or property damage suffered in

acting, if:

(a) the intervention created or significantly increased the risk of such in-

jury or damage; and

(b) that risk, so far as foreseeable, was in reasonable proportion to the risk

to the principal.

Chapter 3:Rights and authority of intervener V. – 3:103

393

V. – 3:104: Reduction or exclusion of intervener’s rights

(1) The intervener’s rights are reduced or excluded in so far as the inter-

vener at the time of acting did not want to demand indemnification,

reimbursement, remuneration or reparation, as the case may be.

(2) These rights are also reduced or excluded in so far as this is fair and

reasonable, having regard among other things to whether the interve-

ner acted to protect the principal in a situation of joint danger, whether

the liability of the principal would be excessive and whether the inter-

vener could reasonably be expected to obtain appropriate redress from

another.

V. – 3:105: Obligation of third person to indemnify or

reimburse the principal

If the intervener acts to protect the principal from damage, a person who

would be accountable under Book

VI (Non-contractual liability arising out

of damage caused to another) for the causation of such damage to the

principal is obliged to in demnify or, as the case may be, re imburse the

principal’s liability to the intervener.

V. – 3:106: Authority of intervener to act as representative

of the principal

(1) The intervener may conclude legal transactions or per form other juri-

dical acts as a representative of the principal in so far as this may rea-

sonably be expected to benefit the principal.

(2) However, a unilateral juridical act by the intervener as a representative

of the principal has no effect if the person to whom it is addressed

rejects the act without undue delay.

V. – 3:104 Book V

394

Book VI

Non-contractual liability arising out of

damage caused to another

Chapter 1:

Fundamental provisions

VI. – 1:101: Basic rule

(1) A person who suffers legally relevant damage has a right to reparation

from a person who caused the damage intentionally or negligently or is

otherwise accountable for the causation of the damage.

(2) Where a person has not caused legally relevant damage intentionally or

negligently that person is accountable for the causation of legally rele-

vant damage only if Chapter 3 so provides.

VI. – 1:102: Prevention

Where legally relevant damage is impending, this Book confers on a person

who would suffer the damage a right to prevent it. This right is against a

person who would be accountable for the causation of the damage if it

occurred.

VI. – 1:103: Scope of application

VI. – 1:101 (Basic rule) and VI. – 1:102 (Prevention):

(a) apply only in accordance with the following provisions of this Book;

(b) apply to both legal and natural persons, unless otherwise stated;

of other private law rules; and

(d) do not affect remedies available on other legal grounds.

395

Chapter 2:

Legally relevant damage

Section 1:

General

VI. – 2:101: Meaning of legally relevant damage

(1) Loss, whether economic or non-economic, or injury is legally relevant

damage if:

(a) one of the following rules of this Chapter so provides;

(b) the loss or injury results from a violation of a right otherwise con-

ferred by the law; or

legal protection.

(2) In any casecovered only by sub-paragraphs (b) or (c) of paragraph (1) loss

or injury constitutes legally relevant damage only if it would be fair and

reasonable for there to be a right to reparation or prevention, as the case

may be, under

VI. – 1:101 (Basic rule) or VI. – 1:102 (Prevention).

(3) In considering whether it would be fair and reasonable for there to be a

right to reparation or prevention regard is to be had to the ground of

accountability, to the nature and proximity of the damage or impend-

ing damage, to the reasonable expectations of the person who suffers

or would suffer the damage, and to considerations of public policy.

(4) In this Book:

(a) economic loss includes loss of income or profit, burdens incurred

and a reduction in the value of property;

(b) non-economic loss includes pain and suffering and impairment of

the quality of life.

Section 2:

Particular instances of legally relevant damage

VI. – 2:201: Personal injury and consequential loss

(1) Loss caused to a natural person as a result of injury to his or her body or

health and the injury as such are legally relevant damage.

(2) In this Book:

VI. – 2:101 Book VI

396

(a) such loss includes the costs of health care including expenses rea-

sonably incurred for the care of the injured person by those close

to him or her; and

(b) personal injury includes injury to mental health only if it amounts

to a medical condition.

VI. – 2:202: Loss suffered by third persons as a resu lt

of another’s personal injury or death

(1) Non-economic loss caused to a natural person as a result of another’s

personal injury or death is legally relevant damage if at the time of

injury that person is in a particularly close personal relationship to the

injured person.

(2) Where a person has been fatally injured:

(a) legally relevant damage caused to the deceased on account of the

injury to the time of death becomes legally relevant damage to the

deceased’s successors;

(b) reasonable funeral expenses are legally relevant damage to the per-

son incurring them; and

whom the deceased maintained or, had death not occurred, would

have maintained under statutory provisions or to whom the de-

ceased provided care and financial support.

VI. – 2:203: Infringement of dignity, liberty and privacy

(1) Loss caused to a natural person as a result of infringement of his or her

right to respect for his or her dignity, such as the rights to liberty and

privacy, and the injury as such are legally relevant damage.

(2) Loss caused to a person as a result of injury to that person’s reputation

and the injury as such are also legally relevant damage if national law

so provides.

VI. – 2:204: Loss upon communication of

incorrect information about another

Loss caused to a person as a result of the communication of information

about that person which the person communicating the information knows

or could reasonably be expected to know is incorrect is legally relevant

damage.

Chapter 2:Legally relevant damage VI. – 2:204

397

VI. – 2:205: Loss upon breach of confidence

Loss caused to a person as a result of the communication of information

which, either from its nature or the circumstances in which it was ob-

tained, the person communicating the information knows or could reason-

ably be expected to know is confidential to the person suffering the loss is

legally relevant damage.

VI. – 2:206: Loss upon infringement of property or

lawful possession

(1) Loss caused to a person as a result of an infringement of that person’s

property right or lawful possession of a movable or immovable thing is

legally relevant damage.

(2) In this Article:

(a) loss includes being deprived of the use of property;

(b) infringement of a property right includes destruction of or physical

damage to the subject-matter of the right (property damage), dis-

position of the right, interference with its use and other distur-

bance of the exercise of the right.

VI. – 2:207: Loss upon reliance on incorrect advice or information

Loss ca used to a person as a result of making a decision in reasonable

reliance on incorrect advice or information is legally relevant damage if:

(a) the advice or information is provided by a person in pursuit of a pro-

fession or in the course of trade; and

(b) the provider knew or could reasonably be expected to have known that

the recipient would rely on the advice or information in making a de-

cision of the kind made.

VI. – 2:208: Loss upon unlawful impairment of business

(1) Loss caused to a person as a result of an unlawful impairment of that

person’s exercise of a profession or conduct of a trade is legally relevant

damage.

(2) Loss caused to a consumer as a result of unfair competition is also

legally relevant damage if Community or national law so provides.

VI. – 2:205 Book VI

398

VI. – 2:209: Burdens incurred by the state upon

environmental impairment

Burdens incurred by the State or designated competent authorities in re-

storing substantially impaired natu ral elements constituting the environ-

ment, such as air, water, soil, flora and fauna, are legally relevant damage

to the State or the authorities concerned.

VI. – 2:210: Loss upon fraudulent misrepresentation

(1) Without prejudice to the other provisions of this Section loss caused to

a person as a result of another’s fraudulent misrepresentation, whether

by words or conduct, is legally relevant damage.

(2) A misrepresentation is fraudulent if it is made with knowledge or belief

that the representation is false and it is intended to induce the recipient

to make a mistake.

VI. – 2:211: Loss upon inducement of non-performance

of obligation

Without prejudice to the other provisions of this Section, loss caused to a

person as a result of another’s inducement of the non-performance of an

obligation by a third person is legally relevant damage only if:

(a) the obligation was owed to the person sustaining the loss; and

(b) the person inducing the non-performance:

(i) intended the third person to fail to perform the obligation, and

(ii) did not act in legitimate protection of the inducing person’s own

interest.

Chapter 3:

Accountability

Section 1:

Intention and negligence

VI. – 3:101: Intention

A person causes legally relevant damage intentionally when that person

causes such damage either:

(a) meaning to cause damage of the type caused; or

(b) by conduct which that person means to do, knowing that such dam-

age, or damage of that type, will or will almost certainly be caused.

Chapter 3:Accountability VI. – 3:101

399

VI. – 3:102: Negligence

A person causes legally relevant damage negligently when that person cau-

ses the damage by conduct which either:

(a) does not meet the particular standard of care provided by a statutory

provision whose purpose is the protection of the person suffering the

damage from that damage; or

(b) does not otherwise amount to such care as could be expected from a

reasonably careful person in the circumstances of the case.

VI. – 3:103: Persons under eighteen

(1) A person under eighteen years of age is accountable for causing legally

relevant damage according to

VI. – 3:102 (Negligence) sub-paragraph

(b) only in so far as that person does not exercise such care as could be

expected from a reasonably careful person of the same age in the cir-

cumstances of the case.

(2) A person under seven years of age is not accountable for causing dam-

age intentionally or negligently.

(3) However, paragraphs (1) and (2) do not apply to the extent that:

(a) the person suffering the damage cannot obtain reparation under

this Book from another; and

(b) liability to make reparation would be equitable having regard to the

financial means of the parties and all other circumstances of the

case.

VI. – 3:104: Accountability for damage caused by

children or supervised persons

(1) Parents or other persons obliged by law to provide parental care for a

person under fourteen years of age are accountable for the causation of

legally relevant damage where that person under age caused the dam-

age by conduct that would constitute intentional or negligent conduct

if it were the conduct of an adult.

(2) An institution or other body obliged to supervise a person is accoun-

table for the causation of legally relevant damage suffered by a third

party when:

(a) the damage is personal injury, loss within

VI. – 2:202 (Loss suf-

fered by third persons as a result of another’s personal injury or

death) or property damage;

VI. – 3:102 Book VI

400

(b) the person whom the institution or other body is obliged to super-

vise caused that damage intentionally or negligently or, in the case

of a person under eighteen, by conduct that would constitute in-

tention or negligence if it were the conduct of an adult; and

vise is a person likely to cause damage of that type.

(3) However, a person is not accountable under this Article for the causa-

tion of damage if that person shows that there was no defective super-

vision of the person causing the damage.

Section 2:

Accountability without intention or negligence

VI. – 3:201: Accountability for damage caused by employees

and representatives

(1) A person who employs or similarly engages another is accountable for

the causation of legally relevant da mage suffered by a third person

when the person employed or engaged:

(a) caused the damage in the course of the employment or engage-

ment; and

(b) caused the damage intentionally or negligently, or is otherwise ac-

countable for the causation of the damage.

(2) Paragraph (1) applies correspondingly to a legal person in relation to a

representative causing damage in the course of their engagement. A

representative is a person who is authorised to effect juridical acts on

behalf of the legal person by its constitution.

VI. – 3:202: Accountability for damage caused by the

unsafe state of an immovable

(1) A person who independently exercises control over an immovable is

accountable for the causation of personal injury and consequential

loss, loss within

VI. – 2:202 (Loss suffered by third persons as a result

of another’s personal injury or death), and loss resulting from property

damage (other than to the immovable itself) by a state of the immo-

vable which does not ensure such safety as a person in or near the

immovable is entitled to expect having regard to the circumstances

including:

Chapter 3:Accountability VI. – 3:202

401

(a) the nature of the immovable;

(b) the access to the immovable; and

(2) A person exercises independent control over an immovable if that per-

son exercises such control that it is reasonable to impose a duty on that

person to prevent legally relevant damage within the scope of this Ar-

ticle.

(3) The owner of the immovable is to be regarded as independently exer-

cising control, unles s the owner shows that another independently

exercises control.

VI. – 3:203: Accountability for damage caused by animals

A keeper of an animal is accountable for the causation by the animal of

personal injury and consequential loss, loss within

VI. – 2:202 (Loss suf-

fered by third persons as a result of another’s personal injury or death), and

loss resulting from property damage.

VI. – 3:204: Accountability for damage caused by

defective products

(1) The producer of a product is accountable for the causation of personal

injury and consequential loss, loss within

VI. – 2:202 (Loss suffered by

third persons as a result of another’s personal injury or death), and, in

relation to consumers, loss resulting from property damage (other than

to the product itself) by a defect in the product.

(2) A person who imported the product into the European Economic Area

for sale, hire, leasing or distribution in the course of that person’s busi-

ness is accountable correspondingly.

(3) A supplier of the product is accountable correspondingly if:

(a) the producer cannot be identified; or

(b) in the case of an imported product, the product does not indicate

the identity of the importer (whether or not the producer’s name is

indicated), unless the supplier informs the person suffering the

damage, within a reasonable time, of the identity of the producer

or the person who supplied that supplier with the product.

(4) A person is not accountable under this Article for the causation of

damage if that person shows that:

(a) that person did not put the product into circulation;

VI. – 3:203 Book VI

402

(b) it is pr obable that the defect which caused the damage did not

exist at the time when that person put the product into circulation;

tion for economic purpose nor manufactured or distributed it in the

course of business;

(d) the defect is due to the product’s compliance with mandatory reg-

ulations issued by public authorities;

(e) the state of scientific and technical knowledge at the time that

person put the product into circulation did not enable the exist-

ence of the defect to be discovered; or

(f) in the case of a manufacturer of a component, the defect is attri-

butable to:

(i) the design of the product into which the component has been

fitted; or

(ii) instructions given by the manufacturer of the product.

(5) “Producer” means:

(a) in the case of a finished product or a component, the manufactur-

er;

(b) in the case of raw material, the person who abstracts or wins it;

and

guishing feature on the product, gives the impression of being its

producer.

(6) “Product” means a movable, even if incorporated into another movable

or an immovable, or electricity.

(7) A product is defective if it does not provide the safety which a person is

entitled to expect, having regard to the circumstances including:

(a) the presentation of the product;

(b) the use to which it could reasonably be expected that the product

would be put; and

but a product is not defective merely because a better product is sub-

sequently put into circulation.

VI. – 3:205: Accountability for damage caused by motor vehicles

(1) A keeper of a motor vehicle is accountable for the causation of personal

injury and consequential loss, loss within

VI. – 2:202 (Loss suffered by

third persons as a result of another’s personal injury or death), and loss

Chapter 3:Accountability VI. – 3:205

403

resulting from property damage (other than to the vehicle and its

freight) in a traffic accident which results from the use of the vehicle.

(2) “Motor vehicle” means any vehicle intended for travel on land and

propelled by mechanical power, but not running on rails, and any trai-

ler, whether or not coupled.

VI. – 3:206: Accountability for damage caused by

dangerous substances or emissions

(1) A keeper of a substance or an operator of an installation is accountable

for the causation by that substance or by emissions from that installa-

tion of personal injury and consequential loss, loss within

VI. – 2:202

(Loss suffered by third persons as a result of another’s personal injury

or death), loss resulting from property damage, and burdens within

VI. – 2:209 (Burdens incurred by the State upon environmental impair-

ment), if:

(a) having regard to their quantity and attributes, at the time of the

emission, or, failing an emission, at the time of contact with the

substance it is very likely that the substance or emission will cause

such damage unless adequately controlled; and

(b) the damage results from the realisation of that danger.

(2) “Substance” includes chemicals (whether solid, liquid or gaseous).

Microorganisms are to be treated like substances.

(3) “Emission” includes:

(a) the release or escape of substances;

(b) the conduction of electricity;

(d) noise and other vibrations; and

(e) other incorporeal impact on the environment.

(4) “Installation” includes a mobile inst allation and an installation under

construction or not in use.

(5) However, a person is not accountable for the causation o f damage

under this Article if that person:

(a) does not keep the substance or operate the installation for purpo-

ses related to that person’s trade, business or profession; or

(b) shows that there was no failure to comply with statutory standards

of control of the subst ance or management of the installation.

VI. – 3:206 Book VI

404

VI. – 3:207: Other accountability for the causation of

legally relevant damage

A person is also accountable for the causation of legally relevant damage if

national law so provides where it:

(a) relates to a source of danger which is not within

VI. – 3:104 (Account-

ability for damage caused by children or supervised persons) to

VI.–

3:205 (Accountability for damage caused by motor vehicles);

(b) relates to substances or emissions; or

VI. – 3:204 (Accountability for damage caused by defective

products) paragraph (4)(e).

VI. – 3:208: Abandonment

For the purposes of this section, a person remains accountable for an im-

movable, vehicle, substance or installation which that person abandons

until another exercises independent control over it or becomes its keeper

or operator. This applies correspondingly, so far as reasonable, in respect of

a keeper of an animal.

Chapter 4:

Causation

VI. – 4:101: General ru le

(1) A person causes legally relevant damage to another if the damage is to

be regarded as a consequence of that person’s conduct or the source of

danger for which that person is responsible.

(2) In cases of personal injury or death the injured person’s predisposition

with respect to the type or extent of the injury sustained is to be dis-

regarded.

VI. – 4:102: Collaboration

A person who participates with, instigates or materially assists another in

causing legally relevant damage is to be regarded as causing that damage.

VI. – 4:103: Alternative causes

Where legally relevant damage may have been caused by any one or more

of a number of occurrences for which different persons are accountable and

it is established that the damage was caused by one of these occurrences

Chapter 4:Causation VI. – 4:103

405

but not which one, each person who is accountable for any of the occur-

rences is rebuttably presumed to have caused that damage.

Chapter 5:

Defences

Section 1:

Consent or conduct of the person suffering the damage

VI. – 5:101: Consent and acting at own risk

(1) A person has a defence if the person suffering the damage validly con-

sents to the legally relevant damage and is aware or could reasonably

be expected to be aware of the consequences of that consent.

(2) The same applies if the person suffering the damage, knowing the risk

of damage of the type caused, voluntarily takes that risk and is to be

regarded as accepting it.

VI. – 5:102: Contributory fault and accountability

(1) Where the fault of the person suffering the damage contributes to the

occurrence or extent of legally relevant damage, rep aration is to be

reduced according to the degree of such fault.

(2) However, no regard is to be had to:

(a) an insubstantial fault of the person suffering the damage;

(b) fault or accountability whose contribution to the causation of the

damage is insubstantial;

sonal injury caused by a motor vehicle in a traffic accident, unless

that want of care constitutes profound failure to take such care as

is manifestly required in the circumstances.

(3) Paragraphs (1) and (2) apply correspondingly where the fault of a per-

son for whom the person suffering the damage is responsible within

the scope of

VI. – 3:201 (Accountability for damage caused by employ-

ees and representatives) contributes to the occurrence or extent of the

damage.

(4) Compensation is to be reduced likewise if and in so far as any other

source of danger for which the person suffering the damage is respon-

sible under Chapter 3 (Accountability) contributes to the occurrence or

extent of the damage.

VI. – 5:101 Book VI

406

VI. – 5:103: Damage caused by a criminal to a collaborator

Legally relevant damage caused unintentionally in the course of commit-

ting a criminal offence to another person participating or otherwise colla-

borating in the offence does not give rise to a right to reparation if this

would be contrary to public policy.

Section 2:

Interests of accountable persons or third parties

VI. – 5:201: Authority conferred by law

A person has a defence if legally relevant damage is caused with authority

conferred by law.

VI. – 5:202: Self-defence, benevolent intervention and necessity

(1) A person has a defence if that person causes legally relevant damage in

reasonable protection of a right or of an interest worthy of legal pro-

tection of that person or a third person if the person suffering the leg-

ally relevant damage is accountable for endangering the right or interest

protected. For the purposes of this paragraph

VI. – 3:103 (Persons un-

der eighteen) is to be disregarded.

(2) The same applies to legally relevant damage caused by a benevolent

intervener to a principal without breach of the intervener’s duties.

(3) Where a person causes legally relevant damage to the patrimony of

another in a situation of imminent danger to life, body, health or liberty

in order to save the person causing the damage or a third person from

that danger and the danger could not be eliminated without causing

the damage, the person causing the damage is not liable to make re-

paration beyond providing reasonable recompense.

VI. – 5:203: Protection of public interest

A person has a defence if legally relevant damage is caused in necessary

protection o f values fundamental to a democratic society, in particular

where damage is caused by dissemination of information in the media.

Chapter 5:Defences VI. – 5:203

407

Section 3:

Inability to control

VI. – 5:301: Mental incompetence

(1) A person who is mentally incompetent at the time of conduct causing

legally relevant damage is liable only if this is equitable, having regard

to the mentally incompetent person’s financial means and all the other

circumstances of the case. Liability is limited to reasonable recom-

pense.

(2) A person is to be regarded as mentally incompetent if that person lacks

sufficient insight into the nature of his or her conduct, unless the lack

of sufficient insight is the temporary result of his or her own miscon-

duct.

VI. – 5:302: Event beyond control

A person has a defence if legally relevant damage is caused by an abnormal

event which cannot be averted by any reasonable measure and which is not

to be regarded as that person’s risk.

Section 4:

Contractual exclusion and restriction of liability

VI. – 5:401: Contractual exclusion and restriction of liability

(1) Liability for causing legally relevant damage intentionally cannot be

excluded or restricted.

(2) Liability for causing legally relevant damage as a result of a profound

failure to take such care as is manifestly required in the circumstances

cannot be excluded or restricted:

(a) in respect of personal injury (including fatal injury); or

(b) if the exclusion or restriction is otherwise illegal or contrary to

good faith and fair dealing.

(3) Liability for damage for the causation of which a person is accountable

under

VI. – 3:204 (Accountability for damage caused by defective pro-

ducts) cannot be restricted or excluded.

(4) Other liability under this Book can be excluded or restricted unles s

statute provides otherwise.

VI. – 5:301 Book VI

408

Section 5:

Loss within

VI. – 2:202 (Loss suffered by third persons

as a result of another’s personal injury or death)

VI. – 5:501: Extension of defences against the

injured person to third persons

A defence which may be asserted against a person’s right of reparation in

respect of that person’s personal injury or, if death had not occurred, could

have been asserted, may also be asserted against a person suffering loss

within

VI. – 2:202 (Loss suffered by third persons as a result of another’s

personal injury or death).

Chapter 6:

Remedies

Section 1:

Reparation in general

VI. – 6:101: Aim and forms of reparation

(1) Reparation is to reinstate the person suffering the legally relevant dam-

age in the position that person would have been in had the legally

relevant damage not occurred.

(2) Reparation may be in money (compensation) or otherwise, as is most

appropriate, having regard to the kind and extent of damage suffered

and all the other circumstances of the case.

(3) Where a tangible object is damaged, compensation equal to its depre-

ciation of value is to be awarded instead of the cost of its repair if the

cost of repair unreasonably exceeds the depreciation of value. This rule

applies to animals only if appropriate, having regard to the purpose for

which the animal was kept.

(4) As an alternative to reinstatement under paragraph (1), but only where

this is reasonable, reparation may take the form of recovery from the

person accountable for the causation of the legally relevant damage of

any advantage obtained by the latter in connection with causing the

damage.

Chapter 6:Remedies VI. – 6:101

409

VI. – 6:102: De minimis rule

Trivial damage is to be disregarded.

VI. – 6:103: Equalisation of benefits

(1) Benefits arising to the person suffering legally relevant damage as a

result of the damaging event are to be disregarded unless it would be

fair and reasonable to take them into account.

(2) In deciding whether it would be fair and reasonable to take the benefits

into account, regard shall be had to the kind of damage sustained, the

nature of the accountability of the person causing the damage and,

where the benefits are conferred by a third person, the purpose of con-

ferring those benefits.

VI. – 6:104: Multiple persons suffering damage

Where multiple persons suffer legally relevant damage and reparation to

one person will also make reparation to another, Book

III, Chapter 4, Sec-

tion 2 (Plurality of creditors) applies with appropriate adaptation to their

rights to reparation.

VI. – 6:105: Solidary liability

Where several persons are liable for the same legally relevant damage, they

are liable solidarily.

VI. – 6:106: Assignment of right to reparation

The person suffering the damage may assign a right to reparation, including

a right to reparation for non-economic loss.

Section 2:

Compensation

VI. – 6:201: Right of election

The person suffering the damage may choose whether or not to spend

compensation on the reinstatement of the damaged interest.

VI. – 6:102 Book VI

410

VI. – 6:202: Reduction of liability

Where it is fair and reasonable to do so, a person may be relieved of liability

to compensate, either wholly or in part, if, where the damage is not caused

intentionally, liability in full would be disproportionate to the accountabil-

ity of the person causing the damage or the extent of the damage or the

means to prevent it.

VI. – 6:203: Capitalisation and quantification

(1) Compensation is to be awarded as a lump sum unless a good reason

requires periodical payment.

(2) National law determines how compensation for personal injury and

non-economic loss is to be quantif ied.

VI. – 6:204: Compensation for injury as such

Injury as such is to be compensated independent of compensation for eco-

nomic or non-economic loss.

Section 3:

Prevention

VI. – 6:301: Right to prevention

(1) The right to prevention exists only in so far as:

(a) reparation would not be an adequate alternative remedy; and

(b) it is reasonable for the person who would be account able for the

causation of the damage to prevent it from occurring.

(2) Where the source of danger is an object or an animal and it is not

reasonably possible for the endangered person to avoid the danger the

right to prevention includes a right to have the source of danger re-

moved.

VI. – 6:302: Liability for loss in preventing damage

A person who has reasonably incurred expenditure or sustained other loss

in order to prevent that person from suffering an impending damage, or in

order to limit the extent or severity of damage suffered, has a right to com-

pensation from the person who would have been accountable for the cau-

sation of the damage.

Chapter 6:Remedies VI. – 6:302

411

Chapter 7:

Ancillary rules

VI. – 7:101: National constitutional laws

The provisions of this Book are to be interpreted and applied in a manner

compatible with the constitutional law of the court.

VI. – 7:102: Statutory provisions

National law determines what legal provisions are statutory provisions.

VI. – 7:103: Public law functions and court proceedings

This Book does not govern the liability of a person or body arising from the

exercise or omission to exercise public law functions or from per forming

duties during court proceedings.

VI. – 7:104: Liability of employees, employers, trade unions

and employers’ associations

This Book does not govern the liability of:

(a) employees (whether to co-employees, employers or third parties) aris-

ing in the course of employment;

(b) employers to employees arising in the course of employment; and

industrial dispute.

VI. – 7:105: Reduction or exclusion of liability to

indemnified persons

If a person is entitled from another source to reparation, whether in full or

in part, for that person’s damage, in particular from an insurer, fund or

other body, national law determines whether or not by virtue of that enti-

tlement liability under this Book is limited or excluded.

VI. – 7:101 Book VI

412

Book VII

Unjustified enrichment

Chapter 1:

General

VII. – 1:101: Basic rule

(1) A person who obtains an unjustified enrichment which is attributable

to another’s disadvantage is obliged to that other to reverse the enrich-

ment.

(2) This rule applies only in accordance with the following provisions of

this Book.

Chapter 2:

When enrichment unjustified

VII. – 2:101: Circumstances in which an enrichment is unjustified

(1) An enrichment is unjustified unless:

(a) the enriched person is entitled as against the disadvantaged person

to the enrichment by virtue of a contract or other juridical act, a

court order or a rule of law; or

(b) the disadvantaged person consented freely and without error to

the disadvantage.

(2) If the contract or other juridical act, court order or rule of law referred to

in paragraph (1)(a) is void or avoided or otherwise rendered ineffective

retrospectively, the enriched person is not entitled to the enrichment

on that basis.

(3) However, the enriched person is to be regarded as entitled to an en-

richment by virtue of a rule of law only if the policy of that rule is that

the enriched person is to retain the value of the enrichment.

(4) An enrichment is also unjustified if:

(a) the disadvantaged person conferred it:

413

(i) for a purpose which is not achieved; or

(ii) with an expectation which is not realised;

(b) the enriched person knew of, or could reasonably be expected to

know of, the purpose or expectation; and

have accepted that the enrichment must be reversed in such cir-

cumstances.

VII. – 2:102: Performance of obligation to third person

Where the enriched person obtains the enrichment as a result of the dis-

advan taged person performing an obligation or a supposed obligation

owed by the disadvantaged person to a third person, the enrichment is

justified if:

(a) the disadvantaged person performed freely; or

(b) the enrichment was merely the incidental result of performance of the

obligation.

VII. – 2:103: Consenting or performing freely

(1) If the disadvantaged person’s consent is affected by incapacity, fraud,

coercion, threats or unfair exploitation, the disadvantaged person does

not consent freely.

(2) If the obligation which is per formed is ineffective because of incapacity,

fraud, coercion threats or unfair exploitation, the disadvantaged person

does not perform freely.

Chapter 3:

Enrichment and disadvantage

VII. – 3:101: Enrichment

(1) A person is enriched by:

(a) an increase in assets or a decrease in liabilities;

(b) receiving a service or having work done; or

(2) In determining whether and to what extent a person obtains an en-

richment, no regard is to be had to any disadvantage which that person

sustains in exchange for or after the enrichment.

VII. – 2:102 Book VII

414

VII. – 3:102: Disadvantage

(1) A person is disadvantaged by:

(a) a decrease in assets or an increase in liabilities;

(b) rendering a service or doing work; or

(2) In determining whether and to what extent a person sust ains a disad-

vantage, no regard is to be had to any enrichment which that person

obtains in exchange for or after the disadvantage.

Chapter 4:

Attribution

VII. – 4:101: Instances of attribution

An enrichment is attributable to another’s disadvantage in particular

where:

(a) an as set of that other is transferred to t he enr iched person by that

other;

(b) a service is rendered to or work is done for the enriched person by that

other;

riched person infringes the disadvantaged person’s rights or legally pro-

tected interests;

(d) an asset of the enriched person is improved by that other; or

(e) the enriched person is discharged from a liability by that other.

VII. – 4:102: Intermediaries

Where one party to a juridical act is an authorised intermediary indirectly

representing a principal, any enrichment or disadvantage of the principal

which results from the juridical act, or from a performance of obligations

under it, is to be regarded as an enrichment or disadvantage of the inter-

mediary.

Chapter 4:Attribution VII. – 4:102

415

VII. – 4:103: Debtor’s performance to a non-creditor;

onward transfer in good faith

(1) An enrichment is also attributable to another’s disadvantage where a

debtor confers the enrichment on the enriched person and as a result

the disadvantaged person loses a right against the debtor to the same

or a like enrichment.

(2) Paragraph (1) applies in particular where a person who is obliged to the

disadvantaged person to reverse an unjustified enrichment transfers it

to a third person in circumstances in which the debtor has a defence

under

VII. – 6:101 (Disenrichment).

VII. – 4:104: Ratification of debtor’s performance to

a non-creditor

(1) Where a debtor purports to discharge a debt by paying a third person,

the creditor may ratify that act.

(2) Ratification extinguishes the creditor’s right against the debtor to the

extent of the payment with the effect that the third person’s enrich-

ment is attributable to the creditor’s loss of the claim against the debt-

or.

(3) As between the creditor and the third person, ratification does not

amount to consent to the loss of the creditor’s right against the debtor.

(4) This Article applies correspondingly to performances of non-monetary

obligations.

(5) Other rules may exclude the application of this Article if an insolvency

or equivalent proceeding has been opened against the debtor before

the creditor ratifies.

VII. – 4:105: Attribution resulting from an act of an intervener

(1) An enrichment is also attributable to another’s disadvantage where a

third person uses an asset of the disadvantaged person without author-

ity so that the dis advantaged person is deprived of the asset and it

accrues to the enriched person.

(2) Paragraph (1) applies in particular where, as a result of an intervener’s

interference with or disposition of goods, the disadvantaged person

ceases to be owner of the goods and the enriched perso n be comes

owner, whether by juridical act or rule of law.

VII. – 4:103 Book VII

416

VII. – 4:106: Ratification of intervener’s acts

(1) A person entitled to an asset may ratify the act of an intervener who

purports to dispose of or otherwise uses that asset in a juridical act

with a third person.

(2) The ratified act has the same effect as a juridical act by an authorised

intermediary. As between the person ratifying and the intervener, ra-

tification does not amount to consent to the intervener’s use of the

asset.

VII. – 4:107: Where type or value not identical

An enrichment may be attributable to another’s disadvantage even though

the enrichment and disadvantage are not of the same type or value.

Chapter 5:

Reversal of enrichment

VII. – 5:101: Transferable enrichment

(1) Where the enrichment consists of a transferable asset, the enriched

person reverses the enrichment by transferring the asset to the disad-

vantaged person.

(2) Instead of transferring the asset, the enriched person may choose to

reverse the enrichment by paying its monetary value to the disadvan-

taged person if a transfer would cause the enriched person unreason-

able effort or expense.

(3) If the enriched person is no longer able to transfer the asset, the en-

riched person reverses the enrichment by paying its monetary value to

the disadvantaged person.

(4) However, to the extent that the enriched person has obtained a sub-

stitute in exchange, the substitute is the enrichment to be reversed if:

(a) the enriched person is in good faith at the time of disposal or loss

and the enriched person so chooses; or

(b) the enriched person is not in good faith at the time of disposal or

loss, the disadvantaged person so chooses and the choice is not

inequitable.

(5) The enriched person is in good faith if that person neither knew nor

could reasonably be expected to know that the enrichment was or was

likely to become unjustified.

Chapter 5:Reversal of enrichment VII. – 5:101

417

VII. – 5:102: Non-transferable enrichment

(1) Where the enrichment does not consist of a transferable asset, the

enriched person reverses the enrichment by paying its monetar y value

to the disadvantaged person.

(2) The enriched person is not liable to pay more than any saving if the

enriched person:

(a) did not consent to the enrichment; or

(b) was in good faith.

(3) However, where the enrichment was obtained under an agreement

which fixed a price or value for the enrichment, the enriched person

is at least liable to pay that sum if the agreement was void or voidable

for reasons which were not material to the fixing of the price.

(4) Parag raph (3) does not apply so as to incr ease lia bility beyond the

monetary value of the enrichment.

VII. – 5:103: Monetary value of an enrichment; saving

(1) The monetary value of an enrichment is the sum of money which a

provider and a recipient with a real intention of reaching an agreement

would lawfully have agreed as its price. Expenditure of a service pro-

vider which the agreement would require the recipient to reimburse is

to be regarded as part of the price.

(2) A saving is the decrease in assets or increase in liabilities which the

enriched person would have sustained if the enrichment had not been

obtained.

VII. – 5:104: Fruits and use of an enrichment

(1) Reversal of the enrichment extends to the fruits and use of the enrich-

ment or, if less, any saving resulting from the fruits or use.

(2) However, if the enriched person obtains the fruits or use in bad faith,

reversal of the enrichment extends to the fruits and use even if the

saving is less than the value of the fruits or use.

VII. – 5:102 Book VII

418

Chapter 6:

Defences

VII. – 6:101: Disenrichment

(1) The enriched person is not liable to reverse the enrichment to the ex-

tent that the enriched person has sustained a disadvantage by dispos-

ing of the enrichment or otherwise (disenrichment), unless the enri-

ched person would have been disenriched even if the enrichment had

not been obtained.

(2) However, a disenrichment is to be disregarded to the extent that:

(a) the enriched person has obtained a substitute;

(b) the enriched person was not in good faith at the time of disenrich-

ment, unless:

(i) the disadvantaged person would also have been disenriched

even if the enrichment had been reversed; or

(ii) the enriched person was in good faith at the time of enrich-

ment, the disenrichment was sustained before performance of

the obligation to reverse the enrichment was due and the dis-

enrichment resulted from the realisation of a risk for which the

enriched person is not to be regarded as responsible;

VII. – 5: 102 (Non-transferable enrichment) ap-

plies.

(3) Where the enriched person has a defence under this Article as against the

disadvantaged person as a result of a disposal to a third person, anyright of

the disadvantaged person against that third person is unaffected.

VII. – 6:102: Juridical acts in good faith with third partie s

The enriched person is also not liable to reverse the enrichment if:

(a) in exchange for that enrichment the enriched person confers another

enrichment on a third person; and

(b) the enriched person is still in good faith at that time.

VII. – 6:103: Illegality

Where a contract or other juridical act under which an enrichment is ob-

tained is void or avoided because of an infringement of a fun damental

principle (

II. – 7:301 (Contracts infringing fundamental principles)) or

Chapter 6:Defences VII. – 6:103

419

mandatory rule of law, the enriched person is not liable to reverse the en-

richment to the extent that the reversal would contravene the policy under-

lying the principle or rule.

Chapter 7:

Relation to other legal rules

VII. – 7:101: Other private law rights to recover

(1) The legal consequences of an enrichment which is obtained by virtue

of a contract or other juridical act are governed by other rules if those

rules grant or exclude a right to reversal of an enrichment, whether on

withdrawal, termination, price reduction or otherwise.

(2) This Book does not address the proprietary effect of a right to reversal

of an enrichment.

(3) This Book does not affect any other right to recover arising under con-

tractual or other rules of private law.

VII. – 7:102: Concurrent obligations

(1) Where the disadvantaged person has both:

(a) a claim under this Book for reversal of an unjustified enrichment;

and

(b) (i) a claim for reparation for the disadvantage (whether against the

enriched person or a third party); or

(ii) a right to recover under other rules of private law as a result of

the unjustified enrichment,

the satisfaction of one of the claims reduces the other claim by the

same amount.

(2) The same applies where a person uses an asset of the disadvantaged

person so that it accrues to another and under this Book:

(a) the user is liable to the disadvantaged person in respect of the use

of the asset; and

(b) the recipient is liable to the disadvantaged person in respect of the

increase in assets.

VII. – 7:103: Public law claims

This Book does not determine whether it applies to enrichments which a

person or body obtains or confers in the exercise of public law functions.

VII. – 7:101 Book VII

420

Book VIII

Acquisition and loss of ownership of goods

Chapter 1:

General provisions

Section 1:

Scope of application and relation to other provisions

VIII. – 1:101: Scope of application

(1) This Book applies to the acquisition, loss and protection of ownership

of goods and to specific related issues.

(2) This Book does not apply to the acquisition or loss of ownership of

goods by:

(a) universal succession, in particular under the law of succession and

under company law;

(b) expropriation and forfeiture;

(d) division of co-ownership, unless provided by

VIII. – 2:306 (Deliv-

ery out of the bulk) or

VIII. – 5:202 (Commingling);

(e) survivorship or accrual, unless covered by Chapter 5 of this Book;

(f) real subrogation, unless covered by Chapter 5 of this Book;

(g) occupation;

(h) finding; or

(i) abandonment.

(3) This Book applies to the acquisition and loss of ownership of goods by

extrajudicial enforcement in the sense of Book

IX or the equivalent. It

may be applied, with appropriate adaptations, to the acquisition and

loss of ownership of goods by judicial or equivalent enforcement.

(4) This Book does not apply to:

(a) company shares or documents embodying the right to an asset or

to the per formance of an obligation, except documents containing

the undertaking to deliver goods for the purposes of

VIII. – 2:105

(Equivalents to delivery) paragraph (4); or

(b) electricity.

421

(5) This Book applies, with appropriate adaptations, to banknotes and

coins that are current legal tender.

VIII. – 1:102: Registration of goods

(1) Whether ownership and the transfer of ownership in certain categories

of goods may be or have to be registered in a public register is deter-

mined by national law.

(2) The effects of such registration, as determined by national law, have

priority over the respective rules of this Book.

VIII. – 1:103: Priority of other provisions

(1) In relation to a transfer, or retention, of ownership for purposes of se-

curity, the provisions of Book

IX apply and have priority over the pro-

visions in this Book.

(2) In relation to a transfer of ownership for purposes of a trust, or to or

from a trust, the provisions of Book X apply and have priority over the

provisions in this Book.

VIII. – 1:104: Application of rules of Books I to III

Where, under the provisions of this Book, proprietary effects ar e deter-

mined by an agreement, Books I to

III apply, where appropriate.

Section 2:

Definitions

VIII. – 1:201: Goods

“Goods” means corporeal movables. It includes ships, vessels, hovercraft

or aircraft, space objects, animals, liquids and gases.

VIII. – 1:202: Ownership

“Ownership” is the most comprehensive right a person, the “owner”, can

have over property, including the exclusive right, so far as consistent with

applicable laws or rights granted by the owner, to use, enjoy, modify, de-

stroy, dispose of and recover the property.

VIII. – 1:102 Book VIII

422

VIII. – 1:203: Co-ownership

Where “co-ownership” is created under this Book, this means that two or

more co-owners own undivided shares in the whole goods and each co-

owner can dispose of that co-owner’s share by acting alone, unless other-

wise provided by the par ties.

VIII. – 1:204: Limited proprietary rights

Limited proprietary rights in the sense of this Book are:

(a) security rights if characterised or treated as proprietary rights by Book

IX or by national law;

(b) rights to use if characterised or treated as proprietary rights by other

provisions of these model rules or by national law;

VIII. – 2:307 (Contingent right of trans-

feree under retention of ownership) or if characterised or treated as

proprietary rights by other provisions of these model rules or by na-

tional law;

(d) trust-related rights if characterised or treated as proprietary rights by

Book X or by national law.

VIII. – 1:205: Possession

(1) Possession, in relation to goods, means having direct physical control

or indirect physical control over the goods.

(2) Direct physical control is physical control which is exercised by the

possessor personally or through a possession-agent exercising such

control on behalf of the possessor (direct possession).

(3) Indirect physical control is physical control which is exercised by

means of another person, a limited-right-possessor (indirect posses-

sion).

VIII. – 1:206: Possession by owner-possessor

An “owner-possessor” is a person who exercises direct or indirect physical

control over the goods with the intention of doing so as, or as if, an own-

er.

VIII. – 1:207: Possession by limited-right-possessor

(1) A “limited-right-possessor” is a person who exercises physical control

over the goods either:

Chapter 1:General provisions VIII. – 1:207

423

(a) with the intention of doing so in that person’s own interest, and

under a specific legal relationship with the owner-possessor which

gives the limited-right-possessor the right to possess the goods; or

(b) with the intention of doing so to the order of the owner-possessor,

and under a specific contractual relationship with the owner-pos-

sessor which gives the limited-right-possessor a right to retain the

goods until any charges or costs have been paid by the owner-

possessor.

(2) A limited-right-possessor may have direct physical control or indirect

physical control over the goods.

VIII. – 1:208: Possession through a possession-agent

(1) A “possession-agent” is a person:

(a) who exercises direct physical control over the goods on behalf of an

owner-possessor or limited-right-possessor without the intention

and specific legal relationship required under

VIII. – 1:207 (Posses-

sion by limited-right-possessor) paragraph (1); and

(b) to whom the owner-possessor or limited-right-possessor may give

binding instructions as to the use of the goods in the interest of the

owner-possessor or limited-right-possessor.

(2) A possession-agent may, in particular, be:

(a) an employee of the owner-possessor or limited-right-possessor or a

person exercising a similar function; or

(b) a person who is given physical control over the goods by the own-

er-possessor or limited-right-possessor for practical reasons.

(3) A person is also a possession-agent where that person is accidentally in

a position to exercise, and does exercise, direct physical control over

the goods for an owner-possessor or limited-right-possessor.

Section 3:

Further general rules

VIII. – 1:301: Transferability

(1) All goods are transferable except where provided otherwise by law. A

limitation or prohibition of the transfer of goods by a contract or other

juridical act does not affect the transferability of the goods.

VIII. – 1:208 Book VIII

424

(2) Whether or to what extent uncollected fruits of, and accessories or

appurtenances to, goods or immovable assets are transferable separate-

ly is regulated by national law. Chapter 5 remains unaffected.

Chapter 2:

Transfer of ownership based on the transferor’s right or

authority

Section 1:

Requirements for transfer under this chapter

VIII. – 2:101: Requirements for the transfer of ownership in general

(1) The transfer of ownership of goods under this Chapter requires that:

(a) the goods exist;

(b) the goods are transferable;

(d) the transferee is entitled as against the transferor to the transfer of

ownership by virtue of a contract or other juridical act, a court

order or a rule of law; and

(e) there is an agreement as to the time ownership is to pass and the

conditions of this agreement are met, or, in the absence of such

agreement, delivery or an equivalent to delivery.

(2) For the purposes of paragraph (1)(e) the delivery or equivalent to de-

livery must be based on, or referable to, the entitlement under the con-

tract or other juridical act, court order or rule of law.

(3) Where the contract or oth er juridical act, court order or rule of law

defines the goods in generic terms, ownership can pass only when the

goods are identified to it. Where goods form part of an identified bulk,

VIII. – 2:305 (Transfer of goods forming part of a bulk) applies.

(4) Paragraph (1)(e) does not apply where ownership passes under a court

order or rule of law at the time determined in it.

VIII. – 2:102: Transferor’s right or authority

(1) Where the transferor lacks a right or authority to transfer ownership at

the time ownership is to pass, the transfer takes place when the right is

obtained or the person having the right or authority to tra nsfer has

ratified the transfer at a later time.

Chapter 2:Transfer of ownership VIII. – 2:102

425

(2) Upon ratificati on the transfer produces the same effects as if it had

initially been carried out with authority. However, proprietary rights

acquired by other persons before ratification remain unaffected.

VIII. – 2:103: Agreement as to the time ownership is to pass

The point in time whe n ownership pas ses may be determined by party

agreement, except where registration is necessary to acquire ownership

under national law.

VIII. – 2:104: Delivery

(1) For the purposes of this Book, delivery of the goods takes place when

the transferor gives up and the transferee obtains possession of the

goods in the sense of

VIII. – 1:205 (Possession).

(2) If the contract or other juridical act, court order or rule of law involves

carriage of the goods by a carrier or a series of carriers, delivery of the

goods takes place when the transferor’s obligation to deliver is fulfilled

and the carrier or the transferee obtains possession of the goods.

VIII. – 2:105: Equivalents to delivery

(1) Where the goods are already in the possession of the transferee, the

retention of the goods on the coming into effect of the entitlement

under the contract or other juridical act, court order or rule of law has

the same effect as delivery.

(2) Where a third person possesses the goods for the transferor, the same

effect as delivery is achieved when the third party receives the trans-

feror’s notice of the ownership being transferred to the transferee, or at

a later time if so stated in the notice. The same applies where notice is

given to a possession-agent in the sense of

VIII. – 1:208 (Possession

through possession-agent).

(3) The same effect as delivery of the goods is achieved when the trans-

feror gives up and the transferee obtains possession of means enabling

the transferee to obtain possession of the goods.

(4) Where a person exercising physical control over goods issues a docu-

ment contain ing an undertaking to deliver the goods to the current

holder of the document, the transfer of that document is equivalent

to delivery of the goods. The document may be an electronic one.

VIII. – 2:103 Book VIII

426

Section 2:

Effects

VIII. – 2:201: Effects of the transfer of ownership

(1) At the time determined by Section 1, ownership passes within the lim-

its of the transferor’s right or authority to dispose, with effect between

the parties and with effect against third persons.

(2) The transfer of ownership does not affect rights and obligations be-

tween the parties based on the terms of a contract or other juridical act,

court order or rule of law, such as:

(a) a right resulting from the passing of risk;

(b) a right to withhold performance;

charges; or

(d) a right to use or an obligation not to use or otherwise deal with the

goods.

(3) The transfer of ownership does not affect rights of or against third par-

ties under other rules of law, such as:

(a) any right of the transferor’s creditors to treat the transfer as inef-

fective arising from the law of insolvency or similar provisions; or

(b) a right to claim reparation under Book

VI (Non-contractual liability

arising out of damage caused to another) from a third party dama-

ging the goods.

(4) Where ownership has been transferred but the transferor still has a

right to withhold delivery of the goods (paragraph (2)(b)), terminating

the contractual relationship while exercising the right to withhold per-

formance has retroactive proprietary effect in the sense of the following

Article.

VIII. – 2:202: Effect of initial invalidity, subsequent avoidance,

withdrawal, termination and revocation

(1) Where the underlying contract or other juridical act is invalid from the

beginning, a transfer of ownership does not take place.

(2) Where, after ownership has been transferred, the underlying contract

or other juridical act is avoided under Book

II, Chapter 7, ownership is

treated as never having passed to the transferee (retroactive proprietary

effect).

Chapter 2:Transfer of ownership VIII. – 2:202

427

(3) Where ownership must be re-transferred as a consequence of withdra-

wal in the sense of Book

II, Chapter 5, or termination in the sense of

Book

III, Chapter 3, or revocation of a donation in the sense of Book

IV.H, there is no retroactive proprietary effect nor is ownership re-trans-

ferred immediately.

VIII. – 2:201 (Effects of the transfer of ownership)

paragraph (4) remains unaffected.

(4) This Article does not affect any right to recover the goods based on

other provisions of these model rules.

VIII. – 2:203: Transfer subject to condition

(1) Where the parties agreed on a transfer subject to a resolutive condition,

ownership is re-transferred immediately upon the fulfilment of that

condition, subject to the limits of the re-transferor’s right or authority

to dispose at that time. A retroactive proprietary effect of the re-transfer

cannot be achieved by party agreement.

(2) Where the contract or other juridical act entitling to the transfer of

ownership is subject to a suspensive condition, ownership passes

when the condition is fulfilled.

Section 3:

Special constellations

VIII. – 2:301: Multiple transfers

(1) Where there are several purported transfers of the same goods by the

transferor, ownership is acquired by the transferee who first fulfils all

the requirements of Section 1 and, in the case of a later transferee, who

neither knew nor could reasonably be expected to know of the earlier

entitlement of the other transferee.

(2) A later transferee who first fulfils all the requirements of Section 1 but

is not in good faith in the sense of paragraph (1) must restore the

goods to the transferor. The transferor’s entitlement to recovery of the

goods from that transferee may also be exercised by the first transferee.

VIII. – 2:302: Indirect representation

(1) Where an agent actin g under a mandate for indirect representation

within the meaning of

IV. D. – 1:102 (Definitions) acquires goods from

VIII. – 2:203 Book VIII

428

a third party on behalf of the principal, the principal directly acquires

the ownership of the goods (representation for acquisition).

(2) Where an agent actin g under a mandate for indirect representation

within the meaning of

IV. D. – 1:102 (Definitions) transfers goods on

behalf of the principal to a third party, the third party directly acquires

the ownership of the goods (representation for alienation).

(3) The acquisition of ownership of the goods by the principal (para -

graph (1)) or by the third party (paragraph ( 2)) takes place when:

(a) the agent has authority to transfer or receive the goods on behalf of

the principal;

(b) there is an entitlement to transfer by virtue of a contract or other

juridical act, a court order or a rule of law between the agent and

the third party; and

delivery or an equivalent to delivery in the sense of

VIII. – 2:101

(Requirements for the transfer of ownership in general) paragraph

(1)(e) between the third party and the agent.

VIII. – 2:303: Passing of ownership in case of direct delivery

in a chain of transactions

Where there is a chain of contracts or other juridical acts, court orders or

entitlements based on a rule of law for the transfer of ownership of the

same goods and delivery or an equivalent to delivery is effected directly

between two parties within this chain, ownership passes to the recipient

with effect as if it had been transferred from each preceding member of the

chain to the next.

VIII. – 2:304: Passing of ownership of unsolicited goods

(1) If a business delivers unsolicited goods to a consumer, the consumer

acquires ownership subject to the business’s right or authority to trans-

fer ownership. The consumer may reject the acquisition of ownership;

for these purposes,

II. – 4:303 (Right or benefit may be rejected) ap-

plies by way of analogy.

(2) The exceptions provided for in

II. – 3:401 (No obligation arising from

failure to respond) paragraphs (2) and (3) apply accordingly.

(3) For the purposes of this Article delivery occurs when the consumer

obtains physical control over the goods.

Chapter 2:Transfer of ownership VIII. – 2:304

429

VIII. – 2:305: Transfer of goods forming part of a bulk

(1) For the purposes of this Chapter, “bulk” means a mass or mixture of

fungible goods which is identified as contained in a defined space or

area.

(2) If the transfer of a specified quantity of an identified bulk fails to take

effect because the goods have not yet been identified in the sense of

VIII. – 2:101 (Requirements for the transfer of ownership in general)

paragraph (3), the transferee acquires co-ownership in the bulk.

(3) The undivided share of the transferee in the bulk at any time is such

share as the quantity of goods to which the transferee is entitled out of

the bulk as against the transferor bears to the quantity of the goods in

the bulk at that time.

(4) Where the sum of the quantities to which the transferees are entitled as

against the transferor and, if relevant, of the quantity of the transferor

exceeds the total quantity cont ained in the bulk because the bulk has

diminished, the diminution of the bulk is f irst attributed to the trans-

feror, before being attributed to the transferees in proportion to their

individual shares.

(5) Where the transferor purports to transfer more than the total quantity

contained in the bulk, the quantity in excess of the total quantity of the

bulk to which a transferee is entitled as against the transferor is reflec-

ted in the transferee’s undivided share in the bulk only if the transferee,

acquiring for value, neither knew nor could reasonably be expected to

know of this excess. Where, as a result of such purported transfer of a

quantity in excess of the bulk to a transferee in good faith and for value,

the sum of the quant ities to which the transferees are entitled as

against the transferor exceeds the total quantity contained in the bulk,

the lack of quantity is attributed to the transferees in proportion to their

individual shares.

VIII. – 2:306: Delivery out of the bulk

(1) Each transferee can take delivery of a quantity corresponding to the

transferee’s undivided share and acquires ownership of that quantity

by taking delivery.

VIII. – 2:305 Book VIII

430

(2) Where the delivered quantity exceeds the quantity corresponding to

the transferee’s undivided share, the transferee acquires ownership of

the excess quantity only if the transferee, acquiring for value, neither

knew nor could reasonably be expected to know of possible negative

consequences of this excess for the other transferees.

VIII. – 2:307: Contingent right of transferee under

retention of ownership

Where the transferor retains ownership of the goods for the purposes of a

“retention of ownership device” in the sense of

IX. – 1:103 (Retention of

ownership devices: scope), the transferee’s right to pay the price under the

terms of the contract and the transferee’s right to acquire ownership upon

payment have effect against the transferor’s creditors.

Chapter 3:

Good faith acquisition of ownership

VIII. – 3:101: Good faith acquisition through a person without

right or authority to transfer ownership

(1) Where the person purporting to transfer the ownership (the transferor)

has no right or authority to transfer ownership of the goods, the trans-

feree nevertheless acquires and the former owner loses ownership pro-

vided that:

(a) the requirements set out in

VIII. – 2:101 (Requirements for the

transfer of ownership in general) paragraphs (1)(a), (1)(b),

(1)(d), (2) and (3) are fulfilled;

(b) the requirement of delivery or an equivalent to delivery as set out in

VIII. – 2:101 (Requirements for the transfer of ownership in gener-

al) paragraph (1)(e) is fulfilled;

(d) the transferee neither knew nor could reasonably be expected to

know that the transferor had no right or authority to transfer own-

ership of the goods at the time ownership would pass under

VIII.–

2:101 (Requirements for the transfer of ownership in general). The

facts from which it follows that the transferee could not reasonably

be expected to know of the transferor’s lack of right or authority

have to be proved by the transferee.

Chapter 3:Good faith acquisition of ownership VIII. – 3:101

431

(2) Good faith acquisition in the sense of paragraph (1) does not take place

with regard to stolen goods, unless the transferee acquired the goods

from a transferor acting in the ordinary course of business. Good faith

acquisition of stolen cultural objects in the sense of

VIII. – 4:102 (Cul-

tural objects) is impossible.

(3) Where the transferee is already in possession of the goods, good faith

acquisition will take place only if the transferee obtained possession

from the transferor.

VIII. – 3:102: Good faith acquisition of ownership

free of limited proprietary rights

(1) Where the goods are encumbered with a limited proprietary right of a

third person and the transferor has no right or authority to dispose of

the goods free of the third person’s right, the transferee nevertheless

acquires ownership free of this right provided that:

(a) the tra nsferee acquires ownership in a manner provided for in

Chapter 2 or the preceding Article;

(b) the requirement of delivery or an equivalent to delivery as set out in

VIII. – 2:101 (Requirements for the transfer of ownership in gener-

al) paragraph (1)(e) is fulfilled;

(d) the transferee neither knew nor could reasonably be expected to

know that the transferor had no right or authority to transfer own-

ership of the goods free of the third person’s right at the time own-

ership passes. The facts from which it follows that the transferee

could not reasonably be expected to know of the transferor’s lack

of right or authority have to be proved by the transferee.

(2) Paragraphs (2) and (3) of the preceding Article apply for the purposes

of this Article.

(3) Where the goods are transferred by notice as provided for in

VIII.–

2:105 (Equivalents to del ivery) paragraph (2), the notified pers on’s

limited proprietary rights in the goods are not extinguished.

(4) For the purposes of the application of this Article to propriet ary security

rights,

IX. – 6:102 (Loss of proprietary security due to good faith ac-

quisition of ownership) paragraph (2) applies in addition to this Arti-

cle.

VIII. – 3:102 Book VIII

432

Chapter 4:

Acquisition of ownership by continuous possession

Section 1:

Requirements for acquisition

of ownership by continuous possession

VIII. – 4:101: Basic rule

(1) An owner-possessor acquires ownership by continuous possession of

goods:

(a) for a period of ten years, provided that the possessor, throughout

the whole period, possesses in good faith; or

(b) for a period of thirty years.

(2) For the purposes of paragraph (1)(a):

(a) a person possesses in good faith if, and only if, the person pos-

sesses in the belief of being the owner and is reasonably justified in

that belief; and

(b) good faith of the possessor is presumed.

(3) Acquisition of ownership by continuous possession is excluded for a

person who obtained possession by stealing the goods.

VIII. – 4:102: Cultural objects

(1) Under this Chapter, acquisition of ownership of goods qualifying as a

“cultural object” in the sense of Article 1 (1) of Council Directive 93/7/

EEC, regardless of whether the cultural object has been unlawfully re-

moved before or after 1 January 1993, or not removed from the territory

of a Member State at all, requires continuous possession of the goods:

(a) for a period of 30 years, provided that the possessor, throughout

the whole period, possesses in good faith; or

(b) for a period of 50 years.

(2) Member States may adopt or maintain in force more stringent provi-

sions to ensure a higher level of protection for the owner of cultural

objects in the sense of this paragraph or in the sense of national or

international regulations.

VIII. – 4:103: Continuous possession

(1) Involuntary loss of possession does not exclude continuous posses-

sion for the purpose of

VIII. – 4:101 (Basic rule), provided that posses-

Chapter 4:Acquisition of ownership by continuous possession VIII. – 4:103

433

sion is recovered within one year or an action which leads to such

recovery is instituted within one year.

(2) Where the owner-possessor is in possession of the goods at the be-

ginning and at the end of the period there is a presumption of contin-

uous possession for the whole period.

Section 2:

Additional provisions as to the period required

for acquisition of ownership

VIII. – 4:201: Extension in case of incapacity

(1) If an owner who is subject to an incapacity is without a representative

when the period required for the acquisition of ownership by another

by continuous possession would begin to run, the commencement of

the period against that person is suspended until either the incapacity

has ended or a representative has been appointed.

(2) If the running of the period has already begun before incapacity occur-

red, the period does not expire before one year has passed after either

incapacity has ended or a representative has been appointed.

(3) The running of the period is suspended where the owner is a person

subject to an incapacity and the owner-possessor is that person’s re-

presentative, as long as this relationship lasts. The period does not

expire before one year has passed after either the incapacity has ended

or a new representative has been appointed.

VIII. – 4:202: Exten sion in case of

impediment beyond owner’s control

(1) The running of the period is suspended as long as the owner is pre-

vented from exercising the right to recover the goods by an impediment

which is beyond the owner’s control and which the owner could not

reasonably have been expected to avoid or overcome. The mere fact

that the owner does not know where the goods are does not cause

suspension under this Article.

(2) Paragraph (1) applies only if the impediment arises, or subsists, within

the last six months of the period.

VIII. – 4:201 Book VIII

434

(3) Where the duration or nature of the impediment is such that it would

be unreasonable to expect the owner to take proceedings to assert the

right to recover the goods within the part of the period which has still

to run after the suspension comes to an end, the period does not expire

before six months have passed after the time when the impediment

was removed.

VIII. – 4:203: Exten sion and renewal in case of judicial

and other proceedings

(1) The running of the period is suspended from the time when judicial

proceedings are begun against the owner-possessor or a person exer-

cising physical control for the owner-possessor, by or on behalf of the

owner, contesting the owner-possessor’s ownership or possession.

Suspension lasts until a decision has been made which has the effect

of res judicata or until the case has otherwise been disposed of. Sus-

pension has effect only in relation to the parties to the judicial pro-

ceedings and persons on whose behalf the parties act.

(2) Suspension under paragraph (1) is to be disregarded when the action is

dismissed or otherwise unsuccessful. Where the action is dismissed

because of incompetence of the court, the period does not expire be-

fore six months have passed from this decision.

(3) Where the action is successful, a new period begins to run from the

day when the effect of res judicata occurs or the case has otherwise

been disposed of in favour of the owner.

(4) These provisions apply, with appropriate adaptations, to arbitratio n

proceedings and to all other proceedings initiated with the aim of ob-

taining an instrument which is enforceable as if it were a judgment.

VIII. – 4:204: Postponement of expiry in case of negotiations

If the owner and the owner-possessor or a person exercising physical con-

trol for the owner-possessor negotiate about the right of ownership, or

about circumstances from which acquisition of ownership by the owner-

possessor may arise, the period does not expire before six months have

passed since the last communication made in the negotiations.

Chapter 4:Acquisition of ownership by continuous possession VIII. – 4:204

435

VIII. – 4:205: Ending of period in case of acknowledgement

The period ends when the owner-possessor, or a person exercising physical

control for the owner-possessor, acknowledges the owner’s right to the

goods. A new period begins to run when the former owner-possessor con-

tinues to exercise direct or indirect physical control with the intention of

doing so as, or as if, an owner.

VIII. – 4:206: Period of a predecessor to be taken into account

(1) Where one person succeeds another in owner-possession and the re-

quirements set out in this Chapter are fulfilled cumulatively by the

predecessor and the successor in possession, the period of the prede-

cessor is taken into account in favour of the successor.

(2) A successor in good faith may take into account the period of a prede-

cessor in bad faith only for acquisition under

VIII. – 4:101 (Basic rule)

paragraph (1)(b).

Section 3:

Effects of acquisition

of ownership by continuous possession

VIII. – 4:301: Acquisition of ownership

(1) Upon expiry of the period required for the acquisition of ownership by

continuous possession the original owner loses and the owner-posses-

sor acquires ownership.

(2) When the owner-possessor knows or can reasonably be expected to

know that the goods are encumbered with a limited proprietary right of

a third person, this right continues to exist as long as this right is not

itself extinguished by expiry of the respective period, or a period of 30

years (

VIII. – 4:101 (Basic rule) paragraph (1)(b)) or 50 years (VIII.–

4:102 (Cultural objects) paragraph (1)(b)) has passed.

VIII. – 4:302: Extinction of rights under rules on unjustified

enrichment and non-contractual liability for damage

Upon acquisition of ownership, the original owner loses all rights to re-

cover the goods and all rights to payment of the monetary value of the

goods or for any future use of the goods under the provisions on unjustif ied

enrichment (Book

VII) and non-contractual liability for damage (Book VI).

VIII. – 4:205 Book VIII

436

Chapter 5:

Production, combination and commingling

Section 1:

General provisions

VIII. – 5:101: Party autonomy and relation to other provisions

(1) The consequences of production, combination or commingling can be

regulated by party agreement. The provisions of Section 2 apply where

production, combination or commingling takes place:

(a) without the consent of the owner of the material; or

(b) with the consent of the owner of the material, but without a party

agreement as to the proprietary consequences.

(2) An agreement in the sense of paragraph (1) may provide for:

(a) proprietary rights as recognised by this Book; and

(b) a right to payment or other performance.

(3) The effects of production, combination and commingling as to goods

subject to a retention of ownership device are regulated by Book

IX.

(4) Proprietary security rights created under Section 2 of this Chapter are

subject to the provisions on proprietary security rights in Book

IX, un-

less provided otherwise in Section 2. Proprietary security rights created

by a party agreement under paragraph (1) are subject to the provisions

on proprietary security rights in Book

IX except as provided otherwise

VIII. – 5:204 (Additional provisions as to proprietary security rights)

paragraph (3).

(5) This Chapter does not affect the applicability of the rules on non-con-

tractual liability for damage (Book

VI). The rules on benevolent inter-

vention in another’s affairs (Book V) have priority over the provisions

of this Chapter.

Chapter 5:Production, combination and commingling VIII. – 5:101

437

Section 2:

Default rules and supplementary provisions

VIII. – 5:201: Production

(1) Where one person, by contributing labour, produces new goods out of

material owned by another person, the producer becomes owner of the

new goods and the owner of the material is entitled, against the pro-

ducer, to payment equal to the value of the material at the moment of

production, secured by a proprietary security right in the new goods.

(2) Paragraph (1) does not apply where:

(a) the labour contribution is of minor importance; or

(b) the producer knows that the material is owned by another person

and that the owner of the material does not consent to the pro-

duction, unless the value of the labour is much higher than the

value of the material.

(3) In the ca ses covered by paragraph (2) an d in cases whe re no new

goods are produced, ownership remains with the owner of the material

or, where there is more than one such owner, the attribution of own-

ership is determined by application of

VIII. – 5:202 (Commingling) or

VIII. – 5:203 (Combination). The person contributing labour is entitled

to the reversal of any enrichment subject to the provisions of Book

VII.

For the purposes of this paragraph,

VII. – 2: 101 (Circumstanc es in

which an enrichment is unjustified) paragraph (1)(b) does not exclude

the entitlement of a person contributing labour to a reversal of the

enrichment.

VIII. – 5:202: Commingling

(1) Where goods owned by different persons are commingled in the sense

that it is impossible or economically unreasonable to separate the re-

sulting mass or mixture into its original constituents, but it is possible

and economically reasonable to separate the mass or mixture into pro-

portionate quantities, these persons become co-owners of the resulting

mass or mixture, each for a share proportionate to the value of the

respective part at the moment of commingling.

(2) Each co-owner can separate a quantity equivalent to that co-owner’s

undivided share out of the mass or mixture.

VIII. – 5:201 Book VIII

438

VIII. – 5:203: Combination

(1) This Article applies where goods owned by different persons are com-

bined in the sense that separation would be impossible or economic-

ally unreasonable.

(2) Where one of the component parts is to be regarded as the principal

part, the owner of that part acquires sole ownership of the whole, and

the owner or the owners of the subordinate parts are entitled, against

the sole owner, to payment subject to sentence 2, secured by a pro-

prietary security right in the combined goods. The amount due under

sentence 1 is calculated according to the rules on unjustified enrich-

ment (Book

VII); or, where the owner of the principal part effects the

combination, is equal to the value of the respective subordinate part at

the moment of combination.

(3) Where none of the component parts is to be regarded as the principal

part, the owners of the component parts become co-owners of the

whole, each for a share proportionate to the value of the respective

part at the moment of combination. If, in the case of more than two

component parts, one component part is of minimal importance in

relation to other parts, the owner of this part is entitled, against the

co-owners, only to payment proportionate to the value of the respec-

tive part at the moment of combination, secured by a proprietary se-

curity right in the combined goods.

(4) Paragraph (2) does not apply where the person who owns the principal

part effects the combination, knowing that a subordinate part is owned

by another person and that the owner of the subordinate part does not

consent to combination, unless the value of the principal part is much

higher than the value of the subordinate part. The owners of the com-

ponent parts become co-owners, the shares of the owners of subordi-

nate parts being equal to the value of their respective parts at the mo-

ment of combination.

VIII. – 5:204: Additional provisions as to

proprietary security rights

(1) A proprietary security right created under the preceding Articles on

production and combination is effective against third persons without

requiring possession by, or registration of, the former owner of the

material or of the component part.

Chapter 5:Production, combination and commingling VIII. – 5:204

439

(2) If the proprietary security right in the new or combined goods is ex-

tinguished by a third party’s good faith acquisition (Chapter 3), the

security right extends to the proceeds of the sale. Paragraph (1) applies

accordingly.

(3) A proprietary security right created under the preceding Articles on

production and combination takes priority over any other security right

which has previously been created, by the producer or by the owner of

the principal part, in the new or combined goods. The same applies to

equivalent security rights created by agreement between the former

owner of the material and the producer, or between the former owner

of the subordinate part and the owner of the principal part.

Chapter 6:

Protection of ownership and protection of possession

Section 1:

Protection of ownership

VIII. – 6:101: Protection of ownership

(1) The owner is entitled to obtain or recover possession of the goods from

any person exercising physical control over these goods, unless this

person has a right to possess the goods in the sense of

VIII. – 1:207

(Possession by limited-right-possessor) in relation to the owner.

(2) Where another person interferes with the owner’s rights as owner or

where such interference is imminent, the owner is entitled to a declara-

tion of ownership and to a protection order.

(3) A protection order is an order which, as the circumstances may require:

(a) prohibits imminent future interference;

(b) orders the cessation of existing interference;

VIII. – 6:102: Recovery of goods after transfer based on

invalid or avoided contract or other juridical act

(1) Where goods are or have been transferred based on a contract or other

juridical act which is invalid or avoided, the transferor may exercise the

right of recovery under paragraph (1) of the preceding Article in order

to recover physical control of the goods.

VIII. – 6:101 Book VIII

440

(2) Where the obligation of the transferee to restore the goods to the trans-

feror, after a transfer based on an invalid or avoided contract or other

juridical act, is one of two reciprocal obligations which have to be

performed simultaneously, the transferee may, in accordance with

III. – 3:401 (Right to withhold performance of reciprocal obligation),

withhold performance of the obligation to restore the goods until the

transferor has tendered performance of, or has performed, the transfer-

or’s reciprocal obligation.

(3) The preceding paragraphs also apply where the transfer was based on a

contract or other juridical act subject to a resolutive condition in the

sense of

VIII. – 2:203 (Transfer subject to condition) paragraph (1) and

this condition is fulfilled.

Section 2:

Protection of mere possession

VIII. – 6:201: Definition of unlawful dispossession

and interference

A person depriving the possessor of possession or interfering with that

possession acts “unlawfully” under this Section if the person acts without

the consent of the possessor and the dispossession or interference is not

permitted by law.

VIII. – 6:202: Self-help of possessor

(1) A possessor or a third person may resort to self-help against another

person who unlawfully deprives the possessor of possession of the

goods, or who otherwise unlawfully interferes with that possession,

or whose act of unlawful dispossession or interference is imminent.

(2) The means of self-help are limited to such immediate and proportion-

ate action as is necessary to regain the goods or to stop or prevent the

dispossession or interference.

(3) Under the restrictions of paragraphs (1) and (2) self-help may also be

directed against an indirect owner-possessor who unlawfully deprives

the limited-right-possessor of possession or interferes with that pos-

session in violation of the specific legal relationship between owner-

possessor and limited-right-possessor. This rule applies equally to an

Chapter 6:Protection of ownership and protection of possession VIII. – 6:202

441

indirect limited-right-possessor who unlawfully deprives the other lim-

ited-right-possessor of possession or interferes with that possession.

(4) Where a person in the exercise of a right of self-help conferred by this

Article causes legally relevant damage to the person depriving the pos-

sessor of possession or interfering with that possession,

VI. – 5:202

(Self-defence, benevolent intervention and necessity) applies.

VIII. – 6:203: Entitlement to recover as protection of

mere possession

(1) Where another person unlawfully de prives an owner-possessor or a

limited-right-possessor of possession, the possessor is, within the per-

iod of one year, entitled to recover the goods, irrespective of who has

the right or better position in terms of

VIII. – 6:301 (Entitlement to re-

cover in case of better possession) to possess the goods. The period of

one year starts to run at the time of dispossession.

(2) The right to recover may also be directed against an indirect owner-

possessor who unlawfully deprives the limited-right-possessor of pos-

session in violation of the specific legal relationship between them.

This rule applies equally to an indirect limited-right-possessor who un-

lawfully deprives the other limited-right-possessor of possession.

(3) The right to recover is excluded if the person seeking to exercise it

unlawfully deprived the other person of possession within the last year.

(4) Where the other person in the sense of paragraph (1) invokes an al-

leged right or better position in terms of

VIII. – 6:301 (Entitlement to

recover in case of better possession) to possess the goods as a defence

or counter-claim, the obligation to return the goods according to para-

graph (1) may be replaced by an obligation to hand the goods over to

the court or other competent public au thority, or to a third pers on

pursuant to an order of the competent authority.

VIII. – 6:204: Entitlement to protection order to

protect mere possession

(1) Where another person unlawfully interferes with the possession of

goods or such interference or an unlawful dispossession is imminent,

the owner-possessor or the limited-right-possessor is, within the per-

iod of one year, entitled to a protection order under

VIII. – 6:101 (Pro-

tection of ownership) paragraph (3), irrespective of who has the right

or better position in terms of

VIII. – 6:301 (Entitlement to recover in

VIII. – 6:203 Book VIII

442

case of better possession) to possess, use or otherwise deal with the

goods. The period of one year starts to run from the time when the

interference began or, in cases of repeated interferences, from the time

when the last interference began.

(2) The protection order may also be directed against an indirect owner-

possessor who unlawfully interferes with the possession of a limited-

right-possessor in violation of the specific legal relationship between

them. This rule applies equally to an indirect limited-right-possessor

who unlawfully interferes with the possession of a subsidiary limited-

right-possessor in violation of the specific legal relationship between

them.

(3) Where the other person in the sense of paragraph (1) invokes an al-

leged right or better position to possess, use or otherwise deal with the

goods as a defence or counter-claim, the court order may be suspended

until, or replaced by, a decision on the existence of such alleged right or

better position.

Section 3:

Protection of better possession

VIII. – 6:301: Entitlement to recover in case of better possession

(1) A former owner-possessor or former limited-right possessor is entitled

to recover possession of the go ods from another person exe rcising

physical control over them if the former possession was “better” than

the current possession of the other person in the sense of paragraph

(2).

(2) The former possession is “better” than the current possession if the

former possessor is in good faith and has a right to possess, while the

other person has no right to possess, the goods. Where both persons

are in good faith and have a right to possess the goods, the right de-

rived from the owner prevails over a right derived from an owner-pos-

sessor who is not the owner; if this does not apply, the older rightful

possession prevails. Where both persons are in good faith, but neither

has a right to possess the goods, the current possession prevails.

Chapter 6:Protection of ownership and protection of possession VIII. – 6:301

443

VIII. – 6:302: Entitlement to protection order

in case of better possession

Where another person interferes with the possession, or such interference

or a dispossession is imminent, the owner-possessor or the limited-right-

possessor who is in good faith is entitled to a protection order under

VIII.–

6:101 (Protection of ownership) paragraph (3), unless the other perso n

would, in case of dispossession, have a better possession in the sense of

VIII. – 6:301 (Entitlement to recover in case of better possession) para-

graph (2), or the third person has a better right to use or otherwise deal

with the goods than the owner-possessor or limited-right-possessor.

Section 4:

Other remedies

VIII. – 6:401: Non-contractual liability

The owner and the limited-right-possessor are entitled to reparation for an

infringement of their right of ownership or their right to possess the goods

under the terms of

VI. – 2:206 (Loss upon infringement of property or law-

ful possession).

Chapter 7:

Consequential questions on restitution of goods

VIII. – 7:101: Scope

(1) This Chapter applies where the situations covered by the subsequent

Articles occur while the goods are possessed by a person against

whom, at that time, the owner is entitled to obtain or recover posses-

sion of the goods.

(2) Where the requirements for the application of Book V are fulfilled, the

provisions of that Book apply and have priority over the provisions of

this Chapter.

(3) The provisions of Chapter 5 have priority over the provisions of this

Chapter.

VIII. – 6:302 Book VIII

444

VIII. – 7:102: Loss of, or damage to, the goods during possession

(1) Where the goods are lost, are destroyed or deteriorate during posses-

sion in the sense of

VIII. – 7:101 (Scope of application), the rights of

the owner resulting from such loss or damage are determined by Book

VI.

(2) For the purposes of this Article, intention or negligence as to posses-

sing the goods despite the owner’s entitlement to obtain or recover

possession suffice to establish accountability in the sense of Book

VI,

Chapter 3.

VIII. – 7:103: Fruits from, use of, and other benefits

derived from the goods during possession

Where the possessor obtains fruits from, makes use of, or derives other

benefits from the goods d uring possession in th e sense of

VIII.–7:101

(Scope of application), the rights of the owner resulting from such benefits

are determined by Book

VII.

VIII. – 7:104: Expenditure on, or parts added to,

the goods during possession

(1) Where the possessor incurs expenditure on, or adds parts to, the goods

during possession in the sense of

VIII. – 7:101 (Scope of application),

the rights of the possessor to reimbursement of such expenditure or for

such addition are determined by Book

VII.

(2) The possessor is entitled to retain the goods in order to secure the

rights referred to in paragraph (1). Sentence 1 does not apply where

the possessor knows of the owner’s entitlement to obtain or recover

possession at the time when expenditure is incurred on, or parts are

added to, the goods.

Chapter 7:Consequential questions on restitution of goods VIII. – 7:104

445

Book IX

Proprietary security in movable assets

Chapter 1:

General rules

Section 1:

Scope

IX. – 1:101: General rule

(1) This Book applies to the following rights in movable property based

upon contracts for proprietar y security:

(a) security rights; and

(b) ownership retained under retention of ownership devices.

(2) The rules of this Book on security rights apply with appropriate adap-

tations to:

(a) rights under a trust for security purposes;

(b) security rights in movable assets created by unilateral juridical acts;

and

in so far as this is compatible with the purpose of the law.

IX. – 1:102: Security right in movable asset

(1) A security right in a movable asset is any limited proprietary right in the

asset which entitles the secured creditor to preferential satisfaction of

the secured right from the encumbered asset.

(2) The term security right includes:

(a) limited proprietary rights of a type which is generally recognised as

designed to serve as proprietary security, especially the pledge;

(b) limited proprietary rights, however named, that are based upon a

contract for proprietary security and that are either intended by the

parties to entitle the secured creditor to preferential satisfaction of

the secured right from the encumbered asset or have this effect

under the contract; and

447

this Book, such as the right referred to in

IX. – 2:114 (Right of re-

tention of possession) and the rights covered by paragraph (3).

(3) A transfer or purported transfer of ownership of a movable asset which

is made, on the basis of a contract for proprietary security, with the

intention or the effect of securing satisfaction of a secured right can

create only a security right in the asset for the transferee.

(4) Paragraph (3) applies in particular to:

(a) a security transfer of ownership of corporeal assets;

(b) a security assignment;

(d) a sale and resale.

IX. – 1:103: Retention of ownership devices: scope

(1) There is a “retention of ownership device” when ownership is retained

by the owner of supplied assets in order to secure a right to perform-

ance of an obligation.

(2) The term retention of ownership device includes:

(a) retention of ownership by a seller under a contract of sale;

(b) ownership of the supplier under a contract of hire-purchase;

ed that according to the terms of the contract the lessee at the

expiration of the lease period has an option to acquire ownership

of, or a right to continue to use, the leased asset without payment

or for merely nominal payment (financial leasing); and

(d) ownership of the supplier under a contract of consignment with

the intention or the effect of fulfilling a security purpose.

IX. – 1:104: Retention of ownership devices: applicable rules

(1) Retention of ownership devices are subject to the following rules on

security rights, unless specifically provided otherwise:

(a)

IX. – 2:104 (Specific issues of transferability, existence and speci-

fication) paragraphs (2) to (4);

(b) Chapter 2, Sections 3 and 4;

(d) Chapter 7, Section 1.

(2) When applying rules on security rights to retention of ownership de-

vices, the following adaptations apply:

IX. – 1:103 Book IX

448

(a) references to the encumbered assets refer to the assets sup-

plied under a contract of sale, hire-purchase, leasing or con-

signment, respectively;

(b) in retention of ownership under contracts of sale, references to

the secured creditor are to be understood as referring to the

seller, and references to the security provider as referring to the

buyer;

chase, references to the secured creditor are to be understood

as referring to the supplier, and references to the security pro-

vider as referring to the hire-purchaser;

(d) in retention of ownership devices under contracts of financial

leasing, references to the secured creditor are to be understood

as referring to the lessor, and references to the security provider

as referring to the lessee; and

(e) in retention of ownership devices under contracts of consign-

ment, references to the secured creditor are to be understood

as referring to the supplier, and references to the security pro-

vider as referring to the consignee.

IX. – 1:105: Exclusions

(1) This Book does not apply to security rights for micro-credits, if and in

so far as national legislation of the place where the security provider’s

business or residence is located contains specific protective rules for

the security provider.

(2) The rules of an international Convention dealing with a subject-matter

regulated in this Book and binding upon a member state are presumed

to have for that member state precedence over the rules of this Book.

Section 2:

Definitions

IX. – 1:201: Definitions

(1) For the purposes of this Book the following definitions apply.

(2) An “accessory” is a corporeal asset that is or becomes closely connec-

ted with or part of a movable or an immovable, provided it is possible

Chapter 1:General rules IX. – 1:201

449

and economically reasonable to separate the accessory without dam-

age from the movable or immovable.

(3) “Acquisition finance devices” cover:

(a) retention of ownership devices;

(b) where ownership of the sold assets has been transferred to the

buyer, those security rights in the sold asset which secure the right:

(i) of the seller to payment of the purchase price for the encum-

bered asset under a contract of sale;

(ii) of a lender to repayment of a loan granted to the buyer for

payment of the purchase price for the encumbered asset, if

and in so far as this payment is actually made to the seller; and

graph (a) or (b) has been transferred as security for a credit covered

by sub-paragraphs (a) or (b).

(4) A “contract for proprietary security” is a contract under which:

(a) a security provider undertakes to grant a security right to the se-

cured creditor;

(b) a secured creditor is entitled to retain a security right when trans-

ferring ownership to the transferee who is regarded as security pro-

vider; or

ership of the supplied assets in order to secure its rights to per-

formance.

(5) “Default” means:

(a) any non-performance by the debtor of the obligation covered by

the security; and

(b) any other event or set of circumstances agreed by the secured cred-

itor and the security provider as entitling the secured creditor to

have recourse to the security.

(6) “Financial assets” are financial instruments and rights to the payment

of money.

(7) “Financial instruments” are:

(a) share certificates and equivalent securities as well as bonds and

equivalent debt instruments, if these are negotiable;

(b) any other securities which are dealt in and which give the right to

acquire any such financial instruments or which give rise to cash

settlements, except instruments of payment;

IX. – 1:201 Book IX

450

(d) money market instruments; and

(e) rights in or relating to the instruments covered by sub-paragraphs

(a) to (d).

(8) “Intangibles” means incorporeal assets and includes uncertificated

and indirectly held securities and the undivided share of a co-owner

in corporeal assets or in a bulk or a fund.

(9) “Ownership” for the purposes of these rules covers ownership of

movable corporeal assets and of intangible assets.

(10) A “possessory security right” is a security right that requires posses-

sion of the encumbered corporeal asset by the secured creditor or an-

other person (except the debtor) holding for the secured creditor.

(11) “Proceeds” is every value derived from an encumbered asset, such as:

(a) value realised by sale or other disposition or by collection;

(b) damages or insurance payments in respect of defects, damage or

loss;

(d) proceeds of proceeds.

(12) The “secured creditor” may be the creditor of the secured right or a

third person who may hold the security right in that person’s own

name for the creditor, especially as a trustee.

(13) The “security provider” may be the debtor of the obligation to be

covered by the security right or a third person.

Chapter 2:

Creation and coverage

Section 1:

Creation of security rights

Subsection 1:

General provisions

IX. – 2:101: Methods of creation of security rights

A security right in a movable asset may be created:

(a) by the security provider granting the security right to the secured cred-

itor;

(b) by the secured creditor retaining the security right when transferring

ownership of the asset to the security provider; or

Chapter 2:Creation and coverage IX. – 2:101

451

IX. – 2:102: Requirements for creation of security

rights in general

The creation of a security right in a movable asset requires that:

(a) the asset exists;

(b) the asset is transferable;

(d) the additional requirements for the creation of a security right by grant-

ing, by retention or on the basis of a right of retention of possession are

fulfilled.

IX. – 2:103: Possessory and non-possessory securit y rights

Unless otherwise agreed by the parties, the creation of a security right by

contract does not require possession of the encumbered asset by the se-

cured creditor.

IX. – 2:104: Specific issues of transferability,

existence and specification

(1) A security right can be created in a right to performance other than a

right to the payment of money, even if this right is not transferable,

provided that it can be trans formed into a right to the paymen t of

money.

(2) A security right can be created in an asset, even if its owner had agreed

not to transfer or to encumber the asset. This rule applies also to a right

to performance, whether contractual or not, unless it is non-assignable

by virtue of

III. – 5:109 (Assignability: rights personal to the creditor)

paragraph (1)).

(3) If the parties purport to create a security right in a future, generic or

untransferable asset, the security right arises only if and when the asset

comes into existence, is specified or becomes transferable. Para-

graph (2) remains unaffected.

(4) Paragraph (3) sentence 1 applies with appropriate adaptations to the

creation of security rights in a conditional right, including the rights

covered by that paragraph. A security right may be created in a present

conditional right, especially in the right of a transferee under a condi-

tional transfer of ownership.

(5) Paragraph (3) sentence 1 applies with appropriate adaptations to the

creation of security rights for secured rights which are future or only

conditional.

IX. – 2:102 Book IX

452

Subsection 2:

Granting of security right

IX. – 2:105: Requirements for granting of security right

In addition to the requirements under Subsection 1, the creation of a se-

curity right in a movable asset by granting requires that:

(a) the asset to be encumbered is specified by the parties;

(b) the security provider has the right or authority to grant a security right

in the asset;

granting of a security right on the basis of the contract for proprietary

security; and

(d) the secured creditor and the security provider agree on the granting of a

security right to the secured creditor.

IX. – 2:106: Time when security right is created by granting

Subject to IX. – 2:110 (Delayed creation), the security right is created by

granting at the time when the requirements set out in the preceding Article

are fulfilled, unless the parties have agreed on another time of creation.

IX. – 2:107: Granting of security right by consumer

(1) The cr eation of a security right by a consumer securi ty provider by

granting is only valid within the following limits:

(a) the assets to be encumbered must be identified individually; and

(b) an asset not yet owned by the consumer upon conclusion of the

contract for proprietary security (apart from the rights to payment

covered by paragraph (2)) can only be encumbered as security for

a credit to be used for the acquisition of the asset by the consumer.

(2) Rights to payment of future salary, pensions or equivalent income can-

not be encumbered in so far as they serve the satisfaction of the living

expenses of the consumer security provider and his or her family.

IX. – 2:108: Good faith acquisition of security right

(1) Even where the security provider has no right or authority to dispose of

a corporeal asset, the secured creditor nevertheless acquires a security

right in it, provided that:

Chapter 2:Creation and coverage IX. – 2:108

453

(a) the asset or a negotiable document to bearer on the asset is in the

security provider’s possession or, if so required, the asset is regis-

tered in an international or national register of ownership as owned

by the security provider at the time the security right is to be cre-

ated; and

(b) the secured creditor does not know and cannot reasonably be ex-

pected to know that the security provider has no right or authority

to grant a security right in the asset at the time the security right is

to be created.

(2) For the purposes of paragraph (1)(b), a secured creditor acquiring a

security right in an asset that is subject to a retention of ownership

device which is registered under Chapter 3 Section 3 against the secu-

rity provider is regarded as knowing that the latter has no right or au-

thority to grant a security right in the asset.

(3) Good faith acquisition of a security right is excluded for an asset that

was stolen from the owner or the person holding for the owner.

IX. – 2:109: Good faith acquisition of security right

in encum bered corporeal asset

(1) Where a corporeal asset is encumbered with a security right or another

limited proprietary right and the security provider has no right or au-

thority to dispose of the asset free from the third person’s limited pro-

prietary right, a secured creditor nevertheless acquires a security right

free from that other right, provided that:

(a) the requirements of paragraph (1)(a) of the preceding Article are

met; and

(b) the secured creditor does not know nor can reasonably be expected

to know that the security provider has no right or authority to grant

a security right in disregard of the third person’s limited proprietary

right at the time the security right is to be created.

(2) For the purposes of paragraph (1)(b), a secured creditor acquiring a

security right in the encumbered asset is regarded as knowing that the

security provider has no right or authority to grant a security right in the

asset in disregard of the existing security right if this right is registered

under Chapter 3, Section 3 against the security provider.

(3) Where the requirements of paragraph (1) are not met but the require-

ments of the preceding Article are met, the secured creditor obtains a

IX. – 2:109 Book IX

454

security right in the encumbered assets. The priority between this se-

curity right and the prior encumbrance is determined according to the

general provisions.

IX. – 2:110: Delayed creation

In assets for which at the time when the security right would have been

created according to

IX. – 2:106 (Time when security right is created by

granting) the requirements of

IX. – 2:107 (Granting of security right by con-

sumer) and

IX. – 2:108 (Good faith acquisition of security right) have not

yet been met, a security right automatically arises as soon as the events

indicated in the preceding provisions have occurred.

IX. – 2:111: Security right in cash, negotiable instruments and

documents

A security right in cash, negotiable instruments and documents to bearer

may be created free from any earlier rights, even if the requirements of

IX.–

2:105 (Requirements for granting of security right) sub-paragraph (b),

IX.–

2:108 (Good faith acquisition of security right) and

IX. – 2:109 (Good faith

acquisition of security right in an encumbered corporeal asset) are not met,

provided that direct possession of these assets is transferred to the secured

creditor.

IX. – 2:112: General matters of property law

Rules on general matters of property law in Book VIII, Chapter 2 apply for

the purposes of this Book with appropriate adaptations.

Subsection 3:

Retention of security right

IX. – 2:113: Requirements for retention of security right

(1) In addition to the requirements under Subsection 1, the creation of a

security right in a movable asset by retention requires that:

(a) the secured creditor is entitled as against the transferee to the re-

tention of a security right by virtue of the contract for proprietary

security; and

(b) the secured creditor transfers its ownership in the asset to be en-

cumbered by the retained security right to the transferee.

Chapter 2:Creation and coverage IX. – 2:113

455

(2) The security right is created by retention at the time when all the re-

quirements set out in the preceding paragraph are fulfilled.

(3) The transferee is regarded as the security provider for the purposes of

the application of the rules of this Book.

Subsection 4:

Right of retention of possession

IX. – 2:114: Right of retention of possession

Where under a contract or rule of law a person is entitled as against the

owner of an asset to retain possession of the asset as security for a right to

performance, this right of retention of possession gives rise to a possessory

security right.

Section 2:

Creation of retention of ownership devices

IX. – 2:201: Retention of ownership devices

(1) A retention of ownership device arises in the cases set out in IX.–

1:103 (Retention of ownership devices: scope) paragraph (2) if:

(a) the seller, supplier or lessor is the owner of the supplied asset or

acts with authority in relation to this asset;

(b) the asset is specified in the contract for proprietary security;

(d) the seller, supplier or lessor retains ownership.

(2) Ownership is also retained for the purposes of paragraph (1)(d) where

there is a transfer subject to the suspensive condition that the obliga-

tion covered is performed.

Section 3:

Creation of security rights in specific types of assets

IX. – 2:301: Encumbrance of right to payment of money

(1) The encumbrance of a right to payment of money is also subject to the

following special rules.

IX. – 2:114 Book IX

456

(2) The provisions of Book III, Chapter 5 apply with appropriate adapta-

tions, except

III. – 5:108 (Assignability: effect of contractual prohibi-

tion) paragraphs (2) and (3) and

III. – 5: 121 (Competition between

successive assignees).

(3) A right to payment held by the security provider against the secured

creditor may be encumbered by the security provider also in favour of

the secured creditor.

(4) A security right encumbering a right to payment extends to any per-

sonal or proprietary security right securing this right to payment.

IX. – 2:302: Security rights in shares of a company

(1) Possession of negotiable certificates of shares of a company which are

directly held is regarded as possession of the shares.

(2) Shares of com panies which do not meet the requirements of para-

graph (1), whether or not they are registered, cannot be subject to a

possessory security right.

(3) Security rights in shares of companies ex tend to dividends, bonus

shares and other assets which the shareholder derives from the shares

but are limited to the financial value of the shares and such assets.

IX. – 2:303: Security rights in bonds

Paragraphs (1) and ( 2) of the preceding Article apply also to bonds.

IX. – 2:304: Negotiable documents of title and

negotiable instruments

(1) If and as long as a negotiable document of title covers goods, a security

right in the document covers also the goods.

(2) For negotiable instruments, a security right in the instrument covers

also the right embodied in the instrument.

(3) Possession of a negotiable document of title or a negotiable instrument

is regarded as possession of the goods covered by the document of title

or the right embodied in the instrument.

IX. – 2:305: Security right in an accessory

(1) A security right may be created in an asset that, at the time of creation,

is an accessory to a movable or an immovable. If the rules applicable to

immovable proper ty so provide, the security right may also be created

according to the rules governing immovable property.

Chapter 2:Creation and coverage IX. – 2:305

457

(2) A security right in goods continues even if the encumbered asset sub-

sequently becomes an accessory to a movable or an immovable.

IX. – 2:306: Proceeds of the originally encumbered assets

(1) A security right extends to rights to payment due to a defect in, damage

to, or loss of the originally encumbered asset, including insurance pro-

ceeds.

(2) A possessory security right extends to civil and natural fruits of the

originally encumbered assets unless the parties agree otherwise.

(3) Other proceeds of the originally encumbered assets are covered only if

the parties so agree.

IX. – 2:307: Use of encumbered goods

for production or combination

(1) Where encumbered materials owned by the security provider are used

for the production of new goods, the secured creditor’s security right

may be extended by party agreement:

(a) to the products; and

(b) to the right to payment to which the security provider as former

owner of the material is entitled by virtue of the production against

the producer according to

VIII. – 5:201 (Production).

(2) The preceding paragraph applies accordingly if goods are combined in

such a way that separation would be impossible or economically un-

reasonable for the purposes of

VIII. – 5:203 (Combination).

(3) The issue whether a former owner of material other than the holder of a

retention of ownership device acquires a security right by operation of

law as the result of production or combination involving the material,

and the effectiveness and priority of this security right are governed by

Book

VIII, Chapter 5. If these security rights are created by party agree-

ment, they are subject to the provisions of Book

IX, but enjoy super-

priority according to

VIII. – 5:204 (Additional provisions as to proprie-

tary security rights) paragraph (3).

(4) In the case of paragraph (1)(b), the right of the secured creditor, as the

former holder of an encumbrance in the material, extends to the secu-

rity rights mentioned in paragraph (3).

IX. – 2:306 Book IX

458

IX. – 2:308: Use of goods subject to a retention of

ownership device for production or combination

(1) The rules of Book VIII, Chapter 5 (Production, combination and com-

mingling) apply to the consequences of production or combination of

goods subject to a retention of ownership device; references to the

owner of these goods are to be understood as references to the buyer,

hire-purchaser, lessee or consignee.

(2) Where materials subject to a retention of ownership device are used for

the production of new goods, the seller, supplier or lessor may acquire

a security right by party agreement:

(a) in the products; and

(b) in the right to payment to which the buyer, hire-purchaser, lessee

or consignee is entitled against the producer according to

VIII.–

5:201 (Production) on the basis of being regarded as the former

owner of the material according to paragraph (1).

(3) The preceding p aragraph applies accordingly if the goods are com-

bined.

(4) In the case of paragraph (2)(b), the right of the seller, supplier or lessor

extends to the security rights in the products or combined goods ac-

quired by the buyer, hire-purchaser, lessee or consignee as a result of

the production or combination.

IX. – 2:309: Commingling of assets subject to proprietary security

(1) Where encumbered goods are commingled in such a way that it is

impossible or economically unreasonable to s eparate the resulting

mass or mixture into its original constituents, but it is possible and

economically reasonable to separate the mass or mixture into propor-

tionate quantities, the security rights that had encumbered the goods

continue as encumbrances of the rights which the former owners of

the goods have in the resulting mass or mixture by virtue of

VIII.–

5:202 (Commingling) paragraph (1)); this encumbrance is limited to

a share proportionate to the value of the respective goods at the mo-

ment of commingling.

(2) Where the goods that are commingle d as set out in the preceding

parag raph were subject to a retention of ownership device,

VIII.–

5:202 (Commingling) paragraph (1) applies with the proviso that the

rights of the holder of the retention of ownership device are continued

Chapter 2:Creation and coverage IX. – 2:309

459

in a share of the resulting mass or mixture proportionate to the value of

the respective goods at the moment of commingling.

(3) Any secured creditor is entitled to exercise the security provider’s right

to separate a quantity equivalent to that co-owner’s undivided share

out of the mass or mixture (

VIII. – 5:202 (Commingling) para-

graph (2)).

(4) If encumbered financial assets held by the secured creditor are com-

mingled by the latter in a fund, the security provider is entitled to a

share in the fund. Paragraph (1) applies with appropriate adaptations.

(5) If in the cases covered by paragraphs (1), (2) and (4) the assets of the

mass or fund do not suffice to satisfy all co-owners,

VIII. – 2:305

(Transfer of goods forming part of a bulk) paragraphs (4) and (5) apply

accordingly.

Section 4:

Coverage of security

IX. – 2:401: Secured rights

(1) The security covers, within its maximum amount, if any, not only the

princ ipal secured right, but also the ancillary rights of the creditor

against the debtor, especially rights to payment of:

(a) contractual and default interest;

(b) damages, a penalty or an agreed sum for non-performance by the

debtor; and

(2) The right to payment of the reasonable costs of legal proceedings and

enforcement proceedings against the security provider and against the

debtor, if different from the security provider, is covered, provided the

security provider had been informed about the creditor’s intention to

undertake such proceedings in sufficient time to enable the security

provider to aver t those costs.

(3) A global security covers only rights which originated in contracts be-

tween the debtor and the creditor.

IX. – 2:401 Book IX

460

Chapter 3:

Effectiveness as against third persons

Section 1:

General rules

IX. – 3:101: Effectiveness as against third persons

(1) A security right created according to Chapter 2 has no effects against

the following classes of third persons:

(a) holders of proprietary rights, including effective security rights, in

the encumbered asset;

(b) a creditor who has started to bring execution against those assets

and who, under the applicable law, has obtained a position pro-

viding protection against a subsequent execution; and

unless, subject to exceptions, the requirements of this Chapter are met.

(2) Where a security right that is effective against third persons according

to the provisions of this Chapter is extended by virtue of the provisions

of this Book without a need for an agreement to this effect to assets

other than the assets that were originally encumbered, the extension of

the security right is not subject to the requirements of this Chapter.

(3) A security right that had been acquired by a good faith acquisition in

disregard of a retention of ownership device or an earlier security right

in the asset to be encumbered is effective against the holder of the

retention of ownership device or the holder of the earlier security right

even if the requirements of this Chapter are not met. The effectiveness

of the security right that had been acquired by a good faith acquisition

against other third persons remains subject to the other rules of this

Chapter.

IX. – 3:102: Methods of achieving effectiveness

(1) For security rights in all types of assets, effectiveness may be achieved

by registration of the security right pursuant to Section 3.

(2) Effectiveness can also be achieved pursuant to Section 2:

(a) in the case of corporeal assets, by the secured creditor holding

possession of the encumbered assets; or

(b) in the case of certain intan gible as sets, by the secu red cr editor

exercising control over the encumbered assets.

Chapter 3:Effectiveness as against third persons IX. – 3:102

461

IX. – 3:103: Security right made effective by several methods

(1) If a security right has been made effective by registration, possession or

control, it may be made effective also by any of the other methods.

Where the effects diverge, the stronger effects of a chosen method

prevail.

(2) The preceding rules also apply if a security right that is exempted from

the requirements of this Chapter is also made effective by registration,

possession or control.

IX. – 3:104: Change of method

If the method for achieving effectiveness is changed, effectiveness is con-

tinuous, provided the requirements of the new method are met immedi-

ately upon termination of the preceding method.

IX. – 3:105: Security right in an accessory to an immovable

A security right in an accessory to an immovable may upon accession also

be made effective by registration or annotation in a land register, provided

this is authorised by the law governing the land register.

IX. – 3:106: Security right in commingled assets

(1) Where a corporeal asset, which is encumbered with an effective secu-

rity right, is commingled, the security right in the corresponding share

of the bulk according to

IX. – 2:309 (Commingling of assets subject to

proprietary security) remains effective.

(2) The preceding paragraph applies with appropriate adaptations if finan-

cial assets are commingled in a fund.

IX. – 3:107: Registration of acquisition finance devices

(1) An acquisition finance device is effective only if registered.

(2) If registration is effected within 35 days after delivery of the supplied as-

set, the acquisition finance device is effective from the date of creation.

(3) If registration takes place later than 35 days after delivery, the acquisi-

tion finance device becomes effective only at the time of registration

and does not enjoy superpriority under

IX. – 4:102 (Superpriority).

(4) Where a credit for assets supplied to a co nsumer is secured by an

acquisition finance device, this proprietary security is effective without

registration. This exception does not apply to security rights in pro-

ceeds and other assets different from the supplied asset.

IX. – 3:103 Book IX

462

IX. – 3:108: Importation of encumbered asset

If an encumbered asset is brought from a country outside the European

Union into this area, any pre-existing security right which is effective re-

mains effective if the requirements laid down in this Chapter are fulfilled

within three months.

Section 2:

Possession or control by creditor

IX. – 3:201: Possession

Security rights in encumbered corporeal assets can be made effective by the

secured creditor holding possession:

(a) if the secured creditor or an agent (other than the security provider)

acting for the secured creditor exercises direct physical control over the

encumbered assets;

(b) where the encumbered assets are held by a third person (other than the

security provider), if the third person has agreed with the secured cred-

itor to hold the encumbered assets only for the latter; or

and the security provider or where a third person holds the encum-

bered assets for both parties, if in either case the security provider has

no access to the encumbered assets without the secured creditor’s ex-

press consent.

IX. – 3:202: Negotiable documents of title and

negotiable instruments

(1) Possession of a negotiable document of title or negotiable instrument

is also sufficient for the effectiveness of a security right in the goods

covered by the document of title or in the right embodied in the in-

strument.

(2) The security right in the goods covered by the document of title ac-

cording to paragraph (1) is not affected if the covered assets are relin-

quished to the security provider or another person for a period of up to

ten days against a duly dated formal trust receipt and for the purpose of

loading or unloading, sale or exchange or other dealing with the goods

except the creation of a competing security right.

Chapter 3:Effectiveness as against third persons IX. – 3:202

463

IX. – 3:203: Certificated shares and bonds

Paragraph (1) of the preceding Article applies with appropriate adaptations

to possession of directly held certificates of shares of companies, if nego-

tiable, and directly held bond certificates.

IX. – 3:204: Control over financial assets

(1) Security rights can be made effective by the secured creditor exercising

control over:

(a) financial assets which are entered into book accounts held by a

financial institution (intermediated financial assets); and

(b) non-intermediated financial instruments registered i n a re gister

maintained by or for the issuer or which under national law is

determinative of title.

(2) The secured creditor exercises control over the assets mentioned in

paragraph (1)(a), if:

(a) the secured creditor with the assent of the security provider has

instructed the financial institution administering the book account

not to admit dispositions by the security provider without the se-

cured creditor’s consent;

(b) the assets are held by the financial institution for the secured cred-

itor in a special account; or

(3) The preceding paragraph applies with appropriate adaptations to the

exercise of control by the secured creditor over the assets mentioned in

paragraph (1)(b).

(4) The satisfaction of the requirements of paragraphs (2) and (3) must be

evidenced in writing or recording by electronic means or any other

durable medium.

IX. – 3:203 Book IX

464

Section 3:

Registration

Subsection 1:

Operation of the register of proprietary security

IX. – 3:301: European register of proprietary security;

other systems of registration or notation

(1) A registration that is required or allowed for any security right or reten-

tion of ownership device under the rules of this Book is to be effected in

a European register of proprietary security, subject to paragraph (2).

(2) Where systems of registration or notation on title certificates for secu-

rity rights in specific types of assets exist, the effectiveness of a security

right to be registered or noted in these systems depends upon com-

pliance with any manda tory rules applicable for these systems. For

systems established under the national law of a member state, this

rule is subject to

IX. – 3:312 (Transitional provision in relation to entries

in other systems of registration or notation under national law).

(3) An entry of security rights in financial instruments into a register main-

tained by or for the issuer of fi nancial instruments or which under na-

tional law is determinative of title is not regarded as registration for the

purposes of this Section but may constitute control if the requirements

IX. – 3:204 (Control over financial assets) paragraph (3) are com-

plied with.

IX. – 3:302: Structur e and operation of the register

(1) The European register of proprietary security is to operate as a personal

folio system, allowing entries concerning security rights to be filed

against identified security providers.

(2) The register is to operate electronically and to be directly accessible for

its users in an online format.

IX. – 3:303: Retention of ownership devices and security rights

(1) For the purposes of the Europe an register of proprietary security no

distinction is made between retention of ownership devices and secu-

rity rights.

(2) Any reference in this Section to security rights includes retention of

ownership devices.

Chapter 3:Effectiveness as against third persons IX. – 3:303

465

IX. – 3:304: Authentication as requirement for

declarations to the register

(1) Any declaration to t he online register, such as filing, amending or

deleting an entry in the register or a declaration of consent, requires

authentication by the person making the declaration.

(2) Authentication requires:

(a) the use of log-in information which is issued to individual users of

the online register after an initial enrolment in the register during

which the identity and the contact details of the user are verified;

(b) the use of secure online identity verification systems of general

application, if such systems are brought into operation at a Euro-

pean or member state level.

Subsection 2:

Entries in the register

IX. – 3:305: Entries to be made by secured creditor

and advance filing

(1) Entries in the register can be made directly by the secured creditor.

(2) Entries can be made before or after the security right referred to has

been created or the contract for proprietary security has been conclud-

ed.

IX. – 3:306: Minimum content of the entry in the register

(1) An entry can be entered into the register only if:

(a) it is made in respect of an identified security provider;

(b) it contains a minimum declaration as to the encumbered assets;

assets to which category the encumbered assets belong;

(d) the requirements of consent are fulf illed; and

(e) it is accompanied by a declaration of the creditor that the latter

assumes liability for damage caused to the security provider or third

persons by a wrongful registration.

(2) For the purposes of paragraph (1)(b) a declaration that the creditor is to

take security over the security provider’s assets or is to retain ownership

as security is sufficient.

IX. – 3:304 Book IX

466

IX. – 3:307: Additional content of the entry

An entry in the register may include the following additional content:

(a) additional information provided by the creditor in relation to the en-

cumbered assets or the content of the security right;

(b) a date at which the entry is to expire provided that it is before the end

of the regular period of expiry of five years; and

IX. – 3:308: Information appearing on the register

In respect of each entry the following information appears on the register

and is accessible to any user:

(a) the name and contact details of the security provider;

(b) the name and contact details of the creditor;

(d) the minimum content of the entry under

IX. – 3:306 (Minimum con-

tent of the entry in the register) paragraph (1)(b) and (c); and

(e) any additional content of the entry under

IX. – 3:307 (Additional con-

tent of the entry) sub-paragraphs (a) to (c).

IX. – 3:309: Required consent of the security provider

(1) An entry in the register can be made only if the security provider has

consented to it by declaration to the register. Any such consent can be

freely terminated by the security provider by declaration to the register.

A termination of consent does not affect entries that have been entered

before the termination of the consent is declared to the register.

(2) The secured creditor may demand from the security provider a declara-

tion of consent to an entry to the extent that such a consent is neces-

sary to cover the security rights created in the contract for proprietary

security.

(3) This Article does not affect the validity, terms and effects of any of the

security provider’s agreements with the secured creditor other than the

declaration of consent to the register.

Chapter 3:Effectiveness as against third persons IX. – 3:309

467

IX. – 3:310: Identity of security provider, description

of encumbered assets and effectiveness of registration

(1) If under the rules in this Book the effectiveness or priority of a security

right encumbering assets of a certain security provider depends upon

registration, an entry in the register according to this Subsection suf-

fices only if:

(a) the entry is filed against the correct security provider;

(b) the creditor’s declaration as to the encumbered assets as appearing

on the register covers the assets encumbered by the security right;

ies of assets indicated in the entry; and

(d) the creditor’s declaration is in an official language of the European

Union. The creditor may add translations.

(2) For the purposes of paragraph (1)(b):

(a) the entry is effective in respect of fruits, products, proceeds and

any other assets different from the original assets serving as secu-

rity only if these assets are also covered by the creditor’s declara-

tion as to the encumbered assets; and

(b) a description identifying individual assets is not necessary.

(3) The creditor making the entry bears the risk that:

(a) the description of the encumbered assets, the translation of this

description or the indication of the category or categories of en-

cumbered assets is wrong; and

(b) the entry is filed against a wrong person.

IX. – 3:311: Amendments of entries

(1) The creditor may amend any of the creditor’s entries after filing.

(2) An amendment to an entry can only be entered into the register if:

(a) it is made in respect of a specific entry;

(b) it contains a declaration as to the content of the amendment; and

assumes liability for damage caused to the security provider or third

persons by a wrongful amendment to the original entry.

(3) In case of an amendment, the register preserves and shows both the

original text and the amendment as such, including the time the

amendment was made.

(4) An amendment to an entry is effective only if it does not extend the

creditor’s rights. In particular, an amendment can have the effect of

IX. – 3:310 Book IX

468

limiting the creditor’s rights, especially by subordinating the creditor’s

rights to another creditor’s rights, by indicating a transfer of the secu-

rity right to another creditor, by limiting the scope of assets covered

according to the content of the creditor’s declaration as to the encum-

bered assets or by setting or predating a date of expiry of the entry.

(5) An extension of the creditor’s rights is effective only if contained in a

new entry.

IX. – 3:312: Transitional provision in relation to entries in other

systems of registration or notation under national law

(1) Where a security right is registered or noted in another system of re-

gistration or notation on title certificates under the national law of a

member state, as long as such systems are still in operation for security

rights in specific types of assets, an entry reiterating the content of that

registration or notation, including the time of the registration or nota-

tion, is to be entered into the European register of proprietary security

against the security provider by the body operating the other system.

An entry in the European register of proprietary security is required for

the effectiveness of the registration or notation under this Book.

(2) For purposes of priority according to Chapter 4, the time of registration

or notation in the national system is decisive.

IX. – 3:313: Automated certification of entry to creditor

and security provider

After an entry or an amendment to an entry has been filed, a certificate to

that effect is to be communicated automatically to the creditor and the

security provider.

IX. – 3:314: Third person acting as agent of the creditor

(1) As an additional content of the entry made by the secured creditor, the

latter may identify a third person acting as agent of the creditor, whose

name and contact details will appear on the register instead of those of

the creditor. In such a situation, the entry can be entered into the reg-

ister only if in addition to the requirements of the preceding Articles

being satisfied this third person has also consented to it according to

IX. – 3:309 (Required consent of the security provider) paragraphs (1)

and (3), applied with appropriate adaptations.

Chapter 3:Effectiveness as against third persons IX. – 3:314

469

(2) By a declaration to the register that is subject to IX. – 3:309 (Required

consent of the security provider) paragraphs (1) and (3), applied with

appropriate adaptations, a secured creditor may authorise a third per-

son to make declarations to the register on the secured creditor’s be-

half.

(3) Where a third person acting as agent for the secured creditor is iden-

tified in the entry, the secured creditor and the third person are liable as

solidary debtors for all obligations of secured creditors under this Sec-

tion.

Subsection 3:

Protection of the security provider

IX. – 3:315: Security provider’s right to deletion or amendment

of entry

The security provider is entitled against the secured creditor to deletion or

amendment of an entry if and in so far as no corresponding security right

exists.

IX. – 3:316: Review of contested entries by registration office

(1) The security provider may apply for the assistance of the registration

office in the assertion of the right to demand deletion or amendment of

an entry from the secured creditor.

(2) On the security provider’s application, the registration office asks the

secured creditor whether the latter agrees to the security provider’s

demand.

(3) If the secured creditor does not object within two months of being

asked by the registration office according to paragraph (2), the entry

is deleted or amended according to the security provider’s demand.

(4) If the secured creditor objects within the time limit of paragraph (3),

the entry is marked as contested to the extent of the security provider’s

demand.

(5) The entry remains marked as contested until:

(a) the security provider withdraws the application by declaration to

the registration office;

(b) the secured creditor agrees to the security provider’s demand by

declaration made to the registration office;

IX. – 3:315 Book IX

470

(d) a final decision is rendered on the security provider’s demand by a

competent court.

Subsection 4:

Accessing and searching the register

IX. – 3:317: Access to the register for searching purposes

Access to the register for searching purposes is open to anyone, subject to

the payment of fees; it does not depend upon a consent by the security

provider or the secured creditor.

IX. – 3:318: Searching the register

The register can be sea rched for entri es filed against individual security

providers or for entries containing specified descriptions of the encumbered

assets.

Subsection 5:

Registered creditors’ duty to answer requests for information

IX. – 3:319: Duty to give information

(1) Any registered secured creditor has a duty to answer requests for in-

formation by inquirers concerning the security right covered by the

entry and the encumbered assets if these requests are made with the

security provider’s approval.

(2) The request must be in an official language of the member state of the

European Union where the place of business or incorporation or the

residence of the secured creditor is situated or in English.

(3) The request must be answered within fourteen days after the request,

including the security provider’s approval, has been received by the

secured creditor.

(4) The secured creditor’s duty to answer requests for information by in-

quirers according to the preceding paragraphs is owed both to the in-

quirer and to the security provider. To both parties, the secured creditor

is liable in damages for any loss caused by breach of the duty.

Chapter 3:Effectiveness as against third persons IX. – 3:319

471

IX. – 3:320: Content of the information

(1) Requests for information under the preceding Article must be answered

by the secured creditor giving information concerning the existence of

a security right in specific assets at the time when the information is

given.

(2) The information may be given by:

(a) stating specifically whether the assets concerned are encumbered

in favour of the secured creditor; or

(b) forwarding the relevant parts of the agreements between security

provider and secured creditor covering the providing or retention of

proprietary security.

(3) Where the security right has been transferred, the person registered as

the secured creditor must disclose the name and contact details of the

transferee.

(4) The information must be given in an official language of the member

state of the European Union where the place of business or incorpora-

tion or the residence of the secured creditor is situated or in English.

(5) No information needs to be given:

(a) if it is apparent directly from the entry that the asset concerned is

not encumber ed, provided that the entry complies with the re-

quirements of paragraph (4); or

(b) if the secured creditor had already answered a request for informa-

tion by the same inquirer in relation to the same asset within the

past three months and the information given is still correct.

(6) These provisions do not affect the secured creditor’s obligation to give

information concerning the obligation covered by the security under

IX. – 5:401 (Secured creditor’s obligation to give information about se-

cured right) or any equivalent obligation owed to the debtor of the

obligation covered by the security and the consequences of a non-per-

formance of these obligations.

IX. – 3:321: Consequences of correct information

given by secured creditor

(1) If the secured creditor correctly informs the inquirer under this Subsec-

tion that the assets concerned are not encumbered, a security right in

these assets which is subsequently created in favour of the secured

creditor cannot enjoy priority conferred by the original entry over se-

curity rights of the inquirer. This rule applies only if the security rights

IX. – 3:320 Book IX

472

of the inquirer are acquired by the latter within three months after the

request for information had been made.

(2) If the secured creditor correctly informs the inquirer under this Subsec-

tion that the assets concerned are encumbered, the inquirer can not

acquire a proprietary right in the encumbered assets free of the encum-

brance in favour of the secured creditor even if that would otherwise be

possible under the principles of good faith acquisition.

IX. – 3:322: Consequences of incorrect information

given by secured creditor

(1) If the secured creditor incorrectly informs the inquirer under this Sub-

section that the assets concern ed are not encumbered, the inquirer

may within three months acquire a proprietary right in these assets

free of any encumbrance in favour of the secured creditor on the basis

of a good faith acquisition in spite of the entry in the register covering

the secured creditor’s rights.

(2) If the secured creditor incorrectly informs the inquirer under this Sub-

section that the assets concerned are encumbered, and the inquirer

nevertheless acquires a proprietary security right in the assets con-

cerned from the security provider,

IX. – 3:321 (Consequences of correct

information given by secured creditor) paragraph (1) first sentence ap-

plies with appropriate adaptations.

IX. – 3:323: Consequences of failure to give information

(1) If the secured creditor fails to answer the request for information under

IX. – 3:319 (Duty to give information) and IX. – 3:320 (Content of the

information) or incorrectly answers that its security rights in the assets

concerned have been transferred, the inquirer is to be treated as if the

secured creditor had given the information that the assets concerned

are not encumbered.

IX. – 3:321 (Consequences of correct information

given by secured creditor) paragraph (1) or

IX. – 3:322 (Consequences

of incorrect information given by secured creditor) paragraph (1), re-

spectively, apply with appropriate adaptations.

(2) If the secured creditor delays in answering the request for information

under

IX. – 3:319 (Duty to give information) and IX. – 3:320 (Content

of the information), the preceding paragraph applies if a proprietary

right is created in favour of or acquired by the inquirer before the se-

cured creditor answers the request for information.

Chapter 3:Effectiveness as against third persons IX. – 3:323

473

IX. – 3:324: Form of requests and information

The request for information under this Subsection and the answer must be

in textual form. Both may be made via an electronic means of communi-

cation provided by the register, in which case a certification of the inquiry

or the answer is to be communicated by the register to the inquirer or the

secured creditor, respectively, serving as proof of receipt of the inquiry or of

the answer by the other party.

Subsection 6:

Duration, renewal and deletion of entries

IX. – 3:325: Duration

(1) An entry expires five years after it has been entered into the register or

at the date of expiry indicated in the entry.

(2) Once an entry expires, it no longer appears on the register and is no

longer directly accessible for any user. It ceases to have any effect under

this Section. The content of the entry is kept for reference purposes in

the archives of the registration office.

IX. – 3:326: Renewal

(1) Unless a date of expir y has been included in the entry, an entry may be

renewed before the end of the regular period of expiry for an additional

period of fi ve years.

(2) The re newal of an ent ry is effected by a decla ration of the secured

creditor to the register.

IX. – 3:327: Deletion

(1) The secured creditor may at any time delete the entry by declaration to

the register.

(2) For the consequences of a declaration according to the preceding para-

graph,

IX. – 3:325 (Duration) paragraph (2) is applicable with appro-

priate adaptations.

IX. – 3:324 Book IX

474

Subsection 7:

Transfer of the security right or of the encumbered asset

IX. – 3:328: Transfer of the security right:

general ru les

(1) Where the security right is transferred, it remains effective by virtue of

the original entry.

(2) Even if there is no declaration indicating the transfer under

IX. – 3:329

(Transfer of the security right: declaration indicating the transfer), the

transferee is bound under Subsection 5 in the same way as a secured

creditor from the moment of the transfer.

(3) The transferor is liable towards the transferee for any damage caused by

its co nduct in relation to the entry, as well as to amendments and

deletions thereof from the moment of the transfer of the security right

until a declaration indicating the transfer is filed or until the transferor

declares its consent to such a declaration under

IX. – 3:329 (Transfer of

the security right: declaration indicating the transfer) paragraph (4)).

IX. – 3:329: Transfer of the security right:

declaration indicating the transfer

(1) Where the security right is transferred, the original entry may be amen-

ded by a declaration indicating the transfer.

(2) The declaration indicating the transfer is subject to

IX. – 3: 311

(Amendments of entries) and any additional rules as laid down in this

Article.

(3) The declaration indicating the transfer can be entered into the register

only if:

(a) it is made in respect of a specific entry;

(b) it indicates the security rights to be transferred;

(d) it is accompanied by a declaration of the person making the

amendment that the latter assumes liability for damage caused to

the secured creditor or third persons by a wrongful entry.

(4) The declaration indicating the transfer may be filed by the transferor or,

with the transferor’s consent, by the transferee.

(5) On the basis and to the extent of the transfer of the security right, the

security provider is entitled as against the transferor to the filing of a

Chapter 3:Effectiveness as against third persons IX. – 3:329

475

declaration indicating the transfer and the transferee is entitled to a

declaration of consent by the transferor according to th e preceding

paragraph.

IX. – 3:316 (Review of contested entries by registration of-

fice) applies with ap propriate adaptations to the assertion of these

rights.

(6) Once the declaration indicating the transfer is filed, the original entry is

amended accordingly and is no longer regarded as covering the security

rights indicated as having been transferred.

(7) Once the decl aration indicat ing the transfer is filed, a new entry is

automatically filed against the security provider reiterating the content

of the original entry and stating that the security rights indicated are

transferred to the transferee.

(8) The transferee assumes the position of the secured creditor in respect

of the new entry for all purposes under this Section. In respect of the

security rights indicated as transferr ed, the new entry preserves the

priority conferred by the original entry.

IX. – 3:330: Transfer of the encumbered asset:

general ru les

(1) Ownership of the encumbered asset may be transferred subject to the

existing security right without a new entry being filed in the register.

(2) The continuation of effectiveness and the priority of the security right

in the encumbered asset by virtue of the original entry in the register

are governed by

IX. – 5:303 (Transfer of encumbered asset).

(3) For the purposes of this Section, the transferee assumes the position of

the security provider in respect of the security right in the transferred

assets from the moment of the transfer.

(4) The preceding paragraphs apply with appropriate adaptations where

the rights of a buyer, hire-purchaser, lessee or consignee in or relating

to the supplied assets are transferred subject to an existing retention of

ownership device.

IX. – 3:331: Transfer of the encumbered asset:

declaration of transfer

(1) A transferee acquiring ownership of an encumbered asset subject to an

existing security right has a duty to enter in the register an entry against

itself indicating the transfer, unless such a declaration has already been

entered by the secured creditor.

IX. – 3:330: Transfer of the encumbered asset Book IX

476

(2) The transferee is liable towards the secured creditor holding a security

right in the transferred asset for damage resulting from a breach of the

duty under the preceding paragraph.

(3) The declaration of transfer can be entered by the transferee or the se-

cured creditor if:

(a) it is made in respect of an identified security provider as transferee;

(b) it indicates the identity of an identified security provider as trans-

feror;

(d) it is indicated by one or several references to a list of categories of

assets to which category the transferred asset belongs; and

(e) it is accompanied by a declaration of the person making the de-

claration of transfer that the latter assumes liability for any damage

caused to the transferee, the secured creditor or third persons by a

wrongful entry.

(4) The preceding paragraphs apply with appropriate adaptations where

the rights of a buyer, hire-purchaser, lessee or consignee in or relating

to the supplied assets are transferred subject to an existing retention of

ownership device.

Subsection 8:

Costs

IX. – 3:332: Distribution of costs

(1) As between the parties:

(a) each party has to bear the costs of its enrolment or admission to a

secure online identity verification system; and

(b) the security provider has to bear any other costs reasonably incur-

red by the secured creditor in connection with the registration.

(2) The costs of inquiries and of answers to such inquires are to be borne

by the inquirer.

Chapter 3:Effectiveness as against third persons IX. – 3:332

477

Subsection 9:

Security rights created before establishment of register

IX. – 3:333: Security rights created before establishment of register

(1) Security rights that were effective before the European register of pro-

prietary security started to operate do not require registration under this

Section in order to remain effective thereafter.

(2) If the security rights were registered or noted in any system of registra-

tion or notation on title certificates under the national law of a member

state, an entry reiterating the content of that registration or notation,

including the date of registration or notation, is to be entered in the

European register of proprietary security against the security provider by

the body operating the other register once this register is es tablished.

Chapter 4:

Priority

IX. – 4:101: Priority: general rules

(1) Subject to exceptions, the priority between several security rights and

between a security right and other limited pro prietary rights in the

same asset is determined according to the order of the relevant time.

(2) The relevant time is:

(a) for security rights, the time of registration according to Chapter 3,

Section 3, if any, or the time at which the security right has other-

wise become effective according to the other rules of Chapter 3,

whichever is earlier;

(b) for other limited proprietary rights, the time of creation.

(3) An effective security right has priority over an ineffective security right,

even if the latter was created earlier.

(4) The ranking of two or more security rights which are ineffective is de-

termined by the time of their creation.

(5) Subject to

IX. – 4:108 (Change of ranking), a security right that had

been acquired by a good faith acquisition in an asset subject to a re-

tention of ownership device or in disregard of an earlier encumbrance

in the same asset always has priority over the retention of ownership

device or earlier security right.

IX. – 3:333 Book IX

478

IX. – 4:102: Superpriority

(1) An acquisition finance device that is effective against third pers ons

according to the rules of Chapter 3 takes priority over any security right

or other limited proprietary right created by the security provider.

(2) A security right in financial assets made effective by control according

IX. – 3:204 (Control over f inancial assets) or by possession takes

priority over any other security right or other limited proprietary right

in the same asset. If control is created for different secured creditors,

IX. – 4:101 (Priority: general rules) paragraphs (1) and (2)(a) apply.

(3) A security right based upon a right of retention of possession according

IX. – 2:114 (Right of retention of possession) takes priority over any

other right in the retained asset.

(4) The preceding paragraphs are subject to

IX. – 4:101 (Priority: general

rules) paragraph (5) and

IX. – 4:108 (Change of ranking).

IX. – 4:103: Continuation of priority

(1) Priority is not affected if the encumbered asset:

(a) becomes an accessory to a movable asset; or

(b) is us ed for the production of new goods, or is commingled or

combined with other assets, provided that the security right ex-

tends to the security provider’s rights in the asset resulting from

the production, commingling or combination.

(2) Paragraph (1)(a) also applies if a movable asset becomes an accessory

to an immovable, unless the law governing the immovable determines

otherwise.

IX. – 4:104: Fruits and proceeds: general rules

(1) Security rights in fruits and proceeds of the following types of assets

preserve the priority of the security right in the encumbered original

assets:

(a) fruits and proceeds of the same kind as the assets that were ori-

ginally encumbered;

(b) rights to payment due to defects in, damage to, or loss of the assets

that were origin ally encumbered, including insurance proceeds;

and

curity right in the assets that were originally encumbered.

Chapter 4:Priority IX. – 4:104: Fruits and proceeds

479

(2) In cases not covered by paragraph (1), the priority of security rights in

fruits and proceeds is determined according to the general rules laid

down in

IX. – 4:101 (Priority: general rules) and IX. – 4: 102 (Super-

priority).

IX. – 4:105: Fruits and proceeds: exceptions

(1) Security rights in fruits and proceeds of assets that are subject to an

acquisition finance device or are covered by

VIII. – 5:204 (Additional

provisions as to proprietary security rights) paragraph (3) do not enjoy

the superpriority of the security right in the assets that were originally

encumbered.

(2) The preceding paragraph does not affect the superpriority of security

rights in:

(a) rights to payment due to defects in, damage to, or loss of the assets

that were origin ally encumbered, including insurance proceeds;

and

(b) proceeds of the sale of the assets that were originally encumbered.

IX. – 4:106: Importation of encumbered asset

If an encumbered asset is brought from a country outside the European

Union into this area, the priority of a security right which was effective

before removal of the en cumbere d asset into the European Union and

which fulfils the conditions of

IX. – 3:108 (Importation of encumbered as-

set) is preserved.

IX. – 4:107: Priority of execution creditor

For the purpose of determining priority, an execution creditor is regarded as

holding an effective security right as from the moment of bringing an ex-

ecution against specific assets if all preconditions for execution proceed-

ings against these assets according to the procedural rules of the place of

execution are fulfilled.

IX. – 4:108: Change of ranking

(1) The priority between a security right and other security rights as well as

other limited proprietary rights in the same asset may be changed by an

agreement in textual form between the holders of all rights that would

be affected by the change of ranking.

IX. – 4:105: Fruits and proceeds Book IX

480

(2) A third person acquiring a security right or a limited proprietary right

that has been negatively affected by a change of ranking is bound only

if the entry for the security right in the European register of proprietary

security has been amended accordingly or if the third person at the time

of the transfer knew or had reason to know of the change of ranking.

Chapter 5:

Predefault rules

Section 1:

General principles

IX. – 5:101: General principles

(1) The security provider and the secured creditor are free to determine

their mutual relationship with respect to the encumbered asset, except

as otherwise provided in these rules.

(2) Any agreement concluded before default and providing for the appro-

priation of the encumbered assets by the secured creditor or having this

effect, is void, unless expressly provided otherwise. This parag raph

does not apply to retention of ownership devices.

Section 2:

Encumbered assets

IX. – 5:201: Care and insurance of the encumbered assets

(1) The party who is in possession of the encumbered assets has an ob-

ligation to keep them identifiable from assets owned by others and

must preserve and maintain them with reasonable care.

(2) The other party is entitled to inspect the encumbered assets at any

reasonable time.

(3) The security provider has an obligation to insure the encumbered as-

sets against such risks as are usually insured against by a prudent own-

er at the location of the assets. Upon request of the secured creditor,

the security provider must furnish proof of the insurance coverage. If

there is no or only insufficient insurance coverage or no proof of it, the

secured creditor is entitled to take out sufficient insurance and to add

any expenses to the obligation covered by the security.

Chapter 5:Predefault rules IX. – 5:201

481

Subsection 1:

Security provider’s rights and obligations

IX. – 5:202: Rights in general

If and as long as the security provider is entitled to possession of the en-

cumbered assets, the security provider is entitled to make use of them in a

reasonable manner.

IX. – 5:203: Use of encumbered industrial material

A security provider in possession of encumbered industrial material, such

as raw material or semi-finished products, may apply such material for pro-

duction, unless expressly prohibited.

IX. – 5:204: Dispositions of encumbered assets by

traders and manufacturers

(1) A security provider acting in the ordinary course of its business as a

trader or manufacturer may dispose of the following types of encum-

bered assets free of any security right if they are in the security provid-

er’s possession:

(a) assets designated for sale and lease and industrial material (inven-

tory); and

(b) products of industrial material.

(2) A trader or manufacturer may not dispose of items of its encumbered

equipment, unless expressly so authorised by the secured creditor.

IX. – 5:205: Unauthorised use or disposition

(1) A security provider in possession of the encumbered assets has an

obligation to the secured creditor not to use or dispose of them in

breach of the limits imposed by the preceding Articles of this Subsec-

tion.

(2) In addition to liability for damages for non-performance of the obliga-

tion referred to in paragraph (1), the security provider who is in breach

of those limits is obliged to account to the secured creditor for the

value derived from the use or the proceeds of the disposition and to

pay the resulting amount, but only up to the amount of the secured

right that would otherwise remain unsatisfied.

IX. – 5:202 Book IX

482

Subsection 2:

Secured creditor’s rights and obligations

IX. – 5:206: Limited right of use

A secured creditor who is in possession or control of the encumbered as-

sets is not entitled to use the assets, unless and in so far as proper use is

indispensable for their up-keep and preservation.

IX. – 5:207: Banks entitled to dispose of financial assets

(1) Banks and equivalent financial institutions holding financial assets as

secured creditors are entitled to use, appropriate and dispose of the

encumbered assets, provided this is expressly agreed.

(2) Upon satisfaction of the secured right, the secured creditor is only

obliged to transfer financial assets of the same kind, quality and value

to the security provider.

IX. – 5:208: Appropriation of civil fruits

If the security right extends to civil fruits of the assets that were originally

encumbered, the secured creditor is entitled to collect and to apply money

received as civil fruits to reduce the secured right even before it has become

due.

Section 3:

Change of parties

IX. – 5:301: Transfer of the secured right

(1) If a secured right is transferred to another creditor, the security right

also passes to that creditor.

(2) The transferor is obliged to inform the transferee of any security right

securing the transferred right.

(3) Effectiveness of the security right against third persons is achieved:

(a) by virtue of the original registration according to

IX. – 3: 328

(Transfer of the security right: general rules) paragraph (1);

(b) if either possession or control of the encumbered asset is transfer-

red to the transferee;

Chapter 5:Predefault rules IX. – 5:301

483

feree; or

(d) if the security right had been effective without observation of any

requirements under Chapter 3.

(4) If the security right remains effective, its priority is not affected by the

transfer.

IX. – 5:302: Partial transfer of the secured right

If the secured right is divided into parts held by different persons as the

result of a transfer of a par t of the secured right or of a transfer of the whole

secured right to different transferees each acquiring a part only:

(a) each holder of a part of the secured right is entitled to a part of the

security right in proportion to the nominal amount of its part of the

secured right; and

(b) the effectiveness of the security rights of each holder of a part of the

secured right is to be determined individually; possession or control of

the encumbered asset may be held by one holder of a part of the se-

cured right for the others also.

IX. – 5:303: Transfer of encumbered asset

(1) Where ownership of an encu mbered asset is transferred to another

person, neither the existence nor the effectiveness against third per-

sons of a security right in the asset is affected. As of the time of the

transfer, the transferee is regarded as the security provider.

(2) The preceding paragraph does not apply if the transferor acted with

authority to dispose of the encumbered asset free of the encumbrance

or if the transferee acquires the asset free of the encumbrance on the

basis of a good faith acquisition.

(3) Security rights which before transfer of ownership of the encumbered

asset had been created for secured creditors in future assets of the new

owner do not have priority over security rights encumbering the trans-

ferred asset at the time of the transfer.

(4) The preceding paragraphs apply with appropriate adaptations where

there is a transfer of the rights of a buyer, hire-purchaser, lessee or

consignee in or relating to the supplied assets subject to an existing

retention of ownership device.

IX. – 5:302 Book IX

484

Section 4:

Secured creditor’s obligation to give

information about secured right

IX. – 5:401: Secured creditor’s obligation to give

information about secured right

(1) The security provider has a right to, and the secured creditor has an

obligation to provide on request by the security provider, information

concerning the amount of the obligation covered by the security. The

security provider can require this information to be given to a third

person.

(2) If the security provider is not the debtor of the obligation covered by

the security, the security provider’s right under the preceding Article

depends upon the debtor’s approval.

Chapter 6:

Termination

IX. – 6:101: Instances of termination of proprietary security

(1) A security right is terminated if, and in so far as:

(a) the security provider and secured creditor so agree;

(b) the secured creditor waives the security right, such a waiver being

presumed where t he secured cred itor returns possession of the

encumbered asset to the security provider;

(d) ownership of the encumbered asset is acquired by the secured

creditor;

(e) ownership in the encumbered asset is acquired by a third person

free from the security right; or

(f) any other provision so provides or this consequence is implied,

such as where the debtor and creditor of the secured right become

identical, especially by inheritance or merger.

(2) A security right is also terminated if the secured right ceases to exist

entirely, especially if a right to payment is fully satisfied by payment to

the secured creditor, unless the security right with the secured right pas-

ses to another person who has made payment to the secured creditor.

Chapter 6:Termination IX. – 6:101

485

(3) Paragraph (1)(a) to (c), (e) and (f) and paragraph (2) apply with ap-

propriate adaptations to the termination of a retention of ownership

device. A retention of ownership device is also terminated if the rights

of the buyer, hire-purchaser, lessee or consignee in or relating to the

supplied assets under the contract of sale, hire-purchase, financial leas-

ing or consignment cease to exist.

IX. – 6:102: Loss of proprietary security due to

good faith acquisition of ownership

(1) Whether a security right is lost due to good faith acquisition of own-

ership of the encumbered asset by a third person free from a security

right is determined by

VIII. – 3:102 (Good faith acquisition of owner-

ship free of limited proprietary rights).

(2) For the purposes of

VIII. – 3:102 (Good faith acquisition of ownership

free of limited proprietary rights) paragraph (1)(d) sentence 1, a trans-

feree is regarded as knowing that the transferor has no right or authority

to transfer ownership free from the security right if this right is regis-

tered under Chapter 3, Section 3 unless:

(a) the transferor acts in the ordinar y course of its business; or

(b) the entry is filed against a security provider different from the trans-

feror.

(3) Whether a retention of ownership device is lost due to good faith ac-

quisition of ownership of the supplied asset by a third person is deter-

mined by

VIII. – 3:101 (Good faith acquisition through a person with-

out right or authority to transfer ownership). Paragraph (2) above ap-

plies with appropriate adaptations.

IX. – 6:103: Prescription of the secured right

A security right can be enforced even if the secured right is prescribed and

up to two years after the debtor of the secured right has invoked this pre-

scription as against its creditor.

IX. – 6:104: Consequences of termination

(1) The full or partial termination of a security right implies the correspond-

ing termination of the encumbrance of the asset concerned.

(2) If and in so far as a security right is terminated, the secured creditor is

no longer entitled to possession or control of the asset that was en-

cumbered as against its owner. For the right to deletion of an entry in

IX. – 6:102 Book IX

486

the European register of proprietary security, IX. – 3:315 (Security pro-

vider’s right to have entry deleted or amended) applies.

(3) The secured creditor is obliged to inform any third person holding the

encumbered assets of the removal of the encumbrance and, if the third

person holds the assets for the secured creditor’s account, to ask the

security provider for instructions.

(4) Where in the case of an encumbered right to payment notice of the

encumbrance had been given to the third party debtor, the secured

creditor is obliged to notify the debtor of the removal of the encum-

brance.

(5) If and in so far as a retention of ownership device is terminated, the

seller’s, supplier’s or lessor’s ownership of the supplied assets is no long-

er subject to the rules of this Book. An acquisition of ownership of the

supplied assets by the buyer, hire-purchaser, lessee or consignee or the

latter’s right to use the supplied assets is subject to an agreement of the

parties. For the right to deletion of an entry in the European register of

proprietary security, paragraph (2) second sentence applies.

IX. – 6:105: Secured creditor liable to account for proceeds

Upon termination of the security right, the secured creditor is lia ble to

account for any proceeds from the encumbered assets, whether or not it

has received, used or consumed them, and to transfer them to the security

provider.

IX. – 6:106: Recourse of third party security provider

(1) If a security provider who is not the debtor of the secured right (a third

party security provider), pays the outstanding amount of the obligation

covered by the security,

IV. G. – 2:113 (Security provider’s rights after

performance),

IV. G. – 1:106 (Several security providers: internal re-

course) and

IV. G. – 1:107 (Several security providers: recourse against

debtor) apply with appropriate adaptations.

(2) A security provider other than the debtor has as against the debtor the

same position as a person who has provided dependent personal se-

curity.

Chapter 6:Termination IX. – 6:106

487

Chapter 7:

Default and enforcement

Section 1:

General rules

IX. – 7:101: Secured creditor’s rights after default

(1) After an event of default, and provided that any additional conditions

agreed by the parties are fulfilled, a secured creditor may exercise the

rights under this Chapter.

(2) If a third person listed in

IX. – 3:101 (Effectiveness as against third per-

sons) paragraph (1) and fulfilling the requirements of that provision is

involved, a secured creditor may exercise the rights under this Chapter

only if the security right is effective according to the rules of Book

Chapter 3. If no such third person is involved, it is sufficient that the

security right has been validly created. The provisions on priority re-

main unaffected.

IX. – 7:102: Mandatory rules

As between the enforcing secured creditor and the security provider, the

rules of this Chapter are mandatory, unless otherwise provided.

IX. – 7:103: Extra-judicial and judicial enforcement

(1) Unless otherwise agreed, the secured creditor may carr y out extra-ju-

dicial enforcement of the security right.

(2) A security right in an asset of a consumer can only be enforced by a

court or other competent authority, unless after default the consumer

security provider has agreed to extra-judicial enforcement.

(3) In the case of retention of ownership devices the parties may not agree

to exclude extra-judicial enforcement and paragraph (2) does not ap-

ply.

(4) Enforcement is to be undertaken by the secured creditor in a commer-

cially reasonable way and as far as possible in cooperation with the

security provider and, where applicable, any third person involved.

IX. – 7:104: Right to seek court assistance and damages

Any party or third person whose rights are violated by enforcement mea-

sures or by resistance to justified enforcement measures may:

IX. – 7:101 Book IX

488

(a) call upon a competent court or other authority, which must decide

expeditiously, to order the party responsible to act in accordance with

the provisions of this Chapter; and

(b) claim damages from the party responsible.

IX. – 7:105: Predefault agreement on

appropriation of encumbered assets

(1) Any agreement concluded before default providing for the transfer of

ownership of the encumbered assets to the secured creditor after de-

fault, or having this effect, is void.

(2) Paragraph (1) does not apply:

(a) if the encumbered asset is a fungible asset that is traded on a re-

cognised market with published prices; or

(b) if the parties agree in advance on some other method which allows

a ready determination of a reasonable market price.

(3) Paragraph (2)(b) does not apply to a consumer security provider.

(4) Where appropriation is allowed, the secured creditor is entitled to ap-

propriate encumbered assets only for the value of their recognised or

agreed market price at the date of appropriation. The security provider

is entitled to any surplus over the obligations covered by the security

right. The debtor remains liable for any deficit.

(5) This Article does not apply to retention of ownership devices.

IX. – 7:106: Security provider’s right of redemption

(1) Even after default, if the outstanding amount of the obligation covered

by the security right is paid, the security provider may require the se-

cured creditor to terminate the exercise of the rights under this Chapter

and to return possession of the encumbered asset.

(2) The security provider’s rights under paragraph (1) may no longer be

exercised if:

(a) in the case of an enforcement under Section 2, the encumbered

asset ha s been app ropriated or sold or the secured creditor has

concluded a binding contract to sell the asset to a third person; or

(b) in the case of exercising the rights under Section 3, the holder of

the retention of ownership device has terminated the relationship

arising under the contract of sale, hire-purchase, financial leasing

or consignment.

Chapter 7:Default and enforcement IX. – 7:106

489

IX. – 7:107: Enforcement notice to consumer

(1) A secured creditor may exercise the rights under this Chapter against a

consumer security provider only if the secured creditor delivers at least

ten days before enforcement is to begin an enforcement notice in tex-

tual form to the security provider and, if the latter is not the debtor, also

to the debtor, if the debtor also is a consumer.

(2) The enforcement notice must:

(a) unequivocally designate the obligat ion covered by the security

right and state the amount that is due by the end of the day before

the notice is sent;

(b) state that any other condition for enforcement agreed by the par-

ties has been fulfilled;

identify those encumbered assets against which the secured cred-

itor intends to enforce it; and

(d) be signed by or on behalf of the secured creditor.

(3) The notice must be in an official language of the consumer’s place of

residence.

IX. – 7:108: Solidary liability of several security providers

(1) To the extent that several proprietary security rights have been created

covering the same obligation or the same part of an obligation, the

creditor may seek satisfaction from any, several or all of these security

rights.

IV. G. – 1:105 (Several security providers: solidary liability to-

wards creditor) applies accordingly.

(2) Paragraph (1) applies with appropriate adaptations if, in addition to

one or more proprietary security rights, pe rsonal security has been

granted by one or more persons.

IX. – 7:109: Rights of recourse of third party security provider

If the obligation covered by the security right is satisfied by enforcement

against the assets of a security provider who is not the debtor, the rights of

recourse between several providers of proprietary security or between pro-

viders of proprietary securit y and personal security as well as recourse

against the debtor are governed by

IV. G. – 2:113 (Security provider’s rights

after performance),

IV. G. – 1:106 (Several security providers: internal re-

course) and

IV. G. – 1:107 (Several security providers: recourse against

debtor), applied with appropriate adaptations.

IX. – 7:107 Book IX

490

Section 2:

Enforcement of security rights

Subsection 1:

Extra-judicial enforcement: rules preparatory to realisation

IX. – 7:201: Creditor’s right to possession of corporeal asset

(1) The secured creditor is not entitled to take possession of an encum-

bered corporeal asset, unless:

(a) the security provider consents at the time when the secured cred-

itor exercises this right; or

(b) the security provider had agreed to the secured creditor’s right to

take possession and neither the security provider nor the actual

holder objects at the time when the secured creditor exercises this

right.

(2) In enforcements against a consumer, the right to take possession ac-

cording to paragraph (1) does not arise until ten days have elapsed

since an enforcement notice has been served.

(3) Unless it indicates otherwise, a consent or agreement to the taking of

possession according to paragraph (1) covers the right to enter the

security provider’s or other holder’s premises for the purpose of exer-

cising the right to take possession.

IX. – 7:202: Creditor’s right to immobilise and

to preserve encumbered asset

(1) The secured creditor is entitled to take any steps necessary to immo-

bilise the encumbered asset, to prevent unauthorised use or disposition

of it, and to protect it physically. Paragraphs (1) to (3) of the preceding

Article apply with appropriate adaptations.

(2) The secured creditor is entitled:

(a) to take reasonable steps to preserve, maintain and insure the en-

cumbered asset and to obt ain reimbursement for such actions from

the security provider;

(b) to lease the encumbered asset to a third party for the purpose of

preserving its value; or

vider.

Chapter 7:Default and enforcement IX. – 7:202

491

IX. – 7:203: Intervention of court or other authority

(1) The secured creditor may apply to the competent cour t or other au-

thority for an order to obtain possession of or access to the encum-

bered asset, if the security provider or a third person in possession of

the asset refuses delivery to or access by the secured creditor.

(2) Upon application by either party, a court or other authority may order

the taking of any of the protective measures mentioned in the preced-

ing Article.

IX. – 7:204: Encumbrance of a right to pa yment

(1) Where the encumbered asset is a right entitling the security provider to

payment from a third party debtor, the secured creditor may exercise

the rights under this Chapter only if the secured creditor:

(a) sends to the third party debtor:

(i) where the security provider is a consumer, a copy of an en-

forcement notice complying with all the requirements of

IX.–

7:107 (Enforcement notice to consumer); and

(ii) in other cases, an enforcement notice complying with para-

graph (2)(a) and (d) of that Article; and

(b) informs the third party debtor as precisely as possible in the cir-

cumstances of the nature, amount and maturity of the security

provider’s right to payment against the third party debtor.

(2) The third party debtor is obliged to inform the enforcing secured cred-

itor about the amount and maturity of competing rights of other se-

cured creditors known to the third party debtor.

IX. – 7:205: Negotiable instrument

(1) IX. – 7:201 (Creditor’s right to possession of corporeal asset), IX.–

7:202 (Creditor’s right to immobilise and to preserve encumbered as-

set) and

IX. – 7:203 (Intervention of court or other authority) apply to

the taking of possession of a negotiable instrument as such.

(2)

IX. – 7:2 04 (Encu mbrance of a right to payment) does not app ly to

negotiable instruments.

IX. – 7:206: Negotiable document of title

The preceding Article applies also to the taking of possession of a negoti-

able document of title.

IX. – 7:203 Book IX

492

Subsection 2:

Extra-judicial enforcement: realisation of encumbered asset

IX. – 7:207: Ge neral rule on realisation

(1) The secured creditor is entitled to realise the encumbered asset in order

to apply the proceeds towards satisfaction of the secured right:

(a) by sale of the encumbered asset according to

IX. – 7:211 (Sale by

public or private auction or by private sale), unless agreed other-

wise by the parties;

(b) by leasing the encumbered asset to a third person and collecting

the fruits;

IX. – 7:216 (Appropriation of encum-

bered asset by secured creditor); or

(d) by exercising the methods of realisation (collection, sale or appro-

priation) for rights to payment and negotiable instruments accord-

ing to

IX. – 7:214 (Realisation of security in right to payment or in

negotiable instrument).

(2) Where an enforcement notice is required under

IX. – 7:107 (Enforce-

ment notice to consumer), paragraph (1) applies only if ten days have

elapsed since the delivery of that notice.

(3) The secured creditor may appoint a private agent or apply to a compe-

tent court officer to undertake all or some of the steps for realisation of

the encumbered assets.

IX. – 7:208: Notice of extra-judicial disposition

(1) A secured creditor may exercise its right to dispose of the encumbered

asset only if the secured creditor gives notice of its intention to do so.

(2) Paragraph (1) does not apply if the encumbered asset is perishable or

may otherwise speedily decline in value or is a fungible asset that is

traded on a recognised market with published prices.

IX. – 7:209: Addressees of the notice

The notice required by the preceding Article must be given:

(a) to the security provider, the debtor (if different from the security pro-

vider) and other persons who, to the knowledge of the secured cred-

itor, are liable for the obligation covered by the security; and

(b) to the following persons with rights in the encumbered asset:

Chapter 7:Default and enforcement IX. – 7:209

493

(i) other secured creditors who have registered such rights;

(ii) persons who were in possession or control of the encu mbered

asset when enforcement commenced; and

(iii) other persons who were actually known to the secured creditor to

have a right in the encumbered asset.

IX. – 7:210: Time and contents of notice

(1) The notice required by IX. – 7:208 (Notice of extra-judicial disposition)

must be given in due time. A notice that reaches its addressees at least

ten days before the disposition is regarded as given in due time.

(2) The notice must indicate:

(a) the place and time of the planned disposition;

(b) a reasonable description of the encumbered asset to be disposed of;

and payment terms; and

(d) the right of the security provider, of the debtor and of other interested

persons to avert disposition of the encumbered asset by payment of

the outstanding amount of the obligation covered by the security.

(3) The notice must be in a language that can be expected to inform its

addressees.

IX. – 7:211: Sale by public or private auction or by private sale

(1) Realisation of all or parts of the encumbered assets by sale may be by

an officially supervised auction (public auction) or by an auction to

which the public is invited (private auction).

(2) Realisation of all or parts of the encumbered assets by sale may be by

private sale, if so agreed by the parties or if there is a published market

price for the encumbered asset.

(3) The details of the arrangements to be made under the preceding para-

graphs can be fixed by the secured creditor.

(4) If the transfer is subject to pre-existing prior rights and upon demand,

the secured creditor must disclose to the purchaser the relevant details.

(5) If the secured creditor acquires the encumbered asset in a sale by public

or private auction, the sale may be set aside by the security provider

within a period of ten days after the auction.

(6) Where the owner of the encumbered asset participates as buyer in a

realisation of the encumbered asset according to this Article, the sale

operates as an agreement to release encumbrances of the asset.

IX. – 7:210 Book IX

494

IX. – 7:212: Commercially reaso nable price

(1) The secured creditor must realise a commercially reasonable price for

the encumbered asset.

(2) If there is a recognised market which is easily accessible for the secured

creditor, a price is commercially reasonable if it corresponds to the

market price at the time of the sale, having due regard to any special

features of the encumbered asset.

(3) If the preceding paragraph does not apply, a price is commercially rea-

sonable if the secured creditor took such steps as could be expected to

be taken in the circumstances.

(4) If the sale is by private sale, the security provider may demand that the

creditor communicates to the security provider the expected price or

price range. If the security provider can show that it is likely that this

price range is significantly below what might reasonably be achieved at

a private or public auction, the security provider may demand that the

secured creditor arrange for a private or a public auction. Subject to

paragraph (5) of the preceding Article, a price achieved in this way is

binding upon the parties.

IX. – 7:213: Buyer’s rights in the assets after realisation

by sale

(1) The buyer acquires rights in the sold assets free of the rights of:

(a) the security provider;

(b) the enforcing secured creditor;

tention of ownership devices; and

(d) holders of other limited proprietary rights with lower priority than

the enforcing secured creditor’s rights.

(2) The following rights in the sold assets remain in existence after the

transfer, unless the enforcing secured creditor acted with authority to

dispose of the encumbered assets free of the se rights or the buyer

acquires in good faith according to

IX. – 6:102 (Loss of propriet ary se-

curity due to good faith acquisition of ownership):

(a) rights of senior secured credito rs, whether holders of security

rights or retention of ownership devices; and

(b) other limited proprietary rights with higher priority.

Chapter 7:Default and enforcement IX. – 7:213

495

(3) The buyer’s position is not affected by any failure to comply with no-

tice requirements under this Chapter or by any other violation of pro-

cedural provisions under this Chapter for the auction or private

sale.

(4) If the secured creditor or the security provider participates in the rea-

lisation by sale as buyer, the preceding paragraphs apply with appro-

priate adaptations with respect to the effects of the sale.

IX. – 7:214: Realisation of security in right to payment

or in negotiable instrument

(1) Where the encumbered asset is a right to payment or a nego tiable

instrument, the secured creditor may collect the outstanding perform-

ance from the third party debtor or may sell and assign or appropriate

the right to payment or the negotiable instrument.

(2) If there are other security rights in the encumbered right to payment or

the negotiable instrument which enjoy priority, the secured creditor is

not entitled as against these senior secured creditors to collect the en-

cumbered right to payment or to the negotiable instrument.

(3) The third party debtor, except a debtor under a negotiable instrument,

may refuse to pay unless the secured creditor sends a notice indicating

the amount duet, supported by adequate proof.

(4) The secured creditor may also collect or otherwise enforce any personal

or proprietary security right to which the security in the right to pay-

ment extends according to

IX. – 2:301 (Encumbrance of right to pay-

ment of money) paragraph (4).

IX. – 7:215: Distribution of proceeds

(1) The proceeds of any extra-judicial enforcement of an encumbered asset

according to the preceding provisions are to be distributed by the se-

cured creditor in the following order.

(2) First, the secured creditor who has enforced may apply the proceeds for

the satisfaction of the secured right including the expenses incurred for

enforcement.

(3) Second, any secured creditor whose proprietary security has a lower

priority than the enforcing secured creditor’s right is entitled to receive

any remaining proceeds after any deductions according to paragraph

IX. – 7:214 Book IX

496

(2) up to the amount of the obligation covered by this secured cred-

itor’s security. If there are several junior secured creditors, the remain-

ing proceeds are distributed in accordance with the order of priority

between their rights. The preceding sentences apply with appropriate

adaptations to holders of other limited proprietary rights with lower

priority than the enforcing secured creditor’s rights; instead of an ob-

ligation covered by the security, the value of these limited proprietary

rights is decisive.

(4) Third, any remaining proceeds after any deductions according to para-

graphs (2) and (3) must be repaid to the security provider.

(5) No secured creditor may receive more than any maximum amount that

has been agreed or registered for that creditor’s security right. This limit

does not apply to reasonable expenses incurred for enforcement.

IX. – 7:216: Appropriation of encumbered asset

by secured creditor

The secured creditor may accept the encumbered assets in total or partial

satisfaction of the secured right under the following conditions:

(a) the secured creditor must give advance notice of the intention to ac-

quire all or parts of the encumbered assets in total or partial satisfaction

of the secured right, specifying the relevant details;

(b) the proposal must be sent to the persons specified in

IX. – 7:209 (Ad-

dressees of the notice);

IX. – 7:210 (Time and contents of notice) paragraphs

(1), (2) (b) and (d) and (3) and

IX. – 7:212 (Commercially reasonable

price) paragrap h (1), applied with appropriate ad aptations, must be

fulfilled;

(d) the proposal must indicate the secured amount owed as of the end of

business on the day before the proposal is sent and the amount of the

right that is proposed to be satis fied by accepting the encumbered

asset; and

(e) no addressee objects to this proposal in writing within ten days after

the proposal has been received by every addressee.

Chapter 7:Default and enforcement IX. – 7:216

497

Subsection 3:

Judicial enforcement

IX. – 7:217: Applicable rules

(1) Judicial enforcement is to be undertaken according to the procedural

rules of the member state where enforcement by a court or other com-

petent authority is sought by the secured creditor.

(2) The secured creditor may apply to the court or other competent au-

thority to exercise any of the rights under the preceding Subsections.

These rights may be exercised by the court or other competent author-

ity regardles s of whether they are under the preceding Subsections

dependent upon or excluded by a party agreement or a consent or the

absence of an objection of the security provider or other persons.

Section 3:

Rules for retention of ownership devices

IX. – 7:301: Consequences of default

under retention of ownership devices

(1) The holder of a retention of ownership device exercises the rights under

the retention of ownership device by termination of the contractual

relationship under a contract of sale, hire-purchase, financial leasing

or consignment according to the general rules of Book

III, Chapter 3,

Section 5.

(2) Any rights in the supplied asset that were transferred or created by the

buyer, hire-purchaser, lessee or consignee will terminate, unless:

(a) the latter had been authorised to create or transfer such rights;

(b) the transferee is protected by

IX. – 2:108 (Good faith acquisition of

security right) to

IX. – 2:111 (Security right in cash, negotiable in-

struments and documents) or

IX. – 6:102 (Loss of proprietary se-

curity due to good faith acquisition of ownership); or

rights of the holder of the retention of ownership device.

(3) On resale or re-leasing, the holder of the retention of ownership device

is entitled to any surplus over the original price for the supplied assets

which may be realised.

IX. – 7:217 Book IX

498

(4) A third party to whom the retention of ownership device has been

transferred by agreement or by law is entitled to the rights under para-

graphs (1) to (3).

IX. – 7:302: Possession, immobilisation and preservation

IX. – 7:201 (Creditor’s right to possession of corporeal asset), IX. – 7:202

(Creditor’s right to immobilise and to preserve encumber ed asset ) and

IX. – 7:203 (Intervention of court or other authority) apply in relation to

retention of ownership devices with the adaptations set out in

IX. – 1:104

(Retention of ownership devices: applicable rules) paragraph (2).

Chapter 7:Default and enforcement IX. – 7:302

499

Book X

Trusts

Chapter 1:

Fundamental provisions

Section 1:

Scope and relation to other rules

X. – 1:101: Trusts to which this Book applies

(1) This Book applies to trusts created under Chapter 2 (Constitution of

trusts).

(2) With appropriate modifications this Book also applies to trusts:

(a) constituted by:

(i) a declaration to that effect set out in an enactment; or

(ii) a court order with prospective effect; or

(b) arising by operation of law set out in an enactment relating to a

matter not determined by these rules.

(3) In this Book, “court” includes a public officer or body, if authorised to

act under the applicable national law, but does not include an arbitral

tribunal.

X. – 1:102: Priority of the law of proprietary securities

In relation to trusts for security purposes, this Book is subject to the ap-

plication of the rules in Book

IX (Proprietary security in movable assets).

Section 2:

Definition, special legal effects and parties

X. – 1:201: Definition of a trust

A trust is a legal relationship in which a trustee is obliged to administer or

dispose of one or more assets (the trust fund) in accordance with the terms

governing the relationship (trust terms) to benefit a beneficiary or advance

public benefit purposes.

501

X. – 1:202: Special legal effects of a trust

(1) A trust takes effect in accordance with the rules in Chapter 10 (Rela-

tions to third parties) with the effect that the trust fund is to be regar-

ded as a patrimony distinct from the personal patrimony of the trustee

and any other patrimonies vested in or managed by the trustee.

(2) In particular (and except for some reason other than merely that the

trust fund is vested in the trustee):

(a) the personal creditors of the trustee may not have recourse to the

trust fund, whether by execution or by means of insolvency pro-

ceedings;

(b) the trust fund is not subject to rules allocating property rights on

the basis of matrimonial or family relationships; and

fund on the trustee’s death.

X. – 1:203: Parties to a trust

(1) The truster is a person who constitutes or intends to constitute a trust

by juridical act.

(2) The trustee is the person in whom the trust fund becomes or remains

vested when the trust is created or subsequently on or after appoint-

ment and who has the obligation set out in X. – 1:201 (Definition of a

trust).

(3) A beneficiar y is a person who, according to the trust terms, has either a

right to benefit or an eligibility for benefit from the trust fund.

(4) A trust auxiliary is a person who, according to the trust terms, has a

power to appoint or remove a trustee or to consent to a trustee’s res-

ignation.

(5) Except as otherwise provided for by this Book:

(a) a truster may also be a trustee or a beneficiary;

(b) a trustee may also be a beneficiary; and

(6) In this Book a person’s “successor” is the heir or representative who

under the law of succession becomes entitled to that person’s personal

patrimony on that person’s death. Where the context permits, a refer-

ence to a party (or former party) to a trust is a reference to that person’s

successor if that person has died.

X. – 1:202 Book X

502

X. – 1:204: Plurality of trustees

(1) Where there are several trustees, the trust is solidary.

(2) Where trust assets are vested in several trustees together, their co-own-

ership is joint.

X. – 1:205: Persons entitled to enforce

performance of trustee’s obligations

(1) A beneficiary has a right to performance of the trustee’s obligations so

far as they relate to that beneficiary’s right to benefit or eligibility for

benefit.

(2) The persons who may enforce performance of the trustee’s obligations

under a trust to advance public benefit purposes are:

(a) any public officer or body having that function; and

(b) any other person having sufficient interest in the performance of

the obligations.

(3) A trustee may enforce performance of the obligations of a co-trustee.

X. – 1:206: Right to benefit and eligibility for benefit

(1) A person has a right to benefit if the trust terms require the trustee in

given circumstances to dispose of all or part of the trust fund so as to

confer a benefit on that person.

(2) A person has an eligibility for benefit if the trust terms permit the trus-

tee in given circumstances to dispose of all or part of the trust fund so

as to confer a benefit on that person, but whether or not that person is

to obtain a benefit depends on an exercise of discretion by the trustee

or another.

(3) A beneficiary’s eligibility for benefit becomes a right to benefit if the

trustee gives the beneficiar y notice of a decision to confer benefit on

that beneficiary in accordance with the trust terms governing that elig-

ibility.

(4) In this Book “benefit” does not include the exercise by a trustee of a

right of recourse to the trust fund.

Chapter 1:Fundamental provisions X. – 1:206

503

Section 3:

Modifications of and additions to general rules

X. – 1:301: Extended meaning of gratuitous

(1) In this Book “gratuitous” means done or provided without reward.

(2) A juridical act or a benefit is also regarded as gratuitous in this Book if,

considering the value of the rights created by the juridical act or the

benefit provided, the value of the reward is so trivial that fairness re-

quires it to be disregarded.

X. – 1:302: Notice

(1) Where this Book requires notice to be given to a person, but it is not

reasonably practical to do so, notice may be given instead to the court.

(2) Where there are several trustees, a requirement to give notice to the

trustees is satisfied by giving notice to any one of them, but a notice

relating to a change in trustees must be given to a trustee who will

continue to be a trustee after the change takes effect.

X. – 1:303: Mandatory nature of rules

The rules of this Book are mandatory, except as otherwise provided.

Chapter 2:

Constitution of trusts

Section 1:

Basic rules on constitution by juridical act

X. – 2:101: Requirements for constitution

A trust is constituted in relation to a fund vested in the truster, without any

further requirement, if:

(a) the truster declares an intention to constitute a trust in relation to that

fund;

(b) the decl aration satisfies the requirements set out in X. – 2:201 (Re-

quirements for a declaration); and

without transfer) applies.

X. – 1:301 Book X

504

X. – 2:102: Constitution by transfer

(1) If the other requirements for constitution are satisfied, a trust is con-

stituted when in implementation of the declaration the fund is trans-

ferred to a person who agrees to be a trustee or is identified in the

declaration as a person who is or is to be a trustee.

(2) The rules on contracts for donation apply analogously to an agreement

between truster and intended trustee for the transfer of the fund in the

truster’s lifetime.

(3) Where the truster has made a binding unilateral undertaking to con-

stitute a trust to a person who is intended to be a trustee of the fund,

that person is a trustee of the right to performance of the obligation

created by the undertaking, unless that right is rejected.

X. – 2:103: Constitution without transfer

(1) If the other requirements for constitution are satisfied, a trust is con-

stituted by the declaration alone, without a transfer, if:

(a) the decla ration indicates that the truster is to be a sole trustee;

(b) the declaration is testamentary and does not provide for a trustee; or

the fund to the intended trustee,

(ii) the intended trustee does not or cannot accept the fund, and

(iii) the declaration does not provide otherwise.

(2) When a trust is constituted under paragraph (1), the truster becomes a

trustee.

Section 2:

Declaration

X. – 2:201: Requirements for a declaration

(1) The requirements referred to in Section 1 (Basic rules on constitution

by juridical act) for a declaration of an intention to constitute a trust are

that:

(a) the declaration is made by the truster or a person who has author-

ity to make it on the truster’s behalf; and

(b) the declaration complies with any requirement as to form set out in

X. – 2:203 (Formal requirements for declaration).

(2) No notice or publication of the declaration to any party is required.

Chapter 2:Constitution of trusts X. – 2:201

505

X. – 2:202: Mode of declaration

(1) A person declares an intention to constitute a trust when that person by

statements or conduct indicates an intention that the person in whom

the fund is or is to be vested is to be legally bound as a trustee.

(2) In determining whether one or more statements contained in a testa-

mentary or other instrument determining rights over an asset amount

to a declaration of an intention to constitute a trust in relation to that

asset, an interpretation of those statements which gives effect to their

entirety is to be preferred.

X. – 2:203: Formal requirements for declaration

(1) Where the transfer of a fund requires the making of an instrument by

the transferor, the declaration of an intention to constitute a trust is of

no effect unless cont ained in the instrument of transfer or made in the

same or an equivalent form.

(2) A declaration that the truster is to be the sole trustee is of no effect

unless made in the same form as a unilateral undertaking to donate.

(3) Where the trust is to be created on the death of the maker of the de-

claration, the declaration is of no effect unless made by testamentary

instrument.

X. – 2:204: Revocation or variation of declaration

(1) The maker of a declaration may revoke or vary the declaration or a term

of the declaration at any time before the trust is constituted.

(2) A revocation or variation is of no effect unless it satisfies the formality

requirements, if any, which applied to the declaration.

(3) However, a declaration or term set out in an instrument may be revoked

by substantially destroying or defacing that instrument, so far as it

relates to that declaration or term, if the applicable national rules permit

a statement intended to have legal effect contained in such an instru-

ment to be revoked by that means.

X. – 2:205: Effects when declaration does not satisfy requirements

If the fund is transferred to the intended trustee in implementation of a

declaration which does not satisfy the requirements of X. – 2:201 (Require-

ments for a declaration), the transferee takes the fund on the terms of a

trust to re-transfer the fund to the truster.

X. – 2:202 Book X

506

Section 3:

Refusal of trust and rejection of right to benefit

X. – 2:301: Right of trustee to refuse the trust

(1) If a person has become a trustee without agreeing to act when a trust is

constituted, that person may refuse to act as a trustee by notice to:

(a) the truster; or

(b) any co-trustee who has full legal capacity and agrees to act as a

trustee.

(2) Refusal may take the form of either a rejection of all the rights which

have vested or a disclaimer of the whole trust, but operates as both a

rejection and a disclaimer.

(3) A refusal may not be revoked.

(4) Where a person reasonably incurs costs in order to refuse, that person

has a right to be reimbursed by any co-trustees who accept the trust

fund and agree to act or, if there are no such co-trustees, the truster.

(5) Where a sole trustee refuses or there is no co-trustee who accepts the

trust fund and agrees to act, the truster becomes a trustee of the fund in

accordance with X. – 2:103 (Constitution without transfer) paragraph

(1)(c), unless the declaration of the intention to constitute a trust pro-

vides otherwise.

(6) Subject to the previous paragraphs of this Article, the requirements for

a refusal and its effects are determined by the application or analogous

application of

II. – 4:303 (Right or benef it may be rejected).

X. – 2:302: Rejection of right to benefit or eligibility for benefit

A beneficiary’s right under II. – 4:303 (Right or benefit may be rejected) to

reject a right to benefit or an eligibility for benefit is exercised by giving

notice to the trustees.

Section 4:

Additional rules for particular instances

X. – 2:401: Whether donation or trust

(1) Where a person transfers an asset to another gratuitously and it is

uncertain whether or to what extent the transferor intends to donate

Chapter 2:Constitution of trusts X. – 2:401

507

the asset or to constitute a trust in respect of it for the benefit of the

transferor, it is presumed that the transferor intends:

(a) to donate to the transferee, if this would be consistent with the

relationship between the parties and past or concurrent dealings of

the transferor;

(b) in any other case, that the transferee be a trustee for the benefit of

the transferor.

(2) A presumption in paragraph (1) may be rebutted (and the alternative

intention in paragraph (1) established) by showing that at the time of

transfer the transferor did not or, as the case may be, did intend to

dispose of the asset for the exclusive benefit of the transferee.

(3) Paragraphs (1) and (2) apply correspondingly where the transfer is to

several transferees (including where the transfer is to the transferor and

another).

(4) Where it is shown or presumed that the transferor intends to dispose of

the fund for the benefit of a transferee only in part, or for the benefit of

one transferee, but not a co–transferee, the transferor is to be regarded

as intending to constitute a trust for the benefit of the transferee to that

extent.

X. – 2:402: Priority of rules of succession law

Where the trust is to take effect on the truster’s death, the trust is subject to

the prior application of those rules of succession law which determine:

(a) how the deceased’s estate is to be disposed of in satisfaction of the

funeral costs and debts of the deceased; and

(b) (i) whether the truster was free to dispose of any par t of the fund,

(ii) whether any person has a claim in respect of any part of the fund

by reason of a family or other connection to the deceased, and

(iii) how such claims are to be satisfied.

X. – 2:403: Trust in respect of right to legacy pending

transfer of legacy

Where a truster declares that a legatee is to be a trustee in relation to a

legacy from the truster and that declaration satisfies the requirements set

out in X. – 2:201 (Requirements for a declaration), but the legacy has not

yet been transferred, the legatee is a trustee of the right against the truster’s

successor which arises in respect of the legacy on the truster’s death.

X. – 2:402 Book X

508

Chapter 3:

Trust fund

Section 1:

Requirements for the initial trust fund

X. – 3:101: Trust fund

(1) Trust assets, whether or not of the same kind, form a single trust fund if

they are vested in the same trustees and either:

(a) the trust terms relating to the assets indicate that they form a single

fund or require them to be administered together; or

(b) separate trusts relating to the assets are merged in performance of

the obligations under those trusts.

(2) Where trusts are constituted at the same time, on the same terms, and

with the same trustees, the trust assets form a single trust fund unless

the trust terms provide otherwise.

(3) In this Book “part of the trust fund” means a share of the trust fund, a

specific asset or share of an asset in the fund, or a specific amount to

be provided out of the fund.

X. – 3:102: Permissible trust assets

Trust assets may consist of proprietary or other rights, so far as these are

transferable.

X. – 3:103: Ascertainability and segregation of the trust fund

(1) A trust is only created in relation to a fund in so far as, at the time the

trust is to come into effect,

(a) the fund is sufficiently defined in the trust terms or the assets

forming the fund are otherwise ascertainable; and

(b) the fund is segregated from other assets.

(2) A declaration of intention to create a trust in relation to an unsegre-

gated fund is to be regarded, so far as the other terms of the declaration

permit, as a declaration of an intention to create a trust of the entire

mixture containing the fund on the terms that:

(a) the trustee is obliged to segregate the intended trust fund; and

(b) until the fund is segregated, the rights and obligations envisaged

by the terms of the declaration apply in relation to a corresponding

part of the mixture.

Chapter 3:Trust fund X. – 3:103

509

Section 2:

Changes to the trust fund

X. – 3:201: Additions to the trust fund

(1) After a trust is created, an asset which is capable of being a trust asset

becomes part of the trust fund if it is acquired by a trustee:

(a) in performance of the obligations under the trust;

(b) as an addition to or by making use of the trust fund;

capacity of trustee, if the use is not in accordance with the terms of

the trust; or

(d) when or after the trustee disposed of that asset otherwise than in

accordance with the terms of the trust.

(2) Where there are several trustees, an asset may become part of the trust

fund in accordance with this Article without being acquired by all of

them.

X. – 3:202: Subtractions from the trust fund

(1) An asset ceases to be part of the trust fund when it ceases to be vested

in a person who is under the obligation set out in X. – 1:201 (Definition

of a trust).

(2) Where there are several trustees, an asset remains part of the trust fund

so long as it is vested in at least one of the trustees in that capacity.

X. – 3:203: Mixing of the trust fund with other assets

(1) If trust assets are mixed with other assets vested in the trustee in such a

way that the trust assets cease to be identifiable, a trust arises in re-

spect of the mixture and

VIII. – 5:202 (Commingling) applies analo-

gously, as if each patrimony had a different owner, so as to determine

the share of the mixture which is to be administered and disposed of in

accordance with the original trust.

(2) If the other assets are the personal patrimony of the trustee, any di-

minution in the mixture is to be allocated to the trustee’s personal

share.

X. – 3:201 Book X

510

X. – 3:204: Loss or exhaustion of trust fund

(1) A trust ends when the trust fund has been completely disposed of in

performance of the obligations under the trust or for any other reason

there ceases to be a trust fund.

(2) Where the trustee is liable to reinstate the trust fund as a result of non-

performance of obligations under the trust, the trust revives if the trust

fund is reinstated.

Chapter 4:

Trust terms and invalidity

Section 1:

Trust terms

X. – 4:101: Interpretation

Without prejudice to the other rules on the interpretation of unilateral jur-

idical acts, if the meaning of a trust term cannot otherwise be established,

interpretations to be preferred are those which:

(a) give effect to the entirety of the words and expressions used;

(b) prevent reasonable conduct of a trustee from amounting to a non-per-

formance;

the trust fund; and

(d) confer on the truster a right to benefit or enlarge such right, if the trust

is constituted gratuitously in the truster’s lifetime and the truster has or

may have reserved such a right.

X. – 4:102: Incomplete disposal of the trust fund

(1) To the extent that the trust terms and the rules of this Book do not

otherwise dispose of the trust fund in circumstances which have aris-

en, the trust fund is to be disposed of for the benefit of the truster.

(2) However, if the incomplete disposal of the trust fund arises because

effect cannot be given to a trust for advancement of a public benefit

purpose or because performance of the obligations under such a trust

does not exhaust the trust fund, the trust fund is to be disposed of for

the advancemen t of the public benefit purpose which most closely

resembles the original purpose.

Chapter 4:Trust ter ms and invalidity X. – 4:102

511

X. – 4:103: Ascertainability of beneficiaries

(1) A trust term which purports to confer a right to benefit is valid only if

the beneficiary is sufficiently identified by the truster or is otherwise

ascertainable at the time the benefit is due.

(2) A trust term which permits a trustee to benefit those members of a

class of persons which the trustee or a third person selects is valid only

if, at the time the selection is permitted, it can be determined with

reasonable certainty whether any given person is a member of that

class.

(3) A person may be a beneficiary notwithstanding that that person comes

into existence only after the trust is created.

X. – 4:104: Ascertainability of right to benefit or

eligibility for benefit

(1) A right to benefit or eligibility for benefit is valid only in so far as the

benefit is suff iciently defined in the trust terms or is otherwise ascer-

tainable at the time the benefit is due or to be conferred.

(2) If the benefit to be conferred is not ascertainable only because a third

party cannot or does not make a choice, the trustees may make that

choice unless the trust terms provide otherwise.

X. – 4:105: Trusts to pay creditors

A trust for the purpose of paying a debt, or for the benefit of a creditor as

such, takes effect as a trust to benef it the debtor by a performance of the

debtor’s obligation discharging the debtor.

Section 2:

Invalidity

X. – 4:201: Avoidance by the truster

Without prejudice to other necessary adaptations, Book II Chapter 7

(Grounds of invalidity) is modif ied as follows in its application to trusts

constituted gratuitously in the truster’s lifetime:

(a) the truster may avoid the trust or a trust term if the trust was consti-

tuted or the term included because of a mistake of fact or law, regard-

less of whether the requirements of

II. – 7:201 (Mistake) paragraph

(1)(b) are satisfied;

X. – 4:103 Book X

512

(b) a truster who was dependent on, or was the more vulnerable party in a

relationship of trust with, a beneficiary may avoid the trust or a trust

term in so far as it provides for benefit to that beneficiary unless that

beneficiary proves that the beneficiary did not exploit the truster’s si-

tuation by taking an excessive benefit or grossly unfair advantage;

II. – 7:210 (Time))

does not commence so long as:

(i) the truster exercises an exclusive right to benefit from the income;

(ii) the trust fund consists of one or more rights to benefit which are

not yet due; and

(d) where sub-paragraph (c)(i) applies, acceptance of benefit is not to be

regarded as an implied confirmation of the trust.

X. – 4:202: Protection of trustees and third parties after avoidance

(1) The trustee’s title to the trust fund is unaffected by avoidance.

(2) Unless the trustee knew or could reasonably be expected to know that

the trust or trust term might be avoided:

(a) a trustee is not liable in respect of any administration or disposition

of the trust fund which was in accordance with the terms of the

trust before the trust was avoided;

(b) a trustee may invoke against the person entitled to benefit as a

result of avoidance defences which the trustee could have invoked

against the beneficiary who had a right to that benefit before

avoidance; and

before avoidance.

(3) Avoidance of the trust does not affect the rights of a third party who

before avoidance acquired a beneficiary’s right to benefit, or a security

right or other limited right in that right to benefit, if:

(a) the third party neither knew nor had reason to know that the trust

or trust term could be avoided; and

(b) the disposition is not gratuitous.

Chapter 4:Trust ter ms and invalidity X. – 4:202

513

X. – 4:203: Unenforceable trust purposes

(1) A trust which is for a purpose other than to benefit beneficiaries or to

advance public benefit purposes takes effect as a trust for the truster.

(2) The trustee has a revocable authority to dispose of the trust fund in

accordance with the original trust for the advancement of the unen-

forceable purpose in so far as:

(a) advancement of that purpose does not infringe a fundamental

principle or mandator y rule and is not contrary to the public inter-

est;

(b) it can be determined with reasonable certainty whether any given

disposal of the trust fund is or is not for its advancement; and

from that disposal.

Chapter 5:

Trustee decision-making and powers

Section 1:

Trustee decision-making

X. – 5:101: Trustee discretion

(1) Subject to the obligations of a trustee under this Book and exceptions

provided for by other rules, the trustees are free to determine whether,

when and how the exercise of their powers and discretions is best

suited to per forming their obligations under the trust.

(2) Except in so far as the trust terms or other rules provide otherwise, the

trustees are not bound by, and are not to regard themselves as bound

by, any directions or wishes of any of the parties to the trust or other

persons.

(3) The trustees are not obliged to disclose the reasons for the exercise of

their discret ion unless the trust is for the advancement of a public

benefit purpose or the trust terms provide otherwise.

X. – 5:102: Decision-making by several trustees

If there are several trustees, their powers and discretions are exercised by

simple majority decision unless the trust terms or other rules of this Book

provide otherwise.

X. – 4:203 Book X

514

X. – 5:103: Conflict of interest in exercise of power or discretion

Unless the trust terms provide otherwise, a trustee may not participate in a

decision to exercise or not to exercise a power or discretion if the effect of

the decision is to confer, confirm, or enlarge a right to benefit or eligibility

for benefit in favour of the trustee.

Section 2:

Powers of a trustee

Sub-section 1:

General rules

X. – 5:201: Powers in general

(1) Except where restricted by the trust terms or other rules of this Book, a

trustee may do any act in performance of the obligations under the

trust which:

(a) an owner of the fund might lawfully do; or

(b) a person might be authorised to do on behalf of another.

(2) Subject to restrictions or modifications in the trust terms, the othe r

Articles of this Section provide for the powers of a trustee in particular

cases.

X. – 5:202: Restriction in case of minimum number of trustees

(1) Where there are fewer trustees than a minimum required by the trust

terms or these rules, the trustees may only exercise:

(a) a power to appoint trustees;

(b) the right to apply to cour t for assistance;

tion out of the trust fund); and

(d) any other right or power of a trustee to the extent that its exercise

is:

(i) expressly provided for in the circumstances by the trust terms;

(ii) necessary for the preservation of the trust fund; or

(iii) necessary for the satisfaction of trust debts whose perform-

ance is due or impending.

(2) If the trust is constituted by a transfer to at least two trustees the mini-

mum number of trustees is two, unless the trust terms provide other-

wise.

Chapter 5:Trustee decision-making and powers X. – 5:202

515

Sub-section 2:

Particular powers of a trustee

X. – 5:203: Power to authorise agent

(1) The trustees may authorise an agent to act on behalf of the trustees

and, subject to the restrictions set out in the following Articles of this

Section, may entrust to another performance of obligations under the

trust.

(2) Several trustees may authorise one of them to act on their behalf.

(3) However, personal per formance by a trustee is required for decisions as

to whether or how to exercise:

(a) a discretion to confer benefit on a beneficiary or to choose a public

benefit purpose to be advanced or its manner of advancement;

(b) a power to change the trustees; or

(4) A person to whom performance of an obligation is entrusted has the

same obligations as a trustee, so far as they relate to that performance.

(5) A trustee is obliged not to conclude, without good reason, a contract of

mandate which is not in writing or which includes the following terms:

(a) a term conferring an irrevocable mandate;

(b) terms excluding the obligations of an agent set out in Book

IV. D.,

Chapter 3, Section 1 (Main obligations of agent) or modifying

them to the detriment of the principal;

(d) terms permitting a conflict of interest on th e part of the agent;

(e) a term excluding or restricting the agent’s liability to the principal

for non-performance.

(6) The trustees are obliged to keep the performance of the agent under

review and, if required in the circumstances, give a direction to the

agent or terminate the mandate relationship.

X. – 5:204: Power to transfer title to person

undertaking to be a trustee

(1) The trustees may transfer trust assets to a person who undertakes to be

a trustee in relation to the assets and to dispose of them as the original

trustees direct and in default of any such direction to transfer them

back to the original trustees on demand.

X. – 5:203 Book X

516

(2) The recipient must be:

(a) a person who gives such undertakings in the course of business;

(b) a legal person controlled by the trustees; or

such a trust obligation or satisfying requirements set out therein for

this purpose

(3) X. – 5:203 (Power to authorise agent) paragraphs (5) and (6) apply

correspondingly.

X. – 5:205: Power to transfer physical control to a storer

(1) The trustees may place trust assets and documents relating to those

assets in the physical control of a person who undertakes to keep the

trust assets safe and to deliver them back to the trustees on demand.

(2) X. – 5:204 (Power to transfer title to person undertaking to be a trus-

tee) paragraphs (2) and (3) apply correspondingly.

X. – 5:206: Power to delegate

A trustee may entrust to another the performance of any of the trustee’s

obligations under the trust and the exercise of any of the trustee’s powers,

including the exercise of a discretion, authority to dispose of trust assets

and the power to delegate, but remains responsible for performance in ac-

cordance with

III. – 2:106 (Performance entrusted to another).

X. – 5:207: Power to select investments

In so far as the trustees are obliged to invest the trust fund, the trustees may

invest in any form of investment and determine the particular manner of

investment which is best suited to fulfil that obligation.

X. – 5:208: Power to submit trust accounts for audit

Where appropriate, a trustee may submit the trust accounts for an audit by

an independent and competent auditor.

Chapter 5:Trustee decision-making and powers X. – 5:208

517

Chapter 6:

Obligations and rights of trustees and trust auxiliaries

Section 1:

Obligations of a trustee

Sub-section 1:

General rules

X. – 6:101: General obligation of a trustee

(1) A trustee is obliged to administer the trust fund and exercise any power

to dispose of the fund as a prudent manager of another’s affairs for the

benefit of the beneficiaries or the advancement of the public benefit

purposes, in accordance with the law and the trust terms.

(2) In particular, a trustee is obliged to act with the required care and skill,

fairly and in good faith.

(3) Except in so far as the trust terms provide otherwise:

(a) these obligations include the particular obligations set out in X. –

6:102 (Required care and skill) and the following sub-section; and

(b) an administration or disposal of the trust fund is of benefit to a

beneficiary only if it is for that person’s economic benefit.

X. – 6:102: Required care and skill

(1) A trustee is required to act with the care and skill which can be ex-

pected of a reasonably competent and careful person managing an-

other’s affairs, having regard to whether the trustee has a right to re-

muneration.

(2) If the trustee is acting in the course of a profession, the trustee must act

with the care and skill that is expected of a member of that profession.

Sub-section 2:

Particular obligations of a trustee

X. – 6:103: Obligations to segregate, safeguard and insure

(1) A trustee is obliged to keep the trust fund segregated from other patri-

mony and to keep the trust assets safe.

(2) In particular, a trustee may not invest in assets which are especially at

risk of misappropriation unless particular care is taken for their safe-

X. – 6:101 Book X

518

keeping. Where the asset is a document embodying a right to a per-

formance which is owed to whoever is the holder of the document,

such care is taken if the document is placed in a storer’s safekeeping in

accordance with X. – 5:205 (Power to transfer physical control to a

storer).

(3) So far as it is possible and appropriate to do so, the trustee is obliged to

insure the trust assets against loss.

X. – 6:104: Obligation to inform and report

(1) A trustee is obliged to inform a beneficiary who has a right to benefit of

the existence of the trust and that beneficiary’s right.

(2) A trustee is obliged to make reasonable efforts to inform a beneficiary

who has an eligibility for benefit of the existence of the trust and that

beneficiary’s eligibility.

(3) In determining what efforts are reasonable for the purposes of para-

graph (2), regard is to be had to:

(a) whether the expense required is proportionate to the value of the

benefit which might be conferred on that beneficiary;

(b) whether the beneficiary is a member of a class whose members the

trustee is required to benefit; and

eficiary.

(4) So far as appropriate, a trustee is obliged to make available information

about the state and investment of the trust fund, trust debts, and dis-

posals of trust assets and their proceeds.

X. – 6:105: Obligation to keep trust accounts

A trustee is obliged to keep accounts in respect of the trust funds (trust

accounts).

X. – 6:106: Obligation to permit inspection and

copying of trust documents

(1) A trustee must permit a beneficiary or other person entitled to enforce

performance of the obligations under the trust to inspect the trust

documents and to make copies of them at that person’s own expense.

(2) Paragraph (1) does not apply to:

(a) the opinions of a legal adviser relating to actual or contemplated

legal proceedings by the trustees in that capacity against the per-

Chapter 6:Obligations and rights of trustees and trust auxiliaries X. – 6:106

519

son seeking inspection; and evidence gathered for such proceed-

ings;

(b) communications between the trustees and other benef iciaries and

any ot her communications whose disclosu re would result in a

breach of confidence owed by the trustees in that capacity to an-

other.

(3) The trustees may refuse inspection and copying of trust documents so

far as these relate to information which is confidential to the trustees in

that capacity if the beneficiary does not provide adequate assurance

that the confidentiality will be maintained.

(4) Unless the trust is for the advancement of public benefit purposes, the

trustees may also refuse inspection and copying of documents so far as

the documents disclose the reasons for the trustees’ decision to exer-

cise or not to exercise a discretion, the deliberations of the trustees

which preceded that decision, and material relevant to the delibera-

tions.

(5) The trust terms may enlarge the rights of inspection and copying which

are provided for by this Article.

(6) In this Book “trust documents” are:

(a) any documents containing the truster’s declaration of intentions

relating to the trust (whether or not intended to be binding) and

any juridical act or court order varying the trust terms;

(b) minutes of meetings of the trustees;

received by a trustee in that capacity, including the opinions of

a legal adviser engaged by a trustee at the trust fund’s expense;

(d) any documents containing juridical acts concluded or made by the

trustees;

(e) receipts for disposal of trust assets; and

(f) the trust accounts.

X. – 6:107: Obligation to invest

(1) A trustee is obliged to invest the trust fund, so far as available for in-

vestment, and in particular:

(a) to dispose of assets which ordinarily neither produce income nor

increase in value and to invest the proceeds;

X. – 6:107 Book X

520

(b) to take professional advice on investment of the fund, if the trus-

tees lack the expertise required for the efficient and prudent invest-

ment of funds of the size and nature of the trust fund;

(i) the risks of failure or loss of particular investments are diver-

sified; and

(ii) the expected gain significantly outweighs the potential failure

or loss;

unless the trust fund is so small that a spread of investments is inappropri-

ate; and

(d) to review at appropriate intervals the suitableness of retaining or chan-

ging the investments.

(2) A trustee is not obliged to invest assets:

(a) which are imminently required for transfer to or use by a benefi-

ciary or for satisfaction of a trust debt; or

(b) whose investment would otherwise impede the trustees in carry-

ing out their other obligations under this Book.

(3) The obligation to invest does not authorise a trustee to dispose of trust

assets which according to the trust terms are to be retained by the

trustees or transferred in kind to a beneficiary.

X. – 6:108: Obligation not to acquire trust assets or

trust creditors’ rights

(1) A trustee is obliged not to purchase a trust asset or the right of a trust

creditor against the trustees, whether personally or by means of an

agent.

(2) A contract for the sale of a trust asset which is concluded as a result of

non-performance of this obligation may be avoided by any other party

to the trust or any person entitled to enforce performance of the ob-

ligations under the trust.

(3) The right to avoid is in addition to any remedy for non-performance.

(4) This Article applies with appropriate modifications to other contracts

for the acquisition or use of a trust asset or a right corresponding to a

trust debt.

Chapter 6:Obligations and rights of trustees and trust auxiliaries X. – 6:108

521

X. – 6:109: Obligation not to obtain unauthorised

enrichment or advantage

(1) A trustee is obliged not to make use of the trust fund, or information or

an opportunity obtained in the capacity of trustee, to obtain an enrich-

ment unless that use is authorised by the trust terms.

(2) A trustee may not set off a right to performance from a beneficiary,

which is owed to the trustee in a personal capacity, against that ben-

eficiary’s right to benefit.

X. – 6:110: Obligations regarding co-trustees

A trustee is obliged to:

(a) cooperate with co -trustees in performing the obligations under the

trust; and

(b) take appropriate action if a trustee knows or has reason to suspect that:

(i) a co-trustee has failed to perform any obligation under, or arising

out of, the trust, or such non-performance is impending; and

(ii) the non-performance is likely to result or have resulted in loss to

the trust fund.

Section 2:

Rights of a trustee

X. – 6:201: Right to reimbursement and indemnification

out of the trust fund

A trustee has a right to reimbursement or indemnification out of the trust

fund in respect of expenditure and trust debts which the trustee incurs in

performance of the obligations under the trust.

X. – 6:202: Right to remuneration out of the trust fund

(1) A trustee has a right to such remuneration out of the trust fund as is

provided for by the trust terms.

(2) Unless this is inconsistent with the trust terms, a trustee who acts as a

trustee in the course of a profession has a right to reasonable remu-

neration out of the trust fund for work done in performance of the

obligations under the trust.

X. – 6:109 Book X

522

(3) Paragraph (2) does not apply if:

(a) the trustee, in the capacity of beneficiary, is entitled to signif icant

benefit from the trust fund; or

(b) the trust was created as a result of a contract between the trustee

and the truster; or

X. – 6:203: Rights in respect of unauthorised acquisitions

(1) This Article applies where:

(a) a trustee acquires an asset or other enrichment as a result of a non-

performance of an obligation under the trust; and

(b) the asset becomes part of the trust fund or the enrichment is added

to the trust fund in performance of an obligation to disgorge.

(2) The trustee has a right to reimbursement or indemnification for any

expenditure or obligation which it was necessary to incur to make the

acquisition. If the trustee previously satisfied in full or in part a liability

under X. – 7:201 (Liability of trustee to reinstate the trust fund), the

trustee has a right to reimbursement from the trust fund to the extent

that after the acquisition the trust fund is more than reinstated.

(3) The trustee also has a right to reasonable remuneration if:

(a) the acquisition was made in good faith to increase the trust fund;

and

(b) the trustee would be entitled to remuneration under X. – 6:202

(Right to remuneration out of the trust fund) paragraph (2)(b) if

the acquisition had been in performance of an obligation under the

trust.

(4) If the acquisition resulted from a non-performance of the obligation

under X. – 6:109 (Obligation not to obtain unauthorised enrichment or

advantage) to which a beneficiary validly consented, the trustee may

waive the rights under paragraphs (2) and (3) and take over the con-

senting beneficiary’s right to benefit from the acquisition.

(5) A trustee is not entitled under this Article to more than the value of the

acquisition.

Chapter 6:Obligations and rights of trustees and trust auxiliaries X. – 6:203

523

X. – 6:204: Corresponding rights against beneficiaries

(1) Where the right of a trustee under X. – 6:201 (Right to reimbursement

and indemnification out of the trust fund) exceeds the trust fund, the

trustee may recover the excess from the beneficiaries.

(2) The liability of a beneficiary under paragraph (1) is:

(a) limited to the enrichment which that beneficiary has obtained in

accordance with the trust terms; and

(b) subject to the defence of disenrichment,

VII. – 6:101 (Disenrich-

ment) applying with appropriate adaptations.

(3) The right to recover under paragraph (1) ends six months after the right

to reimbursement or indemnification has arisen.

X. – 6:205: Right to insure agains t personal liability

at trust fund’s expense

(1) A trustee has a right to reimbursement or indemnification out of the

trust fund in respect of expenditure or a debt which the trustee reason-

ably incurs to obtain insurance against liability under X. – 7:201 (Liabil-

ity of trustee to reinstate the trust fund).

(2) Paragraph (1) does not apply in so far as:

(a) the trustee has a right to remuneration for performing the obliga-

tions under the trust; or

(b) the insurance is against liability arising out of a non-performance

which is intentional or grossly negligent.

Section 3:

Obligations of a trust auxiliary

X. – 6:301: Obligations of a trust auxiliary

(1) A trust auxiliary is obliged to disclose the identity of the trustees if this

information is known to the trust auxiliary and is not otherwise appar-

ent.

(2) In deciding whether to exercise a power a trust auxiliary is obliged:

(a) to act in good faith; and

(b) not to obtain an enrichment which is not authorised by the trust

terms.

X. – 6:204 Book X

524

Chapter 7:

Remedies for non-performance

Section 1:

Specific performance, judicial review and ancillary remedies

X. – 7:101: Specific performance

(1) The enforcement of specific performance of an obligation under the

trust includes the prevention of a trustee from disposing of or other-

wise dealing with a trust asset otherwise than in accordance with the

terms of the trust.

(2) Specific performance cannot be enforced if performance requires a trus-

tee to exercise a discretion.

X. – 7:102: Judicial review

(1) On the application of a party to the trust or a person entitled to enforce

performance o f an obligation under the trust, a court may review a

decision of the trustees or a trust auxiliary whether or how to exercise

a power or discretion conferred on them by the trust terms or this Book.

(2) A former trustee who has been removed by the trustees or a trust aux-

iliary without the trustee’s consent has a corresponding right to judicial

review of that decision.

(3) A court may avoid a decision of the trustees or a trust auxiliary which is

irrational or grossly unreasonable, motivated by irrelevant or improper

considerations, or otherwise an abuse of power or outside the powers

of the trustees or the trust auxiliary.

X. – 7:103: Further remedies

Other rules may provide for:

(a) accounts and inquiries concerning the trust fund and its administration

and disposal, as directed by court order;

(b) payment or transfer into court of money or other assets in the trust fund;

(d) the exercise of rights and powers of a trustee by a public officer or body,

in particular in relation to trusts to advance public benefit purposes;

(e) suspension of the rights and powers of the trustees to administer and

dispose of the fund;

in cases of actual or suspected non-performance of the obligations under

the trust.

Chapter 7:Remedies for non-performance X. – 7:103

525

Section 2:

Reparation and disgorgement of unauthorised enrichment

X. – 7:201: Liability of trustee to reinstate the trust fund

(1) A trustee is liable to reinstate the trust fund in respect of loss caused to

the trust fund by non-performance of any obligation under, or arising

out of, the trust, if the non-performance:

(a) is not excused; and

(b) results from the trustee’s failure to exercise the required care and

skill.

(2) However, a person is liable under paragraph (1) only if t hat person

knew, or it was manifest, that that person was a trustee.

(3) A trustee is not liable merely because a co-trustee, an agent or other

person entrusted with performance, or an authorised recipient of trust

assets has caused loss to the trust fund.

(4) Paragraph (3) does not prejudice any liability of the trustee arising:

(a) under paragraph (1) out of the trustee’s own non-performance of

an obligation under the trust, in particular:

(i) an obligation to act with the required care and ski ll when

choosing to appoint or engage that person and agreeing the

terms of the engagement; or

(ii) the obligation to keep the performance of that person under

review and, if required in the circumstances, to take measures

to protect the trust fund; or

(b) out of delegation of performance (X. – 5:206 (Power to delegate));

VI. – 3:201 (Accountability for damage caused by employees

and representatives); or

(d) because the trustee induced, assisted or collaborated in that per-

son’s non-performance.

(5)

III. – 3: 702 (General measure of damages) applies with app ropriate

adaptations to determine the measure of reinstatement.

(6) The following rights of a trustee are suspended until the trustee has

completely reinstated the trust fund:

(a) any right of recourse to the trust fund; and

(b) any right to benefit which the trustee has in the capacity of ben-

eficiary.

(7) This Article is subject to the trust terms.

X. – 7:201 Book X

526

X. – 7:202: Liability of trustee to compensate a beneficiary

(1) A trustee who is liable under X. – 7:201 (Liability of trustee to reinstate

the trust fund) is also obliged to compensate a beneficiary who, de-

spite reinstatement of the trust fund, does not obtain a benefit to

which that beneficiary was entitled or, if there had been no failure of

performance, would have been entitled under the trust terms.

(2) The beneficiary has the same right to compensation as arises from non-

performance of a contractual obligation.

(3) This Article is subject to the trust terms.

X. – 7:203: Disgorgement of unauthorised enrichment

Where a trustee obtains an enrichment as a result of non-performance of

the o bligation under X. – 6:109 (Obligation not to obtain unauthorised

enrichment or advantage) and that enrichment does not become part of

the trust fund under X. – 3:201 (Additions to the trust fund), the trustee is

obliged to add the enrichment to the trust fund or, if that is not possible, to

add its monetary value.

Section 3:

Defences

X. – 7:301: Consent of beneficiary to non-performance

(1) A trustee has a defence to liability to the extent that reinstatement,

compensation or disgorgement would benefit a beneficiary who validly

consented to the non-performance.

(2) A beneficiary consents to a non-performance when that beneficiary

agrees to conduct of the trustee which amounts to a non-performance

and either:

(a) the beneficiary knew that such conduct would amount to a non-

performance; or

(b) it was manifest that such conduct would amount to a non-per-

formance.

(3) Paragraph (1) applies whether or not the non-performance enriched or

disadvantaged the benef iciary who consented.

(4) Where a beneficiary participates in the non-performance in the capa-

city of trustee, paragraph (1) applies in relation to any co-trustees who

are liable. A right of recourse between the solidary debtors as regards

Chapter 7:Remedies for non-performance X. – 7:301

527

any residual liability to reinstate the trust fund or compensate a ben-

eficiary is unaffected.

(5) A consent is not valid if it results from a mist ake which was caused by

false information given by the trustee or the trustee’s non-performance

of an obligation to inform.

X. – 7:302: Prescription

The general period of prescription for a right to performance of an obliga-

tion under a trust does not begin to run against a beneficiar y until benefit to

that beneficiary is due.

X. – 7:303 Protection of the trustee

(1) A trustee is discharged by performing to a person who, after reasonable

inquiry, appears to be entitled to the benefit conferred.

(2) The right of the beneficiary who was entitled to the benefit against the

recipient of the benefit arising under Book

VII (Unjustified enrichment)

is unaffected.

Section 4:

Solidary liability and forfeiture

X. – 7:401: Solidary liability

(1) Where several trustees are liable in respect of the same non-perform-

ance, their liability is solidary.

(2) As between the solidary debtors themselves, the shares of liability are

in proportion to each debtor’s relative responsibility for the non-per-

formance, having rega rd to each debtor’s skills and experience as a

trustee.

(3) A debtor’s relative responsibility for a non-performance to which that

debtor consented is not reduced merely because that debtor took no

active part in bringing it about.

X. – 7:402: Forfeiture of collaborating beneficiary’s right to benefit

(1) Where a beneficiary collaborated in a tr ustee’s non-performance, a

court may order on the application of that trustee or another benefi-

ciary that the right to benefit of the beneficiary who collaborated be

forfeited.

X. – 7:302 Book X

528

(2) The right to benefit of a beneficiary who validly consented to the non-

performance, but did not collaborate in it, may be forfeited only to the

extent that the beneficiary has been enriched by the non-performance.

(3) To the extent that a beneficiary’s right to benefit is forfeited under this

Article, benefit which is otherwise due to that beneficiary is to be ap-

plied so as to satisfy the trustee’s liability until either the liability is

extinguished or the right to benefit is exhausted.

Chapter 8:

Change of trustees or trust auxiliary

Section 1:

General rules on change of trustees

X. – 8:101: Powers to change trustees in general

(1) After the creation of a trust, a person may be appointed a trustee and a

trustee may resign or be removed:

(a) in accordance with a power:

(i) under the trust terms or

(ii) conferred on the trustees by this Section; or

(b) by court order under this Section.

(2) The exercise of a power within paragraph (1)(a) is of no effect unless it

is in writing. The same applies to a binding direction to trustees re-

garding the exercise of such a power.

(3) An exercise of a power under the trust terms by a person who is not

also a continuing trustee does not take effect until notice is given to the

continuing trustees.

(4) The resignation or removal of a sole trustee is effective only if a sub-

stitute trustee is appointed at the same time.

X. – 8:102: Powers to change trustees conferred on trustees

(1) The powers conferred by this Section on trustees may only be exercised:

(a) by unanimous decision; and

(b) if in the circumstances a trust auxiliary does not have a corresponding

power or the trust auxiliary cannot or does not exercise such a power

within a reasonable period after a request to do so by the trustees.

(2) Subject to paragraph (1), the trustees are obliged to exercise their pow-

ers under this Section in accordance with any joint direction by the

Chapter 8:Change of trustees or trust auxiliary X. – 8:102

529

beneficiaries if the beneficiaries have a joint right to terminate the trust

in respect of the whole fund.

(3) The trust terms may modify or exclude the powers conferred by this

Section on trustees.

Section 2:

Appointment of trustees

X. – 8:201: General restrictions on appointments

(1) An appointment of a person as trustee is of no effect if:

(a) it is manifest that the co-trustees would have power to remove that

person, if appointed, on grounds of that person’s inability, refusal

to act, or unsuitability;

(b) the person appointed does not agree to act as trustee; or

for by the trust terms.

(2) A provision in the trust terms that there is to be only one trustee takes

effect as a maximum of two.

X. – 8:202: Appointment by trust auxiliary or trustees

(1) The trustees may appoint one or more additional trustees.

(2) The continuing trustees may appoint a substitute trustee for a person

who has ceased to be a trustee.

(3) Unless the trust terms provide otherwise, a self-appointment by a trust

auxiliary is of no effect.

X. – 8:203: Appointment by court order

On the application of any party to the trust or any person entitled to en-

force performance of an obligation under the trust, a court may appoint:

(a) a substitute trustee for a person who has ceased to be a trustee, or

(b) one or more additional trustees,

if in the circumstances:

(i) no one else is able and willing to exercise a power to appoint; and

(ii) the appointment is likely to promote the efficient and prudent admin-

istration and disposal of the trust fund in accordance with the trust

terms.

X. – 8:201 Book X

530

Section 3:

Resignation of trustees

X. – 8:301: Resignation with consent of trust auxiliary or

co-trustees

(1) A trust auxiliary who may appoint a substitute trustee in the event of

the trustee’s resignation may consent to a resignation.

(2) A trust auxiliary may consent to a resignation without the consent of

the continuing trustees only if a substitute trustee is appointed at the

same time.

(3) The continuing trustees may consent to a resignation.

(4) A trustee may only resign with the consent of a trust auxiliary or co-

trustees if after resignation there will be at least two continuing trustees

or a special trustee.

(5) Special trustees, for the purposes of this Book, are:

(a) any public officer or body having the function of acting as a trus-

tee; and

(b) any legal persons designated as such in an enactment or satisfying

requirements set out in an enactment for this purpose.

X. – 8:302: Resignation with approval of court

A court may approve the resignation of a trustee who cannot otherwise

resign if it is fair to release the trustee from obligations under the trust,

having regard in particular to whether after resignation an efficient and

prudent administration and disposal of the trust fund in accordance with

the trust terms can be secured.

Section 4:

Removal of trustees

X. – 8:401: Removal by trust auxiliary or co-trustees

(1) Where a court might remove a trustee on grounds of inability, refusal to

act, or unsuitability, the continuing trustees may remove that trustee.

(2) The removal of a trustee by a trust auxiliar y or the trustees does not

take effect until notice of the removal is given to the trustee who is to

be removed.

Chapter 8:Change of trustees or trust auxiliary X. – 8:401

531

X. – 8:402: Removal by court order

(1) On the application of any party to the trust, a court may remove a

trustee without that trustee’s consent and regardless of the trust terms

if it is inappropriate for the trustee to remain a trustee, in particular on

grounds of the trustee’s:

(a) inability;

(b) actual or anticipated material non-performance of any obligation

under, or arising out of, the trust;

(d) permanent or recurrent fundamental disagreement with co-trustees

on a matter requiring a unanimous decision of the trustees; or

(e) other interests which substantially conflic t with performance of

the obligations under, or arising out of, the trust.

Section 5:

Effect of change of trustees

X. – 8:501: Effect on trustees’ obligations and rights

(1) A person who is appointed a trustee becomes bound by the trust and

acquires the corresponding rights and powers. Subject to the following

paragraphs of this Article, a trustee who resigns or is removed is re-

leased from the trust and loses those rights and powers.

(2) The obligation to cooperate with co-trustees does not end until the

expiry of a reasonable period after resignation or removal.

(3) A former trustee’s right of recourse to the trust fund takes effect as a

right against the continuing trustees. A right to reimbursement, indem-

nification or remuneration by a beneficiary is unaffected.

(4) A former trustee remains bound by:

(a) the obligation in X. – 6:109 (Obligation not to obtain unauthor-

ised enrichment or advantage);

(b) trust debts; and

X. – 8:502: Vesting and divesting of trust assets

(1) Title to a trust asset vests in a person on appointment as a trustee,

without a court order to that effect, if that title is:

X. – 8:402 Book X

532

(a) capable of transfer by agreement between a transferor and a trans-

feree without the necessity for any further act of transfer or form-

ality; or

(b) regarded under the applicable national law as vested in the trustees

as a body.

(2) The vesting of an asset in a person who is appointed a trustee does not

divest any continuing trustees.

(3) A person who resigns or is removed as a trustee is divested correspond-

ingly.

X. – 8:503: Transmission of trust documents

A continuing or substit ute trustee is entitled to the delivery up of trust

documents in the possession of a former trustee. The person in possession

has the right to make and retain copies at that person’s own expense.

X. – 8:504: Effect of death or dissolution of trustee

(1) Where one of several trustees dies or a corporate trustee is dissolved,

the trust fund remains vested in the continuing trustees. This applies to

the exclusion of any person succeedin g to a deceased or dissolved

trustee’s other patrimony.

(2) Where a sole trustee dies, the deceased trustee’s successors become

trustees and accordingly:

(a) the trustee’s successors become subject to the trust and acquire

the corresponding rights and powers;

(b) the trustee’s successors become liable for trust debts incurred by

the deceased trustee to the extent of the deceased trustee’s estate;

and

but the trustee’s successors may only exercise the powers set out in

X. – 5:202 (Restriction in case of minimum number of trustees) para-

graph (1), regardless of the number of successors.

(3) A trustee’s testamentary disposition of the trust fund is of no effect,

but the trust terms may confer a testamentary power to appoint a trus-

tee.

(4) Obligations arising from non- performan ce devol ve on the deceased

trustee’s successor.

Chapter 8:Change of trustees or trust auxiliary X. – 8:504

533

Section 6:

Death or dissolution of trust auxiliary

X. – 8:601: Effect of death or dissolution of trust auxiliary

A power of a trust auxiliary ends when the trust auxiliary dies or is dissolved,

but the trust terms may permit a testamentary exercise of the power.

Chapter 9:

Termination and variation of trusts and transfer

of rights to benefit

Section 1:

Termination

Sub-section 1:

General rules on termination

X. – 9:101: Modes of termination

A trust in respect of a fund or part of a fund may be terminated:

(a) by a truster or beneficiaries in accordance with a right provided for by

the trust terms;

(b) by a truster in accordance with X. – 9:103 (Right of truster to terminate

a gratuitous trust);

terminate);

(d) by a trustee under X. – 9:108 (Termination by trustee);

(e) by merger of rights and obligations under X. – 9:109 (Merger of right

and obligation).

X. – 9:102: Effect of termination on trustee’s liabilities

(1) To the extent that the trust is terminated the trustee is discharged.

(2) Unless the parties concerned agree otherwise, termination of the trust

does not release a trustee from liability:

(a) to a beneficiary arising out of the trustee’s non-performance of any

obligation under, or arising out of, the trust; or

(b) to a trust creditor.

X. – 8:601 Book X

534

Sub-section 2:

Termination by truster or beneficiaries

X. – 9:103: Right of truster to terminate a gratuitous trust

(1) Except as provided for by paragraphs (2) and (3), a truster has no im-

plied right to terminate a trust or a trust term merely because the trust

was constituted gratuitously, irrespective of whether:

(a) the trust was constituted without a transfer by the truster;

(b) the truster reserved a right to benefit during the truster’s lifetime.

(2) A truster may terminate a gratuitously constituted trust, or a term of

such a trust, which is for the benefit of a person who does not yet exist.

(3) A truster may terminate a gratuitously constituted trust for the benefit

of another to the same extent that the truster might have revoked a

donation to that beneficiary if the benefit had been conferred by way of

donation.

X. – 9:104: Right of beneficiaries to terminate

(1) A beneficiary of full legal capacity may terminate the trust in respect of

a fund or part of the fund wh ich is for that bene ficiary’s excl usive

benefit.

(2) If each is of full legal capacity, several beneficiaries have a correspond-

ing joint right to terminate the trust in respect of a fund or part of the

fund which is for the exclusive benefit of those beneficiaries.

(3) A trust may not be terminated in respect of part of the fund if this

would adversely affect the trust in respect of the rest of the fund for

the benefit of other beneficiaries or for the advancement of public ben-

efit purposes.

X. – 9:105: Meaning of “exclusive benefit”

(1) A fund or part of a fund is to be regarded as for a beneficiary’s exclusive

benefit if all of that capital and all of the future income from that capital

can only be disposed of in accordance with the trust terms for the

benefit of that beneficiary or that beneficiary’s estate.

(2) For the purposes of paragraph (1) the possibility that the beneficiary

might give a consent, or might fail to exercise a right adverse to that

beneficiary’s own benefit, is to be disregarded.

Chapter 9:Termination and variation of trusts and transfer of X. – 9:105

535

X. – 9:106: Notice of termination and its effects

(1) A truster or beneficiary exercises a right to terminate by giving notice in

writing to the trustees.

(2) A trust or part of a trust which is terminated by the truster takes effect

from that time as a trust for the benefit of the truster.

(3) Where a beneficiary, exercising a right to terminate, instructs the trus-

tee to transfer to someone other than the beneficiary, notice of termi-

nation vests in that person the right to benefit from the fund or par t of

the fund which is to be transferred.

(4) Unless the transfer is impossible or unlawful, the trustee is obliged to

transfer the fund or part of the fund in accordance with the notice of

termination and without delay. The obligation to transfer supersedes

the obligation to administer and dispose of the fund or part in accord-

ance with the trust terms.

(5) If a transfer is impossible because it would require the grant of an un-

divided share in an asset for which undivided shares are not allowed,

the trustee is obliged:

(a) to divide the asset and transfer the divided share, so far as this is

possible and reasonable; and otherwise

(b) to sell the asset, if this is possible, and transfer the corresponding

share of the proceeds.

(5) The trust is terminated when and to the extent that the required trans-

fer is made.

X. – 9:107: Trustee’s right to withhold

(1) A trustee may withhold such part of the fund which is to be transferred

as is needed to satisfy:

(a) trust debts;

(b) the trustee’s accrued rights of recourse to the fund; and

so far as those debts, rights and costs are allocated to the part of the

fund which is to be transferred.

(2) The right to withhold ends if the person exercising the right to termi-

nate pays compensation for the debts, rights and costs allocated to the

part of the fund which is to be transferred.

X. – 9:106 Book X

536

Sub-section 3:

Other modes of termination

X. – 9:108: Termination by trustee

(1) Where a beneficiary has a right to terminate a trust under X. – 9:104

(Right of beneficiaries to terminate) paragraph (1), a trustee may give a

notice to that beneficiary requiring that beneficiary to exercise that

right within a period of reasonable length fixed by the notice. If the

beneficiary fails to do so within that period, the trustee may terminate

the trust by a transfer to that beneficiary. The beneficiary is obliged to

accept the transfer.

(2) A trustee may also terminate the trust by payment of money or transfer

of other assets of the trust fund into court where other rules so provide.

X. – 9:109: Merger of right and obligation

(1) A trust ends when the sole trustee is also the sole beneficiary and the

trust fund is for that beneficiary’s exclusive benefit.

(2) Where there are several trustees, paragraph (1) applies correspondingly

only if they have a joint right to benefit.

(3) If a trust subsists in relation to the beneficiary’s right to benefit or the

right to benefit is encumbered with a security right or other limited

right, the trustee remains bound by that trust or encumbrance.

Section 2:

Variation

X. – 9:201: Variation by truster or beneficiary

(1) The trust terms may be varied by a truster or beneficiary in accordance

with:

(a) a right provided for by the trust terms;

(b) the right provided for by paragraph (2).

(2) A truster or beneficiary who has a right to terminate a trust has a cor-

responding right to vary the trust terms so far as they relate to the fund

or part of the fund in respect of which the trust might be terminated.

(3) The exercise by several beneficiaries of a joint right to vary the trust

terms requires their agreement to that effect.

Chapter 9:Termination and variation of trusts and transfer of X. – 9:201

537

(4) A variation which is to take effect from the death of the person exer-

cising the right to vary is of no effect unless it is made by testamentary

instrument.

(5) A variation does not take effect until notice in writing is given to the

trustees.

X. – 9:202: Variation by court order of administrative trust terms

(1) On the application of any party to the trust or any person entitled to

enforce performance of obligations under the trust, a court may vary a

trust term relating to the administration of the trust fund if the variation

is likely to promote a more efficient and prudent administration of the

fund.

(2) A variation under paragraph (1) may not significantly affect the opera-

tion of the trust terms governing its disposal unless the court also has

power to vary those terms under one of the following Articles.

X. – 9:203: Variation by court order of trusts for beneficiaries

(1) On the application of any party to the trust or any person who would

benefit if the term to be varied were removed, a court may vary a trust

term which confers a right to benefit or eligibility for benefit on a per-

son who:

(a) does not yet exist; or

(b) does not presently conform to a description, such as membership

of a class, on which the right depends.

(2) The same applies where th e trust term confers a right to benefit or

eligibility for benefit at a remote time in the future or which is condi-

tional on the occurrence of an improbable event.

X. – 9:204: Variation by court order of trusts for

public benefit purposes

(1) On the application of any party to the trust or any person entitled to

enforce performance of obligations under the trust, a court may vary a

trust term which provides for the advancement of a public benefit pur-

pose if, as a result of a change of circumstances, the advancement of

the particular purpose provided for by the trust term cannot be regarded

as a suitable and effective use of resources.

(2) A variation under paragraph (2) must be in favour of such general or

particular public benefit purposes as the truster would probably have

X. – 9:202 Book X

538

chosen if the truster had constituted the trust after the change in cir-

cumstances.

Section 3:

Transfer of right to benefit

X. – 9:301: Transfer by juridical act of right to benefit

(1) Subject to the other paragraphs of this Article, the transfer by juridical

act of a right to benefit is governed by Book

III Chapter 5 Section 1

(Assignment of rights).

(2) A gratuitous transfer is of no effect unless it is made in writing.

(3) A transfer which is to take effect on the death of the transferor takes

effect only in accordance with the applicable law of succession.

Chapter 10:

Relations to third parties

Section 1:

General provisions on creditors

X.–10:101: Basic rule on creditors

(1) A person to whom a trustee owes a trust debt (a trust creditor) may

satisfy that person’s right out of the trust fund (in accordance with

X. – 10:202 (Rights of trust creditors in relation to the trust fund)),

but other creditors may not except in so far as these rules provide

otherwise.

(2) Paragraph (1) does not affect any right of a creditor of a party to a trust

to invoke a right of that party relating to the trust fund.

X.–10:102: Definition of trust debt

(1) An obligation is a trust debt if it is incurred by the trustee:

(a) as the owner for the time being of a trust asset;

(b) for the purposes of, and in accordance with the terms of, the trust;

which is not gratuitous, unless the creditor knew or could reason-

ably be expected to know that the obligation was not incurred in

accordance with the terms of the trust;

Chapter 10:Relations to third parties X.–10:102

539

(d) as a result of an act or omission in the administration or disposition

of the trust fund or the performance of a trust debt; or

(e) otherwise materially in connection with the trust patrimony.

(2) The obligations of trustees to reimburse, indemnify or remunerate a

former trustee or an intended trustee who has exercised a right of re-

fusal are also trust debts.

(3) Other obligations of a trustee are not trust debts.

Section 2:

Trust creditors

X.–10:201: Rights of trust creditors against the trustee

(1) A trustee is personally liable to satisfy trust debts.

(2) Unless the trustee and the trust creditor agree otherwise:

(a) liability is not limited to the value of the trust fund at the time the

trust creditor’s right to performance is enforced; and

(b) subject to the rules on change of trustees, liability does not end if

the trust fund ceases to be vested in the trustee.

(3) A party to a contract is not to be treated as agreeing to exclude or limit

liability merely because the other party discloses that that other party is

concluding the contract in the capacity of trustee.

X.–10:202: Rights of trust creditors in relation to the trust fund

A trust creditor may satisfy a right out of the trust fund:

(a) to enforce performance of a trustee’s perso nal l iability under X. –

10:201 (Rights of trust creditors against the trustee); or

(b) in the exercise of a security right in trust assets.

X.–10:203: Protection of the truster and beneficiaries

A truster or beneficiary is not in that capacity liable to a trust creditor.

X.–10:201 Book X

540

Section 3:

Trust debtors

X.–10:301: Right to enforce performance of

trust debto r’s obligation

(1) Where a trustee has a right to performance and that right is a trust

asset, the right to enforce performance of the obligation of the debtor

(the trust debtor) accrues to the trustee.

(2) Paragraph (1) does not affect:

(a) a beneficiar y’s right to performance by the trustee of obligations

under the trust in respect of the right against the trust debtor; or

(b) procedural rules which allow a beneficiary to be a party to legal

proceedings against the trust debtor to which the trustee is also a

party.

X.–10:302: Set-off

A trustee’s right against a trust debtor may only be set off against:

(a) a right corresponding to a trust debt; or

(b) a beneficiary’s right to benefit out of the trust fund.

X.–10:303: Discharge of trust debtor

The discharge of a trust debtor by a trustee is of no effect if:

(a) the discharge is not in performance of the trustee’s obligations under

the trust; and

(b) (i) the discharge is gratuitous; or

(ii) the debtor knows or has reason to know that the discharge is not in

performance of the trustee’s obligations under the trust.

Section 4:

Acquirers of trust assets and rights encumbering trust assets

X.–10:401: Liability of donees and bad faith acquirers

(1) Where a trustee transfers a trust asset to another and the transfer is not

in accordance with the terms of the trust, the transferee takes the asset

subject to the trust if:

Chapter 10:Relations to third parties X.–10:401

541

(a) the transfer is gratuitous; or

(b) the transferee knows or could reasonably be expected to know that

the transfer is by a trustee and is not in accordance with the terms

of the trust.

(2) A transferee on whom a trust is imposed under paragraph (1) has a

corresponding right to a return of any benefit conferred in exchange.

(3) The trust imposed under paragraph (1) is extinguished if:

(a) benefit which was provided by the transferee in exchange is dis-

posed of in per formance of an obligation under the trust; or

(b) the trustee or a third party satisfies an obligation to reinstate the

trust fund.

(4) A transferee can reasonably be expected to know a matter if:

(a) it would have been apparent from a reasonably careful investiga-

tion; and

(b) having regard to the nature and value of the asset, the nature and

costs of such investigation, and commercial practice, it is fair and

reasonable to expect a transferee in the circumstances to make that

investigation.

(5) This Article applies correspondingly where a trustee creates a security

right or other limited right in a trust asset in favour of another.

Section 5:

Other rules on liability and protection of third parties

X.–10:501: Liability for inducing or assisting misapplication

of the trust fund

(1) Non–contractual liability arising out of damage caused to another by

virtue of

VI. – 2:211 (Loss upon inducement of non-performance of

obligation) is modified as provided for by paragraph (2).

(2) A person who intentionally induces a trustee’s non-performance of an

obligation under the trust, or intentionally assists such non-perform-

ance, is solidarily liable with that trustee, if the trustee is liable to re-

instate the trust fund.

X.–10:501 Book X

542

X.–10:502: Protection of third parties dealing with trustees

(1) A contract which a trustee concludes as a result of a non-performance

of an obligation under the trust with a person who is not a party to a

trust is not void or avoidable for that reason.

(2) In favour of a person who is not a party to the trust and as against a

trustee, a person who has no knowledge of the true facts may rely on

the apparent effect of a trust document and the truth of a statement

contained in it.

Chapter 10:Relations to third parties X.–10:502

Annex

Definitions

(General notes. These definitions are introduced by I. – 1:108 (De-

finitions in Annex) which provides that they apply for all the pur-

poses of these rules unless the context otherwise requires and that,

where a word is defined, other grammatical forms of the word have a

corresponding meaning. For the convenience of the user, where a

definition is taken from or derived from a particular Article a refer-

ence to that Article is added in brackets after the definition. The list

also includes some terms which are frequently used in the rules but

which are not defined in any Article. It does not include definitions

which do not contain any legal concept but which are only drafting

devices for the purposes of a particular Article or group of Arti-

cles.)

Accessory

An “accessory”, in relation to proprietary security, is a corporeal asset

that is or becomes closely connected with, or part of, a movable or an

immovable, provided it is possible and economically reasonable to

separate the accessory without damage from the movable or immo-

vable. (

IX. – 1:201)

Acquisition finance device

An “acquisition finance device” is (a) a retention of ownership de-

vice; (b) where ownership of a sold asset has been transferred to the

buyer, those security rights in the asset which secure the right (i) of

the seller to payment of the purchase price or (ii) of a lender to

repayment of a loan granted to the buyer for payment of the purchase

price, if and in so far as this payment is actually made to the seller;

and (c) a right of a third person to whom any of the rights under (a)

or (b) has been transferred as security for a credit covered by (a) or

(b). (

IX. – 1:201(3))

545

Advanced electronic signature

An “advanced electronic signature” is an electronic signature which

is (a) uniquely linked to the signatory (b) capable of identifying the

signatory (c) created using means which can be maintained under

the signatory’s sole control; and (d) linked to the data to which it

relates in such a manner that any subsequent change of the data is

detectable. (

I. – 1:108(4))

Act of assignment

An “act of assignment” of a right is a contract or other juridical act

which is intended to effect a transfer of the right. (

III. – 5:102(2))

Agent

An “agent” is a person who is authorised to act for another.

Assets

“Assets” means anything of economic value, including property;

rights having a monetary value; and goodwill.

Assignment

“Assignment”, in relation to a right, means the transfer of the right

by one person, the “assignor”, to another, “the assignee”. (

III.–

5:102(1))

Authorisation

“Authorisation” is the granting or maintaining of authority. (

II.–

6:102(3))

Authority

“Authority”, in relation to a representative acting for a principal, is

the power to affect the principal’s legal position. (

II. – 6:102(2))

Avoidance

“Avoidance” of a juridical act or legal relationship is the process

whereby a party or, as the case may be, a court invokes a ground of

invalidity so as to make the act or relationship, which has been valid

until that point, retrospectively ineffective from the beginning.

Advanced electronic signature Annex

546

Barter, contract for

A contract for the “barter” of goods is a contract under which each

party undertakes to transfer the ownership of goods, either immedi-

ately on conclusion of the contract or at some future time, in return

for the transfer of ownership of other goods. (

IV. A. – 1:203)

Beneficiary

A “beneficiary”, in relation to a trust, is a person who, according to

the trust terms, has either a right to benefit or an eligibility for

benefit from the trust fund. (X. – 1:203(3))

Benevolent intervention in another’s affairs

“Benevolent intervention in another’s affairs” is the process whereby

a person, the intervener, acts with the predominant intention of

benefiting another, the principal, but without being authorised or

bound to do so. (V. – 1:101)

Business

“Business” means any natural or legal person, irrespective of whether

publicly or privately owned, who is acting for purposes relating to the

person’s self-employed trade, work or profession, even if the person

does not intend to make a profit in the course of the activity. (

I.–

1:106(2))

Claim

A “claim” is a demand for something based on the assertion of a

right.

Claimant

A “claimant” is a person who makes, or who has grounds for making,

a claim.

Co-debtorship for security purposes

A “co-debtorship for security purposes” is an obligation owed by two

or more debtors in which one of the debtors, the security provider,

assumes the obligation primarily for purposes of security towards the

creditor. (

IV. G. – 1:101(e))

Definitions Co-debtorship for security purposes

547

Commercial agency

A “commercial agency” is the legal relationship arising from a con-

tract under which one party, the commercial agent, agrees to act on a

continuing basis as a self-employed intermediary to negotiate or to

conclude contracts on behalf of another party, the principal, and the

principal agrees to remunerate the agent for those activities. (

IV.E.–

3:101)

Compensation

“Compensation” means reparation in money. (

VI. – 6:101(2))

Complete substitution of debtor

There is complete substitution of a debtor when a third person is

substituted as debtor with the effect that the original debtor is dis-

charged. (

III. – 5:203)

Condition

A “condition” is a provision which makes a legal relationship or

effect depend on the occurrence or non-occurrence of an uncertain

future event. A condition may be suspensive or resolutive. (

III.–

1:106)

Conduct

“Conduct” means voluntary behaviour of any kind, verbal or non-

verbal: it includes a single act or a number of acts, behaviour of a

negative or passive nature (such as accepting something without

protest or not doing something) and behaviour of a continuing or

intermittent nature (such as exercising control over something).

Confidential information

“Confidential information” means information which, either from

its nature or the circumstances in which it was obtained, the party

receiving the information knows or could reasonably be expected to

know is confidential to the other party. (

II. – 2:302(2))

Construction, contract for

A contract for construction is a contract under which one party, the

constructor, undertakes to construct something for another party, the

Commercial agency Annex

548

client, or to materially alter an existing building or other immovable

structure for a client. (

IV.C–3:101)

Consumer

A “consumer” means any natural person who is acting primarily for

purposes which are not related to his or her trade, business or profes-

sion. (

I. – 1:106(1))

Consumer contract for sale

A “consumer contract for sale” is a contract for sale in which the

seller is a business and the buyer is a consumer. (

IV. A. – 1:204)

Contract

A “contract” is an agreement which is intended to give rise to a

binding legal relationship or to have some other legal effect. It is a

bilateral or multilateral juridical act. (

II. – 1:101(1))

Contractual obligation

A “contractual obligation” is an obligation which arises from a con-

tract, whether from an express term or an implied term or by opera-

tion of a rule of law imposing an obligation on a contracting party as

such.

Contractual relationship

A “contractual relationship” is a legal relationship resulting from a

contract.

Co-ownership

“Co-ownership”, when created under Book

VIII, means that two or

more co-owners own undivided shares in the whole and each co-

owner can dispose of that co-owner’s share by acting alone, unless

otherwise provided by the parties. (Cf.

VIII. – 1:203)

Corporeal

“Corporeal”, in relation to property, means having a physical exist-

ence in solid, liquid or gaseous form.

Definitions Corporeal

549

Costs

“Costs” includes expenses.

Counter-performance

A “counter-performance” is a performance which is due in exchange

for another performance.

Court

“Court” includes an arbitral tribunal.

Creditor

A “creditor” is a person who has a right to performance of an ob-

ligation, whether monetary or non-monetary, by another person, the

debtor.

Damage

“Damage” means any type of detrimental effect.

Damages

“Damages” means a sum of money to which a person may be entitled,

or which a person may be awarded by a court, as compensation for

some specified type of damage.

Debtor

A “debtor” is a person who has an obligation, whether monetary or

non-monetary, to another person, the creditor.

Default

“Default”, in relation to proprietary security, means any non-per-

formance by the debtor of the obligation covered by the security;

and any other event or set of circumstances agreed by the secured

creditor and the security provider as entitling the secured creditor to

have recourse to the security. (

IX. – 1:201(5))

Defence

A “defence” to a claim is a legal objection or a factual argument,

other than a mere denial of an element which the claimant has to

prove which, if well-founded, defeats the claim in whole or in part.

Costs Annex

550

Delivery

“Delivery” to a person, for the purposes of any obligation to deliver

goods, means transferring possession of the goods to that person or

taking such steps to transfer possession as are required by the terms

regulating the obligation. For the purposes of Book

VIII (Acquisition

and loss of ownership of goods) delivery of the goods takes place only

when the transferor gives up and the transferee obtains possession of

the goods: if the contract or other juridical act, court order or rule of

law under which the transferee is entitled to the transfer of owner-

ship involves carriage of the goods by a carrier or a series of carriers,

delivery of the goods takes place when the transferor’s obligation to

deliver is fulfilled and the carrier or the transferee obtains possession

of the goods. (

VIII. – 2:104)

Dependent personal security

A “dependent personal security” is an obligation by a security pro-

vider which is assumed in favour of a creditor in order to secure a

present or future obligation of the debtor owed to the creditor and

performance of which is due only if, and to the extent that, perform-

ance of the latter obligation is due. (

IV. G. – 1:101(a))

Design, contract for

A contract for design is a contract under which one party, the de-

signer, undertakes to design for another party, the client, an immo-

vable structure which is to be constructed by or on behalf of the

client or a movable or incorporeal thing or service which is to be

constructed or performed by or on behalf of the client. (

IV. C.-

6:101)

Direct physical control

Direct physical control is physical control which is exercised by the

possessor personally or through a possession-agent exercising such

control on behalf of the possessor (direct possession). (

VIII.–

1:205)

Definitions Direct physical control

551

Discrimination

“Discrimination” means any conduct whereby, or situation where, on

grounds such as sex or ethnic or racial origin, (a) one person is

treated less favourably than another person is, has been or would be

treated in a comparable situation; or (b) an apparently neutral pro-

vision, criterion or practice would place one group of persons at a

particular disadvantage when compared to a different group of per-

sons. (

II. – 2:102(1))

Distribution contract

A “distribution contract” is a contract under which one party, the

supplier, agrees to supply the other party, the distributor, with pro-

ducts on a continuing basis and the distributor agrees to purchase

them, or to take and pay for them, and to supply them to others in

the distributor’s name and on the distributor’s behalf. (

IV.E.–

5:101(1))

Distributorship

A “distributorship” is the legal relationship arising from a distribu-

tion contract.

Divided obligation

An obligation owed by two or more debtors is a “divided obligation”

when each debtor is bound to render only part of the performance

and the creditor may require from each debtor only that debtor’s part.

(

III. – 4:102(2))

Divided right

A right to performance held by two or more creditors is a “divided

right” when the debtor owes each creditor only that creditor’s share

and each creditor may require performance only of that creditor’s

share. (

III. – 4:202(2))

Donation, contract for

A contract for the donation of goods is a contract under which one

party, the donor, gratuitously undertakes to transfer the ownership of

goods to another party, the donee, and does so with an intention to

benefit the donee. (

IV. H. – 1:101)

Discrimination Annex

552

Durable medium

A “durable medium” means any material on which information is

stored so that it is accessible for future reference for a period of time

adequate to the purposes of the information, and which allows the

unchanged reproduction of this information. (

I. – 1:107(3))

Duty

A person has a “duty” to do something if the person is bound to do it

or expected to do it according to an applicable normative standard of

conduct. A duty may or may not be owed to a specific creditor. A

duty is not necessarily an aspect of a legal relationship. There is not

necessarily a sanction for breach of a duty. All obligations are duties,

but not all duties are obligations.

Economic loss

See “Loss”.

Electronic

“Electronic” means relating to technology with electrical, digital,

magnetic, wireless, optical, electromagnetic, or similar capabil-

ities.

Electronic signature

An “electronic signature” means data in electronic form which are

attached to, or logically associated with, other data and which serve

as a method of authentication. (

I. – 1:108(3))

Financial assets

“Financial assets” are financial instruments and rights to the pay-

ment of money. (

IX. – 1:201(6))

Financial instruments

“Financial instruments” are (a) share certificates and equivalent se-

curities as well as bonds and equivalent debt instruments, if these are

negotiable (b) any other securities which are dealt in and which give

the right to acquire any such financial instruments or which give rise

to cash settlements, except instruments of payment (c) share rights

Definitions Financial instruments

553

in collective investment undertakings (d) money market instru-

ments and (e) rights in or relating to the foregoing instruments.

(

IX. – 1:201(7))

Franchise

A “franchise” is the legal relationship arising from a contract under

which one party, the franchisor, grants the other party, the franchi-

see, in exchange for remuneration, the right to conduct a business

(franchise business) within the franchisor’s network for the purposes

of supplying certain products on the franchisee’s behalf and in the

franchisee’s name, and whereby the franchisee has the right and the

obligation to use the franchisor’s trade name or trademark or other

intellectual property rights, know-how and business method.

(

IV. E. – 4:101)

Fraudulent

A misrepresentation is fraudulent if it is made with knowledge or

belief that it is false and is intended to induce the recipient to make a

mistake to the recipient’s prejudice. A non-disclosure is fraudulent if

it is intended to induce the person from whom the information is

withheld to make a mistake to that person’s prejudice. (

II.–

7:205(2))

Fundamental non-performance

A non-performance of a contractual obligation is fundamental if (a)

it substantially deprives the creditor of what the creditor was entitled

to expect under the contract, as applied to the whole or relevant part

of the performance, unless at the time of conclusion of the contract

the debtor did not foresee and could not reasonably be expected to

have foreseen that result or (b) it is intentional or reckless and gives

the creditor reason to believe that the debtor’s future performance

cannot be relied on. (

III. – 3:502(2))

Global security

A “global security” is a security which is assumed in order to secure

all the debtor’s obligations towards the creditor or the debit balance

of a current account or a security of a similar extent. (

IV.G.–

1:101(f)

Franchise Annex

554

Good faith

“Good faith” is a mental attitude characterised by honesty and an

absence of knowledge that an apparent situation is not the true

situation.

Good faith and fair dealing

“Good faith and fair dealing” is a standard of conduct characterised

by honesty, openness and consideration for the interests of the other

party to the transaction or relationship in question. (

I. – 1:103)

Goods

“Goods” means corporeal movables. It includes ships, vessels, hover-

craft or aircraft, space objects, animals, liquids and gases. See also

“movables”.

Gross negligence

There is “gross negligence” if a person is guilty of a profound failure

to take such care as is self-evidently required in the circumstances.

Handwritten signature

A “handwritten signature” means the name of, or sign representing, a

person written by that person’s own hand for the purpose of authen-

tication. (

I. – 1:108(2))

Harassment

“Harassment” means unwanted conduct (including conduct of a sex-

ual nature) which violates a person’s dignity, particularly when such

conduct creates an intimidating, hostile, degrading, humiliating or

offensive environment, or which aims to do so. (

II. – 2:102(2))

Immovable property

“Immovable property” means land and anything so attached to land

as not to be subject to change of place by usual human action.

Incomplete substitution of debtor

There is incomplete substitution of a debtor when a third person is

substituted as debtor with the effect that the original debtor is re-

Definitions Incomplete substitution of debtor

555

tained as a debtor in case the original debtor does not perform prop-

erly. (

III. – 5:205)

Incorporeal

“Incorporeal”, in relation to property, means not having a physical

existence in solid, liquid or gaseous form.

Indemnify

To “indemnify” means to make such payment to a person as will

ensure that that person suffers no loss.

Independent personal security

An “independent personal security” is an obligation by a security

provider which is assumed in favour of a creditor for the purposes of

security and which is expressly or impliedly declared not to depend

upon another person’s obligation owed to the creditor. (

IV.G.–

1:101(b))

Indirect physical control

Indirect physical control is physical control which is exercised by

means of another person, a limited-right-possessor (indirect posses-

sion). (

VIII. – 1:205)

Individually negotiated

See “not individually negotiated” and

II. – 1:110.

Ineffective

“Ineffective” in relation to a contract or other juridical act means

having no effect, whether that state of affairs is temporary or perma-

nent, general or restricted.

Insolvency proceeding

An “insolvency proceeding” means a collective judicial or adminis-

trative proceeding, including an interim proceeding, in which the

assets and affairs of a person who is, or who is believed to be, insol-

vent are subject to control or supervision by a court or other com-

petent authority for the purpose of reorganisation or liquidation.

Incorporeal Annex

556

Intangibles

“Intangibles”, in relation to proprietary security, means incorporeal

assets and includes uncertificated and indirectly held securities and

the undivided share of a co-owner in corporeal assets or in a bulk or a

fund. (

IX. – 1:201(8))

Interest

“Interest” means simple interest without any assumption that it will

be capitalised from time to time.

Invalid

“Invalid” in relation to a juridical act or legal relationship means that

the act or relationship is void or has been avoided.

Joint obligation

An obligation owed by two or more debtors is a “joint obligation”

when all the debtors are bound to render the performance together

and the creditor may require it only from all of them. (

III.–

4:102(3))

Joint right

A right to performance held by two or more creditors is a “joint

right” when the debtor must perform to all the creditors and any

creditor may require performance only for the benefit of all. (

III.–

4:202(3))

Juridical act

A “juridical act” is any statement or agreement, whether express or

implied from conduct, which is intended to have legal effect as such.

It may be unilateral, bilateral or multilateral. (

II. – 1:101(2))

Keeper

A keeper, in relation to an animal, vehicle or substance, is the person

who has the beneficial use or physical control of it for that person’s

own benefit and who exercises the right to control it or its use.

Definitions Keeper

557

Lease

A “lease” is the legal relationship arising from a contract under

which one party, the lessor, undertakes to provide the other party,

the lessee, with a temporary right of use in exchange for rent.

(

IV. B. – 1:101)

Limited proprietary rights

Limited proprietary rights are such rights of the following character

as are characterised or treated as proprietary rights by any provision

of these model rules or by national law:– (a) security rights (b) rights

to use (c) rights to acquire (including a right to acquire in the sense

VIII. – 2:307 (Contingent right of transferee under retention of

ownership)) and (d) trust-related rights. (

VIII. – 1:204)

Limited-right-possessor

A “limited-right-possessor”, in relation to goods, is a person who

exercises physical control over the goods either (a) with the inten-

tion of doing so in that person’s own interest, and under a specific

legal relationship with the owner-possessor which gives the limited-

right-possessor the right to possess the goods or (b) with the inten-

tion of doing so to the order of the owner-possessor, and under a

specific contractual relationship with the owner-possessor which

gives the limited-right-possessor a right to retain the goods until any

charges or costs have been paid by the owner-possessor. (

VIII.–

1:207)

Loan contract

A loan contract is a contract by which one party, the lender, is

obliged to provide the other party, the borrower, with credit of any

amount for a definite or indefinite period (the loan period), in the

form of a monetary loan or of an overdraft facility and by which the

borrower is obliged to repay the money obtained under the credit,

whether or not the borrower is obliged to pay interest or any other

kind of remuneration the parties have agreed upon. (

IV.F.–

1:101(2))

Lease Annex

558

Loss

“Loss” includes economic and non-economic loss. “Economic loss”

includes loss of income or profit, burdens incurred and a reduction in

the value of property. “Non-economic loss” includes pain and suffer-

ing and impairment of the quality of life. (

III. – 3:701(3) and VI.–

2:101(4))

Mandate

The “mandate” of an agent is the authorisation and instruction given

by the principal, as modified by any subsequent direction, in relation

to the facilitation, negotiation or conclusion of a contract or other

juridical act with a third party. (

IV. D. – 1:102(1)(a))

Mandate for direct representation

A “mandate for direct representation” is a mandate under which the

agent is to act in the name of the principal, or otherwise in such a

way as to indicate an intention to affect the principal’s legal position

directly. (

IV. D. – 1:102(1)(d))

Mandate for indirect representation

A “mandate for indirect representation” is a mandate under which

the agent is to act in the agent’s own name or otherwise in such a way

as not to indicate an intention to affect the principal’s legal position

directly. (

IV. D. – 1:102(1)(e))

Merger of debts

A “merger of debts” means that the attributes of debtor and creditor

are united in the same person in the same capacity. (

III. – 6:201)

Merger clause

A “merger clause” is a term in a contract document stating that the

document embodies all the terms of the contract. (

II. – 4:104)

Monetary loan

A monetary loan is a fixed sum of money which is lent to the bor-

rower and which the borrower agrees to repay either by fixed instal-

ments or by paying the whole sum at the end of the loan period.

(

IV. F. – 1:101(3))

Definitions Monetary loan

559

Motor vehicle

“Motor vehicle” means any vehicle intended for travel on land and

propelled by mechanical power, but not running on rails, and any

trailer, whether or not coupled. (

VI. – 3:205(2))

Movables

“Movables” means corporeal and incorporeal property other than

immovable property.

Negligence

There is “negligence” if a person does not meet the standard of care

which could reasonably be expected in the circumstances.

Non-economic loss

See “Loss”.

Non-performance

“Non-performance”, in relation to an obligation, means any failure

to perform the obligation, whether or not excused. It includes de-

layed performance and defective performance. (

III. – 1:101(3))

Notice

“Notice” includes the communication of information or of a juridical

act. (

I. – 1:105)

Not individually negotiated

A term supplied by one party is not individually negotiated if the

other party has not been able to influence its content, in particular

because it has been drafted in advance, whether or not as part of

standard terms. (

II. – 1:110)

Obligation

An obligation is a duty to perform which one party to a legal rela-

tionship, the debtor, owes to another party, the creditor. (

III.–

1:101(1))

Motor vehicle Annex

560

Overdraft facility

An “overdraft facility” is an option for the borrower to withdraw

funds on a fluctuating, limited basis from the borrower’s current

account in excess of the current balance in the account. (

IV.F.–

1:101(4))

Owner-possessor

An “owner-possessor”, in relation to goods, is a person who exercises

physical control over the goods with the intention of doing so as, or

as if, an owner. ((

VIII. – 1:206)

Ownership

“Ownership” is the most comprehensive right a person, the owner,

can have over property, including the exclusive right, so far as con-

sistent with applicable laws or rights granted by the owner, to use,

enjoy, modify, destroy, dispose of and recover the property. (

VIII.–

1:202)

Performance

“Performance”, in relation to an obligation, is the doing by the debt-

or of what is to be done under the obligation or the not doing by the

debtor of what is not to be done. (

III. – 1:101(2))

Person

“Person” means a natural or legal person.

Physical control

“Physical control”, in relation to goods, means direct physical con-

trol or indirect physical control. (Cf.

VIII. – 1:205)

Possession

Possession, in relation to goods, means having physical control over

the goods. (

VIII. – 1:205)

Possession-agent

A “possession-agent”, in relation to goods, is a person (such as an

employee) who exercises direct physical control over the goods on

behalf of an owner-possessor or limited-right-possessor (without the

Definitions Possession-agent

561

intention and specific legal relationship required for that person to

be a limited-right-possessor); and to whom the owner-possessor or

limited-right-possessor may give binding instructions as to the use of

the goods in the interest of the owner-possessor or limited-right-

possessor. A person is also a possession-agent where that person is

accidentally in a position to exercise, and does exercise, direct phy-

sical control over the goods for an owner-possessor or limited-right-

possessor. (

VIII. – 1:208)

Possessory security right

A “possessory security right” is a security right that requires posses-

sion of the encumbered corporeal asset by the secured creditor or

another person (except the debtor) holding for the secured creditor.

(

IX. – 1:201(10))

Prescription

“Prescription”, in relation to the right to performance of an obliga-

tion, is the legal effect whereby the lapse of a prescribed period of

time entitles the debtor to refuse performance.

Presumption

A “presumption” means that the existence of a known fact or state of

affairs allows the deduction that something else should be held true,

until the contrary is demonstrated.

Price

The “price” is what is due by the debtor under a monetary obligation,

in exchange for something supplied or provided, expressed in a cur-

rency which the law recognises as such.

Proceeds

“Proceeds”, in relation to proprietary security, is every value derived

from an encumbered asset, such as value realised by sale, collection

or other disposition; damages or insurance payments in respect of

defects, damage or loss; civil and natural fruits, including distribu-

tions; and proceeds of proceeds. (

IX. – 1:201(11))

Possessory security right Annex

562

Processing, contract for

A contract for processing is a contract under which one party, the

processor, undertakes to perform a service on an existing movable or

incorporeal thing or to an immovable structure for another party, the

client (except where the service is construction work on an existing

building or other immovable structure). (

IV. C. – 4:101)

Producer

“Producer” includes, in the case of something made, the maker or

manufacturer; in the case of raw material, the person who abstracts

or wins it; and in the case of something grown, bred or raised, the

grower, breeder or raiser. A special definition applies for the purposes

VI. – 3:204.

Property

“Property” means anything which can be owned: it may be movable

or immovable, corporeal or incorporeal.

Proprietary security

A “proprietary security” covers security rights in all kinds of assets,

whether movable or immovable, corporeal or incorporeal. (

IV.G.–

1:101(g))

Proprietary security, contract for

A “contract for proprietary security” is a contract under which a

security provider undertakes to grant a security right to the secured

creditor; or a secured creditor is entitled to retain a security right

when transferring ownership; or a seller, lessor or other supplier of

assets is entitled to retain ownership of the supplied assets in order to

secure its rights to performance. (

IX. – 1:201(4))

Public holiday

A “public holiday” with reference to a member state, or part of a

member state, of the European Union means any day designated as

such for that state or part in a list published in the official journal.

(

I. – 1:110(9))

Definitions Public holiday

563

Ratify

“Ratify” means confirm with legal effect.

Reasonable

What is “reasonable” is to be objectively ascertained, having regard

to the nature and purpose of what is being done, to the circumstances

of the case and to any relevant usages and practices. (

I. – 1:104)

Reciprocal

An obligation is reciprocal in relation to another obligation if (a)

performance of the obligation is due in exchange for performance of

the other obligation; (b) it is an obligation to facilitate or accept

performance of the other obligation; or (c) it is so clearly connected

to the other obligation or its subject matter that performance of the

one can reasonably be regarded as dependent on performance of the

other. (

III. – 1:101(4))

Recklessness

A person is “reckless” if the person knows of an obvious and serious

risk of proceeding in a certain way but nonetheless voluntarily pro-

ceeds without caring whether or not the risk materialises.

Rent

“Rent” is the money or other value which is due in exchange for a

temporary right of use. (

IV. B. – 1:101)

Reparation

“Reparation” means compensation or another appropriate measure

to reinstate the person suffering damage in the position that person

would have been in had the damage not occurred. (

VI. – 6:101)

Representative

A “representative” is a person who has authority to affect the legal

position of another person, the principal, in relation to a third party

by acting in the name of the principal or otherwise in such a way as

to indicate an intention to affect the principal’s legal position di-

rectly. (

II. – 6:102(1))

Ratify Annex

564

Requirement

A “requirement” is something which is needed before a particular

result follows or a particular right can be exercised.

Resolutive

A condition is “resolutive” if it causes a legal relationship or effect to

come to an end when the condition is satisfied. (

III. – 1:106)

Retention of ownership device

There is a retention of ownership device when ownership is retained

by the owner of supplied assets in order to secure a right to perform-

ance of an obligation. (

IX. – 1:103)

Revocation

“Revocation”, means (a) in relation to a juridical act, its recall by a

person or persons having the power to recall it, so that it no longer

has effect and (b) in relation to something conferred or transferred,

its recall, by a person or persons having power to recall it, so that it

comes back or must be returned to the person who conferred it or

transferred it.

Right

“Right”, depending on the context, may mean (a) the correlative of

an obligation or liability (as in “a significant imbalance in the par-

ties’ rights and obligations arising under the contract”); (b) a pro-

prietary right (such as the right of ownership); (c) a personality right

(as in a right to respect for dignity, or a right to liberty and privacy);

(d) a legally conferred power to bring about a particular result (as in

“the right to avoid” a contract); (e) an entitlement to a particular

remedy (as in a right to have performance of a contractual obligation

judicially ordered) or (f) an entitlement to do or not to do something

affecting another person’s legal position without exposure to adverse

consequences ( as in a “right to withhold performance of the reci-

procal obligation”).

Sale, contract for

A contract for the “sale” of goods or other assets is a contract under

which one party, the seller, undertakes to another party, the buyer, to

Definitions Sale, contract for

565

transfer the ownership of the goods or other assets to the buyer, or to

a third person, either immediately on conclusion of the contract or at

some future time, and the buyer undertakes to pay the price. (

IV.A.–

1:202)

Security right in movable asset

A security right in a movable asset is any limited proprietary right in

the asset which entitles the secured creditor to preferential satisfac-

tion of the secured right from the encumbered asset. (

IX.–

1:102(1))

Services, contract for

A contract for services is a contract under which one party, the

service provider, undertakes to supply a service to the other party,

the client. (

IV. C. – 1:101)

Set-off

“Set-off” is the process by which a person may use a right to per-

formance held against another person to extinguish in whole or in

part an obligation owed to that person. (

III. – 6:101)

Signature

“Signature” includes a handwritten signature, an electronic signature

or an advanced electronic signature. (

I. – 1:108(2))

Solidary obligation

An obligation owed by two or more debtors is a “solidary obligation”

when all the debtors are bound to render one and the same perform-

ance and the creditor may require it from any one of them until there

has been full performance. (

III. – 4:102(1))

Solidary right

A right to performance held by two or more creditors is a “solidary

right” when any of the creditors may require full performance from

the debtor and the debtor may render performance to any of the

creditors. (

III. – 4:202(1))

Security right in movable asset Annex

566

Standard terms

“Standard terms” are terms which have been formulated in advance

for several transactions involving different parties, and which have

not been individually negotiated by the parties. (

II. – 1:109)

Storage, contract for

A contract for storage is a contract under which one party, the storer,

undertakes to store a movable or incorporeal thing for another party,

the client. (

IV. C. – 5:101)

Subrogation

“Subrogation”, in relation to rights, is the process by which a person

who has made a payment or other performance to another person

acquires by operation of law that person’s rights against a third per-

son.

Substitution of debtor

“Substitution” of a debtor is the process whereby, with the agreement

of the creditor, a third party is substituted completely or incomple-

tely for the debtor, the contract remaining in force. (

III. – 5:202) See

also “complete substitution of debtor” and “incomplete substitution

of debtor”.

Supply

To “supply” goods or other assets means to make them available to

another person, whether by sale, gift, barter, lease or other means: to

“supply” services means to provide them to another person, whether

or not for a price. Unless otherwise stated, “supply” covers the supply

of goods, other assets and services.

Suspensive

A condition is “suspensive” if it prevents a legal relationship or effect

from coming into existence until the condition is satisfied. (

III.–

1:106)

Tacit prolongation

“Tacit prolongation” is the process whereby, when a contract pro-

vides for continuous or repeated performance of obligations for a

Definitions Tacit prolongation

567

definite period and the obligations continue to be performed by both

parties after that period has expired, the contract becomes a contract

for an indefinite period, unless the circumstances are inconsistent

with the tacit consent of the parties to such prolongation. (

III.–

1:111)

Term

“Term” means any provision, express or implied, of a contract or

other juridical act, of a law, of a court order or of a legally binding

usage or practice: it includes a condition.

Termination

“Termination”, in relation to an existing right, obligation or legal

relationship, means bringing it to an end with prospective effect

except in so far as otherwise provided.

Textual form

In “textual form”, in relation to a statement, means expressed in

alphabetical or other intelligible characters by means of any support

which permits reading, recording of the information contained in

the statement and its reproduction in tangible form. (

I. – 1:107(2))

Transfer of contractual position

“Transfer of contractual position” is the process whereby, with the

agreement of all three parties, a new party replaces an existing party

to a contract, taking over the rights, obligations and entire contrac-

tual position of that party. (

III. – 5:302)

Treatment, contract for

A contract for treatment is a contract under which one party, the

treatment provider, undertakes to provide medical treatment for an-

other party, the patient, or to provide any other service in order to

change the physical or mental condition of a person. (

IV.C.–

8:101)

Trust

A “trust” is a legal relationship in which a trustee is obliged to

administer or dispose of one or more assets (the trust fund) in ac-

Term Annex

568

cordance with the terms governing the relationship (trust terms) to

benefit a beneficiary or advance public benefit purposes. (X. –

1:201)

Trustee

A “trustee” is a person in whom a trust fund becomes or remains

vested when the trust is created or subsequently on or after appoint-

ment and who has the obligation set out in the definition of “trust”

above. (X. – 1:203(2))

Truster

A “truster” is a person who constitutes or intends to constitute a trust

by juridical act. (X. – 1:203(1))

Unjustified enrichment

An “unjustified enrichment” is an enrichment which is not legally

justified.

Valid

“Valid”, in relation to a juridical act or legal relationship, means that

the act or relationship is not void and has not been avoided.

Void

“Void”, in relation to a juridical act or legal relationship, means that

the act or relationship is automatically of no effect from the begin-

ning.

Voidable

“Voidable”, in relation to a juridical act or legal relationship, means

that the act or relationship is subject to a defect which renders it

liable to be avoided and hence rendered retrospectively of no ef-

fect.

Withdraw

A right to “withdraw” from a contract or other juridical act is a right,

exercisable only within a limited period, to terminate the legal re-

lationship arising from the contract or other juridical act, without

having to give any reason for so doing and without incurring any

Definitions Withdraw

569

liability for non-performance of the obligations arising from that

contract or juridical act. (

II. – 5:101 to II. – 5:105)

Withholding performance

“Withholding performance”, as a remedy for non-performance of a

contractual obligation, means that one party to a contract may de-

cline to render due counter-performance until the other party has

tendered performance or has performed. (

III. – 3:401)

Working days

“Working days” means all days other than Saturdays, Sundays and

public holidays. (

I. – 1:110(9)(b))

Writing

In “writing” means in textual form, on paper or another durable

medium and in directly legible characters. (

I. – 1:107(1))

Withholding performance Annex

571

Index

abandonment VI. – 3:208;

VIII. –1:101

ability to pay

III. – 5:112

acceptance Intr. 51;

II. – 4:204-211

assent to an offer,

definite

II. – 4:208

commercial agency

IV.E. – 3:308

conditional

II. – 4:208

conduct

II. – 4:204-205

early performance

III. – 2:103

fixed time

II. – 4:202; II. – 4:205

inactivity

II. – 4:204

late

II. – 4:207

modified

II. – 4:208

personal security

IV.G. – 1:103

silence

II. – 4:204

statement

II. – 4:204

time limit

II. – 4:206

unilateral undertaking

II. – 1:103

accessories

IV.A. – 2:301-302;

IV.B. – 3:102-103;

IX. – 1:201; Annex

security rights

IX. – 2:305;

IX. – 3:105

transferability

VIII. –1:301

accommodation

II. – 5:201;

IV.C. – 5:110

account See also accounting

current account

IV.G. – 1:101;

IV.G. – 1:106

accountability for

damage

VI. –1:101;

VI. – 2:101; VI. – 3:101-104;

VI. – 3:201-208; VI. – 5:102

abandonment

VI. – 3:208

alternative causes

VI. – 4:103

animals, damage

caused by

VI. – 3:203;

VI. – 3:208

children, damage

caused by

VI. – 3:104

contributory fault

VI. – 5:102

emissions

VI. – 3:206

employees, damages

caused by

VI. – 3:201;

VI. – 5:102

immovable,

unsafe state

VI. – 3:202

intention

VI. – 3:101

minors

VI. – 3:103

motor vehicles

VI. – 3:205

negligence

VI. – 3:102

parental care

VI. – 3:104

parents

VI. – 3:104

producer of a product

VI. – 3:204

representatives

VI. – 3:201;

VI. – 5:102

source of danger

VI. – 3:207;

VI. – 4:101

substances, dangerous

VI. – 3:206

supervised persons

VI. – 3:104

572

accountant, independent Index

accountant, independent

IV.E. – 3:204; IV.E. – 3:311

accounting

commercial agency

IV.E. – 3:204;

IV.E. – 3:311

principal

IV.E. – 3:311

accrual

VIII. –1:101

acknowledgement

of receipt

II. – 3:202

ACQP See Acquis Principles

acquis communautaire Intr. 24,

59, 63, 68-69; Princ. 10, 46

Acquis Principles Intr. 57

acquisition, representation for

VIII. – 2:302

acquisition finance

device

IX. – 1:201; Annex

registration

IX. – 3:107

superpriority

IX. – 4:102;

IX. – 4:105

acquisition of

ownership Intr. 2, 37,

43, 53; Princ. 14, 36;

VIII. –1:101

cultural objects

VIII. – 4:102

continuous

possession Princ. 37;

VIII. – 4:101-103;

VIII. – 4:201-206

extrajudicial

enforcement

VIII. –1:101

free of limited

proprietary rights

VIII. – 3:101

free from a prior

security right Princ. 53

good faith acquisition

Princ. 37, 53;

VIII. – 3:101-102

incapacity

VIII. – 4:201

act of assignment

III. – 5:102;

III. – 5:104; III. – 5:112;

III. – 5:114; III. – 5:118; Annex

See also distribution contract

divided obligation

III. – 4:102;

Annex

liability

III. – 4:104

divided right

III. – 4:202-204;

Annex

apportionment

III. – 4:204

dividends

IX. – 2:302

documents

IV.A. – 2:101;

IV.A. – 2:201; IV.C. – 6:106

equivalents to

delivery

VIII. –1:101;

VIII. – 2:105

doing

III. – 1:102

dominant position Princ. 1;

II. – 8:103

donation, contract for

Intr. 2, 18, 54; Princ. 55;

III. – 5:110; IV.H. –1:101;

592

donation, contract for Index

IV.H. – 2:101-104;

X. – 2:401; Annex

avoidance

IV.H. – 2:103

by business

IV.H. – 2:102;

IV.H. – 3:102

change of

circumstances

IV.H. – 4:203

conformity of the

goods

IV.H. – 3:101-103;

IV.H. – 3:202

damages

IV.H. – 3:204-205

data

IV.H. – 1:103

databases

IV.H. – 1:103

delay

IV.-H. – 3:206

electricity

IV.H. – 1:103

electronic

signature

IV.H. – 2:101

enforcement of

performance

IV.H. – 3:202

form

IV.H. – 2:101-102

future goods

IV.H. – 1:102

goods

IV.H. – 1:102;

IV.H. – 3:102

goods to be

manufactured

IV.H. – 1:102

gratuitousness

IV.H. – 1:101;

IV.H. – 1:201-202;

IV.H. – 3:102

immediate

delivery

IV.H. – 2:102;

IV.H. – 3:102

immediate

donation

IV.H. – 1:104

immovable

property

IV.H. – 1:103

immovable property

rights

IV.H. – 1:103

impediment

IV.H. – 3:204

impoverishment of the

donor

IV.H. – 4:201

incorporeal

property

IV.H. – 1:103

industrial property

rights

IV.H. – 1:103

information, contracts

conferring rights

IV.H. – 1:103

ingratitude of the

donee

IV.H. – 4:201

intellectual property

rights

IV.H. – 1:103

intention to

benefit

IV.H. – 1:101;

IV.H. – 1:202-203

investment

securities

IV.H. – 1:103

irrevocability

IV.H. – 4:101

mistake

IV.H. – 2:103

money

IV.H. – 1:103;

IV.H. – 3:206

negotiable

instruments

IV.H. – 1:103

public statement

IV.H. – 2:102

remedies

IV.H. – 3:201; IV.H. – 3:401

restitution

IV.H. – 3:203

revocation

IV.H. – 4:101-104;

IV.H. – 4:201-203

IV.H. – 1:103

software

IV.H. – 1:103

stocks

IV.H. – 1:103

termination

IV.H. – 3:203

third party rights/

claims

IV.H. – 3:103

time limits

IV.H. – 4:104; IV.H. – 4:201

593

Index electronic means

transfer of

ownership

IV.H. – 1:101;

IV.H. – 1:104; IV.H. – 3:101;

IV.H. – 3:301

transferable rights

IV.H. – 1:103

unfair exploitation

IV.H. – 2:104

donee

IV.H. – 1:101

ingratitude

IV.H. – 4:201

obligations

IV.H. – 3:301

predeceasing the

donor

IV.H. – 1:105

donor

IV.H. – 1:101

death

IV.H. – 1:105

impoverishment

IV.H. – 4:202

obligations

IV.H. – 3:101-103

doorstep, contracts

negotiated at the Princ. 20

double mandate

II. – 6:109;

IV.D. – 5:102

Draft Common Frame of

Reference Intr. 1, 6, 74-77

coverage Intr. 34-40, 66, 73;

I. – 1:101

general rules

I. – 1:102

special rules

I. – 1:102

durable medium

I. – 1:106;

II. – 3:106; Annex

duress Princ. 6, 8

duty Intr. 51; Annex

breach Annex “duty”

information

II. – 3:101-109

pre-contractual

II. – 3:101-105

duty to co-operate See co-operation

e-commerce Intr. 67

economic loss Princ. 32, 60;

III. – 3:701; VI. – 2:101; Annex

“loss”

burdens incurred

III. – 3:701;

VI. – 2:101

income

III. – 3:701; VI. – 2:101

injury as such

VI. – 6:204

profit

III. – 3:701; VI. – 2:101

value of property, reduction

III. – 3:701; VI. – 2:101

economic

welfare Intr. 12, 16, 20;

Princ. 58-59, 61

See also distribution contract

exclusive purchasing

contract

IV.E. – 5:101

See also distribution contract

execution, attempted

III. – 7:402

execution creditor

IX. – 4:107

expectations, reasonable

Princ. 17, 19, 25, 35, 37

expenditure

VII. – 5:103; VIII. – 7:104

expenses

III. – 2:110;

Annex “costs”

agent

IV.D. – 2:103;

IV.D. – 7:103

expert

knowledge

IV.C. – 7:103-104

exploitation, unfair

See unfair exploitation

exposure Princ. 32

expropriation

VIII. –1:101

externalities Princ. 3

extinction

III. – 2:114

fair dealing Intr. 13, 27-28;

Princ. 22-23, 25

See also distribution contract

self-contracting

II. – 6:109;

IV.D. – 5:101

consumer

IV.D. – 5:101

self-defence

VI. – 5:202

self-help

VIII. – 6:202

seller

IV.A. – 1:202

barter

IV.A. – 1:203

conformity of goods

IV.A. – 2:101; IV.A. – 4:304

non-business

IV.A. – 4:202

obligations

IV.A. – 2:101

transfer of

ownership

IV.A. – 2:101

specification of

the goods

IV.A. – 3:102

semi-finished products

IX. – 5:203

service provider

IV.C. – 1:101

630

services Index

business IV.C. – 2:101;

IV.C. – 2:105

care

IV.C. – 2:105

duty to warn

IV.C. – 2:102;

IV.C. – 2:108

expenditure

VII. – 5:103

skill

IV.C. – 2:105

standards,

professional

IV.C. – 2:105

services Intr. 54, 61, 68

See also distribution contract

obligations

IV.E. – 5:201-205

supplier of term

II. – 8:103

supply

IV.B. – 4:104;

IV.E. – 4:204; Annex

634

survivorship Index

equivalent II. – 9:410

information,

disclosure of

II. – 3:101

stated prices

II. – 4:201

unsolicited goods/

services

II. – 3:401

survivorship

VIII. –1:101

suspensive condition

III. – 1:106;

Annex “suspensive”

tacit prolongation Intr. 29-30;

III. – 1:111; Annex

lease period

IV.B. – 2:103

tangible durable medium

I. – 1:106

tangible object

VI. – 6:101

tax law Intr. 18

taxes

II. – 3:107

technical drawings

IV.A. – 2:306

telecommunication

operators

II. – 5:201

telephone

II. – 3:104

tenant Princ. 18

tender, new and conforming

III. – 3:202

terminate

III. – 3:501

termination Intr. 51, 53; Princ. 20,

27, 44;

II. – 9:410; III. – 3:501;

III. – 3:509; VII. – 7:101; Annex

agreement

III. –1:108

anticipated non-performance

Princ. 61;

III. – 3:401;

III. – 3:504; III. – 3:508

assignment, retroactive

effect on Intr. 29;

III. – 5:118

assurance of due performance,

inadequate

III. – 3:505;

III. – 3:508

change of

circumstances

III. – 1:110

contractual

obligations

III. – 3:501-505

contractual

relationships

III. – 3:501

delay in performance

III. – 3:503

divisible obligations

III. – 3:506

donation

IV.H. – 3:203

effects

III. – 3:509

extraordinary and

serious reason

IV.D. – 6:103;

IV.D. – 6:105

fundamental non-

performance Princ. 41, 55;

III. – 3:502; III. – 3:504-505

indivisible

obligations

III. – 3:506

loss of right to

terminate

III. – 3:508

mandate

relationship

IV.D. – 1:104;

IV.D. – 6:101-105;

IV.D. – 7:101-103

notice Princ. 20;

III. –1:109;

III. – 3:503; III. – 3:507-508

notices of termination Intr. 51

restitution of

benefits

III. – 3:510-514;

III. – 3:706-707

separate parts, obligations

to be performed in

III. – 3:506

substitute transaction

III. – 3:706

terminology of

the

DCFR Intr. 4, 50, 65

terms Intr. 53; Annex “term”

additional

II. – 4:208; II. – 4:210

contract

II. – 9:101

635

Index trade name

different II. – 4:208; II. – 4:210

implied

II. – 9:101

interpretation

II. – 8:103-106

negotiated

II. – 8:104

not individually

negotiated

II. – 1:110;

II. – 8:103; II. – 9:103;

II. – 9:402-403; Annex

obligation

III. –1:102

right

III. –1:102

standard terms

II. – 1:109

statements,

pre-contractual

II. – 9:102

unfair See unfair contract terms

testaments Princ. 55

variation of trust

terms X. – 9:201

testing

II. – 5:105

textual form

I. – 1:106; Annex

assignment, notice of

III. – 5:119

confirmation of a

contract

II. – 4:210

contract terms

II. – 3:105-106;

II. – 9:103

right to withdraw

II. – 5:104

security,

contract of

IV.G. – 4:104

third parties Intr. 53; Princ. 17-18;

II. – 6:101-102

identity

IV.D. – 3:403

third party

claims Intr. 30;

IV.A. – 2:305

third party rights Intr. 30;

Princ. 4, 56;

II. – 9:301-303;

IV.A. – 2:305

benefits

II. – 9:301-303

defences

II. – 9:302

performance

II. – 9:302

rejection of benefit

II. – 9:303

remedies

II. – 9:302

revocation of benefit

II. – 9:303

rights

II. – 9:301-303

third persons

loss

VI. – 2:202; VI. – 5:501

performance by

III. – 2:107

security rights, effectiveness

as against

IX. – 3:101-309;

IX. – 3:201-204

threats Princ. 42;

II. – 7:101; II. – 7:206

damages

II. – 7:214

disadvantage

VII. – 2:103

remedies

II. – 7:215-216

third persons

II. – 7:208

time

computation

See computation of time

performance

See time of performance

time of performance

Intr. 29;

III. – 2:102

time-limited rights/obligations

Intr. 45;

III. – 1:107

timeshare contract Princ. 11, 20;

II. – 5:202

advance payment

II. – 5:202

withdrawal, right of

II. – 5:202

tools

IV.C. – 2:104;

IV.C. – 3:102; IV.C. – 3:105;

IV.C. – 4:102; IV.C. – 4:104

tort Intr. 48, 69

trade

VI. – 2:207-208; VI. – 3:206

trademark

VI. – 3:204;

Annex “franchise”

trade name

II. – 3:108;

Annex “franchise”

636

trade union Index

trade union VI. – 7:104

traffic accident

VI. – 3:205;

VI. – 5:102

trailer

VI. – 3:205

training courses

IV.E. – 4:203

transfer of contractual position

III. – 5:302; Annex

transfer of goods Princ. 15, 55;

VIII. – 2:101

transferability

VIII. –1:301

transfer of ownership

IV.A. – 1:202; IV.A. – 2:101;

VIII. – 2:101-102

avoidance, effect of

II. – 7:212;

VIII. – 2:202

avoided contract/

juridical act

VIII. – 6:102

barter

IV.A. – 1:203

chain of

transactions

VIII. – 2:303

donation

IV.H. – 1:101; IV.H. – 3:101

effects

VIII. – 2:201-203

immediate

IV.H. – 1:104

indirect

representation

VIII. – 2:302

initial invalidity

VIII. – 2:202

invalid contract/

juridical act

VIII. – 6:102

lease of goods

IV.B. – 1:101

multiple transfers

VIII. – 2:301

ratification

VIII. – 2:102

recovery of goods

VIII. – 6:102

resolutive condition

VIII. – 2:203;

VIII. – 6:102

security purposes

VIII. –1:103;

IX. –1:102

service contract

IV.C. – 2:106

suspensive

condition

VIII. – 2:203

transferee

VIII. – 3:101

transferor

VIII. – 3:101

trust

VIII. – 1:103

unilateral

undertaking

IV.H. – 1:104

unsolicited goods

VIII. – 2:304

transit, goods

sold in

IV.A. – 4:301;

IV.A. – 5:203

transparency

II. – 9:402; II. – 9:407

transport, contracts for

II. – 5:201;

IV.C. – 1:102; IV.C. – 5:101

travel insurance policies

II. – 5:201

traveller’s cheques

II. – 9:410

treating like alike Princ. 40-41, 53

treatment, contract for

Princ. 46;

IV.C. – 1:101;

IV.C. – 8:101; Annex