Article 7.1.1
Concept of non-performance
There is non-performance when a party does not carry out all its contractual obligations in the agreed form, regardless of the cause.
Article 7.1.2
Fundamental non-performance
A non-performance of a contractual obligation is fundamental if:
- strict observance of the obligation which has not been performed is of essence under the contract; or
- the non-performance substantially deprives the other party of what it was entitled to expect under the contract, unless at the time of conclusion of the contract, it has not been foreseen or could not reasonably have been foreseen such result; or
- the non-performance is of a nature that leads the obligee to believe that, in view of the circumstances, it cannot rely on the future performance of the other party.
Article 7.1.3
Remedies for non-performance
1. In case of non-performance, the obligee, without affecting the right to cure by the debtor, may resort to the remedies set out in this Chapter, but may not claim damages if the non-performance is excused under article 7.1.8 of these Principles.
2. The remedies for non-performance may be cumulated if they are not incompatible with each other.
3. The obligee who is exercising its right to performance may change the remedy if it has not obtained satisfaction of its claim.
Article 7.1.4
Withholding performance
1. Where parties must perform their obligations simultaneously, either party may withhold performance until the other party has tendered its performance or has effectively performed its obligations.
2. The party who must perform its obligation at a later time than the other party may withhold performance until the other party has performed its obligations.
3. In any case, either party will be able to cancel the performance of its obligation as soon as it becomes clear that the other party will not perform theirs on the due date.
Article 7.1.5
Cure of non-conforming performance
1. The obligor may cure any non-performance, at its expense, on condition that:
- it notifies the obligee, without undue delay, of the manner and timing of the cure; and
- the cure is appropriate to the circumstances; and
- the obligee has no legitimate interest in refusing the cure; and
- the cure is effected promptly.
2. The obligee may withhold its own performance pending cure.
3. Notwithstanding cure, the obligee retains the right to claim damages for delay and for any harm caused or not prevented by the cure. However, the rights of the obligee that are not compatible with the cure will be suspended from the time of the effective notification of the commitment to cure until the expiry date of the reparation.
4. The notification that a contract has been terminated does not exclude the right of the obligor to cure its non-performance.
Article 7.1.6
Extension of time for performance
1. In the event of non-performance, the obligee may grant the other party, by notice, an extension of time for performance.
2. During the period of extension, the obligee may withhold performance of its own obligations and claim payment for damage but it will not be able to resort to any other remedy for non-performance of its obligations, except in the case where the other party gives notice that it will not perform in the extension period.
3. If the delay in performance is not an essential non-performance, the obligee which has given notice to the other party of the provision of an additional reasonable period for performance may terminate the contract at the end of such period. An unreasonable additional period of performance is considered to be extended to a reasonable time.
4. In any case, on notifying the concession of this extension the obligee may stipulate that the contract will be terminated automatically if the other party does not perform within the agreed period.
Article 7.1.7
Exemption clauses
A clause that limits or excludes one party's liability for non-performance or which allows one party to render performance substantially different from what the other party reasonably expected, may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract and to the circumstances under which the non-performance took place.
Article 7.1.8
Impossibility (Force majeure)
1. A contract party may justify breach of contract when the performance of its obligations becomes impossible due to force majeure reasons.
2. There is force majeure when the aggrieved party proves the existence of an event:
- alien to its responsibility and beyond its reasonable control, and
- whose risk it has not assumed, and
- which could not be reasonably expected or taken into consideration at the moment of the conclusion of the contract, and
- which makes impossible the performance of its obligations.
3. A party that invokes an event which makes performance impossible must give written notice to the other party as soon as possible, providing reliable evidence of that event and taking all reasonable measures to limit the effects on the performance of its contractual obligations. If this notification does not reach the other party in a reasonable period from the time when the invoking party has known or ought to have known of the force majeure event, the other party has the right do damages resulting from the absence or delay in notification.
4. The contract will be deemed to be terminated as from notification, unless the other party declares that it wishes otherwise within a reasonable period. If one of the parties has received a benefit before termination due to acts of performance made by the other party, it must compensate this party by paying a sum of money equivalent to the benefit obtained.
5. When impossibility is temporary, termination of contract will only be possible if the delay in performance significantly deprives one party of its reasonable expectations. In other cases, the party invoking force majeure must perform once the event disappears.
6. When impossibility is partial, termination of contract will only be possible if partial performance significantly deprives one party of its reasonable expectations. In other cases, the party invoking force majeure must perform partially and the obligation of the other party will be proportionally adjusted.
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OHADAC principles on international commercial contracts.pdf
1. Unitary nature of the notion of non-performance
This article defines the concept of non-performance used in these Principles and characterises it according to two essential aspects: its unitary and objective nature. Under this article, there is non-performance in any case of non-performance by a contracting party of any of its main or collateral contractual obligations, where the non-performance is total or merely defective, non-conforming or delayed. This wide notion of non-performance is inspired by the Anglo-American legal tradition, where breach of contract is an all-encompassing category.
In civil law Caribbean systems there is no legal definition of breach or non-performance of the contract; however, case law has inferred it from rules on performance and different forms of non-performance (delay of the obligor, defective performance, etc.) as well as from the rights of the obligee in cases of non-performance (judgment of the Supreme Court of Justice of Colombia, Civil Chamber, of 4 July 2002). However, the special rules on compensation for defects in sale contracts in these systems makes adoption of an all-encompassing notion difficult.
Apart from CISG, which only offers an implicit concept of non-performance in Articles 45 and 46, all other international texts on contract law harmonisation accept an all-encompassing notion of non-performance in the same way as common law. Thus, Articles 7.1.1 UP; 1:301 (4) PECL; III-1:102 (3) DCFR; and 87 CESL embrace, within the notion of non-performance, all cases where a contract party does not adapt its behaviour to the contractual programme, establishing first a general rule and second a list of type of cases of non-performance. The OHADAC Principles share also this encompassing notion but unlike the definitions of uniform texts, do not provide a list of types of non-performance, preferring a general rather than a casuist rule that will be applicable to all kinds of contracts.
The choice of a single concept is not merely theoretical or aesthetic, but is based on its proven efficiency which enables the creation of a framework of remedies that is consistent with respect to contractual liability and is available for all non-performance, regardless of contract type, with the exceptions mentioned in this section (Articles 7.1.3 and 7.1.8 of these Principles).
The total and definitive non-performance of the obligation is the first assumption envisaged in Article 7.1.1.
The second kind of non-performance deals with delayed or out of time performance. Civil law systems consider late performance as a specific institution, because a mere delay does not lead per se to obligor's responsibility, the “constitution in default” or “in mora” being necessary (Article 1.608 of the Colombian Civil Code; Article 1.084 of the Costa Rican Civil Code; Article 295 of the Cuban Civil Code; Article 1.139 Dominican and French Civil Code; Article 1.428 of the Guatemalan Civil Code; Article 1.355 of the Honduran Civil Code; Article 2.080 of the Mexican Civil Code; Article 1.859 of the Nicaraguan Civil Code; Article 985 of the Panamanian Civil Code; Article 1.053 of the Puerto Rican Civil Code; Article 999 of the Saint-Lucian Civil Code; Article 1269 of the Venezuelan Civil Code) only if specific conditions are met: the main ones being formal notice to the obligor to perform its obligation and penalties for delivery.
This rigidity of civil law legal systems is eased, in many cases, by legal and case law exceptions with the simple requirement of formal notice or interpellatio. Some commercial codes also do not provide for the serving of formal notice (e.g. Article 418 of the Costa Rican Commercial Code; Article 677 of the Guatemalan Commercial Code; Article 232 of the Panamanian Commercial Code; Article 94 of the Puerto Rican Commercial Code). This makes it possible to align civil law solutions with those of the common law systems or international solutions in harmonised texts, much closer to international trade requirements. To enable the exercise of the rights and actions available in case of breach of contract, international codification does not provide for a formal act of constitution in default (mora) [Articles 45 to 52 and 61 to 65 CISG; Article 7.1.1 UP; Article 1:301 (4) PECL; Article III-1:102 (3) DCFR].
In line with international texts, under the OHADAC Principles, a delay by the obligor in performing its obligations constitutes a case of non-performance and entails its contractual liability without the need for notification or formal notice for payment.
This kind of non-performance presupposes the possibility of performance and the fact that performance, even delayed, is still satisfactory for the obligee. If the obligation becomes definitively impossible or no longer corresponds to the obligee's interests, the situation is no longer that of a delay, but that of a definitive and complete non-performance as mentioned above, with different legal effects. This will always be the case where non-performance is subject to an essential time period. In this case, this is fundamental non-performance equivalent to fundamental breach in common law systems [judgment of the Supreme Court of Bahamas in Canadian Imperial Bank of Commerce v Owners of MV “New Light” (1997), N. 1217 of 1994 (Carilaw BS 1997 SC 87)].
Thirdly, early performance constitutes non-performance where the established period had been agreed upon in favour of the obligee or of both parties. The OHADAC Principles accept early performance whenever it does not prejudice the obligee or its legitimate interests; in these cases, early performance would constitute a breach of contract (Article 6.1.3).
Fourthly, defective performance is considered to be a breach of contract. This term covers a broad range of assumptions where the obligor's performance does not meet the contract obligations. While civil codes of French and Spanish tradition deal only with lack of identity or integrity of obligations (partial performance governed by Article 6.1.5 of these Principles) and establish a special regime of compensation in sale contracts, the OHADAC Principles follow the line of common law systems and international texts, unifying all cases of defective obligations, whether by quantity, quality or function, and also including aliud pro alio (the delivery of something different from that which was agreed).
Lastly, the lack of cooperation of any party to the contract to achieve full effect also constitutes non-performance. This includes, in a broad sense, non-performance inherent to duties to cooperate, which is particularly significant in some contracts (e.g. construction contracts). In civil law systems of French or Spanish tradition, these cases are known under the generic term of mora credendi and admit two different models of legal treatment. The first model corresponds to legal systems which lack general discipline in the treatment of mora creditoris, but has many fragmented applications of principles on which this doctrine is based (Articles 1.257 to 1.264 of the French and Dominican Civil Code; Article 1.044 of the Haitian Civil Code; Article 1.351 of the Honduran Civil Code; Article 1.130 of the Puerto Rican Civil Code; Article 2.098 of the Mexican Civil Code; Article 2.057 of the Nicaraguan Civil Code). The second model characterises legal systems which have a specific regulation of mora creditoris (Article 252 et seq. of the Cuban Civil Code; Article 1.429 of the Guatemalan Civil Code; Article 695 et seq. of the Honduran Commercial Code; Article 6:58 et seq. of the Dutch and Suriname Civil Code).
For their part, common law systems, because of their single concept of non-performance, do not use the mora creditoris as an autonomous legal institution since the obligee is responsible, in the same way as the obligor, for the breach of contract. However, there are also references to the obligee's duty to cooperate (Section 37.1 English of the Sale of Goods Act; Section 38.1 of the Sale of Goods Act of Bahamas, Montserrat, Antigua and Barbuda, and Trinidad and Tobago; Section 39.1 of the Sale of Goods Act of Belize and Section 37.1 of the Sale of Goods Act of Jamaica), which is the base of the civil law institution of mora credendi [Seubert Excavators Inc v Eucon Corp (1994), 871 P.2d 826, 831 Idaho], and to the very offer of performance and subsequent unjustified refusal by the obligee as a case of breach of contract [Lea v Exelby (1608), 78 English Reports (ER) 1112; Ball v Peake (1660), 82 ER 941].
Equally the Unidroit Principles do not include a rule on mora creditoris, although its effect can be recognised under Article 7.1.2 (interference by the other party), which corresponds with the duty to cooperate envisaged in Articles 1:202 PECL and III-1:104 DCFR.
2. Objective character of the non-performance notion
Aside from its unitary nature, the concept of non-performance in the OHADAC Principles is objective and neutral. Consequently, and in accordance with Article 7.1.8 of these Principles, the breach of the contract is ascertained regardless of the cause for which the obligor has not performed its contractual obligation. This is irrespective of whether or not the breach of contract is justified. Although force majeure renders inoperative certain actions in contract, it constitutes a case of non-performance because the obligee's right has been infringed, even the prejudice was justified.
French and Spanish legal systems do not technically have a subjective notion of non-performance, insofar as only fault is required for a remedy in damages (comment on Article 7.4.1 of these Principles; however, due to the weight of tradition, fault is considered as the central point of breach of contract, and cases of lack of fault are dealt with under risk doctrines (comment on Article 7.3.1 of the OHADAC Principles). On the contrary, objective doctrine is inherent to common law systems, where breach of contract doctrine is construed regardless of obligor's fault, insofar as contract parties are not obliged in respect of a promise for future conduct, but in respect of a given result. This is also the approach in the Dutch and Suriname civil codes.
The objective approach also prevails in harmonised texts. Thus, in Articles 46 and 61 CISG, non-performance is determined regardless of whether there is fault of the contract party in breach of contract or a cause of exoneration of responsibility included in Article 79, which does not entail the absence of contractual liability, but merely the reduction of remedies against breach of contract. Even more clearly, PECL and DCFR define non-performance in Articles 1:301 (4) and III-1:102 (3), respectively, in a neutral way, and set out in Articles 8:108 PECL and III-3:104 DCFR what is known, under a good technical expression, as “excuse due to an impediment”. Thus, they specify that there is non-performance and the obligor is not exonerated, although, since the non-performance is justified, the obligee has no right to specific performance or to damages [Article 8:101 (2) PECL; Article III-3:101 (2) DCFR]. Similar rules are found in UP (Articles 7.1.1 and 7.1.7 on force majeure). Likewise, in Article 87 CESL non-performance is defined as “any failure to perform that obligation, whether or not the failure is excused”, and excuses for non-performance are governed by Article 88 CESL.
Commentary