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Published by the Faculty of Law Haile Sellassie I University Addis Ababa

1973

123598

Copyri�ht by Faculty of Law Haile Sellassie I University

1973

All rights reserved, including tht: right to reproduce this book or portions thereof in any form.

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â&#x20AC;˘

Printed at Con1mercial Printing Press Addis Ababa, Ethiopia

COMMENTARY ON CONTRACTS IN ETIIlOPIA

by Professor Rene David, Faculte de Droit et des Sciences Economi­ ques de Paris, drafter of the prelimin.ary draft of the Ethiopian Civil Code.

•

Submitted to the Imperial Ethiopian Ministry of Justice in Q�t<;>�er and �ovember, 1954, as an explanation and commentary on the Ethi­ opian Civil Code preliminary draft provisions on contracts which were later enacted as Title XII of the Civil Code.

Translated into English and edited by Michael Kind.red, Faculty of Haiie Sellassie I University, Addis Ababa, Ethiopia (1964-1969), The Ohio State University College of Law (1969-1970).

-Law,=

Printed with the perxnission of the Imperial Ethiopian Ministry of Justice.

January, 1970

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TABLE OF CONTENTS

INTRODUCTION

7

CHAPTER I: THE FORMATION OF CONTRACTS

9

SECTION!:

CONSENT I The Elements of Consent Il The Vices of Consent

9 9 20

SECTION Il: OBJECT AND CAUSE

28

SECTION IIl: FORM

33

CHAPTER Il:

THE EFFECT OF CONTRACTS

SECTION!:

THE INTERPRETATIONOF CONTRACTS

36 36

SECTION II: THE PERFORMANCE OF CONTRACTS

39

SECTION ill : VARIATION OF CONTRACTS

51

SECTION IV: NON -PERFORMANCE OF CONTRACTS

56

CHAPTER III: SECTION I:

EXTINCTION OF OBLIGATIONS

77

INVALIDATION AND CANCELLATION OF CONTRACTS â&#x20AC;¢

78

SECTION II: TERMINATION OF CONTRACTS AND REMISSION OF DEBT

82

SECTION III: NOVATION

84

SECTIONIV: SET-OFF

86

SECTION V: MERGER

88

SECTION VI: LIMITATION OF ACTIONS

89

CHAPTER IV: SECTION I:

CONTRACTUAL PROVISIONS

94

TIME PROVISIONS

94

SECTION II: CONDITIONS

96

SECTIONill: ALTERNATIVE OBLIGATIONS

100

SECTION IV: EARNEST

101

SECTION V: PROVISIONS AS TO LIABILITY

102

•

•

•

INTRODUCTION (Articles 167 5-1677)

Article 1676. The Ethiopian Civil Code deals wit11 obligations in two parts. Book IV regulates obligations in general and constructs a general theory of obligations, while Book V treats various rules regulating the principal types of contracts. Additional rules concern­ ing certain specific contracts are found in the Commercial Code.

While this structure of Ethiopian law ressembles that of French law, Ethiopian law differs from French law, and resembles English, American, and Brazilian Jaw in disregarding the autonomy of admini­ strative law in tl1e area of obligations. Article 1676 (1) states that in Ethiopia contracts are regulated by the Civil Code regardless of who the parties are. Except where there are specific exceptions, contracts between the Ethiopian government and private indivjduals are subject to the same rules as contracts between prjvate individuals.

Article 1677. Obligations are created both by the law itself an,d by contracts and other juridical acts of individuals. There is no real opposition between these various sotITces, however, since in a broad sense even the obligatory force of contracts depends on tl1e law, which regulates them a11d ensures their enforcement. Moreover, the law often supplements the agreement of tl1e parties. It defines the con­ tents of the contract a11d provides for various problems that may not be foreseen by the parties at the time of contracting but that may arise subsequently. Fi11ally, since the legislator is charged to do justice, he imposes some contract clauses and certain rules required by equity and the interest of society.

Article 1675. The Title on Co11tracts on Ge11eral (Title Xll) 1 begins with a definition of contract: A contract is an agreement 1.

Editor's note: The commentary presented here deals only with ,vhat later was enacted and promulgated as Title XII of tl1e Ethiopian Civil Code. Other, less detailed explanatory docun1ents were submitted by Professor David with other parts of the preliminary draft and may be published at a later time.

In this translation, article references have bee11 renumbered to correspond with the final numbering in the Civil Code, as enacted. Where noted within we have omitted paragraphs dealing wit11_ p� ovision� of _ the preli�in� ry draft which were deleted by the In1perial Etl11op1an Codificat1on Com1111ss1on or the Imperial Ethiopian Parljament prior to enactment of the Code.

-7-

whereby two or more persons a� between then1selves create, vary or exti11guish obligations of a proprietary 11ature.

The Civil Co de tries to present the rules concer11ing contracts in a sin1ple and rational order. It deals first witl1 tl1e sin1plest case, where the co11tract is between 01:ly one debtor and one creditor and does not contaii1 any unusual pr0Yisio11s.

For t11is situatio11, the Co de provides the rules relative to the forn1ation of contracts (Chapter I), their effects (Cl1apter II), and the cxtinctio11 of obligations (Ch�pter III).

The11 it regulates certai11 special :ontractual provisions (Chapter IV: time provisions, con ditions, alter1ative obligations, ear11est, and pro­ vis_ions as. to liability), the possibiity that a given obligatJon may have several debtors or several credito�s (Chapter V), tl1e position qf th.ird persons in relation to a co11tract (Cl1apter VI: representation, as­ signments of rigl1ts and duties, rigl1ts a11 d obligatjons of the heirs and creditors of the co11tracting parties), and finally proof of the con­ clusion and performa11ce of contracts (Chapter VIn.

. .. . . .

.

. ..

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CHAPTER I: '"fl-IE FORMATION OF CONTRACTS (Articles 1678-1730) Article 1678. The requirements for the exjstence and validity of contracts are enumerated in Article 1678 of the Code. The Sec­ tions of the Chapter then deal with each of these requirements in turn, with the exce'ption of the requirement that the parties be ca.pable of contracting, which is regulated elsewhere in the Code.

SECTION I: CONSENT (Articles 1679-1710) I. The Elements of Consent Article 1679. Article 1679 emphasizes the overrjdi11g in1por­ tance of the parties' consent for the formation of the contract and the definition of its co11tents, but goes further a11d specifies that in order for a contract to exist the parties must intend their agreement to have an obligatory cl1aracter.

In accordance with Article 1679, there is no lega[ly·bi11ding con­ tract in the case of a simulated co11tr,1ct or where declaratio11s are obviously not intended seriously. A similar provisio11 is fou11d i11 the German B.G.B. (Sectio11s 117-118). \Ve will consider later the exte11t to which tlurd perso11s ca11 rely upo11 tl1e appearance creat­ ed by such a simulated co11tract, but between the parties the simulated act is not a co11tract a11d produces 110 effect.

Similarly, two persons mig.ht conclude a real agree-me11t, but want to keep it extra-legal, considering tl1eir undertakings simply as obligations of honour, a11d thtis exclude the possibility for one of the parties to resort to the courts if the other does not perform his obliga­ tions. Here again the agreement is not, under the Civil Code, a con­ tract. The German B.G.B. (Section 145) provides a similar solution.

Illustrations.

1.

A man agrees to give his wife a certain amount of mo11ey each month to co, er household and personal expenses.

1

2.

A father promises lus son a reward if he passes his examina­ tions.

3.

A perso11 promises a friend or a 11eighbour that he will do something for l1im.

4.

•

A clause is expressly included in a written agreement, stating that the agreen1ent cannot give rise to any cou.rt

-9-

•

actio11 and that its sole function is to specify bow the two parties intend to act toward eacl1 other.

In none of these four cases is there a contract.

Article I 680 .- According to Article 1680, the declarations of the parties are considered i11 order to discover if they have reached an agreement.

In general, one does not try to discover what o�e �f the parties _ internally desired; the external manifestations of bis 1ntent1on are what are legally sig11ificant. Only sucl1 external signs are considered in order to determine wl1ether or not a contract has been formed.

Tl1ere are, howeve1·, some exceptions to this principle with respect to vices (or defects) of consent a11d the i11terpretation of contracts.

Illustrations.

I.

2.

A undertakes to do son1e work· for B '',vitbin six months from the conclusion of the contract.'' A thi1iks, in using this forrnula, that it means ''within six months from the day work is begun.'' Tl1erefore, he actually never in­ tended tl1� san1e tl1i11g as B. Nevertheless, a contract exists, since A's declaration of intention accords with B's. Tl1e internal intention of A is irrelevant to the for111ation of tl1e contract. .

A offers to buy B's automobile from him, and B accepts l1is offer. A has freque11tly seen B driving C's automobile, and thinks that the automobile he is buying is the one be l1as seen B driviag. Still, a contract for the purchase of B's car has been formed, since the declarations of A and B indicate agreen1e11t.

Article 1681. The intention to conclude a co11tract can be shown orally or i11 writi11g, but it can also be shown by any other unequiv­ ocal sign or conduct. This rule, set fortl1 by Article 1681 (1), can, of course, be set aside by another express legal provision, and tl1e law requires tl1e use of particular forn1s for the conclusion of some contracts as a condition of validity. Sin1ilarly, the offerer himself, when he makes his offer, can require that the acceptance of the offer ·be n1ade, or communicated to hi1n, in a p�1rticular way. Aside from these t\vo possibilities, tl1e Code only requires that th.e intention to co11tract be unequivocal. lliustrations.

1.

A v.1rites to B to order certain goods. B sends the goods.

A co11tract is formed. It makes no difference whether - 10-

•

or not B writes A and tells rum that he is accepting the offer and is sendin,g the goods.

2.

•

A orders goods from B and specifies that the contract will be concluded only if the goods are delivered to him in a particular place before a particular date. The letter by which B states that he accepts this offer will not be a valid acceptance; the goods must be delivered on time before the contract will exist.

Articles 1682-1686. In general, the silence of a person who has received an offer is insufficient as an acceptance of the o.ffe.r. The response that the offeree intends to n1ake is uncertain as long as he is silent, and that equivocal behaviour cannot be interpreted as a tacit acceptance. One must take care, however, not to co11fu.se silence, which is not sufficient to constitute acceptance, with outward con­ duct other than speech that can amount to a tacit accepta11ce. An offer might be accepted, for instance, where the offeree performs the contract without any reservation.

Articles 1683 and 1684 provide two exceptions to the general rule that silence is not acceptance. Article 1683 deals with persons who are required, by the law or according to the terms of a conces­ sion granted them by the government, to conclude certain contracts witl1 anyone who makes them a11 offer. Since the law or concession requires the offeree to accept the offer, there is no difficulty in decid­ ing that silence, i11 such a case, amounts to acceptance. The moment at which the co.ntract is formed is specified in Article 1683 (2). A.rti­ cle 1683 will be applicable, in particular, to enterprises which are en­ trusted with the management of a public service or the provision of supplies that are necessary to the life of a community. Article 1683 is an innovation by the Ethiopian Civil Code, inspired by the Anglo­ American notion of ''public utility." ''Imposed contracts'' are so common in all countries these days that it seemed necessary to deal with them in the Code.

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Article 1684 provides a second exception to the general rule that silence does not constitute acceptance. This concerns contracting parties who have on-going business relations and have already con­ cluded a contract. They exchange corresponde11ce and one of them proposes to the other the renewal of an expired contract, the modi­ fication of an existing contract, or the conclusion of a second contract supplementing the first. He states that if be does not receive a re­ sponse within a particular period of tjme, be \Vill consider that his pro­ position has been accepted. In such a case, the courts are to inter­ pret the silence of the offeree as a tacit acceptance.

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T11e condjtions in whicl1 Article 1684 is applicable are limited.

It is required tl1at: (1) the parties have concluded a prior contract; (2) one of then1 propose tl1e renewal or n1odificatio11 of the contract or the co11clusion of a supple1nentary contract; (3) tl1at on� state t�at if he does 11ot receive a rejectio11 withi11 a certain period of time, which must be a reasonable period, tl1e offer will be considered accepted; and (4) tliis offer and declaration be made in a special docu1nent.

Th.e last of tl1ese require1nents is not satisfied i11 the case, frequent in practice, where the seller who l1as delivered the goods sends to the buyer an invoice and i11serts in the i11voice clauses on which the par­ ties had not agreed (e.g. arbitration clauses, clauses attributing ju�is­ diction to a particular court, exclusion of liability clauses). Unlike the Lebanese Code of Obligatio11s (Article 180), Article 1685 of the Ethiopian Code states expressly tl1at sucl1 clauses a.re ineffective. This inefficacity will result even if tl1e invoice states that in the absence of protest by the bt1)1er \1/itl1in a certain time limit, tl1e clauses of the in­ voice will be considered accepted. The Code requires that such a staten1ent be 1nade i11 a separate docurne11t, drafted for this purpose.

Tl1e staten1ent in tl1e i11voice alone does not alert tl1e buyer adequately and is co11sidered i11sufficient.

In any case, l1owever, a perso11 who receives an offer tl1at he does not wa11t to accept is well-advised to reject it expressly, especially if he l1as had on-goi11g business deali11gs with the offeror. He must fear that if he sin1ply keeps sile11t tl1e courts will i11terpret tb.e clause inserted by the other party in tl1e invoice not as a unilateral proposal to modify ilie contract but rather as tl1e expression i11 \vriting of the agreement reacl1ed by tl1e parties. It will ofte11 be difficult for a person who has not protested to assert ]ater that the agreement reached did not include the clause inserted in tl1e invoice by tl1e other party and then relied upo11 by him.

Article 1686 of tl1e Code deals witl1 the related problem of general �ern1s of busi11ess appljed by a co11tracti11g rarty. The ru.le adopted 1s the same as for tl1e clauses i11serted i11 invoices: general terms of business ordinarily applied by one of tl1e parties do not obligate the ?tl1er �arty unless he k11e\v of a11d agreed to tl1em. An exception 1s provided, however, for the case where tl1e general tern1s of business �ere prescribed or approved by a gover11n1e11tal authority, as is some­ tlffies_ the case �or aru:m1ustr::1tive bodies tl1emselves or for large en­ terprises of _part1cular unporta11ce to the natio11al eco11omy (insurance, transportat1011, etc.). Ge11eral tern1s of business applied by such a person will always be ob]igatory.

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ruustrations.

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A merchant sends goods to someone who did not order them and later claims the price of the go0ds. The silence• of the person who received the goods does not constitute acceptance. He d .oes not owe the price.

2.

A subscribes to a periodical for a year. At the end of the year, the distributor of the periodical continues to send it although A has not renewed his subscription, and also writes to A that he will renew A's subscription if A Ciloes not inform him 11ot to. The price for the subscription is due if the subscriber does not declare the subscription terminated within a reasonable time. Here the silence consitutes consent, since the parties had h.ad earlier busi­ ness relations and the only question was one of renew­ ing an earlier contract.

3.

A buys some beams from B for b·uilding construction.

B sends A a bill, which states: ''The seller shall not be liable for any defects in the n1aterials deliv·ered.'' This clause had' never been considered during negotiations for the contract. The buyer accepts the bill without pro­ test. The clause writte11 on the bill does not obligate him.

4.

A sends goods by rail. The railroad applies a fixed sche­ dule of rates and conditions, which includes the price of transport, the transit time allowed, clauses limiting their liability, etc. This schedule bas been approved by tb.e governm�nt. The general conditions tl1at the railroad applies are auton · 1atically incorporated i11 the contract; they bind the sender of tl1e goods, even if he was not fami­ liar with tl1em and l1ad not approved them.

Articles 1687-1688. Articles 1687 and 1688 of the Code specify three situations in which there is no contractual offer, in the legal sense. There is only a non-binding declaration of intention, where a person simply indicates that he plans to do son1ething or that be d·esires to receive offers.

Article 1687 (a) adopts and clarifies a rule �f the Moroccan Code _ of Obligations (Article 14), which provides that ''a mere pro011se creates no obligations.'' In order for an obligation to result from a, de· claration of intention, the declaration n1ust be communicated to the person for whom it is intended (Co111pare Indian Contract Act, Sections 3-6). This rule is absolute with respect to offers, but for ac­ ceptances the rules are more :flexible. A ''communication'' is only

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11ecessary if the offeror has expressly required it. Article 1681 (2).

Otherwise, the judge 1nust deterniine wl1ether or not it is necessary, in the circumstances of the case, to require tl1at the offer.ee com.mn­ n.jcate. his acceptance to t11e offeror.

Article 1687 (b) specifies that when a person sends out market prices, price lists, or catalogs, be is only i11viting others to make him offers and is not maki11g an offer lti1nself. This provision is similar to Article 7 of the Swiss Code of Obligations. When the person who receives the catalog or price list se11ds hiin a11 order, he can accept •or reject this offer. Until he does so, the other person cannot require him to deliver the goods ordered. Contrary to tl1e Swiss Code , the Ethiopian Code extends this rule to the case where a 1nerchant dis­ plays goods in a store windo,v \vith an indication of their price.

Article 1688, finally, settle-s a difficulty that has arisen in various countries. When a person announces that he is putting up for auc­ tion something that he owns, he only makes an i11vitation for offers, and .not a true offer in tl1e legal sense of the ter1n. Tl1e offer is made when someone bids on the item. The acceptance comes when the auctioneer says ''Sold!'' i11 respo11se to such an offer.

Illustrations.

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4.

A declares to so1neone tl1at he intends to give $100, 000 to the Red Cross. The Red Cross can11ot require. him to keep this promise i.f they find out about it. The offer can be accepted only after it is communicated to the Red Cross by A. A tra11sportation company posts its time and rate schedule for buses. A can11ot require the departure of a bus that has bee11 annou11ced i11 this way. The posting by the company is a sin1ple declaratio11 of i11tention. A is in­ vited to offer himself as a passenger, but no contract is formed until the compa11y accepts his offer.

A displays his wares in a window with price tags. This is a simple invitation to the public to e11ter the store. If B is attracted by this display a11d comes into the store and. says that be v.1ants to buy son1ething from tl1e window' A can still 'refuse B's offer to buy.

A a�nounces that llis house is to be sold at public auction.

B bids $5000 and no 011e overbids l1im, but A refuses to sell B the house at tltls price. There is no contract. '

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Note: In ill�strations 2, 3, and 4, A n1ay be liable to pay dama­

ges, if the announce1nent made by bin1 caused. B to in- 14-

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. : .-.·.:·· � : .. : cur expenses. All that is decided by Artieles• lo8-1 and .. · ·1688· is that there is. 110 contract in such a case. .. ,. · -::�, .. .. .

Article 1689. A person is n6t bound by his promises as long as they have not been communicated to the person who is to receive them. This rule, stated in A.rticle 1687 (a) of the Code, does not apply t� public .. promises · of reward .. When a person states his in­ tention. to rewatd· wh0ever does some particular thing and makes tpis intent.io�: public by using a 1neans of publicity such as posters, new s- paper advertisemenits, or radio or televisioo. announcements, he . is .b,o.u11d. b.y his offer for the period specified in Articles 1690 and 1691 of the Code. · _ A simple oral declaration, however, even if made ��fo�� -� .f�irly large group of people, is r1;ot sufficient to constitute � ·· pli�li� _. pj"o�nise_ if a '. 'means of publicity'' is not_ ased. . · Arti�le 1689 specifies that any person ·who does the act for which the. �ewa.rd. was publicly offered has a right to receive the reward, e¥el;l .if .be· did fio.t know it had been offered . '

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·· ···· Tne:Cod�· does not regulate in detail the relations between the parties where severat·persons do the act fo·r which the reward wa.s o;fferecl� . It "4,1ill.be for the judges to decide in such cases if the who.le rewa: rd should g0 to one person or if it should be divided among them;..aucl. to determine the bases and proportions of the division if there . . .is•. to. be a division.

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lliustrations.

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.A· .sports association establishes a prize of $500 for the .. . .. : · ,. winner of a competition or for anyone who performs a ·particular feat. The newspaper · of the association pub­ .. . .. . .. .... . ... lishes the pr9mise. · B wins the com.p.etition or does the ... .' .. .... ·. feat. · He ca11 require that the prize be paid to him. .

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· A, a manufacturer of drug products, promises to pay · · · $1000 ·to anyone who, after using one of its prqducts for . . .. . · days according to instructio11s, 15 contracts a particular . . .... .. ; : -· · · · · disease. The promise is. made public by the newspaper . and, to guarantee its seriousness, A states that he has :i'. • .. deposited· $1000 in a special bank account. B, having :-.. - . followep the instructions perfectly, catches the disease.

He.has.a right to th� $1000 promised by A. =: ·. :.. .. ..

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· ·Article · I 6�0. Article 1690 of the Code adopts a rule that 1s found in all recent codes. An offer with a fixed time limit for accep­ tance cannot be revoked by the offeror. By interpretation of the will-of :the· <?fferor -and to: temper· his obligation, Article I 690 (2) ad­ mits that : jn this case the aeceptance must be communicated to the J

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and no t simply sent before the expiration· of the ti1ne limit.

The time and place of conclusion of tl1e co ntract, ho wever, will still b · e decided according to Article 1692 of the Code. o ffero r

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illustrations.

I.

2.

A o ffers to sell B his house fo r $5000, o ffer to be goo d until May 15: B accepts this o ffer by a letter that is put . in A's p ostal box on May 14 A does no t go to pick up his mail at· the po st office until May 16.

He can not claim that· B's acceptance is late. B's letter was . not read until M·ay 16, but it arrivecl May 14.

In the same :�ituation, B writes o n May 5 to say that the price propo sed is too high. Then, he c4anges l1is mind and, in a letter written May 10, which comes to A before May 15, accepts A's o ffer. No contract is f ormed; A's o ffer lapsed ·when B rejected it on May 5.

B's letter of acceptance of ?v1ay 10 is only a new offer (see Article 1694). A c�n accept or reject that offer.

Article 1691. No rule of the sa111e precisio.n can be formulat­ ed for an o ffer without a fixed time limit for acceptance. The prin­ ciple adopted is that the o ffer must be kept open for a reasonable period of time. Tl1e le1_1gth of this perio d will depend on the circum­ stances of the case: -� kind of business, \Vl1ether o r not the offeree • is a businessman, etc.

The interpretation of the words ''reason able time'' may create difficulties. H opefully, .. most of these difficulties will be eliminated

by Article 1691 (2): If the offerer feels that the acceptance was not made within a reasonable perio d of time, he must declare this to the accepto r immediately. Therefore, the question of whether o r not the acceptance was 1nade within a reasonable time will only arise if the offerer, hav1ng received the acceptance, immediately de­ clares that it is late, aefd if the acceptor, when so informed, do es no t accept this position and· \ pro tests that his acceptance was timely and insists that the contr_act be perf ormed.

To determine whether or no t the acceptance was timely, judoes n1ust consider, among: 9ther things, the way in ,vhicl1 the offer ;as sent to the offeree. The offerer has the rigl1t to assume that his offer will be transmitted to the offeree in the time normally required.

IDustratioos.

1.

A writes �o B, i � th� same co untry, offering him some goods at a certain price. His letter is dated January- .1, l

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......-. .. ... ....... ... . . . .... . .. . ..

.t,ut. is d�1ayed as: a result of truly exceptional citcum­ .. stances and only reaches B on April 1. B immediately accepts the offer by a letter of April 3. A receives B's letter on April 5. ·. He sends a telegram immediately say­ ing that the acceptance is late. No contract is formed in th.es.e circumstances.

1.

In the same situation, B does not write to A that A's acceptance is late until April 10. His declaration was not sent immediately, so A and B have made a contract.

..,.) .

A talks to B on the telephone and makes him an offer.

B does not answer immediately, but sends A a letter of acceptance one hour after the end of their telephone con­ versation. No contract is made. A's offer to B over the telephone is equivalent to an offer be· tween present persons and must therefore be accepted immediately before A and B separate, that is to say, before they end thejr telep·ho11e conversation. The offer has not been accepted withi11 a ''reasonable time.''

Article 1692. In this Article, the Code had to choose, for con­ tracts between separated perso11s, between the tl1eory of en1ission and-.the theory of receptio11, each of which has been adopted by some modem ·legal systems. It chooses the theory of emjssion, as do English, A.Inerican, Swiss, a11d Lebanese law. The contract ·between separated persons is deemed to be concluded at the time and place where the accepta11ce is se11t.

Regarding this, it is only necessary to recall Article 1690 (2).

The theory of emission is acc�pted only in principle and the offerer may avoid its application. In particular, when an offer is made \vith a fixed time limit for accepta11ce, it is decided, by interpreta­ tion of the will of the offeror, that the acceptance must come to his attention within the time thus fixed. It is not sufficient that it has been sent within this time.

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Article 1692 may solve some difficulties. It does not, and canr­ not, solve them all. It will be very difficult to fix the place where the contract was concluded if it is the outcome of prologned negotia­ tions, so that it is not clear what is the offer and what is the accep­ tance. It would have been futile to try to solve these difficulties. Only the parties can resolve them satisfactorily, by stating in their con­ tract precisely -when and where the contract was concluded. In the absence of such declarations, the courts will have to decide doubt­ ful cases, taking into consideration all the circt1mstances of the case.

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Article 1692 (2) deals with contracts made · over the telephone and does so on a purely factual basis. 011e simply a:5ks which of tl1e parties called the otl1er for the conversation during which the contract was concluded. Tl1e co11tract is deemed. to have been con­ cluded at tl1e domicile of the person called. 2 Article 1693. Carried to its logical conclusion, tl1e theory of emission would require that botl1 the offer and the acceptance pro­ duce tl1eir full effects from the moment they are sent. For practic�l reasons, Article 1693 avoias these logical co11sequences in some circum­ stances, as do a great ·nu111ber of legal systems. The offeror can revoke his offer if the offeree knows of tl1e revocation before or at the same time he knows of the offer. Similarly, the acceptance can be revoked if tl1e revocation reacl1es the offeror before or at the sa.me time that he learns tl1at his offer has been accepted; the offeror can­ not validly argue that the co11tract was irrevocably concluded the minute the acceptance was sent. illustrations.

l.

A writes to B and offers _to sell l1im his house for $5000.

After he mails the letter, son1eo11e else offers him $6000 for the house. A sends a messenger to B, or sends him a telegram, or telephones him, and says that he revokes his offer before B receives tl1e letter containing the offer: The revocation of the offer is valid.

2.

A writes B a11d offers to sell hin1 a house for $5000. B writes to A on Ja11uary 10 to accept his offer, but then cha �ges �is mi11d and writes a letter on January 15 re­ vok1�1g his acceptance : B establishes that A did not go to his postal box until January 18 and that lie received the two lette�s simultaneously, altl1ough one of the letters was put in t�e postal box before the other. B's accep­ tance is validly revoked.

A�ticle 1694. �n acceptance which goes beyond the offer or . . w�1cl� 111cludes restr1ct1ons or n1odifications to the offer is in fa�t a reJect1on of the offer accompanied by a new offer (B.G.B ' sec t·lOD : .

150).

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Editor's note: Article 1692 (2) simply speaks of ''tl1e place where the · Mt'"' was called.'' Professor David's reference to ''domicile'' seems •to b . P t·y e a s 1p of the pen.

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. mustrations. l.

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A offers to sell B his house for $5,000 and states that the offer will be good until May 15. On May 1, B answers that he accepts this offer, but that he will pay $3000 cash at the time of the sale and the remaining $2000 three months later. B's answer does not amou.nt to an accep­ tance, since it does not agree with the terms of the offer, which did not include any delayed payment. The con­ tract is not completed. .

2.

A offers to sell B his house for $5000; the acceptance is to reach A before May 15. B accepts the offer, but his acceptance does not reach A until May 16. No con­ tract is formed, but the late acceptance consitutes a new offer from B, which A can accept witllin a reasonable time.

1695. The conclusion of a contract requires a perfect .

Article concordance between the dec.larations of intention of the two parties.

Neither of them can claim that a contract exists and require its per­ formance as long as a disagreement continues to exist, even on a point of secondary importance.

It frequently happens in practice, however, that the parties agree to begin performance of the contract before they b.ave reached com­ plete agreement on its tern1s. The essential questions have been settled and the parties think that they will reach agreement on all the outstanding issues.

Also, it often happens that· the agreement between th.e parties turns out to be incomplete. They have indeed reached agreement on what they have discussed, but questions arise that had not been for�seen by them.

Article 1695 (2) deals with these two situations. Its provisions are patteFned on the · German Civil Code (B.G.B., Sections 154-155).

� . Illustrations .

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The parties carry on negotiations concerning a contract . for the delivery of goods and finally declare in writing that they are in agreement on the frequency of de1iverie.s, the quantities to be delivered, and the price of the goods.

There still is, however, an obvious disagreement concern­ ing the conditions in which the buyer can claim compensa. tion . for inferior quality of goods delivered. The contract is not complete, even though a document has been accept-19-

ed that states the agree1nent of tl1e parties on the ques­ tio11s that might seem most important.

2.

The parties, in the same sit�ation, agree to begin tl1e per­ formance of tl1eir contract without waiting until they reach an agreement on the points that they f!re still dis­ cussi11g. In tl1is case, a contract l1 as been formed. Tl1e conditions under wl1ich the buyer ca11 claim compensa­ tion for insufficie11t quality of tl1e goods received by him will be established, i11 the absence of agre�Alent between the parties on this poi11t, on the basis of the suppletory · .· Code articles dealing with the problem.

II. The Vices of Consent Article 1696. Article I 696 sin1ply introduces tl1e . articles that follow, enumerating the defects that can ,,itiate the con·sent of tl1e parties and permit then1 to request the invalidation of tl1e contract. . , These causes are n1istake, deceit, a11d duress......3 The vices of consent listed i11 Article 1696 of the Code are those fa111ilar to all continental legal systems, with some va.riatio11s inter:.

11ally. 011 the otl1er ha11d, tl1e draft is siruilar i11 various respects to tl1e Anglo-American system, in particular ir1 its Articles 1705 and 1709 (2).

Articles 1697-1701. Tl1e require1nents that must be satisfied i11 order for a person wl10 bas com.mitted a :mistake in connectio11. with a declaratio11 of inte11tion to be able to require tl1e invalidation of the declaratio11 are set fortl1 in Articles 1697-1701 of the. Code .

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Article I 697 states the first requireme11t, wluch is a subje_c;tive one. The person involci11g mistake must prove that he would not have given his consent to the contract if l1e bad k11owr1 the truth.

But, for 1uistake to be invoked it is 11ot e11ough that it ·be deter.:. minative for the person \vl1ose consent is vitiated. To tl1is s11bjec­ tive element 011e must add an objective eleme11t: The mistake.

1nust relate to a circumstance that, i11 tl1e particuJar case� was witlun the scope of the contract. 1-11is happe11s in t\vo cases. A's mistake may relate to somethi11g whicl1 ordinarily see1ns to be esseritial in the type of contract in question.: Tl1e identity or price· of the object sold or leased; the ide11tity or special qt1alifications of tl1 e other part)' .

3.

�ditor's 11ote: A sente11ce on1itted by tl1is tra11slation ind.icates that a separate 1ntrodt1ctory �entence was co11ta.ined in the prelin1inary ·draft for Articles 1708- .! 710: tl11s sentence was evidently cleletecl, as superfluous, at a later stage 1n the codification process. . . . . • .. . , . .·. . · -·.

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in a contract concluded i11tuitu personae; nature of the contract; etc.

Or, it may relate to a point which has a special importance for one contracting party and has been tacitly acceptecl by the other party as an element of the contract. A would no doubt be well advised to _ make a fact that is of detennining importance for him a condition of the contract or to request a formal guarantee from B on this point.

Nevertheless, if A has not done this, the law protects him and pern�its him to rely upon the principies of good faith to free himself from the contract that he has co11cluded because of the mistake.

Article 1698 of the Code expresses this second requirement, essential if mistake is to be invoked, in a general formula borrowed from Article 15, paragraph I, of the proposed joint Fran.co-Italian Code of Obligations. Articles 1699-1701 deal with some categories of errors, in order to avoid discussion in these cases on the question of whether or not the mistake relates to a fundame:ntal element of the contract.

The mistake must have been decisive for the person that invokes it. In addition, it must relate to an element that falls within the scope of the contract. These two requirements must be satisfied in order for a person to be able to invalidate a declaration of inten­ tion on tl1e ground of n1istake. These two requirements are neces­ sary and also sufficient. Unlike some legal systems, the preliminary draft makes no distinction between excusable and inexcusable mistake, nor between mistake of law and mistake of fact. Nor is any distinc­ tion made between mutual and unilateral mistake, nor between mistakes resulting from .misrepresentation and those made for some other reason. Once the mistake satisfies the two requirements set forth above, the mistaken person can always have the court invali­ date his declaration of intention, as well as the contract that results from it. Nevertheless, the fact that the mistake is not excusable is not without consequence, since it can lead to the subsequent liability of the person who invokes it (See Article 1703). Simila.rly, it is im­ portant to know whether the mistake is unilateral or shared where this may affect whether or not the mistake relates to an element of the contract that was within the scope of the contract (See illu.stra­ tion number 7 below). For the case where the mistake has been caused by a misrepresentation of the other part)', see Article 1702 below.

Illustrations.

1. . .

A thinks he is signing a petition in favour of a charity when in fact he is signing a promise to contribute annual­ ly to the charity. This is mistake concernin.g the nature of the contract and A can have the contract invalidated.

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· 2. ._ . ... A buys·· a ·· ·tractor fro1n B and·· signs .·a· co11tract ·for '" thi s purchase. .. I-Ie discovers later ..th�t the · sale price:· .; wa s , . stipulated in U.S. dollars, although he l1ad. 'assunied:::fuat the price was stated in Etl1iopian dollars.: Th�- - perfor­ mance that he has undertaken to ma ke is s·ubst. a11tiall.. y: :: � al1d 111v the t ues req can He ed.

-greater than he intend . ' .· · · · : · ·· .. tion of the contract. . ..

3. · - A· _buys ·froµ1 B some Ia11;d, subject to _ a �s1:1fr1:1ct in; _c: Unknown to eitl-ier A or B; C had died befott� the·con: trac. t was. made. . B c an request. tl1e. invalidati�� -�f the .. . . . . . - .. . .. . . . co11tract. . ..

- .. . . . . . .A hires :B .as ·ms accountant for one·. year: . I:.Je ddes·. :ticii 4. know that B ·had previously· beert convicted ·. of·_ breach .. of trust. A's ntistake relates to a personal··quali.ty of.the other party whicl1 in· this case · should be· co11sidere·d. fun..: · r ·.; . ··:,- · damental. A can get ou. t of the co11tract.

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If B,, -_ in tl1e.precedjng case, . had bee_n _. convicte�. of- neg­ lige�t homicide or of assault, the result \Voul_d. be.. different.

A's ig11ora11ce of tl1is fact does 11ot relate to . ": fun�':1- � me11tal p_ersonal quality of accou11tants. A.. canno ,t... have , . tl1e c.ontract invalidated on tl1e basis of .tl1is mistake. .. . ._,

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A buys a house from B because be thinks liis son�is·-g? .iiig to be married and l1e wants to find b.im· a place.. to · 1· iv·e: Even· if tl1e ·marriage does · 11ot take place;· tl1e con:iract will remain valid. A's mistake only relates to tl1e motive . · · . . : -� ·· ... :.·. tl1e contract. that caused him . to enter i11to . . . .A buys a picture fro�l �' thi11king tha� 'it is' th�: ��oik: qf .partic_ular grea�t artis�. In fact the painti11g is · .oniy: ..a copy. A �a11 have tl1e contract_ invalidated .if ·his belief tba� tb�s was tl1e wo�k of a . great a r. tist was shared qy the ·otl1er .party. In. sucl1 a case, . this cl1arac. teristi. c of. tl1e :painting has· b�co111e, in t/1e, e;,es of. t/1e pctrties·,. a·.fup.da� · ....�., · ·· · · me11tal elen1e11t of the contract. Article 1696. .. .._ . .. ..... .. .... . ..

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If B, on _the other hand, had 11ot con·sidered tlie paintirig l1e was selling to be ·a painting of ·a -n1aster; b·ecause,·--fo1� example, l1e did 11ot know of the· fa111e ·of tl1e· persori· whose signature ,vas on tl1e pai11ting, A's n1istake is 011ly n1istake on the n1otives that caused bi1n to 111ake -tl1e·; contract . .A _ cqul_d 11qt ��ly_ on it.to. have the;. contract _ i11validated.

Artic le 1701 (1). _ · .·. . . .

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A buys one hundred .typewritets of a pa·rtitular kind from B at a price of $100 pet machine.··· In :the : contract this -22-

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,�ri�e ?�� �acliihe i� sta��d1, b1:tt- the total is st�ed a& $8,000. .

Th1s- 1� ;a. s1mp>l_e· ,ar11lb:m1etical mjs·take. . Jt. :is elea.F- thal -the · ·•. .

- on·_ tJje basis ofa ·'priee was: : ��e� - pricie per maefrine: One : . . ' . sho�ld s1mply . eorrect t' he·- •t@tal priG·e • in the· cdntraci.

• Art1Gle 17' 01 · (2). . . . . .. .

A tJfers f to S©ll P. a ce11atn quant:ity of good& for $6,000 9. and B _accepts the offer.. The figure of $6,.000 in the offer • �a�, d�e t? a slip of tl�e--pen of the · offeror, who actually 1nte11d_ed to· ask $16, 000" ·.for his goods. This mistake pern 1its A to ·obtai11. the l11va licl. a tion of the cont ract. . . . ' ' .. ' . ,. .. . . . . : 1 Q. , A ·miscalc1:1lates tl1e •cost-of· production of his eooos alitd for this reaso11 states the price as $6,000 instead ;f $16.,000.

His n1istake does 11ot give him the right to request the i11validation or correctjon of the contract. This is neither .. · ·.· . the. .kind, 9f .m}�t�!<e qealt \�it.ti. in Article 1699(b) (i\ will · receiye. the amount i11 mtri'a . at the time that that l1e' . ]1ad ,.. ,,. . he de¢J.ared hi� i _11tention), · nor the arithmetical mistake • dealt with · i� j\rtt�Ie _1701 (2) (wl1ich deals ,vith tbe mis­ . itself not before the coo· · take committed. in the contract . . tract): · �t is a si'm_p1e 1nistake c·oncerning A's motives a11d is \Vithout .:efl'.ect. Artie!� 1701 (1). ·:::_

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Article I 702: The. pe1·s·9u· · who makes a m . istake cannot invoke in a11d faith, :good to co11trary · It _in remains particular, man11eia · . ' . . bound· by the contra·ct that l1e i11tended to make if the other party declares lus willingt1ess ·to· perfo·rn1 tl1at contract. T11is provision rs e§lrr�wed fro111- tire _Swiss . '(Ait- ic)e 25) and- Egyptia.n (Article 1 24) Cod�s; a�1d is also fol1od in the Code.s of - It3:ly (Article 1432) and Gr�ece. (Artiole J4· 4 ).·. .. ·· '

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• . . .. . . . • A owns t,vo l1ouses a11d re11ts the first of them to B for a cer. t'1;in ren�, �J;iinkiJ1g �h�t .4� is renting .tl1e seconp �ouse. He on the basis of his t ac ntr co e �11 of n tio a d_ �li inv e . th s est qu _r¢ · · _ . _ :. : nd co e se th ct, ra nt co e th in e; ut tit bs su to rs · e f of B e: ak ist �m . . . ·· . er off · is th pt ce c a_ t s u_ m A t. �·s i f e th r fo e us ho .

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• t no es do de e Co t11 . at th t ou _: d te ii1 po eii be , lia· s . . · · A,·-ticle 1703. · It ri ee tw r b no e ak ist n1 e . bl sa cu ex i11 · 1d � ai e bl · distinguish· be tw ee n exc1.1sa _ e. ak Jst l ID ua ut d m an al er at 11l 111 11 ee tw be r 11o , w l,1 of mistake of fa ct and n io at rm fo e tl1 in ill w e th of e 11c ta or 1p i11 11g Because of tl1e overricli ct ra nt a to d . un bo be �_ JlO . ld ou sh � 1 01 1�s pe _ of .� q.pt_�acts Arti�le J.679,. � - · . ke ta I.s s m .i h of e us · ca be · 11t· se n co s· hi ve : when h e has only ::ippe�tred to gi \

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The declaration of i11tentio11 tl1at l1e has made, and that is vitiat­ ed by t�e mistake, does not bind tl1e mistaken person. But it would be unfair to make the other party bear the loss in all cases. The other party thought the contract valid and, in reliance on it, ma)' have incurred certain expenses or undertaken pther obligations. He ,vho invokes his mistake must compensate the other party for the loss he sustains from the invalidation of the co11tract.

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Contrary to Article 26 ot' the Swiss Code of Obligations, tl1e Ethiopian Code provides for tl1is obligation. even where the mistake is not due to any fault on the part of the mistaken person. The obliga­ tion to make good the damage caused by the invalidation of the con­ tract disappears only where the other party knew or should have known of the mistake.

IDustrations.

1.

A buys goods from B for a price fixed in Djibouti francs, but A thinks that the price was in regular French francs.

The contract can be invalidated because of the mistake, but B may already have sent tl1e goods from Marseille, where they were stored, to Addis Ababa, where the con­ tract provided tl1ey were to be delivered. A must com­ pensate B for the dan1age that the invalidation of the co11tract causes him: expenses of shipping, storage, and of tl1e retur11 shipping to Marseille if necessary, or loss suffered on resale of the mercl1andise in Addis Ababa at a price lower tha11 the contract price, and so on.

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The correspondence between A and B at the tin1e the contract is n1ade reveals to A4 the n1istake that B is mak­ ing. Nevertheless, A allows B to sig·n the contract with­ out pointing out his error to hin1. When B requests the invalidatio11 of the contract, A cannot claim com­ pensatio11, since l1e k11e\v (or shot1ld have known) of B's mistake.

Articles 1704-1705. Witl1 respect to deceit, Article 1704 re­ ��oduces _ the solutio11s .�h�t ar� accepted i11 all legal systems of con­ tinental Europe. It d1st111gu1shes between essential fraud whicl1 has a determini11g effect on the making of the co11tract, and i;cidental fraud, as a result of wl1ich a person just accepts more burde11some contract terms. Only essential fraud allo,vs a person to have his

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Editor's note: TJ1c ori gina � text of tl1e Commentary says ''reveals to B," ' but clearly tl1e contrary was intended. _

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c9ntract invalidated. , Nevertl1eless, in the case of essentia1 fraud tl1e defrauded person ·may� as iri the case of incidental fraud leave the contract in existence and· just require the ·person who com'mitted the fraud to co1npensate him for the damage sustained. It did not seem nec �ss �ry to state _ this expressly in the Ethlopian Civil Code, although It IS set forth 1n the Greek Civil Code (Article 149).

The concept of fI·aud dealt with in. Article 1704 requires that deceitful practices have been utilized by one person in order to induce an error on the part of another and thus to influe11ce him to enter into a contract. There is 110 fraud when son1eo11e just makes a false assertion and still less wh,en he keeps sile'l1t although he is aware that the other person is i11 error, without expressly ly�g to h.im. The in­ validation of the contract can be obtained, bo·wever, in several situa­ tions where one of the parties h.as acted on the basis of an incorrect statement b y the other party. First, this is possible where the mis­ taken person required a formal guarantee of the fact incorrectly as­ serted, and also where one ought to consider that this fact is within the scope of the contract under Article 1698. Apart from these two sit11ations, it is possible where the requ.ireme11ts of Article 1705 are satisfied. This Article is patterned after a common law solution and requires that the parties be uI1ited by a relationship giving rise to special confidence and requiring pa1·ticular loyalty between tl1ern.

Where such a relatio11sl1ip exists, a person ca11 have a contract in­ validated where he concluded it after makiI1g an error tl1at was caused by an incorrect statement of the other party, made in bad faith., with knowledge tl1at it was incorrect, or as a result of negligence, n.ot hav­ ing taken care to be sure whether it was true or false. The same rule applies where 011e person, by his silence, has allowed the other to believe something that was not true.

The cou1·ts will have to determine - under what circumstances there is a special confidential relationship th.at justifies the application of Article 1705. The special relationsllip in question is only possible where there exists between the parties a penna11ent relationsh:ip, such as that of the family or membership in a close community. The special confidential relationship foreseen by Article 1705 would �so exist where the parties are, in their relationship to each othe_r, 10 a position of superior-inferior, either as a result of the law (policeman and citizen) or of a contract (master and servant). On_ ti1e �ther hand it would not exist simply because one o· f the parties said he would ''have confidence in the other'' at the tin1e of entering into a _particular contract. It is up to each perso11 to beware of the_ ot�er party when concludi�g a co�tract. The la\v does not ? rd1nar1!y _ protect one against simple m1srepresentat100s o� f�ct. It 1s only 1n circumstances unrelated to the contractual negqt1at1ons and tp.e con-. � 25 -

the special co�fidential fii1d ts may cour the hat t ract cont · clusi�n·. of·t�e . .. ' ,. . . . �. - � .., · · ·. f�la�ionship· to · which· �!�I�·. 1_7�5 ·_ ref.�!�· · · ·· · . · . . .· ..

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I. · · A sells B some land in a distant prov. ince, without B having ..:. :;. :i .. seen·· tl1e land. A shows B· what ·he calls photograpl1s .. _. _: ..: _ :· ·. .of the. land, wl1icl1 are in fact photographs. of a _,.:•.: :·. �. · . . co111pletely d1fferent place. :.He also uses false documents •-�· :. _- -.... . ·- _to co11vince .B tl1at a road will soon be built that will in··. '· . - ; · .. crease the value ·of tl1e land greatly. A's deceitful prac. . : ·; tiGes allow: B ; to have tl1e co11tract invalidated. . . . . . .. ·.. ...., . .. -. . .. .

After, buyi11g tJ1js Ia11d from A, B _wants to get a parti. . i.'. .,, . an adjoining cularly a11d so buys adva11tageous position .. . . . . .. . piece of land fron1 C. c. is · not aware of A's fraud. B '• • cannot ·ha,,e the contract witl1 C invalidated on the basis · · of A's fraud..

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3. . A asserts to· B that l1is land is ·very fertile and near the , · road, whereas in fact it is sterile and i11accessible. ·This is a case of simple affirmations wl1ere A does not resort · · · to any · deceitful practices to support his affir111ations anc;I . ' .. .

111ake B believe. tl1e1n. Tl1ere is no fraud, in the legal .• . . ' se11se, and B cannot require the invalidation of the con• ' • · .'. tract. .' . . .

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4. ·· A .. excha11ges. a piece of land that belongs to hin1 _.for: .a . pi�ce, of la.11d belongiI1g. to his.brother, B. B tells A that ..' ·tl1e exchange \.Vas d��i�ed by_ .their father,. C, before his death. A agrees to tl1e e�change because he believes that · :.:. · ·· · · ·· · statein�nt,·. wl1icl1 is false. The con�ract of exchange can .. , be invalidated .. . ·,

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�...: �. A · is employed by B and buys · some . stocks from . him; ·· · · ·· · · · - B_ tpld · A the stocks were valuable,- · w11ereas in fact· the .- . � · .. partnership _tl1�t· -issued then1 l1ad go11e bankrupt. . A ·. c;an. _dema11d_ th� invalidation of tl1e contract. . .. .. . ::· ·: · 6. ·, · · · _A ·sell�· to B, th; district govern�r, s01ne · cattle be · ca� -�6 · B says, _or lets ·:A �nders'ta11d, that if he does not sell them .. · th ot1ld be req_uisitioned by the govern1nent. at a lower ey \v : _. _ . ; . · price. If tl1e affi.rmatio11 n1ade by . B is -untrue,. the con� _ · · · : .. · tract wjJl be subject to i11vaJidatio11. . · . ... .. -,,. . . . :·: . A.i�ic{es 1706.:·1709 .. The provisions: of Article 1706 are. i11 · a�co·r­ · dttnce :�with ·: a11· contine11tal legal systems.� - We· ·· need· only: to·:: poirit .

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out ��t.. : . 5 ._ �e:w��d�. _'.ip�§.itio� o� thy P8:rties,' l in 4rticle 1706 (3) refer not. only . to social positi�n, strictly s.peaking; but�·also to such circumstances ·as 1· eve1 o( education. (se.e� Arti9le. ·2 f-1;L . ebanese Code of Obligations). or healtfi (see -.Article 127, ·tivil Code) of · Egyptian · · the victim of the duress. , .

• . . to:· .most 1707(1 provis Article of ) ion is.

The similar · ly commo n_ . other civil law systems, althougl1 not to that of Egypt (Civil. Code� Article 128). Article 1707 (2) is similar to articles in the S,viss Code . of Obligations (Article 29), the Lebanese Code of Obligc\.tjonf; __ (Artic1� 210), and the Greek Civil Code (Article 152); it constitut"es· an eq_uit-able counter-balance to the rule of Article 1707 (1). .

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Article 1708, in conformity with various codes (Swiss; Article 30 •(2); Lebanese, Article 212 (2); I ta1ian, Article J438), regufates a pa.rticular difficulty re.lated to the theory of abuse of rights-; and in particular, to the unjust character that the duress must generally • present. ,. .

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The provision of Article 1709 (1) ts borrowed from the Fren: cn (Article 1114) and Italian (Article 1437) Ci�il Codes. It is- temper­ ed by Article 1709 (2), which is borrowed from English law and t!m.e . · .·. theory of ''undue influence'' that it has developed. · -

IDustrations.

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A's son signs checks, in1itating A's s1gbaiture. The payee of th€se checks, B, inforn1s A that if A·· will not promise to pay tl1e ch€cks, A's son ,vill be prosecuted and will be in danger of a serious penal conviction. A signs a promjse to pay. This contract cannot be· ii. n•­ validated. Article. I708. .' .

B, in the same situa.tion, obtains a promise from A· to pay $10,000, when the value of the checks is only $2000.

A's undertakin.g can be invalidated. Article 1708 ·.·. · .

A agrees to sell something to B on the in.siste_qce ·or :11is superior, C, out of fear of displeasing the l�tte_r.. -i::t1Y ated' contract . between A and B .can.not, be' invalid - ,for.

- ,, duress. Article 1709 (J). . .. .

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A, having joined a monastery, sells someting to B, his superior in the monastery, for a price of less than one-

Editor's note: Words from the origina1·commentary that are omitted here indicate that Article 17�6 (1), in t�e prelir�1i!1ary d.r��t �� � �Y-. ��d�, _ i:eferred generally to persons close to tl1e· person threatened. The P:?''. 1s1-0n, as �n�c��d , _ _ . refers to danger to ''ascendants, descendants, or spouse.

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· tl1 ird its value. A establishes tl1at he· did not tl1ink he could refuse to give his consent to B because of the re­ verential fear that he had for B. The contract can be invalidated. Article 1709(2).

,,-1rticle 1710. Jurists have long been divided over whether or not lesion should constitute a basis for i11validation of contracts.

France and E11gland give a 11egative respon.se, in pri11ciple, to this question. But this positio11, take11 at a tin1e of rampant laissezfaire capitalism, has since been repudiated, first in the German Civil Code (B.G.B., Section 138), and then by all tl1e recent codes (Swiss Code of Obligatio11s, Article 21; Leba11ese Civil Code, Article 214; Greek Civil Code, Article 129; ltalia11 Civil Code, Article 1448; Egyptian Civil Code, Article 129; Franco-Italian draft code, Article 22). The Ethiopian Code joins tl1is ge11eral movement.

The Italia11 Civil Code (Article 1447) provides for the case, apart from lesion, where a co11tract l1as been obtained by exploiting the state of necessity of one of the parties. It penil.its the person · who entered into the contract because of necessity to .get out of it, even if the contract is 11ot unfair. The Ethiopian Code does not incorporate tl1is rule.

It has follo,ved tl1e Italian Civil Code (Article 1448), on the other l1and, in not excluding the invalidation for lesion with respect to a contract i11volving risk or speculation. Tl1e provisio11 of the Lebanese Civil Code (Article 214) which decides tlus questio.n in the opposite way did not seem justified. Obviously, whether or not a c·o11tract is lesionary must be judged as of tl1e time the contract was made.

As witl1 tl1e provision of Article 1709(2), A1iicle 1710 will only come into play in cases of onerous contracts. If the consent of one of the parties is it1spired by a gratuitous inte11tio11, it is obvious that this person cannot invoke lesion. Gratuitous acts are, \vithout a doubt, particularly subject to suspicion, since tl1ere is reason to fear t�at t�e consent of the person wl1 � g�ve � up so111ething is not always give? 1n complete freedoI?. But 1t 1s 1n the rules relating to gifts, 11ot 1n those on contracts 1n general, tl1at one will fi11d tl1e provisions appropriate to deal with this problem.

SECTION II: OBJECT AND CAUSE ..

(Articles 1711-1718)

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Th� subjects of the ''object'' and ''cause'' of contracts .have . given rise to continuing controversies among western legal scholars, -28-

prii:narily because different writers use the terms to mean differe·n·t things. For this reason, it ia necessary at the outset to define what �e Code mea�s by _the ?bj�ct and cause of a contract. The object of a contrac� ts the obl1gat1ons undertaken by the parties, not the _ things to which these obligations relate. The object of a contract is t �e seller's obligation to transfer to the buyer of sale, for example, _ the o ':oersh1p o � the th1ng sold and the buyer's obligation to pay the pnce; the thing sold, movable or immovable, is not the object of the contract. The cause of the contract, on the other hand, is the relationship of the parties' obligations to each other. Articles 1716 (2) and 1717 of the <;:ode show why this notion is useful an.d how it is distinguished from the object of the contract and the motives of the . contracting parties.6 Article 1711 of the Code poses a pri11ciple with respect to the object of the parties: It is up to tl1e parties to draft their contract, not up to the courts to make it for them.

The parties determine freely the object of the contract, tl1e obliga­ tions that each of ttiem is to undertake. The Code accepts, as do present Western lega� systems, the principle of contractual freedom, ,vhich is fundamental to a society and an economy that want to leave considerable scope to private initiative. In addition to the particular kinds of contracts regulated by the Code, individuals can devise other contracts. As long as these contracts do not violate any legal pro­ hibition, the la\v witf· sanction them and give effect to the will of the p�rties, as manifested by their contract.

Article 1712. There are three categories of obligations that parties can include in their contracts: obligations to give, where one party undertakes to transfer all or part of the ownership of something to the other party; obligatio11s to do, where one party undertakes to act in a certait1 way that will benefit the other party; and obliga­ tions not to do, where a person undertakes to abstain fro1n acting in a particular way.

In obligations to do, there are some cases where a person under­ takes strictly to procure a particular advantage to the other (so-called obligations of result). There are others where one undertakes only to do his best to procure the advantage to the other (so-called obliga-_ tions of means). The doctor and the advocate, for example, do not undertake to cure the sick or to win a lawsuit for the client; they only undertake to do their best to obtain this result. The carrier, 6.

Editor's note: The word ''cause'' is not used in the Ethiopian Civil Code, as enacted, but tl1e substance of the provisi9ns remains as they were in the preliminary draft.

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. _ es . �.� arriv t , n _ s t jec tl�e o : . . ¢at J tq,j �e s . s to �, tak� r u11d ., � 0_9 .--tJ1�__co�1t�ry, � . l: rr1va . � � _ tS:: J tee15 ar,a u • g· :t�u� e J1� s se11_ • · fl: _: .. . in : : · . · a11d l; )��O� ��ti_ L o its . . . .. . : . -· --· . .. ' .• . . ,..

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· • e' e 1· 1u·n;ie·rate�. ·. tl1ese varioiis poss1bJe · ct '•:.- -: Article 1·712 · of ti 1e 'Co ki�}9S of obljgation?,. inviting:_ tlie pa'i:·t,res· . to e�plaii1 ·.a. .s c�early �s po���- : ble what IS tl1_e· o't,>, j�ct of t_l1�ir.·co11tra¢t.... ...•· ·, ,. ·:. ·. . . .. . .

111a tter' 1{ow d�tailed the co11tract 'is;. it is u�� ·: :': < Article : 17' 13.� No li�ely · th�t it ,v�ll - de_ al · exhau: stively :,vith· �the obligations of t'he tw o � patties� Particrilarly;: o�ligations are ; the access61:y' not likely to be · . define d;·:· beca�se· ·1fiey ·seem: so_: ·self'"·evide�1t.' _. .J,�ot 011Jy tl1� _letter _of -'�tlie·- agreem · ent that is · expressly the · c611tra-ct n.1ust ··be: co1iside1�etl : ; . articulated by· the:�pa rties : ::1: 11 ust' be sup1)lem��� �d- by .!�� __' �I?ciclen�aI_ " effects that ob, iously a11d necessarily follow· fro1n it as a result· of C!,lst9:rp.,. . eq-uity, ai:19 go_o�.1;ff;Litl�,. �-ticle 1713. sets forth tl�s: · rule, in �o�forn1ity· ,\.vttl1·.- Eµrq1jea11:: ,9<?de.�.. :(F�-�11c� .Civil _Code? ArticJe 1135; Italian Civil Code, Article l374�. Greek ·civil Code, }:\.rticl� 2 _ _8�). _: I_t is also fou11d in tl1e sec_tio11 q�ali11g \Yitl1 _ tl1e interpretation of con· ·· · tracts. . · ..· · - . . · · ., · · · · .' ·· ... · .... .. " · · ·. · . · . ' . .. . . .

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1711(1)_ �s - s!at�d ... more_ �xplic1tly by 1714(2), wl1icb sets forth the �9r�ul�_:co�1rii?��y ,f.<?u,rid:jf1'· �?�n� o!:11· a,,·� ·c,01i1�trie� :· tl1i-��urts c�n116t : ma ke a contract for the parties. · · •• · . .. . .· · .�

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A un derta�es to deliver a ce�-tai� · q·ug�tity· of products . at · a · stated pric e ''at· the end of the rainy season.�' The · _ ObJ ect of the contract and the date at which the obligation of the seller are to be performed are sufficiently defined.

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. A undertakes to deliver ''his crop of sugar cane this year'' �t so �uch p�r quintal. The amount du� by the buyer.

1s not lfilmed1at ely determined, but it is determjnable·. . 'The contract is valid.

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A promises to give B ''a good reward'' if he does some specified work. B does this work. The words ''a good re ward'' are too imprecise; the object of the contract is not sufficiently defined. The contract is invalid.

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· .. Ar-ticle 1715. A second require ment in order for there to be a valid contract is that the object of the contract must be possible. The petfon11ance by the parties, or by one of them, of their obligations unde r the contract m-ust not .be impossible in its elf. If the obligatio·n unde rtaken is impossible to perform, . the contract is not valid and 1!<?.l!��ility is incurred by a failure to perform the obligations created ·

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, . ·To determine whether or not the object of the contract is possible or not; on.e must look at· the situatio·n at .the time the contract was concluded. If · t he performance of the contract appea.red possible at that time , but later beco1nes· impossible , the effects of this circum­ stance are regulated in the Chapters dealing with the effects of con­ tra7�s (Chapter 2, Section 4: Non-perfor°:1ance) and the extinction of_�bl· iga.tions (Chapter 3, Section I: Invalida�ion and Cancellation Contracts). of .. .. . . , .. . . Mor�over, the impossibility must exi�t in itself (Egyptian Civil e 191). It must not icl Art de, Co il Civ ese ban e L ; 132 de e Co ticl r A, . . ' r<::s,:alt_fr�m tp.e �p��ial situation of the debtor, but must exist without r,eg.ar�. to the pe rson. _involve�; tpe performance of the contract would be impossible, e ven if some one other than this particular debtor we re obligated. ,

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­ ip. lar Un sh cu rti pa a on d de loa n, tto co of t en ipm sh a B lls• e s '.; : A . erished b efore p v� ha o rg ca d an ip sh e th es, rti e pa t� o . ·: known t. : ­ im ct is ra nt co e tli of ce an rm rfo e p e Th · : e ad m is ,:-: : : ::·th� contract ng hi et m of so p hi e rs n o e t B to r . e f • ns ? tra � ·.· -. :: po��.ible. A cannot _ t exist. The co. ntract ·1s invalid. no s e that do .

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Article 1716 (1). The obligations assumed by tl1e parties must not be unlawful or in1moral.

For example, a contract will be invalid if the seller undertakes to transfer to the buyer the dwnersl1ip of a slave, si11ce slavery is prohibit­ ed by Ethiopian law. Sii1illarly invalid would be a contract by which A promised to pay B for con1mitting a crime or doing s01ne other act prohibited by law. The same is true for tl1e contract by which A would restrict l1is freedom i11 favour of B, in conditio11s rejected by Ethiopian law and morality.

It is up to the courts to decide, in each particular case, whether or not a c·ontract should be valid, having regard to morals and the conception of morality prevalent in Etl1iopia.

A,·ticle 1716(2). It could happen that, even where the obligations of each of the parties, co11sidered i11 isolatio11, would be perfectly de­ fined, possible, legal and moral, it would seem that the contract ought to be prohibited by the law, on the grou11d that it is repugnant to law or morality that the obligatio11s of 011e party have as a counterpart the obligatio11s of the other. 111 tl1is case, the contract will be invalid, because its cause is illegal or immoral.

This will be the case, for example, if one person, A, undertakes to pay another, B, a sum of money i11 order that B not commit a crime.

I11 themselves, there is nothi11g illegal or in1moral about the obligations of either A or B. What is shocking is that B would take mo11ey for 11ot doing son1ething that, in any case, l1e is required to abstain from doing. The contract between A and B bas an immoral cause; it is invalid.

Article 1717. It is essential not to confuse with the cause of the contract, understood in this sense, tl1e motive that could n1ake the parties, or one of them, contract. This motive is legally i.rrelevent a11d does not affect the validity of the co11tract, regardless of how shocki.11g it may be in the light of law or morality. Tl1e Code departs on this point from the Italian Civil Code (Article 1345) and the Leba­ nese Civil Code (Article 201), which provide for the co11trary solution.

Illustrations.

I.

A re1 �ts � house from B so that he can set up a house of prost1tut1on. Tl1e use that A intends to n1ake of the hous �, \Vhether _or not it be known to B, l1as nothing to do with the obJect of the contract. This motive which impelled A, and perl1aps B, to n1ake the contract ·does not make the contract invalid.

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2.

A loans money t.o B. B intends to use this money to buy a boat and organize a sm11.1ggling expedition. The con­ tract is valid without regard to whether or not A knew B's motive. It wiO not be invalid, by the application of Article 1716, unless th.e illegal use to be made by B of the money lent was a condition of the loan, B undertaking to organize the smuggling if he received the money from A.7 SECTION ID:

FORM

(Articles 1719-1730) Article 1719 establishes the principle that there are no formal requirements for the conclusion of contracts: the agreement of the parties is sufficient to form a contract. . This principle, however, i� set aside in two cases: where the law requires tl1at a partic·ular contract be put in a special forn1, and where the parties themselves have provided that their contract will be con­ cluded in a particular form.

Article 1720. If the law or an agreement o·f the parties provides that tl1e contract must be concluded in a particular form, the failure to observe that form results in the invalidity of the contract. Article 1720 states this rule explicitly, tl1us eliminating the difficulties that have arisen in some legal systems, where it has not been clear in all cases whether the form require� by the law was sanctioned by invali­ dity· (c1d validitate,n) or was only a rule of evidence (acl probationem).

The rule of Article 1720 was previously stated in the Swiss Code of Obligations, (Article 11) and in Greece (Civil Code, Article 159).

Requirements of form must not be confused with tax requirements s·uch as registration, that may be reql1ired by the law at the time of the conclusion of contracts. Uh.like formal requirements, tax require­ ments usually are not sa11ction�d by invalidity of the contract in ques­ tion; non-compliance with them results in other sanctions (fines, impossibility to enforce the contract through the courts, etc.) that are stated in the statutes concerned. Article 1720(2) states this rule, which is of great importance Witp respect to internation.al contracts.

Similarly, failure to comply with requirements of publication, such as the copy·ing or mention of a contract in a public register, does 7. · Editor's note: Article 1718 of the Etl1iopian Civil Code was not contained in Professor David's prelimi11ary draft and is not commented upon by hin1 in this Commentary. It \\'as apparently added to the Code at some later stage, prior to enactment.

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not lead to tl1e i11validity of the contract, u11less there is an express . . . . law of the io11 vis pro y tar con . Articles 1721 and 1722. Formal requirements for particular co11tracts, as a result either of the law or of a11 agreeme11t of the parties, also apply to preliminary co11tracts and to modifications that are to be· made in these contracts. 011 tlus point, the Code follows tl1e G·reek Civil Code (Articles 164.:166); it was 1101 thougl1t wise to retain the limitations that are found i11 the Swiss code (Article 12, Code of Obliga­ tions) on this point. Nevertheless, the term ''modifications'' does not include the various ways of extinguislu11g contracts; provisions con­ cerning the formal requirements for extinctio11 are found in Chapter III of Title XII. lliustrations.

I.

Article 1723 of the Code requires that the sale of a11 im­ movable be i11 writing. A agrees with B that he will sell t him an immovable at a particular price if a par icular event occurs. This promise of sale, prelin1i11ar)' contract, is not valid unless it is i11 writing.

2.

A gives C a power of attor11ey to sell B an immovable belongi11g to A. This power of attorney, preliminary con­ tract, must be in writing.

3.

Article 1725 of the Code requires tl1at the contract of partnersl1ip be in \Vriting. 8 A co11cludes a conqact of part11ership wjth B. Tl1e parties later agree to modify. the provisions of this contract. This n1odificat_ion of their original co11tract must be in \Vriting in order to be valid.

-Articles 1723-1725. The· principle of f reedo1n fron1 formal :re­ quirements stated by Article 1719 is i11 fact set aside in the case of a nu1nber of contracts, the importance of wl1ich must be called to the attention of interested p�rsons by requiring a. written document. '

The importance attached to land by Etl1iopians justifies Article 1723, w�ich requires.tl1e conclusion in writi11g of all acts creating or tra11sferr1ng ownerslup, usufructs, or servitudes 011 immovables · as well as for contracts of con1promise or partitio11 relating to · · an imn�ovable.

8.

Editor's· note: Tl1is rule is no t included in Article 1725 as enact ed . pro, , 1ressor Dav1·ct s comn1ent refers to the prelin1i11ary draft of tlie Civ·1 1 cod e. .

See, however, E tI 11o · p1a · n con1merc1al Code, Article 214, wl1icI1 requ·.

IIes ti 1at . . . r m a busine contracts to 1or ss orgaruzat1on be in vvriting.

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. . . . ,-\rticle 1724 requires th.e written form for all contract$ l>inaing the Government or a public adrn 1 .nistration. · 'Article 1725, finally, fo.rmulates the same requirement for certain contracts that establish lastin.g relations between the parties and for which it thus seems necessary to establish the provisions precisely and indisputably.

Still other contracts may be subjected to particular for1nal re­ quirements by provisions of the Code or other special legislation....9 It is sufficie11t to note here the general approach of the draft. While starting from the principle of th� freedom from formal requirements, it is favourably inclined toward SOJ!1e formalism, which seems to constitute a necessary guarantee of sincere agreements in conditions presently prevailing in Ethiopia.

Article 1726 requires no comment. It adopts a rule from th.e Lebanese code (Article 220), borrowed in its substance from the Swiss and German codes (Swiss Code of Obligations, Article 16; B.G.B., Section 154 (2)). .

Articles 1727-1728. These two articles provide certain clari­ fications concerning the meaning of the words ''written form'' when the law or an agreement provide that a contract shall follow this form.

The requirement that th.ey be concluded in writing is, in the scheme of the Code, a requirement of forn1, not of proof. The requirement of the law is, therefore, not satisfied by producing letters that the parties exchanged and that indicate their agreement. It is required that a special instru.n1e11t be drafted to express the agreement and that this special instrun1ent, a solemn 1nanifestation of the agreement of the parties and of tl1eir irrevocable intention to be obligated, be signed by them. On this point, the Code differs from French law, from Swiss law (Code of Obligations, Article 13) and from Greek law (Civil Code, Article 162).

The signature of the parties must generally be handwritten. If one of the parties does not know how to write or is unable to, his signature is to be replaced by his fin.gerprint. The Code found it appropriate to resort to this method of identification even in the area of civil law, as it has been used previously in administrative and crimi­ nal la\v. ..

Article 1728(3) adopts a provision of the Swiss Code of Obliga­ tions (Article 14), but the Code does not include a provision similar 9. Editor's note: At this point, Professor David noted that the legislature, · · upon enacti:ng the Civil Code or at a later time, might \Visll to subject other ..., type�. of c<;>ntracts to the. general formal regulation provided by Articles . . .. . .. . ·17i9-1730.

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to Article 14(2) of the Swiss code, wl1icl1 provides tl1at a· 111achi11e.­ made sig11ature is sufficie11t where it is accepted as a matter o! custo� (particularly in tl1e case of signature� 011 commercial paper issue? 1n qua11tity). If tl1ere is need for sucl1 a rule, it ought to be contained in tl1e Commercial Code rather tl1an the Civil Code. 10

CI-IAPTER II: TI-IE EFii'ECT OF CONTRACTS (Articles 1731.-1805) The first Article of the Civil Code Chapter on the effect of co11tracts reaffi.r1ns solemnly, on the legal pla11e, tl1e moral rule that a man's word is his bond. Pacta si,nt servanda: contracts legally formed become law for those who sigi1 the1n. (Comp. Frencl1 Civil Code, Article 1134; Lebanese Civil Code, Article 221; Italian Civil Code, Article 1372; Egyptian Civil Code, Article 147).

Tl1e Chapter is then divided into four Sections, devoted respec­ tively to tl1e interpretation, perforrna11ce, variation, and non-per­ fonna11ce of contracts. The effect of contracts on third parties is dealt with i11 Chapter VI of Title XII . .

SECTION I: TI-IE INTERPRETA1'10N OF CONTRACTS (Articles 1732-1739) Articles 1732-1739. There are fairly co11siderable differences an1ong Wester11 legal systems i n tl1e difficult area of interpretation of co11tracts. English a11d Fre11ch Law approacl1 the problen1 from theoretically conflicting points of vie\v. The English approach says that contracts are to be i11terpreted st1�ictly, looki11g 011ly at what the. parties have said, interpreting tl1eir words as objectively as possible and giving them the meani11g they \Vould l1ave for a ''reasonable man.''

The French approach on the other ha11d, is to searcl1 for the real in­ tention of the parties, correcting imprecise te1ms or incorrect figures where necessary. The English approacl1 is 1)runarily co11cerned with the eco11omic utility of co11tracts wl1ile tl1e Frencl1 stresses their n1oral basis.

Although the contrast betwee11 these two approaches definite!)' has practical co11sequences, it is clearer i11 tl1eory than i 11 practice.

Rules of eq11ity in English la,v allow some correction of contracts to 10.

Editor's note _: Articl �s 1727 (2), 1729, a11d 1730 are not co1nmented upon _

by Professor David, since tl1ey only appeared at a later staoe in tl1e codifica­ tio � process. Article 1727(2) is of capital in1portance; it pr�vides tlJat ''(TI1e \.\ r1tten document) sl1aJl be of no eflect tmless it is attested by t\vo \Vitriesses. ', 1

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give .effect to the true in tention of the parties; the difficulty of d�scover­ ing this true inte ntion, on the other hand, leads th e Fr ench judge to give primary attention to the d eclarations of th.e parti es.

No doubt the real reason for the contrast between English and Fren ch law is that Fre nch law speaks primarily to the con tracting partie s th emselves, while i11 England law is conceived of primarily as directives to the courts.

In England, as in Prance, one would recommend that the con­ tracting parties conduct th emselv es prop erly and thus act according to wha t they really inte·nded rather than to the letter of tl1e contract.

But, if on e consid.ers the courts' problems in interpreting contracts, one will ine vitably pay more attention to what was actually said and le ss to what may have been intend ed. much .

Becaus e a code is addressed simultaneous.ly to the con tracting par ties and the courts, it is difficult to formulate in a code rules on th e interpretation of contra cts.

Although the parties should be instructed always to act in good faith, one must bewar e lest the judges go astray, in the name of good faith, on a search for intention tha t can easily beco·me p·ure specula­ tion. One mus t keep them from violating the pri11ciple, already stated in Article 1714, that the court is not to make a contract for the parties under the guise of interpretation.

The Ethiopian Civil Cod e atte1npts to balanc e these two ap­ proaches. Article 1732, iI1 a provision that should be compared to Ar ticle 1713, stat es the principle that contracts are to b e in terpreted according to good faith. It seemed essential to reaffirm thls p·rinci­ ple , because it ought always to guide the contracting parties.

For the courts, how e ver, the principle is limit ed by an exception: the judg e is to interpret the con tract only when interpretation is re­ quired, and he is e xpressly reminded of this by Article 1733, coming as it do es directly after Article 1732. Where the contract is clear, the court may not depart from it and determine by way of in terpreta­ tion the i11 tention of the parties. The courts are no t to distort the contract under the guise of interpretation and make it say something o ther than what a reasonable man, knowing th e circu1nstanc es in which the contract was made, would understand by reading its terms.

If the te r1ns of the contract are clear, the judg e must give them effect.

The r emedy available to a person who claims that his intention was incorrectly stated is invalidatio11 of the co11tract for error (Articles 1698 and 1699). T11e courts may not, under the guise of interpreta­ tion, re vise the contra ct and thus impose on the other party a con­ tract to which he n ever agreed.

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Co11tracts require.interpretatio11 ·,only when tl1eir t�rms :are · ambi­ guous (Compare .Egyptian Civil Code, Article 150); but the11·· it is proper to ask'the courts' .to · seek tl1e parties' com1non intentiop·.· Ip ·spite of its difficulties, to searcl1,for . t�is con11non intention ge��rally is the best way to establish the n1eaning of the contract. It 1s l.��s. artificial than assigning words tecl1nical 1neanings tl1ey did. nq! b�ye for · ·the co11tracting pa.rties. Article 1734(2), borrowed f.r_om" _the ' powe ' ..1n ... . rs ts cour Italian Civil Code (Article 1362(2)), e11Iarges the looking for the parties' intention. They may even look to events subsequent to the conclusion of the contract. · . · : ·, . , .

Article 1735 �tates one_ specific application of . the principle that . the courts are to seek the ·· parties' i11te11tio11. This provisio'ri se�r�.'�d _ ._ _An. ex ,-: particularly useful, since it avoids any possible confusion ample will show that tl1e apparent conflict between Articles 1733 a1id 1735 is only an appearance.· Suppose · that A sells B ·''all -his- immov­ ables' ' for an overall price. The conditions in which the. contract is made and all the surrounding circumstances make it perfectly clear, l1owever,. tl1at tl1e parties n1ean only A's immovables locared in ?thi­ opia. B might argue tl1at tl1e tern1 ''all his in1movables.' '. is a ·cl�ar . pl1rase, with no room for interpretation. Where, .as i11 . this case,' the intention of the parties is clear, however, that intention ought to prevail; tl1e expression ''all his innnovables'' is actually an1bigu<?us:_ . . '

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Articles 1736 and 1737 give the courts some directives to ·guide tl1em i11 their search, for the parties' intenti011, or independ�11tl)' of that intention if they cannot determi11e wl1at the intention. was, i�1 . � order to settle the n1eaning a11d purpose of the contract. .

A different idea inspired Articles 1738 and 1739. In ambiguous contracts, tl1ey favour one party over the other. The favoured party is usually tl1e debtor. Wl1ere the co11tract is u11clear, he will be con­ sidered not obljgated or obligated to a lesser degree. Article 173_8(2) provides an exception to this _principle: tl1e favoured party i n, adhesio11 contracts is he who sin1ply sig11ed the do·cu111ent drafted_ by tli,e_ other. Where the contract clearly was drafted by 011e of_ the pa_r�i�s., tpe contract is to be interpreted agai11st that party, in favour of tli'e. other. The rule set fortl1 i11 Article 1738(2) is patterned after ·t11e recent civil codes of Italy (Article 1370), and Egypt (Article :1 s·1).

Article 1738(1), 011 tl1e otl1er l1a11d, adopts tl1e Frencl1 rule (Ci\,il Co.d e;� Article 1162), wl1ich is also fou11d in the Egyptian Civil Code · (Article·· .

15_ 1).· It rejects the Italia1J rule (Civil Code, Article 1371), �hich.·. ��yites the· courts ' �to _conciliate equitably tl1e interests of the, .pa_ rti¢�'-' ..· ·· · · 1n. the case of ambiguous o·nerous contracts. .

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tn,:decide that the iclebto·r ass·u1l!ed · the mirum:um obligati·on .compati­ 1tbe ambigu.ous .terms of the. contract.. A particularly ,n·ar,rcj'W b le wi1ih. , · : interpre taticin iS' called. for, according to Article .1739, when the debtor · derives no. economic..benefit from the contract. . '

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· · , An example· of this is where one person, A, agrees to hold s'ome� t�ing. on. deposit · for a second person, B, without co.mpensation. He �·� ?bligated .�o t�ke· care of ·the thing, but this obligation might be interpreted with· greate� or I.esser. severity. Since it is a gratuito·us contract; ·A's oblfgation· wiil ·be very leniently interpreted. A will be required to care for B's property as if it were his own, but will rrot 1?.e reqp}red to �se- greater diligence tl1an he shows in bis own affairs. ,.

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. . . : - (Articles. 1740-1762) · - · . In the ·sectior' i on performance of cont1·acts, the following questibrts are:,oealf· with- : Who must perform the contract? To who· m ought'.' payrrierit '(perforni.ance)11 . be re11dered? Wbat constitutes pe.rforma11ce? To ' wh,at-dbligation does a give11 payment apply? When _ · Wl10 -bears th·e costs of payment? is:it' . due? ' · - : :t�e· word ·,: 'p ai�ment' ,.. js used in Fre11cl1 legal language with a __ht9'!4��·.meani'ifg t� -a� ... it: tias in co111mon language. It refers to the peiformarice·or any·ob1igation� ·not just the obligation to pay money.

Article l 74Q. · Wl10 is to perform tl1e contract? The contract (?teate·s·•.a relatibnship between a creditor and a debtor, 12 and one normally --�expects' the debtor to· perfor1n the contract. There are, however, two questions that arise. First, when can the debtor have �J.s.:age9t .or - e!,npl_oyee per. form the contract for him? . And second, W.�Y -�. t�i�d: _pe_: rs91); �n- the ab�ence of any agreement with the debtor, inteffere c_tµd� perform lus contract for him? Article 1740 answers . (�e. s� - qu�_stio��-- · : l�: does not deal, h9wever, with the resulting relari<;> �_ s_ ��e!���i:! .-the. debtor a�d _the third party who pe�ormed �e obligation. This problem is dealt with in Chapter VI of Title Xll. •

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Editor's note: The French term paien1ent is translated in tl1e Civil Code most freq:uet1tly·as ''payment_" -and will generally be translated in that way - here, but the reader must be a\vare tl1at the term is being used in a broad, :te_ chnical sense explained in the second p 'aragraph of this section. .. . . . . . ... . . �· .. . . . . .. .. . .

12. Editor's note: ··The French terms ''debite1,r'' and ''crea,1cier'' are translat: ed in the· Civil Code as debtor and creclitor and will be translated that way - ··.:, -. he_re. •Again; l1owever, it ·must _be noted tl1at these tern1s are being used in a broad, technical sense. There is a debtor a.nd a creditor for every obliga­ tion: the debtor is the perso11 obliged; the creditor, the perso11 to whom the __ ,.. ·promise. is..ma�e: Thus, in a contract of sale both parties are both debtor. :-.: : :. .aQd cred-itor.,,The.seller is· creditor witl1 respect to the ·price and. debtor witl1 respect to delivery; tl1e buyer is debtor for the price and creditor of delivery.

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· • Contracts can i1npose a variety of obligatio11s on a debtor.

This variety requires that one make a distinction in answering the question posed. Son1etimes it is important to the creditor that the obligation be discharged by the debtor and no one else. This is particularly true fo. r certain obligatio11s to do, in which the de�tor's personal qualifications are i1nporta11t. In otl1er cases, it makes no difference who. is obligated; the creditor is interested in receiving the thing promised, but not in who performs the obligation. This. is true usually for obligations to give, and in tl1e case of n1any obliga­ tions to do.

Although the distinctio11 between these two categories of cases is clear in pri11ciple, it is often difficult to apply. Article 1740, in the Title on Corztracts i11 Ge11eral, is able to do little �ut state the principle: The debtor shall personally carry out his obligation where the cred­ itor has a special interest in his carrying it out --personally. The cred­ itor must establish that he has a special i11terest in having the obliga­ tion performed by the debtor hin1self, that be·c�use of the nature of the obligation, 13 it would not be equivalent to have it perform�d by someone else. If, however, the parties have expressly stipulated per­ forma11ce by the debtor l1imself, the creditor need not establish this special i11terest; l1e can auton1atically req11ire the debtor to perform tl1e contract. In suc.h a case, the courts have no power of interpreta­ tion.

Except for these cases, tl1e obligation may be perfor1ned by some­ one other tha11 tl1e debtor, by either l1is delegate or someone authorized by the courts or tl1e law.

As we have said, the relations between the debtor and the person who performs tl1e obligation are dealt \Vith in a later Chapter of this Title. In addition, one will find, in the va1·ious Chapters of Book V of the Code, which is devoted to special contracts, specific provisions on the personal or no11-perso11al cl1aracter of the obligations created by the various contracts.

Illustrations.

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A buys five quintals of Dutch seed potatoes from B. It �akes little differe11ce to A whetl1er the potatoes are de­ livered by B or C. B can have C discharge his obligations.

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A is to djg an irrigation canal on B's land. It makes little difference to B whether the ca11al is dug by A or by

Editor's note: Tl1e phrase ''eta,11 clo1111e sa 11ature'' appears in the p rench · · version of· Article 1740 (I). It is translated in the Amllaric versio · n, b u 1s t · d .1·n t he Englisl1. .. compIeteIy onutte

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C as long_ as the work is done. A can have C do the · ,vork ander his, A's, responsibility.

A deposits some valuable objects with B. It is important to A that the bailee be B, whom he knows personally or who has a guaranteed solvency, and not C, any other person. B cannot give over to C the valuables that he has received by virtue of bis contract of bailmeot with A.

Articles 1741-1744. To whom should perforrnance be tendered?

To whom 14 should payment be made? The principle stated 'by Article 1741 requires no comment: Payment sl1all be made to the creditor or a thi.rd party authorised ·by the creditor, the court, or the law to receive it on his behalf.

The creditor may be incapable of receiving pay1nent because of minority, for exan1ple, or because of a judicial decision taking from him the administration of his property. In such a case, payment is to be made to the person designaced by the court or tl1e law to re­ present tl1e creditor, rather than to the creditor himself or someone 9esig11ated by him. The debtor who pays the creditor in such a situa­ tion does not make a valid payment, and he thus exposes himself to a possible second claim. Even so, he will not be required to pay a second time if he can prove tl1at his payment benefited the creditor and that the creditor, ,vhen l1e requests the second payment, still has the enrichment from the first payme11t. Article 1742 adopts this provision from the French Civil Code (Article 1241)· . A similar provision is found in the Italian Civil Code (Article 1190).

Article 1743 provides for two cases where payme11t is valid and the debtor conseque11tly is discharged, even tl1ough be has not pa.id the person legally entitled to payment.

Article 1743(1) adopts the rule of French Civil Code Article 1239 (2). Payment is valid if ratified by the creditor or if it benefits him, that is if it has, and to the extent that it has, enriched the creditor in fact. .

Article 1743(2), using a formula borrowed from the Italian Civil Code (Article 1189), states a rule that is also found in the Civil Codes of France (Article 1240), Lebanon. (Article 293) and Egypt (Article 333). The debtor is discharged ·with respect to the true creditor if he pays in good faith a person ,vho has no right to receive payment but who seems unequiyocally to be the creditor. The particular situation in mind here is that of the apparent heir. It is also the case of i4.

Editor's note: In the original, French version of the Commentary, these words are ''par q11i," but the meaning is clearly ''a qui.�, ·

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a-·perso11· who -- has• in1properly taken possessio11 of. a .bearer 11ote and pays t�e deman ds paymen t of the- -note. at maturity.. T-he debtor : pc,rson .whose po_sition as creditor appears to be establ��hed. . He 1s discharoed a11d the true creditor has recourse only aga1.nst the per­ son w�� l1as improperly used his note; t�e creditor c. an re�uire �h� latter to .r�imburse the . an1ount improperly collec ted (See Itali an C1v1l ..

Code, _Article. _ 189(2)).

1 . .. ... .. . \ .. . Article .1744, �nally, deals \Vith the situation where . the �ebtor ca11n:ot be sure who is the creditor. An exan1ple of this woul_d be \Yhere th� succession of the original creditor is in dispute between two per��!ls,. �ot� of ·wh _ om clai111 to be the heir. Artic�e 1744 borrows Article 168 of the Swiss Code of Obligations to solve this. problem. . .

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· A · owes B $1000, but B is 15 years old an d thus subject to the incapa.city of all mi11ors. Rather than pay B; A ought to pay C, B's legal representative. ..

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· In tl1e san1e s1tuati�n, A pays tl1e $1000 to B and _B was�e_s the nJ011ey. Si11ce the p ayn1ent to B is not valid, a seconq payment of $1000 ca_n be requested by B after lie. reache� n:iajority, or by C, B's legal representative.

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B wastes $500, but invests tl1e other $500 in shares · tha t doubled in value and ar.e wortl1 $1000 at the time B · ·. su.es . A.. A does not l1ave to pay anything. As a result of A's payment, B is presently e11riched by. $1000. �t is irrelevent that B wasted $?00 of the $_I 000 paid him by A. A owes B $1000. He pays C,·who has a mature·'claim of $1000 against B. A is discharged· . · . .-; : .

What thi11gs, goods, or services are to be delivered?

Article 17�5 first reaffir111s the pri11ciple already set forth· in A·rticle 1731: Contracts are law-for the parties. · Wl1at must be given - by t,he -pa�ties · is -what they ha.ve agreed to give. A contractin g- party �ari� �t·• discl1arge his o�Iigat�on by offering l1is cre�itor somethin g else, _ ��e,n �� the other thin? 1 s of 1ncon test� bly_ greater value than the tQing· _ _ promised. The creditor 11ever commits an abuse of right in holdino· to· tlie c6ntract and requiri11g, eve11 if 011e ca11not see why -he should� _ �he exact_ thing tl�a_t was agreed to. Article 1745 adopts tl1e ru le that 1�.. f�.u�_ �.: �-�- �h.� . �1v1� C(?�es of fr�nce (Article 1� _43), �e�anon .(Artie!� _ 299), Italy (Art1cle·l197) �nd Egypt (Article.341).... .... :_ _ ·: Article 1745.

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-�· . .... ·-- . ,. .. . . . ·s�, of · Chat�pagne· of ,x ,·brarrdn � bu ys ft� w B a ·ca � anre:- -�B:_ di-· . --�.· .l1ve· r� -� case of Cba-qipag0:e of Y brand, sayiiig_ tlia·t b·�· does ·not have any more bottles of bran . d X in his storeroom at the moment · b�� that brand Y is better and that, as a special favom ," he will give� the b�ttles of brand Y at the price of brand x' in order to · .:keep bis promise. in doing this, _B is actually offering to mo dify . · the contract; he is not perfarming the contract that has already bee� concl�ded. A can refuse the delivery tendered by B.

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Arti<;le 1746. From _this principle that the creditor can d�mand exactly what was promised follows the creditor's right to ref1:1se � pa:rtii;l�. paym�nt. Article 1746 (1) states this rule. Similar provi­ sions are found in the civil codes of France (Article 12�), Germany (B.9.�.,. Section 266), Lebanon (Article 300), Italy (Article I l 81), · and Greece (Article 316).

The rule of Article 1746(2) is borrowed from the Egyptian Civil Code (Article 342(2)). It gives the creditor tl1e right to require, as weµ as refuse; a payment that he con.siders partial if part of the debt is contested by the debtor. The debtor cannot delay payment until the. dispute is resolved, nor subordinate payment to the condition that the creditor agree 11ot to press his cla.im to receive more. lliustrations.

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A sells B three cases of Chan1pagne. A delivers two · can refuse accept this performance. cases.

B to · • A and B are discussing the amount that B owes _A. . � claims it is $1300; B clain1s it is only $1100. A writes ·,;to: B , ''Send m·e $1100 now; we will settle our dispute • · later.'.' B must se11d the $1100. 15 .

.. . Article 1747. Where the obligation is to deliver fungible thi.ngs, there are other problems. Who bas the right to ·select. the thing that' the creditor is to receive? A.rticle 1747 leaves this choice to the debtot in. the absence of agreement to the contrary, as do the Swiss Code qf. Obligations (Article 71) and the civil codes of Frai:ice (Article 1246),, Lebanon (Article 299), Italy (Article 1178), and Greece (Ar�cle 28�)..

B ut .· the debtor, in performing his obligation, must choose good� �f. at.l�ast average qualitJ. . , . '• . . .

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Editor's note: The commentary on the preliminary draft at this poiiit cion-­ tains several paragraphs discussing an Article 70 of tl1e draft, wl1ich ':as replac-· ed at a later stage in th�_codificatjon process by tl1e _present Ar�1cle J758.

•·. :. .. This Jat.ter Article, uniike Articie· 70 of the draft, p'Iace· s tl1e risk 'of deter­ :· .. foration and loss on· th·e debtor; in principle, rather than orr th·e creditor� · ·..

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What is to happen if the goods that he ·tenders, in.-such a situatio11, are of less tha11,. average quality, or are 11ot strictl)1 of the quality. expressly required by the contract. Tl1ere .is no pro­ blem if the quality delivered is higher tha11 the quality specified; suffice it to say tl1at in such a ,case tl1e debtor will be e11titled only to the payment· provided in the contract and cannot req1;1ire .more. But tl1ere is a problem wl1en the thing delivered is of a l�sser quality than was due. Can the creditor refuse the perform8:nce. thus . off�red or must he a�cept it and be satisfied wi�h a11 indef!1nity to reestablis� tl1e contractual equilibriu1n? Article 1748 adopts the second position, and extends it to th� case where the ·qua11tity offered by the debtor · · is .1iot in exact co11formity with· the contract. . . The . creditor who wants. to refuse the performance offered, by_ asserting that wl1at is offered is no'i: of t. he qua11tity or quality provided· for.in the contract, must show tl1at he h as a special interest· in _ receiv­· ing exactly the quantity or quality specified.

Article 1748.

Usually l1e will not be able to establisl1 such a11 interest and he will have to accept the performa11ce tendered �nd may only reduce his own performance or dema11d tl1e paymen� of · damages t·o- com­ pe11sate for the deficie11cy. Tl1e exte11t to whicl1 he _can reduce �is own perfor111a11ce or the amount of inden:i11ity he ca·n claim will h?,ve · to be fixed by tl1e courts in case of dispute.

The creditor also can stipulate in the contract a right· to reject the other party's performance if it cloes not.�on.fo1�m st�ictly in quality and quantity to the contract proyisions. Such a �lause obviate.s the necessity of sl1owing a special inte�e_s t i11_ recei,1ing exactly \.vhat was specified. · · In addition, tl1e quality of tl1e goods may be so described i n the contract tl1at a te11der of non-confor1ning goods will be of ''a different thing''. than that �pecified. In that case, 011e would apply Article 1745 r. ather than Article 1748. Witl1out sl1owing any special in· terest, h_e could reject the goods tendered. . .

One ought also to 11ote the relationship between ·Article 1748 · and Article 1746. Article 17�6 applies to a partial -perforrr1ance while Article 17�8 applies :1I1ere th�..debtor pretends to discl1arge th; whole debt but In fact delivers an 111sufficient -qua11tity. -In the first case, the creditor ca11 always refuse tl1e performance· tendered; in the second, he must, except i11 the two cases just dealt with, show that he has a special inter�st in receivi11g exactly the performance. promised. · · . . . · In West� rn codes, _tl1e rule �f �rticle - 1748 is usually fou.nd in the _ chapter deal1ng with· sale, and 1t IS accepted as current commercial '·

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u �age. It seem�d desirable �o place it in the Title of the Code dealing �th Cont�acts zn General and thus to extend the scope of its appJica:.. tion..

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B sells A I 00 liters of olive oil, to be delivered in Addis Ababa. When B's shipment comes to A, it co11tains only 97 liters. A cannot refuse tl1e shipment.

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The contract specifies that the oil must be of a particular quality. The quality delivered is slightly inferior. A must still a�cept the shipment, unless he specified that he would have the right to refuse anything not satisfyin· g the contract specifications or can prove that the difference in quality is sufficie11tly important that the delivery is not of value to him.

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A specifies that he is buying olive oil of a certain brand.

B delivers 1·00 liters of olive oil of a different brand. Here it is not just the quality of the goods, but their identity that is involved. A ca11 refuse the shipment.

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In place of olive oil, B sent peanut oil. A can refuse the shipment.

. . Articles 1749-1750. Mo11ey debts are to be discharged in the currency of the cou11tty where payment is to be made. This is so even where the amount, is stated in the contract in another currency, unless the contract expressly states that payment is to be made in the foreign currency.

Articles 1749(1) and 1750 formulate these rules in accordance with Section 244 of the Ge11nan Civil Cocle and Article 84 of the Swiss Code of Obligations.

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Article 1749 (2) p · rovides for these clauses because monetary instability and inflatic,n can occur independently of · any legislative decision. No effort was made, on the other hand, to specify in the - 45-

Code · the ··effects 'of·-monetary regulations;- · these ·w6uld- tequire spe:cial· legislative action• : · The Code,. rrtade · to · 1ast;: can· ·only ·p·rovide prin�; ciples tl1at prevail in normal circumstances a11d in a time of stability� When stability is coropro1nised, the legislator must take appropriate action in the particular circun1stances of the moment: ·to· concilate public. and private interests. Legislation: that devalues the currency o_ught to include provisions dealing witl1 -contracts· it_l _forc_e. Legisla­ tion on control of _foreign ·currency ought to say \VlJat happens to clauses in existing · and future co11tracts that provide for payment in foreign. currency.. ·1n · ·any case, tlie- 'legislator· must defi·11e what is meant b·y �'local. currency;' :as . that ·t'erm is : used iiJ Article 1749( 1).

Provisions on payinent ·should be put• ih the. Civil Code• 011.ly if they reflect permanent · monetary concepts or ··relate. to currency pheno­ mena that can occur independe11tly ·of legislative action. · . . . ,.•.

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A·owes B E$300, payable· i11-Asn1ara. A can119t discharge his -deb� by paying B the equivale11t_, il). Egyptian pounds, of E$300. He must pay in bills .or· �Oi.J?.S that are legal tender· ill: Etl1iopia. . . . .. ., . ' -�

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A concludes a contract with B and is to pay B, according t_o the contract, ?00 pounds. st�rli11g. T�.� place . of. pay­ ment is Asmara... A �.iij• disc�a�ge h1s debt�- by· . paying. .11_t ll.1 Etliiopian dollars' o.f 5PQ , B, in Asmara, ti1e equivale ., . . . .· �- . ,. . · __ . : . pounds sterling. . .. . . . .. . .. . . .. . �

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In the precedi11g case, it is specified i11 the contract that pounds sterling niust .actually ·be ..paid, and. not· Eth.io.pian ,, must dollars.. A pay i11.pounds sterling... ;. .. · . ·, · · · . . •· . . . . . ... ... .. ..

4 . _ A_ l?a1:1s. B._E$JQOO; _ I. � is ��ip�I8:t�d that. B �s to r�pay a . sum correspondi_ng to the price o·r·x· kii_ogr'�ms OT butter _ �r ?(. m�te�s of a par .ticu�ar k�11� _of cloth:· This stipula; . . : ·: , tion 1s-val1d;• . ,. . .. · · ..- . .. . · .·· . . . .. . . . .. . . · · ::: ·, Article 175 � : Arti_cle 17j:1 is "sin1iia:r · to·· r\iles in·· ·1:11e cod· �s: :of: · S\'Yit _ �e�la�d (�ode of Obligatio11s ·; A:�tjcle·· 73· )� Ge�ma:ny·�(��G.-B::,: . : ·1� do:7 - rticle · I� 8 ��: �ect1on 246), �.nd Ita��.(Civ�l_ C9�e, � s.. �6t sp�cify _ 1n what cases interest IS due In the abse11ce of acrreeme11t between tlie 0 parties or at what time i11teres� pay1nents are to be made. It sim · ply: __ _ states .the: rate :of interest_ tl1at 1,s · to.-J�e - l1en� interest is--due an d . i.d � : :p:;t the .parties l1ave·_not fixed the ·rate� : : _· -The -pr_o�isi�P 9f irti�l�·--:i7 Sl�- is, '.2 · applica1;'le, in particular,. where:·one qf ·the pa,;ties, -owes -' th e· ..�t h �� � · . . . . .)

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: Articte3. ,1752· -1754. When a �ebtor does not' pay all he owes bi's creditor, either because he m.akes a partial payb1ent that i� ac�epted by the creditor, or because he owes several debts to the creditor atid makes.a payn1ent_tha t � i nsufficient to discharge them all, j t is necessary to determine to what the payment applies. .

· · Articie ·1752·deals with partial payments and states that it covers first c osts, the11 i11terest due, and only fmally the principal debt. Tl.us �oofpr. rp.s·. with th� r:ule in various Western legal . systems: Fre11ch Givj1 . Code .(�ticle 1254),. Swiss Code of Obligations (Article 85), Italian Civi l. Code (Article 1194). The formula itself is borrowed fron1-the c oue.s pf Leb�n on (Ar ticle 308) and Egypt (Article 343). ,

1753 and 1754 deal with . the case where the debtor is : . . Articles· . . . . liable , toward a s.ingle creditor for several debts. The debt or may 1ridi¢ate which of the debts he i 11teuds to di.sch�rge. If he does not, tire· credi tor may specify in his receipt the debt to which he is· applying the payment; when tl1e debtor receives the receipt he can declare his �pp·os�tion to tb�.s 8(ppliQation of the n1oney and declare which debt �e :-has-_qischarg�q: Th� provisions of Article 1753 are similar to �l;lles:j1:i th� Swi ss Qpde of o.bligations (Article 86) and the Leba·nese C_i��· Code (Ar· ticl�:397).. .· '

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If the cJ,ebt or does not declare his choice and jf the receipt con­ ·�ajns J1Q specifica;tio11; the law itself makes an imp·utat:ion of the pay­ �en�· . Article 1754 c. oT�siders first the date of matur ity of the d.eb t an4 secopdly · how .burdensome the _ debt is for the debtor. Payments are· appl ied firs t to debts that are due; among debts that are due no d istinct ion is made on the basis of the date on \vhich they fell due.

For debts that are 11ot due, payments are imputed first to those that wjµ fall cl'. ue firs:t� :If-s,everal debts are already due or will become due OJ1: t4e s-ai;ne date, the payment is imputed first to the one most burden­ �G.me• t,o the• debtor. If an application of these principles does not 9i�Jate in;1putation to one de�t over another, the payme11t is to be appli­ ed tq �U·.debts in p�oportion to their am oHnt. :'.�: : ':(.Ji�� ruJ,es, which apply when neither the debtor nor the cre.ditor .qa�- sp,_ e�ifj�4: his choic�, seemeq sµfficient and certain distinctions made in other civil codes (French, Article 1256; Italian, A1·ticle 1193; Swiss, Article 87) have been abandoned. .. . .. ... . .. ... .. ..

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­ pay ere wh ce pla the s ine er1n det icle Art is Th 5.

115 icle Art ment is to be made. If the parties deter1nine the place of payment, their agreement will be respected. If tl1e parties ba�e said notbi_ �g, it is provided generally that the payment is to be made at the dom1c1le of the debtor. 17 There is, however, an exception to this principle under Article 1755(3): unless otherwise agreed, payn1ent in respect of a definite thing is to be made at the place where sucl1 thing was when the con­ tract ,vas made.

Article 1755 is similar to rules in the civil codes of France (Article 1247), Leba11on (Article· 302), a11d Egypt (Article 347). It differs, however, from the Swiss Code of Obligations (Article 74), the German B.G.B. (Section 270), the Italian Civil Code (Article 1182) and the Greek Civil Code (Article 321), wl1icl1 declare payments of money due, in general, at the domicile of tl1e creditor. It did not seem advisable to include in the Code such a provision, which would favour creditors; if tl1ey desire such a clause they should be sure to include it in the contract.

Nor does the Code contain any pro, ision like Italian Civil Code Article 1182, which provides that exceptions to this rule may result from custom, the ki11d of business i11volved, or circumstances. A clear rule see1ned preferable; if tl1e parties wish, they can alter these rules by agreement.

1

The example of the Greek Civil Code (Article 322) led us to speak in Article 1755(2) of the· place where the debtor had his don1icile at the time the contract was made rather than, as do other codes, simply at the domicile of the debtor (or creditor). 18 Illustrations.

1.

A loans B £$1000. Nothing is sa.id about the place where the money is to be paid. It is to be paid at the place where B has his domicile at the tin1e the contract is, made. The place where the contract is concluded and the place where the mo11ey is paid to B are irrelevant.

2.

A sells B a carpet. T �e carpet is to be put at B's disposal . at the place wl1ere 1t rs located when tl1e contract is con­ cluded.

17.

Editor's note: I-Jere again, Professor David uses tl1e word ''don1icile'' in a non-tecl1nieal sense, sine � tl1e text speaks in terms of ''tl1e place where the _ debtor had h1s normal reside.nee.'• See note 2 abo,,e.

18.

Editor's note: See note 17 above.

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3. .

A undertakes to deliver 10 quintals of flour to B. The flour is to be delivered at the place ,vhe.re A bas his donucile when the contract is made.

Articles 1756 and 1757(1). The time when pay1nent is due, like the place of payment, is to be fixed by agreement between the parties. Among the possible provisions in the contract, the Code deals in Chapter IV of Title XII with time provisions and conditions, both of which are related to this question.

Where 110 time for paym�nt is fixed in the contract, the parties are normally required to perform their obligations i1nmediately. A party must perform as soon as the other party gives him a notice of default in the manner prescribed in Section IV of this Chapter.

Perfor1n.ance (in bilateral contracts) should take place, in pri11ci­ ple, simultaneously; he who requires the other· party to perform his obligation should already have performed his own, or should offer to perfor1n it immediately, unless of course the contract fixes a later time for perfor1nance by him. Article 1757(1) states this rule expressly, similarly to the codes of Germany (B.G.B., Section 271), Switzer­ land (Code of Obligatio11s, Article 82), Italy (Civil Code, Article 1400), and Egypt (Civil Code, Article 161).

Articles· 1757 (2) and 1759. Article 1757 (2) deals with two situa­ tions where one party, although not the beneficiary of a tin1e provi­ sion, can, as an exception to· Article 1757(1), refuse to pe1·form his obligations. This is inspired by the English concept of anticipatory breach of contract.

The first situation is tl1at where the otl1er party has clearly shown that he will not perform his obligations. Article 1757(2) does not require that this intention be expressed in any particular way nor that it be commu11icated to the creditor by the debtor.

The second case is that where the insolvency of the other party has been established by a court. The Code does not require that bankruptcy have been declared; an attachment that has been ordered without success in favour of another creditor of the debtor is sufficient.

In these two situations, a person has the right to refuse to per­ form his obligations; the other party cannot then object that his own obligations need not be perforri:ied.

In order to have a clear idea of the rights of the parties, one should consider together with Article 1757 (2) the provisions in the Section dealing with the non-performance of contracts that allow a party to declare a contract cancelled i11 certain cases.

The right to suspend performance of the contract in the two situations outlined in Article 1757(2) ceases, by virtue of Article 1759,

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:

if the otl1er par�Y produces securities sufficient to guara11tee tl1at he . will perform his obligations. A new_ undertaking by the defa� .lt1ng party is insufficient; he must provid� s_e�qrities that guarantee timely performance of his obligations. 19 Illustrations.

1.

A has undertaken to perfor1n for B a role in B's tl1eater in February. A then undertakes to play another role in another theater in the san1e city at tl1e same time. It is clear that the two u11dertakings cannot both be performed. B . . can refuse to n1ake adva11ce payments that he was to make to A u11der the contract. '

'

2.

B declares in public tl1at he \\ ill not perform his obliga­ tion to A. A can suspend perfo1·1nance· of his part of that contract that B has deciared he will not perforr�.

3.. •

A concludes a contract with B. I-I� is to deliver to B a fixed number of cases of beer per month that B will pay for every three n1onths at a fixed ti.me. B goes batlkrupt.

A can stop his deliveries, u11til he receives a guarantee that lie will be paid.

4.

A is to deliver to B, under a co11tract, I 00 cases of beer, for which he has ali·eady been paid. B negligently ·in.:. jures A in an accident and must pay l1in1 co111pe11sation for this. A cannot refuse to deliver the cases of beer until tl1is compensatio11 has been paid. B's debt is not co1111ected witl1 the contract from \-vl1ich A's obligations derive.

1

1760. 20 Unless otl1er\vise agreed, the debtor is to n1eet the costs of payment. Tl1is rule is also found in tl1e codes of France (Article 1248), Leba11on (Article 304), Italy (Article -1196), and Egypt (Article 348). The· costs of payme11t can be considerable; th e. y in­ cltide costs of packaging, tra11sportation to tl1e place of delivery, �nd taxes that are collected at the ti111e of tl1is tra11sportatio11 (import duties in particular). Generally, l1owever, the debtor will not. have to meet most of these expenses anyway because of the way Artic\e 1755 establishes the place of payment. The expenses of payment will Article

19.

E�itor's note: T l· 1 e Co�men �ary on tl1� preliminary draft at tl1is poi'ut con­ tains two paragrapl1s d1scuss1ng an Article 83 of tl1e draft ' \Vl1icl1 was omitte·d ' at a later stage in tl1e codification 1,rocess. '

•

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Editor's 11ote: Article .1758 was not co 11tained in tl1e 1,relin1t11ary draft of the Code. It was added at a later stage i11 the codification process. and so is the subject of no con1ment here.

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a.lw.ays include, on the other hand, the costs of providing a receipt · • and stamp taxes that may be collected at the time of payment.

A·rticles 1761-1762. Articles 1761 and 1762 establish the debtor's right to require a receipt for paym.ent and, when he has paid the whole debt, the return of the docun1ent evidencing the debt. These Articles are similar to Articles 88 and 90 of the Swiss Code of Obligatio ns. ..., Similar articles are found in other codes: Egypt (Civil Code, A,rticle 349); Italy (Civil Code, Article 1199); Lebanon (Civil Code, Article 366), and Germany (B.G.B., Sections 368-371).

SECTION ID.VARIATION OF CONTRACTS

21

(Articles 1763-1770) Articles 1763-1766. The question of whetl1er the courts should have tl1e power to modify contracts in certain circumstances has caused liv_eJ y discussion since the War of 1914. Writers, courts and legis­ lators have proposed a11d adopted various solutions to this problem.

Tl1e problem of modification of contracts comes up in t\VO different ways. First, do the courts have a supervisory power over the forma­ tion of contracts so that they can modify its cla11ses simply because they seem ineqtlitable, apart from any change in circun1stances?

Aside · from a few specific co11tracts (co11tract of assistance at sea, payment of some age nts, and, in France, marriage brokerage), West­ ern legal systems have unani1nously refused to give courts this power, which· would allow the1n ''to make contracts for the par t, ies." Arti­ cle I 763 states thjs ·rule explicitly. The only remedy for a party to an inequitable contract is to request the invalidation of the contract on the ground of a defect in co11sent.

The threat of such an action might lead the other party to com­ promise and modify by agreeme·nt the unfair clauses in the contract.

Variation ·by agreement is, of course, always possible. The courts themselves can only jnvalidate an inequitable contract; they cannot modify it.

-The problem of whether a court can modify a contract also comes up in another contexr, where circumstances have cl1anged after the contract vvas made. The balance in the contrac_ t that ex.isted whe11 it was concluded has been upset. The party who is prejudiced claims either that t he contract should be modified or that he should be released.. He asserts the existe11ce of an in1plied rebus sic staniibus . • Editor's not�: Tl1e words ''vary·,, and ''modify'' are used interchangeably iri the translation of this Section of the Commentary, as they are in tl1e Code articles themselves. ,

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clause in the con.tract. Or l1e claims tl1at it is impossible to perform the original contract; the contract tl1at can be performed, he says, is a different co11tract from the one tl1.e parties agreed to. There was considerable division among Western legal systems following the War of 1914 concernincrb how this problem should be dealt with.

Article 1764 holds to the traditio11al position on this point which was accepted in all cot111tries before �914 and which still prevails in France. Except where expressly per1nitted by Ja,v, the courts cannot vary contracts.

The reasons that support this solution are obvious. First, it is an attempt to avoid a proliferation of litigatio11. And second, although courts are well able to solve. legal problems a11d state the law, they are not qualified to deal ,vitl1 questions of economics and to draft contracts. For tl1is double reason, it is essential to have tl1e rule set forth in Article· 1764. The parties n1ust know that their con­ tracts bind tl1en1; wl1en they conclude a contract of long duration, they should protect tl1en1selves against tl1e risk of circumstances changi11g after the contract is made. Tl1is is in fact what happens in cou11tries like Fra11ce ,vl1ere tl1e ''theory of i111previsio11'' is rejected.

The rule provided in Article 1749(2) increases these possibilities in Ethiopia.

Tl1e courts cannot 1nodify co11tracts except in cases provided

by Ia,v. Article 1764 , i11 stati11g this rule, calls contracting parties' attentio11 to the proble1n of co11tract 1nodification and suggests that they may wa11t to provide for it in their original co11tract. It also suggests that even if they did 11ot put such a provision in tl1e contract, they may want to mal<e a new contract taking accou11t of new circum­ sta11ces where justice so requi1·es. With respect to this latter possibility, however, 011e should remember Article 1722: the new agree1nent, 111odifying the earlier 011e, must be concluded in the same form that was required for the validity of the original contract. lliustrations.

I.

A contracts with B to have B do some work for a fixed price. A l �ter le �rns t?at tl1is price, wlticl1 he freely agreed to, 1s terribly l11gh. Another co11tractor would have do11e the sa1ne work for 011e third the price. The court ca11not vary tl1e contract 011 tl1e grou11ds of fairness.

2.

A agrees to fur11ish water to B for the irrigation of B's land. The_ contract is m _ade for 99 years. It is provided that A will supply B with a certai11 number of gallons of water r�r da 1 or per week for a fixed total pr.ice. The cost ?f l1v1ng increases greatly and the price agreed to - 52-

seems absurdly low. The courts cannot vary th,e con­ . tract in order to raise the price.

3.

A undertakes toward the central' or a nrovincial ' governr,; ment to provide specified transportation services between two towns for a certai11 time according to stated condi­ tions. Circumstances change and the service can no longer be provided except at a loss under the tenns of the contract. Nevertheless, the contract must be per­ formed. The courts cannot modify it (except in the circumstances set forth in Article 1767).

Article 1765 again shows the Code's positive attitude toward the variation of contracts where circumstances have changed, witl1 the single restriction t,hat the variation is not to be made by the courts.

It allows, and even suggests, that the parties submit to third pa,rty arbitration in such a case. Article 1765 seemed desirable also to make it clear that, if there was an arbitratio11 provision in the contract, no one ·can claim that the object of the contract is insufficiently defined and that the contract is therefore invalid by virtue of Article 1714.

A particular use of Article 1765 is show11 in the discussion below of Article 1767.

Article 1766. Articles 1766 and following provide four excep­ tions to the general principle that courts cannot modify contracts.

The first exception, provided by Article 1766, deals with certain contracts where good faith is particularly reqtiired of the parties because there is, independent of the contract, a special relationship between them. Article 1766 should be seen in conjunction with Article 1705(1), which also deals, in connection with vices of consent, with cases where there exists between the parties ''a special relation­ ship of confidence that com111ands particular loyalty in their dealings with each other." This same kind of relationship justifies the varia­ tion of the contract by the court in certain cases under Article 1766.

Article 1767. It seemed necessary to provide for cou.rt modi­ fication of contracts in a second situation: contracts with the govern­ ment, 22 to which the Civil Code does apply, as we have already point22.

Editor's note: The French legal term ''l'ad1ninistratio11'' is a particularly difficult one to translate into English. The term designates one part of tl1e excecutive branch of government. ''L'ac/1ni11istratio11'' is that part of the executive which administers, in tJ1e strict sense, and is distingt1ished from ''le got1vernr11ent'' which is made up of higher level officials who make the policies that are adn1inistered by ''/'ad111i11istratio11''. ''L'admi11istratio1i'' is ordinarily tra11slated in tl1e Etlliopian Civil Cod.e by the term ''the administra­ tive authorities.'' We will use this translation here, but will also· translate ''/'ac/111i11istratio11'' as "the government'' in cases where that seems more clearly wl1at was intended.

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ed out. · Co11tracts . with tl1e governme11t pose a :special proble111 because the go,,ernme11t. is significantly differe11t·fro:ril private per­ sons. 111 additio11 to its J)Ower to concl1.:1de contracts, the govern­ ment can enact rules that apply to_ all. I� cannot be admitted, i11 a code based on the pri11ciple of the equality of · co11tra�ti11g parties, that such general rules could t1pset the equilibriu� of th� co_11tract to the detrime11t . of a person who contracted with the ,. governme11t. In such a case, Article 1767 allows the coltrt to modify. the contract.

Article 17.69 .. specifie� tl1e basis 011 wl1icl1 th_e moc:lific�tion is to be made: the court is to e11st1re that the eqt1ilibr�u�. of ,the contract, upset by the u11ilater�l act of 011e of th,e COJ?tra�ting ,parties, _is re. . . , . . established. ..-

'.

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., ..

Article 1767 presupposes an act of tl1e gover11n1e11t� This n1:ust · be a regulatory a· ct: . statute, decree,. order, etc: ··The , gene,:al policy of tl1e government or its failure to act may n1ake :tl1e�. performance of a contract more difficult, but it is not sufficient r.ea·son ·to modify the contract. Moreover, the act in .question 1nust. be- . a11·: asser.tio11 of public pd\ver, that is to say a11 · act that the.government. could t:ake . only because .it. is the government PO"'er. and tl1us ,q.a,� regulatory . . . . . . . .

The person co11tracting cannot co111plain of an act that- does .- ,nQt result from these special prerogatives of public po,v�r sln�e h� _could l1ave beet1 exposed to the same risks if the ·other p· ar�y_ pa:d bee11 s·o!11�: · · •· · · ... :. · one other than tl1e government. .. , ... . �. ... .

TJ1e ten11 ''a public adpiinistration,�' as used in. Articie· __-lYqJ., includes the State a11d its admi11istrative subdivisions,. both oi1 . - �·gep�: graphical b·asis (provi11ces, districts, con1n1unes) a·11d· on a fu11ctf9ijci) · 2 3·, •. - __· .·. _-, basis (ministries, public scl1ools, public hospitais, . etc�)� · .

111 spite of appeara11ces, Article 1767 does not coristitute:· a1i:· ex­ . ception to tl1e general rt1les on contracts .· In an , ordiriarj pri�a'.ie contract, the rule that contracts are to be perforn1ed ·in: C,o-cJod • faith would prohibit one party fro1n 1nodifying llni1atera11y tlie �co11ditioi1s in light of whicl1 the contract was co11cluded, ilius. n1aking .tl1e. per­ fonnance of tl1e co11tract more onerous for the otl1er party.-� , Soch conduct \Vould a1nount to a _failt11·e to J)erforrn the co11tract an.d:.,tlie other party wo·uld be a.ble to collect da111ages or even have tl1e con. . .

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Editor's 11ote: In otl1e.r words, it n1eans ''the go,1eru111ent':· as tliat .terni is ?sect in �nglisl1� ancl tl1at st�ll in � very_ b�oad sens�: This.pa_ ragr.apl1 was � nte11ded to _clarify tl1e broacl- sen�e 1n wl11cl1 l 'ac�111i11istratio11 was ·n1eant 11ere 1n tl1e origi11al, Frencl1, prelin1i11ary draft 'of Article 1767.. See note.. 22 ab ove .

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�ci·:caneelled; · Th_ e all0cati0n of damag€s,. which . i s .gen- erally avail­ ali>le, is, aottia.lly equiv-alent t<;> the variation. of' , the:cot\1tact provided foi ·i1i· Ai-ticle -1767�· · A special Ful© fo.£. contraGts With�the· government is useful for two reasons. First, it is impossible to. say that the govern­ ment acts contr�ry .to good faith when it exercises 'its publi� p.ower.

And second, it is tmportant to limit tl1e possibi1ities for variation to cases where there has been an assertion of the. ptiblic p_o�1er, -�hich ts here distir>:guished from the goverrune11t's general conduct of busi.. . ness and its .poli�ies. . . .

•

•

Article 1767 seems to give the person who contracts with fhe government a privileged p·osition, since the right to require mo·dffica.. tion of the contract only operates in his favour. But tl1is is otjly appearance� since the government l1as the 1neans, when it enacts · a decree or an order, to lin1it its effects \.vith reference to contracts.in · f.oi-ce. · · •

.

., How�ver justified- _court modification of contracts may see.re in this situation, it is still desirable to lin1it this kind- of n1odification to the minimum required. Tb.e best way to avoid the necessity of court modification of administrative contracts is to in·clu·de a clause -in the contract providing for third party arbitration in the situation dealt w��l1 ,by .Article 1767. The proble·m of admii;iistrative contracts was 24 the inai11 reaso11 that Article 1765 was included in the Code. . ' . . . ' .. .

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'Illustrations. .

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A undertakes, i11 a co11tract with a proviooial gover11me11t, .' • - . .. . to provide· transportation between cities X and Y. The ·-• -� � .government estab1ishes a new gasoljne tax or requires . the payment of a toll for the use.' of a bridge between X · . . .

• . .

• ' and. Y. A can require the modification of the contract - to compensate hin1 for the dan1age caused by this general . ... ' ' , · · ·· regulation. . . . . '

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•.. - :2.... - - In· the sa.me situatio11, A complai11s that the road· is bad,ly ' cared for by the province _so that his equipme11t wears •.. ... :.: . . out ·q�i�kly.. The contract cannot be v�ried by the couFt, since there has been no act of \.\'.hicp. A can complain. , •

1

:: . :·

: ,

•

. , .3.: :. :·The tax· on commercial profits, to which the transporter is subject, is increased. A ca11not require the modifica,-... . ...,... , . . ... " ',

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Editor's note: Article 1767 can give �n illusi-on of simplicity. It must be read together with Article 3179-3193, \-Vhicl1 provide ,L complex set of rules concern­ :� �.:l ·ing:the m·odification· of administrative contract.s, a special kind �r·g·o ve�n� . ; ; . � ... :ment· contract that is defined i11 Articles 313'1-3 I 32 of tl1e Code.. . · · .. · ,

24.

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tio11 of bis contract. The business in which I1e is engaged may l1ave become less profitc:J.ble, but the perfonnanc_e by ·· A o. f his obligations under the coµtract has not be99me more onerous.

Art1cle 1768. Article 1768 states a rule that has long been accept­ ed in Western· legal systen1s. It applies where the per�orma� c� _of the co11tract ·bas becon1e partially impossible. The 1mposs1b1l1ty may n.ot be sufficie11t to justify the cancellatio11 · of the contrac� un�er Article 1788, but the judge is autl1orised, in such a case, to modify the contract ;in.d. reduce the obligations of the party who will not receive the full per.forma11ce tl1at v;1as pre>n1ised him. Court interven­ tion is not subject to the usual criticism in tl1is case� . He�e something affe_cts the vr;ry _.possibil!ty of performing the contract, rather than being exterior to it, and requires the intervention of the court. In addition, the court \Vill not be creating a new co11tract with '1: new balance between the parties. Rather its attenti�n is to be directed to reestablishii1g the ·equilibriun1 bet\-vee11 the parties that was reflected in the original contract.

Article 1769 states this explicitl)'· Illustrations.

l.

A le�ses land belonging. to B. A part of this land is ex­ propriated by the State in order to build a military base.

A 011ly retains 9/10 of the la11d tl1at he leased. The court 1nay reduce tl1e rent to 9/10 of what was provided in the contract.

A unde�takes to build a house for B, using a certain kind 2. of wood for tl1e floors. It beco1nes impossible to get the wood sp�cified, and a different· wood, of inferior quality, is substituted. The price agreed to by B may be reduced. . .

Article 1770. Article 1770, finally, allows a court to grant the debtor a period of grace. This possibility is also provided by the civil codes of Fra11ce (Article 1244), Leba11011 (Article 115), and Egypt _ (Article 346). It seems to be u11know11 in other countries. With 1nuch hesitatio11 it was i1Jcluded in the Code, which did limit it, how­ ever, to six months 1naxu.11un1.

It is ·possible for tl1e parties to provide that tl1e courts cannot grant a period of gra.ce.

SECTION IV: NON-PERFORMANCE OF CONTRACTS (Articles 1771-1805) . .- _ • Ar �ic/e 1771. Son1etimes a debto� fails to pe1form his obliga­ tions, either totally or in part, or he may perforn1 them_ improperly '

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or late. In all of these cases ,- the Code speaks of 1100-perfor1na11ce , . · . · · of the · contract. .

Article 1771. introd·uces generally the th.ree possible consequences of non:..performance irrespective of whether or not the debtor is at fault. · They are specific performan.ce, cancellation, and damages.

The subsequent Articles of this Section specify the conditions under which these various remedies are available.

Articles 1772-1775. Before a person can· assert the rights that arise from non-performance of a· · contract, he must put the other party in default, that is he must call his attention to the fact that the obliga­ tions are due and to the sanctions the debtor may incur if he does not perform them. This requirement of putting the other party in default by notice exists in all Western legal systems: 25 French (Civil Code, Article 1139), Swiss (Code of Obligations, Article I 02); Lebanese (Civil Code, Article 257), ltaliati (Civil Code, Article 1219), Greek (Civil Code, Article 340) and Egyptian (Civil Code, Article 218).

No special formality is required to put a perso11 i11 default. The 11otification can be by means of an official summons, or simply by a letter, even unregistered. The notification of default can be accom­ plished by any act that indicates to the debtor that the time 11as come for him to perfor1n his obligation and that indicates the creditor's intention to require performance. The only condition imposed by the law concerns the time for notification; it cannot be given before the debtor's (?bligations are due and, thus, enforceable. '

Tl1e notification of default has four fu11ctions. In obligations to give, it puts the risk of loss of the thing on the debtor. In obliga­ tions to pay money, it begins the accumulation of interest for delay.

More generally, it ren1inds the debtor of his obligations and of the sanctions he will face if he does not perform. And finally, it should lessen the number of cases that come before the courts; they will only get cases in \\1bich there is a clear failure to perform. of default cannot serve any of these ends, Where tl1e notification . the Code does not require the creditor to use it and allows him, instead, to immediately bring a court action against the debtor. Arti­ cle 1775 (a) and (b) enumerate two cases where this is so. Article 1775 (c) adds a third case, where the debtor has declared in writing that he will not perform his obligations. The effects that would _ otherwise result from the notification of default ru.n from the tune when this written declaration is made. Finally, according to Article .

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Editor's note: By this Professor David means all western leg al systems of . . the civil Ia\V type.

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.I 7J5(d),,•:notifi.c ation of . default is unnecessary._:when the parties. :have expressly so· agreed. Oti-ier situations in which no: . notification of d.efa�l�. i�_ re_quj.r�4. . �.r� prov,id�Q _f�r ,in �rti_�le_ I ?8Q. _·. _ : : _ . . �: _ . -�. . :_:: A�ti�Ie 1774 �dopts: ·a· ·pro�isi�� . fro� -.�h� Ger1nan.. Civil €ode (B;O,.B;,_· Section , 250) and allows the creditor. to ·specify in his noti­ fi.catio11..of · default-,a time after.. wl1icl1 he will not. accept .actual pet.; fon11ance of the contract and will insist on cancellation and damages. '"fl�� p�rpose qf �l1i� proyision . is . to. permit, as often as P?ssi�I- �, the sett1ement o'i1tside o _f court. of. . d.i. ffic�Ities that_ �rise at the t1�e. · qf _per� · · . .· 7 . _ ••. f�rtnafic·e of rtl�e · cobt�a:ct. . . .· . . .. . . . . _..·;;·:·.-. ·· Th� tim.e fixed by �he c�editor ·must be reasonable. But if it. is re.a.s·onable a11d has -expired; tl1e creditor· may- unilaterally cancel·: the oontraGt•. without:going to court. : In such:a· case, the courts will only be. �o1ne .inyolv.ed :if . tl1�r:e is a :disp·ute a·s to whether the time fixed was also clain1s da_mages and th� d1:;btor . diso· r if tl1�-.creoitor :t:ea&-en'1;ble, . . · · ... - '. putes_ · their :aw.o-µn·t · or tb.G · fact- that· �h·ey ar.e due. : .,

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-. · . · ·J:,.: . · .· A, wl10 manages a cafe, undertakes to· buy beer exclusively . . "fro1n B's brewe·ry. fie then orders·-.:beer from C's.�biew=· . ---·:; •. · . '.. ..

• ery '. ··The ·sanctions - ·for · n9n-perfor1nance follow . with·, � · · : · · out tl1e necessity of · a notification of default, since it• is- an ·· ·. ·· .obligation ·11o·t to do something tl1at · bas .·been breached. . . .. . . .

2. orders A e,-ci r fi ackers and dance costumes frorr.i B some � ·. - _;, · ·· : for a· feast· -or fair.· It is · obvious tl1at A -inferids to sell . . these items at the feast and -th.at if they: are delivered -late ; . ·.-.- :· .. . ·. '_: ·· · he will not ·oe able to se�l tl1em for a very long tii ne. · . B-will '·:-:: be subject to the sanctiOI)S for non-perfo11r1ance .if Ile has '.! .: ; . ''.'.: ·· ·· · :. - · not-delivered the · items- before the · tair.. A: n.otification :: · of . .. !· ·� , · :·: · . default_ is not necessary· iri such. a case. · . . . . · · · Artic le Wl1e 1776. a n debto r fails to perform his obi'i�b.ations' . . . . . .· .· ' one · ·remedy· available to tl1e creditor is to request the cou.:rts to · · force . . �-.:. to · perforrn. . ... .

-..':'. :; ...�pe�ifl�, . ·or· :_·fprced, pe�-f�;n1cinc� js --����ally c�nside��d ·- is: th� �R-�n1al r�Il!ed.y in a civil la\_v �y�tem. The.Anglo-Am�rican c- ����. ·� la'?':syst�m:; qn �l1e ot��r l1a�d, r�garqs this as :an exceptional �eme4y, �Y:?.J.labl� only �f -d�D:1�ge� are inadequate , to satisfy _the creditor's , .. . . · · · ·:··· needs. . . .. · . . \. ' ......

The Code lea11s i11 tl1e direction of tl1e common law solution �ta�m. g 0':lt_-sp , ec,ifif-.pe�fqrn1a.n ce-. is_ only_,.av�ila:t,le .,vh�re it. is of::�peQi; fie interest to the creditor. Even then 1t must-and_·.t_ his .requirement •J

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.:ste.rn : is:· comm on :,tn � ai v r • n !�c ,. . le g· a:·l·. s� ;1 ·...t� em · : s� es pos b s1 · e ;te.: ha 'b l . ..,. - _ : ve: speci. : • fic p erfoon•ance. w1tho·ut.affect1ng the ,·personaLlibert:r of .tiel debtor� !,J?:u�, �-�Jl�_r.a c_t _ .C? f �PJ:plqy��µt _c�µn _ .o._t .. I?�. the _ qbj,ect of a. judgment ··· '· -�of �. P,�c�fic petf orri1ance : ·· · · . .-·. ·: · · · · . . ... r ,. . � , .. .

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s. . ." . . Illus. tration . . .

I . . . . A· manages · a factory that ru.ns on· el�ctric �urr�nt. •·· H� . .. . . · c on� racts with B to furnish the electricity needed. Afte�a d1sag �eement, B cuts the current to A's factory� :·The . co?rt. �1ll ,9rder that the current be turned back on (�peci� '. . �c, . or �orced, performa_ nce}, since A has· a particula� ' ·· interest 1n the performanc� · of the contract.

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A unde i. takes to· provide B with room an d board for a fixed ;Period of time · at a fixed price. A refuses to per.:. " form the contrtlct. · The -courts will ordinarily .11ot oide.r the specific performance of this c ontract. As an e�cep.. ti on, they may order it if:

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ce �� ' t�� rforma interest particular· of is co11tract the of a) � . .,.

- _ _d ariy place else to live ; and who to fin cannot �, '.. '

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the perfor1na,nce of the .contract is possible without A himself, acting, sucl1 as· wl1ere oth :er perso11s _i11 A's establish­ .. me nt can provide the services d·ue. B. •1 .. ,

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· .. : -Bo th of these tw o conditions m · ust be satisfied . befor� specific , perf orma11ce will be ordered. .. . .A,�tieles I 777-17,78. '- Article� 1777 and· 1778 dea1 with several ! situations·· wl1ere.: specifiq • perform.ance, of �e- d�btor s · obligatjons diffe rs little fr on1 an award of damages a11d where; cpnsequently, the possible objection� to specific. perfor�ance disappear.. Whe·re .the ·��editor . mething, the debtor has undertaken 'to do or not to do so ed at the ·expense' rm s perfo ation ed · to· have the oblig riz o auth e can b r, ' •• • • • ' - -, • • • t • . •• -his e�pe�se tl1e ·th· ing·that the · a� d e c;>y destr e hav to· r o r, th o e of e d bt . . debtqr ha� constructed· in violation of their agreen:i.ent; . These �fyl_o possibilities are also "foreseen by ··the laws of Frfilice (C!y�l Co�e; · 'rtic1e"_ ?8), , A of Obligations de (Co la11d Articles. I143- .1144J, Switzer • .. . .. I\ .... "' � • ., • "' Ies e; Cod ivil A� C ( pt · Egy and ), e ,_ Article 250 Lebanon ( C. ivil. Cod . . .. ·. � �- . �;. . : - . : . · . ..

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_ . Egyp��ap _l�w . ey�P. p_rovides _ th�t i� _c�se o[ emer� e�� Y. _ the cre��­ . tor n eed ript obtain the,: QoJ.Irt�s. at1;�horizatioQ,. but 1t _91�. 9,.Q� .• seem advisable to -include such . .. a ·. provision �n the E1:1\iopian· �:yif.:, Code.

Forced perfor1n�nce of the obligati,011 presuppos�s. 4 GQ:l,!�:��cision in all cases where the debtor was obljged to do or n ot:to ·0.o·s0tnething.

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:In the case ·of obligations relati11g to fungible goods; . on the othe1· hand, it see111ed useful to 1nake a clisti11ction · in Article 1-778.

In pri11ciple, tl1e· creditor n1ust o· btain a court authorization �ven here if he wants to purchase at the expense of the debtor the things _ that were supposed to be delivered but were not. A court author1za.­ tion is not necessary, however, where the contract explicitly allows the creditor to by-pass it. Similarly, it is not necessary if the things that were to be delivered are quoted on an exchange or 11ave a market ·· 26 price.

No article of the Code deals specifically with the situation where the contract creates an obligation for the debtor to transfer to the creditor his ownership or some other·real tight in a specific thing.

Article 1776 is sufficient to deal witl1 tl1is . case. . I.f the interest of the creditor requires, the court can transfer the ·right to the er.editor and authorise him to perform all the neGessary _for-malities at the expense of the debtor. '

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Illustrations.

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A under.takes_ .·to mai11tai1i ,i11·• good .cond.�tion irrigation ditches belonging to B. If he does riot perfon11 his obliga­ tions, B can request court autho1·ization t6 have C do the 11ecessary work a11d se11d C's bill to A. .

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A., in violation of a contract with B, · closes off a passage that B 11eeds to · use. B can ·be authorized to clear the . , passage at A's expense.

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A buys 500 kilograms of sugar from B. B does not de-. liver. A can be autl1orized to buy 500 ·kilograms of sugar at B's expense ....

Articles 1779-1780. To the rights given the . creditor under· Arti­ cles 1777 a11d 1778 there correspond certai"n rights for the debtor where the creditor cannot or refuses to receive 1]1e performance that is due and offered by the debtor. These are specifie_ d in Articles 1779 to 1783; where tl1e debtor l1as put the creditor in default for not �ccepting perf �rn1a11ce, he has the rigl1t \o deposit the thing tl1e creditor refuses without good cause to receive. He has the same right whenever he can11ot perform his obligations normally, as for 26.

Editor's note: Tl1e distinction n1entioned by Professor D�vid was removed from the preliminary �a �t '?f .tl1e Code at a later stage in the codificatioii under Article I 778, as enacted, process. Court autl1or1zat1on 1s necessary . m all cases. yve have, tl1erefore, �n11tted � f�urth illustration of the operation _ of these Articles, \1/h1ch dealt with tl1e el1n11nated exception.

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example where he does not .know who hii creditor .is or where he· is to be·.found; where several persons claim to be the creditor and where th� creditor is incapable of receiving payment and, bas ;o represen.. tat1ve. In all· these cases,. a notification of default to the creditor is of no use. A notification of default is necessary, however, when the creditor simply refuses to accept performance, unless this re-fusal was declared in writing (Article I 775). .

In these two categories of cases, the debtor can exercise his right to deposit th� thing without getting a court authorizatjon. The deposit is an act tb�t does not prejudice the rights of the creditor, ,vho can always subsequently dispute whether or not the debtor ha� the right to act as l1e did. If the debtor acted improperly, he will be liable for non-performance of bjs obligations, in_cluding the expenses resulting from. this deposit. It is important, howeve:r, to g�ve him this right to ac� witho�t any court decision a11d thus to pennit hjm to get rid of the thing without delay.

The deposit of goods is made by tl1e debtor at the place designated by the C(?Ur� of the place where performa.nce is due. Since this deci­ sion: by the �. o�rt can be n1ade without the creditor bei11g summoned to court, it. does 11ot establish that in fact the debtor has just cause to deposit the things. The debtor will not need to go to court at all if there exists, at the place ,vhere perf orrna11ce is to be n1ade, a public warehouse that ·can receive the thing the debtor is to deliver, or if it is a debt of money, a public bank that can receive the money . ..

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A transports some coffee for B under contract. The coffee is to be delivered to B in a specific place o·n May 1, 1956. B fails to appear a11d cannot be fou.nd. A may deposit th� thi11g. If there is no public warehouse he will be wise to ask the court to designate a place of de­ • • posit. Otherwise, he will be liable if he has chosen the poorly. warehouse . .. .

A owes B some money. A claims he owes $500, while B 2. claims that $550 is due and refuses to receive the $500 on the ground that he has the right to refuse a partial pay­ ment. A may deposit the money in the Commercial Bank of Ethiopia. l.

B, A's creditor, is dead and both C a11d D claim the in­ heritance. Without waiting for the dispute between C . and D to be settled, A can discharge his debt by deposit­ . · ing the money due in a public bank.· - 61-

s. :the rd ua feg :Sa . lly ua 11s 1 i11g tl he t f it_o os . p e . de Th 1 ; .

•._ �::� Ar- ticle 178 · · · . er� 10V(ever; .wb l , se� . e r_ a . er� Th � . ( · bto. · de d� 1 a1 . r ito th red c b9 � : .

•riglits of. · s e_ th ow all . l 8 17 le t1 .

Ar . s.u eo tag an �v isa d ble : or · / ssi po .

-im &it dep-o . is � · · : e.:. som or, 011 ct1 au c bl1 p11 at l1er eit 1 g 1 tl1i tl1e l sel es l1 to d�btor�-i n suc · cas : times, by private sale. · A. co11rt authorizat�o11 is :al�a �s..- re�uire� .for 1s to He ... d ute .lin -1s ge Jud the of e rol e in .th aga · t re bu e, l1e h sal . suc .: .a. . · decide only \-Vl1etl1er a11d i11 what way tl1e thi11g shoulcl be· sold, assum­ ing that tl1e debtor l1as the _ rigl1t to depos�t._ the �hi_ng. , i,:e }� not to decide whether or no t tlie creclitor·ha d good cause to refuse ·the per­ fo·rmance · tendered · or .-whether tl1e debtor is 'properly claimirig-that he' �o��:- � r� ��e or e mad be ,does not Kriow· to :�horn . perfor1narice should _ . one can be fo'und who is autho1·ized to receive "perfor1nance: · Th� � ��� q�po b e ptice received by tl1e debtor whe11 he· sells the tlii11g should · : ed: in a·public·bank .. Article 1781., �vhic� . states _these r�les; ·j. s- . _ �i�� spired :by the · swiss ·code of· Obligations (Article · 93), the· �gypt1�� 86): Civil Code· (Article·337) and ·the Ge1�mari B.G.B. . (Sectio11s 383�3 .. - . . .. ... .- " ...: '

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The goods that B will not ac�epf' or which are fo �e·:·de� 1.

• · livered to eitl1er J3 or C are perishable: eggs, butte1·;1 .' . :rre�h vegetables. The debt�r cari reques� ·court autlionza.!· . . , ..

•• .. . . · them. tio11 fo sell · : :· · . .. . .. . ... �- . ' . . ..

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Tl1e 9elivery is .of watches, which)are n.ot peris_pa�I� ·'!-.9-P reqµire::n1i11i11�um e?<,•p�ns� for. d�pos�t. -The �o�rt C?,�7 not autl1orize tl1eir sale. · - -

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Delivery is to be of firewood, straw, or n1anure. The . . . Gost of deposit would be .quite high ..relative to the value of . .• the thi11g sold. The court ..sl1ould _autho�ize sale. .

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Articles 1782-1783. · As has been explai11ed, the deposit of some­ .

thi11g does not itself discharge the debtor: It simply rids the debtor of the thing and t�E!:llSfers· the risk of its deteiioration· : or destruction .· · to the creditor� In order for the debto.' r to· be discl1arci-bed ' a court . must decide tl1at bis behaviour was justified and· tliis ·in· a hearing to \yhi�h the creditor is p�operly sU111moned. . .. . . .. · · · The ·j�dg �nt de�iding that tl1e deposit · was_· valid discharges � . the debtor, but !t"does ��t ,tr_ansfer ow!1ership of the thi11g to a creditor who refuses to accept� is 11 ot' i 11 a position to receive, or··d.oes 110t know of, the deposit. Therefore, even after the judg1nent. i-e�ognizino the validity of his '"deposit, the ·thing co11ti11ues to belong to. the d:btor and he n1�y . re�ake it� · 111 such -� ·cas:, .bis contractual -·obligation of _ __ _ course- re:1ves 1mmed1ately, bu.t_.1t rev1 ,1es without the. seeurities that may previously have ·supported - it if the deposit was 'recognized as •

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valid ·by· a. ·court: . 011 :this. poi11t, Article 1783 has fallowed th.e rul�­ of the. civil ·codes of Egypt (Article 340) and Ger1nany (B.G.B., SeG­ tion 376), rather than that of the Swiss Code of Obligations (Article 94) . . ·. lliustrations.

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A deposits coffee tbat he owes B in a place fixed by the

judge. B has not taken delivery of it. A can have the deposit decla.red va�d by a court. Subsequently, B can­ not claim that A has not properly performed his obliga­ tion.

Even then, A can retake the deposited coffee in order to sell it to C. The judgment declaring the deposit valid will cease to have effect in such a case. B can again claim that A has :o.ot properly performed his obligations to B . .

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The performance by A of his obligations to B was secured by C's personal guarantee.

C is djscharged when the • court declares valid the deposit made by A. He remains discharged even if A retakes the thing that he deposited.

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· Articles 1784-1785. The Articles studied so far relate to the situation where one party has not perfor1ned his obligations and the other holds to the contract ai1d intends to require its perfo·rmance.

Another re1nedy available to a party where the other party has failed to_ perfor� his obligations is to request from the court, or declare U:nil�teral).y in some circun1stances, the cancellation of the contract.

Ge11erally, the cancellatio11 ·or a contract mt1st be requested from a__court. · This is an application of the principle that no one n1ay be a judge in his own case. Non-performance of a contract, however, occurs in quite varying circumstances and it would show too great an attachment to formalities, abd involve solutions that are too rigid, u�fair an� impra�tical, if o�e were always to follow this system.

Although the total and definit'.ive failure to perform a contract ought automatically to result in the cancellation of the contract, the same solutio11 is not always suitable for cases of partial performance, delay in performance, or defective perforinance. In the earlier Sections of this Chapter, we have alrea, dy seen Articles that take account of these· variations. Article 1748 deals with the situation where the debtor who is obligated to deliver fungible goods delivers a quantity o.r-quality slightly different from that required by the contract. Arti­ cle 1770 gives the court the power to gra.nt the debtor a period of grace._

· The -'non-performance of the contract must be of some i1npor­

tance before it should result in the cancellation of the contract. Arti-63-

cle .1785 ;equires that tl1e very. esse11ce of the contract· be affected �-� tl1e non-perfor111ance. Tl1is for1nula is i11spir�d by the German con­ '' ion rat ust ''fr of t cep con sl1 gli En the ge d an 1clla r1,11 tsg 1af scl t cep of Ge a11d should be seen in co1111ectio11 with the JJrovisio11s co11cerning error in the for111ation of the co11tract. Tl1e ca11cellatio11 of the contract is 11ot to be pro11ounced ·by- tl1e court if the 11on-perforn1a11ce by one of the parties is of little i1uporta11ce i11 re1atio11 to tl1e wl1ole co11tract (Compare Article 1455, Italian Civil Code, and Article 157(2), Egyp­ tian'j Civil Code). It is not required, on tl1e otl1er hand, that the contract have lost all interest for the person requesting cancellation.

Ca11cellation is to be pro11ounced by the court whe11 the economic basis of the co11tract is upset by non-perforn1ance and a11 adjustment of the contract to fit the circumstances is no longer possible, because it would in fact result in making a contract for the parties that is com­ pletely differe11t from that to wl1icl1 they agreed. Ca11cellation is to be pronounced also wl1e11 tl1e psychological basis of tl1e co11tract is destroyed, as wl1en the relatio11ship of co11fide11ce that is assun1ed by tl1e· contract, in view of its 11ature, l1as been destroyed by the non­ perf or1nance and ca11not be restored.

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In evaluati11g tl1ese circu1nsta11ces and in decidi11g whether or not tl1e co11tract should be cancelled, the co11rts l1ave some discretion. "' 1 hey are to exercise that discretio11 taki11g account of the interests of botl1 parties and the requirements of good faith.

If tl1e court does 11ot declare the contract cancelled, it will still consider tl1e 1100-perfor111ance of the co11tract and impose sanctions for it.

The court may order the performance of the contract if that is possible. If perfor111ance is in1possible or undesirable, or if there has been a loss througl1 delay i11 performa11ce, tl1e court n1ay n1 odify the contra�t in tl1e 1Jlai1�tiff's favour (Article 1768) or require the pay­ _ ment of dan1ages to h11n, 10 accorda11ce with later Articles of the Code.

Illustrations.

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A undertakes to repair B's house. The wo rk is begun but not completed by tl1e agreed date. B requests th; _ ca11cellat1on of the contract so tl1at he ca11 I1ire· a11other contrac�or to finisl1 the work. The ourt, in deciding � . wl1ethe1 .or 11ot to cancel tl1e cont1·act, will co11sider: a. the importance that seen1s to have been given to th e _ t1111e for performance in the negotiatio11s that le d to the co11clusion of the co11tract '· -64-

�- - ·.· · · · b. -the state- of the. work� ... \,¾hat..)la&;:-been-don_e.ancj \vhat remains to be done;

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the damage tl1at the ca11cellation of the contract will cause A and the interest that B has in cancellation; and

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tl1e reasons why the work has not bee11 completed in the time agreed a11d the additional time that will be required to finisl1 it.

A borrows E$3000 from B at 7% interest for a period of 5 years. Interest was to be paid every three montl1s on a day specified in the co11tract. A fails to 1nake a required payment at the ti1ne agreed. B requests tl1e cancella­ tion of the contract. The court must exercise its discre­ tio11 i n this case as i11 the precedi11g one. It will determi11e the i111porta11ce tl1at the parties attached, whe11 1nak­ i11g the contract, to tl1e regularity of interest payments, considering their professio11, their earlier relations, the amou11t of the loan, etc. It will determine whether this is a.n isolated instance or whether there have been earlier delays, how tl1e parties in tl1e case l1ave 'been acting, the causes of the present delay, the adva11tages and disadvan­ tages that cancellation, wllicl1 wotild rec1uire A to itnmedi­ ately repay the loa11, would have for A a11d B. In view of all tl1ese circt1n1stances, it will grant or refuse, or gra11t conditio11ally, the cancellation reqi1ested by B.

Articles 1786-1789.

Alt11ough cancellation of a contract for no11-performa11ce generally n1ust .be pronounced by tl1e court, there are situatio11s where it is appropriate to give a party the right to de­ clare the cancellation without havi11g to go be·fore a cou1·t. Arti­ cles 1786-1789 set forth four cases where tl1e cancellation of the con­ tract may be declared unilaterally by one of the parties.

The first case is wl1ere the contract. co11tains an express stipula­ tion that the contract ca11 be cancelled in certain circumstances. The contract is law between the parties. Where it is certain that the specified circw11stances have occurred, it is useless to require a perso11 to go to court to have the contract cancelled. �

The second case is where a fixed, rigid ti1ne for perfo1ma11ce has been specified in the cont1·act and perforn1ance has not taken place within this time. In fact, this is only a specific application of the previous case, but it see1necl useful to state it sepa:rately. The same solution is provided for the situation where : the court, acting under

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Article 1770, has fixed � time fo1· final performa11ce. S01ne codes (Italia11 Civil Code, Articie 1454; Greek Civil Code, Article 343) �er­ mit one party, even whei:e there is no clause i11 the co11tract allowing for it, to set a .rigid time limit for perforn1ance by the other party, _ the duration of which must be at least two weeks, after wh1cl1 the contract will be automatically cancelled if it has not been performed. _ The Code has adopted this solution in order to avoid the co�gest10� of the courts as much as possible, but it seemed best to speak 1n � t1cle 1774 simply of ''reasonable time'' witl1out specifying any duration.

The two other situations, whicl1 are dealt with in Articles 1788 and 1789, occur at a different stage from tl1e p1·ecedi11g ones. A party may declare a co11tract cancelled eve11 befo1·e there l1as been an actual failure to perforni, if performance by the other party in con­ formity with the contract has become impossible or can be regarded as very unlikely. .

Article 1788 provide� for the situatio11 where tl1e performance of one party's obligations has becon1e in1possible. The classic situa­ tion is where a specific thing that was essential to performance has peri hed: the house to be leased was destroyed by fire, the animal to be delivered has died. imilarly, the perfor1na11ce of an obligation can become impossible because it is forbidde11 by a new law: it may be made illegal to manufacture or sell the product that one of the parties was supposed to manufacture or purchase for the other.

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In these situations, the performance of tl1e contract by one of the parties has become pl1ysically or legally impossible. The other party can declare the contract cancelled, so that l1e need not perform his own obligations or so that he can assert his rigl1ts after ca11cella­ tion under Chapter II.I of Title XII. One problem can arise witl1 respect to this cancellation. It may . _ at happen that the impossibility of per.f ormance is 11ot complete or th it is not final. One party cannot perform the contract perfectly or completely, but he ca·n per·forn1 it in part or late. \1/l1at should happen in such a situation? Article 1788 states explicitly that .the· other party ca11 declare a contract cancelled i11 such a situation· �nly� if the very essence of the contract is affected. Naturally, the courts. �ill �ave to exercise a co�trol on tl1e judgn1ent of the cancelling patty 1n this regard. Just as 1n the case of a request for court cancella­ tion u11der Article 1785, the judge must consider the importance of the part of the contract that cannot be performed relative to that of the part that can, as well as the interests of both parties and the requirements of good faith.

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1789, is similar to .. . The other situation, dealt with in Article a tha� dealt with in Articles 1757(2) and 1759. When one party clearly indicates that h� is not goin.g to perform his obligations, the other party is authorized immediately to suspend his perf or1nance 0f the contract (Article 1757(2)). In addition, he can decide whether he prefers to require the specific performance of the contract as soon as the obligation is due or to declare the co.ntract cancelled. Article J 789 allows h.irn to take this latter position without going to cou.rt and without waiting for the debt to become due or to be liquidated by the court. The conditions laid down by Article 1789(2) for the exercise of this right of cancellation are in conformity with the rules stated earlier in Article 1759. The only d.ifference is that a time was sp�cified h�re that did not seem necessary in Article 1759. Article 1789(3) provides a limitation on Article 1789(2), in conformity with Article 1775(c).

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Illustrations.

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.A borrows money from B, and it is stipulated in the contract tl1at, if A does not ma.ke interest payments on the stipulated days, B can immediately require the repayment of the capital loaned. This formal clause must be en-­ forced. Si11ce the court has no discretion with respect to it, the Code authorises the cancellation by B's simple unilateral declaration.

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The contract contains no such clause. A has not paid the interest tl1at was due on April 1, and in an action in­ stituted by B, the court has given him until May 15 to pay it. If he has not paid the interest by May 15, B can declare tl1e contract cancelled without going to cou:rt • again.

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A is required, under a contract, to manufacture machines for B and to deliver them on a particular date. Political eve11ts (a revolution in A's country, war bet\veen B's country and another country, blockade of the port of embarkment or destination provided in the contract) prevents the perforn1ance of the contract within the time stated. The delay in execution is of unpredictable dura­ tion. It had seemed that the contract could be performed ·within about a year, but this now appears very unlikely because of the delay. B would certainly not have con­ cluded the contract in such conditions and A knows this full well. B can declare the contract cancelled in such circumstances.

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·A,·ticle ··1790(1). · Spec1fic performance and ca11cellation of the contract are alternatives, between \vhicl1 a person roust choose v,hen his coco11tractant does not · JJerfor1n his obligations. Botl1 �f these remedies may, hovvever, be i11sufficie11t. In spite of them, a perso11 frequently fmds himself in a worse position that he would l1a:'e been in �f the contract were properly perforn1ed as he had exp:cted rt to b�.

If the court orders specific perforn1anee, it may be effective only · aft�� _ a delay, so that for a time the r)ersci11 is deprived of the enjoyment of the thi11g that he had counted· 011. · He n1ay also have lost a good cha11ce to resell the object 'if tJ1at w�s l1is i11tentio11. On the other hand, if the c·ontract is cancelled� the person is �deprived of the advan.; tage. that he couid l_egitimately expect from it. 111 botl1 cases, it is proper to reestabli�h ·the eqttil_ibri11;1n established by the contract a.n d upset by the failure· to perfor1n · the co11tract. Tl1is is done by requiring the person who has not perforn1ed his co11tract, or has per:. formed it incompletely, itnperfectly, or late, to pay da1nages to the · other party.

A.rticle 1790(2). 27 The rules relating to ''extracontractual lia­

bility,' apply by analogy i11 the case of co11tract11al liability. The Code l1ere re·produced tl1e rule give11 i11 tl1e Swiss Code of Obligations (Article 96(2)). Thus, for exa111ple, vario11s rules in tl1e Title o.n extra­ co11tracttial liability tl1at cleal \\1ith the evaluatio11 of injury or of the sharing ·of a loss between the debtor and the creditor or a third party a1·e also applicable to co11tractual liability. · Articles 1791-1794. In pri11ciple, dan1ages are due whenever the co11tract l1as 11ot bee11 perforn1ed as it was supposed to be, unless of course 11otlli11g is due by vi1·tue of the rt1les that determine the amount to be l )aid. 28 Article ·1791 pro·vides that there is only one excuse for non-per­ forma11ce. Dan1ages are not d11e if the debtor can establish that his non-performa11ce is the result qf force .111ajet1re. Article 1792 defines force majeure. · ,.fhere is force maje11re only \Vl1e11 tl1ere 11as been an . occurrence tha �- -\vas unfore �eable a�d i11sur1no1111ta ble. \¥ith respect to u11foreseeab1l1ty, tl1e Article considers 11nforeseeable any event that could 11ot normally be foresee11. With respect to tl1e i11surn1ounta­ bility, the Article is r�ore st :ict a11d requires that it be absolutely, and 11ot only norn1all y, 11J1possJble to perform tl1e obligatio11. .

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Editor�s note: 1�11e di � cussjo11 origi11ally referred to an Article 132 of tl1e _ prel1n1 1nary draft, v1h1cb ca�1e at Llie very end of the Section on No,z-per­ _ for ,na nce Co of 11tr act Tl1 s.

1s Ar ticl e \vas revised son1e\\1hat and l)ecame _ . ArrjcJ� ..1790... (2). . ·. . . . . . . .

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Editor's See Articles 1799 ff. in tl1is regard.

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.. In or�er to make it very clear what is meant by force majeure, Article 1792 defines it twice, first in a posiuive formulation and then in a negative one. The general f or�ula of Article 1792 is supplement­ ed by. the two following Articles. Article 1793 suggests certain situa­ tions that, according to the circumstances, may or may not be cases of f�rce majeu.re. Article 1794, on the other hand, enumerates various situations and states that in no case may a.ny of them ever be consider­ ed to constitute force majeure. These particulars, more similar to E-nglish legal methodology than to continental, seemed useful. What is essential is to provide rules that can be easily understood. Know­ .ing _ these ruies, the contracting ·parties can always provide for other ca�es in whicl1 non-performa11ce will be excused, if they so desire.

In this area, the Code deliberately chose a very strict approach.

Its provisions are inspired in tl1is respect by the French Civil Code (Article 1147), which has been followed also by the Civil Codes of Italy (Article 1218), Greece (Article 336), a11d Egypt (Article 215).

The severity of these codes seemed preferable to the greater laxity of the Swiss Code of Obligations (Article 97) and the German B.G.B. (Sections 275 and 55), according to which the debtor is discl1arged whenever no fault is imputable to him.

In using the stricter approacl1, the Code has tried to increase the responsibility of tl1e debtor and make it more difficult for him to escape liability when he has not prope1·ly perforn1ed his obligations.

The approach of the S\viss Code was avoided because of a fear that it would encourage the courts to be lax. They could easily consider that the absence of fault, a negative fact, would be establisl1ed by proof that the debtor did what he thought he was obliged to do, i.e. that he acted in good faith. In principle, it did not seem that tl1is shouid be sufficient, and only in certain exceptio11al cases, provided for in Article 1795, is it allowed. A rule of strict liability seemed necessary; in principle, the Code favours the party who does 11ot receive what was promised over the party who ca11not do what he bas promised to do. It therefore defi11es very narrowly the bases for dis­ charge of the debtor, in conformity with a policy which is also followed in. the common law.

The severity of Article· 1791 is attenuated by the Code for certain kinds of contracts (Articles 1795 and 1796), and the parties can always limit· or eve11 partly exclude their liability. Provisions as to liability are dealt with in the Chapter on Special Term.s of Co11tracts (Chapter IV).

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Illustrations.

I. A sells 100 quintals of sorghum to B. He is cou.nting on . .his harvest in order to be able to perform his obligati�·n.

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1�he harvest. is less tl1an 100 quintals. This may. be a11 event tl1 at is exterior to gind not i1nput.able to A·.. · But this event does not preve11t A absolutely from performing his obligations, so long q� he did not promise that . the 100 quintals ''would come from !us harvest.'' S111ce sorghu.m is fungible, he can obtain it else\vhere. He is liable if he does 11ot perfom1 bis obligations. ?· ' .

A sells I 00 quintals of paper to B. He is count�ng on C -· , · · to provide him with this paper. C does not deliver it and as a result A cannot keep his promise. In this case, the eve11t is not exterior to A. A must bear th.e · risk · of having badly chosen his coco1itracta11t, C. A .is liable , if he does not perform the contract.

A is to transport a tru11k for B. He has his en1J:>loyee, 3.

C, handle the transportation.· C breaks into the trun� and steals things. A is liable. The theft by C is not A.'s fault but it is still i 1nputabie to him since he should· have . · chosen his employee with greater care. • . . . -.

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A's factory is closed dow11 for two weeks be�a_us�-- t�_e electric current is tur11ed off, a11d therefore ·A is late· �iil delivering some merchandi�e that he has to deliver· .to B. B asks for damages for this dela)'· The court must ask·: •

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a. whether, accordi11g to the contract, tl1e. things promJsed to B had necessarily to come fro1n A's factory that was shut down. b. whether the circumstances that led to the· shutting down of the factory \Vere unusual, or whether A should hc;tve ·: have foresee11 them. c. whetl1er tl1ese circun1sta11ces are in1putable to ·A, a11 d whether they prevented him absolutely- from · perfor· ming · · · · :. . . . : his obligations. .

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A is to manufacture son1et:iing for B. Tl1e . n1acl1i1ii used to manufacture tl1ese products breaks down. �11_d._tl�e products are 11ot ready 0 1 1 tin1e. A is liable ai1 d owes da1nages. A can11ot be discharged by n1.erely provi 11g that he alwa)1 S took good care of the machine, that l1e did his best to perforn1 the contract, and tl1at he has co1nmitt� ed no fault. He is responsible for running• bis·· factory .

1 is failure to perform where that , is a11d therefore for l caused by a break-dow11 in the factory. .

Articles I7 ?5-1796. TI1e fo?11ula.· u.sed by· A-ttiGle. 1791, .. may appear· very strict for the debtor, but · one mt1st · not. fqrget that this '

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�. �ictness p:i;esuppo�es that the debtor ·has failed to perform his obliga­ .fi!QllS. . Before the de}?tor will be liable, it must -be esta1blished that he has not performed. In this regard, one must recall. the distinction tha � is ?la.de in Article 1712 between obligations of result and simple obligations of 1ueans. If a person has undertaken only a11 obligation of means, it is clear that be incurs no liability if he proves that he acted in good' faith and has ·committed no fault; in such a case, he has thus fully performed his obligations under the contract .

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· It can be seen that the rule of Article 1791 is only effective i11 cases wh.ere a person has promised a particular result and this result ha.s not been achieved: obligations to give, obligations not to do, and obligati�ns to do that are also obligations of result. But there are many contracts in which, because the party has not obligated himself to produ.ce a given result, one must come back to the less ri­ gourous approach of the Swiss Code of Obligations and admit that damages are not due where one party bas not obtained what he ex­ pected from the contract s_o long as the other party has done every­ thing that ca.n reasonably be expected of him, in conformity with good faith, and where be ha.s committed no fault. , . In a situation of this kind, there is actually no non-perf ormanct; of the contract. Nevertheless, one can expect that the other party, dis8:ppointed in the expectatio11s he had from the contract, will think otherwise and accuse the first party of 11ot performi11g his obligations.

For this re�son, it seen1ed desirable to clarify the position of the parties i n ·the Chapter dealing with 11on-perf orn1ance. This is the purpose of Article 1795. The provision of this Article applies to contracts where it has been foreseen by the parties, either explicity or implici�ly, that · one of then1 proniised the other 011ly his best efforts, without guaranteeing the particular result. In additioJ1, it can apply by virtue of a legal provisio11 to certain kinds of contracts in which the legislator ��s fit to atte,D.uate the lia�iJity that Article 1791 ordinarily places �ppn the debtor.

In addition, a second situation has been dealt with in Article 1796, that of contracts that are made for the exclusive advantiage of one of the parties. Article 1739 also deals with this kind of contract, providing that in case of ambiguity they are to be interpreted in favour of the par�y.. that derives n9 advant�ge from the contract. Article 1796 reenforc.es that provision, -providing• that it is only where there has been a grave fault that that par ty will be liable in such contracts. ,

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Illustrat1ons ,

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"·. , 1. . A, � surgeo11, concludes a �ontract wiµi · B to . operaie· on..:a .. . tµmor. The operation does n_ ot hav� tpe effeqt· expect®, artd

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·:B remains diseased.. B de1nands that A pay hi1 dam.ages, · '.· · B,will get dan1ages only if he pro,1es that A committed a fault. · .. .

2. . A deposits a suitcase with B. B agrees t� take this s�itcas�_ a� · a favour to A an d receives 110 re1nu11erat1011. The suitcase aI1d .. b)' -Vla�er or mice. J_f A clai�s d age ts dam teJ1 its are con .' ·. dan1ages from B, tl1e court 111ust as}<. whet�er B ha s c�m� . . .' . hlitted a grave. fault. . . . . .

B t�kes l� ss car,e w�th � 's e!e \1/l1 ly 011 st exi ve lt l gra fau wil .A · · · · . suitcase than l1e \vould l1ave with his own. B's ·o�I1gaI1<?n ·. ·. �- , . ·a1�d his . liability, \Vill tl1erefore be C0l1Sfdered �iffere11tly ·, wi:i accordin o ·to \.vhetl1et or 11ot B knew or should _ ha�e k?o . . · · · : � · · the 11atiu� �11d tl1e vaiue of the objects eJ.?,trusted to llin1. n

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· � :· Articles· 1797-1798. Where tl1e debtor proves tl1at his non-performance was the result of force •1najeure, this non-performance does n.ot expose him to liability. E,,en in tllis case,. however; there are two exceptional cases where he "''ill be req1.1ired to pay damages to - t he · ·· , oth�.r. party. ,. ·· . ··· · . . . , .

The first case arises where· l1e does 11ot infor111 the other party immediately of tl1e reaso11 wl1y lie can11ot perfor111 l1is obligati.on. The ot}:ter party can tl1e11, ·vvithin · tl1e li1nits of Articles 1799 ff�-, require c0mpel1satio11 for damage tl1at lie has suflered aJ1d would have beep. able to a.void J1ad he recei,;ed ti1nely 11otice of the• noJ.1-performance. · . . · . Tl1e second case is that ,;vJ1ere tl1e debtor \Vas in defa1.1lt. at the · time·· of ·the, eve11t that preve11ts l1i1n fro1n 1)erformi11g. It makes no diff.ei·ence that t11e event is a case of force majet1re. If he l1ad performed his obligation Oll time, 'the event \VOU]d not ·have obstructed his pe_�for�ai1_ce. Tl1is is sufficient to 111ake l�im comp·e�1sate· tl1e other pc_1�ty -. · for·tI�e· da�ages ca_used him b_y no11-:-performa11ce.. ,. .

•• : Article 1799. Witl1 respect to the amount of damages due, -the Code differs from Fre11cJ1 a11d Frencl1-i11spired laws and adopts- :a formula similar to that used i11 the con1moJ1 law cou.i1tries .

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• In order to decide how mucl1 111ust be pajd as d.amages, there is �1.0 .. need to · start, as 011e does i11 conti11e11tal legal systen1s, ,from the _ act�al iJ1jury that the 11on-performance c-a11s.ed the otl1er party. One begins- by asking, more abstractly, what i1tjt1ry one would• normally �xpect fr .01n the fcl.illl;re to perfor1n the contract. . · :· This rule may seem at first gla.11ce, l1arder to. apply than the _ : co11t111ental rule. In fact, 1t see1ns to us to be simpler. Tl1e coJ1tiiiental . rule men�i�ned above �s actually tem ere� by otl1er r11les, which r·equire � that the 111Jury for wluch compe11sat1on 1s demanded be a direct res ult ◊f·:n o . .F1-pe�forma11ce ·aJ1d. that it . have .- been foreseeable · at the time -72-

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the·�ontr�ct :Was .c.oncluded. These .t\.l/9 funitati_ons bring the; continen­ :tal rule much• closer to the comm.on law rule a11d that of tl1e. Ethiopian ,,�ode.- '.They make tllis latter r-ule, which allows one. to ignore the exc�ftion�,. seem . at least as simple, and perhaps simpler,- than the continental approacl1. . ..

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:· .: · There ma y be many cases in which it is hard to see how Article · · I·799 would be.applied-at all, because it is hard to see how there would • :be any· ·-�normally fores·eeable'' damage that results from non-perfor;111an�e: The solution in such a case is simple enough: non-performance -woul� -hot· necessarily 'tesµJt in the payment of damages. If the parties want: tti:· a:void tl1is sit11ation and give their contract more force, they can de>' s�o.' Under Article 1801 ) t11ey can require tile debtor to pay Qarµages for injury tl1at is caused to the other party in the peculiar �lr(?ums.t.a,nces of.the case. Or they can fix the amount of damage·s that \Y]ll .be dtte.upo11 failure to perf orrn by i11serti11g a penalty clause in !Jie c;qntract. ·Penalty re dealt with in Chapte�- IV of Title XII. .. . . clauses_a· . .. .. . . . .. ··· · · ·. Although the formuia of Article 1799( 1) is inspired by the Engljsl1 rule derived fro1n the case of Hadley v. Baxe11dale, the Code does ;not .acfep_t: all the conseque11ces that have bee11 deduced fro111 that rul� ip. �J1gland. 111 particular, it seemed that the ''reasonable ma11'' called t9. �ay �v11at iJ1jury tl1e 11on-perfo1ma11ce ,v�uld ''norm�lly'' cause creditor otight to take account not only of tl1e 11ature of . ..the . .. the contract, .but also . . of all other circu.n1staJ1ces k110\vn to the t\vo partie� ,. on: tl1e. basis of ,vhich it ot1gl1t to be co11sidered tl1at they contracted. Article 1799(2) sta.tes this explicitly. The illustrations of Article 1 7. 99 that are listed below should serve as a guide to the meaJ1ing of this A.-rticle.

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A fs· to deliver 10 to11s of coal to B, a private individua'l, lt is if B normal to foresee that v e 011 October i5. does not recei_ . . . the coaf from A, l1e �v,ill buy it from C. A ovles B the difference · betwe·en ·the price set in the co11tract and the p1·ice that B '• :haci·to pay c.· 2. A sells 400 kilos of coflee to B. It is normal to think that B is a mercha11t ai1d that lie will resell tile coffee at a certain .. s fit thi pro t of oun am · the s · age dam as � tai b o· _ i �ii .. _ B . t fi_ � _ ·pr . ·. : _ . ' ·· · � lost him . ha act ntr co the or� · that. the f per ·to A by e lur fai . . . .. ' • ­ sti lar de cu rti pa a, to 1ik tru s .

B' rt po ns tra . to s ke rta de u11 3_ .. A · tion. The trunk is lost.-· It_ is. reasonable to think that it has ' na · s pe ­ ain J1t it at co th d a11 t igh :we s t. i . of ht lig � in. e l11 a . inv a rt_ e:e a. · : .-·. :. . ;:_ :, sonal effects rather than precio�. -objects. ·.-The court w1ll

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award as damages the value of the objects that one could reasonably expect to find in .the truJ1k or the. value' of �e . objects that B proves .to have i11 fact put in the t1·u� a� long as it was 11ot uJ1reasonable for him to put them. In without wa111ing A especialI y. ,, : · . 4. · A makes a contract with B fo r tl1e r�pair of a -turbine. It is . · normal to thiJ1k that if the repairs are I10� made � in tin1e;_ A will be injured somewl1at: l1e ,vill have to use more expe11s1ve machinery or hire additio11al labourers. But it is 11ot norm�l to think that the mill ,vill be totally stopped an d that A will be liable to third persons vvith whom h� had contracted who were in turn preve11ted from performing their obligations.. . The .. evaluation of the injury for wltich compensation i� · due �ccb_r�ng to Article 1799 may result in a11 amount of damages greater than the actual damage caused to the injured party by the 11on-perfor­ man:ce. ·Article 1800 allows the person who did not perfor1n to prove that tllis is the case. If he does so, he will only be liable to the extent �f tJ1e jujury actually suffered by the otl1er party. · · One specific case that is ofte11 dealt with i�1 Western codes is the following: Tf?.e debtor is late i11 performing his obligations, and after he is iJ1 default a11 event that is not imputable to him occurs, which makes it impossible for him to perform. 111 principle, he is liable in such a case (A.I·ticle 1798). He may avoid this liability, however, under Article 1800, if he proves that the event that prevented him from perfornu.ng would liave occ11rred to the detrime11t of the creditor even if the co11tract l1ad been performed, and tl1at the creditor \vould thus liave been deprived of the benefit of the contract in any case. The animal or thing that was to be delivered and that perished before delivery \1/0uld have perished u1 the same way if it had been ·delivered to the other party on time. This result is expressly stated i11 various �odes (Article 1302, French Civil Code; Article 103, Swiss Code of (?bligations; Article 207, Egyptia11 Civil Code; Article 344, Greek Civil Code), it f oll9ws, witl�out aJ1y necessity to · state it separately, fron1 the general rule set forth by Article 1800 of the Ethiopian Code. .'

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A is to se �1d B's t1 :un.k by ship X. Breaching his obligation, he sends It by ship Y and the trunk -arrives three weeks later tl1an tl1e time provide � in the contract. Generally A would owe dama?es for_ tl11s delay, but if he proves that . . ship X sank w1tl1 all its cargo a11d tl1at B 's.tru.nk would have • .bee� lost if it had been sel1t ori ship x,· he will not be liable .. ..... .'.: · . to :B for damages.

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· �- t,: · .A is to tum . a n apartment over to B on ·October I .. He does ,�_.. . not do so until November I. A_proyes that B w9uld have · : ·. left the place unoccupied and would not have ·used it before · · November I in any case. A is not required to pay B damages.

Article 1801. On the other hand, it can hapf>en that the injury to the disappointed party is acttially greater than �1e amount of damages that a court would award if it applied the rule of Hadley v. Baxerzdale.

According to Article 1799, the injured party usually cannot claim com­ pensation for the full irtjury he has suffered. Nevertheless, Article 1801 _ provides for two cases where he can claim full compensatio11. ..

- The first case is where the party who has failed to perform the contract was warned by the other party, at the time they concluded the c9ntract, of particular circumstances that have the effect of increas­ ing the amount of �jury above what it would normally be. In such a case, we consider ili'.at the debtor has accepted the risk of lmving to pay the higher daII?-ages if he does not perfor1n the co11tract .pro­ perly. Because this js the basis for the increased liability, it is required t4at the circun1sta11ces that lead to the u1crease in the damages due be pointed out to the non-performing party at the time the contract is concluded. Liability will be limited to tl1at provided for under Article 1799 if 'the non-perf arming party has bee11 warned of these c�rcuinstances 011ly after· the contract was made . .

Even in this latter case, it is true, full compensatio11 may some- 1 from Article (2), required, but this will result not 1801(1) .

1801 times be . · 'Article 1801 (2) provides a seco11d case in which a person wh?, d9es �o� perform his obligations must compensate the other party fully for the injury he has suffered. This is tl1e case where tl1e failure to perform can be imputed to an intentio11 to injure,'to gross negligence or to a grave fault on the part of the person who fails to perform. · · Once one party knows of a special interest that the other party has in the performance of the contract, he cannot ignore that special interest, and less still can he purposely fail to perform in · order to injure the other party. If a perso11 fails to perform his obligations and· a result of such an intentio11 to injure, or if he shows by his gross negligence that he does not care whether or not the other party is spared this loss, Article 180 I (2) requires him to pay for it. He is simi-_ larly liable whenever the failure to per·form the contract is the re�ult_ of":. grave fault on his pa�t, and in this case, even if he did not know the peculiar injury that the failtrre to perform would cause the >otliet· party. illustrations •

.. . . .

1.'. A informs B,,in giving him a machine part to.. tep. aii-,:· t11at· this par1l is of strategic importance and that the who�e factory,

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.-.. . . . .. . . ... ... .. ..

·:·:

or a::part of it, \vill be ·shut · do·wri �n�il :tJ1e· :pa: t·_ hag: been re-

_ -• placed.· ·B 1111dertakes to repair the part ,v1th1n .· 48 �o urs. ... . _ _ Instead, l1e keeps it for four days. He is liable for t-he 1nJury caused by the closing of the factory during the two days of delay in performing his obligatio11s. . · 2. B is warned of the same circurnstaJ1ces, but only ori the 'd'ay: · after -I1e aor�ed to his obligatio·ns. He is 11ot liable for the special inj�ry suffered by A, si11ce l1e, B, could no� fore�� ·· it at the tin1e the contract was 1nade. , 3. B, warned of these special circumstances tl1e �e:LY �_fter �e entered into the co11tract, gives priority i11 his·work.to .r�pa1rs_ that are not urge11t, tl1us sl1owing a disregard for the _inju�_ y fully (d! that will .be suffered by A. I-Ie n1ust con1pe11s�te: A , the injury suffered. . . _ __ _ _ •

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Articles 1803-1805. 29 -With respect to mo11ey debts, Article 1803 -· . sets forth special rules. .

�.

�

Article 1803 contains a precise r1ile to facilitate tli.e applicatio.n of �he principle stated in Article 1799. Tl1e injury that failure· to pay ought normally to ca11se the creditor is here set by tl1e law itse]!; it is generally tl1e legal rate of interest establis�1ed by Article 1751_ of ·the Code. A higl1er rate of interest is due if, during the currency of the . .. debt, it produced interest at a rate l1igl1er tl1an tl1e legal .rate. . '

.,

.

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of moTl1e rule of Article 1800, moreover, is. set aside. in the case . ney debts: th(? debtor vvho does 11ot JJ�Y Iris debt owes tl1e legai rate o! interest, or a higher contract rate if there was one, even if tI;i.e other part>7 has not suffered any injury as a rest1lt �f the delay iI1 payme.nt. .

.

SJJecial rules are provided :iJ1 Article . 1804 for tl1e case where tl1e debt that I1as l10t been discharged Ol1 time is a debt wlrich re_quires from the debtor periodical payments and wl1ich constitute,s for the creditor a11 income ratl1er than a return of capital. Wp.ere these two conditions are met, a special, favourable treatn1ent.is given the debtor Ill conformity with the precedent established in. certain Western C0\111tries ·(Articles 1154-1155, French Civil Code; Arti . cle I 05 ' Swiss Cod . e of Obligations; Articles 1282-1283, Italian Civil Code; Article 296, Greek Civil Code; Article 232, EgyJJtian Civil Code). Tl1ere is a two­ fold explanation for tl1is special treat11:-1ent. First, it is pres1l:p1ed that the creditor is i11·Iess of a hurry to receive his -money, and s·�c�nd, it 29• •I

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. ...

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E�tqr.'s 11ote: Article 18 02 seen1s to l1ave been added at � later st·a �� in tI1e .

0 _codificat�o11 process and, there�?re, is i1ot disct1ssed.-id. Profe ssor navid's · ·· · Commentary.

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is "rrecognized ·that the:re is great <danget for a· debto.1r. in: ·the·. rapiclt -� crease in his debt as a result O'f the accumulation of , compound Uilterest. ·'.fhe favour shoWJ1 the debtor by the Code appears, first, in the prqvision that interest on ,interest runs 01tly from the day on. which legal proceedings for recovery are instituted rather than, as _i� th� case under Article 1803, from tl1e day when tl1e debtor is pYt in default.

In addition, a second preconditioJ1 must be satisfied before inter<?st q� interest begi11s to n111: it is required that the debtor be a full ye�r � 9:e.f�ult on his payments. ., .

Article 1804(2) reenforces this protection still 1nore i11 one partic­ ular case: con1pou11d u1terest itself 11ever produces interest.

A11 award of damages for delay, of which the amount is fixed according to the forn1ula just set forth, is ordinarily the only award of damages tl1at will be given u1 the case where the obligation that jg not performed is an obligation to pay mo11ey. Nevertheless, it might liap'pert·:that, in the particular circumstances of the case, the injury caused by no11-performa.tJ.ce would be greater tl1an this amount. Article 1805 provides that, in tl1is situation, the debtor will be required to compensate tl1e creditor fully for the loss sustau1ed by him in the two case� tl1at .are provided, for other ki11ds of obligatioJ1s, i11 ArticJe 1801 of the Code. There is no need to dwell further on these case&, since they were discus�ed fully above. . IDustrations.

I. · A borrows $1000 fro1n B at 3% interest and is to repay th.is sun1 011 October 1, but he does 11ot do so. A is put in default on October 15. Starti11g fro111 October 15, tl1e• $1000 bears interest at the legal rate.

2. If tl1e i11terest rate is originally 11 %, the debt will continue to bear 11. % i11terest after the debtor has bee11 put in default.

3. A leases a house to B. Tl1e rent is to be $2000 per year, , • payable in fourths on January 1, April I, July 1, and October • 1. B does not meet the April 1 pay111ent. A puts him in default on April 10; the fact that B is i11 default does not make i11terest for delay begin to accumulate. A attaches some ' property belonging to B 011 .t\pril 20; still interest for delay does not accumulate. Tl1is interest only begins to. run after the amo11nt ip. arrears reaches $2'000, the amount due by B for one year of rent. l

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CI-IAPTER ill: EXTINCTION OF OBLIGATIONS (Articles 1806-1_ 8 56) . . ·. Contractual obligatiops ar.� , �iorm,ally · extjn . guished � through performance in accordance with tl1e co11tract a11d tl1e law. There are, -77 -

. ted crea s l16wever, other ,vays · in whicli a · ·co11tract· a.11d the obligation .•..

-· by··it can come to an end; .

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Tl1e ·� co11tract, may for · iI1starice, be cancelled or invalidated.

Although we hav_e already discussed tl1e circumstances iri whic�· cancellation or invalidatio11 ca11· occur, 30 Section I of this Chapt_er,. deals with the details of i1nplementatio11 a11d the effect� of i11validation: and cancellation. The five followi.I1g Sectio11s, as outlined in Article 1807, deal respectively with tern1ination of contracts· and · remissio11 of debt (Section II), 11ovation (Section III), set-off (Section IV), m_erger· :·.

(Section V), and limitatio11 of actions (Section VI).

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· ION LAT CEL CAN AND ION DAT N I: ALI TIO INV SEC · .

OF CONTRACTS' · · (Articles 1808-1818)

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Article 1808. With respect to invalidatio11, the· Code distingu.ishes:·

between two kinds of cases, as do Wester11 legal systen1s..

· Where the contract's i11validity results from a vice ii:, co��ent, . its ·purpose is to protect 011e, a11d only 011e, of the contracting par.fies·, � i.e. the victim of error, fraud, or duress, 9r the· per.son wl1ose want, simplicity of mi11d, se11ility, or manifest business mexperierce ·has, been exploited. In such a case, only the person that the law intends to protect can invalidate the COlltract. Tl1e other party cannot invalidate it, and the invalidity of the COlltract will l16t be ·effective for him unless the .victimized party chooses to invoke it..

When the contract is iJ1valid fer sonie otl1er reason, on the other hand, the parties' positions are equal; either one of tl1em,. or any other interested person, can invalidate the co11tract. 3 1 lliustrations.

l.

,

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A enters into a contract with B because of a11 error induced by·B 's fraud.A cai1 have tl1e co11tract iI1validated, but B can­ not.

2. A and B co11clude a partnership coJ1tract, but they do not put the contract in writing as the Ia� requires. Either of them can assert the invalidity of the contract.

30.

Editor's note: For invalidatio11, see .PP· 20-36 above; for cancellation, see pp. 63-67 above. l

3 1 :. _ �dit �r�s :nqte: Professo: David's lis � of cases tn. wl1jcµ on).y qqe par t can __ _ ..:· .. 1nvaLida�e th� -�ontract �s not exclusive. Article 1808 (l) iilso 111 entiofs tl1 e ·· · ·· case of 1nval1d1ty resulting from incapacity. · · . ,� _

-7 8-

. : =: .�- 3. ·_ A · promises .to pay B $200 per month if B ,vill prostitute .: · · · . · . l1erself and turn ove1· to lun1 her receipts from prootittttion.

Both A and B can assert the invalidity of the contract.

Articles 1809-1810. There may be a tin1e lin1it for assertion of tke invalidity. As Jong as the situation is w1changed ai1d the contract has not been performed, tl1ere is .no limit. Anyone entitled to assert the invalidity of the contract may, at a11y time, refuse to perform it.

lf, however, the contract has been performed, it is necessary to fix a deadline after which invalidation can11ot be required. Western legal syste1ns differ i11 the time limits that they fix, as well as i.J1 the poi11t from which the limitation is calculated. The Code adopts a ve.ry short time limit, two years from tl1e day on which tl1e ground foT invalidation disappears. In practice, the only case where tltls limitatioJ1 is likely to be important is where the invalidity results from a vic.e i11 consel1t, since normally this is the only case where tl1e grotmd for itl.­ validation would disappear. SiJ1ce other cases are not co,rered by Article 1810, their solution depends on the gene·ral provisioJ1 011 liroi­ tatio� of actions. Tl1eref ore, the invalidity of acts do11e in performance of the contract ca11 be invoked as long as the action to invaljdate these acts is :i1ot barred by the limitation that extinguishes all actio11s. 32 '

illustrations.

1.

A sells B a picture at a high price, having fraudttlently n1ade him think that this was a masterpiece. B caJ1 require the invalidatio11 of the contract within t\vo years of the ti1ne when he pays the agreed price. 33 If l1e l1as 11ot paid, he can refuse to pay at any time.

2.

A and B conclude a partnership contract that is ix1valid because not in the proper form. Both A and B can at a11y time refuse to carry out the contract. The ground for the con­ tract's invalidity will disappear 0J1ly i11 the ln1likely event that a new law is enacted changing the fo1·mal requireme11ts for a partnership contract, allowing it to be made iJ1 the form used by A and B. A and B can require the invalidatio11 of acts done in performance of the contract at any time prior to the expiration of the ordinary period of limitation, ;.e. at a11y time within ten years of when they took place.

32.

Editor's note: See Section 6 of Chapter 3 of Title XII.

33.

Editor's note: Note that the point of departure tinder Article 1810 wo11Jd seem to be tl1e mon1e11 t whe11 tl1e fraud is discovered ratl1er than tl1e mon1col of payn1ent, as is st1ggested here.

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Article 1811. In 1he case of a vice in conseJ1t, the perso11 who can assert the invalidity may also co11firm the co11tract. This confirmation can occur onl)' after the cause that vitiated the consent has disappeared.

Whe11 t11e mistake or fraud is discovered or tl1e duress ceases, the party's \vill becomes free and i11formed. When tl1e co11tract is then confirmed, tl.1e vice i11 conse11t disappears and there is nothiJ.1g wrong with the contract. If it has 11ot been performed, it must be; if it has been, invalidation will 110 longer be granted.

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Since confirmation is neither a prelimi11ary co11tract nor a modification of the origi11al contract, Articles 172 1 and 1722 require no special for111. It did not seem necessary to expresslj' state this rule, as was done in Germany (B.G.B., Section 144).

The short period of limitatio11 set by Article 18 10 where the ground for u1validity disappears seemed to obviate t11_e 11eed for a provision that would permit 011e party to require the otl1er, \vl1ere the latter has tl1e rigl1t to require invalidatio11, to state witl1in a certain period whether he inte11ds to confirn1 the contract or assert its i11validity. 34 ,

Nor was any rule included in tl1e Code similar to Article 3 1 (3) of the Swiss Code of Obligations, wluch provides tl1at ''co11fmnation of a co11tract tainted by fraud or co11cluded as a result of justifiable fear does not necessarily imply re11u11ciatio11 of the rigl1t to require the payment of damages." In light of t11e Code's silence on this pomt, tl1e opposite solutio11 should be given to tlus p1·oblem in Ethiopia.

The provisio11s of Article 1811 apply only to the case where n invalidity res11lts fro1n a vice i11 co11se11t. A co11tract cannot be coJ1fin­ ed where tl1e invalidjty results from a deficiency in the object, the cause, or the form of the contract.

Article 1812. Article 18 12 provides a special defence where tl1e action for invalidation is based on lesiOll.35 Tl1is provisiol1 is i11tended to mi1umize tl1e disturba1-1ce to established expectations caused by ormula of_ Article I �12 draws on su1ular provi­ TI1 s�ch aJ1 action. � � _ s1011s found 111 the c1v1l codes of Italy (Article 1450) and Egypt (Article 129).

Illustration

A, taking advantage of B's se11ility, buys fron1 him a house agreeing to pay a life annuity of $100 per year. A ''fair price': 34.

Editor's note: Altl1ough the prelin1inar)' d.raft of the Code did not c ontam · . . . any prov1s1on to this effect, st1cl1 a 1Jrovisio11 \Vas i11serted at a later stage tl1e codification process and is co11tained in Article 1814 of the Code' : enacted.

35.

Editor's note: See Article 1710.

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would have been an annuity of $300. B re.quests the·invalida­ tion of the contract on the ground that A exploited his senility.

A can have this action dismissed by promising to pay B an annuity of $300 per year it1 the future and $200 supplement for each payment already made.

Article 1813. Article 1813 states a11 express rule concerning inval­ idatio11 of contracts that finds its parallel for cancellation of contracts in Articles 1785 a11d 1788. These latter Articles provide that the otl1er party's failure to perform does llOt al\vays justify cancellation; the non-performance in question must affect the very essence of the contract. The same principle applies to invalidation. TI1e whole contract is not 11ecessarily i11valid just because some of its clauses are.

The whole contract is i11valid 011ly if invalidation of the affected clauses will upset the very essence of the contract, where enforceme11t of the contract without its il.1valid clauses would be like writing a new contract for tl1e parties.

Except for a modification a1: the end, Article 1813 was formulated on the 1Jattem of Article 20(2) of the Swiss Code of Obligations. It corresponds to French case law, particularly the court interp1·etatio11 of French Civil Code Articles 900 and 1172. One also f inds similar provisio11s in the civil codes of Ger111any (B.G.B., Section 139), Italy (Article 1419), and Egypt (Article 143).

Articles 1815-1817. Articles 1815-1817 indicate the conseqt1ences of i11validatio11 and cancellatio11 of contracts. 36 I11 p1inciple, invalida­ tion and cancellatio11 have a retroactive effect. All tl1at has been done in execution of the contract is to be invalidated. De]jveries made in performance of tl1e co11tract are to be returned, so that the parties are put in tl1e positions they would have held if the invalidated or cancelled contract bad never been concluded. · To this pri11ciple, there are two exceptions. First, tl1e retroactivity

of the invalidation or cancellation o·ught not to affect the rights of third persons in good faitl1. If one of the parties has transferred to a third perso11 in good faith something that he received as a result of a contract that is being invalidated or cancelled, this third person will keep the th.ii1g he thus acquired. The contracting party's obligation to return the thing does not extend to the third person. By tlurd person in good faith \Ve mean any person who has acquired Ins rights without knowing of the ground for invalidation that tainted the right of his transferor.

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More generally, the reestablishment of the status quo and the restitution of deliveries made by the parties may be very inconvenient 36.

Editor's note: Article 1818 of tJ1e Code as enacted was not contained in the preliminary draft and so is the object of no commentary l1ere.

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or u1volved. In such a case, we 11eed 11ot i11sist on restitution. 111 place of the r'estitution provided by Article 1815, the court can order the payment of damages or some other appropriate remedy. .

. By stating this general pri11ciple, AI·ticle 1817 m.ade it ltnnecessary to inclt1de a special provision for contracts requiring repeated or con­ tinuous performance, as is fou11d i11 Article 1458 of the Italian Civil Code.

Where i11validation of the acts done in performru1ce of the con­ tract would cause considerable iI1conve1lience or serious complicatiop_s, the validity of the acts ''is mai11tai11ed." By sayiJ1g that the validity ''is mai11tained," instead of simply tl1at it ''may be n1aiJ.1tai11ed," the Code indicates that this is not a possibility to be u,tilized 011ly rarely.

Althougl1 Article 1815 is theoretically tl1e principle a11d Article 1817 the exception, it may well happe11 i11 practice for n1an)' kiJ1ds of con­ tracts that the exception will become the rule a11d the rule the exception, particularly in the commercial area.

SECTION II: TERMINATION OF CON'rRACTS AND REMISSION OF DEB1'

(Articles 1819-1825) Articles 1819-1822. ''Terminatio11'' of a contract indicates that the parties, or one of them, ha,1e put a11 end to the contract. It is the opposite of cancellation in that the latter l1as a retroactive effect, while ternlination is only effective prospectively. All tl1at l1as already bee11 done in performa11ce of the contract re1nains effective whe11 the cC>n­ tract is terminated; the co11tract snnply ceases to be enforceable or to produce new effects in the future.

Ordinarily, terroination of a contract requires the consent of both parties. There are, however, two situatio11s i11 v.1hicl1 the coJ1tract .can be terminated by a simple unilateral declaration.

This can happen if the contract itself foresees the possibility for one or both of the parties individual! y to denom1ce it by a simple unilateral declaration. Such a stipulatio11 is ,1 alid. It seemed tu111eces­ sary to state this expressly; u1 such a case, tl1e contract is not invalid as having been contracted under a purely potestative condition.

Although the parties may p11t an and to the contract at any time, until they do so they are bound by the co11tract and subject to the obligatio1.1s that it imposes on them.

Similarly, it is possible in multilateral contracts to include a 1Jrovision for the expulsion of 011e of tl1e parties and its co11tinuation -82-

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among the remaining parties. Such a clause would seem particularly useful in such contracts as the contract of association.

The second situation where unilateral ter111ination is possible is that of co11tracts of indefinite duration. A hires B, or A leases a field to B, or A receives sometlung from: B on deposit and no time provision is included; tl1e contract does not provide how long the contract of employment, or of lease, or of deposit, is to last. If the law itself, in a suppletory provision, does not fix the duration of the contract, either party can end the contract unilaterally.

Where either the law or the contract gives one party the right to terminate a contract, this right cannot be exercised a.rbitrarily. If there are c·ustomary periods of notice, they are to be observed, and the termination is effective only at the expiration of such notice period.

If tl1ere is no such customary period, one must give 11otice that is reasonable i11 the circumstances. By thus expressly forbidding what would be a clea1· abuse of right, Article 1822 states a specific applica­ tion of the principle, found in Article 1732, that contracts are to be interpreted accordh1g to good faith.

Articles 1823-1824. In addition to termination by agreement and by 011e person's unilateral declaration, the Code provides for two cases of judicial terminatioo., where one party can reqlrire the court to tern1inate a contract lie has entered i11to.

The first case is that of contracts in which the parties do not have antago11istic interests, but rather have a common interes1i in the pursuit of a si11gle objective. Typical co11tracts of this sort are the contract of association and the co11tract of partnership, but other contracts may have this characteristic as well. An example is the contract of employ­ ment, where often one of t]1e parties js not in a position to supervise tl1e other and must necessarily have confidence in him. If the confi­ dence, harmony, or cooperation that is essential to such a contract disap pears, either of the parties ot1ght to be able to get out of the con­ tract. Obviously, parties to such a co11tract would be wise to foresee this possibjlity and regt1late it in their contract. Nevertheless, if they fail to do so, they should be allowed to appeal to the court, which will decide whetl1er or not the reason invoked to justify termination is sufficient and justified, considering the nature of the contract, the relationship that it requires betwee11 the parties, and their behavio'ur.

The second case where the court can terminate a contract, also provided by Article 1824, is that of gratuitous contracts, entered into for the exclusive advaJ1tage of one of tl1e parties. The Code allows a him e fre to ge jud the e uir req to act ntr co a h suc by d ate n lig rso ob pe for good cause.

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principally The provisio11s of Articles 1823 aJ1d 1824 are inspired _

by German legal w1iters.

Article 1825. Tl1e termination of a coJ1tract puts an end to tl1e

obligatio11s of botl1 parties. The remission of debt, on tl1e other hand, is unilateral; it discl1arges 011e party from 11.is obligations without regard to any perforn1ance the otl1er party may have provided or still owes.

Before a remission of debt ca.11 exti11gt1isl1 an obligatio11, it must be accepted by the debtor. Nevertheless, sii1ce it is economically advan­ tageous for tl1e debtor, tl1e Code l1ere reverses the traditional rule, found in Article 1682, that sile.11ce does J1ot aroott11t to acceptance of an offer. If the debtor inte11ds to reject tl1e remission of debt, he must so inform tl1e creditor imn1ediately whe11 informed by the creditor of his iJ.1tentio11. Tl1e word i111111ediately l1as been substituted for tl1e phrase in a reaso11able tin1e that is found in tl1e correspo11ding article of. the ltalja11 Civil Code (Article 1236). If one i11tends to reject a gift, it is reasonable that it be do11e imn1ecliately. 37 SECTION Ill: N0\7ATION (Articles 1826-1830) Article 1826. A11other method of exting1tislling obligations is

11ovatio11, wl1ich consists of replacing a11 old obligation by a new one.

Tl1e 1.1ew obligation may differ from the old i11 its obj ect. One 1nigl1t agree for example tl1at D ,vould work for C for X days instead of payi11g lti1n Y Ethiopia11 dollars as had been agreed i11 the original contract. The new obligation may also differ from tl1e original one by its cause. Suppose , for example, that B o\ves A $10,000 for some goods he purchased from hin1; it is agreed in a new co11tract that B will keep the $10,000 as a loa11 from A. This is J1ovatio11 by change in the cause: B's debt has the sa1ne ob ject, $10,000, but henceforth it has a different cat1se. B o\ves the $10,000 to A because A le11t it to him, not because he p11rcl1ased the goods from llim. Tl1e debt of B tl1e pur­ cf1aser has been exti11guished ; it has been replaced by the debt of B the borrower.

Article 1827. Novatio11 ca11 l1ave several effects. For example,

the 11ew debt is not created at t11e sa111e tin1e as tl1e old 011e, and the period ,vitl1in wbicl1 it ca11 be exti11gt1ished by limitatio11 will, tl1erefore, have a differeJ1t starting 1)oint a11d, depe11ding Oll the ki11d of obligation 37.

E�itor's 11ote: 1"11e C �1n111e1 �tary 011 tl �e prelimi11ary draft at tI-1is point .co11tau1s two J)aragrapl1s d1scuss1ng an Article 150 of tl1e clraft, ,vl1ich was on1itted at a later stage i11 tl1e codiocatio11 process. Tl1at Article dealt ,vitl1 the form reqt1ired for tl1e ter111i11ation of a contract and a remission of debt.

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involved, may even 11ave a different duration. The creditor's original right may also have been supported by a preferential right, a personal guarantee, or a pledge. As seller of goods, A had the seller of movables' preferential right; a surety may have guaranteed that B would pay the price; D might l1ave given C somethlng as a pledge to ensure the pay­ ment of the debt. In the absence of express agreement to the contrary, these prefere11tial rights, sureties aJ1d guarantees will 11ot be transferred to the 11ew debt. After the novation, A can no lo11ger invoke hls pre­ ferential right as seller, the surety will be released, and D can reclaim the thing he gave i11 pledge. Article 1827(1) states this expressly, sinlilarly to the Frencl1 Civil Code (Article 1278), the Swjss Code of Obligations (Article 114), and the Italian Civil Code (Article 1232).

Article 1827(2), drawing on tb.e Swiss Code of Obligations (Article 114(2), eliminates a possible difficulty in inte.rpreting tl1e new agreement between the creditor and the debtor: tb.e new performaJ1ce promised by the debtor replaces, in principle, the perfo1ma11ce to which he was originally held and all his accessory obligations.

Article 1828. The way in which obligations are no·rmally extiJ1guished is by the debtor's performance. Novation is therefore an excep­ obligations. Not 0J1ly is it not presumed, tio11al means of extinguishing • as the Swiss Code of Obligatio11s provides (Article 116), but it will be recogilized only if tl1e inte11tio11 of tl1e parties to carry it out and to extinguish the original obligation in this way is unequivocal. Article 1828 states this principle, in accordance with the civil codes of Frru1ce (Article 1273) and Italy (Article 1230).

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Article 1829. Article 1829 clarifies the pri11ciple formulated in the preceding Article by specifying three cases o·f novation, as do the codes of Switzerland (Code of Obligations, Article 116) and Italy (Civil Code, Article 123 I).

The examples given in Article 1829 illustrate the principle stated in Article 1828, but the general formula of Article 1828 will help de­ cide cases in many other circumstances as well. For example, unless the contrary is clearly intended, one ought not to consider that the parties t intend a novation were they modify the terrr1s of tl1e contract eiher by adding or deleti11g a particular clause.

Again in confornlity with tl1e Swiss Code of Obligations (Article 117), Article 1830 provides for the case of the current account. The inscription of items on a ledger of curre11t account does not act as a novatio11, although the acceptance of a specific balance of account does have that effect. Eve11 i11 tllis latter case, l1owever, Article 1830 provides an exception to Article 1827, in that the creditor keeps the benefit of guarantees that may support 011e of the items entered in the current account in order to ensure the payment of the new debt.

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SECTION IV: SE f-OFF r

(Articles 1831-1841)

f are -of set th wi 11g alj de les ·tic AJ. de · Co 4. e 83 Th 1-1 183 .11rticles \rery similar to correspondiJ1g provisioJlS of WesterJ1 codes, . pa�ti?L� ­ J1 vil l1a Ci Ita tl1e d an ) 99 -12 89 12 s cle rti (A de vil Co ch Ci en the Fr ly lar Code (Articles 124 1-1252).

After an iJ1troductory Article establishing tl1e principle of. set-off, Articles 1832-1834 define t11e conditioJ1s i11 wlucl1 set-off occurs auto­ matically. Article 1832 imposes tl1ree positive coJ1dit�on�: t11e debts must be in money or similar fungibles, they must be l1qUidated, and they must be due. With respect to tlus last requirement, �cle 1 � 34 pro­ vides that a grace period granted by a court (see Article 1770) 1s no bar to set-off. The debt is coJ1sidered dl!e even though the debtor has obtained a period of grace for the perfor1nance of his obligatioJ1.

To the positive conditio11s stated iJ1 Article 1832, Article 1833 adds several negative conditions. There are some debts tl1at cannot be set-off against otl1ers. lJ1 such cases, tl1e obligated person must actually perform his obligatio11s witl1out regard to tl1e fact that ms creditor is at tl1e san1e time his debtor witl1 respect to ,u1other obligation.

The fi1·st two cases provided for by Article 1833 are absolute bars to set-off. T11e person ovled a mainteJ1ance allowa11ce must actually receive tl1e n1oney due him, since lie lleeds it to pt1rcl1ase J1ecessities.

His debtor caJ1not be allowed to reft1se to pay this moJ1ey and simply reduce anotl1er obligation that the 1nau1te11ance creditor owes him.

Nor can set-off be allowed whe11 the creditor is the State or 0J1e of its subdivisions; it ,vottld run counter to principles of public accoun. ting.

The two cases dealt with i11 Articles 1833(c) and l 833(d) are pe1·­ haps less clear. They have tradjtionally bee11 accepted in Westen1 coun­ tries, and the Code retains them. Article 1833(c) atten1pts to reenforce the thief's o? ligations �f restitutio11, or more generally, that of anyone. �ho_ has llllJUSt!y deprived another of sometlling. Article 1833(d) is 1nsp1red by the idea that the deposit and tl1e loa11 for ttse are generally _ gratuitous co11tracts and tht1s require a higl1 degree of fiduciary responsibility. .

Article 1835. A ovves B $1000 a11d B o,ves A $1000. Th e two•

debts are e�tinguisl1ed by set-off. But \Vl1at is to be done if B owes ,A . .

11ot only this $1000, but a11other $1000 based on another cause.

Ass. wne. __ that. B bought $1000 worth of goods from A, a11d that in additio11 he borrowed $1000 from A. All tl1ese debts are liqui dated a d-d e ·.. .

Which one-is to be set-off witl1 tl1e debt that A o,ves .

B? Arti:ie l� 5 .

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so_l,V,eS this..p·t,0ble1n•by:r,-efer:ri:ng -back.-t0 Ar.ticles J 7,52· -I 7S4,-which deal . .. with the appropriation of payments.

A· rtic/es 1.836-1837. Th'e effects·of'set..off are stated in Articles 1836 and. 1837.

•

The two debts are extinguished reciprocally at the first moment when they : exist simultarreous1y, trp· to the amount of the lesser of the nvo debts. Three comme11ts ne·ed to be made about Article J 836. First, by '.'the' day ,vhen 1 they both·ex.ist'' is meant the moment when they both exist with the characteristies that allow set-off to take place between them. Set-off does not take place, in other words, until both debts a.re liquidated a11d ..due. 38 '

·Second comment: Set-off is effective from the moment stated by· Article 1836, but it 011ly takes place if it is asserted by 011e of the parties.

Another Article a bit further on states tlus explicitly. 39 Fi11ally, we should observe that although set-otf can be a11alysed as a simplified double payment, it operates between debts of 1111equal amount and allowed by law, to the pri11ciple that the creditor thus is a11 exception, . cann�t b e required to receive a partial payme11t.

Wl1atever resemblance there·1nay be betwee11 set-off and a double payment, set-off is a mode of extinctio11 of obligations disti11ct .from JJayment. Just as the rt1le excluding partial payme11ts does llOt apply to set-off, there are otl1er rt1les concerni11g payme11ts that are inapplic­ able to it. For example, altl1ougl1 it is iI11possible to make a valid payn1el1t to a11 i11ca. pable persol1; set-off is available agai.I1st suclt a i persol�. A owes B, a nil 1or, $1000 a11d B owes A $1000. A cannot make a. valid payment to B, and B cannot make a valid payment to A, but A can refuse to ,pay l1is deb,t to B by asserti11g that it has been set-off agail1st the debt owed hin1 by B. . .

-Article 1836 seen:is to say that . set-off occl1rs automatically. This 11otion is 11ot, however, p u. shed to its logical extreme. Article I 837 states expressly tl1at set-oft� shall not prejudice the rights of tlrird persons. . ' Article 1298 of the Frencp.. Civil Code . gives a11 example of this.

A owes B $1000. B's creditor, C, gets a court order forbidding B to pay -A. ·Later, A.acquires a right against B for $1000. Set-off cannot take. place ,between tlus. right and.B's debt to A. Set-off here would prejudice the. rights. of · tl1!3 third perso11, C, who l1as acquired a privi'

38. ·.:Editor's.note:·Tl1e. Fre11cJ1 versio11. of t]1eCode speaks of "l'i,zstant OU elles . se tro11ver1t exister a la /'ois,"_. so t{:lat Pr9fessor David's comn1ent is not ·addressed to the difference bet\veet1 t11e \Vords ''day'' and ''n1on1ent'', but rather to the meaning of the word''exist'' in Article 1836.

39.

Editor's note: See Article 1838.

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leged position througl1 attachment of tilie right tlu1.t B, his debtor, has against A. Article 1838. Article 1838 is borrowed fron1 the Swiss Code of Obligations (Article 124) a11d the Italian Civil Code (Article 1242).

It elimi11ates difficulties that exist in French law.

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Articles 1839-1840. By agreeme11t, tl1e parties ca11 set aside tl1e �ode provisions on set-off and exclude set-off in tl1eir relatio11s.

Inversely, they may liberalize these provisio11s and provide that set-off will occur between then1 i11 situatio11s \.\'l1ere, under the Code, the con­ ditions for. set-off would not be satisfied.

Such a11 agreement is of course, as always, subject to the require­ me11ts of public policy. It would not be possible, for exan1ple, to proyi<;l.e tl1at a rigl1t to mai11te11a11ce \Vould be set-off against a debt oweµ by the �reditor of the n1aiJ1te11ance rigl1t. This rule will be ·stated _explicitly i11 tl1e part of the Code \Vhere mai11 tenance rights are regulated. 40 Article 1841. As a supple1ne11t to set-off by virtue of the law and set-off by agreeme11t, Article 1841 provides for judicial set-off. Gener­ ally, tl1e Code reqtrires tl1at botl1 debts be liquidated before set-off can occur between tl1en1. Nevertl1eless, Article 1841, which is inspired by J\rticle 1243 of tl1e Italian Civil Code, allows a loosening of this rule wl1ere 011ly one of the debts is liquidated.

J u.dges are giveJ1 two alter11atives. If a part of the debt is indisput­ able, tl1ey may declare that part set-off. Or tl1ey may delay giving judgment agai11st the debtor of the liquidated debt 11ntil the other debt lias been liquidated, but tlus is only possible if the liquidation of the non-liquidated debt can be accon1plished easily and quickly. The ltaliaJ1 Civil Code req1rires the satisfaction of tllis last condition before tl1e judges may utilize eitl1er of the two alternatives described above, but it seemed better to impose it only in the secoJ1d case.

SECTION V: MERGER (Articles 1842-1844) A rticles 1842-1844. Merger occurs wl1e11 one perS Oll, witl1 respect _ to a single debt, becomes both creditor a11d debtor at the same tiine.

The Code provides for tl1is meiliod of extinctioJ1 of obligati OllS, as do West-er11 codes.

111 principle� merg�r extinguisl1es the obljgation, wluch has actt1ally become 1n1poss1ble to perform. It does not occur, however .

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40.

Editor's note: See Articles 807-825.

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to the pr.ej1,1.di�e of inter�sts which third persons may have in the right.

Thus, if a third perso:n h-ad_a usufructuary right or a pledgee�s right on the credit, he does not loss. this right as a result o·f the merger (See Italian Civil Code, Article 1253). The same rule will apply where the creditor inherits from his debtor, or vice versa, as long as the two patrimonies have not bee·n merged, because for example the creditors of the deceased have blocked tl1e me·rger.

Article 1844 reproduces a provisio11 of tl1e Swiss Code of Obljgat­ ions (Article 118). It applies where the l1eir assigns his successoral rights, among which are f OUlld a credit of the deceased against him or a debt he had toward the deceased.

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SECTION VI: LIMITATION OF ACTIONS (Articles 1845-1856) L1mitatio11 of actions is a means of extinguis11i11g obliga1lio11s which all legal systems recognize as necessary. WJ1ere a creditor fails for many years to exercise his r·ights, it is proper to declare t11e rights extinguished. It is probable i11 fact that th_is extinction bas resulted from another cause, either payment of the debt by the debtor or remission of the debt by tl1e creditor. Although there no doubt are cases where this is not true, they are exceptions and even the11 the creditor cannot con1p1ain about losing a right that he \Vas i11 so little a hurry to enforce.

Article 1845. The Frel1ch Civil Code (Article 2262) sets the tin1e after which recovery is barred at tl1irty years, but everyo11e 110w agrees that thjs is too long. In light of tl1ese criticjsms, Article 1845 fixes a ten year period of limitation, as do the codes of Switzerland (Code of Obligations, Article 127), Japan (Article 167), Lebanon (Article 349), a11d Italy (Article 2946). Longer periods of ]imitation have been kept by some codes: 15 years in the Egyptian Civil Code (Article 374), 20 years in the Greek Ci,;il Code (Article 249), 30 years in the German Civil Code (B.G.B., Section 195). The Philippine Civil Code (Article I 149) fixes the general period of limitation at just five years, but pro­ vides for nun1erous exceptio11al cases.

In the Ethiopia11 Civil Code, \Ve have tried to avoid exceptions.

Some ex·ceptiollS may be desirable and may be it1cluded in other Titles of the Code, but it seemed possible a11d desirable to avoid any excep­ tio11s i11 the Section co11taining the ge11eral rtiles on limitation. The Ethiopian Code differs in this way from the civil codes of France, S�it­ zerland, Italy, and other cou11tries, \Vhich provide a shortened pe�1od of limitatio11 for certain kinds of debts. Since tl1ese shorte11ed periods \Vere based, according to the commentators, on prestrmptions of -89•

•

paymel1t; ·it seen1ed better to 0111it tl1em fro1n thls se· ctio11 · and i11clu�e .

41 · · · ent. paym .of proof with 1g tl1ein. µi:a· Secti611 deali1 . . . . . . . . . .. .. . The fo1-mula-of tl1e French Civil Code is that all actions are barred if not bro:ugl1t ,vithi11 tl1e time establisl1ed by the Code. The Ethiopia11 Code. preferred tl1e for1n11la found in tl1e Italia11 Ci,1il Code, which provides that all rig/its are subject to a ten year limitation. This makes it clear that at tl1e end of ten years the possibility of raising a right as a defe11ce to· anotl1er action is precluded as well as tl1e possibility o� · he right created by the asserting the· rigl1t in an affirmative action. T 42 way. a11y i11 ted co11tract dis•appears by limitation; it ca1111ot be asser ;

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Article 1845 deals only with co11tractual rights. Wllile tl1e rules dealing with limitation will 110 doubt be of use with respect to other types of problems, it seems that limitatio11 needs to be considered from different poi11ts of view in the areas of property and fan1ily law than in co11nection witl1 co11tracts. This fact seems to justify tl1e restrictions contained i11 Article 1845. · the day Articles 1846-1847. The period of li1nitation runs from tl1e obligation falls due a11d tl1is can be enforced by tl1e creditor: This ..

43 due date is independent of 11otice putting the debtor in default. .. Al-= tl1ough the creditor may l1ave to serve a default 11otice before l1e can enforce l1is clain1, tl1e obligation is due before notice is given. Indeed, .

111aturity· of the dept is a prerequisite to t11e creditor's default notice: (Article 1773(2)). tArticle 130 of the Swiss Code of Obligations, after providing tl1at ·tl1� period of limitation ru11s from the time w .hen the debt can be e11forced, •adds: ''If the rigl1t can be enforced only after notice, th� _period of limitatio11 runs fro111 the day whe11 this notice cot1.ld be given.''

Article 1846 covers tl1is san1e problem by referri11g to the tin1e when ''the rigl1ts tinder the contract could be exercised.'' In such a situation.the creditor loses l1is right to give the debtor notice te11 )'ears after the day on which l1e could first have gi,,e11 it. '

It see1ned u11necessary to provide in tl1e Ethiopia11 code for th� many special cases enun1erated i11 the French Civil Code (Ai·ticle 22· 57)� since th.ey can be dealt �1ith si111ply by applying Article ·1846. Because · '

41.

.

Editor's 11ole: See Articles 2023-2024 to tl1is effect.

42.

Editor's 11ote: T!1is co111n1e11t clarifies tl1e 111eaning of Article 1845.' ' \,\,1)IC · I1· . . ◄ ren cI1 version o· 1n· . tl1e I� f tl1e Code 1s still son1c,vl1at an1bigtiotis sin ce it spea· ks , . . of t1e 1 , , 1 �1g · 11t �� exerc1se an act1?11'' ratl1er .tl1an of ''all rigI1ts arising fronl _ , � _ . tJ,1e contract. fhe E11gl1sl1 vers1011 speaks only 1n tern1s of ''actions.,, _ 43. · Editor -'S· note: See ArLicles 1772 011 notice of default.

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a_ conditional tight cannot be enforced until the condition is -fHlfilled, it is only theD: that the perio d , of limitation begins to�� on. �.uch a risht. It does not run on a warranty of peaceful enjoyment ui1tif after eviction. It does not run with respect· to an obligation due· on ·a spec­ ified date until that date arrives. It seemed 11nnecessary to deal specifi­ cally in the Code witl1 these particular applications of the general rule.

A difficulty could have arisen, however, with respect to life and perpetual annuities, had we not included a special provisio11 for them. . Assume, for example, that the beneficiary ca.n require payments on April 1 and October I each year througl1out his life. How does the period of limitation work if the debtor makes no payment after Octoeer 1, 1954 and the beneficiary waits u11til 1970 to assert his claim to all post-1954 payments. Should he be told that he loses l1is right to the ·• payments due between October 1954 and October 1959 because these payments have been due for more tha11 ten years, but allowed to collect the money due for 1960 and the years following. Or should we say that since he has waited more than ten years to assert his right to payn1ents due, he has lo�t this rigl1t itself and so cannot collect eitl1er the past amounts due or a11y in the future 011 this co11tract? �he Code had to choose_ and opted for the second solution, follo\ving Article 131 of tl1e Swiss Code of Obligations: All right to claim payments is barred ' ten years after the debtor ceased paying n1oney due under the ann11ity.

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Article 1848. Is the period of limitation calculated l19urly or daily? Article 1848 answers that it is c,alculated daily. Normally ten full years must pass before a claim is barred. If a claim is due on March 3, 1955, the period of limitatio11 \.vill be completed on fylarch 4, 1965 at tl1� very begin11ing of the day (6:00 a.m. if the present rn.anner of dividing days into 12 day hours and 12 nig11t hours is kept : in Ethiopia).

If the last day of the period ·is a holiday, the day �,hen the claim is. ba.rred is delayed until after the first non-holiday. To decide whether or 11ot a day is a holiday, one must look to the place of performance, t}.lat is, the place where.p�rfor1nance is supposed to take place accord­ .ing to the contract or to the law. The Ethiopian Code does nqt require, as does Article 78 of the Swiss Code, that the holiday be a legal holiday.

In th� ijthiopian Code, the question of w_hetl1e� or not a particular day is a holiday is a question of fact to be dete11nined by the court.

I

Articles 1849-1850. Articles 1849 and 1850 reproduce Articles 133 a,n d 140 of the Swiss Code of Obligations and require no comment.

Articles 1851-1852. The period of limitation is interrupted in two ·cases: (1) recognition of the debt by the debtor; and (2) th� bringing . of.ap. action to enforce the claim or the givi11g of default notice by the -91-

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credit.or. A11y act of tl1e debtor i11dicating tl1at .l1e considers himself · b·ound by the debt will constitute a recognition of the debt. . . . . A court ·action inter1�upts tl1e per1od of liinitatiori only if tl1e debtor receives 11otice of it. Wl1ere this l1as happened, it is not essential that the action have been brougl1t before tl1e proper court. Even if it is brougl1t i11 tl1e wro11g court, it ,vill serve as notice of default and the Code states that defa11lt notice is sufficie11t to i11terrupt the period of limitation. 44 This system is si1nilar to tl1at of French law (Civil Code, Article 2244) and Italia11 law (Civil Code, Artiole 2943) a11d less strict than the Swiss Code (Code of Obligations, Article 135), \Vhose com­ plications are thus avoided.

The effects of interrupti11g the period of Ji111itation are indicated i11 Article 1852 of the Code, i11 co11fon1lity witl1 the provisions of the Swiss Code of Obligations (Article 137) and the Italian Civil Code (Articles 2945 and 2953).

Article 1853. Article 1853 states a rule that is u11ique to the Ethio­ pian Code; 110 other code has a corresponding provision.

Other codes suspe11d tl1e period of limitation in certain cases, apart fro1n tl1ose where tl1e period is iJ1terrupted. In the interest of simplification, these special cases of suspension were elinunated from tl1e Ethiopian Civil Code.

Ma11)' Codes suspend the statt1te of limitations were a child, wife or servant is tl1e creditor of his pare11t or tutor, husband, or master, si11ce their inactio11 is explai11ed by their delicate sitt1atio11 in relation to their debtor. 45 Article 1853 allo\vs these cases to be disposed of satisfactorily without the auto1natic mecl1a1tism of other codes. Jn so doing, it makes use of a general co11cept that is applied elsewhere in the Code (Articles 1705, 1709, aJ1d 1766): Because tl1e law must be more fle�ible \Vhere a coJ1tract exists in special circun1stances, as between persoJ1s li11ked by a close relatio11sltip of parentage or sub­ ordination, a special approach was 11eeded.

Still, other legal systems do suspend tl1e period of li11titation in . other cases as well: the Codes of Switzerland (Code of Obligations, Article 134) and Italy (Civil Code, Article 2941) suspe11d it \Vhere the debtor has a usttfructuar)' interest m the right. Tl1e ItaliaJ1 Civil Code 44.

Editor's note: No explicit state111ent to tl1is efrect is contai11ed in Article 1851, but such a position mjgl1t be seen as a logical exte11sion of that Article.

45.

Editor's note: The original version of tl1e comn1entary refers to ''/eur creanci­ er'', but tl1is is clearly as slip of tl1e pen. Naturally, in bilateral contracts both parties are botl1 creditor and debtor, but in respect to the statue of limi­ tations it is tl1e creditor of tl1e particular obligation wl1ose right is barred.·

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also suspends it in relations between an heir an,d the succession he has inherited (Article 2941), and in favour of miI1ors or others lacking capacity who do not have a legal representative (Article 2942) .. It is suspended in the Swiss Code of Obligations (Article 134) for as long as it is impossible to assert the claim before a Swiss court.

In the majority of these cases, one can bar the claim by limitation without prejudjce to the person wl1ose claim is barred, because this person can require indemnification from someo11e else for the loss he suffers. Even i11 the other cases, it seemed to us that, 011 balance, i t was better to eliminate sus·pensio11 of the period of limitation.. This institution, whicJ1 undermines that of limitation and impairs its utility, seems to be far from essential, given the length of tl1e period of limita­ tion. T]1e creditor has ten years to act a11d sho11ld not wait to enforce his right until the last 1 minute. If a special sol1ttion see.ms desirable in a particular 'kind of case, the Code ca11 deal with it whe11 regulating that situation. The Code achieves a desirable simplificatio11 by elimin­ ating the general provisions on suspensio·n of periods of 'limitation that are found in otl1er codes. \

Article 1854. Article 1854 states a general principle without which the whole institution o·f limitation would be undermi11ed. Ali action i& barred even though the debtor is in bad faith. One ca11 01.1Iy hope that a debtor who knows he should pay a debt will not i11voke limitatio11.

But should he be without scruples, the 1nost ob·vious bad faith on his part will not prevent l1il11 f1·om relying 011 li1nitation.

Articles 1855-1856. Limitation is an institution imposed by the law. 46 One's right to invoke limitation ca1111ot be waived by prior agreement; an agreement that limitation will bar recovery only after a period other than the statutory period is ineffective.

Although the parties can achieve a si111ilar result by putting appropriate clauses in their contract, the imperative r·ules dealing with ]imitation cannot be modified by agreement.

On the other hand, once the period of limitatio11 has ex.pired, the parties are not required to take advantage of it. The court may not, of its own motion, reject a claim on the basis of limitation; they may only base their decision on this ground if the defence has been raised by one of the parties. In additio11, once the period of limitation bas expired, one may validly �gree not to raise it as a defence.

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46.

i11stit11tion d'orclre p11blic. '' Editor's note: ''1111e .

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:·PRQYISIO. NS�.�- ·. -�.- �CHAP-TER. IV.: .CONTRACTUAL. . . . . . . . .

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-_ �_ _ ·. · . ·· ·_ .. · · · . · : · (Artic1es ·1ss1�.1-s9s)· - .

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The Ethiopia11 Civii · Code· a�epts the pri11ciple of fre�qo:µ1 of �ontract, with the consequence tbat contr�cting parti�s are fr.�� to organize their relations as tl1ey like, except \¥here the law specifically provides otherwise. For tl1is reason, it is impossible-to· foresee, and to specify the n1eani11g and effect of, all the provisio11s that one migh t include in a co11tract; and it ,vould be futile to try. ..

Nevertheless, some provisions are used very frequently, so that tl1e Code ca11 usefully. provide for them; The Code considers five s�ch . provisions: the time provision; tl1e condition;. tl1e case of alternative obligations; the payn1e11t of ear11est, and finally, provisio11s concerning liability (particularly, the pe11alty clause). One Section.: in .Cl1apter JV is devoted to each. of these five. kinds of provisions. .

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SECTION I: TIME PROVISIONS .'

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(Articles 1857-1868)

No provisio11 .is more freque11t ·tl1an. the time 1?rovision. ·One or both of the obligations under the· contract is 11ot -.to be performed immediately. A time is set for perfor1nance: tl1e co11tract may .provide for perfprrr1a11ce 011 a give11 date, or. iJ1,so ma11y days, weeks or months, or at the begin11ir1g, middle or e11d . of a particular 111011tl1, or before a. · · particular date. · Articles 1857-1864. l11 eacl1 of tl1ese situations, we 11_eed to_ specify . precisely the moment at which perforniat?,c� is d11e in order that the debtor may be clear as to his obligations �nd so. tha:t we know· when that flow fron1· nonthe creditor may set in motion the sanctio11s . ,, to run. performance and whe11 the period of· limitatio11 ·be'gins •

The provisions of Articles 1857 . to 1864 reproduce those of the Swiss Code of Obligations (Articles 76-80);_ They · were n1odified - in only one respect, and the text is clear i11 that case, wl1ere the period is . fixed in months (Article 1860). · In Art tha the icle t , Sw Co iss d� \1/� s �op ted in the. first. two: p·ai-a. _graphs to cover cases where the period 1s fixed accordin.g to the Greoor­ ian calander. But a 11ew paragrapl1 was added t_q de al witl1 . tI1e �ase where a period is fixed according to the Copti? ca_lendar.. Art� l� 1�i6d(3) .. .�. . �

47.

,

Editor's note: 111 �l1e Civil Code itself, tl1e title of Chapter IV is ''S ecial .

Tern� s of ?bligat1ons or Co11tracts," tl1us indicating tl1 at va rious the . prov1s1ons 1n tl1e CJ1apter may apply to obligations otl1er tlian co n tractt1a I . . obl1gat1ons. . .· ·· · ·· ·. :· ·: ::····. .· •:�· :·· ... ·.--

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declares that the thirteenth month of the Coptic cale11dar is to be ignored.

The meani11g of this paragraph is as follows. If a contract was concluded on Sene 10 and provided that the debtor was to perfor1n his obligations ''in three months,'' he must perfor1n on Maskaram 10. The 5 or 6 days of Pagume tl1at co1ne between Nah.asse and Mask­ aram are not counted.

I.f .a contract is co11cluded during Pagt1me, and contains the same time provisio·n, it will be considered as if concluded on Maskararn 1, since Paguine is not counted. Performance will be due on Tahsas 1.

One should also note the respective positions of Articles 1862 and 1863. Article 1862 provides an exception to the Articles that precede it. It cannot be invoked by the debtor in the case provided for in Article 1863. If tl1e debtor has undertaken to perform his obligation before , July 1, he must perform it by Ju11e 30 at the latest. He is in default if he performs on July 1, even if Jt1ne 30 is a holiday.

Article 1862, the Code s_peaks of a day that is a holiday at the place of payment and not, as the Swiss Code does, of a day that is a legal holiday at that place. The same modification was made with respect to A.l·ticle 1848, and it is discussed more fully in co11nectio·n with that Article.

111

Articles 1865-1867. Articles 1865 to 1867 determine the effects of time provisions. The significa11ce of a time provision differs according to whether it was inclt1ded in favour of the debtor, in ·favour of both parties, or in favour of the creditor alone.

Article 1865 establishes a presumption that a time provision is ordinarily included for the benefit of the debtor alone, as do the Civil Codes of France (Article 1187) and Italy (Article 1184). This presump­ tion can be reb·utted, however, either by invoking an express clause or by provi11g on the basis of circlunstantial evidence that the time provision ,vas put in exclusively for the benefit of the creditor or for the mutual advantage of the two pa.rties.

If the provision was included for the benefit of the debtor alone, he ca11 renounce it and perform his obligation before the due date. But �f he does this, he can11ot reclaim the mo11ey as an undue payment. 48 If the time provision was included i11 tl1e parties' mutual interest, or exclusively for the creditor's benefit, bis agreeme11t is necessary before advance performance can be given. i.r the provision was i11cluded for the creditor's exclusive ben�fit, .he can require that the debtor perfonn his obligations before the time .

48.

Editor's note: See Article 2164.

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t t ai us aw tn he , 1t e1 em re ag e th se vi re s ie fixed. Otl1erwise, unless the part s ts hi gh d ri ar gu fe sa to t ac 1ly 01 n ca l1e ; at tl1 , the due date prior to n io is e ov tim pr e th re he vv ) 1 e1 Ev .

4 27 le ic (See Egy1Jtia11 Civil Code, Art ; ce at1 m or rf pe te ia ed m im ire qu re s ay is for hi s be11efit, l1e can11ot alw e le ab tim on as re a or bt de e tl1 ve gi t us m l1e y where it appears necessar , t ­ is no ex ch hi w lt, su re is th ) s e i ( if ec sp 2 for performa1 1ce. Article 1867 il e, iv od (C C y al It · 01 ) 86 11 le ic rt A pressly stated i 11 Fra11ce (Civil Code, ss gi es le pr ex t ou ith w it pt ce ac es tri m1 co Article 1183), although both lative provisio11. ss e lo r th fo es id ov pr n io ct Se is th in e cl rti Article 1868. Tl1e final A 's or bt de e th n he w s en pp ha s hi T 1. of the benefit of a time provisio1 ed in us so al a ul rm fo a '' ed ish bl ta es , ly al ici ud insolve11cy l1as been ''j ce du re d to te ac s ha or bt de e th e er ) wh s Article 1757(2 . It also happen n­ co in is de Co e th t, in po is tl1 On r. ito ed cr e th ve to the security he ga e th of 86 I 1 d an de Co l vi Ci ch ·en F1 e th of 88 s formity with Article 11 Italia11 Ci, il Code.

If the securities given by the debtor have been lost or reduced in value by son1etl1i11g for whicl1 the debtor is 11ot responsible, tl1e debtor 1 ision and he does no t hav e , pro e tim tl1e of efit 1 bei the e not los s doe to furnisl1 new secu1·ities to tl1e creditor. It did not seem advisable to follow AI·ticle 273 of tl1e EgyJJtia11 Civil Code on this point.

SECTION II: CONDITIONS (Articles 1869-1879) Article 1869. Contracti11g parties may make conditio11al the effective11ess or tl1e cancellation of their contract or one of its clauses. The contract will 11ot have any effect unless the condition is satisfied, or in the contrary case, will cease having effects if the coi1dition is satisfied.

The co11d�tion must relate to an u11certain event by definition. But the uncertainty 1nay relate to whether the eve11t .will occur or 110t or_ to the �ate whe�1 it w.ill occur. � addition, tl1e uncertainty may e�st onl� 1n the minds of the parties and relate to \.Vliether son1etl1ing · Ie did or did not actually l1appen i11 tl1e past. TL1e formula of Ar 1IC 1869 covers all these possibilities. 49 1

49.

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· Edjtor's note: Professor David's defi11ition of a cond·t· · 1 ronaI obl"Jgation Ill . .

• n1ater1ally broader tlia, 11 tlie t.ta ct·t· th.1s paragrap . 11 1s 1 1ona 1 con cep t. Most .

Iega I systems regard as conditional o11ly tl1ose obl. a l.ions ,v . 11ose \'ery ex1 �­ te1.1ce is u11certai11, because it is depende11t 011 an ��· eiit \.vl1ose occurre nce 1s _ . . uncertai11. Wl1ere only tlle date of t·l1e evet1t IS t1nccrta1n , a t1· l of a s tle d eat1 . . spec1fiecl person ' 111ost lega' l syst e111 s consider tl1at tiier.e · • • is an ut1certa1n time for performance, bttt not a corlditiori.

While the official Amha.ric version of tl1e C c Ie and tl1e. unofficial French text permit tl1is broader j 11terpretation , tlle E�ng1?

1s 11 tra11sl::i • • . a.tio n speer·fica II y excIu d . es 1t, since rt refers to ''a' n obligati ' ·o11 \V11ose ex1s te11c e d epend s on t he occurrence or 11011-occtirrence of an unceI·tau. 1 eve11t. . or's emphasis)."

(Edit

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Article 1870. The conditions on which the perf01mance of contracts are made to depend vary greatly. Some a.re a matter of pure chance, while the parties themselves may influence or deterr1tine wh.ether others are fulf:tl1ed. In this latter case, Article 1870 falls back upon the principle of good faitl1, whicl1 dominates all of the law of contracts. It 11ses the principle boldly a11d provides tl1at, even though a condition is not fulfilled, one party can consider the contract effective and thus reqtlire its performance where the other party has prevented the condition's fulfillment in a ma.n.ner contrary to good faith. Article 1870 differs from the stateme11t found i11 the Swiss Code of Obligat足 ions (Article 156) and still more from that of the French Civil Code (Article 1178) and the Italian Civil Code (Article 1359), as it gives the person an option, whereas the other codes seem to require that he consider the condition fulfilled. There seems to be no justification for the more mecl1anical approach.

Article 1871. When a contract is s11bject to a conditio11 prece足 dent, it l1as effect only from tl1e time when the- condition is fulfilled.

When it is subject to a condition subsequent, it has effect immediately, b11t its effects are \\1iped out if the condition is f u1filled.

Altho11gh the parties are to decide wl1ether their contract is subject to a co11dition precedent or a condition subseq11ent, their lan足 guage is not always clear on this point. Article 1871 solves the problem by creating a prestlillption tl1at the parties intended to make their contract st1bject to a condition precedent.

Article 1871 also establishes the principle that where a contract is made subject to a condition precedent, it has no effects until the condition is fulfilled.

The creditor, therefore, cannot require perfo1mance before this time, nor can the debtor validly tender performance (See Article 268, Egyptian Ci,1il Code). Article 1871 is similar to Article 151 of the Swiss Code of Obligations.

Article 1872. Article 1872 provides the inverse r11le for contracts subject to a condition subsequent. Where a contract is concluded subject to a condition subsequent, performance can be required immediately: the inunovable sold subject to a condition subseque11t is delivered to the buyer; the thi11g lent subject to such a co11ditio11 is given over to the borrower.

When the condition is fulfilled, the contract is cancelled and ceases to be effective; tl1e immovable sold subject to condition subse足 quent must therefore be ret11r11ed to the seller. Similarly, the thing lent subject to condition subsequent must be retur11ed to the le11der \Vithout delay.

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Articles ·1873-1877. The rights of the two parties before tl1e fulfilln1ent of tl1e co11ditio11 a11d the effects of the condition's fulfill­ ment are specified by Articles 1873 to 1877.

Article 1873 is anotl1er affirn1ation of the principle of good faith.

The parties are to refrain from any act that would prevent the nor1nal performa11ce of the co11tract upo11 the fulfilhne11t of the co11ditio11.

A similar express rule is found in tl1e Swiss Code of Obligations (Article i52(1)) and the Italia11 Civil Code (AI·ticle 1358).

This general rule did 11ot seem suJlicient, however, and we have attempted in subseqtrent Articles to specify tl1e acts tl1at parties to a conditio11al contract may perform before tl1e condition is fuliilled and the status of st1cl1 acts whe11 the 1·igl1ts of tl1e person who perform­ ed them are cancelled by f111fillment of t11e conditio11.

The Code decided against simply annou11cing a general principle of retroactivity or non-retroactivity to solve tl1ese problems. Rather, it has isolated tl1e various q11estio11s that ca11 arise and l1as p1·ovided a. solution for eacl1 of then1.

Article 1874 deals with the acts of n1anagement 5 0 that the party holding tl1e right51 can perforn1 prior to the fulfillment of the condit­ ion. These acts are norn1al for l1e wl10 does them, because he holds the rigl1t under tl1e conditional co11tract. Often they are eve11 required i11 order to keep tl1e rights from being dissipated. Tl1e seller of an an illl1novable subject to a co11ditio11 .precedent and the btryer subject to a condition subseqt1e11t conclude contracts for the upkeep, repair, and leasi11g of the immovable; \Vl1ere sl1ares are sold subject to a condition precedent, the seller pa1·tici1Jates in tl1e .delibe1·ations of tl1e ge11eral shareholders' meeting. These acts are valid and enforceable against the other pa-1iy, wl10 1nt1st respect them once tl1e condition is fulfilled. Damages can be claimed by hi1n 011ly if these acts cause hi111 a loss and were do11e in bad faith, ;.e. p·ur1)osely t o injure the other party or in disregard of his interests.

On the other hand, the l1older of a rigl1t that has beei1 transferred by a conditional contract can11ot validly conclude acts beyond 1nanage50.

Editor's note: Jn tI1is tTar1slation, \Ve11t1.vekept tl1e terrnjnology of tile E 1·isI1 ng_ trar1slation of tl1e Code itself, i.e. acts or "'111e,,t and acts be '011c.

'J 111a,1c1oa,, I n1.a11'J c ...., ager11e11 t. 1l1e Frencl1 terms t1sed are actes cl'ad11ii,,ist ratio,z and acIes de . . d.1s os1t1011. p

51.

Editor's 11ote: Wl1en using tl1is co11cept of ''llolding tt1e r1g 1. t'' p roi. · 11 cessor . . . . .

Dav1·ct 1s · s1Jeak1n • g of tl1e ,ea! 11gl1t to deal \,V1tl1 tl1e tl1ii1g tllat 1s · be111 ·. g so Id , 01. vv I1a_tev · · ona1 contract. TI1e I1oldii1g of a re _ · er _ , t�n der tI1e co11 d1t1 al rigllt must be d1st1ngu1shed fron1 tl1e personal ri(}'l1ts tl1at tl1e :· .· g ·p�rt1e t\vo cont rac�1n s have against each otl1er by virtt1e of tl1� co11tract.

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. ment with respect to the right until the condition has been fulfilled.

This conclusion would result from Article 1873 alone, but A . rticle 1875 .reaffirms it aad specifies wl;tat happens if the rtµe is violated. It pro­ vides that the improper acts are subject to invalidation. This invalidity . can be requested only by the other party to the conditional contract; it cannot be asserted against a third party who has acted in good faith. It ca11 also disappear as a result of confirmation, which Article 1875(2) allows 'any interested third party to insist upon .withi11 a reasonable period of time. -The right to i11validate the act disappears if within a reasonable period of time the person has not declared his i11tention to do .so. The requests for invalidation and for confi1111ation can be made even before the fulfillment of the condition.

This result is dictated by general principles and it seemed unnecessary to state it expressly in the Code. .. · Article 1876 deals witl1 the disposition of fruits and profits that accrl1e to tl1e right that is the subject of a conditio·nal contract prior to the ft1lfi.llme11t of the condition. Th.e solution adopted relates only to frujts and profits collected in good faith. Fruits collected premature­ ly and profits whose accrual was accelerated contrary to good faith must be returned t� the other party, either in kind or by damages.

W'hile Article 1873 requires tl1e holder of the right prior to the fulfillment of the conditio11 to do whatev�r is necessary to protect this right, Article 1877 expressly gives the other party the right to . take the same protective measures. He ca11 provide for publicity that will protect him fully against possible acts beyond managem.ent by the other party; he can interrupt the running of a period of limitation with respect to a right that he has acquired subject to a condition precede11t. Provisions similar to Article 1877 are also found i11 the codes of Switzerla11d (Code of Obligations, (Article 152(2)), France (Civil Code, Article 1180), Italy (Civil Code, Article 1356), a.nd Egypt (Civil Code, Article 268).

Articles 1878-1879. Article 1878 deals with impossible, unlawful, and immoral conditions. Their consequences depend on the importance of the condition i11 relation to the whole contract. Article 1878 pro­ ·vides for the application to this problem, by analogy, of the Code Articles dealing with clauses of the co11tract that are impossible, -illegal, or immoral.

Article 1879 establishes the invalidity of a.n obligation that is subject to a condition that depends wholly on the person obligated.

For example, a person 1night undertake an obligation with the stip­ . ulation that be will perform if he wants �o, or if he judges it fitting.

Since·· failure to perform an. obligation undertaken in this way would result in no liability, it is not an obligation. It is invalid. Article -99-

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1879 states this • rule, in confot1nity witl1 the Civil Codes of France (Article 1174), Egypt ·(Article 267) a11d Lebanon (Article 84). · It did 11ot seem· desirable· to inciude in the Ethiopian Code the reservations on·tilis subject that ftre co11tained in the Lebanes.e Code. 52

SECTION ID: ALTERNATIVE OBLIGATIONS ,

(Articles 1880-1882) Articles I 880-1882. Alternative obligations exist where the contract says to the debtor: you do either this or that, you rent me one of these two houses, or you deliver either so many meters of material or so many shammas. 53 Articles 1880 to 1882 deal witl1 this ki11d of contract. It did not seem 11ecessary, on the other hand, to deal separately vlith optional obligatio11s, as various other codes do.

The Ethiopian Code considers optional obligations as a kind of alternative obligation.

Article 1880 sets forth the basic principle that reg�ates alterna­ tive obligations: the debtor is discharged by performance of either of the obligations provided in the contract.

Which of tl1e obligations ought he to perfo11n? Article 1881 states that ordinarily �e may decide, but l1e must make l1is choice as soon as tl1e creditor puts l1im in default to perfo1m l1is obligation, assunli11g perfoni1ance is due. If he does not make his choice imme­ diately, the right to choose passes to tl1e creditor. Tllis latter rule becomes in1porta·nt if the creditor inte11ds to ask for farced perfor1na11ce a11d in tl1e calculation of damages i11 case of non-performance.

Wl1ere the co11tract gives tl1e creditor the cl1oice of wl1ich obliga­ �tion. is to be performed, a similar rule applies. The debtor gives the creditor 11otice that l1e 11111st state his cl1oice; if tl1e creditor does not then choose i1nmediately, tl1e choice passes to the debtor.

On the other hand, if tl1e cl1oice belongs to a third person, tl1e Code does 11ot provide for a re1Jlaceme11t in case l1e fails to act. In tlli.s ca �e, 011e would_ apply tl1e rules relating to an insufficiently defined O�J �ct. If t �e tl11rd ·party has pron1ised to make tl1e cl1oice, l1e may _ be·l1able.to 111demn1fy tl1e contracti11g parties·for the damaoe st1ffered.

The Ethiopia11 �ode does 11ot follow the Italian Civil Cobde (Article 1287) , _under wl11cl1 the court chooses wl1ich obligatio11 is to be perfor­ _ med 1n st1cl1 a case.

52.

Editor's note: ·Article 1879 (2) see111s to I1ave been added at a Iat er sta g· e o f . . t . : .. 11e i;od.Ifi catio .· n pro�ess n11d 1s tl1e SLlbJect of no commentary he re.

• • 53:·•, . Editor's note: Tl,e shan1111a is tl1e Etl1io ian natioi,a p l dress.

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Article 1882, finally, di$ppses of the case where performance oi on� of t. he obligations foreseen in tl1e contract is or has become impossible.

Th� other obligcl:tion ffilJ.Si be perfo1m�d. The party who by his.. fa:nlt has deprived th.e other of hjs choice can be I;eq.uired to pay damages.

The Ethiopian Code does not adopt the distinctions in this respect that are made by the_ Italian Civil Code (Articles 1288 and 1289).

Seen as a whole, the rules provided by Articles 1880 to 1882 are basically in conformity with the provisions found in tl1e Civil. Codes of France (Article 1189 ff.), Ge11nany (B.G.B., Sections 262-264), 72), Egypt (Article 276 ff.)

Switzerland (Code of Obligations, Article · and Greece (Article 305). .

SECTION IV: EARNEST (Articles .1883-1885) Article.,;; 1883-1885. It often happens that when a coI1tract is concluded one party gives the other a sum of money as ear11est. But in spite of how old and l1ow frequent this practice is, there is little agreement 011 its 11ature a11d significa11ce.

The Civil Codes ·or Germany (B.G.B., Section 336) a11d Switzer­ land (Code of Obligations, Article 158), followed generally by the Italian Civil Code (Article 1385(3)), consider tl1e giving of earnest as designed to establish clearly tl1at the co11tract l1as bee11 co11cluded; tl1ey state specifically that the giving of earnest does not co1:ifer on the person who has paid it the right to tenninate tl1e contract unila­ terally. But it is precisely this latt�r meaning tl1at is given to earnest by the Egyptian Civil Code (Article I 03), and tl1e sa1ne meaning is given to ear11est in the only Article i11 the Fre11ch Civil Code that deals with it (Article 1590), with respect to the option to buy. The Greek Civil Code (Articles 402-403) also adopts this second approach, seeing in ear11est a kind of penalty clause.

The Ethiopian Code fallows the Egyptian Code on this point,· but indicates more clearly the double function of earnest: it establishes clearly that the co11tract has been concluded and also gives one party the right to terminate the contract unilaterally. T11e first function exists in all cases, the second ex.ists only in the absence of a contrary stipulation or usage. A contrary usage must be established beyond question by the person relying on it, but it may be a local usage or a usage for a particular trade or kind of contract. .

Where earnest has been given, the contract may be perfor, med or it may be terminated. Where it is performed, a further question arises: Ought earnest to b� considered as a down-pa� e�t on the price owed by the debtor or is it paid in addition to this pr1c� ?_ Here -101-

again Wester11 legal systems provide diffe1·e1it a.11sviers: T11e ·C ivil Codes ·of GermaJ1y (B.G.B., Section 337) a11d Italy ·(Article 1385) adopt ·the first:; the Swiss Code of· Obligations (Article 158) adopts the second. Article 1884 of the Ethiopian Code· opts for the ·first solution, n1ore favourable to the debtor,' in conformity witl1 the gen-· eral principle of interpretation fo11nulated by Article 1738. But here again only a presumption is created a11d it can be rebutted by proving a contrary stipulation or usage.

We have seen that ordinarily t11e party who· gives earnest ma y terminate the contract u11ilaterally. If he does this, l1e.loses the earnest that he paid tl1e other party; the latter is allowed to keep it.

May the party \vho has bee11 paid earnest also terminate unilater­ ally? Swiss law (Code of Obligations, Article 158(3)) and Egyptian la\v (Civil Code, Article 103) allow this with the proviso that in such a case the cancelling party 1nust pay double the ear11est to the other p�rty. The same solutio11 was adopted by the Itali'an Civil Code (Arti­ cle 1386) fo.r cases where the earnest is paid in addition to the contrac_t price, and by the French Civ.il Code for options. 111 spite of all these examples, tl1e Ethiopia11 Code has cl1osen th·e opposite solution, which seemed more in co11formity with practice; tl1e persoi1 who has received earnest does not have a right to tenninate the contract, in the absence . .. of ·a contrary stipulation or usage .... 5� . .,

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SECTION V: PROVISIONS AS TO LIABILITY (Articles 1886"1895)

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Article 1886. Clauses extending contrac�al liability _ are ·permiss-

ib!e. Article 1886 of the Code recognizes their validity, as does Article 21.7 of the Egyptia11 Civil Code. ,

Articles 1887-1888. Clauses limiting or excluding· liability ·are ·a

matter for greater concern. 011e can fear that the beQeflciary� of such a clause has imposed them 011 the other party. In a<;Iditlo1i, .in extreme cases, they destroy the very essence of tJ:te obligation and contract; a -person who incurs liability is not legally obligated. Tl1e Co4e's . .

54.

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Editor' � note: It sl1ould be re1nen1bered tl1 �t the present· ''commentary'' _ was written as a me�o�and�� to tl1e Cod1.ficat1on CoID1nission prior· to enactment of tl1e Etl11op1a? �1v1I C?�e. Articl9 188� (2) expressly provides, c�nt _a�y to Professor David s prov1s1onal recommendatio11, tI1at the party rece1v1.ng earne�t can cancel the contract by repaying-do�ble that earnest .

Presu�ably, th1� change �as �ad e after Prof�sor. David's proposal had been discussed �n the Cod1ficat1on Con1m• ission. 111. a sentence · ·tt·e d 111 . O m1 ·. · • r sor David suggested that the Codification c · · ·· t·h1s transIat1o • n, Pro1es · omm1ss1on . . · . . n with especial care. · cons1der th'1s questio

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approach to these problems has already been indicated by Articles 1679 and 1879. · Nevertheless, it is desirable to per1nit certain clauses limiting liability. Thus Articles 1887 and I 888 allow two kinds of provisions.

Article 1887 allows clau�es limiting tl1e liability of the parties or of one of them to the case where non-performance is due to his fault.

Ordinarily the Code provides for liability for non-performance even in the absence of fault (Article 1791), but contracting parties ought to -be able to stipulate that liability arises only in case of fault, with the burden of proof of fault on the person who asserts liability.

The parties cannot, l1owever, provide that they will not be liable even in case of fault. We have not adopted the distinction made in some codes betwe�n serious and slight faults in this respect: compare the Italian Civil Code (Article 1229), the Egyptian Civil Code (Article 217(2)), and the Swiss Code of Obligations (Article 100). It did not seem desirable to include this distinction here.

In addition, the parties can limit their liability by providing that they will not be liable, even in case of a fault, wl1ere the fault is committed not by themselves but by one of their employees. Article 1888 gives them this possibility, in co11formity with the Swiss Code of Obligations (Article 101) a11d the Egyptian Civil Code (Article 217).

The second paragraph of Article 1888 is patterned after the Sw:iss Code of Obligations (Article 101 (3) and, for certain cases, prol1ibits tl1is· exclusion of liability where one's employees or auxiliaries are at fault.

Article 1889. The parties agree that if one of them does not perform his obligatio11s, he will have to pay the other $1000. Or they agree that if performance is late, $20 per day will have to be paid for delay. Such stipulations are called penalty clauses, and the paymep.t required is called the penalty. Penalty clauses are frequent in contracts and are provided for and regulated in tl1e various Western civil codes: France (Civil Code Article 1226), Switzerland (Code of Obligations, Article 160), Lebanon (Code of Obligations, Article 266), Italy (Civil Code, Article 1382), Greece (Civil Code, Article 404), and Egypt (Civil Code, Article 223).

Article 1890. A first question concen1ing penalty clauses is to know how to interpret them. When contracting parties include a penalty clause in their contract do they i11tend to give the debtor a choice between performance of his obligation and payment of tl1e penalty stipulated? Or is the penalty clause only a fixed evaluation of damages, so that the creditor can still insist on forced perfo1mance of the con­ tract?

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The pe11alty clause definition given by Article 1889 should answer this question, but it seemed desirable to be more explicit. Article 1890 provides expressly tl1at, unless otherwise agreed, the creditor may i11sist upon performance of a co11tract even though it includes a pen­ alty clause. Tllis solution is i11 accordance with Fre11ch law (Civil Code, Article 1228), Germa11 (B.G.B., Section 340), a11d Swiss (Code of Obligations, Article 160).

As in French law, penalty provisio11s are thus treated differently than earnest, for which the opposite solution is provided. Where earnest is paid tl1e person wl10 l1as paid it can ordinarily terrninate the contract unilaterally (see Article 1885). But where a penalty clause has been stipulated, the debtor is irrevocably bound by his contractual obligations. Unless it is agreed that the penalty is an alternative obligation, he cannot extinguish his obligation by paying the amount stated i11 the penalty clause.

There is no difficulty in allowing tl1ese two solutio11s simultaneously.

A penalty clause is easy to distingi1isl1 from earnest since the latter is paid at the tin1e the contract is co11cluded, while the penalty clause is not effective u11til later. It may be more difficult to distinguish between a penalty clause and alternative obligations, but Article 1890 (1) helps solve tl1e problem by establishing a presumption in favour of the penalty clat1se. A clear stipulatio11 is required before a contract will be interpreted to include alternative obligations.

Article 1890 (2) also defines the creditor's rights, by stating that ordi11arily he ca1111ot require both performance and payment of the penalty. The only case in whicl1 l1e can do so is where the penalty was inte11ded to pe11alize a mere delay in perfor1nance or tl1e non­ lJerf ormance of an accessory obligation. Article 1890(2) is in accor­ dance with French law (Civil Code, Article 1229), Lebanese law (Code of Obligations, Article 266), a11d Italian law (Civil Code, Article 1383).

Illustration.

A purchases some wool from B, witl1 tl1e stipt1latio11 that B 1s to deliver wool of a partict1lar quality. It is agreed tl1at if, upo11 inspectio11 of a bale to be chosen by tl1e-: purchaser, the wool is sl1ow11 to be of a quality inferior to tl1at p;omissed, B will pay A a compe1 �sa.tion equal to I 0% of the sale price. 111 sucl1 a case. , A can require both tl1e performa11ce of tl1e contract and the pay1nent of the penalty, si11ce the JJe11alty related 011ly to the seller's accessory obligatio11 to guara11tee the qt1ality of the goods sold.

Article 18 ?1. Where a penalty l1as been stipulated, should a debtor who fails to perform, or performs late, be excused and thus

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not have to pay the penalty, where he can show that his delay or non­ perfu11nance was caused by for example, force majeure? .

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Article 1891 deals with this question and simply refers back_ to the general rules on non-performance of contracts, which deter1nine the circ11msta.nces in which damages are due for non-perfo11nance.

The penalty clause determives the amount of damages to be paid, but it has no effect on the rules that determine \Vheµ damages are due.

This solution is in accordance \.Vith Fre11ch law, but contrary to German law (B.G.B., Section 340).

Article 1892. Where there is a failure to perfor1n a contract and the debtor is liable as a result of Articles 1791-1798, the penalty clause constitutes a definitive liquidation of the damages that are to be paid.

This liquidation excludes the application of Articles 1799 ff. In particular, Article 1800 is no longer available to the debtor; the penalty is due even if the creditor has suffered 110 damage at all. The same solution is found in Article 161 of the Swiss Code of Obligations, Article 1382 of the Italian Civil Code, and Article 405 of the Greek Civil Code. Egyptian law provides the contrary sol11tion (Civil Code, Article 224).

Article 1801 is similarly excluded except that Article 1892(2) permits the applicability of Article 1801(2) in cases where there is a penalty clause. Tl1e Code has followed the Egyptia11 Civil Code (Article 225) on tl1is point. It does not go as far as Germa.n law (B.G.B., Section 340), however, which permits tl1e debtor to clain1 damages in excess of the amount stipulated in the penalty clause when­ ever non-performa11ce is due to fa·u]t of the debtor without r@gard to the seriousness of the fault.

Article 1893. Western legal systems are divided on the question of whether the courts have the right to reduce a11 excessive penalty.

Courts are given such a right in Lebanon (Code of Obligations, Arti­ cle 266), Italy (Civil Code, Article 1384), Egypt (Civil Code, Article 224), Ge11nany (B.G.B., Section 343), and Greece (Civil Code, Article 409).

The Swiss Code of Obligations (Article 163) even imposes a duty upon the court to do so. On the other hand, French and English case-law deny to the courts any power to reduce a penalty, even where it· is excessive.

The Code adopts the latter approach. The court may �ot reduce the amount of the penalty in case o.f .non-performance of the obligation �hat the pen?Ity wa,� , Pe.signed- tQ. sa0:9tjq11, unless there has been a partial performance. This provision, siinilar to Article 1231. of the

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French Civil Code, is in accordance with the . general spirit of the Ethiopian Code. 5 s.Article 1894. Article 1894 is a reproduction of Article 1227 of the French Civil Code. It actually is nothing more than a specific appli­ cation of general principles already stated in the Code. Article 189� 2), �n particular, is a simple application of the principle found in 1?' rt1cle 1813, since th_e invalidity of a penalty clause could never �e considered to affect the very essence of the contract. 56

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55.

Editor's note: See, l1owever, Article 1710(2).

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Editor's note: The present Article 1895 \\1 as not contained in th� preliminary draft, and so is the subject of no comentary here. A different Article 1895, copied from Article 162 of the Swiss Federal Code of Obligations, was in· eluded in the preliminary draft and was subsequently deleted. Considerable r :search indicates that no co �entary exists on the last three chapters of _. _ _ T1tl� XII. _ T�e �� Cl1 �pter ar � e �t1tled r �spectively, with ''Plurality of Debto�s ·_ and Cr�d1tors, ''Third Pc:trt1es 1n Relation to Contract;'' and ''Proof in Relat·: ·. ion to Contracts.

56.

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