(1) These Principles set forth general rules applicable to domestic and international contracts, but not to consumer contracts.
(2) These Principles apply when:
a) The parties subject themselves to them, in part or in full.
b) The parties have agreed that their contract be governed by general principles of law, the lex mercatoria, or the like.
(1) These Principles apply to interpret international uniform law instruments and domestic law governing the contract.
(2) They may also be used as a model for national or international legislators.
Nothing in these Principles shall restrict the application of mandatory rules or the operation of principles that are protected by public policy, whether of national, international, or supranational origin, which are applicable in accordance with the rules of private international law.
(1) The parties may vary, derogate from, or exclude the application of these Principles or any of their provisions, except as otherwise provided.
(2) In the interpretation of these Principles, regard is to be had to their international character and the need to promote uniformity in their application.
(3) Issues within the scope of these Principles but not expressly settled by them are as far as possible to be settled in accordance with their underlying general principles.
The parties are free to enter into contracts and to determine their content, so long as this does not violate public policy or the law.
A contract validly entered into is binding upon the parties.
(1) The parties must act in accordance with the requirements of good faith.
(2) Agreements limiting good faith shall have no effect whatsoever.
A contract is an agreement by means of which two or more parties create, transfer, modify, or extinguish a legal relationship of an economic nature.
Consent, subject-matter, cause, and in certain cases, formalities, are the elements required to form a contract.
The parties are free to negotiate the contract and to withdraw from the negotiations at any time, in accordance with good faith.
(1) Compensation must be provided for harm caused by withdrawing from negotiations in bad faith.
(2) A party that initiates or continues negotiations when not able or not intending to reach an agreement is also required to provide this compensation.
(3) In no event shall compensation be provided for the loss of expected benefits under a contract that is not concluded.
A party receiving confidential information in the course of negotiating a contract may not use or disclose such confidential information, subject to compensation for the losses and restitution of benefits received.
Contracts are concluded at the time of valid acceptance, unless the parties agree otherwise or unless otherwise provided by law.
The consent of the parties is demonstrated by their statements or conduct.
(1) A proposal for the conclusion of a contract constitutes an offer if it indicates the intention of the offeror to be bound in case of acceptance and if it is sufficiently definite.
(2) An offer may be made to one or more specific persons or to the public at large.
(1) An offer becomes effective when it reaches the offeree.
(2) An offer may be withdrawn before it reaches the offeree.
(1) An offer may be revoked before the offeree has dispatched an acceptance.
(2) If acceptance consists of a conduct differing from a declaration of acceptance, it may be revoked until the contract is concluded.
An offer is irrevocable if:
(1) The offeror has indicated that it is irrevocable.
(2) The offeror has fixed a time for its acceptance and the offeror does not expressly reserve the power to revoke it.
(3) The offeree has been able to rely, in good faith, on the offer being irrevocable.
The offer will expire in the following cases, even if it is irrevocable:
(1) When rejected by the offeree. Expiration will be effective at the time the rejection reaches the offeror.
(2) When the offeree’s reply contains additions, limitations, or other modifications that materially alter the terms of the offer.
(3) When the offeror dies or is incapacitated prior to receiving the acceptance.
(4) When it is not accepted within the time fixed by the offeror or, if no time is fixed, within a time that may be expected in good faith.
(1) Any statement made by or other conduct of the offeree indicating assent to an offer constitutes acceptance.
(2) Modifications to an offer by the offeree constitute the proposal of a new contract.
Silence or inactivity does not in itself amount to acceptance, except when it is considered to be an acceptance by operation of law, the intention of the parties, customs and usages, or the prior conduct of the parties.
(1) A contract is concluded at the time the acceptance reaches the offeror.
(2) When acceptance consists of a conduct, conclusion of the contract will take place at the time the offeror becomes aware of such conduct.
(3) If by virtue of the offer or as a result of practices that the parties have established between themselves, the offeree may indicate assent by performing an act without notice to the offeror, acceptance will be effective at the moment the act is performed.
(1) Any form of acceptance is effective when it reaches the offeror within the fixed time or, if no time is fixed, within a time period that is in accordance with good faith, having regard to the circumstances of the negotiation and to the means of communication employed by the offeror.
(2) An oral offer must be accepted immediately, unless the circumstances indicate otherwise.
A late acceptance is effective if:
(1) The offeror immediately notifies the offeree to that effect.
(2) The written communication containing the late acceptance shows that it should have reached the offeror within the fixed time.
(1) A reply to an offer that contains additions, limitations, or modifications constitutes a counteroffer.
(2) However, if the terms of the offer are not materially altered, the reply constitutes an acceptance, and the contract will be concluded with such additions, limitations, or modifications.
(3) Even when the limitations or modifications do not materially alter the terms of the offer, the reply will be understood as a rejection in the following cases:
(a) When the offer expressly demands full or partial acceptance of the proposed terms.
(b) When the offeror without delay informs the offeree of its objection to the changes.
Acceptance may be withdrawn until the time at which it becomes effective.
The defects of the contract are mistake, fraud, threat, and gross disparity.
Mistake means ignorance or an erroneous assumption relating to facts or to law when of such importance that a reasonable person in the same situation would not have concluded the contract or would have done so on significantly different terms.
(1) Mistake vitiates a contract when:
(a) It is caused by information supplied by the other party.
(b) The other party knew or should have known of the mistake and did not disclose it against good faith.
(c) Both parties made the same mistake.
(2) In these cases, the contract is null if the mistake can be excused or the risk of its existence was not or ought not to have been assumed by the person who made it.
A mistaken party may not claim nullity of the contract if the counterparty offers to perform it in the manner according to which the mistaken party had intended to form the contract.
The provisions of the foregoing articles apply to mistakes in expressing and transmitting intention.
(1) Fraud is the deceitful inducement to conclude a contract by means of an act or omission of a party thereto or of a third party.
(2) Fraud vitiates the contract when it is clear that in its absence the parties would not have concluded the contract and there has been no reciprocal fraud.
(1) The defrauding party is liable for damages.
(2) The party that was, at the time the contract was concluded, aware of the fraud committed by a third person is jointly and severally liable.
A contract may be annulled if a party has been led to conclude it by an unlawful threat of an imminent and serious harm.
Consideration must be given to the age, gender, personal condition, and other circumstances of the party in question that might have a bearing on the seriousness of the threat.
Threatening the regular exercise of a right and simple reverential fear are not grounds for annulling a contract.
(1) A party may seek the adaptation of a contract or any of its clauses, or to annul the contract, if it or they give the other party an excessive advantage in contravention of the requirements of good faith.
(2) All circumstances must be taken into account when considering the excessiveness of an advantage, in particular the dependence of the aggrieved party and its extraordinary economic distress, urgent needs, ignorance, or lack of experience.
Likewise, the relationship of trust existing between the parties as well as the nature and purpose of the contract must be taken into consideration.
(3) Upon request of the aggrieved party, the court may adapt the contract in order to make it consistent with the agreement that would have been reached by the parties in accordance with good faith.
(4) The party against which an action of nullity is brought may also request adaptation in accordance with the previous paragraph, provided it promptly informs the other party of this decision.
(1) The subject-matter of a contract must be ascertained or ascertainable, possible, and lawful.
(2) It is unlawful when it is prohibited by law or when it is contrary to good morals or to public policy.
(1) All obligations require a cause. A cause is presumed to exist as long as it is not proven otherwise, even if it is not expressed.
(2) The cause of the contract must be lawful.
(1) As to form, a contract is valid when it complies with the requirements of the law that govern it, or the legal requirements of the State in which it is concluded, or the law of the place where it is to be performed.
(2) When persons are located in different States at the time a contract is concluded, the place of conclusion shall be understood as the place where the contract is concluded in accordance with these Principles.
Nullity is absolute when the public interest is affected; and relative when only private interests are affected.
(1) Where one or more individual terms of a contract are found to be null, the remaining terms of the contract will continue in effect, unless this is not possible due to the nature of the contract or the original intention of the parties. In the event of the latter, a court must rule on the total nullity of the contract.
(2) As to partial nullity, if necessary, a court may adapt the contract in accordance with the requirements of good faith.
Nullity may be invoked through an action or a defence.
Absolute nullity must be determined by a court, and may be undertaken at the own motion of the court. It may also be invoked by any interested party, even when such party is not party to the contract.
Contracts that violate the law, public policy, or good morals incur absolute nullity.
Article 46. Confirmation under absolute nullity not possible
A contract affected by absolute nullity cannot be confirmed.
Relative nullity may only be invoked by the person for whose benefit it is established.
(1) The party with the right to invoke relative nullity may confirm the contract by explicitly or implicitly expressing its intention to uphold the contract as valid.
The act of validation does not require the consent of the other party.
(2) The confirmed contract will be understood as valid as of its conclusion and in no way will it impair third parties in good faith.
(3) The action to invoke relative nullity is extinguished by prescription.
The party with the right to invoke the relative nullity of the contract or exercise one of the means of relief for non-performance may choose between these options.
(1) The nullity results in the extinction of the contract, unless the nullity is partial.
(2) Restitutions are governed by the rules provided in articles 119 to 123.
Nullity may be upheld against third persons, except when they have acquired rights through the payment of valuable consideration and in good faith.
Restitution is not possible with regard to transfers or payments knowingly proceeding from an unlawful subject-matter or cause.
A private declaration by the parties that is inconsistent with that which they have overtly contracted for may be enforced by either party.
(1) Third persons in good faith may enforce the private declaration or that which they have apparently contracted for, at their discretion.
(2) Third persons may seek a declaration of simulation to the extent the declaration affects their interests.
(3) In the event of a dispute between third persons, preference will be given to the third persons in good faith that enforce the overt act.
This section does not govern representation conferred by law or as a result of an appointment made by a public or judicial authority.
(1) The acts that one person performs in the name of another, within the scope of its authority, produce the same effects as if they had been done by the principal; so long as the third party knew, or ought to have known that the representative was acting in that capacity.
(2) When the principal authorizes the representative to act in its own name, the effects of the contracts entered into by the representative with a third party will directly affect the representative.
(1) The scope of the representative’s authority is determined by the grant, notwithstanding the authority that is implied from the nature of the transaction delegated.
(2) The authority granted in general terms authorizes the agent to perform the acts of ordinary administration related to the delegated transactions.
(3) All other acts require the conferral of special authority.
When a party acts as an employee of a business or under other analogous circumstances, it is to be understood that it has authority to perform the acts that are ordinarily performed in the course of that business.
The act performed by a party that acts without authority, or exceeding its authority, does not bind the principal to the third party, unless the third party had believed, because of the conduct of the principal, that the representative had authority to act.
(1) The person that acts without authority, or exceeding its authority, shall be liable for damages to the third party, unless the third party knew, or ought to have known, that the person acted without authority, or exceeding its authority.
(2) The principal may ratify the acts performed by the person that acted without authority or exceeding its authority, in which case the principal is bound as of the date of the act, subject to the rights of third parties in good faith.
(1) Unless otherwise agreed, the representative may delegate authority to another person, in which case the representative is liable for the acts of the delegate.
(2) The representative is not liable for the acts of the delegate, if the delegate has been appointed by the principal.
Where several representatives have authority, it is to be understood that all of them act separately, unless otherwise agreed.
(1) The representative may not enter into self-contracting or conclude a contract with third parties that could involve the representative in a conflict of interest with the principal, unless the principal authorizes it or if due to the nature of the act no detriment to the interests of the principal is caused. The representative is also precluded from entering into contracts, when also acting as a representative for the third party.
(2) The contract concluded in violation of this provision may be annulled.
(1) Termination or modification of the authority, for whatever cause, shall not be upheld against third parties, unless they knew or ought to have known of it.
(2) Notwithstanding the extinction of authority, the representative remains authorised and shall perform those acts that are necessary to prevent harm to the interests of the principal.
(1) Any party may contract in favour of a third party, and both the promisee and the beneficiary may demand what has been contracted.
(2) If the third party renounces the benefit, it will be considered as having never acquired the right.
(1) The promisee may revoke the contract or substitute the third party as long as the third party has not accepted it. The acceptance of the beneficiary renders the right conferred irrevocable.
(2) In the event of revocation or of lack of acceptance, the right will remain with the promisee, unless the contract indicates otherwise.
The promisor may assert against the third party all defences arising out of the contract concluded with the promisee.
A party that has promised that a third party will assume an obligation will be liable for compensating the counterparty if the third party refuses to be bound.
A contract is to be interpreted according to the common intention of the parties.
When determining the common intention of the parties, regard shall be had, among others, to the following criteria:
(a) The rules of interpretation agreed upon by the parties.
(b) The conduct of the parties during the formation, conclusion, and performance of the contract.
(c) Prior, concurrent, or subsequent conduct of the same parties in other contracts of the same nature.
(d) The type, subject-matter, and cause of the contract.
(e) The usages of the place where the contract is concluded.
Technical words and terms of art shall have the meaning assigned to them by those practising in the respective field, unless it is evident they have been assigned a different meaning.
The clauses of a contract shall be interpreted one by another, so as to give them the meaning that most conforms to the contract in its entirety.
The interpretation of a clause that is able to produce some effect shall be preferred to the interpretation of a clause that is not capable of producing any effect.
Ambiguous clauses shall be interpreted in favour of the party that has contracted under the dominant influence of the other party, taking into consideration the dependence of the affected party, its extraordinary economic distress, its imperative urgent needs, its ignorance, its lack of experience, or its lack of bargaining skill.
Non-negotiated clauses must be interpreted against the party that proposed them.
Contracts must always be interpreted in accordance with good faith.
Performance is the fulfilment of a contract according to its terms.
(1) A contract must be performed at the place expressly or implicitly fixed by, or determinable from the contract.
(2) If the previous rule does not apply, the place of performance shall be:
(a) For monetary obligations, at the address of the obligee.
(b) For obligations, the subject-matter of which are specific goods, at the place where the goods were located when the contract was concluded.
(c) For all other obligations, at the address of the obligor. If the obligor moves, the obligee has the right to demand payment at the current or previous address. The obligor has the same option when the place of payment is the address of the obligee.
(1) The contract must be performed at the time fixed by the contract, and in the absence of any provision, the following rules shall apply:
(a) If performance can take place immediately, it shall take place within the shortest time possible after the conclusion of the contract.
(b) If a lapse of time is required due to the nature of the performance, it shall be performed within the shortest time possible after the conclusion of the contract.
(2) If it is not possible to fix the time of performance in accordance with these rules, the contract must be performed at the time resulting from its nature, usages, or good faith.
(1) The obligor may perform early, unless this seriously harms the interests of the other party. Earlier performance does not affect the performance of the reciprocal obligation.
(2) The obligee may waive the lapse of time established in its favour.
Performance of the contract cannot be demanded prior to the lapse of the time agreed, except:
(a) If the obligor has been declared bankrupt or insolvent.
(b) If the obligor has not established the promised securities or the securities have suffered a considerable reduction due to a cause attributable to the obligor.
(c) If the time period is only fixed in favour of the obligee.
(1) The contract may also be performed by a third party, except when special conditions of the obligor have been considered or the obligee and obligor both oppose this.
(2) An interested third party is a person for whom the failure of the obligor to perform may cause economic damage.
(1) Unless otherwise agreed, each party shall bear the costs of performing its obligations.
(2) An obligee is liable for the costs arising out of a default attributable to it.
(1) If after its conclusion, performance of the contract becomes excessively onerous or the utility of the performance considerably decreases, due to a change of circumstances, the event or magnitude of which could not have been reasonably foreseen, and if the risk of the change of circumstances has not been assumed by the affected party, the latter may request the renegotiation of the contract.
(2) Performance of the contract is not suspended during the renegotiation, unless such performance causes irreparable harm to the affected party.
(3) If, after a reasonable time, the parties have not adapted the contract, either party may request the court to adapt or terminate the contract. In doing this, the court has to take into consideration the distribution of risks and the costs assumed by the parties.
The definitive frustration of the cause of the contract, due to a change of the circumstances existing at the time of its conclusion, unforeseen by the parties and that exceeds the risk assumed by the affected party, authorizes the latter to terminate the contract.
(1) Non-performance is a failure to perform the contract in the agreed manner.
(2) Defective performance includes all forms of non-conformity between that which was agreed and that which was performed by the obligor.
(3) Non-performance by the obligor includes the persons it employs to perform the obligation.
Non-performance shall be understood as fundamental when:
(a) The parties have agreed that it is with respect to specific obligations or specific events of non-performance.
(b) The non-performance is intentional.
(c) The conduct of the non-performing party gives the obligee reason to believe that it cannot rely on the other party's future performance.
(d) It substantially deprives the obligee of what it was entitled to expect according to that which was foreseeable for the parties at the time the contract was concluded.
(e) The obligor does not perform within the term for cure, as set forth in article 93.
The obligee may not invoke non-performance due to its own acts or omissions.
Force majeure or an act of God is an event beyond the control of the obligor that temporarily or permanently impedes it from performing an obligation at no risk to it and the occurrence and effects of which it could not have avoided.
(1) The total and final supervening impossibility to performing a contractual obligation due to an act of God extinguishes the obligation and releases the obligor. In this event, the obligee may choose to terminate the contract or require the assignment of the rights and actions that, due to the impossibility, the obligor held against a third party.
(2) When the impossibility is partial or temporary, the obligee may suspend performance or reduce it by an equal proportion, unless, as a result of the impossibility, it substantially deprives it of what it was entitled to expect according to that which was foreseeable at the time the contract was concluded. In the event of the latter, the option set forth in paragraph (1) shall apply.
(1) In the event of non-performance, the obligee may, at its discretion and as appropriate, exercise one of the following means of relief:
(a) Specific performance;
(b) Price reduction;
(c) Termination of the contract;
(d) Suspension of performance; and
(e) Damages.
(2) Damages may be claimed separately or in conjunction with the remaining means of relief.
(1) In the event of defective performance, the obligee shall give notice of the non-conforming performance within a reasonable time after it should have become aware of it.
(2) If notice is not given, the obligee may not demand performance or terminate the contract.
(1) Unless non-performance is fundamental, the obligee must allow an additional period of reasonable length for curing non-performance.
(2) During the additional period, the obligee cannot exercise any mean of relief incompatible with the cure, notwithstanding its right to claim damages.
(3) If the obligor fails to effect cure within the time allowed, or declares that non-performance shall not be cured, the creditor may exercise any of the means of relief.
(1) Specific performance can always be demanded for monetary obligations.
(2) In the case of non-monetary obligations, specific performance is subject to the following limitations:
(a) It may not be demanded when performance is impossible. However, the obligee may require that the obligor assign its rights and actions against third parties.
(b) Even though it is possible, specific performance may not be demanded when it is extremely burdensome for the obligor, taking into consideration that the obligee may satisfy its interest by choosing another means of relief.
(c) It may not be demanded when it represents an injury to personal dignity.
(1) Regarding defective performance, specific performance includes the repair or cure of the non-conformity or replacement, subject to the limitations contained in the previous article.
(2) Replacement always requires fundamental non-performance.
(1) In the event of defective performance, the obligee may accept this and reduce the price in proportion with the difference between the value of the performance at the time it was carried out and the value it would have had at that same time if the performance had occurred.
(2) Reduction in price is not compatible with compensation for reduction in the value of performance.
(3) In any case, the obligee may demand compensation for other harm.
(1) Any party to a contract may terminate it when the other party incurs fundamental non-performance.
(2) Reciprocal non-performance shall not prevent the termination of the contract.
(3) A contract may be terminated by a court or by notice.
Termination exercised by written notice to the other party shall be effective upon receipt.
(1) Termination extinguishes the effects of a contract, unless it is partial. Notwithstanding, it does not affect the clauses agreed to by the parties for the settlement of disputes or those related to non-performance itself, or any other clause which is to operate even after the termination.
(2) Restitutions may be demanded in accordance with articles 119 to 123.
The rules provided in article 51 regarding third parties are applicable as per termination.
(1) The parties may incorporate into the contract clauses that provide the obligee with the power to terminate it.
(2) The clauses must indicate the obligations non-performance of which causes termination.
(3) These clauses shall not deprive the aggrieved party of the possibility to choose any other means of relief.
Each party may refuse to perform if the other does not perform, unless performance by one must take place prior to performance by the other due to the nature of the contract or an agreement between the parties.
A party may refuse to perform the contract when, prior to the date of performance, it is evident that the obligor will not perform. Suspension shall cease if the obligor performs or adequately guarantees performance.
When non-performance results in damages, the obligor is liable for compensation.
If non-performance is the result of an act of God, there shall be no grounds for damages.
The recovery of damages covers monetary and non-monetary harm.
Non-performance of a monetary obligation requires the obligor to pay interest, notwithstanding compensation for other harm.
(1) The non-performing party shall be liable for harm it could have foreseen at the time of the conclusion of the contract and that results from its non-performance.
(2) In the event of fraud or gross negligence, the obligor shall be liable for all harm that results from its non-performance.
Compensation is subject to reduction when the obligee has contributed to the harm by way of its acts or omissions.
(1) Compensation is subject to reduction when the obligee has failed to take reasonable measures to mitigate harm in good faith. Reduction shall correspond to the amount by which the harm could have been mitigated.
(2) The obligee is entitled to compensation for what it has allocated towards mitigating harm, even if these measures have been ineffective.
A penalty clause is that in which one of the parties is to pay a sum of money to the other in case of non-performance.
(1) The penalty clause guarantees the exact and timely performance, and estimates the damages with anticipation.
(2) The penalty may be agreed in substitution of compensation for the value of the object of the obligation, of the damages beyond the value of the object, or of those derived from mere delay on performance.
The penalty may be requested with no proof of harm. Force majeure excludes payment of the penalty, unless otherwise agreed.
A court may, upon request by a party, reduce the penalty when it is manifestly excessive, taking into consideration the value of the performance, the nature and purpose of the contract, and other relevant circumstances.
If performance is defective and the obligee accepts it, the obligor will be entitled to proportionally reduce the penalty, unless otherwise agreed.
The period of cure provided in article 93 does not preclude the obligee from the right to request the penalty for the value of the performance, when the parties have agreed that the penalty will be compatible with the specific performance of the contract.
Unless otherwise agreed, the obligee:
(1) May choose between the penalty or damages.
(2) May accumulate specific performance with the penalty for damages that exceed the value of the performance or of those derived from delayed performance.
(3) May accumulate the penalty with damages that exceed the value of the performance with the price reduction.
(4) Must not accumulate the penalty agreed for the value of the performance with specific performance.
(5) Must not request specific performance or termination along with the penalty agreed for the value of the performance, but either one or the other.
(1) If the contract is entered into considering earnest money, each party may withdraw from the contract. As a result, the party that has provided earnest money loses it, and the party that has received the earnest money has to return it, plus an equivalent amount.
(2) If the parties have not agreed a time for the withdrawal that causes the loss of the earnest money, they may only withdraw prior to the beginning of the performance of the contract.
(3) If parties do not exercise their right to withdraw, the earnest money shall be deducted from the value of the performance of the contract, or be returned, as appropriate.
(1) The parties may incorporate into the contract clauses that limit or exclude damages.
(2) These clauses shall have no effect, if non-performance is intentional or grossly negligent.
(3) Harm caused to inalienable rights of the obligee does not admit limitation or exclusion whatsoever.
(1) If the contract is annulled or terminated, restitution shall be made for performance that has taken place and any fruits received, concurrently or within the time agreed by the parties, or otherwise, by the court.
(2) Restitution of useful and equivalent performances that have taken place is not required, unless the purpose of the contract requires its complete performance. Utility shall be considered in accordance with the purpose of the contract.
(3) When performances have not been useful, the rule in paragraph (1) shall be applied.
(4) When performances are not equivalent, restitution shall be limited to the value of the difference.
(1) Restitution of a sum of money includes indexation and legal interest, accrued until complete payment.
(2) Interest accrues from payment if the party that has received the sum of money has acted in bad faith. If a party that has received a sum of money has acted in good faith, interest accrues from the time of notice of the lawsuit or from the time of termination.
(1) When restitution is not possible, the obligee shall be entitled to the value of the performance determined at the time of restitution.
(2) Alternatively, each party may demand that the other party assign its rights or actions against third parties.
A party shall not be compelled to comply with its restitutionary obligations whilst the other does not comply with its own restitutionary obligations.
Securities shall be extended to the obligation of restitution until the time agreed, with the exception of those granted by third parties.