Title

IV.1.2 - Sanctity of contracts

Content

No. IV.1.2 - Sanctity of contracts

(a) A valid contract is binding upon the parties. It can only be modified or terminated by consent of the parties or if provided for by the law. The parties to a contract must, unless legally excused from performance, perform their respective duties under the contract ("pacta sunt servanda").

(b) A valid unilateral promise or undertaking is binding on the party giving it if that promise or undertaking is intended to be legally binding without acceptance.   

Commentary

1 The Principle is an expression of the general Principle of good faith which above all signifies the keeping of faith. Without such a rule international contract law would be a mere mockery.

2 The respect for this Principle requires parties to execute their contractual undertakings. However, the modalities of this execution are not indicated by this general Principle. It is the Principle of good faith which provides this precision in a way that one can merge both Principles into one when it comes to the performance of a contractual obligation: pacta sunt servanda bona fide.

3 In spite of its pivotal importance, the Principle of sanctity of contracts is not without exceptions. One such exception is the Principle of hardship. However, since the principle of sanctity of contracts is the rule, the hardship defense is available only in exceptional cases.

4 The Principle applies only between the parties to the contract. It does not prejudice any effect which the contract may have vis-à-vis third parties.

References

Arbitral Awards

ICC Award No. 10422, Clunet 2003, 1142 etseq.ICC Award No. 12456, Collection of ICC Arbitral Awards 2008-2011, at 811 et seq.ICC Award No. 14470, Collection of ICC Arbitral Awards 2008-2011, at page 945 et seq.ICC Award No. 1795, YCA 1999, at 196 et seq.ICC Award No. 2321, YCA 1976, at 133 et seq. (also published in: Clunet 1975, at 938 et seq.)ICC Award No. 3344, Clunet 1982, at 978 et seq.ICC Award No. 4761, Clunet 1987, at 1012 et seq.ICC Award No. 5485, YCA 1989, at 156 et seq.ICC Award No. 5953, Clunet 1990, at 1056 et seq.ICC Award No. 7331, Clunet 1995, at 1001 et seq.ICC Award No. 8365, Clunet 1997, at 1078 et seq.ICC Award No. 8486, YCA 1999, at 162 et seq. (also published in: 10 ICC Bull. No.2, 1999, at 69 et seq.; Clunet 1998, at 1047 et seq.)ICSID Award Amco Asia Corp. et al. v. Republic of Indonesia, 24 ILM 1985 at 1022 et seq. (also pblished in: Clunet 1987, at 145 et seq.; ICSID Rep. 1993, at 413 et seq.; IntICSID Award, AMCO Asia Corpoation et al. v. Republic of Indonesia, Clunet 1987, at 145 et seq.LIAMCO v. The Government of the Libyan Arab Republic, YCA 1981, at 89 et seq.Saphire Award, ILR 1963, at 136 et seq.Texaco Overseas Petroleum Company v. The Government of the Libyan Arab Republic, YCA 1979, at 177 et seq. (also published in: ILM, 1978, at 1 et seq.; Int‘l L. Rep. 1979, at 389 et seq.; Clunet 1977, at 350 et seq.).

Court Decisions

Barkhuizen v Napier, Constitutional Court of South Africa, 2007 (5) SA 323 (CC)BG, 4P.143/2001, 18. Septembre 2001Nuclear Tests (Australia v. France), Judgment, I.C.J. Reports 1974, p. 253 et seq.Paradine v. Jane, [1647] EWHC KB J5, 82 ER 897

Doctrine

Aguilar Alvarez, Guillermo, note to ICC Award No. 4972, Clunet 1989, at 1105 et seq.Black, Henry Campell, Black's Law Dictionary, 6th ed., St. Paul 1990Blessing, Marc, Das neue internationale Schiedsgerichtsrecht der Schweiz - Ein Fortschritt oder ein Rückschritt?, in: Böckstiegel (ed.), Die internationale Schiedsgerichtsbarkeit in der Schweiz (II), Cologne, Berlin, Bonn, Munich 1989, at 13 et seq.Braeckmans, H., Paralegale Normen En Lex Mercatoria, 23 TvPr. 1986, at 1 et seq.Charles T. Kotuby Jr. / Luke A. Sobota, GENERAL PRINCIPLES OF LAW AND INTERNATIONAL DUE PROCESS - Principles and Norms Applicable in Transnational Disputes, New York NY USA 2017Cheng, Bin, General Principles Of Law as Applied by International Courts and Tribunals, reprinted, Cambridge 1987Coing, Helmut, La Détermination de la Loi Contractuelle en Droit International Privé Allemand, in: Klein/ Vischer (eds.), Colloque de Bâle sur la Loi régissant les Obligations Contractuelles, Basel, Frankfurt a.M. 1983, at 29 et seq.Craig, W. Laurence/ Park, William W./ Paulsson, Jan, International Chamber of Commerce Arbitration, 3rd ed., Dobbs Ferry 2000Dalhuisen, Jan H. - Legal Orders and Their Manifestation: The Operation of the International Commercial and Financial Legal Order and Its Lex Mercatoria, (2006) 24 Berk J Intl L  129.Dasser, Felix, Internationale Schiedsgerichte und Lex Mercatoria, Zürich 1989Dickstein, Michael E., Revitalizing the International Law Governing Concession Agreements, 5/6 Int’l Tax & Bus.Lawy. 1987/88, at 54 et seq.Domingo, Ortega, Rodriguez-Antolin, Zambrana, Principios de Derecho Global, Navarra, 2006Drobnig, Ulrich, General Principles of European Contract Law, in: Volken/ Sarcevic (eds.), International Sale of Goods - Dubrovnik Lectures, New York, London, Rome 1986, at 305 et seq.Ebenroth, Carsten Thomas, Code of Conduct, Konstanz 1987Ehricke, Ulrich, Zur Einführung: Grundstrukturen und Probleme der lex mercatoria, 30 JuS 1990, at 967 et seq.Fouchard Gaillard Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John Savage) The Hague 1999Fouchard, Philippe, L'Arbitrage Commercial International, Paris 1965Goldman, Berthold, The Applicable Law: General Principles of Law - the Lex Mercatoria, in: Lew (ed.), Contemporary Problems in International Arbitration, London 1986, at 113 et seq.Goldstaijn, Aleksandar, The New Law Merchant Reconsidered, in: Festschrift Schmitthoff, Frankfurt a.M. 1973, at 171 et seq.Horn, Norbert, Das Recht der internationalen Anleihen, Frankfurt a.M. 1972Jenks, Edward et al., A Digest of English Civil Law, London, Sydney, Calcutta, Winnipeg, Wellington 1921.Jennings, Robert Y., What is International Law and How Do We Tell It When We See It ?, Schw.Jb.Int.R. 1981, at 59 et seq.Lando, Ole, CISG and Its Followers: A Proposal to Adopt Some International Principles of Contract Law, in: American Journal of Comparative Law 53, Berkley 2005.Lauterpacht, Hersch, Private Law Sources and Analogies of International Law, New York, Toronto 1927Laviec, Jean-Pierre, Protection et Promotion des Investissements, Paris 1985Lowenfeld, Andreas F., Lex Mercatoria: An Arbitrator's View, Arb.Int’l 1990, at 133 et seq.Magnus, Ulrich, Die allgemeinen Grundsätze im UN-Kaufrecht, 59 RabelsZ 1995, at 469 et seq.Majeed, Nudrat, Good Faith and Due Process: Lessons from the Shari'ah, 1 Arb. Intl'l 2004, at 97 et seq.Marrella, Fabrizio, La nuova lex mercatoria, Principi Unidroit ed usi di contratti des comercio internazionale, CEDAM, Tratto di dritto commerciale e di dritto publico dell‘economia, Volume 30, Padova 2003Mayer, Pierre, Le Principe de Bonne Foi devant les Arbitres du Commerce International, in: Festschrift Pierre Lalive, Basel, Frankfurt a.M. 1993, at 543 et seq.Molineaux, Charles, Moving Toward a Lex Mercatoria - A Lex Constructionis, 14 J. Int‘l Arb. 1997, No. 1, at 55 et seq.Mustill, Michael, The New Lex Mercatoria: The First Twenty-five Years, Arb.Int'l 1988, at 86 et seq.Nassar, Nagla, Sanctity of Contracts Revisited, Dordrecht, Boston, London 1995Osman, Filali, Les Principes Généraux de la Lex Mercatoria, Paris 1992Paulsson, Jan, La Lex Mercatoria dans l‘Arbitrage C.C.I, Rev.d.Arb. 1990. at 55 et seq.Ripert, Georges, Les Règles du Droit Civil Applicables aux Rapports Internationaux (Contribution à l'Etude des Principes Généraux du Droit Visés au Statut de la Cour Permanente de Justice Internationale), 44 Rec.Cours 1933-II, at 569 et seq.Samuel, Adam, Jurisdictional Problems in International Commercial Arbitration. A Study of Belgian, Dutch, English, French, Swedish, USA and West German Law, Zürich 1989Schmitthoff, Clive, International Trade Usages, Institute of International Business Law And Practice Newsletter, Special Issue, ICC Publ.440,4, Paris 1987Schulze, Reiner, Gemeineuropäisches Privatrecht und Rechtsgeschichte, in: Müller-Graff (ed.), Gemeinsames Privatrecht in der Europäischen Gemeinschaft, Baden-Baden 1993, at 71 et seq.van Houtte, Hans, Changed Circumstances and Pacta Sunt Servanda, in: Gaillard (ed.), Transnational Rules in International Commercial Arbitration (ICC Publ. Nr. 480,4), Paris 1993, at 105 et seq.Verdross, Alfred, The Status of Foreign Private Interests Stemming from Economic Development Agreements with Arbitration Clauses, in: The Southwestern Legal Foundation (ed.), Private Investors Abroad, Dallas 1964, Albany, NY 1965Wühler, Norbert, Application of General Principles of Law, in van den Berg (ed.), Planning efficient Arbitration Proceedings - The Law Applicable in International Arbitration, p. 553 et seq.

International Legislation

Fontaine, Marcel, OHADA Uniform Act On Contract Law Preliminary DraftUnited Nations Convention on Contracts for the International Sale of Goods (CISG)

Model Laws

A Contract Code: Drawn up on Behalf of the English Law CommissionPrinciples of Latin American Contract Law (PLACL)

Model Terms

FIDIC 1999 Conditions of Contract for Construction (Red, Yellow, Silver)

National Legislation

Civil Code of the People's Republic of China (2020)Civil Code Québec 1991Contract Law of the People's Republic of ChinaContract Law of the People's Republic of ChinaEgyptian Civil CodeFrench Civil Code 2016Indonesian Civil Code (excerpts)Louisiana Civil Code 2015Philippines Republic Act 386 (Civil Code)

Principles / Restatements

OHADAC principles on international commercial contractsThe Most Recent Legal Principles Adopted by the Arbitral Tribunals under the Auspices of the Cairo Centre, CRCICA-Newsletter, Jan. 1997, page 2 et seq.UNIDROIT Principles of International Commercial Contracts 2016

Contract Clauses

1. Contractual Clause Stating Enforceability of AgreementSales & Purchase ContractTermination

Upon effectiveness of this Contract, neither party may cancel the Contract without the other party's consent, otherwise the terminating party shall be liable for all losses incurred by the other party due to such breach.


Accounts Receivable AgreementLegal Effect

This Agreement constitutes, and any document, instrument or agreement required hereunder when delivered will constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms.


1996Bankruptcy AgreementNo Qualifying Obligations
All intercompany Agreements shall remain in full force and effect unless (a) modified or terminated in the ordinary course of business or pursuant to the Plan of Reorganization or (b) the Proponents agree in writing otherwise.

1998Mortgage Financing Contract

The Mortgagor shall duly and punctually perform and serve all of the material terms, covenants and conditions of the Space Leases required to be performed and observed by it as landlord thereunder substantially in accordance with the terms thereof. The Mortgagor will further do all things reasonably necessary to preserve and keep unimpaired its rights under all Space Leases. The Mortgagor shall require all Space Tenants to observe, keep and perform all material covenants and agreements imposed upon them under the Space Leases. The Mortgagor shall appear in and defend any action or proceeding arising under or in any manner connected with any of the Space Leases.


2004Trust is Irrevocable

This Trust Agreement and the Trust shall be irrevocable and, except as provided in Section X hereof, unamendable except that the Board of Governors may terminate or amend its authorization pursuant to Section 13(3) of the Federal Reserve Act, thereby revoking or amending the Trust in accordance with Federal law, provided, however, that a Trustee's rights to resign as a trustee hereunder and to compensation and indemnification with respect to acts or omissions occurring prior to any such revocation or amendment may not be modified without the written consent of that Trustee. 


2009