Contract Law Remedies | Free Contract Law Essay
The Remedies for unexcused non-performance of the contract under French and English Law. Comparative study considering the influence of the Principles of European Contract law
The importance of contract law and its central place amongst the other disciplines in Private law has never been underestimated by both, scholars and practitioners. ‘A complex legal discipline in both its jurisprudential foundation and its practical function,' it is often referred to as the cornerstone of the Private Law in every legal system and the most ‘rewarding' legal field.
Consequently a definition of what a contract is seems necessary. If one turns to the French Civil Code, one will find the following definition in Art. 1101: ‘The contract is a convention whereby one or several persons bind themselves towards one or several persons to give, to do or not to do something.' On the other hand, according to some authors, English Law does not offer a precise definition of a contract. For example, J. Beatson and W.R. Anson define the Law of Contract as ‘the branch of the law which determinates that a promise should be legally binding on the person making the promise.' Those similar definitions result from the fact that both, the English and the French legal systems are based on the Latin statement ‘Pacta sunt servanda' (pacts must be kept) and therefore lie on the duty of both parties to a contract to perform their obligations.
Thus, in both systems' contract law, an essential feature of the contractual relationship is the performance of the contract as the principle that pact must be kept is firmly established and considered as the backbone of the contractual relationship. However, a problem could arise if a contract is not properly executed and one party refuses to perform its obligations. In this case the concept of non-performance and the remedies available for the aggrieved party, become relevant and therefore will represent the object of this note, which will try to offer comprehensive analyses of the contractual non performance in the English and the French legal systems, but also will take into account the possible influences of the Principles of European contract Law and further European development in the area of Contract law and assess the solutions offered by those.
Consequently important questions need to be examined such as what the contractual non-performance is in the Civil law legal system of France and the Common law system of England? Is the concept the same under both jurisdictions? In addition one should ask oneself whether the non-performance could be distinguished and how could it be distinguished from concepts such as the breach of contract? What are the remedies available for a party seeking relief because of the non-execution of the contractual obligations of the other party and are they different in both system because of the distinction between Civil and Common Law? Moreover, one should not neglect texts such as the Principles of European Contract Law (hereinafter referred to as the PECL), which could offer a new perspective of the concept of non-performance and the remedies available to the suffering party? Is the solution of the Principles in accordance with both jurisdictions? Have it managed to offer more suitable remedies than the pure Common and Civil Law traditions? Additionally, would the Principles play an important role for the future private European law development or they will be supplanted by new texts?
In order to answer to those questions, we will first try to establish the differences between the concept of non-performance in the English and French legal systems with existing broader concepts such as the breach of contract (I). In a second part we are going to discuss whether substantial differences between the essential English and French remedies for contractual non-performance exist as a consequence of the distinction between Civil and Common law legal traditions (II). Eventually, this note will discuss the possible influences of the PECL and the remedies for non-performance they are offering (III).
Comparison of the French and English concept of non performance contrasted with the broader scope of the concept of breach
As it was already mentioned at the beginning of this research, the French and the English Law of contracts are based on the principle that pacts must be kept and ‘every contract,' unilateral or bilateral (the latter is known under the term synallagmatic in French) ‘imposes obligations on at least one of the parties.' Likewise, the rights and obligations on each party depend on the contractual terms that they have agreed on. As explained by G. Treitel: ‘Performance must be exactly in accordance with these terms.' If one of the parties to a contract refuses or ‘fails to perform' his contractual duties, this will be qualified as non-performance, which will also be prima facie qualified as a breach. Nonetheless, as clarified by the author, not every non-performance will amount to a breach of contract.
First, if we try to define the concept of non-performance, we will see that in both systems it reflects the refusal of one party to perform what has been agreed in contract. In France, the contract has the force of ‘loi' (law) between the parties and has to be respected. Thus, French Law considers that the contract obliges the debtor to accomplish a service or an action, which he should not have been obliged to perform if there was no contractual relationship. Similarly, English law requires that the parties perform their obligations as they have agreed when they concluded the contract. Consequently, both legal systems seem to accept that contractual performance is an essential duty in the contractual relationship and try to give solutions to the situations where one of the parties will refuse to continue the performance of the contract. However, non-performance could not only be the result of voluntary action or inaction, but could also be the consequence of external elements, independent from the willingness to perform of the parties to the contract. Therefore, one need to understand that the liability for non-performance could be due to a fault from one of the contractors, but will also arise in some cases ‘independently of fault' (strict liability). This one should also remark that although non-performance will usually amount to a breach of contract, it will not always be the case. Thus, a non-performance could be ‘excused by some rule of law, or by the terms of the contract' and examples of excused non-performance could be found ‘under the doctrine of frustration' or the ‘force majeure' in French law. Other reasons, excusing the non-performance could be ‘that the duty has not yet arisen,' ‘le fait du prince' and the ‘cas fortuit' in the French system.
If a party refuses to perform or does not perform efficiently its obligations, it becomes necessary to enquire about the main remedies available to the affected party. This note will be interested in the remedies for unexcused non-performance, which will be discussed is in the next party of this note. As ‘failure to perform a contract is generally a breach,' the remedies available for breach of contract such as performance in specie and damages will be discussed bellow. The other types of remedies available to the claimant could be avoidance of the contract and the possibility to refuse performance if the other contractor has not compelled with his undertaking. All these deserve our full attention and will be considered in the next part of this study, dedicated to the remedies for non-performance in the French and English legal systems.
Comparison of the remedies for non-performance of the contract in France and England
In a first part we are going to concentrate on a comparison of the French and English domestic provisions relating to non-performance and the remedies offered (A). However, in the French legal system, one must distinguish between the pure French domestic law and, therefore the French Civil Code and other international provisions the country has ratified, such as the Vienna Convention on International Sale of Goods (hereinafter referred to as the CISG ). The latter will be discussed in a second point (B).
The remedies for non-performance offered by both legal systems' domestic laws
As it was already explained above, when one of the parties refuses to carry out his obligations, the question of what recourse the other party has against this non-performance, arises. Thus, it becomes necessary to assess both jurisdictions' approaches towards the remedies for defective performance. The first remedy to be considered by this paper is known as the ‘exception d'inexécution' in French law, its parallel in English law being the ‘unpaid seller lien' or retention right (a). The second point will be dedicated to a comparison of the importance of the ‘execution en nature' in the French legal system contrasted with the role of ‘performance in specie' (b). Another part will analyse the place of damages (c), whereas a last part will review the principle of judicial résolution in France and the right to unilateral termination of the contract in English Law (d).
L'exception d'inexécution and unpaid seller's lien
The remedy of ‘exception d'inexécution,' ‘non adimpleti contractus' or as it is translated in English: the ‘defence of unperformed contract' is the first French remedy that we will be interested in. Well established in French Law, it will intervene only if one party does not respect his contractual duties but requires that the other party still compel with his part of the contract, the most important condition being that the obligations should be ‘concurrent.' As the principle in bilateral contracts is that both actions should be performed simultaneously, if one refuses to honour his obligations, the remedy allows the creditor to refuse the execution of his contractual obligations ‘unless the other party performs his' own obligations.
According to Prof. Nicholas, the French and Latin denominations are deceptive as the language used could wrongly imply that the remedy has the effect of a ‘moyen de defence' (mean of protection) against an action, whilst in fact the remedy gives the opportunity to a party to not perform the contract, without needing to resort to court, if the other party refuses to carry out his duties.This possibility to resolve the dispute arisen without resorting to national courts is the main particularity of the remedy. It is often qualified as a ‘voie de justice privée' (remedy for private justice). A practical application of the principle, could be found for example, in sales contracts, where the seller could refuse delivery if he has not received payment. Furthermore, the remedy could be used by the landlord, who can refuse to maintain the building in good condition if the tenant refuses to pay the rent.
One could be surprised to learn that this remedy was inexistent in Roman law, on which French Law is mainly based, but originated only in the Middle Ages. It finds its source in the ‘principe de retention' (the principle of retention), which allowed a party to the contract to keep the object of the agreement as a collateral, until the other party performed its obligations. Although, being the basis of the today's concept of exception d'inexécution, the principle of ‘retention' should not be confused with the former as it has narrower application. However, as it is observed by scholars, it was only in the 20th century that the jurisprudence made generalised application of the principle ‘to all synallagmatic contracts'. In order to justify its position, it ‘founded it' on one of the essential elements for the constitution of a contract: ‘the doctrine of the cause', which requires that ‘each obligation is the cause of the other.' As a result, if one party refuses to perform its part of the contract, the other will find justification in ‘the cause' to refuse to perform its obligations.
One important point that needs to be clarified, however, is that the suspension of contractual performance that will result, will be ‘temporary and provisional.' It will not bring the parties' contractual obligations to an end. Hence, if the infringing party decides to perform his duties, the party, which has resorted to the remedy of exeption d'inexécution, should also be required to perform his own obligatons. However, the inconvenience that could arise from this type of situations for the party originally willing to carry out his obligations should not be neglected, as for example, in sales contracts, this party will have to refuse delivery, if not paid. Nevertheless, it should still be ready to perform and therefore deliver the goods, if the debtor eventually decides to complete its part of the contract. Therefore, it will not be able to dispose with the goods, because of the temporary effect attached to the remedy and this could result in substantive losses for him. The only possibility for him then will be to ask for resolution of the contract (this remedy, however, will be discussed lately in our note) in order to be liberated from his duties.
This remedy has been widely used in the French legal system. However, it is also an area of concern for scholars as they consider that ‘it is capable of abuse', because one party could try to rely on the remedy unjustifiably. Nevertheless, one should not forget that even in these cases, the party against whom the remedy has been used, could ask the judge to decide whether the exception d'inexécution has been unjustifiably employed, and if this is the case this party will be allocated damages. Thus, even though it is not necessary to go to court in order to apply for the remedy, the court will still have the power to scrutinise the recourse to the remedy and therefore limit its abusive use.
In English law on the other side, the French remedy of ‘exception d'inexécution' amounts to what is knowns as the ‘unpaid seller's lien,' reference to which could be found in Sect. 39 et 41 and following of the English Sale of Goods Act from 1979. The first provision recognises the right for a seller, ‘notwithstanding that the property in the goods may have passed to the buyer,' a lien, or right to retain the goods ‘for the price while he is possession of them.' Thus in cases of ‘insolvency of the buyer,' the unpaid seller has a right of stopping the goods in transit after he has parted with the possession of them' and ‘a right of re-sale as limited by' the Sale of Goods Act. Even when ‘the property in goods has not passed to the buyer, the unpaid seller has (in addition to his other remedies) a right of withholding delivery similar to and coextensive with his rights of lien or retention and stoppage in transit where the property has passed to the buyer.' Moreover, Sect. 41 lays emphasis on the fact that ‘the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price' if ‘the goods have been sold without any stipulation as to credit,' if they ‘have been sold on credit but the term of credit has expired,' or ‘where the buyer becomesinsolvent.' These provisions imply that the seller has the right to refuse delivery, if he is still ‘in possession' of the goods ‘until the buyer performs his obligations. In addition to this, alike in French law, it appears that the Sale of Goods act does not consider the contract rescinded by the mere fact that he seller has exercised his lien. This implies that the remedy is also temporary and not definitive. Performance from the creditor will still be required if the debtor decides to honour his obligations.
After this reading of the Sale of Goods Act, one can conclude that the English legal system mirrors the French point of view in relation to non-performance and authorises a party to refuse to perform his part of the contract if the other party has not compelled with his obligations. It is also a remedy available for the non-performance of ‘concurrent obligations' (i.e. delivery of the goods and payment of the price' as explained by the Sale of Goods Act, Sect. 28. Furthermore, in both jurisdictions it represents a remedy of temporary nature, and should not be considered on its own as a rescission of the contract. The ‘exception d'inexécution' is however wider than the lien or right of retention, as ‘the creditor is not confined to retaining a specific thing to which the debtor is entitled.' However they both have the same effects and very often are ‘undistinguishable.' The ‘exception d'inexécution' and the unpaid seller's lien could be defined as successful means of pressure against the reluctant debtor, as they authorise the creditor to retain the goods object to the contract until the debtor performs his undertaking. Under the Common law system, however, the seller will lose his right of lien or retention if he has not reserved the right of retention on the goods, if the buyer ‘lawfully obtains possession of the goods' or ‘by waiver' of this right. This is slightly different from the French position which does not contain those limitations. In spite of this, the main points of the remedies are akin in both legal systems.
After having compared these two remedies, particular attention should be drawn to another remedy: this of performance in specie in both systems.
The importance of the ‘execution en nature' in the French legal system contrasted with the role of ‘performance in specie' under English law
As performance of the contract is essential in French law, ‘a contractor is in principle entitled to demand that his contract be performed in specie.' This implies that a party can apply to court and request that the judge ‘orders the defendant actually to perform his undertaking.' As it is rightly observed by scholars these orders will require ‘positive' performance, and will therefore compel one party to accomplish an action. One the other hand, there are orders prohibiting a party to continue an action: ‘negative' orders (referred to in English law, as injunctions).'
Performance in specie is a well established remedy in the French legal system whose importance should be contrasted with its place amongst the other English remedies for defective performance. In fact, one should understand that performance in specie is a primary remedy in Civil Law countries, but constitute a concern for Common law lawyers. The French Civil Code in its Art 1184 emphasises that:
‘La condition résolutoire est toujours sous-entendue dans les contrats synallagmatiques, pour le cas où l'une des deux parties ne satisfera point à son engagement.
Dans ce cas, le contrat n'est point résolu de plein droit. La partie envers laquelle l'engagement n'a point été exécuté, a le choix ou de forcer l'autre à l'exécution de la convention lorsqu'elle est possible, ou d'en demander la resolution avec dommages et interêts.'
This article gives the opportunity for the aggrieved party to choose between the performance in specie of the contractual obligation (execution en nature), or the resolution of the convention and recovering damages. This possibility to apply for the performance of the contractual obligations is, however, not without limitations. Thus, as it is observed by K. Zweigert and H. Kotz, an order for performance in a kind could be awarded only to the extent ‘that (it) is still possible'. The authors have remarked that in the case of sales contracts, for example, Art. 1610 French Civil Code states that if the seller fails to deliver the goods on time, the buyer could ask for the resolution of the sales contract or the ‘possession of the goods'. Specific performance finds its justification in the idea that ‘what the creditor expects from an obligation is its performance in a kind.' When one does not compel with his undertaking, but his creditor requires ‘execution en nature,' ‘the law will if necessary enforce that performance' (‘execution forcée'). The ‘execution en nature' is only one element of the execution forcée, the other being the ‘réparation par équivalent', or as it is commonly known ‘damages' (the latter is going to be discussed in our next part).
In English law on the contrary, although recognised as a remedy for non-performance, performance in specie does not occupy as important place as it does in French law. This is due to the fact that ‘the common law did not specifically enforce obligations except those to pay money.' Therefore ‘there is no right to specific performance: the remedy is equitable and discretionary.' This underlines the big difference between the Common and Civil systems as orders for positive and negative performance do not seem to have a real legal recognition and be remedies that one could expect to be awarded for sure in case of non-performance in England, while in Civil law countries there are clearly accepted as primary remedies. This is due to the importance that Civil law systems, and therefore French law, give to the ‘saving' of the contractual relationship. English law, on the other hand privileges damages and if possible it will always award damages instead of performance in a kind. Only if damages are cannot offer the aimed relief that the court could decide to resort to order for performance. This brings the question of situations where damages would not be enough to compensate for the loss that the aggrieved party suffered. These will include contracts for ‘unique goods' such as pieces of art, sales of specific ‘land or of a house', ‘commercially unique things as ships or machinery,' etc. This need for ‘uniqueness' of the goods in dispute has been the essential factor considered in order to decide whether or not specific performance or injunctions can be awarded. More recently the decision of whether to order performance in specie has shifted from the question whether damages could be an appropriate remedy to this of ‘whether specific performance is the most appropriate remedy.' Thus, the relevant factor becomes the degree of ‘inconvenience' that an order for specific performance could cause. An order of specific performance depends on the sovereign appreciation of the court, which could ‘refuse specific performance even where the remedy will be a more appropriate one than damages.' Therefore, there is no guarantee that although performance in a kind will be more appropriate than damages, it will be granted by the court. It may be refused because of the ‘undue hardship to the defendant' and therefore where the ‘cost of performance' is excessive. Another important reason could be the ‘gross unfair' nature of the contract or certain ‘unfair' behaviours of the creditor.
From what we have seen until now, it prima facie appears that the French and English systems differ sharply in relation to the remedy requiring performance in a kind. The French system is really attached to the preservation of the contractual performance, to the extent that it is still possible, whereas English law will be more willing to compensate the suffering party, than to award specific performance. It could therefore appear that while in French law performance in a kind is the usual remedy, in the Common law world, it represents the exception. It should, however, be pointed out that although in principle the French legal system recognises specific performance as a primary remedy, in practice, its role could be altered. In fact, Art. 1142 Code Civil privileges the award of damages in case of ‘obligation de faire ou pas faire' and ‘prohibits any judgement' forcing a debtor to ‘act or to refrain from acting in a particular way': ‘Toute obligation de faire ou de ne pas faire se résout en dommages et intérêts, en cas d'inexécution de la part du débiteur.' This article seems to privilege the award of monetary relief instead of specific performance in case of ‘obligations to do.' It indeed seems to offer a similar to the English position and one could conclude that it could reduce the remedy of specific performance to an exception. However, after profound reading of the disposition and the Civil Code, we will see that this is incorrect. The restrictive view of this provision could be explained by the fact that ‘it is often impossible to oblige one to do what he does not want to do... in the case of personal obligation.' Thus, if a painter refuses to deliver the portrait commissioned by the client, he cannot be obliged to perform his obligation. This case is a perfect illustration of the practical consequences of Art. 1142. One should, nonetheless, understand that the application of this article, although reducing the cases where specific performance could be awarded, is quite exceptional. Therefore, the effect of the article appears to be limited. In fact, the reading of Art. 1142 prohibits specific performance in case of ‘obligation to do' involved, giving preference to damages as the most appropriate remedy. Thus, it becomes necessary to make the distinction between the ‘obligations to do' (obligation de faire) and ‘to give' (obligation de donner). Distinguishing both is important as while the first is usually ‘self-executing' (when relating to specific or ascertained goods), this is not the case of the second. Moreover, even though ‘the obligation to give' is ‘self executing', it still involves an element of an ‘obligation to do' because ‘there will commonly remain an obligation to deliver.' Consequently, the question of whether specific performance could be obtained in this case remains. As explained by scholars, in this case the performance could be required ‘since the creditor is already owner and the obligation to deliver', which is an ‘obligation to do', ‘is closely related to the obligation de donner.' Therefore, even though there is an element of an ‘obligation de faire' involved, Art. 1142 will not find application.
As it was already explained, the limited role of Art 1142 has further been bound by the Civil Code itself and the jurisprudence, even where an ‘obligation de faire' is involved. Art. 1443 states that ‘in case of obligation de ne pas faire,' the party suffering the non-performance could ask the court ‘to order the destruction of this what has been done against the contract.' Not only can he ask for the destruction of the thing in question, but he also can be authorised by the judge to accomplish this on his debtor's expense. This does not amount the right of the aggrieved party to obtain compensation because of the non-performance of the contract from the other side. Furthermore, Art. 1144 offers the possibility for the debtor to procure the goods or the services in question elsewhere on its debtor's expenses. Besides, since recently the judge may order that all the expenses necessary for ensuring the performance of the services or the delivery of the goods by a third party, will be covered in advance by the debtor.
The Civil Code is not the only source of limitation for the significance of Art. 1142. The jurisprudence has also played an important role for restraining its application. The first of the proceedings coming to limit the importance of the said article is ‘la saisie' or as it is known in English: the seizure of the goods. As it is observed by Y. Buffelan-Lanore, since 1867, only the debtor's movable and immovable goods, could be seized, but this procedure cannot be used for ‘biens insaisissables.' These orders for ‘saisie' will be executed by an ‘officer of the court': ‘un huissier de justice'. Another limitation of Art 1142 is ‘l'expulsion.' In fact, in cases concerning the illegal occupation of property, the obligation to leave this property is an ‘obligation to do' and therefore, if the text of the Code Civil was applied, the obligation to do should have been remediated in damages. Damages, however, will not give the expected relief for the aggrieved party. The only appropriate remedy could be the eviction of the wrongful occupant. Once more, the importance of Art. 1142 is greatly reduced in practice. Eventually, the practical importance of the text could also be reduced by the mean of ‘astreinte'- a sum that should be paid by the debtor for each day of late performance or non-performance. As it is a very important means of persuasion for the infringing party an overview of it should be presented. Its particularity consists in the fact that though not an individual remedy, it intervenes as a mean of pressure to the debtor and aims to make him comply rather sooner than later with his original undertaking. The ‘astreinte' represents a court order obliging the non-performing party ‘to pay to the creditor a specified sum for each day that he remains in default.' It intends to cause ‘considerable prejudice' to the breaching party, which should become more and more important the longer the contract is not performed. There are two types of ‘astreinte' existing: ‘astreinte provisoire'(temporary) and ‘astreinte definitive'(definitive), provided that if not qualified as ‘definitive' by the judge it will be considered as ‘provisoire.' Whereas the amount of the former can vary depending on the ‘time of performance and the difficulties that the debtor has experienced,' this of the latter cannot be changed.
One of the major problems that has long time been related to the orders for ‘astreintes,' was this of their legal basis, as they were not contained in a legal text. This issue found eventually solution by the adoption of the law of 5 July 1972 and today ‘astreintes' have been clearly accepted in French Law. However, their ambiguous nature has been source of controversy in relation to their ‘nature juridique' as they have been confounded with ‘a variant of an order for damages' This was source of a weakness, as the ‘astreinte' was imagined as a mean of pressure for compelling the non-performing party to execute his obligations, while if assimilated to damages, their pressure power and their importance will be greatly diminished.
After having offered an overview on the limitations that the performance in specie could have, we need to turn attention to another mechanism relating to this remedy for non-performance in the French legal system: ‘la mise en demeure,' necessary step before performance in a kind could be granted. Essential difference between both systems' remedies could be found in the way of ‘mise en oeuvre' of the remedy of performance in specie. In fact, under the French system, if the creditor wants to resort to the remedy of performance in a kind, he has first to ‘mettre en demeure' the debtor. The ‘mise en demeure', although not a remedy on its own, is an essential prerequisite for requiring specific performance or for calculating damages. Thus, unlike the English legal system, in France there are two steps in the remedy of performance in a kind, the first of these being the ‘mise en demeure' an element of fundamental importance for the second step, which is the performance in a kind. The creditor needs to detain a ‘title establishing the inexecution of the obligations of the other party' in order to obtain performance from the other side. This title represents the proof of the faulty performance of one of the parties. The ‘mise en demeure' is necessary in order to ‘establish that the debtor knows that the creditor requires performance.' On the other side it is not required when an obligation ‘de ne pas faire' is concerned, when there is specific provison in the contract for that purpose, when performance is no longer possible or when ‘the nature of the obligation is such that' its performance is solely possible during a laps of time defined for the performance and it has already ‘elapsed' etc..
The French system appears to be far more complex than the English Common Law system. Not only it privileges the performance of the contract as long as possible, instead of damages, but it also requires the fulfilment of a condition known as the ‘mise en demeure' before ordering performance in a kind. In our opinion the Continental French approach offers greater advantages than the English approach, because it tries by any means to save the contract and its performance. The problem that we perceive in the English system is that specific performance is more like an exceptional remedy and therefore, in case of non-performance damages will be the primary remedy. This could give place to abusive non-performances, as if one party prefers not to execute the contract; it knows that it will be most surely not compelled to do so. On the other side, in French law, not only a defective performance will be most certainly remediated by an order for specific performance, but even most importantly, abusive request for performance in a kind will be prevented by the double mechanism requiring first a ‘mise en demeure,' in order to establish the contractual non-performance, before that an decision for specific performance could be ordered. Consequently, it appears that the French system offers more advantages in relation to the remedy of specific performance than the Common law system. However, it should also be appreciated that the difference between both approaches is reduced with Art. 1142 (although its application is rather exceptional). Other cases where performance in a kind will be regarded as unsuitable, will be those of ‘personal obligations.' Similarly, English law in principle will not ‘enforce a contract for personal service' as it mirrors the French principle that nobody can be obliged to compel with an action which will interfere with his ‘personal liberty.' In the other situations, however, specific performance in French law is still the preferred remedy for ‘inexecution' necessary for ‘achieving just equilibrium.' It seems that English law also appreciates the advantages performance in specie can offer, and if it is the most appropriate remedy, it could be awarded instead of damages.
As previously explained, the execution force in French law contains two elements: the ‘execution en nature', which was discussed in depth above and the ‘reparation par equivalent' which implied the award of monetary relief. This is the reason why the next part of this research is going to concentrate on the concept of damages in the French and English legal systems.
Damages constitute an important remedy, recognised by both, the Civil and the Common Law systems. However, whilst they are primary remedy in Common law systems, they have secondary place in the French legal system. Both jurisdictions consider that monetary relief has compensatory role ‘for a loss he (the aggrieved party) has suffered as a result of the non-performance. Moreover, in both jurisdictions, damages have in principle only compensatory effect, but not punitive. Their aim is ‘to put the claimant in the position he would have been in had the contract been properly performed.' Unlike the English legal system, in France ‘damages begin to run only from the moment at which the debtor is put in delay' as required by Art. 1146 French Code Civil, which emphasises that ‘damages are due only when the debtor is in delay in fulfilling his obligation, except where the thing which he was bound to convey or do could only be conveyed or done within acertain time which he has allowed to collapse.' This is the ‘mise en demeure', necessary to establish the defective performance of the contractual obligation, before substitutionary relief can be awarded. It prevents situations where the debtor will contest his knowledge of the expected performance and its main effect is to define ‘the date from which damages will run and to cause the risk to pass in a sale or similar contract.' It is very important step for requiring damages as in its absence the principle is that no monetary relief can be granted.
The claimant has to demonstrate that he had suffered from the non-performance as if the creditor can prove that he had endured any loss, damages will be awarded by French Courts. Nevertheless, both jurisdictions require that this loss must be ‘the immediate and direct consequence of the non-performance' Damages are ‘compensatory, commonly awarded to protect a claimant's performance interest' Each time the contractual obligation is broken damages could be required as a remedy. Alike in French law, in the Common law world, their aim is to compensate for the loss suffered by the injured party. Thus, as in French law, the degree of loss as estimated by the court, will play essential role. Similarly, both systems consider that one should be compensated only to the extent of the damage he has suffered and therefore, one cannot be awarded more than what ‘his actual loss' In order to obtain compensation, under both jurisdictions a claimant needs to establish that the damage was ‘certain, consequence of the non-performance and was foreseeable.' English law privileges the award of damages instead of performance in specie, because it considers that damages constitute the most ‘adequate and definitive remedy' compensating the loss of the claimant. In French law, the privilege of performance in specie instead of damages is founded on art. 1134 al.3 Code Civil which states that ‘contracts must be performed in good faith.' This preference for performance in specie is well established by the jurisprudence. Consequently although, the award of damages seems in principle to obey to the same rules in both legal systems, French law will try to preserve the contract, instead of primarily resorting to damages for compensating the aggrieved party. English law on the other hand, seems to have preference for damages, this however, not excluding orders for performance in a kind, as in situations where damages will not be enough to compensate for the loss suffered.
The award of damages also comes to offer monetary relief to the party resorting to another essential remedy for non-performance-the termination of the contract.
The principle of judicial résolution in France compared with the right to unilateral termination of the contract in English Law
As we already highlighted above, if one party refuses to execute its undertaking under the contract, Art. 1184 Code Civil, offers the possibility for the creditor to demand the termination of the contract. As it is remarked by K. Zweigert and H. Kotz, the French system considers ‘that every bilateral contract is concluded under the implicit resolutory condition of the proper performance of reciprocal duties,' this allowing a party in the case of non-performance to resort to the judge in order to have the contract ‘rescinded.' The termination of the contract (résolution) could be accompanied by ‘dommages et interêts' as stated by the Code. Even when the creditor has opted for a claim for performance in specie, this does not prevent him to ‘switch to a claim for rescision' and damages ‘where appropriate.' The contrary is also possible. Alike when applying for the other remedies for breach available, the claimant has to prove the existence of the non-performance, in order to obtain rescission. When there is ‘total non-performance' before awarding ‘résolution' the judge may award additional period of time to the breaching party: ‘délais de grâce.' The award of supplementary time for performance aims to prevent cases where a plaintiff in bad faith is trying to ‘take advantage of temporary difficulty in order to escape from a bad bargain.' When there is only partial non-performance, the decision of whether to award rescission depends on the ‘pouvoir souverain du juge' and therefore, on their appreciation of the ‘particular circumstances' in each case. Thus, even if ‘the extent of the breach is small,' resolution may be granted if the debtor appears to have acted in bad faith. The wide discretion of the court, gives it the power to settle the dispute by awarding 'partial resolution, with modification of the creditor's obligation.
As it was already explained above, the French Code Civil demand that the aggrieved party resort to the judge for the termination of the contract. Thus it should be distinguished from ‘self-help' remedies such as the ‘exeption d'inexécution.' However, there are very limited and closely regulated cases when the court participation is not required (when the contract specifically provides for that, when the legislator ‘has dispensed with the need for recourse to court,' or in the limited cases established by the jurisprudence). In the cases, where résolution is pronounced, it will nullify the contract ‘retrospectively,' ‘with consequential restitution.' When the effect of the performance from one side cannot be reversed, the termination is often referred as ‘résiliation.'
In the Common law point of view, rescission also comes to give relief to an injured party. Alike the French system, opting for rescission does not limit the ‘right to damages for breach,' One very important element of the English approach however, is to be noted- rescission is a self-help remedy, unlike in French Law. This means that the creditor does not need to resort to the judge in order to declare the contract avoided. In practice however, creditors sometimes prefer the recourse to the court for termination, as it is in cases where there is ‘legal uncertainty.' Moreover, court supervision could permit to avoid abusive rescission as the judge will enquire whether the party rescinding tries to use the defective performance ‘as an excuse for getting out of a bad bargain.' On the other hand, similarly to the French approach, in order to declare the contract avoided, the creditor should prove that there has been ‘serious' non-performance form the part of the other contractor, depriving ‘the injured party of substantially the whole benefit,' he should have attained if the agreement was performed according to its terms. In these situations damages will not be enough to compensate the loss caused by the other's party non-performance. Rescission, however, could give to a party the relief necessary.
It was already demonstrated that the main difference in relation to resolution of contracts is the unilateral rescission in English law contrasted with the judicial process necessary in French law. Unilateral resolution, excluding any need to resort to the court in order to pronounce the termination of the contract is however, also existing in French Law. It takes the form of ‘resolution clause' or ‘clause résolutoire.' Both, the French and the English systems recognise the possibility to insert in the contract a special clause allowing the creditor to rescind the contract if the debtor does not compel with one or more of his obligations. Whilst this does not appear to be a big surprise in the English system, its impact in French law should not be underestimated. This type of clauses implies that the sort of the contract in case of non-performance depends entirely on the creditor. Having been of slightly controversial nature in French law, as normally the resolution of the contract could be only judiciary (Art.1184 Code Civil), these clauses have, however received recognition and the Cour de Cassation has affirmed their legal validity. The justification of the clauses finds its origins in Art. 1134 al. 1 Code Civil, which affirms that the contract ‘has the effect of law' between the parties. Therefore, if the parties have included a ‘clause résolutoire,' its existence should be respected. The clause is considered as ‘guaranteeing the ‘force obligatoire' of the contract as its presence in it is a mean of pressure to perform for the debtor of the obligation. The inclusion of a ‘clause résolutoire' permits to avoid the generally required recourse to the judge as its role will be reduced to establishing that the creditor has terminated the contract and enquire whether the rescission has been abusive. In order to terminate unilaterally the contract, the creditor has to prove that there are ‘circumstances of extreme gravity' which justify the avoidance, and that the judge would not have decided otherwise, would the case been brought to him for decision. Other exceptions to the rule of judicial resolution come also to limit the effect of Art 1184. They can have legislative or jurisprudential character and allow the creditor to declare the contract avoided, without the judge's decision. Widely accepted, the ‘clause résolutoire,' and the exceptions to the judicial resolution discussed above, eventually make the French system becoming closer to the English approach as they derogate to the principle of judicial resolution of Art. 1184.
Both systems seem to have adopted the same point of view in relation to the termination of contracts, accepting that in certain circumstances termination of the contract will be the only appropriate remedy. However, as observed by scholars, two differences exist. First, as we already explained, under English law, no need for recourse to the judge is necessary for the rescission of the contract. If the other party does not perform, the plaintiff could consider that he is ‘discharged' from the contract. This is not the case in French law which require the claimant to apply to the judge for the resolution. Nevertheless, as it was illustrated above, for the purpose of convenience, in practice court judgement for rescission are possible even in English Law. French law also experiences limitations to the principle of judicial resolution, such as resolution clauses and legal and jurisprudential derogations of the Art. 1184. Thus, although one should recognise that termination has more important place in English than in French law, this one should also acknowledge that the prima facie substantial differences between both systems in relation to the remedy, are in fact not really significant.
The second difference usually observed, consists in the fact that the French system does not have specific ‘legal criterion' defining the degree of the breach necessary for requiring termination. This French approach could be considered more advantageous as it offers a case by case appreciation and therefore more flexibility. However, it appears to us that it should be criticised, as the appreciation of the seriousness of the non-performance depends on the judges' appreciation. As it will vary in every case, no clear and harmonised view could be achieved. Thus it seems that the English position is more advantageous as termination could be granted when the non-performance is ‘substantial' or when ‘it goes to the root of the contract.' Although, this principle is subject to exceptions, the requirement of substantial seriousness brings more certainty than the French position. Where the defective performance is ‘less serious,' the plaintiff will have to find satisfaction in the award of damages.
The attention that this paper has drawn to national remedies for unexcused non-performance, has to be extended to another legal source, part of French law- The Vienna Convention on International Sale of Goods from 1980.
The CISG as a current part of French law, and the different remedies for non performance it could offer in comparison the pure domestic solutions
With the emergence of a new concept in recent years- this of harmonisation, new texts need to be taken into account such as the international conventions that the countries are signatories to. The Vienna Convention of International Sale of Goods from 1980 (hereinafter referred to as the CISG), is one of the international conventions designed to achieve harmonisation. This harmonisation instrument could influence the concepts of non-performance and the remedies available for the aggrieved party in the national legal systems of the countries-signatories. Therefore, it will play a significant role in this note. However, only France has ratified the Convention, while the reluctance of England is making the country one of the very limited ‘major trading' countries in the world, which has still not signed the CISG. This is the reason why the Convention must be examined in this note, as a part of the French legal system.
The first thing that could surprise an English lawyer is the ‘complex regime' of remedies for non-performance in the CISG. It tries to establish, to the extent that it is possible, equilibrium between both Civil and Common law remedies for non-performance. Some difficulties have nevertheless, occurred. Indeed, not only it affirms the existence of a very controversial remedy for Common law countries, such as specific performance, but it also offers wider range of remedies that those existing in the English legal system such as ‘remedy by the seller even after the date for delivery' to his own failure in performance (Art. 48) and ‘price reduction (Art. 50). Another important point that should not be neglected is that the term ‘breach' as used by the text, implies not only faulty performance as the English law understands ‘the word breach,' but also the cases of excused performance. The Convention clearly privileges specific performance (Art 46 relates to specific performance by the seller, whereas Art. 62 gives the possibility to ask for specific performance by the buyer), but nonetheless, leaves place for some flexibility as it states that it should be awarded only if it is in conformity with the law of the court which decides the case. This flexibility was probably designed in order to reduce the reluctance that Common Law countries could experience, because of the primary role given to specific performance in the CISG. Art. 28 is, however, been criticised as instead of adopting a clear position, it refers the matter to national laws. This could have as a consequence the encouragement of forum shopping. However, practice has shown that the provision has not been a source of problems. Art. 46 CISG, lays emphasis on the fact that the breaching seller could be compelled to perform any ‘repairs' necessary due to the non-conforming performance, or ‘delivery of substitute goods,' however, in the latter case only if the non-performance has amounted to a ‘fundamental breach.' On the other hand, Art. 62 requires that the buyer in default ‘pays the price, takes delivery or performs his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.'
A secondary place amongst the remedies offered by the Convention is occupied by damages. Alike specific performance, they are available to both parties, independently of other remedies. In case of non-performance, the claimant has the right to obtain monetary compensation. They could be the only available remedy in cases where neither termination, nor specific performance could compensate for the loss suffered, or could be used to supplement a demand for specific performance or avoidance.
Art. 47 and Art. 63 of the Convention offer the possibility for the creditor to ‘fix an additional period of time' for the performance of the breaching party, stating expressly that if an additional period of time is accorded, the aggrieved party should wait for its expiration before resorting to any other remedy for breach of contract. This, however, does not limit its right to obtain damages because of the ‘delay in performance.' If the breaching party has not performed, even after being accorded additional time, the creditor could declare the contract avoided. Articles 49, 51(2), 64 and 73 define the rules and offer to the aggrieved party the opportunity to avoid the contract, but only if the failure of the other party ‘amounts to a fundamental breach (Art. 25).' This brings the question of the definition of ‘fundamental breach'- one of the biggest controversies in the Convention. First, breach in the sense of the CISG the word ‘breach' implies ‘not only an unexcused failure in performance, but any failure to perform.' In addition, the term ‘fundamental' is a source of difficulty. It comes to strengthen the importance the meaning of breach and should be appreciated in relation to the degree of ‘detriment caused to the other party,' a detriment which should not have been ‘foreseeable' for the party in breach. It should cause excessive, ‘substantial' lost for the aggrieved party, but as the importance of substantiality is not defined, its appreciation is left to national courts and arbitration tribunals. This is a source of concern, as their appreciation of the fundamentality of the non-performance, varies. Therefore a uniform application cannot be achieved. It should, however, be observed that as the Convention is a text of compromise and in order to attract signatories from both Civil and Common law countries it needed to remain vague in certain provisions in order to realise the equilibrium necessary and leave certain amount of flexibility to the member states. In relation to avoidance it adopts closer to the Civil law positions as it tries to maintain the contract. This could represent concern for the Common law world. However, the flexibility left in the appreciation of the importance of the breach, makes the difference. Thus, Common law countries, which ‘tend to perceive termination as an important remedy' and Civil law countries which try to save the existence of the contract to the extent it is still possible, could find satisfaction and adopt the Convention. In addition the flexibility in relation to specific performance has the same effect.
As we can see, there is no surprise in the main existing remedies under the CISG in comparison with the French and English systems as, specific performance, damages and avoidance are known remedies in those systems. What could be however, striking for an English lawyer, is the importance of specific performance in the Convention in comparison with the English tradition. The other point of concern for the English approach could be the secondary role of avoidance. Nevertheless, the flexibility of the Convention gives the opportunity to each legal system to adapt the degree of ‘breach' and thus, avoidance to its own system and appreciation. Specific performance will also be regulated under the law of the state hearing the case. From French point of view, the Convention does not seem to achieve unwelcome surprises as it does not substamtially differ from the French approach.
The only concern one could have with the remedies for non performance in the Convention, will be in relation to terms such as ‘fundamental breach,' or the provision relating to specific performance. Here, texts such as the UNIDROIT principles or the Principles of European Contract Law come to clarify the vagueness and offer more appropriate solutions. One set of principles, will be of major interest- the Principles of European Contract law.
The concept of non-performance and the remedies offered by the Principles of European Contract Law and their possible influence on the French and English concepts of non-performance
As both, France and England, are members of the European Union one should ask oneself whether there are important European texts, which could influence the national concepts of non-performance. With the rose in power of the Union, and its main purpose to ensure the ‘free movement of goods, persons, services and capital' the idea of establishing a European Law of Contract emerged. This part of our note will be dedicated to the remedies for non-performance offered by an European text relating to contract law- the Principles of European Contract Law (B), after having briefly given general information about the background of the text(A). Our final analyses will consider a new text, which should not be neglected: the new European Common frame of reference, which could represent the beginning of a binding legal European rules on contract and supplant the PECL (C).
The principles in general and the concept of non-performance
The previous part of this dissertation examined the traditional concept of non-performance from a national point of view. It also discussed the products of a current trend towards harmonisation, such as the CISG. Another texts, that harmonisation brought to the legal scene, are the Principles of European Contract Law (hereinafter referred to as the PECL, or the Principles). These should be seen as ‘non-binding restatements of law', i.e. a compilation of principles, which are taking into account the already existing rules of the various legal systems taking part in the harmonisation process and trying to establish the best possible ‘law.' They should be inspirational for judges, arbitrators and more importantly contracting parties, if the latter decide to include the harmonised text in their agreements.
The Principles have been designed as a soft law text and originate in the work of the Lando Commission: a commission constituted from ‘scholars drawn from each member-state of the European Community under the chairmanship of Professor Ole Lando.' Similarly to the other set of contract restatements: the UNIDROIT principles, they contain provisions regulating the formation, performance and non-performance, agency, etc. As both Principles have been created for the same purpose, it is not surprising that scholars consider that ‘two-third' of their provisions are analogous. However, on must observe that whilst the UNIDROIT principles are addressed to international contracts, the European Principles are exceptionally confined to contracts within the European Union. The latter were also conceived as a basis for the future codification of the European private law ‘intended eventually to become a European Contract Code or part of a European Civil Code' and therefore a legally binding text.
The existence of the PECL has been inspirational for judges and arbitrators, especially in cases where vague and imprecise terms have been used, such as those contained in the CISG. Thus, their role for supplementing the Vienna Convention is being appreciated by scholars and practitioners.
In relation to the non-performance of contracts, the Principles, consider that 'non-performance' denotes any failure to perform an obligation under the contract, whether or not excused, and includes delayed performance, defective performance and failure to co-operate in order to give full effect to the contract.' The concept of non-performance as defined by the Principles includes ‘any failure to perform, whatever the cause' and therefore alike the CISG, it encompasess excused and unexcused cases of non-performance. It is interesting then, to understand whether the Principles manage to conciliate Civil and Common law traditions in comparison with the two systems that we discussed above.
The remedies for non-performance in the PECL
Similarly to the CISG, and therefore not surprisingly for Civil lawyers, the PECL define ‘specific performance' as a ‘primary remedy' for non-performance ‘other than one to pay money, including the remedying of a defective performance.' The essential place of specific performance in the principles in contrast to the Common Law approach has been, once more aiming the preservation of the contractual relationship, to the extent that it is still possible. Thus, it appears to reflect the French position. It should, nevertheless be noted that the PECL limit the primary place of the remedy in the cases where ‘unreasonable effort or expense' will be caused to the debtor or in situations where the claimant could ‘reasonably obtain performance from another source.' This limitation should be perceived as trying to conciliate the Civil and Common law points of view. Its effect is to make specific performance awarded only if it is appropriate enough, whereas if is causes ‘exceptional' inconvenience and expense for the debtor, other remedies like damages must be privileged. On the other hand, the Principles confirm the French and English positions that no specific performance could be granted in relation to ‘services or work of a personal character or depends upon a personal relationship.' For what is concerning, performance of monetary obligations, it is Art. 9.101 that illustrates the position already adopted by the French and English systems (even though the English position knows some limitations under Sect 49(1) SGA).
Not surprisingly, amongst the other remedies offered by the text, we could find damages for ‘loss caused by the other party's non-performance which is not excused under Article 8:108.' As in national law damages aim to compensate the injure party and allow him to attain ‘as nearly as possible... the position in which it would have been if the contract had been duly performed.' In comparison with the other legislations and international texts that have been studied in this note, this is not an originality of the PECL.
Termination as a remedy is not surprise either. As highlighted by Art.9.301, ‘a party may terminate the contract if the other party's non-performance is fundamental,' or even in case of delay, after additional period of time has been fixed, but the debtor has not performed. In the latter case, the text gives the option for the creditor to state that if the other party does not perform within the additional period of time the contract will be automatically terminated.
Art. 9.201 regulates the right to withhold performance which finds equivalent in the ‘exception d'inexécution' and the ‘unpaid seller lien' previously discussed in this note. The remedy is also temporary, like stated in national laws. Amongst the other remedial provisions in the PECL we could find price reduction and the possibility to retender documents in the case of rejection
As one could see the Principles appear to have efficiently conciliated Civil and Common Law approaches, the main point for concern for Common lawyers being only the particular importance given to specific performance. However, the non-binding character of the Principles could be seen as a drawback as they can only serve as guidelines, but are by no means able to make a breaching party to compel with his obligations, unless incorporated in the contract. This does not correspond to the willingness of establishing uniform European Law. A new project in the area of contracts has been undertaken within the Union: the drafting of a Common Frame of Reference.
The Common Frame of Reference
The Common Frame of Reference (hereinafter referred to as CFR) originates in the idea of identifying ‘the problems caused by divergences in contract law and identifying possible ways forward.' Recently adopted by the European Union in the aim of creating unified contract law, it represents:
‘a long-term project which aims at providing the European Legislators (Commission, Council and European Parliament) with a "toolbox" or a handbook to be used for the revision of existing and the preparation of new legislation in the area of contract law. This toolbox could contain fundamental principles of contract law, definitions of key concepts and model provisions.'
Particular attention should be drawn on the meaning of the term ‘toolbox.' It implies that the CFR will similarly to the PECL represent a compilation of the ‘best solutions' inspired from the national legislations of the member-states of the Union in order to create ‘common' private law. Also non-binding text, this compilation will be used to provide uniform solutions when ‘particular problem' concerning European contract law arises. As clarified by R. Madelin, the CFR offers clear advantages as ‘the tools will be designed to work together and can be used again next time a similar problem arises.' It does not depart from the dispositions already established by the PECL, but combines them with the ‘acquis communautaire' and important texts such as the CISG, in order to create a text necessary to improve and harmonise the European contract law. The CFR will cover all areas of contract law, and therefore will provide solutions to issues such as contractual non-performance and its remedies. Their importance should not be neglected as they could represent the foundation of a possible future codification of the Private law of the Union. In addition to this, one should ask oneself whether the establishment of the new text will not result in the fall into disuse of the PECL, as the CFR will represent an improved combination of the pre-existent European legislations and the PECL themselves. It is too early to draw conclusions on the question, as only the practical application of the Common Frame of Reference will provide us with the answer, but nevertheless this solution should be considered.
For the purpose of this study, two national legal systems and two supranational texts have been studied. Aiming to define the similarities and differences that those are offering in the definition and the main remedies available to the aggrieved party in case the non-performance of the contract, this note is tempted to conclude that the prima facie sharp differences, are in reality greatly diminished by various exceptions. Thus, although in principle, performance in specie is an exceptional remedy, in practice it could be awarded if it is more appropriated than damages. French law, on the other hand, notwithstanding his preference for specific performance has also experienced limitations to the principle as this note has illustrated. In relation to other remedies, such as termination, after a profound study, the difference does not appear greater either. The different supranational texts that have been taken into account for the purpose of this paper, appear to have efficiently managed to conciliate Civil and Common law interest in their provisions on remedies. Their preference, for specific performance could be, nevertheless, a source of preoccupation for English lawyers. The effect of these dispositions is nonetheless limited by the texts themselves, allowing some flexibility in the appreciation to national legislators.
Eventually, our last point would like to bring attention once again to the new text within the European Union: The Common Frame of Reference, which will probably make the Principles of European Contract law obsolete. This does not imply that what have been established by the Principles will be abandoned. On the contrary, it has served for the basis of the CFR, and will probably one day find its place amongst the provisions of a European, legally binding contract law.