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Remedies in case of non – performance Under Ethiopian Law of Sales

2.5. Remedies in case of non – performance

After putting the debtor in default or if notice is excluded as discussed above, the party to whom performance is required to have been made, may apply to the remedies of non-performance provided under Article 1771. The remedies of non-performance is accordingly aimed at discussing the different alternative and cumulative remedy of non-performance, the pre-conditions to require and apply each remedies and the guidelines and ways of applying these remedies.

This section is therefore aimed at enabling students

  • to list the remedies of non-performance of contract of sale
  • to list the cumulative and alternative remedies of non-performance of contract of sale
  • to state the conditions upon the fulfillment of which the remedies can be effected
  • to specifically put the ways of assessing compensation
  • effect of the remedies of non-performance of contract of sale 

The remedies for non-performance of obligations in a contract of sale are structured in such a way that the various possibilities are provided with respect to each of the remedies. These remedies have been provided under Article 1771 of the general contract provisions as effect of non-performance of contracts verbally as:

(1) Where a party does not carry out his obligations under the contract, the other party may, according to the circumstances of the case, require the enforcement of the contract or the cancellation of the contract or in certain cases may himself cancel the contract.

(2) He may in addition require that the damage caused to him by non-performance be made good.

According to Article 1771, the remedies for non-performance of contract of sale are:

  • Forced (specific) performance
  • Cancellation of the contract
  • Damages

The objective of these remedies is to put the party aggrieved by non-performance in the same position as if the contract has been performed so that certainty, security of transaction and optimal cooperation is secured.

2.5.1 Forced Performance

Forced performance is one remedy of non-performance of contract of sale. Forced performance, as the term implies, is to have the contractant carry out the contractual obligations unwillingly in compliance with the order of the court. Forced performance can be applied as, either specific performance or substituted performance.  Forced performance begs the role of court for its implementation.  Specific performance is not, however, ordered for the mere reason that it is required by the party. Certain requirement shall be fulfilled in order that the court orders specific performance.

Art. 1776. – Specific performance.

Specific performance of a contract shall not be ordered unless it is of  special interest to   the party requiring it and the contract can be enforced without affecting the personal liberty of the debtor.

Two criteria are put, in this provision to order specific performance. Indispensably the creditor shall have a special interest and the personal liberty of the debtor shall remain intact. These requirements protect the debtor from violation of his right to liberty in civil case. In addition to these conditions of the general contract, in sales contract forced performance can be required when certain failures happen that is when a there is failure to deliver, when there is non-conformity or defects, and non-payment of price.

The presence of special interest can be inferred from the importance of the obligation required to be discharged towards the creditor and its possibility of being discharged otherwise. Accordingly, the buyer cannot require forced performance in all cases of non-performance of the obligation to deliver unless the following conditions are fulfilled. First, the buyer must have a particular interest in the thing sold pursuant to Article 1776 and 2329 which provides that:

Where the thing has not been regularly delivered, the buyer may demand the forced performance of the contract where it is of particular interest to him.

Article 2329 provides ‘where the thing has not been regularly delivered, the buyer may demand the forced performance of the contract where it is of particular interest to him”. The buyer should have a particular interest, no possibility of purchase in replacement and should notify within a short period. The buyer cannot demand the forced performance of the contract where the sale relates to a thing in respect of which a purchase in replacement conforms to commercial practice or such purchase can be effected by him without inconvenience or a considerable expense.  The buyer shall lose the right to demand the forced performance of the contract where he fails to inform the seller, within a short period after he has ascertained the delay, of his intention to demand such performance. This period is estimated with particular strictness where the date fixed for the performance of the contract is a compulsory date.

Unlike the general contract in the sales contract provision, the requirement of leaving the liberty of individual intact is not provided as a condition. This is because in sales contract there cannot be a circumstance where the liberty of individual is affected. What is done is only attaching the property of the party who failed to perform the contract.

The seller may demand forced payment when the buyer fails to pay the price pursuant to Article 2333. Forced performance is the only option where the thing is delivered to the buyer and it cannot be returned as the buyer has already assigned, transformed or the thing is destroyed due to the fault of the buyer. The seller cannot require forced performance when the thing is not delivered to the buyer and the seller can make compensatory sale according to the custom of the market. Compensatory sale is possible when the thing can be sold to other persons.

The buyer has a particular interest in the thing sold when no other thing except the thing sold to him satisfies his need. For example, Guyo wants to buy a horse for inorder to participat in a regional horse competition. He bought a horse that was a champion in the national horse competition from Galgalo. Thus, Guyo has a particular interest in the horse he bought.

To give additional example of this, in obligation of supplying electricity assumed by corporation can be of special importance as such service is  not  of trivial advantage rather of paramount importance and such service cannot be given by other party.

Secondly, the buyer must not have any possibility of purchase in replacement. In this regard Article 1778 reads:

Art. 1778. – Fungible things

Where fungible things are due, the creditor may be authorized by the court to buy at the debtor’s expense the things which the debtor assumed to deliver.

Where the fungible things are due the debtor may have substituted performance be made upon court authorization to buy the thing at the debtors expense. If Ato Shewa fails to perform his obligation of delivering 100,000 of sugar in due time, the creditor may buy the agreed amount of sugar from the market upon court authorization. The price of the sugar would then be covered by the debtor.

Article 2330 also provides that:

The buyer may not demand the forced performance of the contract where the sale relates to a thing in respect of which a purchase in replacement conforms to commercial practice or such purchase can be effected by him without inconvenience or considerable expense.

The buyer cannot require the forced performance if the market usage is to buy the thing from another seller. For example, Becky agreed to buy a 14 inch Sony® TV set from Natoly who deals in TV sets and another electronic goods. Becky cannot require forced performance if it is the custom of the market that the buyer should obtain the good from other seller. Even if it is not a custom in the market, the buyer should obtain the TV sets from other sellers if he could do that without incurring considerable expenses or inconvenience. Thus, if the buyer cannot obtain the thing in the same market it is inevitable that he will incur considerable expenses. For example, the buyer incurs considerable expense if he had bought the thing in Dire Dawa and if that thing cannot be found except in Addis Ababa. When the buyer incurs such an expense he may require it in the form of compensation.

It must be born in mind that the buyer may not be awarded with forced performance if the non-performance is owing to dispossession even though the buyer has a particular interest and the liberty of the seller cannot be affected. This is because contract including contract of sale creates an obligation between the contracting parties only. Forced performance in case of dispossession affects not only the contracting parties but also third parties who have better title that the contractant. Ordering forced performance results in negative externality (affecting third parties). Article 1952 (1) shows that contract shall have effect only on contracting parties. Article 1675 also indicates that a contract can have effect “as between” the contractants.

The buyer may require forced performance in case of non-conformity or defects. The buyer who has regularly given notice of the defects may require the seller to deliver new things or the missing part or quality of the things where the forced performance of the contract may be demanded.  He may require that the defects be made good by the seller within a reasonable time where the sale relates to a thing which the seller has to make or produce on the specifications of the buyer and where such defects can be made good. Where the buyer’s right to decide later as to the form, measurements or other details of the thing is reserved in the contract and he has failed to give such specifications within the time fixed in the contract or on the expiry of a reasonable period of time notified to him, the seller may himself make the specifications according to the requirements of the buyer as he knows them. The seller shall inform the buyer of the specifications of the thing where he has determined them and fix him a reasonable period of time for giving different specifications. Where the buyer fails to give his specifications within such time, the specifications made by the seller shall be binding.

Non-payment of price might also be remedied by forced performance. Where the buyer fails to pay the price, the seller may demand payment unless the sale relates to a thing in respect of which a compensatory sale is imposed by custom.

2.5.2 Cancellation of contract of sale

The other remedy for non-performance of the contract of sale is cancellation. There are conditions and effects of cancellation. There are two kinds of cancellation under law of sales. Cancellation is the action by which contracting parties make an already formed contract   ineffective. Cancellation of contract is made in response to non-performance.  Cancellation presupposes the presence of contract. They are judicial cancellation and unilateral cancellation. Cancellation by the court, upon the request by party who is aggrieved by non-performance, is judicial cancellation. Sometimes the party is empowered to cancel the contract and it is called unilateral cancellation follows.

2.5.2.1. Cancellation by Court

Cancellation of a contract can be made by court action. The party who requires cancellation as a remedy for non-performance shall bring action to effect.  Article1784, deals with cancellation of contract by court action as a remedy for nonperformance of a contract, and is provided as:

Art. 1784. – Cancellation of contract by the Court

A party may move the court to cancel the contract where the other party has not or not fully and adequately performed his obligations within the agreed period of time.

A party whom assumed an obligation has not been performed, not been fully and adequately performed, can have the court cancel the contract. The party requiring cancellation shall be in a position to perform or shall have performed his obligation unless he can be benefited from time limit.

The court does not cancel a contract when an action is brought to this effect simply because there is non-performance of a contract.  The court shall consider the good faith of the parties.  Manadatory Article 1785 has put the importance of good faith to guide the court in deciding whether are not to order cancellation or not in the following words:

Art. 1785. – Good faith.

(1) In making its decision, the court shall have regard to the interested of the parties and the requirements of good faith.

(2) A contract shall not be cancelled except in cases of breach of a fundamental provision of the contract.

(3) No contract shall be canalled unless its essence is affected by non-performance and it is reasonable to hold for such reason that the party requiring cancellation of the contract would not have entered into the contract without the term which the other party has failed to exacted being included.

Article 2340 also shows that the court shall not cancel the contract of sale unless there is a fundamental breach and if the breach can be made good with in a period of time fixed by the contract. According to this provision, where the seller delivers the thing at a place other than that where he is bound to make delivery, the court shall not cancel the contract on the application of the buyer unless the manner in which the contract was enforced constitutes a fundamental breach of contract. The contract may not be cancelled where the breach can be made good by the seller within such a period of time as is fixed by the contract or by law. The court is required to consider the interest of the parties and requirements of good faith. The party requiring cancellation shall be affected in a way his interest is not secured by the non-performance.

Assume Ato Kahadi enters into a contract with Ato Tamagn. In the contract, Ato Tamagn agreed to deliver the thing in Addis at Kahadi’s domicile. Later for Ato Kahadi has been a resident of Mekelle, Ato Tamagn delivered the coffee at Ato Kahadi’s residence in Mekelle. Ato Kahadi requires cancellation for non-compliance of place of performance. The court shall not invalidate such contract, as the non-compliance of place of performance does not affect his interest.

Cancellation by court shall be ordered in cases of only fundamental breach. Note that it is fundamental breach which can obviously affect the interest of the party. For example, A enters into a contract where he will make a table out of oak but he made the table out of a piece of metal.  The contracting party of A requires cancellation.  The court shall cancel the contract for there is a fundamental breach of contract provision.

Breach of fundamental provision should be seen in light of the effect it results in. The interest of the party requiring performance shall take the decisive nature of the non-performance. Cancellation shall be effected if the essence of the contract is affected. Whether the party requiring cancellation would have entered into the contract of sale without the term, which the other party failed to perform, shall be considered.

Mesebo Cement Factory enters into a contract with XY Company. The XY Company undertakes to deliver necessary materials at the head office of the company in Addis.  XY Company delivered the raw material in Mekelle where cement is produced. Mesebo Cement Factory would have entered, into the contract had it known the way of performance as it had been.

As the seller can require cancellation when the thing is not delivered in the place where it should have been delivered, cancellation can also be required when the whole ownership is not transferred to the buyer pursuant to 2341. The contract may be cancelled where, as a result of a defect affecting his title, the seller has not procured for the buyer the thing free from all rights belonging to third parties. The contract, however, may not be cancelled where the buyer, on buying the thing, knew of the encumbrance. In addition, the contract may not be cancelled where the right with which the thing is encumbered is of small importance and it appears that the buyer would have bought the thing, had he known of the encumbrance.

The seller may also require cancellation of the contract when there is default in taking delivery according to Article 2349. Where the buyer fails to take delivery of the thing on the conditions laid down in the contract, the seller may require the cancellation of the contract where the failure of the buyer justifies the fear that he will not pay the price or it appears from the circumstances that taking delivery was an essential stipulation of the contract.

Court cancellation can be required when there are contracts for successive deliveries as is provided under Article 2351 of the Civil Code. Where, in contracts for successive deliveries, by reason of the non performance or the defect of one of the performance due by a party, the other party is justified in fearing that the future performance will not be made or will be affected by defects, such party, may require that the contract be cancelled for the future. The buyer may also require the cancellation of future deliveries or deliveries already made, or both, where he proves that, by reason of their connection, these deliveries are of no use to him without those which have not been made or were affected by defects

2.5.2.2. Unilateral cancellation

In addition to court cancellation, parties, who are aggrieved by non-performance of a contract, may opt to cancel it unilaterally, as provided under the law. Unilateral cancellation can be made by the party without going to court if there is a unilateral cancellation clause, expiry of time limit, impossible performance, anticipated nonperformance, dispossession, partial delivery, defect, non-payment of price, impossibility of performance and anticipatory breach.

The buyer and the seller do have different conditions which entitle them to the power of canceling the contract and some common ones.  The parties are also required to take into consideration whether the breach of contract affect the essence of the contract in unilaterally canceling the contract of sale. Article 1786 provides the possibility of unilateral cancellation by cancellation clause in a contract.

Art. 1786. – Cancellation by a party. – 1.  Under the contract

A party may cancel the contract where a provision to this effect has been made in the contract and the conditions for enforcing such provision are present.

Contracting partners are free to the extent of stipulating a clause that permits unilateral cancellation when a certain condition is fulfilled.   Stipulating cancellation clause helps to avoid going to court to effect cancellation.  It can also serve to avoiding delay and back log. In addition to agreement expiry of certain period of time can also lead to unilateral cancellation according to Article 1787.

Art 1787. – 2. Expiry of time limit

A party may cancel the contract where the other party has failed to perform his oblations within the period of time fixed in accordance with Art. 1770, 1774, or 1775 (b).

This provision makes cross-reference to the provisions upon the expiry of which a unilateral cancellation is legally possible.   The expiry of period of grace, period put in default notice and the expiry of a fixed period of time in which the debtor shall perform the obligation having to the nature of the contract, and the party unilateral cancellation of contract.

In light of this general contract provision, the expiry of a compulsory date for delivery entitles the buyer the power to cancel the contract unilaterally pursuant to Article 2338(2). The date fixed for delivery is deemed to be compulsory date where the thing has a market price on markets to which the seller can apply to obtain it.  The date fixed by the seller or the buyer, where it is for either of them to fix such a date within a period of time provided in the contract, shall also be deemed to be a compulsory date. Where the date fixed for delivery is not a compulsory date, the court may grant the seller a period of grace within which he shall perform his obligations. The buyer may, under the same circumstances, grant the seller an additional period of time fixed in a reasonable manner and inform him that he shall refuse the thing upon the expiry of this period. The contract shall be cancelled as of right where the seller fails to deliver the thing within such additional period.

Where the period fixed by the buyer is not reasonable, the seller may, within a short time, inform the buyer that he shall only deliver the thing upon the expiry of a reasonable period. Failing such declaration, the seller shall be deemed to accept the period of time fixed by the buyer.

Non-payment of price as of 2333 may make the seller cancel the contract when an express stipulation is put to that effect. The seller may forthwith declare the cancellation of the contract in case of non-payment of the price where this right has been expressly given to him by the contract of sale. Failing an express stipulation, the seller may cancel the contract on the expiry of a reasonable period fixed by him in the notice placing the buyer in default, where the sale relates to things which are quoted on the stock market or have a current price or where this right has been expressly given to the seller by the contract. The seller may also declare the cancellation of the contract upon the expiry of the period of grace, where the court has granted such period to the buyer.

Moreover, failure to make specifications within specified time can entitle the power of unilateral cancellation. Where the buyer has reserved in the contract the right to decide later on the form, measurements or other details of the thing and he fails to give such specifications at the date agreed as being compulsory or upon the expiry of a reasonable period granted to him by the seller, the seller may declare the cancellation of the contract.

Impossibility of performance is also another way where unilateral cancellation is possible pursuant to Article 1788 and 2352

Art. 1788. – 3. Performance impossible

A party may cancel the contract even before the obligation of the other party is due where the performance by the other party of his obligations has become impossible or is hindered so that the essence of the contract is affected.

It must be born in mind that impossibility of performance in Article 1788 is different from object impossible provided in Article 1715. Article 1715 refers to an obligation which is impossible before the formation of the contract and that is why it affects the formation of the contract.

Article 1788 refers to an obligation which becomes impossible after the formation of the contract.  The impossibility shall affect the essence of the contract in order to carry out unilateral cancellation, as non-performance is required to affect the essence of the contract to affect it.

In addition to the aforementioned provisions Article 2352 of the civil code connotes that either the seller or the buyer can cancel the contract unilaterally where the performance of the obligation of the other party became impossible or when one of the parties inform another, party that he would not perform the contract.

For example, Adem agreed to sell his ox to Bushra. According to their contract, Bushra will take delivery and pay the price after ten days. On the third day, the ox died. Bushra can unilaterally cancel the contract. If the ox is alive and Bushra told Aden before delivery date that he would not pay the price of the ox, Adem can unilaterally cancel the contract.

For example Mugger Cement Factor enters into a contract of sale assuming the obligation to deliver 1000 tone in consideration to 1,000,000 of cement to Surconstruction. Later Mugger assured that Surconstruction is declared bankrupt and cannot pay the price. The cement factory came across damage, which hinders it to produce the agreed amount of cement.

Anticipated non-performance unequivocally expressed by the refusal of the contracting party pursuant to. Article 2353 and 1789 has been put to add clarity to the possibility of unilateral cancellation this way:

Art. 1789. – 4. Party refusing performance

(1) A party may cancel the contract where the other party informs him in an unequivocal manner that he will not carry out his obligations under the contract.

(2) The party who intends to cancel the contract shall place the other party in default and the contract shall not be cancelled where the party in default produces with in fifteen days securities sufficient to guarantee that he will perform his obligations at the agreed time.

(3) Notice shall not be required and the contract may be cancelled forthwith where a party informs the other party in writhing that he will not perform his obligations.

When there is an indication that the party would not perform the contract, the other party shall put him in default and cancel the contract. If the party who protests cancellation can provide security   guarantying his payment within fifteen years, the contract shall remain effective. However, if the contractant showed that he would not perform in writing immediate cancellation of the contract can be made without any default notice.

Dispossession of the subject of sale entitles the buyer the power of unilateral cancellation pursuant to Article 2342. The contract shall be cancelled as of right where the buyer is totally ousted from the thing and the seller is bound to warrant the buyer against dispossession. The contract may be cancelled where the buyer is partially ousted from the thing. The contract may however not be cancelled where dispossession only affects a part of the thing of minor importance and it appears that the buyer would have bought the thing, had he known that he would be dispossessed of such part.

Partial delivery also gives similar power to the buyer. According to Article 2343 where part of the thing only has been delivered or does not conform to the contract, the buyer may not cancel the contract for the whole unless it appears that he would not have entered into the contract, had he known how it would be executed. In case of delay in the delivery of part of the thing, the buyer may cancel the contract for the whole notwithstanding that the remaining part of the thing is delivered subsequently, where the date of delivery constituted a compulsory date for the whole. Where the buyer is not entitled to cancel or require the cancellation of the contract, he may cancel it partially or require that it be partially cancelled and confine himself to paying a price proportionate to the value of such part as has been duly delivered to him.

In addition to what has been seen delivery of defective thing or partially defective thing can lead to unilateral cancellation. The contract may be cancelled where the thing is affected by a defect against which the seller warranted the buyer. The contract may however not be cancelled where the defect is of small importance and it appears that the buyer would have bought the thing, had he known of the defect pursuant to Article 2344.

Article 2345 also connotes that where the sale is of several things at a time or of collection of articles and only some of them are defective, the contract may be cancelled with regard to such defective things or articles only. The buyer shall in such case pay to the seller a price proportionate to the value of the things or articles, which have been delivered to him free from defects. The contract however, may not be cancelled for the whole where the defective thing or article cannot be separated, without considerable inconvenience to the buyer or seller, from those which are free from defects. The cancellation, which relates to the principal thing, shall extend to accessories notwithstanding that they have been sold for a separate price.

Generally, there are certain conditions and effects of cancellation. The effects and conditions of cancellation are the ambiguity of the intention of the other party in delayed performance, effect of cancellation on price and profit, expenses, outlays, transformed things and when restitution is not possible.

In case of delay the other party can assure the intention of the other party according to Article 2354. Where a party, being late in the performance of an obligation which constitutes an essential stipulation of the contract, asks the other party whether he still consents to the execution of the contract, the contract shall be cancelled as of right where the other party does not answer within a short time.

Where a contract is cancelled, the parties shall be released from their obligations under the contract, without prejudice to such damages as may be due. If a party has performed his obligations in whole or in part, he may claim the restitution of what he has supplied including expenses incurred. On the other hand, if both parties have performed their obligations, each of them may refuse the restitution due by him until the other party has effected his obligation.

The effect of cancellation on price and profit has been stipulated under Article 2356. Accordingly, whenever the seller is required to refund the price, he shall in addition pay interest on such price calculated from the day of payment. The buyer shall restore, in addition to the thing, the profits he has derived therefore.

Where the thing cannot be returned in its previous condition, however, the buyer shall retain the right to require or declare the cancellation of the contract or to avail himself of cancellation already declared where the thing or part thereof has perished or been damaged without this being due to his own act or that of a person for whom he is liable.  He shall in particular retain this right where the thing has been damaged as a result of an examination made by him in accordance with custom. The contract may not be cancelled where the buyer is unable to restore the thing because he has assigned or transformed it or it has perished or been damaged by his act.

Transformation of thing also makes reinstatement impossible. where the thing is transformed, the buyer shall retain the right to require or declare the cancellation of the contract where: (a) the thing or part thereof has been transformed by him before he was able to discover the defect of which he avails himself to require or declare the cancellation of the contract; or (b) the alteration of the thing is of no importance.

As regards outlays made by the buyer on the thing, the provisions of the Chapter of this code relating to ‘unlawful enrichment ‘shall apply (Articles 2168-2178). The buyer may only claim from the seller the payment of these outlays in the case of dispossession where he is unable himself to be indemnified by the third party by whom he is dispossessed.

Abebe has for example sold his TV Ato Chala and Ato Chala has fixed a certain known problem of the TV. If the contract is cancelled then Abebe is duty bound to cover the expenses of repairing the TV.

2.5.3. Compensation  

In addition to forced performance and cancellation, compensation is also among the remedies for non-performance of sales contract. Compensation because of non-performance is recommended to put the   victim of non-performance in a place he would have been had the contract been performed.  Most scholars of economic analysis of law are ardent proponent of this purpose of compensation.

Any one enters into a contract to get benefit not to be in the same position of his before the formation of the contract.  If the law does not either enforce the contract or have the party given a remedy that puts him indifferent between performance and non-performance of the contract, the contracting party would be reluctant to enter into a contract. And this would in turn affect security of transaction.

On such analysis scholars of economic analysis of law agree on the efficient nature of perfect expectation damages that is a compensation which puts the contracting  party at the place he would have been had the contract been performed. The relevant general contract provisions and special sales contract are also expected to be in light with this purpose.

In light with this Article 1771(2) has permitted damage to be required in addition to the other remedies put in Sub-article (1). Reading this provision in light with Article 1790 shows that compensation can be both alternative and cumulative remedy of non-performance of a contract. Article 2360 also supports the aforementioned general contract provisions by allowing claiming of damages whether the contract is cancelled or upheld.

The concept of perfect expectation damages is enshrined in these provisions. Only enforcement of a contract may not put the victim of non-performance in a place he would have been had the contract been performed. Because the failure of the party to perform in due time may negatively affect the victim of non-performance and may make him incur cost of court litigation.

Only   cancellation may not also put the victim of non-performance in the place he would have been, had the contract been performed. Therefore, allowing damage and enforcement or damage and cancellation together gets its justification from the need to put the contracting partner in a place he would have been, had the contract been performed.

Where the contract of sale is not cancelled, the amount of damage is fixed in accordance with the provisions of general contract law pursuant to Article2361. This provision seems to connote that the provisions of contract of sale is applicable in other cases. However, general contract provisions are also applicable when it is relevant even in case of cancellation and compensation pursuant to Article 1676. Accordingly, the preconditions of compensation which are not covered by sales contract are also to be governed by general contract provisions.

2.5.3.1. Conditions for compensation

The remedies of non-performance do not ignore the interest of the party who failed to perform although the absence of fault does not relieve the party, who fails to perform, from making good the damage. The preconditions for damage owing to non-performance are aimed at protecting the interest of the other party. Therefore, there are certain excuses for the non-performing party one of which is force majuer.

 Art. 1791. – Damage when to be made good.

  • The party who fails to perform his obligations shall be liable to pay damages notwithstanding that he is not at fault.
  • He shall not be released unless he can show that performance was prevented by force majuer.

This provision shows that non-performance is not excusable although the party is not at fault except for force majuer. The fact that party is not at fault does not mean that he is not in a better position of avoiding the risk.

This is because of non-performance whose ground is neither of force majuer nor fault, is a foreseeable event. Its foreseeability puts the party with duty of performance in a better position of avoiding the risk. Accordingly, the party in a better position of avoiding the risk shall bear it.

Putting force majuer as an excuse for performance is also justified by equal position of the parties to avoid the risk. Force majuer is not foreseeable. The absence of foreseeability put neither of them in a better position of avoiding risk

Putting force majuer as an excuse for performance is also justified by equal position of the parties to avoid the risk. Force major is not foreseeable. The absence of foreseeability put neither of them in a better position of avoiding risk.

Knowing force majuer as an excuse of non-performance, it is worth noting what force majuer is. An attempt to define force majuer has been made under Article 1992. Instance of force majuer and absence of force majuer have been put under Article 1993 and 1794 to add clarity on Article 1792

Art 1792. – Force majuer.

(1) Force majuer results form an occurrence which the debtor could normally not foresee and which. Prevent him absolutely from performing his obligations.

(2) Force majuer shall not exist where the occurrence could normally have been foreseen by the debtor or where it renders more onerous the performance by the performance by the debtor of his obligation.

Force majuer has been put under the determination of objective standard of foresee ability. An occurrence, to be force majuer, shall absolutely prevent the performance and not be foreseen by a reasonable person.

Article 1793 has provided examples of force majuer

 Art. 1793. – Cases of force majuer

The following occurrences may accordingly the circumstances, constitute cases of force majuer.

  1. the unforeseeable act of a third party for whom the debtor is not responsible; or
  2. an official prohibition preventing the performance of the contract; or
  3. a natural catastrophe such as an earthquake, lightning or floods; or
  4. international or civil war; or
  5. the death or a  serious accident or unexpected serious illness of the debtor

It must be born in mind that Article 1793 illustratively puts examples of force majuer. Accordingly, by analogical interpretation, other case of force majuer can be included.

The same holds true for Article 1794 that illustrates the absence of force majuer.

Art. 1794. – Absence of force majuer.

Unless otherwise expressly agreed, the following occurrences shall not be deemed cases of force majuer:

  • a strike or lock-out taking place in the undertaking of  a party or affecting the branch of business in which he careers out his activities; or
  • an increase or reduction in the price of raw materials necessary for the performance of the contract; or
  • the enactment of new legislation whereby the obligation of the debtor become more onerous.

There are certain exceptions where force majuer does not relieve the parties from paying compensation. The party who fail to perform a contract may be excused for non-performance on certain grounds. In addition to his failure to perform, the party may also fail to notify the other party about his non-performance to avoid further loss. In such case the party who tends not to perform is in a better position of avoiding certain loss. Article 1797 is put in order to avoid such loss by imposing duty of notifying the creditor about nonperformance.

Article 1797 provides a warning that his failure to notify the other party of the reasons, which prevents him, from performing can result in taking the benefit of excuse off him. Although non-performance is attributable to force majuer, the party who failed to notify is liable to the damages owing to his failure to notify.

The other exception of exclusion of damages when non-performance is owing to force majuer is, if the other party is put in default. Although force majuer relieves the party who failed to perform his obligation, his being put in default changes such situation of the debtor.

Although performance is hindered by force majuer, if performance had been possible before the default notice, the party would be liable to pay damages for non-performance.

Illustration: The compulsory date of the obligation of A was March 1, he was put, in default March 5, the force majuer occur on March 10, A is liable to make the damage good since force majuer occurred after the debtor was put in default.

2.5.3.2. Assessment of compensation

As far as the assessment of compensation is concerned the provisions starting Article 1799 till 1805 of the general contract shall be, as gap filling provisions, applicable in a way they do not contradict with special provisions provided in provisions of contract of sale. When the contract is cancelled there are ways of assessment of compensation in things that have current price, purchase in replacement, special circumstances, thinng that have no current price, anticipatory breach and in dispossession in the special sales contract provisions and general contract provisions.

A) Things having a current price: – Article 2362 in principle depicts that where the contract is cancelled and the thing has a current price, damages equal to the difference between the price fixed in the contract and the current price as on the day the right to declare the cancellation of the contract could be exercised or on the day following the day the contract was cancelled by the court or as of right. In addition, regard shall be giver to the normal expenses of a purchase in replacement or compensatory sale. The price to be taken into account shall be that on the market where the buyer or seller would, in the normal course of business, buy or sell the thing to which the contract relates.

This is in line with Article 1799 (1), which reads, “Damages shall be equal to the damage which non-performance would normally have caused to the creditor in the eyes of a reasonable person.”

Sub Article (1) of this provision orders objective standard to be employed in assessing damage. The damage is assessed as a damage which non-performance would normally cause in the eye of a reasonable person. That is why the difference between the price fixed in the contract and the current price is taken into account in assessing the damages.

According to this provision actual damage which has been actually incurred may not be awarded. If the loss which has been actually incurred is more than the loss which is reasonably assessed (normal damage), the normal damage which has been assessed by taking into account a reasonable man’s standard would be paid. This provision excluded an actual damage which is not foreseeable and which is the result of excessive raliance. Accordingly; the party who excessively relies on buying in excess of price in the normal course of business is not compensated to that extent. The law orders only normal damage to be made good.

B). Purchase in replacement:- Where the buyer has effected a purchase in replacement or the seller has effected a compensatory sale according to Article 2363, the price paid for such purchase or obtained from such sale shall be taken into consideration in calculating the amount of damages.  Such amount may be reduced where the other party proves that the purchase in replacement or compensatory sale has been effected in bad faith or in abnormal business conditions.

Article 1802 in line with the above concern provides the duty with its consequence of reduction of compensation verbally as:

 Art. 1802 – Duty to limit the extent of the damage.

  • The party who invokes nonperformance shall take all reasonable measures not involving inconvenience or heavy expenses to limit the extent of the damage caused.
  •  Where he fails to take such measures, the other party may invoke such failure to require that the amount of damages be reduced.

The party who is entitled to claim compensation may have a chance to reduce the damage by buying for a lesser amount without considerable inconvenience. At least if he buys more than the normal business the compensation is reduced for he failed to discharge his duty to limit the extent of damage.

C). Special circumstances: – Article 2364 and 1808 order greater damage as an exception to the normal damage. Damages shall be equal to the prejudice actually caused where the party who suffered such prejudice shows that, at the time of the making of the contract, he had informed the other party of the special circumstances by reason of which the prejudice caused is greater. The same is true where the party shows that non-performance is due to the other party’s intention to harm, gross negligence or grave fault.

D). Thing having no current price:- Article 2365 and 1799 provides that if the thing has no current price, damages shall be equal to the prejudice which non-performance would normally cause to the creditor in the eyes of a reasonable person. Damages shall be equal to the prejudice actually caused where the party informed the other party of the special circumstances by reason of which prejudice is greater, or where the party shows that non-performance is due to the other party’s intention to harm, gross negligence or grave fault.

E). Anticipatory breach of contract:- In cases of anticipatory breach of contract, damages shall, where the thing has a current price, be calculated having regard to the market price of the thing on the last day of the period fixed in the contract for the performance of the obligation. Where no period has been fixed in the contract, damages shall be calculated having regard to the market price of the thing on the day when the right to declare the cancellation of the contract could be exercised. Damages however, may not exceed the price actually paid for a previous purchase in replacement nor the difference between the price fixed in the contract and the price actually received for a previous compensatory sale.

F). Dispossession:- Where the buyer is dispossessed of the thing, the seller shall, without prejudice to other damages, reimburse him the judicial and extra-judicial expenses of the proceedings he had to institute, with the exception of the expenses he could have avoided by informing the seller of the proceedings. This compensation is not expected to be perfect expectation damage as it does not consider the opportunity he has lost and does not award him with the expense of buying such thing.

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