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(1) Where there has been performance under a contract infringing a mandatory rule under Article 3.3.1, restitution may be granted where this would be reasonable in the circumstances.

 

(2) In determining what is reasonable, regard is to be had, with the appropriate adaptations, to the criteria referred to in Article 3.3.1(3).


(3) If restitution is granted, the rules set out in Article 3.2.15 apply with appropriate adaptations. 

 

COMMENT


1. Restitution under contracts infringing mandatory rules to be granted where reasonable under the circumstances

 

Even where as a consequence of the infringement of a mandatory rule the parties are denied any remedies under the contract, it remains to be seen whether they may at least claim restitution of what they have rendered in performing the contract. According to Article 3.3.1(1), the answer first of all depends on the mandatory rule itself which may or may not expressly address the issue (see also Comment 4 on Article 3.3.1).


If the mandatory rule is silent on the issue, this Article, in line with the modern trend, adopts a flexible approach and provides that where there has been performance under a contract infringing a mandatory rule, restitution may be granted if this would be reasonable in the circumstances (paragraph 1). In other words, contrary to the traditional view that, at least where both parties were aware or ought to have been aware of the infringement of the mandatory rule, they should be left where they stand, i.e. should not even be entitled to recover the benefits conferred, under the Principles restitution may or may not be granted depending on whether it is more appropriate to allow the recipient to keep what it has received or to allow the performer to reclaim it.

 

2. Criteria for determining whether granting of restitution reasonable

 

The same criteria laid down in paragraph (3) of Article 3.3.1 to determine if any contractual remedies are available in the circumstances, if any, apply to determine whether granting restitution under paragraph (1) of this Article is reasonable. However, since the contractual and restitutionary remedies are different, the same criteria may lead to different results under the same facts.

 

Illustrations

 

1. The facts are the same as in Illustration 1 in the Comments on Article 3.3.1, except that A, having been awarded the Contract, had almost completed the construction of the power plant when in country Y a new Government comes to power which claims that the Contract is invalid because of corruption and refuses to pay the outstanding 50% of the price. Under the circumstances it would not be fair to let D have the almost completed power plant for half the agreed price. A may be granted an allowance in money for the work done corresponding to the value that the almost completed power plant has for D and D may be granted restitution of any payment it has made exceeding this amount.

 

2. Contractor A of country X enters into negotiations with D, the Minister of Economics and Development of country Y, with a view of concluding an agreement on a large infrastructure project (“the Contract”). D requests the payment of a “commission” of 7.5% of the contract price in order to conclude the Contract. A pays the requested “commission” and the Contract is concluded. After A has fulfilled all of its obligations under the Contract, a new Government comes to power in country Y and the new Minister of Economics and Development, invoking the payment of the “commission”, refuses to pay the remaining contract price. A may be granted an allowance in money for the work done corresponding to the value of the infrastructure project.

 

3. The facts are the same as in Illustration 15 in the Comments on Article 3.3.1, except that B, given that the goods had arrived safely at destination, claims the recovery of at least the value of its service. Under the circumstances, i.e. in view of the seriousness of the violation and the necessity of preventing by all means the carriage of dangerous goods by vehicles lacking the required safety requirements, B may not even be granted the right to recover the value of its service.

 

3. Rules governing restitution if granted

 

If restitution is granted under this Article it is governed by the rules set out in Article 3.2.15 on restitution in the context of avoidance. These rules however need some adaptations, in the sense that in paragraph (1) of Article 3.2.15 the reference to avoidance is to be understood as a reference to the case where the contract becomes ineffective as a result of the infringement of a mandatory rule, and the reference to avoidance of part of the contract as a reference to the case where only part of the contract becomes ineffective as a result of the infringement of a mandatory rule. For further explanation of the rules on restitution referred to in this Article, see the Comments on Article 3.2.15.

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