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(1) The obligee may discharge the original obligor. 

 

(2) The obligee may also retain the original obligor as an obligor in case the new obligor does not perform properly. 

 

(3) Otherwise the original obligor and the new obligor are jointly and severally liable.

 

COMMENT

 

1. Extent of original obligor’s discharge

 

The obligee’s consent, whether given under Article 9.2.1(b) or under Article 9.2.3, has the effect of binding the new obligor to the obligation. What still remains to be determined is whether the original obligor is discharged. It is primarily up to the obligee to choose among different options. Only in the case of Article 9.2.1(b) will the choice depend also on the original obligor.

 

2. Obligee’s choice: full discharge

 

The obligee may first of all fully discharge the original obligor.

 

Illustration

 

1. Supplier X accepts that its obligor company A transfer its obligation to pay the price to customer B. Fully confident that the new obligor is solvent and reliable, X discharges A. Should B fail to perform, the loss will be on X who will have no recourse against A.

 

3. Obligee’s choice: original obligor retained as a subsidiary obligor

 

Another possibility is for the obligee to accept the transfer of the obligation from the original obligor to the new obligor on condition that it retain a claim against the original obligor. 

There are two options. 

 

The first option is that the original obligor is retained as an obligor in the event that the new obligor does not perform properly. In this case the obligee must claim performance first from the new obligor, but if the new obligor does not perform properly the obligee may call upon the original obligor.

 

Illustration

 

2. Supplier X accepts that its obligor company A transfer its obligation to pay the price to customer B, but this time stipulates that A will remain bound if B does not perform properly. X no longer has a direct claim against A, and must first request performance from B. However, should B fail to perform, X will have a claim against A.

 

4. Obligee’s choice: original obligor and new obligor jointly and severally liable

 

The second option, the one most favourable to the obligee, is to consider the original obligor and the new obligor jointly and severally liable. This means that when performance is due, the obligee can exercise its claim against either the original or the new obligor (see Articles 11.1.3 et seq.). Should the obligee obtain performance from the original obligor, the latter would then have a claim against the new obligor (see Articles 11.1.10 et seq.).

 

Illustration

 

3. Supplier X accepts that its obligor company A transfer its obligation to pay the price to customer B, but stipulates that A and B will remain jointly and severally liable. In this case X may request performance from either A or B. Should B perform properly, both A and B would be fully discharged. Should A have to render performance to X, it would then have right of recourse against B.

 

5. Default rule

 

The language of this Article makes it clear that the last-mentioned option is the default rule. In other words, if the obligee has neither indicated that it intends to discharge the original obligor, nor indicated that it intends to keep the original obligor as a subsidiary obligor, the original obligor and the new obligor are jointly and severally liable.

 

llustration

 

4. Supplier X accepts that its obligor company A transfer its obligation to pay the price to customer B, but says nothing about the liability of A. Also in this case X may request performance from either A or B. Should B perform properly, both the original and the new obligor would be fully discharged. Should A have to render performance to X, it would then have right of recourse against B.

 

6. Original obligor refusing to be discharged

 

When the obligation is assumed by means of an agreement between the obligee and the new obligor, as provided in Article 9.2.1(b), and the agreement provides that the original obligor is discharged, the agreement amounts to a contract in favour of a third party. Under Article 5.2.6 such a benefit cannot be imposed on the beneficiary, who may have reasons not to accept it. The original obligor may thus refuse to be discharged by the agreement between the obligee and the new obligor. 

 

If such a refusal occurs, the new obligor is bound to the obligee, but the original obligor and the new obligor are jointly and severally liable, in accordance with the default rule of Article 9.2.5(3).

 

Illustration

 

5. The facts are the same as in Illustration 1, except that the obligation is assumed by an agreement between X and B, and that X discharges A. If A is no longer interested in a business relationship with B, it may accept to be discharged. On the other hand, if A wants to keep the possibilities it has of benefiting from a renewal of its contract with X, it might wish to keep the relationship and may therefore refuse to be discharged.

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