(1) The obligee may reject an offer to perform in part at the time performance is due, whether or not such offer is coupled with an assurance as to the balance of the performance, unless the obligee has no legitimate interest in so doing.
(2) Additional expenses caused to the obligee by partial performance are to be borne by the obligor without prejudice to any other remedy.
1. Partial performance distinguished from performance at one time or in instalments
The situation covered by this Article should be distinguished from that of Article 6.1.2.
Article 6.1.2 attempts to solve a preliminary question which concerns only certain special cases. If a party’s performance can be rendered at one time or in instalments and if the contract does not make it clear or determinable how that party is to perform, it must in principle perform at one time.
This Article has a more general scope. It provides that at the time performance is due the obligee may in principle reject an offer of partial performance. This applies at maturity, irrespective of whether what is due then is a global performance or an instalment of a wider obligation (which, in some cases, has been previously determined on the basis of Article 6.1.2).
1. A owes USD 1,000,000 to a bank and it has been agreed that A will pay back USD 100,000 on the first day of each month, starting in January. On 1 April A offers to reimburse only USD 50,000, and the balance two weeks later. In principle, the bank is entitled to refuse A’s proposal.
2. Obligee entitled in principle to reject partial performance
When performance is due at maturity (be it the whole performance or an instalment), that which is due must be performed completely. In principle, the obligee may reject an offer of partial performance, whether or not it is coupled with an assurance as to the balance of the performance, since it is entitled to receive the whole of what was stipulated. Subject to what will be said below, partial performance normally constitutes a breach of contract. A party who does not obtain full performance at maturity may resort to the available remedies. As a rule, the obligee has a legitimate interest in requiring full performance of what was promised at the time that performance is due.
The obligee may of course also refrain from rejecting the offer to perform in part, while reserving its rights as to the breach, or may accept it without any reservation, in which case partial performance can no longer be treated as a non-performance.
2. A wishes to open a branch office in country X and rents the necessary office space in a building under construction, due to be finished in time for the move on 1 September. On that date, only four of the ten offices are made available to A, with an assurance that the remaining six will be ready in one month. In principle, A may refuse to move into those four offices.
3. Obligee’s right to reject partial performance conditional on its legitimate interest in so doing
There may be situations where the obligee’s legitimate interest in receiving full performance is not apparent and where temporary acceptance of partial performance will not cause any significant harm to the obligee. If the party tendering partial performance proves this to be the case, the obligee cannot then refuse such partial performance (subject to paragraph (2)), and there is no non-performance in such cases. This may be seen as a consequence of the general principle of good faith and fair dealing enunciated in Article 1.7.
3. An airline promises to transport 10 automobiles from Italy to Brazil in one single consignment due to be delivered on a definite date. When performance is due, some circumstances make it difficult, although not impossible, for the airline to find sufficient space in a single aircraft. The airline suggests making two successive deliveries within a week. It is established that this will cause no inconvenience to the purchaser of the cars, which will not actually be used before the following month. In such a case the obligee has no legitimate interest in refusing partial performance.
4. Additional expenses entailed by partial performance to be borne by obligor
If partial performance is accepted, it may entail additional expenses for the obligee. In all cases, such expenses are to be borne by the other party. If partial performance amounts to a non-performance (as it usually does), these expenses will be part of the damages, without prejudice to any other available remedy. If partial performance does not amount to a non-performance (the obligee has been shown not to have any legitimate interest in rejecting the offer of partial performance, or has found the offer to be acceptable without reservation), it will only be entitled to those expenses.
4. The facts are the same as in Illustration 3. If the purchaser has to meet additional expenses on account of having to make double arrangements for picking up the cars at the airport, those extra costs will be borne by the airline.