(1) If the place of performance is neither fixed by, nor determinable from, the contract, a party is to perform:
(a) a monetary obligation, at the obligee's place of business;
(b) any other obligation, at its own place of business.
(2) A party must bear any increase in the expenses incidental to performance which is caused by a change in its place of business subsequent to the conclusion of the contract.
1. Place of performance fixed by, or determined from, the contract when possible
The place where an obligation is to be performed is often determined by an express term of the contract or is determinable from it. It is obvious, for instance, that an obligation to build must be performed on the construction site, and that an obligation to transport goods must be performed in accordance with the agreed route.
2. Need for suppletive rules
Rules are however needed to cover cases in which the contract is silent on the matter and circumstances do not indicate where performance should take place. Paragraph (1) provides two solutions.
The general rule is that a party is to perform its obligations at its own place of business. The second rule is specific to monetary obligations where the converse solution applies, namely that the obligor is to perform its obligations at the obligee’s place of business (subject to the application of Article 6.1.8 concerning payments by funds transfers).
These solutions may not be the most satisfactory in all cases, but they do reflect the need for rules where the parties have not made any other arrangement or where the circumstances do not indicate otherwise.
1. A wishes some of its engineers to learn the language of country X, where they will be employed for some time. It agrees with B, a language school, for a series of intensive lessons. If nothing else is stipulated, the lessons are to take place at B’s place of business (see Article 6.1.6(1)(b)).
2. The facts are the same as in Illustration 1. The language school sends its bill to A. The cost of the lessons must, in principle, be paid at B’s place of business (see Article 6.1.6(1)(a)).
3. Consequences of change in a party’s place of business subsequent to conclusion of contract
In view of the importance of the parties’ respective places of business for the application of paragraph (1), it is necessary to cater for the situation where a party changes its location after the conclusion of the contract, a move which may involve additional expense for the performing party. The rule established in paragraph (2) is that each party must bear any such increase of expenses occasioned by a change in its place of business.
It is moreover possible that a party’s move may entail other inconvenience for the other party. The obligation to act in good faith (Article 1.7) and the duty to cooperate (Article 5.1.3) will often impose on the moving party an obligation to inform the other party in due time so as to enable the latter to make such arrangements as may be necessary.
3. A enters into a technical assistance agreement with B, under the terms of which A undertakes to train ten of B’s engineers for a period of two months on A’s premises. The engineers are to be accommodated at a local hotel which offers very reasonable rates on account of A’s location in a rural area. After the agreement has been concluded, but before B’s engineers arrive, A notifies B that it has moved to the capital city where hotel rates are much higher. Irrespective of whether the initial costs of accommodation were to be paid by A or by B, the additional costs will be borne by A.
4. Each year on 3 May, A must pay royalties to B at B’s place of business. B moves to another country, to which it takes some time (e.g. two months) for a payment to arrive. A formerly gave its bank the transfer order on or about 15 April, but from now on the order must be given towards the end of March at the latest if A wishes to avoid late payment. B is under a duty to inform A of its new place of business in sufficient time to permit A to make the necessary arrangements for payment and B will bear the additional costs.