(1) On termination of a contract to be performed over a period of time restitution can only be claimed for the period after termination has taken effect, provided the contract is divisible.
(2) As far as restitution has to be made, the provisions of Article 7.3.6 apply.
1. Contracts to be performed over a period of time
Contracts to be performed over a period of time are at least as commercially important as contracts to be performed at one time, such as contracts of sale where the object of the sale has to be transferred at one particular moment. These contracts include leases (e.g. equipment leases), contracts involving distributorship, out-sourcing, franchising, licensing and commercial agency, as well as service contracts in general. This Article also covers contracts of sale where the goods have to be delivered in instalments. Performances under such contracts can have been made over a long period of time before the contract is terminated, and it may thus be inconvenient to unravel these performances. Furthermore, termination is a remedy with prospective effect only. Restitution can, therefore, only be claimed in respect of the period after termination.
1. A contracts to service company B’s computer hardware and software for a period of five years. After three years of regular service A is obliged by illness to discontinue the services and the contract is terminated. B, who has paid A for the fourth year, can claim restitution of the advance payment for that year but not for the money paid for the three years of regular service.
Since contracts are terminated only for the future, any outstanding payments for past performances can still be claimed. This Article does not prevent a claim for damages being brought.
2. Company A leases equipment to company B for three years at a rental of EUR 10,000 a month. B pays punctually for the first two months but then fails to make any further payments despite repeated requests by A. After a lapse of five months A terminates the lease. A is entitled to retain the EUR 20,000 already received (see Article 7.3.7 (1)) and to recover the EUR 50,000 accrued due (on the basis of the contract of lease which is terminated only for the future), together with whatever damages for breach it has sustained (see Article 7.3.5 (2)).
3. A, a hospital, engages B to carry out cleaning services for the hospital, the contract to run for three years. After a year B informs A that it cannot continue with the cleaning services unless the price is doubled. A refuses to agree and B ceases to provide the service. On terminating the contract A can recover damages for any additional expense it incurs in hiring another cleaning firm (see Article 7.4.1 in conjunction with Article 7.3.5 (2)), while B is entitled to retain the payments it has received for services already provided (see Article 7.3.7 (1)).
The rule that restitution can only be claimed for the period after termination has taken effect does not apply if the contract is indivisible.
4. A undertakes to paint ten pictures depicting one and the same historical event for B’s festival hall. After delivering and having been paid for five paintings, A abandons the work. In view of the fact that the decoration of the hall is supposed to consist of ten paintings to be painted by the same painter and showing different aspects of one historical event, B can claim the return of the advances paid to A and must return the five paintings to A.
This Article is a special rule which, for contracts to be performed over a period of time, excludes restitution for performances made in the past. To the extent that there is restitution under this Article, it is governed by the provisions under Article 7.3.6.