LAW OF OBLIGATION ACT, CHAPTER 10, DIVISION 1 & 2

Chapter 10

TERMINATION OF OBLIGATION 

Division 1

General Provisions

  • 186. Bases for extinction of obligation

An obligation extinguishes:

1) upon a conforming performance;

2) upon a set-off;

3) upon merger;

4) by an agreement to terminate the obligation;

5) upon withdrawal from the contract;

6) upon cancellation of the contract;

7) upon the death of an obligor who is a natural person if the obligation cannot be performed without his or her personal participation;

8) upon the death of an obligee who is a natural person if the obligation is to be performed personally for the benefit of the obligee;

9) in other cases prescribed by the law or the contract.

  • 187. Termination of accessory obligations and security

(1) Upon termination of an obligation, the security and accessory obligations relating to the obligation also terminate unless otherwise provided by law.

(2) If the security provided to secure a claim is not related to the claim and the obligation terminates, the security shall be returned, pursuant to the agreement on the basis of which the security was provided, to the person who provided the security.

[RT I 2002, 53, 336 – entry into force 01.07.2002]

Division 2

Withdrawal from Contract

  • 188. Declaration of and consequences of withdrawal

(1) A party withdraws from a contract by submitting a declaration of withdrawal to the other party.

(2) If a party may withdraw from a contract pursuant to law or the contract, withdrawal from the contract shall release both parties from the performance of their contractual obligations. Withdrawal shall not affect the validity of rights and obligations which have arisen from the contract before the withdrawal.

(3) Withdrawal shall not affect agreements on the resolution of disputes arising from the contract or other contract terms concerning the rights and obligations of the parties after withdrawal from the contract.

  • 189. Return of and compensation for that which was delivered under contract

(1) In the event of withdrawal from a contract, each party may claim return of that which was delivered by the party under the contract and delivery of the fruits and other gain received if the party returns all property that has been delivered to the party. Obligations arising from withdrawal shall be performed by the parties simultaneously, and the provisions of § 111 of this Act apply mutatis mutandis. Interest shall be paid on money refunded as of the moment of receipt of the money.

(2) In lieu of return or delivery, a party shall compensate for the value of that which was received by the party if:

1) return or delivery is impossible due to the nature of that which was received, including in the case of the provision of a service or the use of a thing;

2) the party has consumed or transferred the object received, encumbered it with the right of a third party or processed it;

3) that which was received has been destroyed.

(3) If the price of that which was received is set in the contract, the price is deemed to be the value of that which was received for the purposes of subsection (2) of this section.

(4) If a thing subject to return or delivery has deteriorated and such deterioration is not the result of the regular use of the thing, the decrease in the value of the thing shall be compensated for.

(5) A party who, under the circumstances, should reasonably be able to foresee the possibility of withdrawal from the contract shall ensure that it is possible to return that which was received in the case of withdrawal from the contract.

  • 190. Preclusion of compensation

(1) A party is not required to compensate for the value of that which was received by the party in lieu of return or delivery thereof if:

1) the circumstances on which withdrawal is based become evident only upon processing the thing;

2) deterioration or destruction occurred due to circumstances dependent on the other party or due to circumstances the risk of which is borne by the other party, or if the damage would also have occurred if that which was received had been in the possession of the other party;

3) upon exercising the right of withdrawal arising from the law, that which was received has deteriorated or been destroyed although the party exercised such care as the party would exercise in the party’s own affairs.

(2) In the case of unjustified enrichment of a party under the circumstances specified in subsection (1) of this section, the party shall return that which was received pursuant to the provisions concerning unjustified enrichment.

  • 191. Gains and expenses

(1) In the case of withdrawal by a party who does not receive fruits or other gain which the party could have received upon adherence to the requirements for regular management, the party shall compensate the other party for the value of such fruits or other gain. If the right of withdrawal arises from the law, the party entitled to withdrawal shall be liable only for the exercise of such care in the receipt of fruits and gain as the party would exercise in the party’s own affairs.

(2) If a party returns an object or compensates for the value of the object or if the obligation to compensate for the value of the object is precluded pursuant to clause 190 (1) 1) or 2) of this Act, the other party shall compensate the first party for the necessary expenses incurred with respect to the object. In the case of unjustified enrichment of the other party through other expenses incurred by the first party, the first party shall be compensated for such other expenses pursuant to the provisions concerning unjustified enrichment.

  • 192. Indivisibility of right of withdrawal

(1) If several persons participate in a contract as one party, the persons may only exercise the right of withdrawal collectively. If the right of withdrawal extinguishes for any one person entitled to withdrawal, the right shall also extinguish for all the other persons.

(2) If a party withdraws from a contract where several persons participate as the other party, the first party may exercise the right of withdrawal only with regard to all such persons collectively.

(3) In the case of a multilateral contract, a party may withdraw from the contract only if the other party or parties fail to perform an obligation assumed with regard to the first party.

  • 193. Set-off after fundamental breach of contract

Withdrawal from a contract due to a fundamental breach of the contract is void if the party with regard to whom the right of withdrawal is to be exercised may terminate the obligation by a set-off and gives notice of the set-off immediately after the other party has given notice of withdrawal from the contract.

  • 194. Specifications for withdrawal from consumer contracts

[Repealed – RT I, 31.12.2013, 1 – entry into force 13.06.2014]

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