LAW OF OBLIGATION ACT, CHAPTER 5, DEVISION 1

Chapter 5

NON-PERFORMANCE 

Division 1

General Provisions

  • 100. Definition of non-performance

Non-performance is failure to perform or improper performance of an obligation, including a delay in performance.

  • 101. Legal remedies in case of non-performance

(1) In the case of non-performance by an obligor, the obligee may:

1) require performance of the obligation;

2) withhold performance of an obligation which is due from the obligee;

3) demand compensation for damage;

4) withdraw from or cancel the contract;

5) reduce the price;

6) in the case of a delay in the performance of a monetary obligation, demand payment of a penalty for late payment.

(2) In the case of non-performance, the obligee may resort to any legal remedy separately or resort simultaneously to all legal remedies which arise from law or the contract and can be invoked simultaneously unless otherwise provided by law or the contract. In particular, invoking a legal remedy arising from non-performance shall not deprive the obligee of the right to demand compensation for damage caused by non-performance.

(3) An obligee shall not rely on non-performance by an obligor nor resort to legal remedies arising therefrom insofar as such non-performance was caused by an act of the obligee or by circumstances dependent on the obligee or by an event the risk of which is borne by the obligee.

  • 102. Notification obligation

An obligor shall notify the obligee of an impediment to performance by the obligor and of the effect of such impediment on the performance of the obligation immediately after the obligor becomes aware of the impediment.

  • 103. Excused non-performance

(1) An obligor shall be liable for non-performance unless the non-performance is excused. It is presumed that non-performance is not excused.

(2) Non-performance by an obligor is excused if it is caused by force majeure. Force majeure are circumstances which are beyond the control of the obligor and which, at the time the contract was entered into or the noncontractual obligation arose, the obligor could not reasonably have been expected to take into account, avoid or overcome the impediment or the consequences thereof which the obligor could not reasonably have been expected to overcome.

(3) If the effect of force majeure is temporary, non-performance is excused only for the period during which force majeure impeded performance of the obligation.

(4) In the cases provided by law or the contract, a person shall be liable for non-performance regardless of whether the non-performance is excused.

  • 104. Liability in case of culpability

(1) In the cases provided by law or contract, a person shall be liable for non-performance only if the person is culpable of the non-performance.

(2) The types of culpability are carelessness, gross negligence and intent.

(3) Carelessness is failure to exercise necessary care.

(4) Gross negligence is failure to exercise necessary care to a material extent.

(5) Intent is the will to bring about an unlawful consequence upon the creation, performance or termination of an obligation.

(6) If, pursuant to law or a contract, a person is required only to exercise such care as the person would exercise in the person’s own affairs, the person shall nevertheless also be liable in the case of intent and gross negligence.

  • 105. Legal remedies independent of liability of obligor

In the case of non-performance by an obligor, the obligee has the right to withhold performance of the obligation of the obligee, withdraw from or cancel the contract or reduce the price regardless of whether the obligor is liable for the non-performance.

[RT I, 05.04.2013, 1 – entry into force 15.04.2013]

  • 106. Agreement to release person from liability or to restrict liability

(1) An obligor and an obligee may agree in advance to preclude or restrict liability in the case of non-performance of an obligation.

(2) Agreements under which liability is precluded or restricted in the case of intentional non-performance or which allow the obligor to perform an obligation in a manner materially different from that which could be reasonably expected by the obligee or which unreasonably exclude or restrict liability in some other manner are void.

  • 107. Cure

(1) A party who fails to perform a contractual obligation may, at the party’s own expense, cure the non-performance, including improving or replacing defective performance, as long as the other party has not withdrawn from or cancelled the contract or demanded compensation for damage in lieu of performance, provided that:

1) cure is reasonable in the circumstances, and

2) cure does not cause unreasonable inconvenience or expenses to the injured party, and

3) the injured party has no legitimate interest in refusing cure.

(2) A non-performing party may cure non-performance within a reasonable period of time after the party has given notice to the injured party of the intention to cure and of the proposed manner and timing of the cure and if the injured party with a legitimate interest in refusing cure has not given notice of such refusal within a reasonable period of time.

(3) The injured party may withhold performance as of receipt of the notice of cure until completion or failure of the cure. During the time for cure, the injured party may use other legal remedies only if these are not inconsistent with the cure.

(4) Cure shall not deprive the injured party of the right to claim compensation for damage caused by a delay in performance or by the cure, including the right to claim payment of a penalty for late payment or a contractual penalty.

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