VK Schelhaas PICC Sec 7.2 - Right To Performance

Section 2: Right to performance
Selected bibliography
Literature on Section 7.2 of the PICC

Eberhard, Stefan, Les sanctions de l’inéxecution du contrat et les Principes UNIDROIT
(2005) 77–185
Felemegas, John, ‘The right to require specific performance: Comparison between the
provisions of the CISG (Arts 28, 46 and 62) and counterpart provisions of the
UNIDROIT Principles (Arts 7.2.1–7.2.5)’ in J Felemegas (ed), An International
Approach to the Interpretation of the United Nations Convention on Contracts for the
International Sale of Goods (1980) as Uniform Sales Law (2007) 143–161
Heidemann, Maren, Methodology of Uniform Contract Law: The UNIDROIT Principles in
International Legal Doctrine and Practice (2007) 61–126
Liu, Chengwei, ‘Remedies available: Comparison between the provision of CISG Articles
45 and 61 and the counterpart provisions of the PECL Articles 8:101 and 8:102’ in
J Felemegas (ed), An International Approach to the Interpretation of the United Nations
Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales
Law (2 66–372
Perillo, Joseph M, ‘UNIDROIT Principles of International Commercial Contracts: the
Black Letter Text and a Review’ (1994) 63 Fordham LRev 281–317
Rosett, Arthur, ‘UNIDROIT Principles and Harmonization of International Commercial
Law: Focus on Chapter Seven’ [1997] ULR 441–450
Schwenzer, Ingeborg, ‘Specific Performance and Damages According to the 1994
UNIDROIT Principles of International Commercial Contracts’ (1998/1999) 1 EJLR
289–303
Zahraa, Mahdi and Aburima A Ghith, ‘Specific Performance in the Light of the CISG,
the UNIDROIT Principles and Libyan Law’ [2002] ULR 751–773
Comparative literature on the right to performance

Beale, Hugh et al, Ius Commune Casebooks on the Common Law of Europe: Cases, Materials
and Text on Contract Law (2002) 674–722
Eiselen, Siegfried, ‘Specific Performance and Special Damages’ in H MacQueen and
R Zimmermann (eds), European Contract Law: Scots and South African Perspectives
(2006) 249–280
Farnsworth, E Allen, ‘Comparative Contract Law’ in M Reimann and R Zimmermann
(eds), The Oxford Handbook of Comparative Law (2006) 899–935
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Selected bibliography Chapter 7: Non-performance
Hartkamp, Arthur S, ‘Principles of Contract Law’ in AS Hartkamp et al (eds), Towards a

European Civil Code (3rd edn, 2004) 125–143
——‘Remedies for Breach of Contract’ in A von Mehren (ed), International Encyclopedia
of Comparative Law, vol VII: Contracts in General, ch 6 (1978)
Treitel, Guenter H, Remedies for Breach of Contract: A Comparative Account (1988)
63–75
Zimmermann, Reinhard, Breach of Contract and Remedies under the New German Law
of Obligations (2002)
Zweigert, Konrad and Hein Kötz, An Introduction to Comparative Law (3rd edn, 1998)
470–485
778 Schelhaas

Introduction to Section 7.2 of the PICC
The subject matter of this Section is the right to performance, one of the remedies available 1
for the non-performance of a contract. The other remedies are prescribed by Art 7.1.4
(cure by the non-performing party); by Art 7.1.5 (fixing of an additional period of time for
performance); by Section 7.3 of the PICC (termination); and by Section 7.4 of the PICC
(the right to damages).
The structure of the Section is as follows. The cornerstones of the Section are the right 2
to require performance of monetary obligations (Art 7.2.1), and (subject to several
exceptions) the right to require the performance of non-monetary obligations (Art 7.2.2).
The right to performance also includes cure for defective performance (such as repair or
replacement under Art 7.2.3). To ensure the effectiveness of judicial orders to perform
contractual obligations, courts may impose penalties for non-compliance (Art 7.2.4).
Should an order to perform nevertheless prove ineffective, the aggrieved party may change
the remedies sought (Art 7.2.5).
Section 7.2 of the PICC is not modelled on any particular domestic jurisdiction, or on an 3
international treaty or set of rules. The discretionary power to attach penalties to a court
order (Art 7.2.4), however, is modelled on French law.
Schelhaas 779

Article 7.2.1
(Performance of monetary obligation)

Where a party who is obliged to pay money does not do so, the other party may require
payment.
I. General 1–3 IV Currency 6

II. ‘Monetary obligation’ 4 V. Exception 7, 8
III. Conditions 5
I. General
1 Art 7.2.1 contains the rule that a debtor of a monetary obligation is always entitled to
require payment of an agreed sum of money. This rather obvious rule is an expression of
the principle pacta sunt servanda (Art 1.3) and can be found in most domestic jurisdic-
tions.1 Even in many common law systems, some of which deny the possibility of specific
performance, it is accepted that performance of an obligation to pay an agreed sum of
money can be required by the aggrieved party.2
2 The PICC distinguish between the right to request performance of a monetary obligation
(Art 7.2.1) and the right to demand performance of non-monetary obligations (Art 7.2.2).
The common law also makes such a distinction: a right to require payment is usually known
as the ‘action for an agreed sum’ or ‘action for the price’, whereas performance of
non-monetary obligations is denoted as ‘specific performance’. The only difference between
an ‘action for an agreed sum’ and ‘specific performance’ is the subject matter of the non-
performing party’s obligation: the payment of money versus the performance of a
non-monetary obligation. Despite this similarity, common law systems approach both
actions differently. Whereas specific performance of non-monetary obligations is an
equitable and discretionary remedy for common law courts, the action for an agreed sum is
based on a true right. In contrast, the PICC (although dedicating separate articles to both
subjects) deal with both forms of performance in the same manner: for the PICC, as a
matter of principle, the performance of monetary and non-monetary obligations is a
1 H Beale et al, Ius Commune Casebooks on the Common Law of Europe: Cases, Materials and Text on Contract
Law (2002) 717. For the hesitations of the drafters to include such a provision ‘stating the obvious’, see: (1986)
PC – Misc 9, pp 3–4.
2 For English Law see GH Treitel, Remedies for Breach of Contract: A Comparative Account (1988) 62;
E McKendrick, Contract Law (7th edn, 2007) 437–438 and 451–455; M Heidemann, Methodology of Uniform
Contract Law: The UNIDROIT Principles in International Legal Doctrine and Practice (2007) 93; JO Honnold,
Uniform Law for International Sales under the 1980 United Nations Convention (3rd edn, 1999) 197 (also
referring to US law).
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Chapter 7: Non-performance Art 7.2.1
primary right of the aggrieved party. However, the right to request payment of the
price under Art 7.2.1 is not subject to the numerous exceptions which limit the right to the
performance of non-monetary obligations under Art 7.2.2.
The word ‘require’ in Art 7.2.1 clarifies that the aggrieved party is entitled both to demand 3
payment from the other party and to require the enforcement of such a demand by a court.3
In other words, the aggrieved party has a right to claim for payment that can be enforced
in the courts.
II. ‘Monetary obligation’

Art 7.2.1 applies to monetary obligations,4 which covers not only the primary obligation 4
to pay the contractual price but also to pay sums arising from any secondary obligations
(such as interest or damages). Payment of agreed contractual damages based upon penalty
clauses or liquidated damages clauses can also be required under Art 7.2.1, but only
for a reasonable amount if the stipulated sum is grossly excessive according to
Art 7.4.13(2).
III. Conditions
A party is only entitled to demand payment if, and insofar as, the other party is already 5
‘obliged’ to pay money. This obviously means that a request for the payment of the price
cannot be made if the duty to pay has not yet arisen. In other words, performance can only
be claimed if the monetary obligation has become due according to the provisions on
performance treated in Section 6.1 of the PICC and if non-performance is not justified by
any of the provisions in Section 7.1 of the PICC, notably the interference by the obligee
(Art 7.1.2); the obligor’s right to withhold (Art 7.1.3) or to cure (Art 7.1.4); the setting of
an additional period of time (Art 7.1.5); or temporary impossibility to pay due to a force
majeure (Art 7.1.7).5
IV. Currency
The currency in which payment is due does not affect the application of Art 7.2.1.6 This 6
means that the right of the aggrieved party to require payment extends to obligations to
pay in a foreign currency, if that is what results from the application of Arts 6.1.9, 6.1.10
and 7.4.12.7 Foreign currency set-off is dealt with in Art 8.2.
3 Off Cmt to Art 7.2.1, p 209.

4 For details on performance of monetary obligations, see Arts 6.1.6–6.1.13.
5 See also Heidemann (n 2 above) 62–72.
6 Off Cmt to Art 7.2.1, p 209.
7 ibid; see also (1986) PC – Misc 9, p 4.
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Art 7.2.1 Chapter 7: Non-performance
V. Exception
7 The right to require payment may be excluded if a certain usage (Art 1.9) requires the seller
to resell goods which are neither accepted nor paid for by the buyer.8 There are no other
exceptions to the right to claim payment under the PICC.9 The exceptions that may apply
to the right to performance of non-monetary obligations under Art 7.2.2 cannot apply to
the enforcement of monetary obligations.
8 Since Art 7.2.1 is not mandatory, the parties themselves are entitled to exclude or limit the
possibility to claim payment. If parties exclude the right to require payment altogether, the
obligation is regarded as a ‘gentlement’s agreement’, or as a mere moral agreement.10
8Off Cmt to Art 7.2.1, p 209.

9For a critical account, see I Schwenzer, ‘Specific Performance and Damages According to the 1994
UNIDROIT Principles of International Commercial Contract’ (1998–1999) 1 EJLR 289. See also Heidemann
(n 2 above) 62–70. Contra: S Eberhard, Les sanctions de l’inexécution du contrat et les Principes UNIDROIT
(2005) 104–105.
10 The parties usually lack the intent to be bound by such a ‘gentlemen’s agreement’: see above, Art 2.1.2
para 10.
782 Schelhaas

Article 7.2.2
(Performance of non-monetary obligation)

Where a party who owes an obligation other than one to pay money does not perform,
the other party may require performance, unless
(a) performance is impossible in law or in fact;
(b) performance or, where relevant, enforcement is unreasonably burdensome or
expensive;
(c) the party entitled to performance may reasonably obtain performance from another
source;
(d) performance is of an exclusively personal character; or
(e) the party entitled to performance does not require performance within a reasonable
time after it has, or ought to have, become aware of the non-performance.
I. Introduction 1–5 4. Replacement transaction, Art 7.2.2(c)

II. Starting point: performance as the (a) Replacement transaction 34–36
primary remedy (b) ‘Reasonableness’ of replacement
1. Conditions 6–8 transaction 37–39
2. Order to perform 9–12 (c) Legal consequences 40, 41
5. Performance of an exclusively personal
III. Exceptions character, Art 7.2.2(d)
1. General 13–17 (a) General 42, 43
2. Impossibility of performance, Art 7.2.2(a) (b) Definition 44, 45
(a) Impossibility in law or fact 18, 19 (c) Exception: obligation to abstain
(b) Definition 20–23 from doing something 46
(c) Legal consequences 24 6. Request within a reasonable time,
3. Unreasonably burdensome or expensive, Art 7.2.2(e)
Art 7.2.2(b) (a) General rule 47–49
(a) General 25, 26 (b) Two time limits 50–56
(b) Costs and benefits 27–29 (c) Contractual time limit 57
(c) Change of circumstances 30, 31 (d) Legal consequances 58
(d) Enforcement unreasonably burden-
some or expensive 32, 33
I. Introduction
Art 7.2.2 confers a right on an aggrieved party to the performance of non-monetary 1
obligations. The existence of such a right to performance is highly controversial, and his-
torically reveals a division between the common law jurisdictions and civil law systems.
Though most civil law systems recognize a right to performance,11 most common law
11 See § 241 German Cc; Art 3:296 Dutch Cc; Art 1184(2) French Cc and Cass com, 3 December 1985,
Bull civ IV, no 286; Art 1453(1) Italian Cc; Arts 97, 98 and 107 Swiss CO, see Eberhard (n 9 above) 129.
Schelhaas 783

systems do not accept it as a primary remedy (specific performance).12 Thus, where a right
to performance is the starting point in civil law systems, it is the exception under common
law jurisdictions. Although, in practice, the gap is narrower than theory assumes,13 a major
conceptual difference still exists between the exceptional nature of specific performance
under the common law, and the right to perform under the civil law. In principle, in
common law jurisdictions the performance of a non-monetary claim is only granted if
damages are not adequate,14 for instance where the sale of property or goods of a unique
kind are involved.15
2 The solution chosen by the drafters of Art 7.2.2 represents a middle ground between the
common and civil law systems. Whilst establishing the right to performance as a rule is in
accordance with the civil law tradition, the inclusion of numerous exceptions which in
effect considerably limit the right, resembles the restrictive approach of the common law.16
However, the most important common law limitation to specific performance, ie the
adequacy of damages, is not one of the exceptions. Due to this middle ground approach
between the restricted action for specific performance under the common law, and the more
liberal attitude of the civil law jurisdictions, it can be assumed that an order compelling
performance is allowed under the PICC at least in all those cases where the common law
accepts performance.
3 The right to performance stems directly from the principle of pacta sunt servanda
(Art 1.3).17 The binding nature of the contract entails a right of the aggrieved party to claim
what it was contractually promised. The drafters of the PICC apparently considered it very
important that the contract stays alive as long as possible and that the parties just do what
See also for Art 206 Libyan Cc (obviously influenced by the French Cc): M Zahraa and AA Ghith, ‘Specific
Performance in the Light of the CISG, the UNIDROIT Principles and Libyan Law’ [2002] ULR 765. Chinese
law also accepts a right to performance: W Limng and X Chuanxi, ‘Fundamental Principles of China’s Contract
Law’ (1999) 13 Colum J Asian L 1, 14–15. Russian law only allows specific performance if awarding damages
would not be adequate: C Osakwe, ‘Modern Russian Law of Contracts: a Functional Analysis’ (2002) 24
Loy LA Int’l & Comp LJ 113, 230–232.
12 See eg H Beale (ed), Chitty on Contracts (29th edn, 2004) para 27-001; Treitel (n 2 above) 62. South
African law is somewhere in between. Although the right to specific performance is emphasized, it is eroded by a
general discretion to refuse the remedy: S Eiselen, ‘Specific Performance and Special Damages’ in H MacQueen
and R Zimmermann (eds), European Contract Law: Scots and South African Perspectives (2006) 260. The same
holds true for Scots law: ibid 261–264.
13 See eg Schlechtriem/Schwenzer/Müller-Chen Art 28 para 4 for further references; Eberhard (n 9 above)
132; EA Farnsworth, ‘Comparative Contract Law’ in M Reimann and R Zimmermann (eds), The Oxford
Handbook of Comparative Law (2006) 932; H Lando and C Rose, ‘On the Enforcement of Specific Performance
in Civil Law Countries´ [2005] Int’l Rev L & Econ 473; K Zweigert and H Kötz, An Introduction to Comparative
Law (3rd edn, 1998) 484–485.
14 Treitel (n 2 above) 63. Courts in the USA have a less strict view: see § 2-716(1) UCC where specific
performance is a remedy where the goods are unique or in other appropriate circumstances. According to
EA Farnsworth, Contracts (4th edn, 2004) para 12.6, though, ‘specific performance remains the exception
rather than the rule under contracts for the sale of goods’.
15 See s 52 UK Sale of Goods Act 1979 under which the courts have a discretionary power to order the
performance of ‘specific or ascertained’ goods.

16 JM Perillo, ‘UNIDROIT Principles of International Commercial Contracts: the Black Letter Text and a
Review’ (1994) 63 Fordham LRev 303.

17 (1990) Study L – Doc 47, p 4.
784 Schelhaas

they promised to do. Not only is the right to performance of Arts 7.2.1 and 7.2.2 one of the
leading principles of the PICC; other provisions in Chapter 7 of the PICC also pay tribute
to the principle of pacta sunt servanda. One example is Art 7.2.4, which reinforces the right
to specific performance by providing a strong enforcement mechanism: the aggrieved party
can apply for a court order and the court even has the discretion to impose a judicial penalty
if the non-performing party fails to comply. Furthermore, the PICC give the parties the
possibility to ensure performance themselves through the inclusion of penalty clauses in the
contract. According to Art 7.4.13, such penalty clauses are valid in principle. The agreed
amount does not have to equate to the foreseeable or actual harm from non-performance
and as such can provide a strong tool to enforce performance by the other party. For extreme
circumstances, however, Art 7.4.13 provides the court with the authority to reduce a
contractual penalty if it is ‘grossly excessive’. In addition, Art 7.1.4 (the non-performing
party may cure any non-performance) and Art 7.1.5 (the aggrieved party may allow an
additional period of time for performance) show that the PICC favour the preservation of
the contract as long as possible.18
In view of the theoretical divergence between the common and civil law on the issues dealt 4
with in Art 7.2.2, the PICC opted for neutral terminology: the term ‘right to performance’
is used instead of the common law concept of ‘specific performance’.
Art 7.2.2 is in line with Art 9:102 PECL, but differs from the right to performance in the 5
CISG (Arts 45, 46, 61, and 62), in the sense that the CISG treats the right to performance
as subject to a discretionary power of the court (Art 28 CISG): a court is not bound to order
specific performance unless it would do so under its own law in respect of similar contracts
of sale not governed by the CISG.
II. Starting point: performance as the primary remedy

1. Conditions
The remedy to require specific performance is a right, and not a discretionary power of the 6
court. Unless one of the exceptions provided by Art 7.2.2 applies (see paras 13–58 below),
the court must order performance if the obligation to perform is due according to the
contract.19 A right to performance emerges in case of non-performance (see above, Art 7.1.1
paras 1–15) of the obligation due, according to the provisions on performance set out in
Section 6.1 of the PICC, and if non-performance is not justified by any of the provisions
in Section 7.1 of the PICC, notably when the non-performance results from an interference
by the obligee (Art 7.1.2) or from force majeure (Art 7.1.7).
The right to require performance is suspended if the obligor has a right to withhold 7
(Art 7.1.3), if the obligor immediately uses its right to cure non-performance upon notice
by the obligee of the time period necessary to effect cure ‘promptly’ (Art 7.1.4), and if
18 Off Cmt 1 to Art 7.1.4, p 197.

19 Emphasized in Off Cmt 2 to Art 7.2.2, p 210. See also Zahraa and Ghith (n 11 above) 759–760 who
highlight that the open-ended term ‘reasonable’ still gives the courts a certain margin of appreciation.
Schelhaas 785

the obligee grants an additional period for performance of at least a ‘reasonable length’
(Art 7.1.5).
8 Non-performance covers various circumstances (Art 7.1.1). It applies when the other party
has not performed at all, has provided a partial or defective performance, or has tendered
defective performance which has been validly rejected by the aggrieved party. Considering
the broad formulation of Art 7.2.2 (‘an obligation other than one to pay money’), it also
applies to negative obligations, such as the obligation not to disclose trade secrets.
2. Order to perform
9 In the examples of non-performance mentioned in para 8 above, a decision ordering
performance might consist of the following: the delivery of goods or the rendering of
services which have become due, the transfer of property,20 the removal of any legal
limitation on property,21 or the performance of additional obligations (such as handing
over documents and the delivery of missing parts).22 For the case of defective performance,
Art 7.2.3 codifies a particular form of performance, ie the right for reparation or
replacement.
10 Negative obligations will usually be the subject of (interim) injunctions by (state) courts
to prevent the other party from breaching these obligations. In the USA, courts fre-
quently issue such injunctions which order a party to refrain from a specified act. If the
contractual obligation purely consists of forbearance, the consequence of such an
injunction is to order performance.23 For more elaborate detail on the question whether
an arbitral tribunal may order payment penalties on the basis of Art 7.2.4, see below,
Art 7.2.4 para 2.
11 The aggrieved party has a ‘right’ to performance which it ‘may’ use, but it is not obliged to
do so. It is free to opt for another remedy, such as a request for damages or the termination
of the contract, if the requirements for these remedies are met.24 However, this freedom is
restricted by the right of the non-performing party to cure its non-performance under
Art 7.1.4. From this provision, it follows that if the non-performing party offers to perform
and the aggrieved party has no ‘legitimate interest’ in refusing this, it has to accept
performance and is not entitled to resort to other remedies.25
12 It follows from the principle of freedom of contract (Arts 1.1 and 1.5) that the right to specific
performance can be waived in advance or subsequently, thus limiting the parties to secondary
remedies, ie a combination of tertminating the contract and claiming damages.26
20 In Dutch law this is explicitly provided for in Art 7:15 Dutch Cc.
21 Art 7:20 Dutch Cc.
22 See also Art 7.1.1 for obtaining a title ordering the payment of money.
23 Farnsworth (n 14 above) para 12.5 and (for personal service contracts) para 12.7.
24 Zahraa and Ghith (n 11 above) 761.
25 Art 7.1.4(3). See also Art 7.1.4(2): it follows from this provision that a notice of termination does not
preclude the possibility of a cure.

26 For US law see Sun Bank v Lester 404 So 2d 141 (Fla App 1981): ‘provision waiving specific performance
as a remedy was valid’.
786 Schelhaas

III. Exceptions
1. General
Art 7.2.2 stipulates five exceptions to the right to performance. The list of exceptions is 13
exhaustive, but open-ended concepts such as ‘unreasonably burdensome or expensive’ and
‘reasonably obtaining from another source’ cover a large range of situations.
If one of the exceptions only applies to a part of the performance required (eg the delivery of 14
only some of the goods is impossible), then the performance of only this part is excluded, and
the remainder of the contract must be performed.27 But, if the obligation is indivisible, then
performance of the entire contract may not be required even if one of the exceptions merely
relates to a part of the obligation. An obligation will be regarded as indivisible if the aggrieved
party loses any interest in the performance when the performance is not fully rendered.
Whether this is the case will depend primarily upon the content of the contract.28
The legal consequence of the operation of one of the exceptions is that the aggrieved party 15
has no right to performance and has to content itself with damages29 and/or the termination
of the contract.30 If no exceptions arise, the non-performing party is obliged to perform,
and a court must order performance.
The use of ‘unless’ in Art 7.2.2 makes it clear that the burden of proving one of the exceptions 16
to the right to performance (and consequently excluding the right to performance) falls on
the non-performing party. It should be noted that the circumstances which are outlined in
Art 7.2.2 are formulated as exceptions rather than as negative requirements. It follows from
the overall scheme of the PICC, in which the right to performance is expressed as a clear
right and from the wording of Art 7.2.2, that these exceptions are not to be seen as (nega-
tive) conditions which an aggrieved party has to prove in order to invoke its right to
performance.
Cases where even the common law accepts specific performance will in any event not fall 17
under one of the exceptions to specific performance under Art 7.2.2. For instance, an
order for performance is granted under the common law in contracts for the sale or
lease of land,31 and in respect of contracts to buy shares which are not readily available on
the market.32
27 For a similar solution see § 275 German Cc: ‘A claim for performance cannot be made in so far as it is
impossible’ (emphasis added).

28 See above, Art 6.1.3 para 1.
29 See above, Art 7.4.1 para 3. See also Art 9:103 PECL: ‘The fact that a right to performance is excluded
under this Section does not preclude a claim for damages’.

30 See below, Art 7.3.1 paras 1–97.
31 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, HL. This is so even if the purchaser has bought it
for resale and/or if the object of sale is not unique as such: Chitty (n 12 above) para 27-007.
32 See eg Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] AC 207, HL.
Schelhaas 787

2. Impossibility of performance, Art 7.2.2(a)

18 (a) Impossibility in law or fact. The first exception to the right to performance is the
situation where performance is impossible in law or fact. The underlying notion is that
demanding performance in such circumstances is simply pointless. This obvious rule
has been adopted in all major domestic legal systems33 and is related to the Latin adage
impossibilium nulla est obligatio.34
19 If performance is not definitively unavailable, but only temporarily impossible, then the
enforcement of performance is excluded only for that time period. This is consistent with
Art 7.1.7(3) (force majeure). The question whether the aggrieved party has a right to
terminate the contract during the temporary impossibility to perform is discussed below.35
If the barrier to performance disappears, then the aggrieved party regains its right to demand
performance.
20 (b) Definition. The PICC do not specify exactly when performance is to be regarded
as ‘impossible’, nor what kinds of ‘impossibility’ are covered. Art 7.2.2(a) only states
that ‘performance is impossible in law or in fact’. Since the provision does not exclude
any kind of impossibility from its scope and on the basis of the underlying principle
that a party cannot be forced to do something which is impossible, it is submitted that
neither the cause of the impossibility, nor the moment at which the impossibility arises,
is relevant. Thus, the exception of ‘impossibility’ covers all possible kinds of impossibility,
ie objective and subjective impossibility, initial and subsequent impossibility, and partial
and full impossibility. Furthermore, the exception to the right to performance explicitly
includes both the impossibility in fact (such as the sale of unique goods which have
perished or even never existed) and the impossibility in law (such as requiring acts that are
prohibited by law, eg contrary to public policy or other trade restrictions).
21 Although no general definition of impossibility is given in the PICC, the PICC pay special
attention to one particular type of impossibility: Art 3.3 provides that the occurrence of an
initial impossibility (eg an asset to which a contract relates has already perished at the time
of contracting) does not affect the validity of the contract. However, initial possibility falls
within the scope of Art 7.2.2(a), and accordingly prevents a valid claim for performance.
22 An event which can be classfied as force majeure under Art 7.1.7 (ie an impediment beyond
the control of the non-performing party) might fall under Art 7.2.2(a). If such an event
makes performance impossible, an order to perform will be denied under Art 7.2.2(a).36
If force majeure results in performance not being impossible, but rather unreasonably
33 See Art 3:236 Dutch Cc; Art 1184(2)(2) French Cc; § 275(1) German Cc; Arts 1256, 1463 Italian Cc;
Art 119(1) Swiss CO. For English law: Castle v Barber (1870) LR 5 Ch App 534, Ch and Locabail Int’l Finance
Ltd v Agroexport and Atlanta (UK) Ltd (The Sea Hawk) [1986] 1 WLR 657, CA.
34 See R Zimmermann, The Law of Obligations (1990) 809 for the historical development.
35 Art 7.3.1 paras 1–97.
36 See Off Cmt to Art 7.1.1, p 193 where it is observed that a party is not entitled to claim specific performance
for an excused non-performance. Non-performance is excused where it is caused by an impediment which is

beyond the control of the non-performing party: see Art 7.1.7. See also the observations by Eberhard (n 9
above) 114–115.
788 Schelhaas

burdensome or expensive, performance will be denied under Art 7.2.2.(b) (see paras 25–33
below). However, in both cases, (consequential) damages and the termination of the
contract remain possibilities open to the aggrieved party.
The question of whether or not the non-performing party was responsible or to be blamed 23
personally (culpa) for the impossibility, is generally not relevant for the purposes of
Art 7.2.2(a).37 This is consistent with the general approach of ‘liability sine culpa’ contained
in the PICC, under which culpa is not a requirement for liability.38 However, if, the aggrieved
party causes the impossibility of performance on the part of the non-performing party, then
in accordance with Art 7.1.2 a non-performance in the sense of Art 7.1.1 does not eventuate
and the question whether performance can be ordered under Art 7.2.2 becomes irrelevant.
Therefore, obviously, the reason for the impossibility in this specific situation is relevant.
(c) Legal consequences. Any impossibility prevents the aggrieved party from requesting 24
performance, but it does not automatically affect the validity of the contract.39 The
latter depends upon the rules on validity in Chapter 3 of the PICC. The consequences
of hardship and force majeure are dealt with by Arts 6.2.2 and 7.1.7. But, if in a specific
situation, a certain event renders the contract invalid, then the question whether a right
to performance exists obviously does not arise. This occurs, for instance, if a public
permission, which is required under the applicable law and the absence of which affects
the validity of the contract, is denied (Art 6.1.17(1)). It is, however, also possible that the
refusal of a public permission renders the performance impossible without affecting the
validity of the contract (Art 6.1.17(2)). In such a case, the contract remains in force, but
its performance cannot be required.40
3. Unreasonably burdensome or expensive, Art 7.2.2(b)

(a) General. The second exception to the right to performance is the situation in 25
which performance would result in an unreasonable burden or performance would be
unreasonably expensive for the non-performing party. If, for instance, there has been
a change of circumstances after the conclusion of the contract, and performance is still
possible but has become so onerous that it would be contrary to good faith to require it,
the aggrieved party is deprived of its right to performance.41 The rule that an aggrieved
party does not have a right to performance if this would be unreasonably burdensome or
expensive has been adopted in several domestic legal systems.42
37 This is similar to the position under the recently amended § 275(1) German Cc.
38 See above, Art 7.1.7 para 3, and Art 7.4.1 para 2.
39 This is in contrast with the English doctrines of mistake and frustration: an impossibility results in the
avoidance of the contract, see McKendrick (n 2 above) 312–313 and (for the effects of frustration) 319–323.
40 Off Cmt 3 to Art 7.2.2, p 211.
41 ibid 212.
42 Reference can be made to § 275(2) German Cc (but this only applies to a relative disproportion between
cost and benefit); for Dutch law HR 5 January 2001, NJ 2001, 79 and MBM Loos, ‘Right to Performance’
in HN Schelhaas et al, The Principles of European Contract Law and Dutch Law: A Commentary (2002) 347,
353–357.
Schelhaas 789

26 The formula ‘unreasonably expensive’ indicates that a comparative economic assessment

between costs and benefits should be made for evaluating whether this exception to the
right to performance can be relied upon. The wording ‘burdensome’ and the reference in
the Official Comment to the principle of good faith could be understood to suggest that
other factors could also be relevant. However, only a purely economic analysis weighing
costs and benefits should be applied. The underlying reason for this is that the PICC are
applicable to international commercial contracts and that international trade is (purely)
aimed at economic and financial costs and benefits. Introducing an element of good faith
in determining whether performance is required, would run counter to the essentials of
international trade. Furthermore, it would undermine legal certainty since a general
criterion of ‘good faith’ is too loose in international commercial contracts and so the parties
would never know in advance whether specific performance can be claimed or not. It is,
therefore, submitted that the best course is to simply balance the economic costs and
benefits against each other, and then come to an economic decision whether performance
should be allowed or not.43
27 (b) Costs and benefits. The PICC make it clear that exceptional circumstances must
exist before contractual performance is considered to be unreasonably burdensome. From
Illustration 1 to Art 7.2.244 it can be deduced that the major factor which should be taken
into account is the proportionality between the expenses which the non-performing party
has now to incur in order to render performance, and the actual value of the contract.
Thus, when the cost of performance to the non-performing party is out of proportion to
the benefit which performance will confer on the aggrieved party, an order to perform falls
within this exception and will be denied. So if an oil-tanker has sunk in coastal waters and
it would be technically possible to lift the ship and perform the contract, performance is
according to the Official Comment regarded as unreasonably burdensome since the costs
for the non-performing party would vastly exceed the value of the oil.45
28 The mere fact that the contract has turned out to be less profitable for the non-performing
party is not a justification for refusing specific performance. Above all, the fact that damages
might be an adequate remedy is not sufficient under the PICC to deny an aggrieved party’s
right to performance.
29 If the goods or services are of a unique and/or irreplaceable character the non-performing
party cannot easily rely upon the exception under Art 7.2.2(b), for instance, if the
non-performing party is (virtually) the only manufacturer or deliverer of the goods or ser-
vices.46 In this case, the aggrieved party has a strong interest in obtaining performance if the
goods or services are not easily available elsewhere. Even under the common law, where
specific performance is the exception rather than the rule, this is a situation where
43 cf German law, where good faith is only relevant for the decision whether the discrepancy between costs
and benefits is disproportionate: an assessment of all the circumstances of the case will not take place here. See
MüKo/Ernst § 275 para 69.
44 Off Cmt 3 to Art 7.2.2, p 211.
45 Illustration 1 to Art 7.2.2.
46 See, however, the exception stipulated in Art 7.2.2(d): if the non-performing party proves that performance
is of an exclusively personal character, a request for performance can be refused.
790 Schelhaas

performance can be requested, subject to the assumption that performance is not impos-
sible under Art 7.2.2(a). Since the PICC goes further than the common law (by specifying
performance as a basic right), the common law instances which allow for specific perform-
ance will also be acknowledged under the PICC and will not readily come under one of the
exceptions listed in Art 7.1.2 (see para 16 above). So if the subject matter of a sale is a ship
which as a matter of fact usually has unique characteristics,47 then performance is due even
under the common law.48 The same holds true if the goods or services which the non- per-
forming party is obliged to deliver are scarce at the time of performance (commercial
uniqueness) and the same goods or services are not reasonably available elsewhere.49
(c) Change of circumstances. The Official Comment makes it clear that the exception 30
might also be invoked if there has been a drastic change of circumstances.50 Again, a
change of circumstances may only prevent a valid claim for performance, if weighing the
costs and benefits of performance leads to the conclusion that the costs for performance
for the non-performing party exceed the benefits to the aggrieved party. The distinction
between performance which has become unreasonably burdensome or expensive
and a drastic change of circumstances (hardship, Art 6.2.1) is a delicate one, and the
concepts usually overlap. If an event fundamentally alters the equilibrium of the contract
(Art 6.2.2), either because the cost of performance has increased or the value of the
performance a party receives has diminished, performance will usually also be considered
as unreasonably burdensome or expensive. However, the concepts do not necessarily
coincide. For instance, it is conceivable that it is still reasonable to require performance,
even if the market price for a certain good (eg oil) rises and in order to comply the non-
performing party now has to buy a product which is considerably more expensive than
originally assumed. The reason for this is that the aggrieved party still has an interest in
performance, even more so since the market price has risen. The fact that this is more
expensive to the non-performing party is not relevant to the aggrieved party’s right to
performance, since the interest of the aggrieved party has also proportionally increased.
Consequently, no gross disproportion exists between the non-performing party’s effort
and the aggrieved party’s interest in receiving the oil and a request for performance must
be accepted.51 At most, the non-perfoming party may rely on the doctrine of hardship
(Art 6.2.1), which might for instance, result in an obligation to enter into renegotiations
47 Behnke v Bede Shipping Co Ltd [1927] 1 KB 649, KB, and see Chitty (n 12 above) para 27-014.
48 s 52 UK Sale of Goods Act 1979: the purchaser of ‘specific or ascertained goods’ may request specific
performance. The court has a discretion whether or not to order performance.
49 cf Schlechtriem/Schwenzer/Müller-Chen Art 28 para 2; see for English law Howard Perry Ltd v British
Railways Board [1980] 1 WLR 1375, Ch, and Sky Petroleum v VIP Petroleum [1974] 1 WLR 576, Ch (specific
performance of the duty to deliver petroleum was ordered since at the time there was an acute petroleum
shortage); for US law see § 2-716(1) UCC and Duval & Co v Malcom 214 SE 2d 356 (Ga 1975) (‘the mere fact
that cotton prices soared after this alleged contract is not in itself adequate to show that buyer [is] entitled to
specific performance’), but see Mitchell-Huntley Cotton Co v Waldrep 337 F Supp 1215 (ND Ala 1974) (specific
performance of contract to sell cotton granted where buyer could not satisfy demand in market due to cotton
shortage).
50 Off Cmt 3 to Art 7.2.2, p 211.
51 Example derived from R Zimmermann, Breach of Contract and Remedies under the New German Law of
Obligations (2002) 13.
Schelhaas 791

on the content (eg the price) of the contract (Art 6.2.3). Thus, as under German law,52
an increase in the price after the conclusion of the contract is generally only relevant
in the context of hardship, and not so much when deciding whether performance is
unreasonably burdensome or expensive for the non-performing party. The ‘burden’ for
the non-performing party is compensated by the aggrieved party’s increased interest in
the performance of the obligation and performance cannot therefore be determined to be
‘unreasonably burdensome’ or expensive.
31 However, if the provisions for hardship and performance being unreasonably burdensome
or expensive apply to the same facts, it is not certain which provision takes precedence.
Neither the PICC nor the Official Comment consider this issue. It might be argued that the
doctrine of hardship, being the more specific rule, prevails over the doctrine relating to
performance as ‘unreasonably burdensome’ or expensive (lex specialis derogat legi generali).
It is, however, preferable to let the aggrieved party choose which of the two provisions it
wants to rely on. With regard to the comparable relationship between hardship and force
majeure, the Official Comment to Art 6.2.2 mentions that it is for the aggrieved party to
decide which remedy to pursue.53 If performance can be classified as unreasonably burden-
some or expensive under Art 7.2.2(b), this situation can be characterized, just like force
majeure, as an impediment.
32 (d) Enforcement unreasonably burdensome or expensive. Art 7.2.2(b) not only
stipulates that a request for performance must be refused if it is unreasonably burdensome
or expensive, but also if its enforcement is unreasonably burdensome or expensive. This
rule was included to reflect specific difficulties in common law courts.54 Unlike some
civil law countries where enforcement is to be instigated and organized by the aggrieved
party, in some common law systems it is the courts themselves that are charged with
the enforcement of orders for specific enforcement. Accordingly, English courts have
refused specific performance when subsequent supervision would place a significant
burden on them, such as in the case of the enforcement of long-term contracts,55 or
when the specific implementation of the contractual obligation would be too complex to
be worded in the order.56 Under Art 7.2.2(b), which must be construed autonomously
despite this concession to a particular legal system (Art 1.6), specific performance will
not automatically be denied in such circumstances. However, it is important to recognize
that this will be one of the relevant factors in determining whether the enforcement of
performance is ‘unreasonably burdensome’.
33 The circumstances covered by Art 7.2.2(b) must be distinguished from the situation when
a court has actually ordered performance, but subsequently cannot enforce its own order.
Here, the aggrieved party can elect to pursue another remedy.57
52 MüKo/Ernst § 275 paras 18–23.

53 Off Cmt 6 to Art 6.2.2, p 187.
54 Off Cmt 3b to Art 7.2.2, p 211.
55 Ryan v Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116, 123, CA.
56 Tito v Waddell (No 2) [1977] Ch 106, 322–323, Ch.
57 See below, Art 7.2.5 para 7.
792 Schelhaas

4. Replacement transaction, Art 7.2.2(c)

(a) Replacement transaction. If a contract for staple goods and services (ie goods and 34
services of a standard kind) is not performed, a request for specific performance from
an aggrieved party may be denied if the other party proves that the aggrieved party may
reasonably obtain substitute goods or services. This is a very important exception to
the right to performance, and it is generally not known in civil law jurisdictions. If the
aggrieved party chooses to enter into a replacement transaction, the non-performing party
is relieved from its obligation to perform, but is obliged to compensate for additional
damages for non-performance, for example caused by the fact that the substitute
transaction is more expensive than the original contract price.
The rationale behind this rule is that it saves time and effort if the goods and services 35
can easily be obtained from another source: the aggrieved person should make use of a
remedy which can be obtained most easily.58 The wording of the Official Comment indi-
cates that a notion of efficient breach has influenced this provision. This theory postulates
the potential economic efficiency and the social desirability in re-allocating resources to
remedy an instance of non-performance.59 The Official Comment highlights that it is
‘economic reality’ which drives parties in contracts for staple goods and services, namely that
such aggrieved parties do not want to waste time and effort to compel the non-performing
party, but rather wish to obtain substitute goods and services and be compensated for any
possible losses.60
This rule does not reflect a general principle of law. Several jurisdictions do not recognize 36
any rule on substitute transactions. Furthermore, the jurisdictions which have adopted
such a rule usually define it as a right of the aggrieved party, and not as an obligation to carry
out a replacement transaction.61 In addition, under some jurisdictions the non-performing
party itself can be compelled to deliver equivalent goods.62
(b) ‘Reasonableness’ of replacement transaction. A replacement transaction only has to 37
be concluded when it is ‘reasonable’, which means that the aggrieved party could in certain
circumstances not reasonably be expected to resort to an alternative supplier. It is not clear
when such a circumstance occurs. The Official Comment uses the example of A (located
in a developing country where foreign exchange is scarce), who buys standard machinery
from B and pays in advance. If B does not deliver, it cannot reasonably be expected that
A should buy another machine, in view of the scarcity and high price of foreign exchange
in its own country. A may still require the delivery of the machinery from B.63 But if the
performance consists of delivering staple goods without a special character (eg the goods
are not antique or unique) which can be provided by another supplier, then the aggrieved
party should buy the goods from this alternative source, even though the price is higher
58 (1990) Study L – Doc 47, p 6.

59 For the notion of efficient breach in American law, see Farnsworth (n 14 above) para 12.3.
60 Off Cmt 3c to Art 7.2.2, p 211.
61 Arts 7:36 and 37 Dutch Cc; Art 1144 French Cc.
62 For French law: Cass civ 20 January 1953, JCP 1953 II 7677.
Schelhaas 793

than the contract price and the aggrieved party is deprived of its right to performance
against the non-performing party.
38 The exception operates if the possibility of a replacement transaction is ‘reasonable’, not
only at the time when the exception is raised, but also at the moment of the court’s decision
in the case. Missed opportunities for replacement which where reasonably available after
the aggrieved party has (or ought to have) become aware of the non-performance, but
which are no longer ‘reasonable’ at the time the exception is raised (eg due to a sharp rise of
market prices), will not benefit the non-performing party that seeks to resist an order of
performance. Such a restrictive interpretation follows not only from the wording of the
provision (‘may reasonably obtain’ instead of ‘could have reasonably obtained’), but also
from its nature as an exception. However, if market prices have risen between the first
moment in which a replacement transaction would have been reasonably possible and the
moment of the delivery of a court judgment, but not so much as to make the replacement
transaction unreasonable, the aggrieved party has to discount the difference from the
damages it may claim because of its failure to mitigate the loss (see Art 7.4.8).
39 In view of the economic rationale for this provision, it is submitted that the exception
should only be applied if the non-performing party that seeks to rely on this exception offers
sufficient security for damages, including transaction costs, to which it is liable as a result
of the need to procure replacement. If not, the replacement transaction is not economically
‘reasonable’ for the aggrieved party, and the remedy of performance must be granted.64
40 (c) Legal consequences. The aggrieved party’s claim for performance must be refused
if the non-performing party establishes that a replacement transaction is reasonably
possible. The aggrieved party then has to content itself with the replacement transaction
and additional damages. In this case, a claim for additional damages by the aggrieved
party may be reduced, since it can be argued that the aggrieved party did not mitigate its
harm by not making a replacement transaction in time under Art 7.4.8.
41 A party that concludes a replacement transaction, however, may terminate the contract
under Art 7.3.1. If the replacement transaction involves the payment of a price above the
contract price, the aggrieved party can claim the difference between the two amounts as
damages for further harm under Art 7.4.5.
5. Performance of an exclusively personal character, Art 7.2.2(d)

42 (a) General. The fourth exception to the right to performance occurs when performance
is of an exclusively personal character. This rule is accepted by most (but not all) of the
major jurisdictions.65 The basic rationale for denying performance in such situations is
64 See Farnsworth (n 14 above) para 12.3 who observes that an economic analysis of non-performance is
affected if transaction costs are disregarded.

65 In England, Ireland, Scotland, and the USA, performance is excluded in contracts involving personal
services: McKendrick (n 2 above) 452; Farnsworth (n 14 above) para 12.7. But particularly in the USA
injunctions in relation to duties to abstain from something can be used and can result in an indirect means
to force the other party to do what it has promised: Farnsworth (n 14 above) paras 12.5 and 12.7. Also,
in France, performance is excluded in contracts involving personal services (Art 1142 French Cc). In other
794 Schelhaas

that it interferes with the personal freedom of the aggrieved party, and that it gives rise to a
number of practical difficulties: even if the aggrieved party were to succeed in compelling
the unwilling non-performing party, this would presumably impair the quality of the
service subsequently rendered.66
Art 7.2.2(d) does not prevent a party from asking for an injunction under the applicable 43
national law to prevent the non-performing party from performing for a competitor, as
is commonly done in the USA.67 Injunctions to enforce a mere obligation to forebear (to which
Art 7.2.2(d) does not apply; see para 46 below) have the effect of an order to perform.68
(b) Definition. It is essential that the performance is unique. For instance, this does 44
not occur when a company offers a type of performance which many other companies
also offer, or when ordinary types of performance by service providers or businesses
are involved. Such professionals can easily delegate the task to one of their colleagues
or to another company in the trade, and so infringement of personal freedom is not
in issue.69 Art 7.2.2(d) explicitly states that the obligation must be of an ‘exclusively’
personal character. The Official Comment explains the ‘modern tendency to confine this
concept to performances of a unique character . . . A performance is of an exclusively
personal character if it is not delegable and requires individual skills of an artistic or
scientific nature or if it involves a confidential and personal relationship’.70 Therefore,
the sole fact that an agreement involves personal services or employment is not sufficient
to deny a right to performance. If the performance of services or employment (or any
other obligation) can easily be delegated to someone else, it cannot be assumed that the
performance is of an exclusively personal character.71 So if a builder fails to complete work
under an ordinary construction contract, Art 7.2.2(d) does not apply and the aggrieved
party may demand performance if no other exception applies.72 This includes ordinary
activities by, for instance, lawyers, surgeons or engineers because other persons with the
same experience can also perform these activities.73 This leads to a peculiar situation,
since under Art 7.2.2(c) a request for performance can be refused if the non-performing
party proves that a replacement transaction is possible. So even though the exception of
jurisdictions, however, this rule is restricted to employment cases, or is not known at all, see eg South African
law: National Union of Textile Workers v Stag Packings (Pty) Ltd (1982) 4 SA 151, Transvaal Provincial Division;
Santos Professional Football Club v Igesund (2003) 5 SA 73, Cape Provincial Division, both discussed by Eiselen
(n 12 above) 258–264 and 267–270.
66 Off Cmt 3d to Art 7.2.2, p 212.
67 Farnsworth (n 14 above) paras 12.5 and 12.7.
68 ibid, para 12.5, p 744.
69 ibid.
70 ibid. This is more or less in line with South African law, where specific performance is only denied when
the personal liberty of the debtor is unreasonably limited: see Eiselen (n 12 above) 269. See also Zahraa and
Ghith (n 11 above) 760; Eberhard (n 9 above) 121.
71 cf Art 9:102(2)(b) PECL: ‘Specific performance cannot, however, be obtained where: . . . (c) the
performance consists in the provision of services or work of a personal character or depends upon a personal
relationship . . . ’. See also PECL Art 9:102 Comment G: a provision that work may not be delegated does not
necessarily make the work of a personal character.
72 For an example from German law, see BGHZ 10 October 1985 (VII ZR 303/84) 96, 111.
73 Off Cmt 3d to Art 7.2.2, p 212.
Schelhaas 795

Art 7.2.2(d) does not apply since performance is not of an exclusively personal character,
performance cannot be requested if the other party proves that such a replacement service
by someone else is in fact readily available at the market. In this case, the aggrieved party
should obtain this replacement service under Art 7.2.2(c).
45 If a performance requires individual skills of an artistic or scientific nature (a famous art-
ist commissioned to paint a portrait, an architect employed to design a unique building,
or a surgeon contracted to perform a unique surgical operation)74 or if it involves a
confidential and (long-term) personal relationship, the performance is usually of an
exclusively personal character and specific performance cannot be required. The aggrieved
party has to content itself with damages and/or the termination of the contract. But if the
work does not bring a non-performing party into close personal contact with the aggrieved
party, then the exception to the right to performance usually does not arise.
46 (c) Exception: obligation to abstain from doing something. One important situation
does not fall within Art 7.2.2(d): the performance of obligations to abstain from doing
something, for example an obligation not to perform certain services, such as a restraint
of trade.75
6. Request within a reasonable time, Art 7.2.2(e)

47 (a) General rule. The last exception to the right to performance is of a more formal
character, and is very important in practice: the aggrieved party must require specific
performance within a ‘reasonable’ time after it has or should have discovered the
non-performance. If it fails to do so, it loses its right to performance.
48 This duty to demand performance within a reasonable time is not accepted in all
jurisdictions.76 Under Art 46(2) and (3) CISG, this rule is limited to cases where the buyer
claims the delivery of substitute goods and the repair of non-conforming goods. Further, it
can only be invoked if there has been a fundamental breach.
49 The rationale of Art 7.2.2(e) is to protect the non-performing party’s reliance that the
aggrieved party will not insist upon performance after a reasonable period of time, and at
the same time to prevent unfair speculation by the aggrieved party concerning favourable
developments of the market.77 A similar rule concerning the loss of the right to terminate
the contract if a notice is not given within a reasonable time is discussed below (see Art 7.3.2
paras 2–4).
(b) Two time limits
50 (1) General. The reasonable time starts to run after the aggrieved party has, or should
have, discovered the non-performance. It follows from the wording ‘should have
discovered’ that in cases of defective performance the aggrieved party should inspect the

75 Off Cmt 3d to Art 7.2.2, p 213.
76 It is for instance totally absent in Italy, see F Sartori, ‘Right to Performance’ in L Antionolli and A Veneziano
(eds), Principles of European Contract Law and Italian Law: A Commentary (2005) 391, 399–400, whereas a
comparable rule exists under Art 6:89 Dutch Cc.
77 Off Cmt 3e to Art 7.2.2, p 213.
796 Schelhaas

delivered goods or the rendered services.78 If it fails to do so and it is likely that it would
have discovered the non-performance if it had inspected the performance, the calculation
of the ‘reasonable’ time within which a complaint should be made already starts at this
moment, although the aggrieved party was at the time not actually aware of the non-
performance. The idea is that the aggrieved party should have discovered it if it had
inspected the performance. In order words, the aggrieved party is not legally required to
inspect the goods and services, but its legal position weakens if it fails to do so.
The foregoing analysis implies that in cases of defective performance the aggrieved party 51
usually has to take into account two open-ended time limits: the time limit for inspecting
the goods and services as well as the time limit for then requiring performance. If no
performance was rendered at all, only the latter time limit applies: the aggrieved party has
to require performance within a reasonable time after performance was due.79
(2) First time limit: inspection for defective performance. With regard to the first time 52
limit, it depends upon the nature of the defect and the nature of the obligation as to
whether it is necessary to inspect the goods and services immediately after delivery or at a
later stage. If, for instance, the other party was under an obligation to deliver perishable
goods, then the aggrieved party should immediately after delivery check whether the
goods were defective. Immediate inspection may, for instance, also be required if the goods
were for immediate use, and a simple inspection could have revealed whether or not the
goods contained any defects. If, however, the goods were not intended for immediate use
and/or the defects in the goods and services could not be easily detected (eg with difficult
technical services), then the aggrieved party is not expected to check the quality of the
goods and services immediately upon receipt.80 Here, a duty to inspect may extend over
weeks or even months.81
The legal consequence of not inspecting the goods and services on time (when such defects 53
could have been detected by a proper inspection) is that the ‘reasonable period’ within
which to demand performance starts to run at an earlier stage and will consequently lapse
at an earlier stage. The lapse of the (second) reasonable time limit in turn results in the
aggrieved party not being entitled to demand performance. The aggrieved party may only
claim damages and/or terminate the contract.
(3) Second time limit: performance within a reasonable time. The second time limit 54
contains a duty to request performance within a reasonable time after the aggrieved
party has, or ought to have, become aware of the non-performance. This period of
‘reasonable time’ obviously varies and depends upon the nature of the performance and
all the circumstances of the particular case. Trade usages and practices between the parties
are also relevant. Since a similar rule concerning the loss of a remedy is contained in Art
7.3.2(2) (termination), more guidance as to the length of ‘reasonable’ time can be obtained
78 For an explicit duty to examine: Art 38 CISG. For a duty to examine in domestic systems, see eg § 377
German Ccom and Art 7:23 Dutch Cc.

79 (1990) Study L – Doc 47, p 8.
80 For the position under Art 38 CISG see Schlechtriem/Schwenzer/Schwenzer Art 38 para 16.
81 See, in relation to the CISG, ibid para 17.
Schelhaas 797

from the Official Comment to this article. According to this Comment, notice must be
given without delay if the aggrieved party may easily obtain a substitute performance
and may thus speculate on a rise or fall in the price. But if the aggrieved party must
make enquiries as to whether it can obtain substitute performance from other sources, the
length of the period will be longer.82
55 The comparable provisions in the CISG may give some guidance as to what is ‘reason-
able’. With regard to the sale of goods, Art 39(1) CISG requires that a notice with regard
to non-conformity must be given within a ‘reasonable time’ after the aggrieved party
has discovered, or ought to have discovered, the defect.83 For durable goods, where
there are no special circumstances, the reasonable period under the CISG is rather
short, but varies according to the nationality of the court which applies the CISG:
from 14 days in Austria,84 to (on average) a month in Germany85 and France.86 Where
perishable goods are concerned, notice must be given within hours87 or, depending on
the nature of the goods, within a few days.88 Other circumstances which should be
taken into account include: whether the non-performing party expressly guaranteed
that the goods and services were free from defects (even when the non-performing party
knew they had defects),89 or if the non-performing party intentionally did not perform
its contractual duties. Any of these circumstances extends the reasonable period for the
aggrieved party.
56 The time limit for requiring performance differs from limitation periods, which are
treated in Chapter 10 of the PICC. The ‘reasonable’ time limit of Art 7.2.2(e) is usually
shorter than the limitation period of 3 years which is laid down in Art 10.2 PICC. This
means that the time limit of Art 7.2.2 takes effect, notwithstanding the fact that the
limitation period has not yet lapsed. A party that does not require performance in court
within such a reasonable time loses the right to request performance altogether. If,
however, in a particular and quite exceptional case, the reasonable period of time of
Art 7.2.2(e) were to be longer than the limitation period of Art 10.1, then the limitation
period prevails.90
82 Off Cmt to Art 7.3.3, p 225.

83 The starting point of this period is in principle determined by Art 38 CISG, in which the duty to examine
the goods is laid down: first, the buyer must examine the goods within a short period, after which a reasonable
period of time starts to run for actually giving notice of the lack of conformity: see Schlechtriem/Schwenzer/
Schwenzer Art 39 paras 15 and 19–21.
84 OGH 15 October 1998 (2 Ob 191/98x), CISG-online 380.
85 BGH 3 November 1999 (VIII ZR 287/98), CISG-online 475 and OLG München 11 March 1998 (7 U
4427/97), CISG-online 310 (for sweaters), but shorter periods are recognized as well. See, eg, BGH 30 June
2004 (VIII ZR 321/03), CISG-online 847 where a period of 2 weeks was regarded as reasonable.
86 Cass civ (1) 26 May 1999 (97-14315), CISG-online 487.
87 See Schlechtriem/Schwenzer/Schwenzer Art 39 para 16, where many German cases are cited: 1 day in the
international flower trade; 6–12 hours for the fruit trade; one day with regard to living sheep, and 8 days for
living fish.
88 ibid.
89 See Art 40 CISG.
90 See Off Cmt 2 to Art 10.1, p 313.
798 Schelhaas

(c) Contractual time limit. Parties are free to make their own arrangements concerning 57
time limits and may both contractually limit and extend the ‘reasonable’ period within
which the aggrieved party has to submit a claim for performance (Arts 1.1 and 1.5).91
(d) Legal consequences. The legal consequence of not giving notice of defects within a 58
reasonable time is that the aggrieved party loses its right to claim performance. Its rights
to claim damages remain unaffected,92 however, its right to terminate the contract will
usually be lost due to the limitation to a ‘reasonable time’ in Art 7.3.2.
91See also para 10 above.

92This is different under, eg, Dutch law, where a failure to notify in good time results in the lapsing of all
remedies for non-performance (Art 6:89 Dutch Cc); see Loos (n 42 above) 356.
Schelhaas 799

Article 7.2.3
(Repair and replacement of defective performance)

The right to performance includes in appropriate cases the right to require repair,
replacement, or other cure of defective performance. The provisions of Articles 7.2.1
and 7.2.2 apply accordingly.
I. Introduction 1–6 3. Replacement 13–19

II. Repair, replacement, and other cure 4. Other cure 20
1. General 7 III. Repair and replacement with respect to
2. Repair 8–12 payment of money 21
I. Introduction
1 Art 7.2.3 provides a right of performance with regard to one specific kind of non-
performance, ie defective performance. It stipulates that the right to performance includes
the right to require the defect to be cured by means of a repair or replacement.93 In essence,
Art 7.2.3 is superfluous, since repair and replacement are special applications of perform-
ance which are already included in Art 7.2.2, but according to the Official Comment, the
provision is included ‘for the sake of clarity’.94
2 Art 7.2.3 is the counterpart of Art 7.1.4, which gives the non-performing party a right to
cure non-performance by, for instance, repair or replacement. Art 7.2.3 provides a right
for the aggrieved party to request such a cure.
3 The PICC do not specify the time limit within which repair or replacement must take place,
nor do they clarify whether the aggrieved party has to accept inconveniences during repair
or replacement. It is submitted that the right to repair or replacement is virtually under-
mined if the cure is not completed within a reasonable time, without significant incon-
venience, and free of charge.95 The duty to complete a repair or replacement within a
reasonable time, without any significant inconvenience to the aggrieved party and free
of charge, follows from the general obligation to act in good faith (Art 1.7). For instance,
this duty may result in the obligation to offer the aggrieved party the use of a substitute
product during the time in which the original product is being repaired. If the non-
performing party refuses to supply a substitute product, the aggrieved party may have to
93 This is also explicitly provided in Art 7:21 Dutch Cc.

94 Off Cmt 1 to Art 7.2.3, p 214.
95 This obligation is laid down in Art 46 CISG, see Schlechtriem/Schwenzer/Müller-Chen Art 46 para 45;
and also in Art 3 of the Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on
certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L 171/12.
800 Schelhaas

hire a substitute good, and claim the rental charge as damages. The fact that repair or
replacement should take place free of charge means that in principle no costs for postage,
labour, and materials are to be paid by the aggrieved party. This might be different if the new
or repaired goods and services are of a substantially better quality than what the aggrieved
party is entitled to under the contract. For instance, imagine the scenario where the engine
of a truck breaks down 4 years after purchase. Assuming that a repair is not possible, replace-
ment of the engine usually results in a truck with a longer life span than before. In this situ-
ation, it is submitted that the general obligation to act in good faith results in an obligation
of the aggrieved party to contribute proportionally to the costs of the replacement.
The starting point is that the aggrieved party has a right to a repair or replacement. However, 4
the same limitations which are enumerated with regard to the right to the performance of
non-monetary obligations are directly applicable (Art 7.2.2(a)–(e)). This means that the
aggrieved party may require a repair or replacement, unless this is legally or factually impos-
sible. For instance, a repair or replacement cannot be required if this is legally or factually
impossible under Art 7.2.2(a) (eg in the case of unique goods), unreasonably burdensome
under Art 7.2.2(b), requires personal skills on the part of the non-performing party under
Art 7.2.2(d), or is not required within a reasonable time under Art 7.2.2(e). Similarly, the
aggrieved party may not require repair or replacement if a replacement transaction is avail-
able, see Art 7.2.2(c).
If the non-performing party successfully invokes one of the exceptions to the right to repair 5
or replacement, the aggrieved party still has the other remedies at its disposal, such as
terminating the contract and/or claiming damages for non-performance.
The non-performing party bears the burden of proving that one of the exceptions applies. 6
II. Repair, replacement, and other cure

1. General
Art 7.2.3 explicitly mentions two forms of cure with regard to defective performance: repair 7
and the delivery of substitute goods or services. However, other forms of curing the defect
are not excluded (see para 20 below).
2. Repair
The first example which Art 7.2.3 explicitly mentions is repair. The aggrieved party has a 8
right to require a repair with regard to both delivered goods and rendered services (ie mak-
ing good insufficient services).
The right to repair is subject to the exceptions to performance as set out in Art 7.2.2 (see 9
above, Art 7.2.2 paras 13–58). Thus, a court or tribunal will deny a request for repair under
Art 7.2.2(e) if the aggrieved party has not requested repair within a reasonable time after it
has, or ought to have, become aware of the non-performance.96
96 See above, Art 7.2.2 paras 50–56, on the length of such a reasonable time limit and on the fact that Art
7.2.2(e) actually implies two time limits in cases of defective performance.
Schelhaas 801

10 Furthermore, a request to repair may not be unreasonably burdensome or expensive for the
non-performing party (Art 7.2.2(b)). Just like under Art 46(3) CISG, a request to repair
will be denied if the repair is substantially more expensive than the replacement or the costs
of the repair are disproportionate to the advantage which the aggrieved party obtains from
the removal of the defect.97 The same holds true when a repair cannot be justified on
technical or economic grounds, or if the repair of small, insignificant defects involves
unreasonable effort or expense,98 and is therefore disproportionate. In deciding whether a
cure is disproportionate, the following factors should be considered: the value of the goods
if performance was completed, the significance of the non-performance, and whether
the alternative remedy could be completed without significant inconvenience to the
aggrieved party.99
11 As has been stated in para 3 above, it follows from the principle of good faith (Art 1.7)
that the non-performing party is obliged to repair the good or service within a reasonable
period of time, and without inconvenience to the aggrieved party.100 If the non-
performing party fails to cure within a reasonable period of time, the aggrieved party is,
according to Art 7.2.5, entitled to invoke any other remedy.
12 No provision deals with the situation when the non-performing party repairs the goods and
services within a reasonable period of time, but the repair itself is defective. Here, the
aggrieved party is once again entitled to exercise its full rights. It is no longer limited to
a new request for repair, and is also entitled to consequential damages if it suffers losses as a
result of the defective repair. This approach is consistent with Art 7.2.5 and corresponds to
the solution under the CISG.101
3. Replacement
13 Unlike under Art 46(2) CISG, claiming replacement for defective goods and services
under Art 7.2.3 PICC does not require that non-performance amounts to a fundamental
breach of the contract. Nevertheless, the applicability of the exceptions listed in Art 7.2.2
implies that not each and every non-performance creates the right to a replacement.
Compared to the rule in the PICC, however, the CISG places a heavier burden on the
aggrieved party. Where under the PICC it is for the non-performing party to prove that
performance is, for instance, unreasonably burdensome or expensive (Art 7.2.2(b)), under
the CISG the aggrieved party has to prove that non-performance is fundamental to the
contract.
97 For the CISG, see Schlechtriem/Schwenzer/Müller-Chen Art 46 para 40.

98 Off Cmt 3 to Art 7.2.3, p 214; see also Illustration 1 to Art 7.2.3: minor defect in paintwork decreases
car’s value by 0.01% while repair would cost 0.5%.
99 The EU Consumer Sales Directive (n 95 above) which also adopts the rule that a right to repair or
replacement will be denied if this would be disproportionate, explicitly mentions these circumstances.
100 See also Art 3 of the EU Consumer Sales Directive (n 95 above) and Art 46 CISG (see Schlechtriem/
Schwenzer/Müller-Chen Art 46 para 45).

101 ibids para 37.
802 Schelhaas

Therefore, replacement is not an option under the PICC if the non-performing party proves 14
that the particular deficiency is only minor and can be easily repaired. But if the deficiency
in the goods and services is serious, a replacement can be requested even if a repair is viable.
A replacement will also be allowed if a defect is simply irreparable.
The non-performing party cannot prevent the emergence of its obligation to provide a 15
replacement by offering to pay damages instead. Nor is a non-performing party’s offer to
repair the goods sufficiently and within a reasonable period enough to deny a request for a
replacement. This depends on the circumstances of the case, more specifically on the seri-
ousness of the non-performance. If the goods or rendered services are only slightly defective
and the non-performing party offers to repair them, then it could be unreasonable in the
sense of Art 7.2.2(b) to request a replacement. However, the non-performing party has to
prove that this is the case.
Like the other forms of performance, a replacement can only be requested if this is done 16
within a reasonable period of time after the aggrieved party has, or ought to have, become
aware of the non-performance (Art 7.2.2(e)).102
Once a good is replaced, the defective goods obviously have to be returned. This obligation 17
arises once the aggrieved party requests a replacement. It is submitted that Art 7.3.6 (restitu-
tion after the termination of the contract) should apply mutatis mutandis to the consequences
of this return. The PICC do not state who has to bear the costs of returning the goods. Since
it is the non-performing party’s responsibility to rectify the defects, this party has to bear or
reimburse any transportation and related costs.103 This result follows either from the (implicit)
contents of the contract itself (ie delivering goods or services for a certain price without
defects) or from the general obligation to act in good faith (Art 1.7). If the non-performing
party refuses to bear these costs, they can be qualified as damages for non-performance
(ie defective performance) and have to be compensated in accordance with Arts 7.4.1–7.4.2.
These considerations apply mutatis mutandis to the costs arising from the removal of the 18
consequences of the defective services. If, for example, the painting of a factory is defective,
the non-performing party also has to bear the costs for removing the paint.
If the substitute goods and services are defective as well, this constitutes a new non- 19
performance, and the aggrieved party is entitled once again to exercise the remedy it
chooses.104
4. Other cure
Other forms of curing the defects are also possible. The Official Comment mentions the 20
removal of rights of third persons over goods (‘defects in title’)105 and the obtaining of
102 See above, Art 7.2.2 paras 50–56, on the length of such a reasonable time limit and on the fact that this
exception in fact implies two time limits in cases of defective performance.

103 For the solution in the CISG see Schlechtriem/Schwenzer/Müller-Chen Art 46 para 36.
104 For the CISG see ibid para 37.
105 See also Art 41 CISG.
Schelhaas 803

a necessary public permission (Art 6.1.14).106 Furthermore, this includes the delivery of
missing goods, if a wrong number of goods have been delivered.
III. Repair and replacement with respect to payment of money

21 According to Art 7.2.3, Art 7.2.1 applies to the right to repair and replacement. In other
words, if payment is effected in the wrong currency or the non-performing party did not
pay enough money, ‘repair’ might be requested (ie payment in the agreed currency or pay-
ment of the outstanding amount) under Arts 7.2.3 and 7.2.1.107
106 Off Cmt 2 to Art 7.2.3, p 214.

107 ibid.
804 Schelhaas

Article 7.2.4
(Judicial penalty)
(1) Where the court orders a party to perform, it may also direct that this party pay a
penalty if it does not comply with the order.
(2) The penalty shall be paid to the aggrieved party unless mandatory provisions of the
law of the forum provide otherwise. Payment of the penalty to the aggrieved party
does not exclude any claim for damages.
I. Introduction 1–5 2. Mandatory provisions with regard to

II. ‘Judicial penalty’ 6 the beneficiary: lex fori 11
3. Refusal to pay 12–14
III. Discretionary power 7–9
V. Judicial penalty and damages 15
IV. Beneficiary: the aggrieved party
1. General 10
I. Introduction
In order to make a court order to perform more effective, the PICC provide for the possibil- 1
ity to attach a judicial penalty to the decision of the court. This provision is modelled on
French law. The possibility to impose a judicial penalty (in French astreinte)108 is not a
general principle of law, since a number of legal systems deny such a possibility or have dif-
ferent requirements for the use of this mechanism.109 These jurisdictions regard a judicial
penalty as an inadmissible infringement of personal freedom, especially if it is attached to a
request for the specific performance of a contract,110 or as an impermissible confusion of
private and criminal law (ie criminal punishment should not attach to private law
scenarios).
Although such a judicial power reinforces the strength of an order for performance, the prac- 2
tical relevance of Art 7.2.4 may be questioned. This is so because the procedure relating to
the imposition of a judicial penalty, as well as its admissibility, is governed by the lex fori,
108 See Art 33 of the Loi no 91-650 du 9 juillet 1991 portant réforme des procédures civiles d’exécution
(1991 French Act Reforming the Civil Enforcement Procedures): ‘Tout juge peut, même d’office, ordonner une
astreinte pour assurer l’exécution de sa décision’.
109 English law, for instance, acknowledges (non-monetary) injunctions against the non-performing party
only in limited circumstances. If the non-performing party does not obey such an injunction, it is in contempt
of court and may be imprisoned or fined. The same holds true if an order for specific performance is not
obeyed.
110 For a comparison between French, German, English, and American law on the subject, see Farnsworth
(n 13 above) 929–932. For another comparative account, see O Remien, Rechtsverwirklichung durch Zwangsgeld
(1992).
Schelhaas 805

in other words, the law of the seized court. If a judicial penalty has to be enforced or recog-
nized in a country other than the forum state, this might be difficult if this country does not
recognize a judicial penalty. The Official Comment acknowledges this problem.111 If the
enforcement of such a judicial penalty is regarded as being contrary to public policy under
the particular national law, it will not be enforced.112 The situation is particularly compli-
cated if it is not a state court, but an arbitral tribunal, which imposes the judicial penalty
(the most frequent scenario as regards the application of the PICC). Although most juris-
dictions generally recognize judicial penalties, they do not accept that arbitrators have the
power to impose them.113 It is therefore not realistic to expect a judicial penalty which is
imposed by a foreign tribunal to be recognized and enforced in another jurisdiction.114
3 Art 7.2.4 only provides for monetary sanctions, and it goes without saying that it abstains
from the possibility of civil imprisonment for the non-payment of a debt or for contempt
of court (which is possible in some legal systems). Neither is the court authorized to order
that the obligation will be performed by a third party at the non-performing party’s
expense.115
4 A judicial penalty can be attached to any judgment, even a monetary judgement. For infor-
mation on monetary judgments, see para 8 below.116
5 A judicial penalty may be imposed in the form of a lump sum, by instalments, or as an
amount for every day or each time the non-performing party does not comply with the
judgment (eg €500 for each day the non-performing party infringes its duty).
II. ‘Judicial penalty’

6 A judicial penalty must be distinguished from agreed payments for non-performance
(penalty and liquidated damages clauses) which are dealt with in Art 7.4.13. Whilst a
judicial penalty is imposed ex post by a court to make its order more effective, contractual
damages are agreed between the parties ex ante to enforce their contractual obligations.
However, in many cases, the function of a judicial penalty and an agreed payment for non-
performance (which under the PICC includes both a penalty clause and a liquidated dam-
ages clause) is similar. They are both intended to coerce the other party to do what it is
obliged to do by the contract or court order. In view of these similarities, a court may abstain
from imposing a judicial penalty if it considers that the contractual damages are a sufficient
incentive to induce performance.117
111Off Cmt 7 to Art 7.2.4, p 217.

112See also Eberhard (n 9 above) 126–127.
113 Contra, for instance, Dutch and Belgian law, which accept such a possibility in Art 1056 of the Dutch
Code on Civil Procedure and Art 1709 of the Belgian Code on Civil Procedure respectively.
114 Schwenzer (n 9 above) 301–302.
115 For an overview see Perillo (n 16 above) 306.
116 For French law, on which Art 7.2.4 PICC is modelled, see Cass com 17 April 1956, JCP 1956, 9330.
117 (1990) Study L – Doc 47, p 14.
806 Schelhaas

III. Discretionary power

It is at the discretion of the court whether or not to impose a judicial penalty (‘may’). The 7
wording of the provision suggests that a court may decide autonomously whether a judicial
penalty should be attached to its decision. This is both reasonable and understandable,
since the judicial penalty is a procedural measure to enforce the decision of a court. A court
is capable of deciding of its own volition if and to what extent a judicial penalty is necessary.
As under French law,118 a request by the aggrieved party is therefore not necessary for
imposing a judicial penalty.
A decision whether or not to impose a judicial penalty should be highly dependent upon 8
the kind of obligation which has to be performed. For instance, since an obligation to pay
money or to deliver goods can normally be easily enforced by ordinary means of execution
or coercion, a judicial penalty will only be imposed in exceptional circumstances.119 An
important factor in deciding whether a judicial penalty should be imposed is whether
prompt payment is essential for the aggrieved party. But if the obligation consists of doing
something personally or (on the contrary) to refrain from doing something, the only effect-
ive mechanism to enforce the non-performing party to comply with its obligations may be
to impose a judicial penalty. In this case, a court should be more willing to impose a
penalty,120 for a decision not to impose it would make the performance of such obligations
almost illusory. It is virtually the only effective tool to enforce such obligations, even more
so since it is difficult to assess the damages in advance in such cases.121
Overall, Art 7.2.4 seems to provide courts and tribunals with too much liberty in deciding 9
whether or not to impose a judicial penalty. No guidance is given as to the calculation of the
penalty, nor as to the maximum amount, nor as to the kind of obligations where a court
should be reluctant (or more lenient) in imposing a judicial penalty. The fact that Art 7.2.4
does not impose any constraints on courts and tribunals will not make the enforcement of
judicial penalties under the PICC more palatable to domestic jurisdictions.122
IV. Beneficiary: the aggrieved party

1. General
In line with its French model, Art 7.2.4(2) provides that the judicial penalty has to be paid 10
to the aggrieved party.123 This approach is not taken by some of the jurisdictions which
118 Art 33 of the 1991 Act Reforming the Civil Enforcement Procedure (n 108 above).
119 Off Cmt 2 to Art 7.2.4, p 215.
120 See also Schwenzer (n 9 above) 301–302.
121 See also, for French law, Cass com 31 March 1956, Bull civ III no 219; Cass civ 1 March 1995, JCP
1996, 22587.
122 For similar criticism: Schwenzer (n 9 above) 301–302.
123 For French law, see Arts 33–37 of the 1991 Act Reforming the Civil Enforcement Procedure (n
108 above). See also the Benelux Convention containg a uniform law relating to appeal sums (Benelux-
Overeenkomst houdende eenvormige wet betreffende de dwangsdom/Convention BENELUX portant loi
Schelhaas 807

acknowledge the concept of the judicial penalty in principle. In several legal systems the
penalty has to be paid to the state.124 These legal systems often regard payment to the
aggrieved party as an unjustified benefit to that party which is contrary to public policy.
2. Mandatory provisions with regard to the beneficiary: lex fori

11 Art 7.2.4 expressly stipulates that the judicial penalty will not be paid to the aggrieved party
if mandatory provisions of the law of the forum provide for another beneficiary. Although
the PICC do not mention the legal consequences of such a mandatory rule of the lex fori,
it follows from the wording of Art 7.2.4 that the judicial penalty itself remains enforceable,
but that the court has to assign another beneficiary, most likely the state.
3. Refusal to pay
12 The PICC do not deal with a refusal of the non-performing party to pay the judicial penalty.
From the structure of Section 7.2 of the PICC, however, the following conclusions can be
drawn. The court’s decision to impose a judicial penalty is discretionary, which implies that
the aggrieved party does not have a direct right against the non-performing party. If the
non-performing party refuses to pay the judicial penalty, the aggrieved party must apply to
the court once again for an enforcement order.125
13 If the non-performing party still refuses to perform after the imposition of a judicial penalty,
the aggrieved party is entitled to invoke any other remedy (Art 7.2.5).
14 If the non-performing party pays its judicial penalty late, it is also liable for interest under
Art 7.4.9 (interest for a failure to pay money).
V. Judicial penalty and damages

15 According to Art 7.2.4(2)(2), a claim for damages is still available even if a judicial penalty
is imposed. The rationale of this rule is that if the judicial penalty were deducted from the
total amount of damages payable, the coercive character of the judicial penalty would be
undermined.126 This is an important rule, since it enhances the effectiveness of judicial
penalties.
uniforme relatif à l’astreinte (The Hague, 26 November 1973) 1162 UNTS (www.benelux.be/NL/pdf/rgm/
rgm_dwangsom1973_nl.pdf ). This BENELUX Convention on Judicial Penalties has been implemented in
Belgium, the Netherlands, and Luxembourg. It provides for the imposition of judicial penalties (to be paid to
the aggrieved party).
124 See Schwenzer (n 9 above) 301.
125 Beale et al (n 1 above) 681 (on French law).
126 Zweigert and Kötz (n 13 above) 478.
808 Schelhaas

Article 7.2.5
(Change of remedy)
(1) An aggrieved party who has required performance of a non-monetary obligation
and who has not received performance within a period fixed or otherwise within a
reasonable period of time may invoke any other remedy.
(2) Where the decision of a court for performance of a non-monetary obligation cannot
be enforced, the aggrieved party may invoke any other remedy.
I. Introduction 1–3 3. Unenforceable decision, Art 7.2.5(2) 7

II. Requirements III. Time limit for a notice of termination 8
1. General 4 IV. Performance incompatible with other
2. No performance after expiry of period remedies 9
of time, Art 7.2.5(1) 5, 6
I. Introduction
An aggrieved party has the freedom to choose between the available remedies (ie termin- 1
ation, damages, or performance), provided that the requirements for these remedies are
met. Under Art 7.2.5, an aggrieved party that has already demanded performance may in
certain circumstances invoke another remedy (ius variandi). The aggrieved party may
have several reasons for wanting to change remedies. For instance, the actual enforcement
of a demand for performance may be ineffective, since its success is highly dependent upon
the personal co-operation of the other party. Furthermore, performance may have
subsequently become impossible due to circumstances which have arisen after the order
to perform, or the aggrieved party simply changes its mind and wants to terminate the
contract or claim damages instead of requesting performance. Art 7.2.5 confers on the
aggrieved party the right to abandon the remedy of performance and to opt for another
remedy if performance is not received within a reasonable period of time, or within a period
fixed in advance.
Art 7.2.5 merely lays down the possibility of a change of remedy if the aggrieved party has 2
already requested performance. It is conceivable, though, that a change of remedy is also
relevant with regard to other remedies. If the aggrieved party has as a matter of fact already
terminated the contract (triggering the effects of termination under Art 7.3.5), a change of
remedy is no longer possible simply because the contract has come to an end.127 If, however,
127 For the PECL, which have a similar rule, see C Liu, ‘Remedies available: Comparison between the
provision of CISG Articles 45 and 61 and the counterpart provisions of the PECL Articles 8:101 and 8:102’ in
J Felemegas (ed), An International Approach to the Interpretation of the United Nations Convention on Contracts
for the International Sale of Goods (1980) as Uniform Sales Law (2007) 371.
Schelhaas 809

the non-performing party only received a notice of termination, it still has the right to cure
under Art 7.1.4. It is possible to argue that the contract has not yet come to an end, and
therefore that a change to a demand for performance and/or damages under Art 7.2.5 seems
possible.128 But this should be rejected for various reasons. First, the notice of termination
results in the termination of the contract, whether the non-performing party uses its right
to cure or not. This view is supported by a statement in the Official Comment that a notice
of cure only suspends the effects of termination.129 Second, once an effective notice of cure
is given, the rights of the aggrieved party that are ‘inconsistent’ with the non-performing
party’s performance are suspended under Art 7.1.4(3).
3 The scope of Art 7.2.5 is limited by the principles of good faith and fair dealing. On this
basis, a change of remedy can be prevented if the interests of the non-performing party are
not duly protected. For instance, this could be the case if the non-performing party relied
upon the exercise of a particular remedy. Furthermore, the scope of Art 7.2.5 is limited by
Art 7.1.5. If the aggrieved party allows the non-performing party an additional period of
time for performance under Art 7.1.5, it is not possible to change remedies during this
additional period of time.
II. Requirements
1. General
4 Art 7.2.5 allows for two situations in which an aggrieved party is entitled to change its rem-
edy: first, when the aggrieved party changes its mind after it has requested performance;
and, second, when a court order to perform has proved to be unenforceable.
2. No performance after expiry of period of time, Art 7.2.5(1)

5 In the first situation, the aggrieved party has required performance but changes its mind
before the enforcement of a decision in its favour (eg because it subsequently discovered
the non-performing party’s incompetence to satisfactorily perform). However, an
unlimited option to change the remedy at any time might damage the interests of the
non-performing party. It is, for instance, conceivable that the non-performing party has
already invested a great deal of effort and/or incurred expenses in preparing its performance.
Against this background, it would be unreasonable to allow the aggrieved party to change
its mind at any time, and therefore the aggrieved party is only entitled to change remedies
if it has not received performance within a fixed period of time (see Art 7.1.5), or (if there is
no fixed period) within a reasonable period of time. This requirement safeguards the
interests of the non-performing party that may have acted in reliance of the demand for
performance.
128 See, however, the right to cure of the non-performing party in Art 7.1.4.
129 Off Cmt 8 to Art 7.1.4, pp 199–200.
810 Schelhaas

It cannot be stated in general terms what constitutes a ‘reasonable period of time’. According 6
to the Official Comment, this depends amongst other things upon the difficulty of the
performance.130
3. Unenforceable decision, Art 7.2.5(2)

The aggrieved party is also entitled to change its remedy if it has unsuccessfully attempted 7
to enforce a decision ordering the non-performing party to perform. The aggrieved party
may immediately pursue other remedies. This scenario only arises when enforcement of the
performance seemed possible at the time performance was ordered, but an order to perform
has subsequently turned out to be pointless.
III. Time limit for a notice of termination

If the aggrieved party, after unsuccessfully requesting performance, wishes to terminate the 8
contract, the required time limit for a notice of termination under Art 7.3.2(2) must be
extended accordingly. It starts to run after the aggrieved party has, or ought to have, become
aware of the non-performance upon the expiry of the additional (or reasonable) period, or
after the party has, or ought to have, been aware of the unenforceability of the order requir-
ing performance.131
IV. Performance incompatible with other remedies

A related issue which is not answered in the PICC, concerns whether the invocation of 9
another remedy automatically results in the non-availability of the right to performance. If,
for instance, the aggrieved party has accepted a price reduction, is it still entitled to claim
performance? The Official Comment132 only mentions that all remedies which ‘are not
logically inconsistent’ may be accumulated and that in the case of specific performance
damages might be requested for the delay with which the aggrieved party receives perform-
ance and for any (additional) expenses which might have been incurred.133 In other words,
the ‘inconsistency’ with other remedies has to be established. Arts 46(1) and 62(1) CISG
provide for a similarly broad rule on a possible accumulation between remedies in these
cases: the buyer can require performance, unless it has elected a remedy which is inconsist-
ent with this requirement. Thus, the solutions adopted under the CISG can provide some
guidance for the approach as to the consistency of a demand for performance with other
remedies. Under the CISG, it is beyond doubt that if the contract is lawfully avoided or
terminated, any subsequent request for performance is excluded.134 Only if the aggrieved
party is not yet bound by its declaration of avoidance or termination (eg because the
130 Off Cmt 2 to Art 7.2.5, p 218.

131 Off Cmt 4 to Art 7.2.5, pp 218–219. See below, Art 7.3.2 paras 5–14.
132 Off Cmt to Art 7.1.1, p 194.
133 Off Cmt 1 to Art 7.4.2, p 233.
134 Schlechtriem/Schwenzer/Hager Art 62 para 5; Schlechtriem/Schwenzer/Müller-Chen Art 46 para 7.
Schelhaas 811

non-performing party has not yet received the declaration) may it demand performance.135
Under the PICC, the result of a lawful termination (Art 7.3.2 or Art 3.2) or avoidance on
the basis of mistake (Art 3.5) is the same: a subsequent request for performance is no longer
possible since the contract has come to an end. Likewise, under the CISG, a request for a
price reduction (under the PICC this might be accomplished by the partial termination of
the contract) is usually regarded as an acceptance of the performance (rendered in part or
defectively), and so a subsequent request for full performance must be denied.136 An action
for damages owing to delay or other consequential damages can, however, be combined
with an order to perform.137
135Schlechtriem/Schwenzer/Müller-Chen Art 45 para 16.

136ibid para 7.
137 This is also accepted in a number of domestic jurisdictions. See for instance s 49 English Supreme Court
Act 1981 and Ford-Hunt v Raghbir Singh [1973] 1 WLR 738, Ch. For German law § 280(1) and (2) together
with § 286 German Cc; see Palandt/Heinrichs § 286 para 44.
812 Schelhaas

VK Schelhaas PICC Sec 7.2 - Right To Performance

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Section 2: Right to performance

Literature on Section 7.2 of the PICC

Comparative literature on the right to performance

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Hartkamp, Arthur S, ‘Principles of Contract Law’ in AS Hartkamp et al (eds), Towards a

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(Performance of monetary obligation)

I. General 1–3 IV Currency 6

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II. ‘Monetary obligation’

3 Off Cmt to Art 7.2.1, p 209.

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8Off Cmt to Art 7.2.1, p 209.

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(Performance of non-monetary obligation)

I. Introduction 1–5 4. Replacement transaction, Art 7.2.2(c)

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performance of ‘specific or ascertained’ goods.

Review’ (1994) 63 Fordham LRev 303.

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II. Starting point: performance as the primary remedy

18 Off Cmt 1 to Art 7.1.4, p 197.

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24 Zahraa and Ghith (n 11 above) 761.

preclude the possibility of a cure.

as a remedy was valid’.

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impossible’ (emphasis added).

under this Section does not preclude a claim for damages’.

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2. Impossibility of performance, Art 7.2.2(a)

35 Art 7.3.1 paras 1–97.

for an excused non-performance. Non-performance is excused where it is caused by an impediment which is

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3. Unreasonably burdensome or expensive, Art 7.2.2(b)

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26 The formula ‘unreasonably expensive’ indicates that a comparative economic assessment

45 Illustration 1 to Art 7.2.2.

is of an exclusively personal character, a request for performance can be refused.

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Obligations (2002) 13.

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52 MüKo/Ernst § 275 paras 18–23.

56 Tito v Waddell (No 2) [1977] Ch 106, 322–323, Ch.

57 See below, Art 7.2.5 para 7.

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4. Replacement transaction, Art 7.2.2(c)

58 (1990) Study L – Doc 47, p 6.

61 Arts 7:36 and 37 Dutch Cc; Art 1144 French Cc.

63 Illustration 2 to Art 7.2.2.

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5. Performance of an exclusively personal character, Art 7.2.2(d)

affected if transaction costs are disregarded.

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73 Off Cmt 3d to Art 7.2.2, p 212.

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6. Request within a reasonable time, Art 7.2.2(e)