KluwerArbitration

Document information Chapter 5: Content, Third Party Rights and Conditions

Legislative History (key documents)
Publication In preparation of the 1994 Principles – Rapporteur Marcel Fontaine:
UNIDROIT Principles of P.C.-Misc. 19 (1994), pp. 49-52, 53, 56, 99-105 (Discussion and vote to insert Chapter 5,
International Commercial consisting of provisions formerly included in Chapter 6, Section 1 (Performance in
Contracts: An Article-by- General) in 1994); See Legislative History on Chapter 6, Section 1;
Article Commentary
(Second Edition) In preparation of the 2004 Principles (introducing Art. 5.1.9) – Rapporteur Arthus
S. Hartkamp:
StL-Doc. 87 (1st draft in 2003); StL-Doc. 89 (2nd draft in 2003); StL-Doc. 96 (3rd draft in
Organization 2003);
International Institute for
the Unification of Private In preparation of the 2016 Principles (change to Art. 5.1.7, 5.1.8; change to Official
Law Comments on Art. 5.1.3, 5.1.4) – Rapporteurs Michael Joachim Bonell (Art. 5.1.3), Neil Cohen
(Art. 5.1.4, 5.1.7), Reinhard Zimmermann (Art. 5.1.8):
StL-Doc. 126 (position paper in 2014); StL-Misc. 31 rev., pp. 3-7, 13-16 (1st discussion
Promulgation in 2015); StL-Doc. 129 rev., pp. 3-4, 6-8 (revised comments on Art. 5.1.4, 1st draft and
2016 comments on Art. 5.1.7 in 2016); StL-Doc. 133 rev. (revised comments on Art. 5.1.3 in 2015);
StL-Doc. 134 rev. (revised draft and comments on Art. 5.1.8 in 2015); StL-Misc. 32, pp. 6-7, 7-
8, 12-13 (2nd discussion in 2016); UnIDROIT 2016, C.D. (95) 3, Annex 2,
Link(s) to Related pp. 6-8, Annex 3, pp. 3-4, Annex 6, pp. 2-3, Annex 7, pp. 2-3 (final draft in 2016)
Legislation
Unidroit PRINCIPLES OF Section 1 Content
INTERNATIONAL
COMMERCIAL CONTRACTS Article 5.1.1 (Express and implied obligations)
2016 The contractual obligations of the parties may be express or implied.

A. A Cultural Bridge to Common Law

Bibliographic 1 Art. 5.1.1 recognises the concept of ‘implied’ obligations, (1) as further specified in Art.
reference 5.1.2. ‘Implied’ obligations may exist in any given contract in addition to ‘express’
obligations. The concept originated in common law (2) (it was apparently inspired by the
'Chapter 5: Content, Third English concept ‘implied in law’), (3) while civil law lawyers tend toward coming to a
Party Rights and similar conclusion by interpretation (4) (→ Art. 4.1, 4.3 et seq.) which, in turn, comes close
Conditions', in Eckart to supplementation, Art. 4.8 (5) (inspired apparently by the English concept ‘implied in
Brödermann , UNIDROIT fact’). (6) The line between the two concepts may indeed be thin (7) and ‘gradually
Principles of International unravelling’. (8) As discussed at Art. 4.8. (at Art. 4.8 no. 5), systematically it appears to be
Commercial Contracts: An correct (i) to first interpret the contract pursuant to Art. 4.1-4.7, to then (ii) try to
Article-by-Article ‘supplement’ a term under Art. 4.8 (iii) before determining if there is an ‘implied term’
Commentary (Second pursuant to Art. 5.1.1-5.1.2. The 2016 edition of the Official Comments recognises the thin
Edition), 2nd edition line between Art. 4.8 and 5.1.1 in the comments to Art. 2.1.14 which refer to the gap-filling
(© Kluwer Law in longterm contracts (Art. 1.11 3rd hyphen) – when the solutions otherwise offered by the
International; Kluwer Law Unidroit Principles “may not be appropriate even where they cover the subject matter of
International 2023) pp. 227 the missing term” (9) – to ‘Art. 4.8 or 5.1.2’. (10) From a practical perspective; it does not
- 280 matter if the missing term is determined pursuant to Art. 4.8 or Art. 5.1.1-5.1.2. (11)

B. The Arbitrator’s Perspective

2 In practice, an arbitration tribunal applying the Unidroit Principles may also proceed in
another order, starting with the interpretation under Art. 4.1–4.7, and to then ‘jump’
directly to Art. 5.1.1-5.1.2 to search for an ‘implied’ obligation. Often, it may be possible to
leave this question open whether a result is rather based on Art. 4.8 or on Art. 5.1.1-5.1.2
which are “functional equivalents”. (12) This can be extremely helpful when sitting as an
arbitrator in a mixed-common/civil law tribunal to overcome different mindsets of
arbitrators from different backgrounds. Alone for that purpose the slight overlap of
provisions (as criticized by Vogenauer based on a thorough analysis of the drafting
history) (13) may be helpful in practice. It can avoid lengthy deliberations because,
through alternative reasoning leaving the academic part of the question open, arbitrators
of all backgrounds can and may reach a joint decision.
Article 5.1.2 (Implied obligations)
Implied obligations stem from
(a) the nature and purpose of the contract;
(b) practices established between the parties and usages;
(c) good faith and fair dealing;

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 (d) reasonableness.
List of Criteria
1 Art. 5.1.2 supplements Art. 5.1.1 by providing a list of criteria to determine if the contract
contains an implied term. In line with the underlying conception of the draftsmen
(inspired by the ‘implied in law’ rules, → Art. 5.1.1 no. 1), it provides for a similar list of
criteria as Art. 4.8 except for ‘the intention of the parties’, and it adds instead in lit. b
‘practices established between the parties and usages’. (1) From the perspective of an
arbitrator; if the implied term is mainly deduced from “practices established between
the parties and usages” (→ Art. 1.9 (1) (2) ) it may be technically the best solution to base a
decision on Art. 5.1.1-5.1.2 rather than Art. 4.8. In contrast, if a decision on an additional
term is mainly based on ‘the intention of the parties’, the black letter rules suggest
applying Art. 4.8.
2 The more specific rules set forth in Art. 5.1.3-5.1.9, immediately following Art. 5.1.1–5.1.2,
may well be interpreted as particular applications of ‘implied duties’, explicitly set forth
in the Unidroit Principles and thereby overriding the application of the general rules in
Art. 5.1.1 and 5.1.2. (3) In the same vein, they will usually displace the application of Art.
4.8 (→ Art. 5.1.6 no. 2) when the parties have chosen the Unidroit Principles as applicable
rules of law (→ Introduction no. 9d) or when they have implemented them into their
contract (→ Preamble no. 15).
Article 5.1.3 (Co-operation between the parties)
Each party shall cooperate with the other party when such co-operation may reasonably
be expected for the performance of that party’s obligations.

A. Consequence of a ‘Common Project’

1 The Unidroit Principles perceive international contracts as ‘common projects’ (1) which
entail the duty to co-operate as a special expression of the duty of good faith and fair
dealing (Art. 1.7). (2) This perception of the Unidroit Principles corresponds to the reality
of B2B cross-border, inter-cultural (and possibly long distance) contracting. It is often
more complex and costly than domestic contracting and therefore requires cooperation,
often even more so than in a domestic context. The (implied → Art. 5.1.2 no. 2) duty to co-
operate is considered as a general principle of lex mercatoria , (3) as it is essential for
“smooth commercial dealings”. (4) Its main purpose is “to enable the debtor to perform
his obligation and thus earn the counter-performance.” (5) As noted in the Official
Comments, “there are many instances in which the parties may be requested to
cooperate with each other in the course of contact formation and contract performance.”
(6) It can require a duty (i) either to engage in action (7) (e.g. to provide information, for
example to enable the obligor to perform its duties under an agreed INCOTERM®, (8) or
about a change of its place of business (Art. 6.1.6); (9) to request proper invoicing instead
of simply refusing to pay; (10) to store the contractor’s equipment when this does not
cause an excessive workload or considerable costs; (11) to preserve property even if the
oblige failed to take delivery; (12) to assist an assignee to receive security rights
transferred under Art. 9.1.14; (13) to react to a contracting partner’s request for
renegotiation (14) ) or sometimes (ii) to remain passive (15) (e.g. a duty to tolerate an
effort to cure nonperformance under Art. 7.1.4 (16) and generally not to obstruct the other
party’s efforts to perform). (17) The duty to co-operate requires not to spread untrue
information about the contract partner. (18)
2 The 2016 edition of the Official Comments highlights the particular importance of the
duty of co-operation for long-term contracts (19) (Art. 1.11 3rd hyphen), e.g. the necessity
to avoid interference on the construction site by other workers employed for other
projects or, for a franchise contract, not to set up another franchise store in the
immediate neighborhood. (20)

B. Limits
3 (i) The duty to co-operate is limited by a reasonableness test (21) (argumentum Art.
5.1.2 lit. c and d; 1.7) which includes a specific regard to (a) costs (argumentum Art. 7.2.2
lit. b), (b) the economic balance agreed in the contract (22) and (c) any possible
information asymmetry of the acting parties (23) (e.g. with respect to the (foreign) market
where an action needs to be undertaken, argumentum Art. 6.1.14 (a)). (ii) More specific
rules on cooperation are contained in Art. 6.1.14-6.1.17 (actions re public permissions),
(24) Art. 7.4.8 (duty to mitigate harm), (25) as well as implicitly in Art. 5.3.3 (no
interference with conditions) (26) and Art. 7.1.2 (no interference of the other party). (27)

C. Legal Consequence of a Violation

4 A violation of the duty to co-operate implies the consequences under Chapter 7 (28)
(see in particular Art. 7.1.1, 7.1.3, 7.4.1), e.g. damages for reasonable costs (→ Art. 7.4.8)
when goods need to be preserved. (29) If the obligor cannot (timely) perform its
obligation because of a violation of the obligee’s duty to co-operate it will be excused for
its own non-performance under Art. 7.1.2.

D. Contractual Options

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 5 The parties are often well advised to determine duties of co-operation precisely,
especially in long-term contracts (Art. 1.11 3rd hyphen). A list of concrete affirmative
steps to be taken by the obligee as active co-operation may be necessary (e.g. to provide
electricity on the construction site).
6 In complex (long-term) contracts with an obligee engaging several separate obligors
under separate contracts (Art. 11.1.1 (b)), e.g. for a large construction project, from a
‘second’ obligor’s perspective, the prior performance of another obligor (a ‘first obligor’)
may be (i) a necessary provision or supply (‘buyer procured material’; ‘Beistellung’) of the
obligee to be provided under Art. 5.1.3 before the ‘second’ obligor can perform; (ii)
‘circumstances indicating otherwise’ under Art. 6.1.4 (2) relating to the ‘order of
performance’. Further, (iii) it may become impossible for the second obligor to perform
timely so that its liability for non-performance will be excluded under Art. 7.1.2, if such
‘prior performance of another obligor’ is a necessary measure owed by the obligee to
accept performance from the second obligor (→Art. 6.1.1 at no. 1 A.). (iv) The second
obligor will also be able to withhold performance under Art. 7.1.3 (2); (v) the second obligor
may incur damages as a result of the non-performance (Art. 7.4.1 et seq.); (vi) in extreme
cases the failure to co-operate may even amount to a right of termination under Art. 7.3.1.
(30) In such circumstances the duty to co-operate under the contract with the second
obligor imposes on the obligee the risk of a state of the art and timely performance of
the first obligor (which in turn will reflect on the contract negotiation with the first
obligor). In the preparation of a long-term contract, an obligor is well advised to
concentrate also on rules relating to co-operation duties at the end of the project when
priorities of the parties have changed, e.g. to provide a basis for disposal of (then
unnecessary) tools owned by the other party, in order to save costs, time, place and
resources. Example: right of disposal x weeks after the end of the contract.
Article 5.1.4 (Duty to achieve a specific result. Duty of best efforts)
(1) To the extent that an obligation of a party involves a duty to achieve a specific result,
that party is bound to achieve that result.
(2) To the extent that an obligation of a party involves a duty of best efforts in the
performance of an activity, that party is bound to make such efforts as would be made
by a reasonable person of the same kind in the same circumstances.

A. A Cultural Bridge to the French Law Family

1 Para. 1 provides a bridge between common and civil law (→ Art. 5.1.1 no. 1) by pointing
at a distinction between obligations which require, as a matter of strict liability, (1) the
achievement of a specific result (2) (obligation de résultat, e.g. the delivery of a ‘legal
opinion’) as opposed to the ‘best efforts’ obligations (3) addressed in para. 2 (e.g. to
provide ‘legal advice’, or an obligation to obtain a permission → Art. 6.1.15 no. 1 and as
known in the French civil law family). (4) The qualification of an obligation is a matter of
interpretation (5) (whereby the domestic mindsets around the globe tend to differ (6) and
Art. 5.1.4 requires an autonomous interpretation under Art. 1.6), with due regard to the
specific criteria in Art. 5.1.5. Art. 5.1.4 is meant to sharpen the perspective (7) on the
obligation as the qualification influences the standard to prove (8) performance or non-
performance, Art. 7.1.1 (depending on the perspective of the party). In international
contract practice, it has become common in my experience (e.g. in international M&A
contracts) to discuss at the drafting stage of a clause what kind of duty shall be agreed
upon (e.g. with respect to an obligation to provide certain information about the target
company).

B. Legal Consequences
2 While a ‘duty to achieve a specific result’ can only be excused by force majeure (Art.
7.1.7), (9) a duty of ‘best efforts’ is subject to a personalised and contextualised
reasonableness test (10) (para. 2), as known from the rules on interpretation in Art. 4.1 (2)
and 4.2 (2). Therefore, it appears appropriate to rely for this test under para. 2 on the
same criteria in Art. 4.3 lit. d)-f) as under a reasonableness test pursuant to Art. 4.1 (2)
and 4.2 (2), 4.3 (→ Art. 4.1 no. 5; 4.2 no. 2). (11) For example, ‘the meaning commonly given
in the trade concerned’ (Art. 4.3 (e)) will not require that a party acts against its own
commercial interests. (12) In long-term contracts (Art. 1.11 3rd hyphen), a general duty “to
use best efforts” to solve a problem may amount to a duty “to negotiate in good faith” (13)
(→ Art. 2.1.15 no. 3 at C.).

C. Limitation of Liability (contractual option)

3 The liability regime in Chapter 7 Section 4 is strict and, subject to an excuse under the
Principles, it gives a right to damages (Art. 7.4.1) irrespective of any notion of fault (→ Art.
7.1.1 no. 2). Therefore, if the contract is submitted to the Unidroit Principles, two
considerations are important at the contract drafting stage: (i) the need to precisely
describe the mutual obligations and their kind (as covered by para. 1 or para. 2); (ii) Art.
7.1.6 is interpreted broadly and includes limitations of liability as principally accepted
excuses under the Principles (→ Art. 7.1.6 no. 2-3). Subject to the exceptional control
mechanism in case of excessive advantages (→ Art. 7.1.6), an exemption clause may
introduce (a) with respect to both ‘para. 1 duties’ (to achieve a specific result) and ‘para.

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 2 duties’ (of best efforts) caps of liability which are reasonable under the circumstances
(→ Art. 7.1.6 no. 2, 4), and (b) with respect to best efforts duties under para. 2 an exclusion
of liability is generally possible as long as it does not violate applicable mandatory law
(Art. 1.4) and as it does not grant an excessive advantage to the obligor (→ Art. 7.1.6 no. 1),
e.g. by excluding of liability for ‘grossly negligent conduct’ without any possibility of
insurance. (14)
Article 5.1.5 (Determination of kind of duty involved)
In determining the extent to which an obligation of a party involves a duty of best
efforts in the performance of an activity or a duty to achieve a specific result, regard
shall be had, among other factors, to
(a) the way in which the obligation is expressed in the contract;
(b) the contractual price and other terms of the contract;
(c) the degree of risk normally involved in achieving the expected result;
(d) the ability of the other party to influence the performance of the obligation.
Assistance in the Classification of an Obligation
14 1 Art. 5.1.5 provides specific and special criteria for the classification of an obligation
pursuant to Art. 5.1.4 (and therefore the applicability of the reasonableness test under
Art. 5.1.4 (2)). By referring to ‘other factors’, the door is open to also apply the other
criteria set forth in Art. 4.3, as the classification is part of general contract interpretation
(Art. 4.1, 4.3-4.7). The criteria are generally self-explanatory. (1) A very high price may be
an indication for a duty to achieve a specific result. (2)
Article 5.1.6 (Determination of quality of performance)
Where the quality of performance is neither fixed by, nor determinable from, the
contract a party is bound to render a performance of a quality that is reasonable and
not less than average in the circumstances.

A. A System of Default Rules

1 Art. 5.1.6 is part of a system of default rules in the Unidroit Principles which serve as a
tool for the underlying favor contractus principle (→ Introduction no. 8), i.e. the open
attitude of the Unidroit Principles towards contract conclusion (→ Art. 2.1.1 no. 3; Art.
2.1.14). It covers the case that the contract does not contain a determination of one of the
essential issues like ‘quality of performance’. (1) Parallel rules can be found on price
determination (Art. 5.1.7), time of performance (Art. 6.1.1), order of performance (Art.
6.1.4), place of performance (Art. 6.1.6) and currency which is not expressed (Art. 6.1.10).
The rule reflects parallel developments in both civil and common law. (2)

B. An Autonomous Standard Characterised by ‘Reasonableness’

2 With due regard to its purpose of international contracting (Preamble, para. 1) and in
the spirit of Art. 1.7 (‘good faith and fair dealing’), (3) the default rule in Art. 5.1.6 (4) with
respect to insufficiently defined ‘quality’ (i.e. “factual and legal circumstances concerning
the relationship of the goods to their surroundings”) (5) of all types (6) of performance
(goods, services, mixed supply) goes beyond the provisions in most domestic laws (7) and
requires an autonomous interpretation (Art. 1.6). Displacing Art. 4.8, (8) it upholds (9) and
supplements the contract with a (possibly implied) (10) term whereby the quality needs
to meet a double test: (i) reasonableness under the circumstances (as known from Art.
5.1.2 lit. d and Art. 4.8 (2) (d)). The assessment of reasonableness must take into account
the type of transaction and market conditions (11) as well as the type of obligation (‘duty
to achieve’ or ‘best efforts’) as distinguished in Art. 5.1.4; (12) and (ii) average as a
minimum threshold (13) whereby the criterion of reasonableness may require a higher
standard under the circumstances. (14) If there exist several alternatives of action to
discharge the obligation in a quality that is reasonable, the rule in Art. 5.1.6 entails that,
in line with an underlying general principle, the obligor (→ Art. 1.11 4th hyphen) has the
choice to determine the reasonable alternative of action (example: purchase of parts of
the shelf to be integrated into a product). (15)

C. Limits
3 Art. 5.1.6 is only (and possibly rarely) (16) applicable if the interpretation pursuant to
Art. 4.1, 4.3-4.7 will not provide a concrete obligation with respect to the quality of
performance. (17) The reasonable standard under Art. 4.1 (2) may lead even to a lower
than average quality requirement under the circumstances (e.g., an example from
practice, if the supply of an old satellite is sufficient to maintain the valuable satellite
orbit slot for the contracted period of time until a new satellite can be brought to that
orbit (slot)).

D. Options
4 The parties are well advised to agree on criteria for the quality of performance. (i) In
sales and construction contracts, the technical specification of the object of sale or

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 construction is often the core of a contract. The parties may like to endeavor to leave as
little room as possible and as much room as practical to the application of the default
rule. For example, in a contract of sale of machinery or a complex technical system with
detailed technical specifications requiring the consent of the obligee to all changes, the
obligor may wish to negotiate at least in part a clause that leaves the level of freedom of
Art. 5.1.6 (e.g. for products of the shelf). (18) (ii) The same is true for certain documents to
be provided by either party in the context of the sale of goods or services (19) (such as
documents needed for customs like a certificate of arrival, or other authorities).
Depending on the jurisdictions involved the parties may even wish to include
requirements, for both parties, with regard to invoices (e.g. in the European Union the
provision of the Value Added Tax number of a buyer with its seat in the European Union).
(iii) The parties will often add non-physical criteria like conformity with defined “good
manufacturing practice”, “production standards”, “fundamental ethical principles” (20) ,
or “no child labour” as often contained in code of conducts or corporate social
responsibility guidelines (as e.g. included as an annex in framework or supply contracts,
also under the Unidroit Principles, as observed in recent years in the automotive
industry). As national mandatory laws on supply chain management are increasingly
emerging, (21) the compliance with such quality standards has become in recent years
also more and more a matter of mandatory law (→ Art. 1.4, 3.3.1).

Article 5.1.7 (Price determination)

(1) Where a contract does not fix or make provision for determining the price, the parties
are considered, in the absence of any indication to the contrary, to have made reference
to the price generally charged at the time of the conclusion of the contract for such
performance in comparable circumstances in the trade concerned or, if no such price is
available, to a reasonable price.
(2) Where the price is to be determined by one party and that determination is
manifestly unreasonable, a reasonable price shall be substituted notwithstanding any
contract term to the contrary.
(3) Where the price is to be fixed by one party or a third person, and that party or third
person does not do so, the price shall be a reasonable price.
(4) Where the price is to be fixed by reference to factors which do not exist or have
ceased to exist or to be accessible, the nearest equivalent factor shall be treated as a
substitute.

A. Part of a System of Default Rules

1 Like Art. 5.1.6 (on quality), Art. 5.1.7 is part of several default rules which support the
underlying principle of favor contractus (→ Introduction no. 8) in the Unidroit Principles.
It covers the scenario that a contract, properly concluded (1) (→ Art. 2.1.1 no. 3; Art. 2.1.14)
and interpreted, does not contain a price (para. 1) or contains a clause on price
determination (paras. 2-4). In addition to its default rules, Art. 5.1.7 also serves as a
reminder, because parties are best served if they state the price. (2) In the case of long-
term contracts (→ Art. 1.11 3rd hyphen) this is often possible only to a limited extent
without risking a fundamental alteration of the economic equilibrium (→ no. 6 below).

B. General Default Rule (Para. 1), Contractual Option

2 Para. 1 – described by Vogenauer as an “emerging general principle of law” (3) which
was an international compromise (4) inspired by Art. 55 CISG (5) and the preparatory work
for the PECL (6) – provides a three-prong default rule, which is subject to autonomous
interpretation (Art. 1.6): (7)
(i) Interpretation of the contract (Art. 4.1, 4.3-4.7) may imply an overriding specific
approach to price determination (8) (there are no limits to the phantasy of merchants
acting under special circumstances);
(ii) otherwise, unless otherwise agreed, Art. 1.5, (9) a ‘general’ market price (10) applies, if
existent, (a) at the time of contract conclusion (11) (which reduces the risk of
manipulation; (12) not: at the time of performance or of payment), and arguably (b)
pursuant to Art. 6.1.6 (1) (a) at the obligee’s (→ Art. 1.11, 4th hyphen) place of business (13)
with due regard to ‘comparable circumstances in the trade concerned’, even if it is
manifestly unreasonable (14) (this rule has been called a ‘rebuttable presumption’); (15)
but “[r]ecourse would then have to be made to the general provision on good faith and
fair dealing …” (Art. 1.7), “… or possibly to some of the provisions on mistake, fraud and
gross disparity” (16) (i.e. Chapter 3, Section 2); (iii) the ultimate default rule is a
‘reasonable’ price (to be determined ex aequo et bono), (17) whereby unavailability of the
market price includes the absence of a market (18) or disproportional costs to determine
it. (19)
2a The parties are free (Art. 1.5) to adapt the general default rule in para. 1 to their needs.
In long-term contracts (→ Art. 1.11 3rd hyphen) it is good practice to integrate price
adaptation clauses that (i) permit adaptations under pre-agreed scenarios (e.g. in case
of an alteration of the base price of specified raw materials; and/or in case of agreed
substantial variations from the sales volumes as forecasted at contract conclusion) and

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 (ii) schemes for price adaptation with reference to specific moments in time (instead of
the ‘time of the conclusion of the contract’ which is referenced in para. 1). In some
industries so-called ‘economical clauses’ serve a similar purpose (→ Art. 6.2.2 no. 6).

C. Specific Default Rules (Para. 3-4)

1. Paragraph 3 (Non Performance of a Price Determination)
3 In line with the developments of both civil and common law, para. 3 pre-supposes the
validity of a contract that leaves the determination of the price, an essential contract
element, to one party or a third party, even if that party does not do so (→ Art. 2.1.14 (2)
(b) and (c)). (20) Since the 2016 edition, para. 3 has a double function. (i) It reduces the
dependence (21) of the parties from a third person entrusted with the price
determination (Art. 2.1.14 (1), 2nd alternative). If (a) the third party does not accept the
appointment or does not deliver a price determination, and (b) the parties have not
agreed otherwise (Art. 1.5), e.g. on a substitute (22) third party, para. 3 leads with its
reference to a ‘reasonable’ price to the same ultimate default rule as para. 1. (ii) Further,
para. 3 provides the same ‘reasonable’ price as a default rule if the one party
contractually instructed to determine the price does not do so. According to the Official
Comments, avoidance pursuant to Art. 3.2.8 (2) is possible “[i]f the third person
determines the price in circumstances that may involve fraud, threat or gross disparity.”
(23)
2. Paragraph 4 (Non Existing Factors)
4 Para. 4 reduces the dependence of another third person who calculates or publishes a
factor; (24) the default rule in case of a non-existing factor points to “the nearest
equivalent factor” (25) (e.g. an index or a quotation of a substitute organisation). (26) If
none is available, Art. 5.1.7 (1) applies. (27)

D. A Mandatory Boundary to Unreasonable Unilateral Price Determination (Para. 2)

1. The Rule
5 In practice, one party sometimes leaves the determination of a ‘reasonable’ price to
the discretion of the other party. (28) For example, this can build trust at the beginning of
a relationship and ‘bring the deal’; or it can cut off the need for future negotiations in
case that certain circumstances in the future generate an ‘extra price’, Art. 1.1. (29) The
Official Comments highlight the service industry as an example for a sector where this
frequently happens. (30) Providing legal advice in a long-term relationship for a foreign
client under a client agreement governed by the Unidroit Principle is such an example
from practice. (31) In the interest of ‘fair dealing’ in international trade (Art. 1.7 (1)), para.
2 cuts off abuse (32) by determining that a ‘manifestly’ (not: ‘lightly’; that risk is to be
taken), (33) i.e. evidently (34) and obviously (35) unreasonable price shall be substituted
by a reasonable price. It is mandatory pursuant to Art. 1.5 (‘notwithstanding any contract
term to the contrary’). A court (Art. 1.11 1st hyphen) is obliged to take a decision, (36)
possibly assisted by an expert opinion.
2. Contractual Options
6 The obligee (Art. 1.11) can reduce risks (i) by negotiating criteria for the unilateral price
determination (37) (Art. 1.5); and/or (ii) by agreeing on a scheme by which the obligee can
request within a given time frame that a contractually pre-determined third party (e.g. a
chartered accountant), or a third party appointed by a certain institution (e.g. a Chamber
of Commerce), shall determine whether the price is manifestly unreasonable (38) and, if
so, determine a reasonable price; (iii) as observed in situations where the price relates to
the share of a company (especially in split 50%:50% equity situations), by agreeing on a
‘shoot out clause’ by which any of the parties has the choice to pay the price offered by
the other party and to receive the obligor’s share or to transfer its own share of the
company to the other party and to receive the same price in exchange. In a simple
service contract, a termination clause providing for an adequately short period of
termination (with regard to reasonable needs of transition of know-how to another
service provider) will often suffice as an incentive for the service provider to actually
determine the price in a reasonable way.

E. Unreasonable Price Determination by a Third Party (Para. 3), Contractual Option

7 Para. 2’s scope of application is restricted to unilateral price determination. In case of
price determination by a third party (para. 3, second alternative), the parties take the
risk of an unreasonable determination by the third person, (39) subject to the boundaries
of a ground for avoidance (Art. 3.2.8 (2)). (40) To reduce the risk, the parties are “free to fix
the standards or procedure with which the third person must comply” in the course of
determination. (41) They are also free (Art. 1.5), for example, to establish a staggered
procedure integrating a further third party, e.g. (i) a right to the critical party (which does
not deem the price determination to be reasonable) to appoint another third party to
make an alternative determination, combined (ii) with a mechanism to determine the
final price, e.g. (a) that the first determination becomes binding if the second
determination deviates from the first determination by less than x %, and (b) if the

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 discrepancy is x % or higher, (aa) the arithmetical figure in the middle shall apply, or (bb)
an umpire third party (appointed by a pre-determined institution) shall make the price
determination within the price range corridor which follows from the first two price
determinations.
Article 5.1.8 (Termination of a contract for an indefinite period)
A contract for an indefinite period may be terminated by either party by giving notice a
reasonable time in advance. As to the effects of termination in general, and as to
restitution, the provisions in Articles 7.3.5 and 7.3.7 apply.

A. Contracts for an Indefinite Period of Time

1 Contracts with an ‘indefinite period’ can be found in two sets of circumstances: (i) by
explicit agreement and, quite often, (ii) by implicit agreement when they ‘occur’ by
continuing to live a contractual relationship (e.g. of an agency agreement) after the term
(i.e. duration of contract) of the initial contract has ended and/or in light of drafting
errors in the prolongation agreements (even if lawyers have been involved initially in the
contract drafting, they are often not consulted for mere contract prolongations). There is
no reason to exempt such situations from the applicability of Art. 5.1.8. (1) There is a fine
line whether an old contract is subject to prolongation or if there is a conclusion of a new
contract.

B. Function of Art. 5.1.8

2 With due regard to the complexity of international trade for which the Unidroit
Principles are conceived (Preamble, para. 1) and the challenges for many market players
to survive in a competitive market, Art. 5.1.8 opens a way out of a contract with an
indefinite term by advance notice. (2) It thereby (i) serves a risk-management function
(against the risk of being bound for an indefinite period of time) and provides a chance to
adapt to market developments (either on the general level, e.g. by the market
concentration or emerging new needs and opportunities, or on the level of one of the
parties, e.g. in case of a change of control), (3) unless, by their agreement (Art. 1.1), the
parties avoid an ‘indefinite contract duration’ (below no. 6 at E (i)). (ii) Art. 5.1.8 thereby
statutes an exception to the pacta sunt servanda principle in Art. 1.3 sentence 1
(accepted by each party which agrees on the Unidroit Principles) and provides
‘otherwise’ in the sense of Art. 1.3 sentence 2 (unless the parties agree under Art. 1.5 on a
definite time period for a notice of termination). At the same time, (iii) Art. 5.1.8 protects
the residual freedom of a contract which includes the freedom to revisit the decision on
the contract partner and not to be bound indefinitely. (iv) The implicitly mandatory (4)
rule in Art. 5.1.8 permits the parties to separate in a fair way (Art. 1.7), avoiding ‘evasion’
(5) (e.g. ‘dirty tricks’ provoking a right to termination or termination under Art. 7.3.1 or
corporate re-organisation to avoid liability under the contract). There are no further
special requirements to exercise termination under Art. 5.1.8, (6) whereby the good faith
principle (Art. 1.7) always remains as an overarching duty. (7) (v) Art. 5.1.8 is not available
to terminate a long-term contract (Art. 1.11 3rd hyphen). The rule proposed by the
Working Group to permit termination of long-term contracts for compelling reasons in
exceptional circumstances (8) (as found in a number of domestic legislations) (9) was
overruled by the Governing Council of Unidroit in June 2016. (10) Parties are free to agree
on such a rule contractually (→ Art. 1.5) which they might like to do with regard to the
draft articles for termination for a compelling reason. (11) Absent a default rule in the
Unidroit Principles, it is important to solve the issue of termination in a long-term
contract (including the impact on related contracts, (12) and adequate legal
consequences which may differ depending on the reason for the termination (13) ). In
business relations over a long period of time, it may happen that trust in the business
partner is lost as a result of a breach while, technically, only one contract out of a
multitude of contracts is affected. (14)
3 Absent an express term, interpretation (Art. 4.1, 4.3-4.7; Art. 5.1.2 with regard to e.g. ‘the
nature and the purpose of the contract’ (lit. a), which may require cooperation for a
certain minimum period of time) or supplementation under Art. 4.8 (2)
(a) (e.g. in light of the intention of the parties and an omission in the drafting process)
may lead to discover a term displacing the otherwise mandatory rule in Art. 5.1.8 for
some time. It has been argued that in an extreme scenario, the interpretation of the joint
intention of the parties may lead to a dependence of the contract duration on the
indefinite property or IP rights (e.g. trade marks in the case of the ICC case no. 9479) (15)
and thereby qualify the contract to be distinct from the ordinary ‘indefinite period’
situation.

C. Reasonable Time in Advance

4 The factors for the reasonableness test to be applied under sentence 1 to the timing of
the advance notice (Art. 1.10) include (16) (i) the time of co-operation, (ii) whether or not
investments in the relationship were made and have been paid off, (iii) the time needed
under the circumstances to find an exchange business partner. The criteria mentioned in
Art. 4.3, in particular regard to ‘the nature and the purpose of the contract’ (Art. 4.3 (c))
may provide guidance (argumentum Art. 1.7, 1.6 (2)), or (iv) possible impacts on and

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© 2023 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 interrelationships with other contracts, e.g. between the same party or parties belonging
to the same group of companies. Any stricter rule with fixed time periods for termination
would not be able to reflect the variety of international trade and investment.

D. Legal Consequences
5 An advance notice (Art. 1.10) given reasonably in advance has the effect of a termination
notice. (17) Sentence 2 was introduced by the 2016 edition of the Unidroit Principles. It
explicitly refers to (i) Art. 7.3.5 for the (prospective) (18) effect of termination (e.g. the
subsisting right to claim damages (19) or to rely on a dispute resolution clause, (20) Art.
7.3.5 no. 3 at C.1.(b)) and (ii) Art. 7.3.7 (which concerns longterm contracts) for issues of
restitution. (21)

E. Contractual Options
6 (i) Parties can avoid the application of Art. 5.1.8 by working (a) with fixed terms (22) ( i.e.
long-term contracts, Art. 1.11 3rd hyphen) and/or (b) options of prolongations. (ii) They
can agree on a change of control clause which, to the contrary supports the goal of Art.
5.1.8 to avoid being bound for an indefinite period of time under all circumstances. (iii) In
some circumstances (e.g. when the other party provides a service that is essential for the
first party’s business) they may like to mitigate the effect of Art. 5.1.8 and provide an
option to purchase the contract partner (or the relevant part of its business) if the latter
wishes to terminate the contract.
Article 5.1.9 (Release by agreement)
(1) An obligee may release its right by agreement with the obligor.
(2) An offer to release a right gratuitously shall be deemed accepted if the obligor does
not reject the offer without delay after having become aware of it.

A. A Clarification to Avoid Cultural Misunderstanding

1 In light of different perceptions around the globe on how to effectuate a release (by
contract (1) or unilateral declaration) (2) , para. 1 repeats the general rule in Art. 1.3
sentence 2 (2nd possibility) for release agreements (3) and thereby avoids
misunderstandings. (4) The conclusion of such an agreement is governed by Art. 1.2, 3.1.2
(no form; no consideration) (5) and the general rules in Chapter 2 on contract formation;
(6) the offer is subject to interpretation (Art. 4.1.2-4.1.3) and applicable mandatory law on
the form of the agreement, if any (→ Art. 1.4). The release agreement leads to an
extinction of rights (7) (usually also with respect to other obligors, if any, under Art. 11.1.6,
see also 11.2.3 (2)).

B. Action Required; Silence can Constitute Consent

2 Under para. 2 an offer from either party which is gratuitously (‘à titre gratuit’) (8) to the
other party is deemed to be accepted by fiction (9) unless the obligor (Art. 1.11, 4th
hyphen) does not ‘immediately’ (10) reject the offer. This fiction does not apply in case of
an offer to release ‘for value’ (e.g. expectation to receive delivery of part of the goods in
time by releasing the obligor from the obligation to deliver the remainder due under the
contract). (11)

C. Distinction
3 A release agreement which extinguishes rights, is distinct from a pactum de nonpetendo
, i.e. an undertaking not to pursue certain rights for a certain time. (12)
Annex to Section 5.1 – U nidroit Principles for Specific Kinds of Contracts (Sales,
Services, Construction)

A. Party Autonomy
1 Within the limits of mandatory law (Art. 1.4) and the general principles of good faith and
fair dealing in international trade (Art. 1.7 (2)), embracing a requirement of reasonable
behaviour towards the contract partner (as assessed from an objectified perspective with
regard to what a merchant in the same situation as the party would consider reasonable
with regard to the nature and purpose of the contract and other relevant circumstances;
→ Art. 1.7 no. 2, 4), (1) the parties are free to shape the content of their contract (Art. 1.1,
1.5). The Unidroit Principles, including in particular Chapters 5 to 11, provide default rules
which apply as background law for those issues which the parties do not regulate
otherwise (→ Introduction no. 9c).
2 While the Unidroit Principles can be agreed upon and applied for all kinds of contracts
(→ Introduction no. 3), including both straightforward simple project contracts and
complex contracts (like joint venture, construction, framework or mixed distribution,
sales, and services agreements, → Introduction no. 9b at vii), they can be very useful for
contracts regarding the sale of movable goods (including international contracts on
software, electricity, gas, and water, rights, shares, know-how, goods to be manufactured;
and international exchange/barter contract) (2) and service agreements, i.e. the oldest
and most frequent kinds of contracts in international trade. (3) In this regard it is useful

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 to be precise about some specific issues (→ no. 4-10 below), especially those which are
not covered by the Unidroit Principles because the Unidroit Principles provide general
international contract law as compared to rules focussing on a specific kind of contract
(like the CISG for the international sale of goods or CMR for international transportation,
→ Introduction no. 9d-e).
3 As noted, however, by Rina See and Darshini Prasad from an English perspective in the
passage cited at → Annex to Preamble no. 4, “if parties carefully drew up their
agreements with the level of specificity common in English law jurisdictions, there would
be […] little substantive difference whether the Un idroit Principles or English law is the
governing law. In other words, the Unidroit Principles are entirely consistent with and can
accommodate the operation of English contract law principles.” (Emphasis added). The
following overview can serve as a checklist.

B. Contracts of Sale (Checklist)

4 When contracting an international contract of sale “under Unidroit” (i.e the Unidroit
Principles), the Unidroit Principles will provide backup solutions for most relevant issues.
However, irrespective of the governing contractual regime, it is sensible to consider the
following agenda items and to actively decide whether to stipulate specific clauses for a
topic or to rely on default rules. For a short contract for a one-off transaction, an order
specifying the good and a trade term on the passing of the risk (below x) as well as the
price will suffice in combination with a choice of the Unidroit Principles clause and an
arbitration clause, as well as possibly a limitation of liability clause (below vii). These
additional points may also be included in general terms and conditions (→ Art. 2.1.19 no.
1), (4) if they do become part of the contractual agreement (→ Art. 2.1.1 et seq., 2.1.22). (5)
For a more complex or a long-term contract, the parties will usually wish to consider
more details. In the following non-exhaustive overview, the default rules under the
Unidroit Principles which apply absent a specific agreement are also indicated, as
applicable. The checklist is also helpful in scenarios in which, during the revision of
general terms proposed by the other party, it is entirely unclear which substantive law
will apply (extreme scenario: the other party proposes a floating choice of law clause and
it is not yet clear if the counter-proposal of the Unidroit Principles will be accepted).
(i) Most importantly, the contract will specify the goods. For that purpose, the parties will
agree in many circumstances on ‘technical specifications’, e.g. for longterm construction
contracts or contracts on the production and sale of parts produced in automatically
functioning productions lines. Precise technical specifications describe also the
expected level of quality (→ Introduction Chapter 7 no. 5). For the sale of complex goods
(e.g. an electrolysis plant for the hydrogen business (6) ), the specifications will also
include technical requirements to be supplied by the customer as a matter of co-
operation (→ Art. 5.1.3).
(ii) In more complex or long-term transactions, the technical parameter will be
supplemented by a time schedule. Otherwise, Art. 6.1.1 provides a default rule. The
parties may also agree on a grace period (→ Art. 7.1.5 no. 4) or, to the contrary, on an
‘agreed payment for non-performance’ in case of delay (→ Art. 7.4.13) which, properly
measured, may also serve as a limitation of liability for delay (→ Art. 7.1.6 no. 1).
(iii) The description of the goods is usually supplemented by some language on the
expected quality standard (e.g. ‘conform to specifications’) which is self-evident with
regard to Art. 7.1.1 and otherwise covered by Art. 5.1.6. As “a party’s subjective motives
and purposes” are “generally […] irrelevant”, they need to be agreed upon if a party
wishes “to make these motives and purposes part of their common project”, (7) e.g. in a
‘fit for purpose’ clause (whereby, from a seller’s perspective, the fitness can be limited to
conforming to the specification).
(iv) From the seller’s perspective, it is particularly important to determine the price and
payment conditions. (8) Art. 5.1.7 (on price determination), Art. 6.1.1 (on time of
performance) and Art. 6.1.7-6.1.12 (on several modes and cost of payment) provide default
rules. In a time of worldwide material shortage, a price adaptation clause in case of
substantial change in raw material prices may be helpful; in case of its absence, the
default rule on hardship (→ Art. 6.2.1-6.2.3) supports the disadvantaged party in extreme
scenarios of a fundamental alteration of the economic equilibrium. The consequences set
forth in Art. 6.2.3 can be adapted to the needs of the parties (→ Introduction to Hardship
no. 3; Art. 6.2.3 no. 4-5).
(v) The language on the quality of the goods will often be combined with language on
‘warranty’, e.g. that the goods conform with the agreed specifications. (9) As the legal
nature of ‘warranties’ is still not entirely clear from an international comparative legal
perspective, (10) an explicit warranty creates a contractual claim. However, even without
such language, this issue is covered by Art. 7.4.1 which grants a claim for damages (11) to
the aggrieved party in case of ‘any non-performance’. (12)
(vi) (a) The clauses on quality are often supplemented by language on the inspection of
goods, (13) at least limited to an inspection of obviously visible defects. (14) (b) Further,
in this context, the contract may also include some language on obvious defects, and on
buyer’s knowledge (15) or constructive knowledge (16) of some nonconformity (e.g., for
samples, that may only be used for test purposes and are not fit to be placed into a

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© 2023 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 product brought to the market). (17) Without such explicit language in the contract, the
interpretation of the contract (Art. 4.1, 4.3 et seq. ), the principle of good faith and fair
dealing (Art. 1.7) or, in case of buyer’s knowledge, the rule on inconsistent behaviour in
Art. 1.8 can serve to avoid the liability of the seller because it constitutes inconsistent
behaviour of a buyer if it claims a right based on a defect of which it knew at the contract
conclusion. (18)
(vii) Especially from the seller’s perspective, the agreement on warranties is usually
connected, at least in long-term contracts, with a liability regime both with regard to
quality and delay (which may differ, → Art. 7.1.6 no. 1). Art. 7.1.6 provides the basis to
agree on limitation of liability clauses.
(viii) In view of the importance of Intellectual Property (“IP”) in modern times, often,
clauses on (background/foreground) IP are added, combined with a clause on a warranty
in this regard or on indemnification in the event that a third party raises a claim. (19)
Again, without such language, the issue is often covered by the contract, duly interpreted
(Art. 4.1, 4.3 lit. d), because the ownership of the good, free from third party claims, latest
in the moment of transfer of ownership, is usually agreed in a contract of sale or at least
implicitly convened (Art. 5.1.2 (lit. a)).
(ix) Since Roman times, (20) a key issue is the transfer of ownership (which is often
connected to a delivery of the goods (21) ). Under the applicable property law (to be
determined always independently from the law governing the contract), the parties will
often be free to agree on the point in time for the transfer of ownership. This is often also
a matter of risk management, security (e.g. by providing for payment as a condition to
transfer of the ownership, i.e. a rule which many jurisdictions recognise) (22) , and proper
accounting in the balance of the company.
(x) (a) A further key issue is the passing of the risk (23) and thus the risk distribution with
regard to the value of the goods. (24) On the one hand, this relates to the ‘risk of counter-
performance’, i.e. “the buyer’s obligation to pay in spite of the full or partial destruction
of goods” (25) (without the interference of the buyer, Art. 7.1.2). (26) On the other hand, in a
broader sense, the ‘risk of performance’ “is used most frequently in the context of
generic obligations: a debtor of generic goods is said to bear the risk of performance if
he has to procure new goods conforming to the contractual description after the goods
which he intended to use for discharging his obligation were damaged or destroyed.” (27)
In view of the variety of national solutions over centuries and until today, (28) and
thereby different preconcepts at the negotiation table, the parties are well advised to
regulate this issue in their contract of sales. Usually, they will cover the issue by an
agreement on a trade term, i.e. usages (→ Art. 1.9 no. 1), such as an INCOTERM ® (2020)
which includes an agreement on the risk of transportation; (29) the agreement in this
regard will often be aligned with the language on the transfer of ownership so that the
change of ownership and the change in risk bearing fall together; (30) or the parties may
prefer to align the passing of the risks with the delivery. (31) Often, the transfer of the
goods will be replaced by a transfer of documents representing the goods, such as a bill
of lading. (32) (b) In that context, though usually driven by straightfor ward operational
pressure, the parties will agree, at least in long-term contracts, also on details with
regard to the (timing and processing of) delivery of goods, often including agents (e.g.
third parties providing the unloading at the buyer’s place of business within certain pre-
agreed time slots); or the parties may wish to integrate rules on the taking of delivery
(e.g. at the premises of the seller). (33) This may require co-operation (→ Art. 5.1.3) which
is sanctioned by a claim for damages in case of non-performance (→ Art. 5.1.3 no. 4). (c) In
case of a sale of goods in transit, special attention and language are required, possibly
by incorporating Art. 68 CISG into the contract to properly address the risk (and insurance
risk) allocation. (34)
(xi) In complex contracts, additional clauses will cover insurance issues (including
possibly special language for product liability and recall); and the seller will cover its
own risk until the passing of the risk by insuring the location where it is keeping the goods
prior to delivery.
(xii) In addition, in complex (long-term) contracts, the parties will often regulate many
more details far beyond the level of detail of any national statute. These include, for
example, packaging (35) (→ Art. 6.1.11 for costs of performance which includes e.g. certain
packaging costs, → Art. 6.1.11 no. 1), labelling or corporate social responsibility standards
(→ Art. 5.1.6 no. 4), buyer procured material (→ Art. 5.1.3 no. 6), or payment of a specific
sum in case of non-performance (→ Art. 7.4.13). Under ‘Unidroit’, such obligations may
stem directly from contract interpretation, the duty of co-operation (Art. 5.1.3 no. 1-6) or
other rules within the Unidroit Principles.
(xiii) Any possibly applicable mandatory law needs to be considered (→ Art. 1.4, e.g. Art.
6.1.14-6.1.17 on public permissions).
(xiv) Finally, and sometimes best raised already at the very beginning of a negotiation
combined with the choice of the Unidroit Principles, it is important to agree on an
appropriate dispute resolution clause, i.e. preferably an arbitration clause (→
Introduction no. 9a).
(xv) Some further issues needed for the contract drafting (such as the scrutiny if the other

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 party has been duly established or incorporated and if it is properly represented) will be
qualified differently by the private international law regime which is applicable from the
perspective of the chosen dispute resolution regime (→ Introduction no. 17). This includes
issues of company law or capacity which are beyond the scope of the Unidroit Principles
(→ Art. 3.1.1 on lack of capacity). Even when all these points are stipulated in detail in the
contract, the parties will often still not regulate other relevant issues which are covered
in the Unidroit Principles, like foreign-currency set-off (→ Art. 8.2), force majeure (→ Art.
7.1.7), the duty to mitigate harm (→ Art. 7.4.8), or the remedy of additional time for
performance (Art. 7.1.5). Some issues will be covered implicitly, like the obligation to
take delivery in case of a contract of sale (→ argumentum Art. 5.1.2 lit. a-d). (36)
5 As a result, the Unidroit Principles can be well (and are often) used to conclude an
international contract of sales. (37) The CISG provides a treaty-based alternative,
especially for the sale of goods over a transit distance (including minor related services
(38) ), and reflects often similar international compromises like the Unidroit Principles
which often took inspiration from the CISG (it also requires adaptations to the particular
circumstances of the contract project). (39) Compared to the CISG, the Unidroit Principles
cover more issues of general contract law which are often needed in the context of a sale
of good (→ Chapters 4, 9-11). The parties are also free to agree on the CISG supplemented
for those issues which are not covered by the CISG, by the Un idroit Principles (→
Introduction no. 9e). If this scheme is too complex (e.g. for lack of time to concentrate on
the contents of two international instruments; (40) or to avoid uphill battles against
lawyers who do not like the CISG (41) ), it is possible to choose the Un idroit Principles
alone for an international contract of sale project (→ Introduction no. 9c) – regardless of
the surrounding national legal environments. This is particularly helpful in case of long-
term or ‘relational contracts’ (including mixed distribution and framework sales
contracts (42) ) which were in the focus of the 2016 revision of the Unidroit Principles (→
Art. 1.11, 3d hyphen), “whereas the CISG and the Limitation Convention tend to focus on
individual, one-off transactions.” (43) During the negotiation phase of long-term
contracts, the applicable substantive rules of law are often not finally agreed until late
into the project. Sometimes, the drafts even contain a floating choice of law clause
excluding the CISG, e.g. choosing the law of the acting purchasing entity in any civil or
common law jurisdiction in the Americas, Europe, Africa or Asia. To mitigate the risk of
such dangerous clause which may entail different interpretations of the same contract
depending on the acting purchasing company, it has proven helpful to add to the choice
of law clause as a “plan B” (if the choice of the Unidroit Principles cannot be agreed) a
sentence integrating in essence Art. 1.7 by explicit agreement into the contract
(“Irrespective of the applicable law, each party must act in accordance with the principles of
good faith and fair dealing in international trade.”). In an ideal world, one would, in such
circumstances, also integrate the entire Chapter 4 on interpretation into the draft or at
least wording inspired by Art. 4.1 (2) (→ Introduction to Chapter 4, no. 3).

C. Service Contracts (Checklist)

6 When contracting an international contract about services, there exist treaty
alternatives only for a few kinds of services. The Convention on the Contract for the
International Carriage of Goods by Road (CMR) and the Uniform Rules Concerning the
Contract of International Carriage of Goods by Rail (CIM) for the transportation industry
provide notable and useful exceptions. For other types of services, including ‘modern
types of services’ such as information technology related programming services (44) , it
has proven helpful in past practice to use the Unidroit Principles (e.g. to avoid, in an
example from practice, local law in Romania or more recently in Ukraine [→ Introduction
no. 3] which was not known or even readable in its original language to the acting German
lawyer). In complex long-term contracts, contracts of sale are often combined with
separate service contracts for training, installation, and support services (e.g. for the
operation of automation lines). Many goods sold under long-term contracts are adapted
to or even developed for the customer’s needs and include software. In such
circumstances, the choice of the Unidroit Principles for the entire contract package
avoids any discussion about demarcation lines between sales and service. (45) This is
especially helpful in case of long-term “relational contracts” as officially noted in a
Tripartite Legal Guide which was jointly issued by UNCITRAL, Unidroit and HCCH. (46)
7 Just as for any other contract it is important, for a service contract, to regulate Who owes
What to Whom When, Where and under Which conditions and with Which limits of liability?’
(→ Introduction Chapter 7 no. 5). As background law for all issues not explicitly regulated
in the contract (→ Introduction no. 9c), the Unidroit Principles provide a neutral legal
environment, preferably in combination with an arbitration clause (→ Preamble no. 6).
Still, even under the Unidroit Principles, it is important to determine the contents of the
service obligation, explicitly (→ Art. 4.1, 4.3 et seq. on interpretation) or implicitly (→ Art.
5.1.2 on implied obligations):
(i) Shall the service provider be obliged to achieve a specific result (→ Art. 5.1.4 (1)) for
which it shall be liable in case of non-performance (→ Art. 7.4.1 et seq.)?
(ii) Or shall the service provider only commit to provide ‘best efforts’ (→ Art. 5.1.4 (2))
which are measured in a ‘personalized and contextualized reasonableness test’ (→ Art.
5.1.4 no. 2)? (47) Example: A lawyer acts under the Unidroit Principles (→ Preamble no. 4).

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 Absent clear language obliging the service provider to achieve a specific result, ‘the
nature and purpose of the contract’ (→ Art. 4.1 (2), 4.3 (d)) will usually lead to an
obligation of best efforts, i.e. to act with reasonable care and skill. (48) This, in turn, will
usually imply an obligation to avoid harm to the property (including digital data) (49) or
the personal integrity of the principal, i.e. the buyer of the service, or of third parties (50)
(→ Art. 5.1.2 lit. c and d). In turn, with regard to the circumstances, a consent of the
principal to necessary or not reasonably avoidable ‘damage’ to the integrity of buyer
procured property (which is needed for the services) can also be implied (→ Art. 5.1.2 lit.
a, c and d). (51) To cover this risk of damage and a claim for compensation (→ Art. 7.4.1) as
a result of a failure to prevent unnecessary harm (i.e. ‘non-performance’ of the service
obligation), the buyer may require some proof of insurance from the service provider
(and mention this as a contractual obligation). Economic limitations to (or the price for)
precautionary measures (52) should be considered to avoid the uncertainty of dispute
resolution (and the discretion of the arbitral panel) subsequently to the occurrence of
damage.
(iii) In service contracts, it is often particularly important to agree on a time schedule
and rules for its modification (unilaterally by the service provider or by consent). Absent
such a clause, Art. 6.1.1 provides a default rule.
(iv) For complex contracts, like in a contract of sale (→ no. 4 above at (i)), the parties will
wish to agree on requirements of co-operation and procurement by the buyer (53) (like
access to the property (54) , electricity etc.; in addition to taking delivery (55) ). Absent
clear contractual agreement, Art. 5.1.3 provides a default rule on cooperation. A violation
of a duty of co-operation constitutes non-performance and would generate a claim for
damages under Art. 7.4.1 et seq. (56) In case of loss of the good to which service was
applied, after the customer failed to co-operate, the assessment of the damage will have
to consider the frustrated right to counter-performance with due regard to the
circumstances. (57)
8 The parties of a service contract will want to give special attention to the clauses on
price and payment (→ default rules on ascertaining of the price, by price determination,
in Art. 5.1.7, on time of performance in Art. 6.1.1, and on several modes and cost of
payment in Art. 6.1.7-6.1.12).
(i) Regarding price adjustment, the service provider may be interested in the same kind
of price adaptation clauses as the seller of a good (→ e.g. no. 4 above at (iii)). If the
service provider takes into its possession property owned by the buyer, i.e. a question
beyond the sphere of the Unidroit Principles, parties may wish to contractually attribute
and cover the risk of loss, not attributable to either party, possibly by insurance and an
insurance clause to avoid discussions held since Roman times (58) (example: a computer
left for services implodes).
(ii) Absent an agreement on a fixed price (59) (possibly in form of a binding cost
estimate), for which the buyer bears the full risk, (60) the buyer, from its perspective, will
wish to include a clause obliging the service provider explicitly to notify the buyer (→ Art.
1.10) “as soon as it becomes apparent to the service provider that the price for the
related service will exceed the approximate price indicated previously or that the price
for the related service will exceed the value of the goods.” (61) Further, the contract may
require the consent of the buyer to a price increase (or a price increase of more than x%)
and the consequences if there is no consent, such a right to termination for the seller and
an obligation to pay for the services already provided. (62) In long-term contracts, with
multiple connected contracts, the parties will often be ‘bound to agree’ by negotiation in
good faith. (63)
(iii) Clear language on the time of payment (e.g. upon reaching certain milestones or
approval or acceptance of the work product (64) ) is often appropriate; the default rule in
Art. 6.1.4 (2) provides for payment after full service is provided, (65) unless the
interpretation of the contract suggests otherwise (e.g. in case of a long-term project). (66)
In this context, the interrelation to the obligation of the buyer (customer) to take time for
approval or acceptance becomes relevant; combined, for example, with a notice
requirement by the service provider about the ‘delivery’ of its product (→ Art. 1.10), the
customer may be obliged to accept ‘delivery’ and nonperformance could cause a claim
for damages under Art. 7.4.1 et seq.
(iv) In light of often existing ‘asymmetry of information’ between the service provider and
the buyer, (67) the buyer will have an interest to provide for detailed invoicing so that
invoices are correct, clear, intelligible and verifiable. (68) Under the Unidroit Principles,
such duty will often be implied by the nature of the contract, usages (→ Art. 1.9; e.g. for
internationally active law firms to provide a sufficiently detailed invoice in a language
that is understandable to the customer), good faith
and fair dealing (→ Art. 1.7) and reasonableness (→ Art. 5.1.2 lit. a, b, c and d). (69) As the
invoice is a tool to communicate relevant information, the duty may also be based on the
duty to co-operate under Art. 5.1.3 (→ Art. 5.1.3 no. 1). Within reasonable boundaries, the
buyer may even withhold payment (→ Art. 7.1.3) but it will have to speak up if it has
objections to the invoice; this follows from the buyer’s own duty of co-operation (→ Art.
5.1.3).

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 9 A service contract will rarely cover all issues so the choice of the Unidroit Princi9 ples,
preferably combined with an arbitration clause (→ Introduction no. 9a), provides a useful
backup, e.g. through the rules on interpretation (→ Chapter 4), force majeure (→ Art. 7.1.7),
the duty to mitigate harm (→ Art. 7.4.8), the remedy of additional time for performance
(→ Art. 7.1.5) or the rules in Chapter 5 like the duty to co-operate (→ Art. 5.1.3).

D. Construction Contracts
10 When using the Unidroit Principles for construction contracts, it is important to
consider all issues discussed above in the context of sales and service contracts (→ no. 4-
9 above). When working with standard contracts like FIDIC (70) , it is possible to agree on a
FIDIC contract template (e.g. red (71) /silver (72) /yellow (73) /green (74) book),
supplemented for those issues which are not covered in the FIDIC rules, by the Unidroit
Principles. Regarding construction contracts with national states or state entities, some
states apparently have accepted contracting under the Unidroit Principles, while others
may insist on their own law. In that case, it may be possible to agree on the Unidroit
Principles supplemented by the respective state law (so that the Unidroit Principles take
priority to the extent that domestic law is not mandatory), or the state law supplemented
by the Unidroit Principles (so that the Unidroit Principles step in for questions not solved
in the respective state law); or else, it is possible to at least use the Unidroit Principles as
templates for clauses (e.g. Art. 7.4.7 on ‘harm due in part to the aggrieved party’ and Art.
7.4.8 on ‘mitigation of harm’).

Section 2 Third Party Rights

Legislative History (key documents)
In preparation of the 2004 Principles – Rapporteur Michael P. Furmston: StL-Doc. 59 (1st
draft in 1999); StL-Misc. 21, pp. 58-64 (1st discussion in 1999); StL-Doc. 66 (2nd draft in
2000); StL-Misc. 22, pp. 109-116 (2nd discussion in 2000); StL-WP.5 (proposal for 3rd draft
in 2000); StL-Doc. 70 (3rd draft in 2001); StL-WP. 8 (proposal for 4th draft in 2001); StL-WP.
9 bis, pp. 2-3 (3rd discussion in 2002); StL-Doc. 76 (4th draft in 2002); StL-Misc. 24, pp. 1-8
(4th discussion in 2002); StL-Doc. 83 (5th draft in 2003); StL-Doc. 94 (6th draft in 2003)
Introduction to Section 5.2
1 From an international contracting perspective, (1) contracts in favor of third parties
relate to a business need as they “increase efficiency.” (2) They reduce negotiation time
and thereby transaction costs. In negotiations of framework agreements between groups
of companies from different jurisdictions, it is a regular topic how to bestow rights to
related (foreign) companies of the “buyer” to place orders under the same framework
agreement without additional needs of signing. (3) Sometimes, related companies will
receive a ‘right’ to adhere to the framework agreement subject to limited, pre-
determined conditions (e.g. acting with a suretyship of the parent company or passing a
financial review; adaptation of logistics’ costs pursuant to a pre-agreed scheme
depending on the place of delivery; submission to the same arbitration clause). In other
contexts, it has proven helpful in situations of tight timing when a ‘special purpose
vehicle’ has not yet been established, to negotiate contracts providing for a right of such
future entity to become a party to the contract. Against this background, it does not
wonder that the legal structure of contracts in favor of third parties has gained
acceptance over time as compared to initial reluctance (with a prohibition and few
exceptions) in Rome and early common law developments (with emerging validity for
those who had been ‘party and privy’ but without third party rights of enforcement). (4)
2 Introduced in 2004, (5) Section 5.2 contains a “comprehensive regime for contracts in
favor of third parties” by covering, in alignment with modern civil and common law
codifications, (6) six necessary topics (7) : (i) the validity of agreements purporting to
create a right, including definitions (→ Art. 5.2.1 (1)); (ii) the recognition of the
enforceability of this right (→ Art. 5.2.1); (iii) the actual requirements for the creation of
this right (→ Art. 5.2.1 (2); 5.2.2); (iv) the scope of the right (→ Art. 5.2.3); the possibility of
renunciation (→ Art. 5.2.6); the position of the original parties apart from their liability
towards the third party (→ Art. 5.2.4; 5.2.5).
Article 5.2.1 (Contracts in favour of third parties)
(1) The parties (the “promisor” and the “promisee”) may confer by express or implied
agreement a right on a third party (the “beneficiary”).
(2) The existence and content of the beneficiary’s right against the promisor are
determined by the agreement of the parties and are subject to any conditions or other
limitations under the agreement.

A. Concentration on Contracts in Favour of Third Parties (para. 1)

1 In line with most domestic laws around the globe based on the principle of party
autonomy (→ Art. 1.1), (1) Art. 5.2.1 goes beyond the ‘principle of relativity of contracts’
(Art. 1.3 sentence 1). (2) Para. 1 documents, (3) at the top of Section 5.2, the right (4) of the
parties, defined as “promisor” and the “promisee”, to create by (ideally an express (5) or
an implied (6) [Art. 1.2], valid) (7) agreement (without any further requirements (8) other

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 than those resulting from Art. 5.2.2) a ‘right’ of action (9) to a third party beneficiary (cf.
also Art. 1.1), governed by the Unidroit Principles regime which is applicable to the
contract; (10) such right of the beneficiary is, however, also enforceable by the promisee.
(11) The ‘right’ shall be “liberally interpreted […] including the right to performance and
damages.” (12) Unless otherwise agreed (→ Art. 1.5), the right comes immediately into
existence. (13)
2 In contrast, Art. 5.2.1 et seq. do not cover (i) mere agreements benefitting a third party,
(14) including e.g. a mere undertaking of one of the parties in a frame agreement to
include a third party (e.g. an affiliate company of the other party) into the protection of a
given clause by explicitly saying that that third party thereby receives ‘no right’ which it
could claim directly (Art. 1.1, 1.5) in order to restrict, for example, any subsequent
disputes to the acting ‘mother’ company and to exclude affiliated third parties from any
future dispute; (15) (ii) undertakings that a third party (e.g. an affiliate company) will do
something (Art. 1.1), (iii) inacceptable (16) agreements merely imposing duties to the
detriment of a third party (17) (iv) other third party right situations such as, e.g., (18)
agency (Section 2.2), assignment (Art. 9.1.1 et seq.), (19) trust or third party rights in rem or
IP-based third party rights. (20)

B. Shaping the Content (para. 2)

3 In light of the risk of interpretation whether a contract implicitly (21) provides a ‘right’ to
a beneficiary (e.g. in a letter of comfort; (22) or despite a parallel action in tort), (23) it is
best advisable to be specific. (24) Pursuant to para. 2 the parties may provide conditions
(e.g. to sign an arbitration agreement (25) ; acceptance) and/or limitations (duties) for
the beneficiary, whereby the mere existence of an arbitration clause in the contract may
imply that a beneficiary has to bring its claim in arbitration. (26) The beneficiary is
protected by a right of renunciation under Art. 5.2.6. (27) Thereby, the situation is distinct
from ‘contracts to the detriment of third parties’ which are invalid as “a direct
consequence of the principle of relativity or privity of contract”. (28)
4 Section. 5.2 does not contain a specific rule on the right of a promisee to claim
performance. (29) In some situations, it may be advisable to provide for such a right in
the contract (or in the arbitration clause), obviously by avoiding double liability. (30)
Article 5.2.2 (Third party identifiable)
The beneficiary must be identifiable with adequate certainty by the contract but need
not be in existence at the time the contract is made.

A. Invalidity in case of Impossibility of Identification

1 In the interest of legal certainty, (1) in particular to the promisor who needs to be able
to calculate its risks, (2) Art. 5.2.2 requires (‘must’) (3) the identifiability of the beneficiary
(even after contract conclusion, latest when performance is due) (4) with ‘adequate
certainty’, e.g. by a proper description in the contract (such as a relation to a contract
party, e.g. a 100% subsidiary to be established under the law of X by the contract partner
Y) (5) and/or by the determination of one party so empowered under the contract. (6)
Otherwise, the clause or sometimes even the contract is invalid (7) (argumentum Art.
3.2.13).

B. Future Beneficiaries
2 As often needed in practice (e.g. when matters move fast and one of the parties has not
yet finished organising its commercial and/or financial set-up, including the
establishment of an affiliate company as ‘special purpose vehicle’), Art. 5.2.2 permits to
provide rights for a ‘future beneficiary’, subject to complying with the ‘identifiable’
requirement and any otherwise applicable law (Art. 3.1.1; (8) 1.4). (9) A supplementary or
additional tool providing third party rights are assignment clauses (→ 9.1.1 et seq.) or
clauses on the transfer of contracts (→ 9.3.1 no. 1, 9.3.4 no. 2).
Article 5.2.3 (Exclusion and limitation clauses)
The conferment of rights in the beneficiary includes the right to invoke a clause in the
contract which excludes or limits the liability of the beneficiary.

A. Function of Art. 5.2.3-5.2.5

1 While Art. 5.2.1–5.2.2 cope with the creation of a third party right, Art. 5.2.3–5.2.5 cover
contents, and Art. 5.2.6 covers renunciation by the beneficiary.

B. A ‘Shield’ to the Beneficiary

2 Art. 5.2.3 provides a ‘shield’ to the beneficiary. (1) In correlation with Art. 5.2.1 (2)
covering the perspective of the promisor and the promisee, Art. 5.2.3 underlines the right
of the beneficiary to rely on clauses in the contract excluding or limiting its liability (2)
(This corresponds with a market need (3) in the event that the beneficiary has to supply
something, as a matter of condition in the sense of Art. 5.2.1 (2) (4) ). This includes any
agreement regarding the beneficiary (duly interpreted Art. 4.1, 4.3), e.g. (i) an express
agreement in a ‘Himalaya’ clause in a bill of lading (5) “which excludes not only the

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 liability of the sea carrier, but also that of the master, the crew, stevedores employed in
loading and unloading, and the owners of ships onto which the goods may be
transshipped”; (6) or (ii) an implied agreement (→ 5.2.1 (1)). (7) In contrast, limitation and
liability clauses protecting only the promisee (Art. 4.1, 4.3) will not imply the protection
of a beneficiary (Art. 1.1). (8)
Article 5.2.4 (Defences)
The promisor may assert against the beneficiary all defences which the promisor could
assert against the promisee.

A ‘Shield’ to the Promisor

1 Unless otherwise stipulated in the contract (Art. 1.1, 1.5), (1) Art. 5.2.4 shields the
promisor (owing an obligation) against the right of the beneficiary. Also against the
beneficiary, the promisor can rely on the defences under the contract (2) from which the
beneficiary derives his right. A restrictive interpretation of the wide wording of Art. 5.2.4
(‘all’), with due regard to Art. 1.7 (good faith and fair dealing) in connection with Art. 1.6
(2), excludes personal defences of the promisor against the promisee (e.g. a set-off with
claims from another relationship). (3) The exclusion of such personal defences in a three-
party-scenario can be qualified as an ‘underlying general principle’ with regard to the
principles in e.g. Art. 11.1.4 (2nd half), 11.1.12 lit. c, 11.2.3 (1).
Article 5.2.5 (Revocation)
The parties may modify or revoke the rights conferred by the contract on the beneficiary
until the beneficiary has accepted them or reasonably acted in reliance on them.

A. Modification or Revocation
1 Art. 5.2.5 is consistent with a number of international instruments and national laws. (1)
As long as the rights of the beneficiary have not been ‘vested’ or ‘perfected’ (2) (below B.),
the promisor and the promisee can modify or revoke the rights of the beneficiary (3) by
agreement (i.e. not unilaterally by the promisee as under the PECL (4) and in some
domestic jurisdictions, unless otherwise agreed in the contract), (5) to be communicated
to the beneficiary (Art. 1.10 (2)), (6) and with retroactive effect ab initio of the contract; (7)
this is an expression of party autonomy (Art. 1.3 sentence 2 2nd and also 3rd possibility in
light of Art. 5.2.5). Prior to accepting a third party right combined with conditions (Art.
5.2.1 (2)), the beneficiary is well advised to ascertain (and if necessary clarify by way of
modification under Art. 5.2.5) if it is properly covered by limitation of liability clauses →
Art. 5.2.3 no. 2).

B. Limits
2 The cut-off point (8) for modifications and revocation is ‘acceptance’ by the benefi ciary
(express or implied, to any of the parties), (9) or (consistent with Art. 2.1.4 (2) (b)),
reasonable action of the beneficiary in reliance on a third party’s right (e.g. a
subcontractor as beneficiary does not take its own insurance relying on the main
contractor’s insurance); (10) either alternative presumes ‘knowledge’ of the beneficiary.
(11) Thereafter, any changes require also the beneficiary’s consent (Art. 1.3 sentence 2, 2nd
possibility of modification), even if the reliance of action of the beneficiary occurred
without communication to either promisor or promise. (12)

C. Options
3 Specific circumstances of the case require adaptations. Pursuant to Art. 5.2.1 (2), the
parties can agree that (i) one of them (e.g. the promisee) can unilaterally revoke the right
of the third party until it is vested, (13) or (ii) to the contrary, that the right should be
irrevocable as of a moment specifically defined in the contract. (14)
Article 5.2.6 (Renunciation)
The beneficiary may renounce a right conferred on it.
Right of Refusal
1 The implicitly mandatory (1) provision in Art. 5.2.6 protects the beneficiary’s freedom of
contract which includes the right not to contract (→ Art. 1.1 no. 2). (2) By application of Art.
5.2.1 the beneficiary receives a ‘right’ (which may or may not be subject to certain
conditions or limitations, → Art. 5.2.1 (2)). Until it becomes vested (3) (→ Art. 5.2.5 no. 2) –
thereafter only under Art. 5.1.9 (2) (4) or by agreement (Art. 1.1, 1.3 sentence 2) – the
beneficiary may (expressly or impliedly, (5) Art. 1.10 (4), 4.2–4.3) unilaterally renounce by
a notice (Art. 1.10), addressed to either the promisor or the promisee (6) without giving
any reason. (7) A notice to the promisor is advisable to avoid performance and to
minimize unjust enrichment risks. (8) Either party would usually be required to forward
the notice, (Art. 5.1.3). (9) The renunciation may operate ex tunc to the beginning of the
contract, (10) subject to interpretation (Art. 4.1, 4.3–4.7).

Section 3 Conditions

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 Article 5.3.1 (Types of condition)
A contract or a contractual obligation may be made conditional upon the occurrence of a
future uncertain event, so that the contract or the contractual obligation only takes
effect if the event occurs (suspensive condition) or comes to an end if the event occurs
(resolutive condition).

A. Function
1 Conditions have been described as “an important extension of the parties’ autonomy,
(1) because an agreement on condition allows the parties to deal with the uncertainty of
the future [...].” (2) Subject to contractual displacement or amendment (Art. 1.5) (3) within
the boundaries of good faith and fair dealing (Art. 1.7) (4) (of which Art. 5.3.5 (2) provides a
specific example), Art. 5.3.1-5.3.5 provide five core default principles (5) with a specific
terminology for an area of international contracting – conditions – which regularly comes
up in international negotiations (practical need), (6) while misunderstandings are
extremely likely due to (i) linguistic misunderstanding in light of differences in the
domestic terminology (7) and (ii) different perceptions (8) in the various civil law
countries (where the concept of ‘conditions’ goes back to Roman law (9) ) and common
law jurisdictions. (10) Section 5.3 mingles civil law terminology (11) with some common
law spice. (12) It builds a bridge between legal cultures and provide assistance in
interpreting (possibly ambiguous) conditions as drafted by the parties, (13) especially in
the context of decisions on an (alleged) ‘breach’ of a condition by interference. (14)

B. Types
2 Under Art. 5.3.1 (which is identical with Art. 16:101 PECL) (15) the existence of both single
obligations or entire contracts (16) can be made dependent on a future uncertain event
(i.e. ‘uncertain to occur’, (17) whereby it suffices if information about an event is unknown
(18) ) either by providing that they take effect (‘suspensive condition’) (19) or that they
cease having an effect (‘resolutive condition’) (20) upon occurrence (or non-occurrence)
(21) of an event, e.g. the act of a third party (e.g. the granting of a credit; (22) board
approval) (23) or a natural event (24) for which the parties can agree on a time limit (25)
(Art. 1.1, 1.5). The classification of a condition is a matter of interpretation (26) (Art. 4.1,
4.3-4.7). Art. 5.3.2 et seq. cope with the consequences of agreeing on either form of the
condition, which includes, in some circumstances set forth in Art. 5.3.3–5.3.4, obligations
for contracts not yet in force (Art. 5.3.3–5.3.4). This is remarkable from some domestic
perspectives, (27) but might otherwise follow anyhow from general principles in (i) Art. 1.7
(good faith and fair dealing), 5.1.3 (co-operation) and 1.8 (inconsistent behavior), (28) and
(ii) by analogy, from Art. 2.1.15 (2) (bad faith in negotiations). With regard to Art. 3.1.3, an
agreement on a condition deemed impossible is not void (but voidable under Art. 3.2.2 if
caused by a relevant fundamental mistake). (29)

C. Distinctions
3 Art. 5.3.1 et seq. focus on ‘transactional conditions’ (30) and do not cover (i) conditions
imposed by law (31) (→ Art. 6.1.14), (32) unless they are incorporated also into the contract
as conditions; (33) (ii) “the reciprocal expectation that the other party will perform, or the
prior fulfillment of a contractual obligation by the other party” (34)
(iii) illegal conditions (→ Art. 3.3.1–3.3.2); (35) (iv) agreements on certain time clauses
(‘terms’); (36) (v) unless otherwise agreed (Art. 1.5), a ‘closing’ in a corporate (‘M&A’)
transaction providing for the signing of a “document acknowledging that all ‘conditions
precedent’ have been satisfied or, if not, waived”; (37) and
(vi) conditions whose fulfilment is entirely (38) (not: partly; ‘mixed conditions’ – which
also depend on other factors – are valid) (39) dependent on the discretion of the obligor
(condition potestative; ‘potestative conditions’; (40) possibly an ‘illusory’ contract lacking
consideration from an English perspective) (41) where the potential obligor, after due
interpretation of its statements or conduct (Art. 4.2–4.3), does not (yet) intend to be
legally bound. (42) If there is no such intention of the potential ‘obligor’, the pre-
contractual obligation under Art. 2.1.15 (2) is not enough to keep it bound. (43) (vii)
Further, the contractual ‘conditions’ under Chapter 5 are also distinct from ‘implied
conditions’ (→ Art. 5.1.1 et seq.) or the understanding that the equilibrium of a contract
should not fundamentally change (→ Art. 6.2.2). (44)

D. Option
4 Under party autonomy (Art. 1.1), parties are free to also create a right under conditions,
e.g. an option that shall substantiate only under certain conditions. Chapter 5.3 is then
applicable by analogy (45) (→ Art. 1.6 (2)). In the daily practice under the Unidroit
Principles, it has proven helpful for their acceptance to distinguish in standard terms
and to operate with a suspensive condition. Local law shall apply if the contract partner
comes from the same local jurisdiction and the Unidroit Principles shall apply if the
other party has its seat in another jurisdiction. It is usually possible to draft standard
terms against such background, keeping both the local law and the Unidroit Principles in
mind because, due to its general character (→ Annex to Preamble), the Unidroit
Principles is compatible with just about all domestic laws.

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 Article 5.3.2 (Effect of conditions)
Unless the parties otherwise agree:
(a) the relevant contract or contractual obligation takes effect upon fulfilment of a
suspensive condition;
(b) the relevant contract or contractual obligation comes to an end upon fulfilment of a
resolutive condition.

A. A System of Default Rules

1 Inspired by an international trend in both common and civil law jurisdictions (1) and
Art. 16:101 PECL, (2) Art. 5.3.2 provides a useful system of default rules, based on non-
retroactivity, (3) which can be amended by contract (‘Unless the parties otherwise agree’;
→ Art. 5.3.1 no. 1).

B. Suspensive Condition (lit. a): Special Characteristics

2 Subject to Art. 5.3.3, a suspensive condition (i.e. a ‘condition precedent’ in English
terminology, (4) although to be interpreted autonomously, Art. 1.6 no. 1) entails:
(i) Suspension of any legal effect (5) until ‘fulfilment’ of the condition, except for those
under Art. 5.3.3–5.3.4; (6) (ii) ‘automatic’ coming to life of the thus far suspended
obligation or contract (7) upon fulfilment of the condition; (8) (iii) extinction of any legal
relation under the obligation or contract upon failure of the condition. (9) It reduces risk
if the condition is worded in clear terms (and not as a ‘negative condition’ (10) ),
especially when non-native English speakers are using English as a language of
convenience (example: not every ‘condition precedent’ constitutes a ‘suspensive
condition’ (11) ).

C. Resolutive Condition (lit. b): Special Characteristics

3 A resolutive condition (i.e. a ‘condition subsequent’ from an English perspective, (12)
although to be interpreted autonomously, Art. 1.6 no. 1) “brings the contract or the
contractual obligation to an end if the uncertain and/or future event occurs”. (13) That
means: (i) The contract or obligation which is subject to the condition has the effect like
an ordinary contract or obligation until ‘fulfilment’ of the condition, supplemented by the
additional (preserving) obligations under Art. 5.3.3–5.3.4; (14)
(ii) displacement of the obligation or contract upon ‘fulfilment’ of the condition (15) and
restitution as set forth in Art. 5.3.5; (16) (iii) failure of the condition ‘consolidates’ the
obligation or contract, as if there had never been such condition. (17)

D. Joint Features
4 (i) Possibility of contractual displacement (argumentum opening sentence ‘Unless …’;
Art. 5.3.2 provides default rules; (18) (ii) effect for the future (non-retroactivity), which was
found to be most straightforward from a practical perspective (19) and which correlates
with a prevailing international trend in modern contract law; (20)
(iii) both types of conditions decide about the binding character of the obligation or
contract. (21)

E. Options
5 (i) To enhance the probability of a condition to occur, parties may sometimes wish to
impose on a party an obligation, e.g. to use best efforts (→ Art. 5.1.4 (2)) or to apply for an
export license (→ Art. 5.1.3 no. 3; 6.1.14), to contribute to the realisation of a condition.
(22) This implies “a stricter standard for the obliged party compared to the general duty
to act in accordance with good faith and fair dealing.” (23)
(ii) The parties are free to limit a condition by a cut-off day in time. (24) (iii) The parties
can provide for a retroactive effect of a condition (→ Art. 5.3.5 (2) and 1.5). (25) The
practice is full of colourful examples: In long-term contract relations, it happens that
parties, acting under market and time pressure, start their international relationships
with an agreement on a number of key points (e.g. an order based on a national statute,
the CISG, or – conflicting (→ Art. 2.1.21) or agreed – general terms and conditions). When
legal departments are integrated into the project at the very last minute (and objectively
too late), this sometimes leads to an agreement to negotiate in good faith (i.e. under a
duty to co-operate, → Art. 5.1.3) certain additional agreements, e.g. a ‘warranty
agreement’ with a reasonable limitation of liability clause taking into account the
turnover envisaged under the project. In such circumstances, the future warranty
agreement will take retroactive effect as of the date of entry into force of the main
agreement. (26) At the same time, the conclusion of such a warranty agreement can be a
suspensive condition for the continuation of the project beyond a pre-defined milestone
(e.g. the development of samples for future series production).
Article 5.3.3 (Interference with conditions)
(1) If fulfilment of a condition is prevented by a party, contrary to the duty of good faith

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 and fair dealing or the duty of co-operation, that party may not rely on the non-
fulfilment of the condition.
(2) If fulfilment of a condition is brought about by a party, contrary to the duty of good
faith and fair dealing or the duty of co-operation, that party may not rely on the
fulfilment of the condition.

A. The Watch-Dog for the Condition

1 As an expression of (i) Art. 1.7 (good faith and fair dealing) (1) and (ii) 5.1.3 (co-operation),
(2) and (iii) in line with many civil and common law jurisdictions, (3) as well as PECL and
DCFR (4) , and (iv) also in line with and as an expression of the prohibition of inconsistent
behaviour in Art. 1.8, (5) Art. 5.3.3 provides two principally selfexplanatory principles in
case of interference with the conditions. They constitute ‘the core of the law conditions’
(6) and contain a remarkable “compromise between the traditional approach of civil law,
i.e. a fictional fulfilment that automatically binds both parties […] and the more cautious
common law rules, which treat most interferences as breaches of implied obligations,
and therefore only impose liability for breach of contract.” (7) Depending on the
circumstances, Art. 5.3.3 provides access to both roads.

B. The Devil lies in the Detail

2 The party preventing the occurrence of a suspensive condition (para. 1) or bringing
about the fulfilment of a resolutive condition (para. 2) may not rely on the non-
occurrence or fulfilment of the condition if its action was contrary to the duty of good
faith and fair dealing or the duty of co-operation. An arbitrator (or other competent
adjudicator) will have to assess whether, under the facts (and with regard to the terms of
the contract, duly interpreted (→ Art. 4.1, 4.3 et seq.) (8) , there is (i) a legitimate reason
for an interference (9) or (ii) a violation of the principles of good faith and fair dealing or
the duty of co-operation. (10) According to the Official Comments, the remedies in case of
a failure to comply with Art. 5.3.3, in particular under Chapter 7 (Art. 7.1.1 relates to a
failure with respect to ‘any’ obligation), (i) the right to performance or (ii) damages (and
their quantum) (11) are “to be determined in accordance with the contractual provisions
and the general rules on these remedies, as well as the particular circumstances of the
case”. (12) This gives discretion, to be exercised with care and due regard to the
uncountable variety of circumstances, including the terms of the contract. Principally, the
Official Comments open the door both to performance (of the obligation or contract) and
to damages. (13) From an arbitrator’s perspective, it will be important to ponder the
options; (iii) termination (→ argumentum Art. 7.3.1 (1)) (14) ; (iv) the continental European
solution, based on Roman law, whereby a prevented (suspensive or resolutive) condition
will be deemed to have occurred (fictional fulfilment), (15) is not automatic but possible
as an alternative. (16) The innocent party’s preference is a circumstance to consider, (17)
as well as possibly the likelihood that the event would have occurred otherwise. (18) It
would shift the balance if the contract, duly interpreted (Art. 4.1, 4.3 et seq.), provides a
‘best efforts clause’ (Art. 5.1.4 lit. b; 5.1.5) to bring about or, as the case may be, to avoid
the fulfilment of a condition. (19) Any impossibility resulting from the interference (e.g. a
missing export license which renders performance impossible, → Art. 7.2.2 (a)) and
practicality are yet further factors to consider (20) (and is likely to result in damages
rather than in fulfilment of the contract).
Article 5.3.4 (Duty to preserve rights)
Pending fulfilment of a condition, a party may not, contrary to the duty to act in
accordance with good faith and fair dealing, act so as to prejudice the other party’s
rights in case of fulfilment of the condition.

A. The Watch-Dog for the Conditioned Right

1 Art. 5.3.4 echoes the obligations in Art. 5.3.3 (relating to the condition) for the
conditioned obligation or contract itself to the extent that it gives a right to the other
party, (1) i.e. the other party’s rights in case of fulfilment of the condition. The roots of the
rule go back to German law. (2) Again, the devil lies in the details, both with regard to the
subsumption of facts (3) and the choice of remedies available to the innocent party. (4)
Again, the innocent party is protected by Chapter 7, at least in cases in which a
suspensive condition occurs and the beneficiary’s right is prejudiced. (5) If, for example, a
contract on the sale of a company provides for performance of certain suspensive
conditions (→ Art. 5.3.2 lit. a) between signing and closing, the seller is under an
obligation “to restrict its activity [with regard to the target] to ordinary business
management”, while the Buyer “is under a duty of confidentiality as to any information
concerning the company that it has received in the course of negotiations.” (6) The
suspended contract has thus a ‘pre-effect’. (7)

B. Options
2 In the context of the sale of a company (i.e. with a contract of sale under the Unidroit
Principles and the contract on the transfer of shares under the applicable company law(s)
(8) ) and subject to mandatory (cartel) law (→ 1.4) which may impose limits to such an
agreement, the parties may wish to formulate clear obligations, e.g. of ‘best efforts’ (→

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 5.3.2 no. 5), for the suspension period between signing and closing to achieve full
coverage by contract, without any discussion about the applicability of Chapter 7.
Article 5.3.5 (Restitution in case of fulfilment of a resolutive condition)
(1) On fulfilment of a resolutive condition, the rules on restitution set out in Articles 7.3.6
and 7.3.7 apply with appropriate adaptations.
(2) If the parties have agreed that the resolutive condition is to operate retroactively,
the rules on restitution set out in Article 3.2.15 apply with appropriate adaptations.

A. Details on the Effects of Resolutive Conditions

1 Art. 5.3.5 supplements Art. 5.3.2 (b). It refers to the fulfilment of a resolutive con-dition
(with prospective effect, → 5.3.2 no. 4), mutatis mutandis, to the rules on restitution (Art.
7.3.6-7.3.7), (1) as the fulfilment of a resolutive condition has the same effect (for the
future) as an immediate termination (→ 7.3.5 (1)).

B. Optional: A Rule of Relevance if Parties Chose Retroactivity

2 If the parties have agreed on a retroactive effect of the fulfilment of a resolutive
condition (→ Art. 5.3.2 no. 5), its occurrence has the same effect as avoidance. This
explains the reference, mutatis mutandis, to the rules on avoidance (Art. 3.2.15). (2)

References
1) Official Comments to Art. 5.1.1, p. 151; J. L. Pulido Begines in Morán Bovio, Art. 5.1, no.
2.a (para. 3), p. 254.
2) S. Vogenauer in Vogenauer, Art. 4.8 no. 6.
3) S. Vogenauer in Vogenauer, Art. 4.8 no. 8.
4) S. Vogenauer in Vogenauer, Art. 4.8 no. 6 note 280 points, inter alia, to M. Schmidt-
Kessel, ZvglRWiss 1997 (Vol. 96), pp. 101, 102-103.
5) S. Vogenauer in Vogenauer, Art. 4.8 no. 1-4.
6) Again S. Vogenauer in Vogenauer, Art. 4.8 no. 8.
7) Cf. M. J. Bonell An International Restatement p. 143 note 141.
8) S. Vogenauer in Vogenauer, Art. 4.8 no. 6 (with reference in note 281 to Restatement
(Second) of Contracts (USA), § 204 Comment a). See also S. Vogenauer in
Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 17 (p. 750) who
observes, after highlighting the comparable criteria offered for supplementary
interpretation and the determination of implied terms (→ Art. 4.8 no. 4): “The
parallelism of rules alone shows that there is no clear dividing line between
interpretation and implications.”
9) Official Comments Art. 2.1.14 no. 3.
10) Official Comments Art. 2.1.14 no. 3.
11) M. J. Bonell, An International Restatement p. 145; S. Vogenauer in Vogenauer, Art. 4.8
no. 7 and 5.1.2 no. 1; see also J. L. Pulido Begines in Morán Bovio, Art. 5.1, no. 2.b, p. 254
(who describes the necessary interaction of Art. 4.8 and 5.1.1, whereby the referenced
Art. 5.1 from the initial version correlates with Art. 5.1.1 of the Version 2010).
12) S. Vogenauer in Jansen/Zimmermann, Introduction before Art. 5:101 [PECL], no. 17 (p.
749).
13) S. Vogenauer in Vogenauer, Art. 4.8 no. 8-9.
1) Official Comments to Art. 5.1.2, p. 152.
2) At the occasion of discussing Art. 1.9 (2), the Working Group adapted the wording of lit.
b) to align it to Art. 1.9 (2), P.C.-Misc. 19 (1994), pp. 49-52, in particular Bonell and
Crépeau, and p. 53 (Tallon, Brazil).
3) See, in this vein, for the necessity to provide access to the property for the
performance of a construction contracts (i.e. an obligation stemming from a duty to
co-operate under Art. 5.1.3) as a matter of an ‘implied term’ in English law, C. Willems
in Jansen/Zimmermann, 19:302 [PECL]: Duty to Co-Operate, no. 3 (p. 2118).
1) Official Comments Art. 5.1.3 no. 1, p. 153; J. L. Pulido Begines in Morán Bovio, Art. 5.3,
no. 1, p. 259; S. Vogenauer in Vogenauer, Art. 5.1.3 no. 3; J. P. Schmidt in
Jansen/Zimmermann, Art. 1:202 [PECL]: Duty to Co-operate, no. 2 (p. 158).
2) This includes the duty to actively cooperate, especially in long-term contracts,
however “only within the limit of expectations” StL-Doc. 133 rev. (2016), pp. 2, 3 (quote
there at no. 2); StL-Misc. 32 (2016), pp. 12, 13; J. L. Pulido Begines in Morán Bovio, Art.
5.3, no. 1, p. 260 (implicitly at the end of para. 5) and no. 2.b (para. 1), p. 261; S.
Vogenauer in Vogenauer, Art. 5.1.3 no. 4 note 18; J. P. Schmidt in Jansen/Zimmermann,
Art. 1:202 [PECL]: Duty to Co-operate, no. 1 (p. 157) with further references in note 5,
and no. 12 (p. 165): it may be treated by courts as “an independent subcategory
within the duty of good faith”. In the “Andersen arbitration” (reported by M. J. Bonell,
Arb Int’l 2001, pp. 249-260), the arbitrators referred to Art. 1.7 instead of Art. 5.1.3
(Arbitral Award (Geneva) 28 July 2000, Unilex No. 668, at V.A.3 and V.D.7.), as noted by
M. J. Bonell op. cit. pp. 253-254. Art. 1:202 PECL contains a similar rule, Art. 154 CESL a
specialised rule of cooperation regarding access to the customer’s premises.

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 3) J. L. Pulido Begines in Morán Bovio, Art. 5.3, no. 2.b (para. 2), pp. 261 et seq. (with
reference, inter alia, to chapter IV para. 17 of the UNCITRAL Legal Guide on Drawing
Up International Contracts for the Construction of Industrial Works); S. Vogenauer in
Vogenauer, Art. 5.1.3 no. 2.
4) J. P. Schmidt in Jansen/Zimmermann, Art. 1:202 [PECL]: Duty to Co-operate, no. 5 (p.
160).
5) J. P. Schmidt in Jansen/Zimmermann, Art. 1:202 [PECL]: Duty to Co-operate, no. 4 (p.
159), arguing for a “narrow scope”. See also ibid. no. 5 (p. 160): “Even parties who
detest each other, and are only concerned with their own profit, will have to engage
in some form of coordinated action if they successfully want to exchange their
performances.”
6) Official Comments, Art. 5.1.3 no. 1, p. 153.
7) Official Comments, Art. 5.1.3 no. 1, p. 153 (‘to take affirmative steps’).
8) See e.g. Art. 32 (3) CISG, i.e. an explicit duty of the seller to provide necessary
information to the buyer to conclude a transportation insurance if the seller is not
bound to effect insurance in respect of the carriage of the goods.
9) Official Comments, Art. 6.1.6 no. 3, p. 194; S. Vogenauer in Vogenauer, Art. 5.1.3 no. 7
(with further examples).
10) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 5 with reference to Arbitral Award 16 March
2012 ICACRF case no 100/201, Unilex No. 1732 (abstract).
11) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 5 in connection with no. 9 with reference to
chapter XI para. 35 of the UNCITRAL Legal Guide on Drawing Up International
Contracts for the Construction of Industrial Works, 14 August 1987,
[Link]
exts/construction_of_industrial_works [last visited on 9 January 2023], and with
further examples.
12) See S. Martens in Jansen/Zimmermann, Art. 7:110 [PECL]: Property not Accepted, no. 7-
8 (pp. 1064-65) and the historic and comparative analysis ibid. at no. 2-4 (pp. 1061-
1064).
13) Official Comments, Art. 9.1.14 no. 4, p. 322; S. Vogenauer in Vogenauer, Art. 5.1.3 no. 6.
14) Ad hoc, Nurhima Kiram Fornan et al. v. Malaysia, Final Award of 28 February 2022, at
no. 267 (Unilex No. 2311 (Abstract); fully published at [Link] and soon in ICCA
Yearbook Commercial Arbitration, vol. XLVIII, 2023).
15) Official Comments, Art. 5.1.3 no. 1, p. 153 (‘to refrain from hindering …’).
16) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 4.
17) J. L. Pulido Begines in Morán Bovio, Art. 5.3, no. 1, p. 260 (para. 3); S. Vogenauer in
Vogenauer, Art. 5.1.3 no. 4 (with further examples).
18) CEAC award of 30 April 2018 (CEAC File no. 20161001, unpublished, on file with the
author) referring to the underlying general principle in Art. 1.7 (ibid. at C.4.b.i).
19) Official Comments, Art. 5.1.3 no. 3; StL-Doc. 126 (2014), pp. 3-4; StL-Doc. 133 rev. (2016),
p. 3.
20) See Official Comments, Art. 5.1.3 no. 3 (with further examples); StL-Doc. 126 (2014), p.
10;.
21) Official Comments, Art. 5.1.3 no. 1, p. 153 and no. 2 p. 154; J. L. Pulido Begines in Morán
Bovio, Art. 5.3, no. 1, p. 260 (para. 3: ‘razonablemente’); S. Vogenauer in Vogenauer,
Art. 5.1.3 no. 3, 8-9.
22) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 9.
23) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 9.
24) S. Vogenauer in Vogenauer, Art. 5.1.3 no. 5 and note 19 and Official Comments, Art.
5.1.3 no. 1, Illustration 1, p. 153.
25) Official Comments, Art. 5.1.3 no. 1, p. 153; S. Vogenauer in Vogenauer, Art. 5.1.3 no. 5; J.
P. Schmidt in Jansen/Zimmermann, Art. 1:202 [PECL]: Duty to Co-operate, no. 10 (p.
164).
26) See Official Comments Art. 5.1.3 no. 1.
27) See Official Comments Art. 5.1.3 no. 1.
28) Ad hoc, Nurhima Kiram Fornan et al. v. Malaysia, Final Award of 28 February 2022, at
no. 267 (Unilex No. 2311 (Abstract); fully published at [Link] and soon in YB
Comm Arb 2023 (Vol. 48)); S. Vogenauer in Vogenauer, Art. 5.1.3 no. 10 and no. 2 note 10
with reference to an arbitral claim based on Art. 5.1.3 (which was rejected on the
facts): Arbitral Award, ICC Case no. 13009 (2011) YB Comm Arb 2011 (Vol. 36), pp. 70, 86
at no. 52-54.
29) Thus, even without a specific rule on this subject, the Unidroit Principles lead to
similar solutions when the creditor fails to take delivery (‘mora creditoris’) as Art.
7:110 PECL, see S. Martens in Jansen/Zimmermann, Art. 7:110 [PECL]: Property not
Accepted, no. 12 (pp. 1066-1067); i.e, a rule developed since Roman law (ibid. no. 2,
pp. 1061-62). See further ibid. Art. 7:111: Money not Accepted, no. 4 (pp. 1069-70) for
similar solutions in the rare case that payment is not possible.
30) See also S. Meier in Vogenauer, Art. 11.1.1 no. 15.
1) Also known from modern international instruments such as Art. 45 CISG, see M. Müller-
Chen in Schlechtriem & Schwenzer Art. 45 para. 2-8; P. Pichonnaz in Vogenauer, Art.
7.1.7 no. 1.
2) P. Pichonnaz in Vogenauer, Art. 7.1.7 no. 1.
3) J. L. Pulido Begines in Morán Bovio, Art. 5.4, no. 1 (para. 1), p. 263.

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 4) J. L. Pulido Begines in Morán Bovio, Art. 5.4, no. 2.b, p. 264; see generally S. Vogenauer
in Vogenauer, Art. 5.1.4 no. 1-2 and 4. On the French civil law family see Introduction
no 8.
5) S. Vogenauer in Vogenauer, Art. 5.1.4 no. 6.
6) S. Vogenauer in Vogenauer, Art. 5.1.4 no. 2 (with further references).
7) Cf. M. J. Bonell An International Restatement, p. 252; S. Vogenauer in Vogenauer, Art.
5.1.4 no. 5-6 (with heavy criticism of the need for Art. 5.1.4 (1)).
8) S. Vogenauer in Vogenauer, Art. 5.1.4 no. 4 and note 56 citing convincingly the Official
Comments, Art. 7.4.1 no. 1, p. 270.
9) Official Comments, Art. 5.1.4 no. 2, p. 156; J. L. Pulido Begines in Morán Bovio, Art. 5.4,
no. 1 (para. 2), p. 263; S. Vogenauer in Vogenauer, Art. 5.1.4 no. 3; P. Pichonnaz in
Vogenauer, Art. 7.1.7 no. 1.
10) Official Comments, Art. 5.1.4 no. 2, Illustration 2, p. 157; J. L. Pulido Begines in Morán
Bovio, Art. 5.4, no. 1 (para. 2), p. 263; S. Vogenauer in Vogenauer, Art. 5.1.4 no. 8; C.
Willems in Jansen/Zimmermann, 19:201 [PECL]: Obligation to Achieve Result and
Obligation of Care and Skill, no. 5 (p. 2092): “PICC 5.1.4 (2) clarifies that the standard
of reasonableness is objective, but respects the subjective situation of the parties to
the contract.” In the same vein, the English Supply of Goods and Services Act 1982
provides in section 13: “where the supplier is acting in the course of a business, there
is an implied term that the supplier will carry out the service with reasonable care
and skill” (emphasis added), see C. Willems in Jansen/Zimmermann, 19:201 [PECL]:
Obligation to Achieve Result and Obligation of Care and Skill, no. 4 (p. 2091). This
standard is also reflected in Art. 148 (2) CESL – i.e. the Proposal for a Regulation of the
European Parliament and of the Council on a Common European Sales Law (Brussels,
11.10.2011 COM(2011) 635 final 2011/0284 (COD)) as follows: “In the absence of any
express or implied contractual obligation to achieve a specific result, the service
provider must perform the related service with the care and skill which a reasonable
service provider would exercise and in conformity with any statutory or other
binding legal rules which are applicable to the related service.” (emphasis added).
11) Art. 148 (3) CESL – specifying the reasonableness test in Art. 148 (2) CESL cited in the
previous note – may help with additional factors to consider: “In determining the
reasonable care and skill required of the service provider, regard is to be had,
among other things, to: (a) the nature, the magnitude, the frequency and the
foreseeability of the risks involved in the performance of the related service for the
customer; (b) if damage has occurred, the costs of any precautions which would have
prevented that damage or similar damage from occurring; and (c) the time available
for the performance of the related service.” Arbitrators may find that this description
well substantiates the criterion in Art. 4.3 (d) relating to “the nature and purpose of
the contract” (as also referenced in Art. 5.1.2 lit. a). (This is an argument inspired by C.
Willems in Jansen/Zimmermann, 19:201 [PECL]: Obligation to Achieve Result and
Obligation of Care and Skill, no. 8 (p. 2093)).
12) S. Vogenauer in Vogenauer, Art. 5.1.4 no. 8 (without reference to Art. 4.3 (e), but with
helpful references to English and US case law).
13) Official Comments, Art. 5.1.4 no. 3, p. 157; StL-Doc. 126 (2014), p. 5; especially “in the
interest of continuing the relationship” in StLMisc. 31 Rev. (2015), p. 13 (Cohen). The
group discussed whether to call it a “duty to cooperate” StL -Misc. 31 Rev. (2015), p. 14
(Cohen) but then dismissed the term “duty” and decided to integrate “reasonably
higher level of cooperation” StL-Misc. 31 Rev. (2015), p. 16 (Secretary General).
14) Official Comments, Art. 7.1.6 no. 5, para. 2, p. 239; H. Schelhaas in Vogenauer, Art. 7.1.6
no. 20.
1) S. Vogenauer in Vogenauer, Art. 5.1.5 no. 2-4.
2) Official Comments, Art. 5.1.5 no. 3, p. 158; S. Vogenauer in Vogenauer, Art. 5.1.5 no. 3.
See also the critical observations J. L. Pulido Begines in Morán Bovio, Art. 5.5, no. 3.a,
p. 268 (at the end: price no criteria).
1) Official Comments, Art. 5.1.6, p. 160.
2) See the detailed overview of H. Dedek in Jansen/Zimmermann, Art. 6:108 [PECL]:
Quality of Performance, no. 1-4 (pp. 853-856) on civil law where the discussion
started, since Roman times (Ulpian) with ‘generic obligations’ and no. 5-6 (pp. 856-
857) on common law history with a focus on emerging implied warranties in light of
the impossibility to apply the caveat emptor principle (which, absent warranties,
places the risk of goods on the buyer) when there is no opportunity to inspect the
goods (including e.g. a discussion of inter alia Gardiner v Gray (1815) 4 Camp 144, 145
(171 ER 46) or section 14 of the 1893 English Sale of Goods Act).
3) J. L. Pulido Begines in Morán Bovio, Art. 5.6, no. 1, p. 272 (para. 2).
4) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 4.
5) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 3 (with reference to I. Schwenzer in
Schlechtriem & Schwenzer Art. 35 para. 9).
6) J. L. Pulido Begines in Morán Bovio, Art. 5.6, no. 3.a, p. 274; S. Vogenauer in Vogenauer,
Art. 5.1.6 no. 2.
7) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 6 (with concrete examples and references); in
the same vein H. Dedek in Jansen/Zimmermann, Art. 6:108 [PECL]: Quality of
Performance, no. 7 (p. 857) summarizing the Official comments of PECL: “PICC 5.6 [...]
an example of a model rule that, in its level of generality, is not matched by any
national statutory or codal provision.”
8) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 7.

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 9) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 1 (with reference to the favor contractus
principle of the Unidroit Principles).
10) Argumentum is the systematic position of Art. 5.1.6 in Chapter 5.
11) Official Comments, Art. 5.1.6 no. 1, p. 160; S. Vogenauer in Vogenauer, Art. 5.1.6 no. 6.
12) Official Comments, Art. 5.1.6 before no. 1 (p. 160); H. Dedek in Jansen/Zimmermann,
Art. 6:108 [PECL]: Quality of Performance, no. 7 (pp. 857-858).
13) S. Vogenauer in Vogenauer, Art. 5.1.6 no. 5.
14) Official Comments, Art. 5.1.6 no. 2 and Illustration 3, p. 161; J. L. Pulido Begines in
Morán Bovio, Art. 5.6, no. 1, p. 272 (para. 3); S. Vogenauer in Vogenauer, Art. 5.1.6 no. 8.
15) In its Art. 7:105, the PECL have developed a further underlying general principle
granting the debtor the right of choice as a default rule, with a passing of the right to
choose to the creditor, if the debtor does not act in time, see S. Martens in
Jansen/Zimmermann, Art. 7:105 [PECL]: Alternative Performance, no. 1-8 (pp. 1029-
1032), including the historical background and a comparative legal overview on the
general acceptance of such an underlying principle in civil and common law.
16) An estimate of S. Vogenauer in Vogenauer, Art. 5.1.6 no. 4.
17) See again S. Vogenauer in Vogenauer, Art. 5.1.6 no. 4.
18) Yet, depending on the field of use, even that level of detail sometimes deserves
attention (experience from a large litigation because of a deviation of the quality of
screws).
19) See I. Schwenzer in Schlechtriem & Schwenzer Art. 35 para. 9 and note 45.
20) I. Schwenzer in Schlechtriem & Schwenzer Art. 35 para. 9 and notes 43-44 and I.
Schwenzer/ B. Leisinger in Cranstron/Ramberg/Ziegel (eds.), Commercial Law
Challenges in the 21st Century – Jan Hellner in memoriam, Uppsala, Stockholm,
Stockholm Centre for Commercial Law (2007), pp. 249, 267 (arguing even that “basic
ethical standards can be regarded as an international trade usage and, thus, as an
implied term in every international sales contract”).
21) See e.g. for USA “Dodd-Frank Act Sec. 1502”, “California Transparency in Supply Chains
Act”, “Tariff Act of 1930 Sec. 307”, “Trafficking Victims Protection (and Reauhtorization)
Act; for Europe: “Lieferkettensorgfaltspflichtgesetz” in Germany (as effective since 1
January 2023), “loi de vigilance” in France, “Modern Slavery Act” in the UK, “Wet
Zorgplicht Kinderarbeid” in the Netherlands.
1) Cf. StL-Doc. 126 (2014), p. 4; J. L. Pulido Begines in Morán Bovio, Art. 5.67, no. 1 (para. 2),
p. 275 (referring to the time of the contract conclusion); S. Vogenauer in Vogenauer,
Art. 5.1.7 no. 1, 4.
2) P.C.-Misc. 18 (1992), p. 57 (Bonell).
3) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 6 (with comparative legal hints to various
domestic systems).
4) The first roots of Art. 5.1.7 (1) go back to a 1935 proposal of Ernst Rabel for a Uniform
Law for the International Sale of Goods, as a compromise between Scandinavian law
and common law see H. Dedek in Jansen/Zimmermann, Art. 6:104 [PECL]:
Determination of Price, no. 10, including note 83, and no. 11 (pp. 829-831): “PICC and
DCFR thus, to a certain extent, echo the compromise that Rabel envisioned.” See
further ibid. no. 1-9 (pp. 820-829) on the history of both civil and common law, until
modern times, (i) for civil law: since ‘Ulpian D [Link] f ‘ discussing “‘borderline cases’
(Zimmermann), in which the parties do not agree on a fixed price but on a method by
which the price can be ascertained, with the result that the price is not deemed
incertum [i.e. uncertain]” (ibid. no. 2 (p. 821); and (ii) for common law: since actions for
an assumpsit based on an agreement to pay a ‘reasonable sum’ (ibid. no. 9 at p. 827);
and W. Blackstone, Commentaries on the Laws of England, vol. II (Oxford 1766), p. 443
(ch 30) who, according to H. Dedek, “had written in 1766 that if one employs someone
who then performs the contracted work, the law implies a promise to pay what the
services are worth (ibid. no. 8 at p. 827, with pertinent quotes from Blackstone and
summaries of subsequent case law since Headly v McLaine (1834) 131 ER 982).
5) Official Comments, Art. 5.1.7 no. 1, p. 162; StL-Doc. 129 rev. (2016), p. 7; J. L. Pulido
Begines in Morán Bovio, Art. 5.7, no. 2.b, p. 277; S. Vogenauer in Vogenauer, Art. 5.1.7 no.
5, 9 (underlining, in essence, that the PICC is not subject to restrictions, while the
interpretation of Art. 55 CISG may be more difficult).
6) (1990) P.C.-Misc. 14, p. 56 referring to (draft) Art. 1:105 PECL.
7) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 5 underlines that decisions applying Art. 55
CISG are not binding.
8) StL-Misc. 31 Rev. (2015), p. 6 (Zimmermann) suggesting that Art. 5.1.7 is a lex specialis
in relation to Art. 4.8; see further S. Vogenauer in Vogenauer, Art. 5.1.7 no. 7 (last
sentence with reference to E.-M. Kieninger in Schulze, CESL, Art. 73 para. 11).
9) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 8 gives the example of a contractually fixed
date for the price determination.
10) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 7.
11) Art. 2.1.1; Art. 2.1.6 (2) (3).
12) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 7.
13) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 8 (with reference to both E.-M. Kieninger in
Schulze, CESL, Art. 73 para. 15 and case law on Art. 55 CISG as reported by F. Mohs in
Schlechtriem & Schwenzer Art. 55 no. 15 note 53).
14) Official Comments, Art. 5.1.7 no. 1, p. 162; S. Vogenauer in Vogenauer, Art. 5.1.7 no. 8.
15) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 7.

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 16) Official Comments, Art. 5.1.7 no. 1, p. 162; UNIDROIT 2016, -C.D. (95) 3, Annex 2 (2016), p.
7; StL-Doc. 129 rev. (2016), p. 7.
17) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 9 (with a comparative hint to the UK Sale of
Goods Act 1979, s 8(3) which requires to consider ‘the circumstances of each
particular case’).
18) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 9.
19) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 9.
20) Interpreting Gaius (who lived in the 2nd century), Justinian (525-548) still “decided in
favour of a solution that considered the contract concluded under the condition that
the third party does indeed make the determination”; H. Dedek in
Jansen/Zimmermann, Art. 6:106 [PECL]: Determination by a Third Person, no. 2 (p. 841)
with reference to Inst 3.23; C [Link]. From that starting point, both civil and
common law developed towards the current position reflected in Art. 5.1.7(2); see the
detailed historic overview ibid. no. 2-11 (pp. 841-850).
21) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 16 (“protection against failure of the third
person”).
22) Cf. Official Comments, Art. 2.1.14 no. 3, pp. 57-58; S. Vogenauer in Vogenauer, Art. 5.1.7
no. 16.
23) See Official Comments, Art. 5.1.7 no. 3, p. 163; H. Dedek in Jansen/Zimmermann, Art.
6:106 [PECL]: Determination by a Third Person, no. 11, duly interpreted (p. 849).
24) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 18-19.
25) J. L. Pulido Begines in Morán Bovio, Art. 5.7, no. 1, p. 276 (para. 2). This happened in
Germany in 2002 when indexes relating to the national currency Deutsche Mark were
substituted by indexes relating to the Euro.
26) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 20; see also H. Dedek in Jansen/Zimmermann,
Art. 6:107 [PECL]: Reference to a Non-existent Factor, no. 2 (p. 851) highlighting that
recent codification in France from 2016 now contains a similar rule (Art. 1167 Civil
Code).
27) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 20; carefully followed by H. Dedek in
Jansen/Zimmermann, Art. 6:107 [PECL]: Reference to a Non-existent Factor, no. 3 (p.
852).
28) For a historic and comparative legal analysis on the emerging admission of such
unilateral price determination see C. Willems in Jansen/Zimmermann, 19:203 [PECL]:
Obligation to Provide Invoice, no. 2-3 (p. 2100-01) and H. Dedek in
Jansen/Zimmermann, Art. 6:105 [PECL]: Unilateral Determination by a Party, no. 1-6
(pp. 832-839), including, for example, (i) from civil law history the argumentation line
of the German B. J. H. Windscheid (1817-1892) who “thought that since any party could
freely decide even to give away their belongings as a gift, it should be possible to
make a valid contract to submit to the determination of price by the other party,
without basing the agreement on an equitable standard” (ibid. no. 3 at p. 835); or (ii)
from common law history the distinction of Viscount Dunedin in May and Butcher v
Regem [1929] All ER Rep. 679 between an ‘agreement to agree’ and “hypothetical
situations that would not fail for uncertainty, such as a mechanism agreed upon at
the time of the contract’s formation that left price determination to one party at a
later stage” (ibid. no. 4 at p. 836).
29) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 10 (with references in note 126 to unilateral
price determination under English, US and German law).
30) Official Comments, Art. 5.1.7 no. 2.
31) The price determination occurs in good faith (Art. 1.7) when assessing and
documenting (i) what type and depth of work is necessary or appropriate in light of
local legal developments, and (ii) to what extent vendor adjustments should apply
because time of the team should be wholly or partially not charged, e.g. because
several lawyers worked jointly on the same matter.
32) Official Comments, Art. 5.1.7 no. 2, pp. 162-163; S. Vogenauer in Vogenauer, Art. 5.1.7 no.
10.
33) StL-Misc. 32 (2016), p. 7, see also S. Vogenauer in Vogenauer, Art. 5.1.7 no. 11 (discussing
‘grossly’) and 14.
34) P.C.-Misc. 14 (1989), p. 63.
35) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 11; see also J. L. Pulido Begines in Morán Bovio,
Art. 5.7, no. 3.a, p. 279 (para. 2, pointing at the difficulty to determine ‘obvious
unreasonableness’).
36) S. Vogenauer in Vogenauer, Art. 5.1.7 no. 12; implicitly also J. L. Pulido Begines in Morán
Bovio, Art. 5.7, no. 3.a, p. 279 (para. 4).
37) J. L. Pulido Begines in Morán Bovio, Art. 5.1.7, no. 1 (para. 2), p. 275; S. Vogenauer in
Vogenauer, Art. 5.1.7 no. 13.
38) StL-Misc. 32 (2016), p. 7.
39) StL-Misc. 31 Rev. (2015), pp. 6-7 (Zimmermann, Wallace); J. L. Pulido Begines in Morán
Bovio, Art. 5.1.7, no. 1, p. 276 (para. 1).
40) Official Comments, Art. 5.1.7 no. 3, p. 163; S. Vogenauer in Vogenauer, Art. 5.1.7 no. 17.
41) Official Comments, Art. 5.1.7 no. 3, p. 163.
1) See also Art. 6:109 PECL. Contra: S. Vogenauer in Vogenauer, Art. 5.1.8 no. 8.

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 2) J. L. Pulido Begines in Morán Bovio, Art. 5.8, no. 1 (para. 2), p. 280; S. Vogenauer in
Vogenauer, Art. 5.18 no. 11. See further H. Dedek in Jansen/Zimmermann, Art. 6:109
[PECL]: Contract for an Indefinite Period, no. 3-7 (pp. 860-865) for (i) historic roots in
limiting life-time employment (‘master and servant’) relations and (ii) the emergence
of the principle also for other contracts – especially in civil law jurisdictions, but to a
limited extent also in common law (see, e.g., as discussed at no. 7, (pp. 864-865),
Staffordshire Area Health Authority v South Staffordshire Waterworks [1978] 3 All ER
769, 781 per Goff LJ).
3) For an entirely different and critical perception: S. Vogenauer in Vogenauer, Art. 5.18
no. 1 (no justification), 3 (contradicts pacta sunt servanda; no compelling reasons for
the rule in Art. 5.1.8), 4.
4) J. L. Pulido Begines in Morán Bovio, Art. 5.8, no. 1, p. 281 (para. 4); S. Vogenauer in
Vogenauer, Art. 5.1.8 no. 14.
5) Contra S. Vogenauer in Vogenauer, Art. 5.1.9 no. 9 (discussing the use of contractual
freedom to remain within a ‘definite’ term as evasion in certain circumstances).
Whatever the rule, fraus omnia corrumpit – abuse is always possible, which is why the
choice of the right business partner will always remain even more important than the
choice of law or of rules of law).
6) Official Comments, Art. 5.1.8 no. 1, pp. 164-165; StL-Doc. 134 rev. (2016), p. 2;; contra S.
Vogenauer in Vogenauer, Art. 5.1.8 no. 10 (“a party may only end the contract under
Art. 5.1.8 if it were substantially unfair to bind the party to the contract for the
future”).
7) J. L. Pulido Begines in Morán Bovio, Art. 5.8, no. 1, p. 281 (para. 2).
8) Proposed jointly by two co-rapporteurs from common and civil law background
(Vivian Ramsay and Reinhard Zimmermann), see the summary of M. J. Bonell at
Unidroit 2016, C.D. (95) 15, para. 34, 111 as well as S. Vogenauer in Eppur si muove: The
Age of Uniform Law, pp. 1698-1713.
9) See e.g. § 314 BGB and StL-Doc. 126 (2014), p. 12 (Dessemontet).
10) Unidroit 2016, C.D. (95), 15 no. 122.
11) Usable Template: The parties could take inspiration from the wording proposed by
the Working Group (quoted hereinafter in its relevant excerpts from the 2016 draft
see Unidroit 2016, C.D. (95) 3, Annex 8, p. 2; emphasis added): “(1) A party may
terminate a long-term contract if there is compelling reason for doing so. (2) There is
compelling reason only if, having regard to the circumstances of the case, it would be
manifestly unreasonable for the terminating party to be expected to continue the
contractual relationship. (3) The right for a party to terminate the contract is
exercised by notice to the other party. (4) Termination of the contract for compelling
reasons takes effect as from the time of notice”. See W. Doralt in
Jansen/Zimmermann, Art. 6:112 [PECL]: Right to Terminate for Compelling Reason, no.
1-16 (pp. 912-918), reporting, inter alia, at no. 10 (p. 916) that German courts (which
have to apply German law with a similar rules in section 314 (1) German Civil Code)
“are rather cautious in their application of § 314 (1) BGB, and the case law thus does
not give any reason to fear an excessive amount to legal uncertainty.”
12) In practice, it is sometimes particularly important to secure that tasks which, from
the perspective of a reasonable person, are still reasonable to ‘do’ under the
circumstances (possibly even to be performed under a merely related contract) will
be accomplished and paid for (and the terminating party, under its duty to co-
operate → Art. 5.1.3 no. 6 and its duty to mitigate damages (Art. 7.4.8) will have to
provide necessary provision such as tooling or supply, → Art. 5.1.3 no. 6, continues to
be supplied by the terminating party); this mitigates damages (→ Art. 5.1.3) and
requires special provisions, for these circumstances, on withholding performance
and set-off (deviating from Art. 7.1.3 and 8.1); see W. Doralt in Jansen/Zimmermann,
Art. 6:112 [PECL]: Right to Terminate for Compelling Reason, no. 1-16 (pp. 912-918),
reporting, inter alia, at no. 10 (p. 916) that German courts (which have to apply
German law with a similar rules in section 314 (1) German Civil Code) “are rather
cautious in their application of § 314 (1) BGB, and the case law thus does not give any
reason to fear an excessive amount to legal uncertainty.” See also ibid. and at no. 14
(p. 917): “The decisions handed down by the German courts under this standard are
mostly uncontroversial.”
13) It is a recurring theme in the negotiations of long-term contracts that different
consequences apply depending on the reason of the termination (at all and, if so, to
what extent). See W. Doralt in Jansen/Zimmermann, Art. 6:112 [PECL]: Right to
Terminate for Compelling Reason, discussing inter alia at no. 12 (p. 916) that
termination for breach may often not be sufficient (as it may technically not affect
related contracts).
14) See W. Doralt in Jansen/Zimmermann, Art. 6:112 [PECL]: Right to Terminate for
Compelling Reason, no. 13 (p. 917).
15) S. Vogenauer in Vogenauer, Art. 5.1.8 no. 5 in reference to Arbitral Award February
1999, ICC case no. 9479 (2001), Unilex No. 680, at (iii).
16) Official Comments, Art. 5.1.8 no. 1, pp. 164-165; J. L. Pulido Begines in Morán Bovio, Art.
5.8, no. 1, p. 281 (para. 2); S. Vogenauer in Vogenauer, Art. 5.1.8 no. 12 (except for (iv)).
17) S. Vogenauer in Vogenauer, Art. 5.18 no. 13 (whereby the reference to Art. 7.3.6 is not
likely to apply in such a situation).
18) Official Comments, Art. 5.1.8 no. 2, p. 165.

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 19) Official Comments, Art. 5.1.8 no. 2, p. 165, and Illustration 2; StL-Doc. 134 rev. (2016), p.
2.
20) Official Comments, Art. 5.1.8 no. 2, p. 165.
21) Official Comments, Art. 5.1.8 no. 2, p. 165; StL-Doc. 126 (2014), p. 11.
22) S. Vogenauer in Vogenauer, Art. 5.18 no. 9 (example of contracting for ‘99 years’ which,
in some circumstances may be inappropriate, Art. 3.2.7 sentence 1; this is also the
limit to avoid ‘evasion’ of Art. 5.1.8 as discussed by Vogenauer ibid. at no. 9).
1) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 5 (with references for Belgium, England,
France, Germany, the Netherlands, Switzerland).
2) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 5 (with references for Italy, Japan,
Scandinavia, Scotland, Spain).
3) For a unilateral alternative of termination see Art. 5.1.8 (for contracts with an
indefinite term).
4) StLMisc. 25 (2003), no. 559 (quoting P. Schlechtriem); S. Vogenauer in Vogenauer, Art.
5.1.9 no. 5.
5) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 14.
6) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 6 and note 197 (underlining the reference to
Art. 2.1.6 et seq. in Official Comments to Art. 5.1.9, Illustration 1, p. 166).
7) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 15.
8) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 8 with reference to the inspiration of the
principle by the distinction in French law from ‘onerous obligations’ (‘à titre
onéreux’).
9) An exception to Art. 2.1.6 (1) sentence 2 (→ Art. 2.1.6 no. 3 at 3.3. (iv); S. Vogenauer in
Vogenauer, Art. 5.1.9 no. 11.
10) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 13.
11) A typical example form practice as witnessed as an arbitrator in a Stockholm
arbitration; see also S. Vogenauer in Vogenauer, Art. 5.1.9 no. 10.
12) S. Vogenauer in Vogenauer, Art. 5.1.9 no. 3, 15.
1) If a contract partner is behaving unreasonable for itself, that is its own risk and not
covered by Art. 1.7.
2) As the Unidroit Principles provide general principles, there are no limits, see
UNCITRAL et al., Tripartite Legal Guide, no. 450 (p. 100); and T. Rüfner in
Jansen/Zimmermann, Art. 18:101 [PECL]: Contracts Covered, no. 19-226 (pp. 1970-72).
Chapter XIII of the 1992 UNCITRAL Legal Guide on International Countertrade
Transactions (including barter, counter-purchase and offset; see UNCITRAL et al.,
Tripartite Legal Guide, no. 449, p. 100) is thus outdated; at that time, the Unidroit
Principles did not yet exist.
3) On the history of sales law since ancient Mesopotamian times see T. Rüfner in
Jansen/Zimmermann, Art. 18:101 [PECL]: Contracts Covered, no. 3-14, 18 (pp. 1963-67,
1969-70), followed by a comparative overview at no. 15-18 (pp. 1967-70).
4) Regularly experienced day-to-day business under the Unidroit Principles, as realised
in past years e.g. in the following industries: automotive, health, hydrogen, ship
painting.
5) As, in practice, the integration of general terms and conditions (“GTC”) of either party
often fails regardless of the transaction volume, it is sometimes helpful to print the
most important terms, including the choice of the Unidroit Principles and the
arbitration clause, directly at the end of the order. If the conclusion of a valid
agreement on the GTC fails and the individual contract (which may be consisting only
of the accepted order) does not include a choice of the Unidroit Principles clause,
the CISG will often apply under its Art. 1 (1) (a) or (b) (without any limitation of
liability clause contained in the GTC), as often observed in practice. For the priority
of the chosen regime of the Unidroit Principles in relation to the CISG see →
Introduction no. 9e.
6) Negotiated twice by the author under the Unidroit Principles in 2022 from a seller’s
perspective and once from a European buyer’s perspective (with a seller from New
York).
7) S. Martens in Jansen/Zimmermann, Art. 18:203 (2) [PECL]: Conformity with the Contract
(Criteria), no. 10 (p. 2002), with an historic and comparative overview on the
emergence of obligations for the buyer which, initially, needed to be explicitly
stipulated, at no. 2-10 (pp. 1989-95).
8) On the historic emergence of a payment obligation as compared to barter see S.
Martens in Jansen/ Zimmermann, Art. 18:101 [PECL]: Main Obligation of the Buyer, no.
1-4 (pp. 1980-82).
9) History: On the emergence of liability for defects since Roman law and a
comparative overview see T. Rüfner in Jansen/Zimmermann, Art. 18:204 [PECL]:
Overview of Buyer’s Remedies for Lack of Conformity, no. 2-11 (pp. 2016-20), including
English law (at no. 10, p. 2020): “In the tradition of the common law, the buyer’s
remedies for defects (or lack of conformity) were never, to a similar extent, subject to
special treatment as in the continental tradition.”
10) S. Martens in Jansen/Zimmermann, Art. 18:203 (1) [PECL]: Conformity with the Contract
(General), no. 1 (p. 1989).
11) See for the CISG Art. 45 (1) (b), 74 et seq. for damages of the buyer.

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 12) This is in line with Art. 35 (1) CISG and has become a general principle of law, see S.
Martens in Jansen/Zimmermann, Art. 18:203 (1) [PECL]: Conformity with the Contract
(General), no. 5, 7 and 10 (pp. 1992-95).
13) For a comparative overview of diverging national laws on the obligation to inspect
the goods see S. Martens in Jansen/Zimmermann, Art. 18:203 (3) [PECL]: Conformity
with the Contract (Buyer’s Knowledge of Lack of Conformity), no. 3 (pp. 2006-07) noting
the Finnish law (section 20 (2) Finnish Sale of Goods Act) as an exception to the
observation that “the buyer is generally not required to examine the object
thoroughly before concluding the sale and he will lose his remedies if he acted
grossly negligently.” (Footnotes omitted).
14) The parties may wish to take inspiration from Art. 35 (2) CISG. For a historic and
comparative overview see S. Martens in Jansen/Zimmermann, Art. 18:203 (2) [PECL]:
Conformity with the Contract (Criteria), no. 1-14 (pp. 1997-2004), noting e.g. at no. 1 (p.
1997) on the change brought about by our modern global society: “Caveat emptor
seemed a fair rule as long as buyers could be expected to examine the goods and
identify defects before concluding the sale. In modern times, however, buyers often
lack the time, expertise and opportunity to do so.”
15) See Art. 35 (3) CISG.
16) See Art. 35 (3) CISG; see also the comparative analysis of European international rules
by S. Martens in Jansen/Zimmermann, Art. 18:203 (3) [PECL]: Conformity with the
Contract (Buyer’s Knowledge of Lack of Conformity), no. 4 (p. 2007) and no. 7 (pp.
2008-09).
17) See S. Martens in Jansen/Zimmermann, Art. 18:203 (3) [PECL]: Conformity with the
Contract (Buyer’s Knowledge of Lack of Conformity), no. 1-11 (pp. 2005-2010) including
historic background and a comparative analysis at no. 2-4 (pp. 2006-07) on the
development of the case group that a buyer has knowledge of a non-conformity and
is therefore ‘unworthy of protection’ (ibid. no. 1 at p. 2005).
18) See S. Martens in Jansen/Zimmermann, Art. 18:203 (3) [PECL]: Conformity with the
Contract (Buyer’s Knowledge of Lack of Conformity), no. 6 (p. 2008).
19) See UNCITRAL et al., Tripartite Legal Guide, no. 446 (p. 99) noting at a high level the
leading relevant conventions and that, “owing to the principle of territoriality, it is
the law of the territory in which the intellectual property is protected that
determines the extent of protection of intellectual property.”
20) See the historic and comparative overview by S. Martens in Jansen/Zimmermann,
Introduction before Art. 18:201 [PECL], (i) no. 2-5 (pp. 1974-77); (ii) no. 1 (p. 1974)
observing that it was the ‘concept of obligation’ which “enabled parties to agree on a
sale at a particular time, but to delay the execution of their respective part of the
transaction until later”; as well as (iii) no. 6 (p. 1977) on the assessment that “there is
still no complete consensus on whether a seller is actually obliged to effect such
transfer of ownership”, as documented ibid. at Art. 18:202 [PECL]: Main Obligations of
Seller, no. 2 (pp. 1986-87).
21) On a historic and comparative overview on the delivery of the goods and the transfer
ownership see S. Martens in Jansen/Zimmermann, Art. 18:202 [PECL]: Main Obligation
of the Seller, no. 1-5 (pp. 1985-88).
22) See e.g. Art. 2367 French Civil Code, German § 455 BGB, Art. 1523 et seq. Italian Civil
Code.
23) See T. Rüfner in Jansen/Zimmermann, Art. 18:301 [PECL]: Passing of Risk, no. 4 (p. 2023).
24) This value is limited if digital content has been destroyed for which a new copy can
be organised at low cost, T. Rüfner in Jansen/Zimmermann, Art. 18:301 [PECL]: Passing
of Risk, no. 16 (p. 2029).
25) T. Rüfner in Jansen/Zimmermann, Art. 18:301 [PECL]: Passing of Risk, no. 1 (pp. 2022-
23); see Art. 66 CISG (which goes back to Ernst Rabel who “stated that – in view of the
ambiguous usage of the term in many legal systems – a definition of risk was
necessary”, ibid. no. 12 (p. 2027), following an historic and comparative legal overview
at no. 6-11 (pp. 2024-27)).
26) See T. Rüfner in Jansen/Zimmermann, Art. 18:301 [PECL]: Passing of Risk, no. 3 (p. 2023).
See further the discussion ibid. at no. 15 (p. 2028) on damages to the goods, caused by
the seller, after the passing of the risk. If the goods are damaged at the occasion of
picking up the containers in which the goods were shipped by the buyer (i.e. the
example given ibid. with reference to G. Hager/ M. Schmidt-Kessel in Schlechtriem &
Schwenzer, Art. 66 [CISG] no. 9), it will depend on the circumstances of the case and
the arbitrators whether they consider this issues as still contractual (e.g. with regard
to the duty of co-operation, Art. 5.1.3, which arguably might cover the obligation not
to damage the goods when performing a last action in the context of delivery).
27) T. Rüfner in Jansen/Zimmermann, Art. 18:301 [PECL]: Passing of Risk, no. 2 (p. 2023,
emphasis added). For a historic and comparative overview on the identification and
separation of goods for a specific contract see ibid., Art. 18:302 [PECL]: Identification
of Goods to Contract, no. 1-10 (pp. 2030-35). See further Art. 67-69 CISG.
28) T. Rüfner in Jansen/Zimmermann, Art. 18:303 [PECL]: Time when Risk Passes, no. 19, (p.
2046) (following a historic and comparative overview ibid. no. 2-18, pp. 2037-46): “The
European legal systems are almost evenly divided between two basic solutions. One
group, mostly consisting of countries following the French legal tradition, still applies
the rule periculum est emptoris. The risk of loss passes onto the buyer as soon as the
contract is concluded. The other group postpones the passing of risk until the goods
have been handed over to the buyer.”

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 29) The choice of an INCOTERM® thus solves issues of risk bearing during transportation
which have occupied lawyers for centuries; see T. Rüfner in Jansen/Zimmermann, Art.
18:302 [PECL]: Identification of Goods to Contract, no. 3 (p. 2031) with e.g. an
instructive report of a series of cases in the 1640s decided by the courts of Saxony
relating to goods stolen on the way to another city and decided on ‘equitable
grounds’ (“The courts of Saxony decided in each case that the buyer had to pay
although he had not received the goods”), as further discussed in a historic and
comparative context ibid., Art. 18:305 [PECL]: Carriage of the Goods, no. 3-7 (pp. 2054-
57). Contra: the passing of risk ‘upon delivery’ “in the medieval law of the cities of
Vienna and Lübeck” (ibid., Art. 18:303 [PECL]: Time when Risk Passes, no. 5 (p. 2038,
footnotes omitted). See further ibid., Art. 18:305 [PECL]: Carriage of the Goods, no. 1
(“There is no Roman precedent”) and no. 8-11 (pp. 2057-58) for a comparative analysis
including Art. 67 CISG.
30) The distinction between risk distribution (with the buyer under the Roman law
maxim ‘periculum est emptoris’, T. Rüfner in Jansen/Zimmermann, Art. 18:303 [PECL]:
Time when Risk Passes, no. 2, p. 2037) and ownership has caused discussions for
centuries (see the detailed overview ibid. no. 6-11, (pp. 2039-42); including at no. 10,
(p. 2041), a discussion of the common law history as of Shipton v Dogge of 1388
relating to the buyer’s risk of a horse dying in the seller’s stables after purchase).
31) See T. Rüfner in Jansen/Zimmermann, Art. 18:303 [PECL]: Time when Risk Passes, no. 16
(pp. 2044-45) on ‘Risk passes upon delivery’.
32) See the synoptic overview by T. Rüfner in Jansen/Zimmermann, Art. 18:303 [PECL]:
Time when Risk Passes, no. 12-13 (p. 2043).
33) See Art. 69 CISG and T. Rüfner in Jansen/Zimmermann, Art. 18:304 [PECL]: Goods
Placed at Buyer’s Disposal, no. 2-10 (pp. 2049-52).
34) See T. Rüfner in Jansen/Zimmermann, Art. 18:306 [PECL]: Goods Sold in Transit, no. 1-7
(pp. 2060-64).
35) See Art. 35 (2) (d) CISG and S. Martens in Jansen/Zimmermann, Art. 18:203 (2) [PECL]:
Conformity with the Contract, no. 14 (p. 2004), noting inter alia: “The national
European legal systems do not, in principle, deal with the issue of packaging as a
matter of (non-)conformity of the goods, but regard the duty of packaging generally
as an ancillary obligation the breach of which gives rise to the general remedies for
non-performance.” For the Unidroit Principles see Art. 7.1.1 which includes any
violations which is not excused, → Art. 7.1.1 no. 1.
36) On a historic and comparative overview of the obligation to take delivery see S.
Martens in Jansen/ Zimmermann, Art. 18:201 [PECL]: Main Obligation of the Buyer, no.
5-8 (pp. 1982-84) arguing at no. 8 (p. 1984) that taking delivery stems from a right and
does not entail necessarily an obligation to take delivery, but also describing at no. 7
(p. 1983) that Art. 60 lit. b CISG “is a duty to co-operate to make actual performance
of the contract possible.”
37) I am beyond counting the number of contracts concluded under the Unidroit
Principles, like, in 2022, the purchase of an ambulance car from a German seller by
the Ukrainian Ministry of Defense (financed by the German-Ukrainian charity
Ukrainian Future Hilfe-Verein e.V. which uses the Unidroit Principles wherever this
makes sense).
38) Art. 3 (2) CISG, see e.g. C. Willems in Jansen/Zimmermann, Introduction before Art.
19:101 [PECL], no. 1 (p. 2074): “the CISG does apply to contracts in which the supply of
related services is only of minor importance compared to the sales part of the
contract”; see further ibid., Art. 19:101 [PECL]: Scope of Chapter, no. 2 (p. 2076) for the
historic roots of sales contracts with combined services and for a comparative
overview ibid., no. 3 (p. 2077). In international practice, the combination of sales with
commissioning is frequent (as witnessed in 2022 in a back-to-back contract relating
to the purchase from a New York supplier, under the Unidroit Principles, of electronic
stacks which were then sold on from Germany to the Czech Republic, again under the
Unidroit Principles, with commissioning in the Czech Republic). If the CISG applies to
such ‘minor related services’, “[t]his means that rules on sales which do not fit exactly
to a minor service part of the contract are to be applied with necessary adaptations”,
as noted by C. Willems in Jansen/ Zimmermann, 19:101 [PECL]: Scope of Chapter, no. 6
(p. 2079) with reference to Art. 7 CISG (footnote omitted).
39) For an overview of the relationship (and overlap) between the Unidroit Principles
and the CISG, see UNICITRAL et al., Tripartite Legal Guide, no. 392-397 (p. 86-88).
Further, the index of this book distinguishes under the entry “CISG” between “as
Source of the Unidroit Principles”, “Differences compared to the Unidroit Principles”
and “supplementation of the CISG”. While this list does not aim to be complete, the
three lists provide a fast-track overview.
40) Depending on the perspective, working with the CISG also requires concentration,
adaptations and supplementations (e.g. of a limitation of liability regime).
41) This was a reason, in 2018, for the general counsel of an international client from the
USA to switch to the Unidroit Principles on a global level.
42) UNCITRAL et al., Tripartite Legal Guide, no. 431 (p. 95).
43) UNCITRAL et al., Tripartite Legal Guide, no. 397 (p. 87), emphasis added.
44) See C. Willems in Jansen/Zimmermann, 19:101 [PECL]: Scope of Chapter, no. 10 (pp.
2081-82) discussing unconvincing definitions in some international instruments.

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 45) See C. Willems in Jansen/Zimmermann, 19:101 [PECL]: Scope of Chapter, no. 21 (pp.
2085) and no. 20 (p. 2085) discussing the demarcation line between service and
transportation with regard to ‘carrying of the machine inside the customer’s house’.
By dépeçage it is also possible to submit different parts of the contract to different
legal regimes, as discussed ibid. no. 22 (p. 2986).
46) See UNCITRAL et al., Tripartite Legal Guide, no. 397 (p. 87): “Some of the provisions
that have no equivalent in the conventions are specifically tailored to service
contracts, not least long-term contracts and so-called ‘relational contracts’ […].”
47) History: For the emergence of this distinction since Roman law and in various
national laws see C. Willems in Jansen/Zimmermann, 19:201 [PECL]: Obligation to
Achieve Result and Obligation of Care and Skill, no. 2-4 (pp. 2089-91).
48) See in this vein also the conclusion of C. Willems in Jansen/Zimmermann, 19:201
[PECL]: Obligation to Achieve Result and Obligation of Care and Skill, no. 10 (p. 2094)
classifying this approach (obligation to act with reasonable care and skill as a
subsidiary approach absent another contractual agreement) as “an appropriate
restatement of European law.”
49) C. Willems in Jansen/Zimmermann, 19:202 [PECL]: Obligation to Prevent Damage, no. 5
(p. 2097), referencing to the ‘Principles of European Law: Service Contracts’ giving “the
example of installation of computer software where precautionary measures like
temporarily storing the information in another place” to prevent damage.
50) See the discussion by C. Willems in Jansen/Zimmermann, 19:202 [PECL]: Obligation to
Prevent Damage, no. 9 (p. 2098), arguing in favor of a broad approach in the context
of CESL.
51) C. Willems in Jansen/Zimmermann, 19:202 [PECL]: Obligation to Prevent Damage, no. 7
(p. 2097). For historic background since Roman times (e.g. with regard of cases where
“a conductor injured a slave of the locator when conducting the promised business
(driving a cart)”) and a comparative legal overview see ibid. no. 2-3 (pp. 2095-96),
referring at no. 3 (p. 2096), inter alia, to the general duty under German law (§ 241 (2)
BGB) “that each party to a contract may, depending on the contents of the obligation,
be obliged to take account of the rights, legal interests, and other interests of the
other party.”
52) See the discussion by C. Willems in Jansen/Zimmermann, 19:202 [PECL]: Obligation to
Prevent Damage, no. 8 (p. 2098), quoting to Principles of European Law: Service
Contracts, Art. 3:104, Comment B: “The service provider, normally having control over
the sphere in which the service is to take place, ‘is usually in the best position to take
protective measures, safety measures and measure limiting any adverse impact of
the activity on property and other people.’”
53) The synthesis developed by C. Willems in Jansen/Zimmermann, 19:302 [PECL]: Duty to
Co-Operate, before no. 1 (p. 2116) contains inspiring language: “The customer is
obliged, where necessary, to provide access at reasonable hours, to give discretions,
and to answer reasonable requests for information.” (It is destined for a future
legislator but also usable as a starting point for drafting contractual language). For a
comparative overview of national laws (including English law which considers
providing access to a construction site as an ‘implied term’) see C. Willems in Jansen/
Zimmermann, 19:302 [PECL]: Duty to Co-Operate, no. 3 (pp. 2118-19) and no. 7 (pp.
2119-20) with reference to obligations to provide information, directions, permits,
licenses.
54) See explicitly Art. 154 CESL as discussed by C. Willems in Jansen/Zimmermann, 19:302
[PECL]: Duty to Co-Operate, no. 4-6 (p. 2119).
55) Since Roman times, not taking delivery had consequences, see C. Willems in
Jansen/Zimmermann, 19:302 [PECL]: Duty to Co-Operate, no. 2 (p. 2117), on ‘mora
creditoris’, relaxing the debtor’s exposure and granting him further, since the ius
commune, a claim for damages.
56) In the same vein for PECL see C. Willems in Jansen/Zimmermann, 19:302 [PECL]: Duty to
CoOperate, no. 8 (p. 2120).
57) See the proposal by C. Willems in Jansen/Zimmermann, 19:302 [PECL]: Duty to Co-
Operate, no. 9 (p. 2120): payment of the price less costs saved by the service provider
by not having to complete its performance.
58) C. Willems in Jansen/Zimmermann, 19:301 [PECL]: Payment of the Price, no. 3 (pp. 2110-
11). This risk is distinct from the ‘risk of counter-performance’, i.e. the buyer’s
obligation to pay for the services in spite of the full or partial destruction of the good
to which the service is provided (without attribution of the loss to the sphere of
either party). For a complex contract, the parties may wish to also allocate this risk,
see the discussion by C. Willems in Jansen/Zimmermann, 19:301 [PECL]: Payment of the
Price, no. 9-13 (pp. 2114-15). A compromise could be to provide for ‘partial
remuneration’ of the service provider (possibly paid anyhow in instalments) with
respect to “both the amount of services already performed and the fact that the
customer will not benefit from that service” (ibid. at no. 13, p. 2115).
59) See proposed as the first alternative also by Art. 153 (1) CESL and the Synthesis (1) of
C. Willems in Jansen/Zimmermann, 19:301 [PECL]: Payment of the Price, no. 1 (p. 2110).
60) Since Roman times, see for the historical background C. Willems in
Jansen/Zimmermann, 19:204 [PECL]: Obligation to Warn of Unexpected or
Uneconomic Cost, no. 2 (pp. 2104-05) (“the service provider had to carry the financial
loss arising from his low estimate as a kind of penalty for his lack of experience in
calculating the appropriate price”).

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 61) C. Willems in Jansen/Zimmermann, 19:204 [PECL]: Obligation to Warn of Unexpected
or Uneconomic Cost, no. 9 (p. 2107) and no. 6 (p. 2107). See also Art. 152 CESL and the
proposed synthesis by C. Willems ibid. before no. 1 (p. 2104).
62) See C. Willems in Jansen/Zimmermann, 19:204 [PECL]: Obligation to Warn of
Unexpected or Uneconomic Cost, no. 3 (pp. 2105-06) with a comparative overview of
national solutions in various European law, including e.g. in Italian law where the
judge can fix an adapted price if the modification of the price was necessary (ibid. p.
2006).
63) In practice, it is fascinating to observe how merchants do succeed to agree
sometimes under the most difficult and economically pressing case scenarios.
64) Since Roman time, see the historical background provided by C. Willems in
Jansen/Zimmermann, 19:301 [PECL]: Payment of the Price, no. 2 (p. 2110).
65) This correlates in essence with Art. 153 (2) CESL; see C. Willems in
Jansen/Zimmermann, 19:301 [PECL]: Payment of the Price, no. 5 (p. 2112) and no. 8 (p.
2113).
66) For a comparative overview in national laws including English law which requires,
absent contractual agreement, the payment of a ‘reasonable charge’ (section 15 of
the Supply and Services Act 1982) see C. Willems in Jansen/Zimmermann, 19:301
[PECL]: Payment of the Price, no. 4 (pp. 2111-12).
67) C. Willems in Jansen/Zimmermann, 19:203 [PECL]: Obligation to Provide Invoice, no. 1
(p. 2100).
68) See the discussion at C. Willems in Jansen/Zimmermann, 19:203[PECL]: Obligation to
Provide Invoice, no. 4 (p. 2101) suggesting that a clear invoice is not necessarily due
(in that sense also the German Supreme Court Reichsgericht in 1909 as reported ibid.
at no. 5, p. 2102).
69) Thus, matters do have changed since the early days of the German Civil Code BGB;
contra C. Willems in Jansen/Zimmermann, 19:203 [PECL]: Obligation to Provide
Invoice, no. 5 (p. 2102).
70) International Federation of Consulting Engineers.
71) Conditions of Contract for Construction for Building and Engineering Works Designed
by the Employer.
72) Conditions of Contract for EPC/Turnkey.
73) Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant
and for Building and Engineering Works Designed by the Contractor.
74) Short Form of Contract.
1) This is distinct from a general civil law perspective which includes e.g. the need of
persons to protect family members by life insurance or other contracts, see e.g. S.
Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a Third
Party, no. 1 (p. 868).
2) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 1 (p. 868), also observing: “In a society of division of labour, such
transactions have enormous economic significance.”
3) Alternatively, an annex will list related and financially (pre-) ‘approved’ companies
of the buyer as additional contract partners, combined with an undertaking of the
acting parent company that it has power of authority to act on behalf of these
companies (otherwise the contract partner is protected by Art. 2.2.6 when the
contract is concluded under the Unidroit Principles;– which makes a lot of sense in
such multi-jurisdictional scenarios). Depending on the flow of the negotiation and the
training of the stakeholders in the negotiations, the line between multi-party
agreements and agreements between two parties which grant substantial third-party
rights is sometimes thin in practice.
4) See the historic overview of S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]:
Stipulation in Favour of a Third Party, no. 11-15 (pp. 874-878); including no. 11 (p. 875)
on Roman history and no. 12 (p. 875) on early English law.
5) Official Comments, p. xxiii (at ‘Introduction to the 2004 Edition’).
6) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 5 (p. 871) observing the influence of the laws of Germany, France, the
Netherlands and the English Contracts (Rights of Third Parties) Act 1999. See further
ibid. no. 8 (p. 873) on the ‘similar’ substance of the Scottish (Third Party Rights) Act
2017.
7) Analysis and enumeration of S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]:
Stipulation in Favour of a Third Party, no. 3 (p. 869); references to articles added; and
no. 5 (p. 871) arguing that “the PICC attempts to address each relevant issue in one of
the six short new articles that were introduced in 2004.” (emphasis added).
1) StLDoc. 76 (2002), p. 1; for England: see the Rights of Third Parties Act 1999 and S.
Vogenauer in Vogenauer, Art. 5.2.1 no. 6 (with respect to Art. 5.2.1 (2)); S. Vogenauer in
Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a Third Party, no. 31
(pp. 886-887).
2) First brought up by Furmston in a position paper StLDoc. 59 (1999), pp. 1-4, then
discussed in StLMisc. 21 (1999), pp. 58-64, and settled in StL-Misc. 22 (2000), pp. 109-
110; Official Comments to Art. 5.2.1, p. 167 and StL Misc. 22 (2000), no. 899 (Crépeau);
see further S. Vogenauer in Vogenauer, Art. 5.2.1 no. 1, 3 (with a pertinent analysis).
3) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 4 (welcoming that the PICC “explicitly spells
out” this proposition), 9.

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 4) See S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 20 (pp. 880-881), distinguishing a ‘right’ from other benefits of third
parties.
5) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 12.
6) StL-Misc. 22 (2000), p. 115 (Furmston); following critical consideration on implied
agreements at StL-WP. 5 (2000), p. 2, the position was adopted in StLWP. 8 (2001), p. 1;
in StL-Doc. 83, p. 1 (2003) the Working Group decided that in case the agreement was
made implicitly, “all terms of the contract and the circumstances of the case will be
taken into account”; S. Vogenauer in Vogenauer, Art. 5.2.1 no. 13-26 (with reference to
the rules on contract interpretation, Art. 4.1, 4.3-4.7, in particular Art. 4.3, as well as
Art. 5.1.2 and 4.8, which, as noted at no. 14, do not contain a ‘rebuttable presumption’
if a contract “purports to confer a benefit on the third party”, as e.g. the laws of
England and New Zealand).
7) No grounds for avoidance under Chapter 3, S. Vogenauer in Vogenauer, Art. 5.2.1 no. 5;
see also ibid. no. 12 (pointing to the risk of a third party ‘right’ which needs to be
qualified as surprising standard term, Art. 2.1.20).
8) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 9, 27-28 (e.g. no knowledge or consent of the
third party, no. 28); S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation
in Favour of a Third Party, no. 27-28 (pp. 884-886).
9) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 10-11.
10) Cf. S. Vogenauer in Vogenauer, Introduction to Section 5.2 of the PICC, no. 8 (with
reference to the applicable private international law to determine the applicability
of the PICC also on the relationship between the parties and the beneficiary).
11) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 36.
12) Official Comments to Art. 5.2.2, p. 169; S. Vogenauer in Jansen/Zimmermann, Art. 6:110
[PECL]: Stipulation in Favour of a Third Party, no. 33 (pp. 887-888).
13) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 32 (p. 887).
14) StL-Doc. 70 (2001), p. 1; StL-Doc. 94 (2003), p. 1; S. Vogenauer in Vogenauer, Art. 5.2.1
no. 10. In German law, this setting is referred to as “Vertrag mit Schutzwirkung zu
Gunsten Dritter”.
15) E. Brödermann § 6 IPR MünchAnwaltshandb. IntWirtschR, no. 165 (on the use of
paramount clauses).
16) S. Martens in Jansen/Zimmermann, Introduction before Art. 7:101 [PECL], no. 2 (p. 996):
“The law will not recognize obligations whose performance would violate the
legitimate interests of third parties […].”
17) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 37.
18) The enumeration is inspired by S. Vogenauer in Vogenauer, Introduction to Section
5.2 of the PICC, no. 2 and 37.
19) Except for assignments of rights under negotiable instruments which are usually
governed by other instruments and laws, S. Vogenauer in Vogenauer, Introduction to
Section 5.2 of the PICC, no. 2.
20) Cf. Art. 41-43 CISG.
21) Official Comments to Art. 5.2.1 and Illustrations 2-5, pp. 167-168.
22) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 18.
23) Official Comments to Art. 5.2.1, p. 169; S. Vogenauer in Vogenauer, Art. 5.2.1 no. 25
(citing inter alia StL – Misc. 25 (2003), no. 429, 432: ‘leave it to the imagination of the
reader whether the availability of the tort claim might affect the application of the
Principles’).
24) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 12.
25) A note on arbitration risk management: If (i) a party contracts with a company
belonging to a group of companies, (ii) another company of the group becomes a
beneficiary of or a party to the contract, (iii) the contract provides for the possibility
of multi-party arbitration, and (iv) the arbitration clause or the chosen institutional
arbitration regime provides for three arbitrators, then the first party needs to be very
specific in the arbitration clause in order to safeguard its right (to the extent
possible under the applicable arbitration law) to appoint an arbitrator irrespective
of the organization of the other companies, which, while related at contract
conclusion, may belong to different groups by the time it comes to arbitration.
26) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 35 with reference, inter alia, in note 142 to
Nisshin Shipping Co Ltd v Cleaves & Company Ltd and Others [2003] EWHC 2602
(Comm.), 40-45, and in note 143 to ECJ Case 201/82 Gerling v Amministrazione del
Tesoro dello Stato [1983] ECR 2503 [20] (regarding the application of choice of court
clauses to third parties in an insurance contract context).
27) While some domestic legal systems (e.g. the Netherlands, South Africa) require
consent, S. Vogenauer in Vogenauer, Art. 5.2.1 no. 28.
28) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 30 (p. 886).
29) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 57 (pp. 897-898).
30) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 57 note 237 (p. 898).
1) S. Vogenauer in Vogenauer, Art. 5.2.2 no. 1.
2) Cf. S. Vogenauer in Vogenauer, Art. 5.2.2 no. 5.

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 3) S. Vogenauer in Vogenauer, Art. 5.2.2 no. 6.
4) StL – Misc. 23 (2001), no. 443 (with reference to German § 332 BGB and Art. 1401 Italian
Civil Code); StL-Doc. 94 (2003), p. 3.
5) In practice, this kind of drafting can assist to get a deal done in situations when the
decision makers are meeting and negotiating under the Unidroit Principles while
there is consent that one of them shall still set up a special purpose vehicle
(experience made in Luxemburg for a Letter of Intent and Pre-Contract on setting up
an uplink station in Germany (satellite industry), with a French decision maker living
in Asia).
6) Official Comments to Art. 5.2.2 and Illustration 1, pp. 169-170; StLWP. 8 (2001), p. 3; StL-
Doc. 83 (2003), p. 3; S. Vogenauer in Vogenauer, Art. 5.2.2 no. 3. For policy issues and
for legal history relating to Art. 5.2.2, see S. Vogenauer in Jansen/Zimmermann, Art.
6:110 [PECL]: Stipulation in Favour of a Third Party, no. 16-17 (pp. 878-879) followed by
an approving assessment at no. 18 (p. 879): “Overall […] all model codes strike a good
balance between commercial flexibility and legal certainty. PICC 5.2.2, though, is
preferable in terms of drafting.”
7) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 5 and 5.2.2 no. 6.
8) Cf. S. Vogenauer in Vogenauer, Art. 5.2.2 no. 8.
9) S. Vogenauer in Vogenauer, Art. 5.2.1 no. 5 and note 44 pointing at possible formality
requirements.
1) S. Vogenauer in Vogenauer, Art. 5.2.3 no. 1 referring to the terminology of H. Kötz in
Kötz/Flessner European Contract Law (1997), Volume 1, p. 257 (at IV.) in his analysis pp.
257-259 which, in turn, emphasises the similar situation under Dutch law (Art. 6:257
Dutch Civil Code) and German case law.
2) Critical with regard to the use of the word ‘rights’ in the context of exclusion and
limitation clauses: S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation
in Favour of a Third Party, no. 23 (p. 882: “legal fiction”) and no. 39 (p. 891).
3) Thus, the overall assessment of S. Vogenauer in Jansen/Zimmermann, Art. 6:110
[PECL]: Stipulation in Favour of a Third Party, no. 36 (p. 890) is also positive: “In view
of the general principle of freedom of contract, there is no reason why the law should
refuse to acknowledge such arrangements, subject, of course, to the general rules on
the validity of exclusion clauses.”
4) Example from practice (in a context involving stakeholders from Austria, Germany,
France and USA): Supplier A concludes a Framework Supply Agreement with company
X, wich includes a limitation of liability clause (→Art. 7.1.6). Company B, related to A
receives orders from X under the Framework Supply Agreement. B acts on that basis
and may also rely on the limitation of liability clause in the Framework Supply
Agreement.
5) Official Comments to Art. 5.2.3, pp. 170-171; StL-Doc. 83 (2003), p. 4.
6) Official Comments to Art. 5.2.3 at the Illustration, p. 170; S. Vogenauer in Vogenauer,
Art. 5.2.3 no. 2.
7) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 24 (p. 883); followed by critical remarks of using ‘implied’ terms as
floodgates to construe ‘tacit’ contracts in favor of third parties solving issues which
might be left to tort law (ibid., no. 25-26 at pp. 883-884).
8) S. Vogenauer in Vogenauer, Art. 5.2.3 no. 3 (criticising ‚inconsistency’ because Art. 5.2.1
permits also ‘implied’ third party rights, whereby it is difficult to imagine ‘implied
conditions’ to such third party right which would require a beneficiary to supply
something and thereby entailing a liability for which it needs protection by
limitation of liability).
1) Cf. Official Comments to Art. 5.2.4, p. 171; S. Vogenauer in Vogenauer, Art. 5.2.4 no. 3.
2) Official Comments to Art. 5.2.4, Illustration 1, p. 171.
3) Convincingly argued by S. Vogenauer in Vogenauer, Art. 5.2.4 no. 2. For a discussion of
underlying policy considerations see S. Vogenauer in Jansen/Zimmermann, Art. 6:110
[PECL]: Stipulation in Favour of a Third Party, no. 52 and 54 (pp. 896-897).
1) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 3 with reference inter alia to Art. II.-9:303(2)
DCFR and the national laws in Germany (Staudinger/Klummp (2015) § 328 no. 71-72),
United Kingdom s 2 (1) UK Contracts (Rights of Third Parties) Act 1999) and USA (§ 311
(2) Restatement 2d Contracts.
2) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 5.
3) Official Comments to Art. 5.2.5, p. 172; StL-W.P. 9 (2002), p. 3; See also S. Vogenauer in
Jansen/ Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a Third Party, no. 45
(p. 893), hinting at the ‘a fortiori’ argument e.g. in Dutch domestic law.
4) Art. 6:110(3) PECL; see S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]:
Stipulation in Favour of a Third Party, no. 48 (p. 894) favouring, in the end, the
solution in the Unidroit Principles.
5) StL-W.P. 8 (2001), p. 4; S. Vogenauer in Vogenauer, Art. 5.2.5 no. 3 (with reference to the
laws in Italy, Netherlands, Spain and Switzerland).
6) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 4.
7) StL-WP. 18 (2008), p. 2 (“unless the parties otherwise agree”); S. Vogenauer in
Vogenauer, Art. 5.2.5 no. 2; S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]:
Stipulation in Favour of a Third Party, no. 47 (p. 894).
8) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 5; for a comparative legal overview see S.
Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a Third
Party, no. 50 (p. 895).

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 9) StL-W.P. 8 (2001), p. 5; StL-Doc. 83 (2003), p. 6; S. Vogenauer in Vogenauer, Art. 5.2.5 no.
6 (underlining that this suffices because no modification is possible without the
consent of both parties).
10) Official Comments to Art. 5.2.5 at the Illustration, p. 172; S. Vogenauer in Vogenauer,
Art. 5.2.5 no. 7; S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in
Favour of a Third Party, no. 50 (p. 895) and no. 51 (p. 895), favoring reliance as the cut-
off point.
11) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 5.
12) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 7.
13) S. Vogenauer in Vogenauer, Art. 5.2.5 no. 3 (with a discussion of possible lines of
interpretation); see also StL-Doc. 83 (2003), p. 5.
14) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 50 (p. 894).
1) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 2.
2) S. Vogenauer in Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a
Third Party, no. 40 (p. 891).
3) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 5.
4) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 5.
5) Official Comments to Art. 5.2.6, p. 173; StL-Doc. 83 (2003), p. 6.
6) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 4.
7) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 1, 3 (beneficia non obtruduntur).
8) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 4 (avoids ‘restitutionary consequences’).
9) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 4.
10) S. Vogenauer in Vogenauer, Art. 5.2.6 no. 6; see also for the underlying policy
considerations and a comparative law overview S. Vogenauer in
Jansen/Zimmermann, Art. 6:110 [PECL]: Stipulation in Favour of a Third Party, no. 40-
43 (at pp. 891-892).
1) R. Zimmermann, Archiv für die civilistische Praxis (1993) pp. 121, 124, 125; see also U.
Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 8 (pp.
1944-45) to overcome some conceptual doubts (of mainly ‘German-speaking authors’)
if some obligations arising from a contractual relationship “cannot be conditional”.
2) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 2 (p.
1932) (reference to R. Zimmermann, Archiv für die civilistische Praxis (1993) pp. 121,
125, citation adapted, emphasis added); and no. 16 (p. 1940).
3) See e.g. U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL],
no. 16 (p. 1940): “it must be stressed that their outline and effect mainly depends
upon the parties autonomy.”
4) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 16 (p.
1940).
5) S. Rowan in Vogenauer, Introduction to Section 5.3 of the PICC, no. 2 (‘clear and
simple default regime’).
6) S. Rowan in Vogenauer, Introduction to Section 5.3 of the PICC, no. 2.
7) See StL-Misc. 26 (2006), no. 192 et seq.; St-Misc. 27 (2007), no. 386 et seq. and S. Rowan
in Vogenauer, Art. 5.3.1 no. 10-15 and no. 6 citing MR Donaldson in The Varenna [1984]
QB 599, 618, CA (who describes the word ‘condition’ as ‘a chameleon-like word which
takes its meaning from its surroundings’); U. Babusiaux in Jansen/Zimmermann,
Introduction before Art. 16:101 [PECL], no. 4 (p. 1933) on ‘terminology’.
8) Therefore the Working Group was initially undecided what terms to use: “conditions”
or “terms” and whether a common law lawyer would understand “suspensive” and
“resolutive” as opposed to “conditions precedent” and “conditions subsequent” StL-
Misc. 26 (2006), pp. 29-31; S. Rowan in Vogenauer, Art. 5.3.1 no. 6-7, 13 who mentions on
the one extreme France with at that time 17 articles on the subject (i.e. ex Art. 1168-
1184 in the old version of the French Civil Code, since the 2016 version replaced by
“only” eight Art. 1304 – 1304-7), while, on the other end, common law jurisdictions
tend to have fact specific case law on the underlying issues.
9) See the summary of U. Babusiaux in Jansen/Zimmermann, Introduction before Art.
16:101 [PECL], no. 2 (p. 1932), no. 8-9 (pp. 1935-36) and no. 15 (pp. 1939-40).
10) U. Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 1 (p.
1942).
11) See U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 1
note 2 (p. 1931).
12) See U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 10
(p. 1937) on the use of conditions with regard to both single obligations and entire
contracts: “The approach of the PICC is inspired by the English law […].”
13) S. Vogenauer, Unif. Law Rev. (2014), pp. 481, 491; Fauvarque-Cosson Unif. Law Rev.
2011, pp. 537, 538; U. Babusiaux in Jansen/Zimmermann, Introduction before Art.
16:101 [PECL], no. 17 (pp. 1940-41).
14) S. Vogenauer, Unif. Law Rev. (2014), pp. 481, 491; U. Babusiaux in Jansen/Zimmermann,
Introduction before Art. 16:101 [PECL], no. 17 (pp. 1940-41).
15) First suggested in StL-Misc. 27 (2007), p. 44 (Gabriel); StL-Doc. 108 (2008), p. 5.

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 16) StL-WP. 22 (2009), p. 4; this is e.g. different from the US system, as noted by S. Rowan
in Vogenauer, Art. 5.3.1 no. 5 referencing to § 224 Restatement (Second) of Contracts
(USA), comment c; Gabriel, RabelsZ 77 (2013), 158, 162-163. See U. Babusiaux in
Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 10 (p. 1937): “The
approach of the PICC is inspired by the English law, which sometimes distinguishes a
condition that is a ‘prerequisite of the very existence of an agreement’ from a
condition precedent, which refers to the performance of an obligation.”
17) Official Comments, Art. 5.3.1 no. 5, pp. 177-178; StL-WP. 16 (2008), p. 5; StL-Doc. 108
(2008), p. 5; StL-WP. 28 (2009), p. 4; S. Rowan in Vogenauer, Art. 5.3.1 no. 15 and 8; see
also R. Peleggi in Eppur si muove: The Age of Uniform Law, pp. 1539, 1601-1604.
18) As noted in the Official Comment C of PECL, Art. 16:101: “it is not the past event that
forms the basis of the condition but the future publication or availability of
information concerning that event”, as cited by U. Babusiaux in Jansen/Zimmermann,
Art. 16:101 [PECL]: Types of Conditions, no. 2 (p. 1943) and highlighting, with reference
to S. Rowan in Vogenauer, Art. 5.3.1 no. 8-9, that this applies also to the Unidroit
Principles.
19) The equivalent under English law would be a ‘contingent condition precendent’, S.
Rowan in Vogenauer, Art. 5.3.1 no. 13.
20) In some common law jurisdictions one would speak of a ‘condition subsequent’,
Official Comments, Art. 5.3.1 no. 3 and Illustration 6, p. 176; S. Rowan in Vogenauer,
Art. 5.3.1 no. 12.
21) Official Comments, Art. 5.3.1 no. 1, p. 174; StL-WP. 22 (2009), p. 4; S. Rowan in
Vogenauer, Art. 5.3.1 no. 2, 8.
22) S. Rowan in Vogenauer, Art. 5.3.1 no. 8.
23) R. Anderson in Vogenauer, Art. 2.1.6 no. 18 (whereby this is debatable in cases where a
100% shareholder of the company, acting in contract negotiations as manager, could
instruct the board).
24) Official Comments, Art. 5.3.1 no. 1, p. 174; S. Rowan in Vogenauer, Art. 5.3.1 no. 8.
25) Official Comments, Art. 5.3.1 no. 2 and Illustration 4, pp. 174-175; StL-Doc. 124 (2010), p.
5; S. Rowan in Vogenauer, Art. 5.3.1 no. 21.
26) StL-Doc. 124 (2010), p. 5; S. Rowan in Vogenauer, Art. 5.3.1 no. 1.
27) In particular from the US perspective, see above no. 320.
28) StL-Doc. 113 (2009), p. 6; StL-WP. 28 (2009), p. 6; S. Rowan in Vogenauer, Art. 5.3.3 no. 4
(with respect to Art. 5.3.3).
29) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 12 (p.
1938) and Art. 16:101 [PECL]: Types of Condition, no. 9 (p. 1945) proposing to ask as a
test “if one party (typically the debtor) took on the risk of the impossibility of the
condition.” In the absence of a fundamental mistake that is relevant under Art. 3.2.2
the contract will be valid including the condition.
30) U. Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 5 (p.
1944).
31) Official Comments, Art. 5.3.1 no. 1, p. 174; StL-Doc. 103 (2007), p. 11 (Fauvarque-Cosson);
StLDoc. 108 (2008), p. 5; S. Rowan in Vogenauer, Art. 5.3.1 no. 4; U. Babusiaux in
Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 5 (pp. 1943-44).
32) Fauvarque-Cosson Unif. Law Rev. 2011, pp. 537, 539; S. Rowan in Vogenauer, Art. 5.3.1
no. 4.
33) Official Comments, Art. 5.3.1 no. 1, p. 174; S. Rowan in Vogenauer, Art. 5.3.1 no. 4; see
also implicitly StLWP. 16 (2008), p. 5; StLWP. 22 (2009), p. 4 U. Babusiaux in
Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 5 (p. 1944) noting
with further references that even the choice of law can be formulated as a condition.
In practice, the choice of the Unidroit Principles is also a ‘condition’ of an offer
whenever such offer is submitted under the Unidroit Principles.
34) U. Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 4 (p.
1943).
35) S. Rowan in Vogenauer, Introduction to Section 5.3 of the PICC, no. 2; Art. 5.3.1 no. 22;
U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 13
(pp. 1938-39) and Art. 16:101 [PECL]: Types of Conditions, no. 9 (p. 1945): “The treatment
of these problems must be derived from the general rules on impossibility and
illegality.”
36) StL-WP. 22 (2009), p. 4; S. Rowan in Vogenauer, Art. 5.3.1 no. 9; U. Babusiaux in
Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 5 (pp. 1933-34).
37) S. Rowan in Vogenauer, Art. 5.3.1 no. 15 (thereby summarizing StL-Doc. 113 (2009), p. 7;
StL-WP. 28 (2009), p. 5) referring to Official Comments, Art. 5.3.1 no. 5, pp. 177-178 and
Fauvarque-Cosson, Unif. Law Rev. 2011, pp. 537, 540; U. Babusiaux in
Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 10 (p. 1946).
38) S. Rowan in Vogenauer, Art. 5.3.1 no. 19.
39) Cf. Official Comments, Art. 5.3.1 no. 4 and Illustration 8, pp. 176-177; S. Rowan in
Vogenauer, Art. 5.3.1 no. 18.

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 40) StL–Misc. 26 (2006), p. 34 (Bonell, Fauvarque-Cosson); StL-Doc. 103 (2007), p. 10
(FauvarqueCosson); Official Comments, Art. 5.3.1 no. 4, p. 176; S. Rowan in Vogenauer,
Art. 5.3.1 no. 19; U. Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of
Conditions, no. 3 (p. 1943) observing pertinently: “This approach means that those
conditions, the fulfillment of which is simply subject to one party’s control, and that
hence signify a complete lack of contractual commitment […] lead to the absence of
a valid contract between the parties.” In the same vein also the Official Comments,
Art. 5.3.1 no. 4, p. 176: “This is a question of interpretation. If it appears that there is
no intention to be bound, there is no contract, nor is there any contractual
obligation.” (Emphasis added). This explains why the Unidroit Principles did not see
the need for an explicit rule on the issues, see U. Babusiaux in Jansen/Zimmermann,
Art. 16:101 [PECL]: Types of Conditions, no. 10 (pp. 1945-46), discussing also the
consequences of voidness of the contract (entirely or partially) if the potestative
condition is unreasonable.
41) S. Rowan in Vogenauer, Art. 5.3.1 no. 20. See also U. Babusiaux as cited in previous
note.
42) Official Comments, Art. 5.3.1 no. 4 and Illustration 7, p. 176; S. Rowan in Vogenauer, Art.
5.3.1 no. 17.
43) See S. Rowan, previous note.
44) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 3 (pp.
1932-33) with the distinction between ‘contractual’ and ‘legal’ conditions “belonging
to the sphere of the law.”
45) See, in the context of PECL, U. Babusiaux in Jansen/Zimmermann, Art. 16:103 [PECL]:
Effects of Conditions, no. 2 (pp. 1952-53).
1) S. Rowan in Vogenauer, Art. 5.3.2 no. 2 (with references to the laws in Germany,
Switzerland, and USA, argumentum § 230 (1) (2) Restatement (Second) of Contracts
(USA)).
2) StL-Doc. 108 (2008), p. 8.
3) Official Comments, Art. 5.3.2 no. 1 and 2; StL-WP. 16 (2008), p. 6; StL-WP. 22 (2009), p.
11; DCFR).
4) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 7 (p.
1934).
5) S. Rowan in Vogenauer, Art. 5.3.2 no. 7; U. Babusiaux in Jansen/Zimmermann, Art.
16:101 [PECL]: Types of Conditions, no. 6 (p. 1944); see for the historical background
and development ibid. no. 9 (pp. 1936-37) on ‘some prior effect’ of an obligation under
a suspensive condition in Roman law as an inheritable asset of the beneficiary which
could also be ‘novated, abrogated and assured via pledge’.
6) S. Rowan in Vogenauer, Art. 5.3.2 no. 8.
7) Official Comments, Art. 5.3.2 no. 2, p. 179; S. Rowan in Vogenauer, Art. 5.3.2 no. 9.
8) See e.g. U. Babusiaux in Jansen/Zimmermann, Art. 16:103 [PECL]: Effects of Conditions,
no. 1 (p. 1952).
9) Cf. S. Rowan in Vogenauer, Art. 5.3.2 no. 10.
10) Discussed by S. Rowan in Vogenauer, Art. 5.3.2 no. 2; U. Babusiaux in
Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 6 (p. 1944): “[…]
meaning that the non-occurrence of a future event will give effect to the contract or
to the contractual obligation.” Example: If no third party challenges this tender
procedure [within the cut-off dates for such action], …”
11) It may refer to a ‘real obligation’, see Fauvarque-Cosson Unif. Law Rev. 2011, pp. 537,
540, as cited by U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101
[PECL], no. 6 (p. 1934).
12) U. Babusiaux in Jansen/Zimmermann, Introduction before Art. 16:101 [PECL], no. 7 (p.
1934).
13) U. Babusiaux in Jansen/Zimmermann, Art. 16:101 [PECL]: Types of Conditions, no. 7 (p.
1944).
14) S. Rowan in Vogenauer, Art. 5.3.2 no. 12.
15) S. Rowan in Vogenauer, Art. 5.3.2 no. 13; U. Babusiaux in Jansen/Zimmermann, Art.
16:103 [PECL]: Effects of Conditions, no. 1 (p. 1952): “the relevant obligation comes to
an end.”
16) S. Rowan in Vogenauer, Art. 5.3.2 no. 13.
17) S. Rowan in Vogenauer, Art. 5.3.2 no. 14.
18) Official Comments, Art. 5.3.2 no. 1, p. 179; S. Rowan in Vogenauer, Art. 5.3.2 no. 2, 5.
19) Fauvarque-Cosson Unif. Law Rev. 2011, pp. 537, 543-544; S. Rowan in Vogenauer, Art.
5.3.2 no. 4.

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 20) StL-Doc. 103 (2007), p. 16 (Fauvarque-Cosson with reference to Hartkamp); however
critical in StL-WP. 16 (2008), p. 6, stating that it is a trend towards abolishing
retroactivity, agreeing StLDoc. 108 (2008), p. 6; S. Rowan in Vogenauer, Art. 5.3.2 no. 2
(citing German, US and Swiss Law; e.g. § 230 Restatement (Second) of Contracts; as
well as a counter example from France in no. 3 (referring to ex-Art, 1183 French Civil
Code, now Art. 1304-7 in the 2016 version, which provides, to the contrary, in principle
for retroactivity as the principle but with two exceptions: an option to waive it and
an exception for the case where the services have been exchanged in instalments
over time). History: The issue of retroactivity was already debated in Roman law (‘no
consensus’). The French counter example goes back to the Middle Ages (Bartolus de
Saxoferrato, 1313-57), U. Babusiaux in Jansen/Zimmermann, Introduction before Art.
16:101 [PECL], no. 14 (p. 1939) and Art. 16:103 [PECL]: Effects of Conditions, no. 6 (p.
1953).
21) S. Rowan in Vogenauer, Art. 5.3.2 no. 1.
22) U. Babusiaux in Jansen/Zimmermann, Art. 16:103 [PECL]: Effects of Conditions, no. 3 (p.
1953), referring to both examples.
23) U. Babusiaux in Jansen/Zimmermann, Art. 16:103 [PECL]: Effects of Conditions, no. 3 (p.
1953) citing PECL 16:102, Comment D.
24) S. Rowan in Vogenauer, Art. 5.3.2 no. 5; U. Babusiaux in Jansen/Zimmermann, Art.
16:103 [PECL]: Effects of Conditions, no. 4 (p. 1953).
25) S. Rowan in Vogenauer, Art. 5.3.2 no. 13; U. Babusiaux in Jansen/Zimmermann, Art.
16:103 [PECL]: Effects of Conditions, no. 4 (p. 1953).
26) In that example of 2018-21, the warranty agreement was in the end concluded under
the Unidroit Principles.
1) Official Comments to Art. 5.3.3, p. 180; S. Rowan in Vogenauer, Art. 5.3.3 no. 4; U.
Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]: Interference with Conditions,
no. 2 (p. 1948).
2) Official Comments to Art. 5.3.3, p. 180; S. Rowan in Vogenauer, Art. 5.3.3 no. 4.
3) S. Rowan in Vogenauer, Art. 5.3.3 no. 3 (with references to French, German, Swiss as
well as English and US law); U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]:
Interference with Conditions, no. 1 (p. 1947).
4) Art. 16:102_PECL and Art. III.-1:106 (4) DCFR, StL-WP. 22 (2009), p. 13; U. Babusiaux in
Jansen/ Zimmermann, Introduction before Art. 16:101 [PECL], no. 10 (p. 1937).
5) Official Comments to Art. 5.3.3, p. 180; StL–Doc. 103 (2007), p. 13 (Fauvarque-Cosson);
StL-WP. 22 (2009), p. 13; StL-Doc. 113 (2009), p. 10; see further both (i) S. Rowan in
Vogenauer, Art. 5.3.3 no. 4 and (ii) U. Babusiaux in Jansen/Zimmermann, Art. 16:102
[PECL]: Interference with Conditions, no. 2 (p. 1948), emphasizing both that this root of
Art. 5.3.3 comes close to the common law theory of estoppel (“it is self-contradictory
to submit the contract to a condition in the first place and then to interfere with its
occurrence or non-occurrence”). There may be an economic reason for the
inconsistent behavior (e.g. a change of the market price) but that risk was taken when
concluding the contract with a condition, exercising party autonomy (Art. 1.1, 1.3).
6) U. Babusiaux in Jansen/Zimmermann, Interference with Conditions, Art. 106:102
[PECL], no. 1 (p. 1947).
7) U. Babusiaux in Jansen/Zimmermann, Interference with Conditions, Art. 106:102
[PECL], no. 1 (p. 1947). The fictional coming into force of a condition prevented by a
party has its roots in Roman law, in the ‘testamentary manumission of slaves’ and the
law of bequests. In English law, the ‘wrongful prevention of the fulfillment of a
condition’ breaches an ‘implied contractual condition’. See the historic overview of
U. Babusiaux ibid. no. 15 (pp. 1939-40) and no. 9 (p. 1936) on the pending condition
(‘condicio pendet’) in Roman law.
8) U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]: Interference with Conditions,
no. 3 (pp. 1948-49) references to “the terms of the contract, the parties’ intentions,
and the interpretation of the scope of the contract with regard to the condition” and
proposes to ask whether the action of the interfering party was reasonable or
unreasonable with regard to the ‘nature and purpose of the contract’, ‘the
circumstances of the case’, and ‘the usages and practices of the trade or profession’
(→ Art. 1.7 no. 2).
9) S. Rowan in Vogenauer, Art. 5.3.3 no. 7 and U. Babusiaux in Jansen/Zimmermann, Art.
16:102 [PECL]: Interference with Conditions, no. 3 (p. 1947) give the example of
intervention to fulfill ‘a legal duty to maintain safety’.
10) See Official Comments to Art. 5.3.3, para. (c) and Illustration 3, p. 181; StL-WP. 16
(2008), p. 8; S. Rowan in Vogenauer, Art. 5.3.3 no. 7-8.
11) U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]: Interference with Conditions,
no. 7 (p. 1950): “If the fulfillment of the condition was not probable, it could be
regarded as unfair to impose the entire loss to the interfering party” (with reference
to S. Rowan in Vogenauer, Art. 5.3.3 no. 20).
12) Official Comments to Art. 5.3.3, p. 180, with examples at pp. 180 et. seq.; StL-WP. 22
(2009), p. 14; S. Rowan in Vogenauer, Art. 5.3.3 no. 12, 19-21.
13) StL-WP. 18 (2008), p. 5; cf. Fauvarque-Cosson Unif. Law Rev. 2011, pp. 537, 546
(mentioning that the consequences have not been subject to regulation in Section
5.3); U. Babusiaux in Jansen/ Zimmermann, Art. 16:102 [PECL]: Interference with
Conditions, no. 4 (p. 1949).

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 14) Arguing in this direction explicitly for the PECL but apparently also with regard to the
Unidroit Principles U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]:
Interference with Conditions, no. 7 (p. 1950) with reference to critical remarks by S.
Rowan in Vogenauer, Art. 5.3.3 no. 21 and 33.
15) S. Rowan in Vogenauer, Art. 5.3.3 no. 13-16; U. Babusiaux in Jansen/Zimmermann, Art.
16:102 [PECL]: Interference with Conditions, no. 4 (p. 1949) and no. 6 (p. 1950) on the
four logical consequences (for each of the two types of – suspensive or resolutive –
conditions, depending on whether the interference hindered or triggered a condition
to substantiate).
16) See U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]: Interference with
Conditions, no. 4 (p. 1949): “It seems indeed opportune to give the injured party the
choice to terminate the contract or to treat the condition as fulfilled, since it may be
intolerable to continue to be bound to a party who has shown to act against good
faith and fair dealing”; see further S. Rowan in Vogenauer, Art. 5.3.3 no. 17, 19 with
doubts, if Art. 5.3.3 leaves at all the door open for fictitious fulfilment of the
condition. These doubts are not shared by U. Babusiaux op. cit.:”The wording of PICC
5.3.3., however, does not prescribe such a limitation.” With regard to the international
and bridge building character of the Art. 5.3.3 (→ Art. 1.6, 5.3.3 no. 1), no road should
be cut off and the fictional fulfilment of the condition should be accepted as one
option among several options.
17) See S. Rowan in Vogenauer, Art. 5.3.3 no. 17 (discussing ‘strengthening’ of the position
of the innocent party).
18) Cf. S. Rowan in Vogenauer, Art. 5.3.3 no. 20 (discussing in no. 21 also the option of
“termination” in case of an interference with a resolutive condition).
19) Slight adaptation of an idea in the Official Comments to Art. 5.3.3, p. 180; S. Rowan in
Vogenauer, Art. 5.3.3 no. 9.
20) U. Babusiaux in Jansen/Zimmermann, Art. 16:102 [PECL]: Interference with Conditions,
no. 5 (pp. 1949-50).
1) Cf. StL-WP. 18 (2008), p. 8; Official Comments to Art. 5.3.4, p. 182; U. Babusiaux in
Jansen/ Zimmermann, Art. 16:104 [PECL]: Duty to Preserve Rights, no. 1 (p. 1955).
2) U. Babusiaux in Jansen/Zimmermann, Art. 16:104 [PECL]: Duty to Preserve Rights, no. 3
(pp. 1955-56) observing that the protection under German law goes further and
includes property law related aspects (example: after a sale of a good the seller
pledges or otherwise transfers in rem the rights over a good sold under a condition).
These aspects are not covered by the Unidroit Principles (→ Introduction no. 17).
3) S. Rowan in Vogenauer, Art. 5.3.3 no. 6.
4) S. Rowan in Vogenauer, Art. 5.3.3 no. 7-11 (pointing at the difference of the restitution
regime which distinguishes, also in the 2016 edition of the UNIDOIT Principles, in Art.
7.3.6 and 7.3.7 between contract to be performed at one time or over a period of time,
→ Art. 1.11, 3rd hyphen).
5) See U. Babusiaux in Jansen/Zimmermann, Art. 16:104 [PECL]: Duty to Preserve Rights,
no. 4 (p. 1956) who observes that this issue is not explicitly covered in Art. 5.3.4.
6) Official Comments Art. 5.3.4 Illustration at p. 182.
7) U. Babusiaux in Jansen/Zimmermann, Art. 16:104 [PECL]: Duty to Preserve Rights, no. 2
(p. 1955), noting also: “In case of a suspensive condition, the parties are bound not to
inflict a detriment to the future contractual rights that will be effective after the
fulfillment of the suspensive condition.”
8) When several European companies are being sold together and lawyers from
different jurisdictions are involved, this is the wiser approach as compared to acting
under just one national law, like Canadian or English law (as both witnessed over
time in practice). When just one company is being sold, it is often simpler to act for
all aspects under the law of the jurisdiction of the target. This is why, in practice, the
use of the UnIDROIT Principles for Merger & Acquisition-transaction will remain rare.
It is of interest if a foreign buyer intends to buy companies in a given industry in
several jurisdictions and wishes to do so on the basis of one adapted template.
1) StL-Misc. 28 (2008), pp. 38-39 (Komarov); StL-WP. 22 (2009), p. 16; see the excellent
critical summary of S. Rowan in Vogenauer, Art. 5.3.3 no. 10 et seq.
2) Official Comments to Art. 5.3.5, p. 183; S. Rowan in Vogenauer, Art. 5.3.3 no. 13-17; U.
Babusiaux in Jansen/Zimmermann, Art. 16:105 [PECL]: Restitution in Case of
Fulfillment of a Resolutive Condition, no. 2-3 (pp. 1957-58) concluding after discussion
that the distinction between prospective and retroactive effect “seems superior” as
compared to a general unitary regime like in PECL.

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