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Go to Database Directory CISG Advisory Council* Opinion No. 10
To be cited as: CISG-AC Opinion No. 10, Agreed Sums Payable upon Breach of an Obligation in CISG Contracts, Rapporteur: Dr. Pascal Hachem, B�r & Karrer AG, Zurich, Switzerland. Adopted by the CISG-AC following its 16th meeting in Wellington, New Zealand on 3 August 2012.
MICHAEL BRIDGE, ERIC E. BERGSTEN JOACHIM BONELL, ALEJANDRO M. GARRO, HAN SHIYUAN, ROY M. GOODE, JOHN Y. GOTANDA, SERGEI N. LEBEDEV, PILAR PERALES VISCASILLAS, JAN RAMBERG, , HIROO SONO, CLAUDE WITZ, Members SIEG EISELEN, Secretary [*]
Comments on Rule 1
Comments on Rule 2
Comments on Rule 3
Comments on Rule 5
Comments on Rule 6
Comments on Rule 7
Comments on Rule 8
1. The Convention governs the incorporation in the contract and interpretation of clauses providing for the payment of agreed sums for failure to perform the contract (�agreed sums�).
2. According to the principle of freedom of contract laid down in Article 6 CISG the parties may derogate from Articles 74-79 CISG by including such clauses.
(a) Provisions on the protection of the obligor of the otherwise applicable law or rules of law relying on notions such as reasonableness, excessiveness or proportionality must be applied in accordance with an international standard. This standard must be developed from the underlying principles of the CISG.
Rule 1 repeats the undisputed view that Articles 14-24 CISG govern the incorporation of agreed sums.[1]
2.1.1 Agreed sums payable upon breach of an obligation are a frequent feature in sales contracts. Today, parties are free to include such clauses in Civil Law systems.[2] Excessive sums are typically [3] subject to reduction.[4] The Nordic systems likewise recognise the concept of agreed sums, although there are no specific rules in the respective Contracts Acts.[5] In terms of their validity, the Nordic systems treat them as every other clause in the contract. This means that a modification of excessive sums is possible under the provisions allowing for a modification of unconscionable terms in a contract.[6]
2.1.4 At the international level the first steps were taken by the 1973 Convention Benelux Relative � la Clause P�nal. In the aftermath of the drafting of the CISG UNCITRAL in 1983 finalised the Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance. Subsequent followers to the UNCITRAL Rules are Article 7.4.13 UNIDROIT Principles of International Commercial Contracts in 1994, 2004 and 2010, Article 9:509 Principles of European Contract Law in 1999 and Article III.�3:712 of the Draft Common Frame of Reference in 2009. The approach taken by the UNCITRAL Rules and its followers dispenses with the distinction of penalty and liquidated damages clauses. Rather, all agreed sums are upheld, subject to reduction in case of excessiveness.[15] An essentially identical approach is also taken by Article 170 of the European Code of Contract published by the Gandolfi Initiative in 2001.[16]
2.2 The Position of the CISG Rule 2 of this opinion acknowledges the frequency of agreed sums in commerce and reemphasises the freedom of the parties to include such clauses into their contract. Courts and arbitral tribunals have based this principle either on Article 6 [17] or on Article 45(2).[18] Since penalty and liquidated damages clauses are inseparably intertwined with the law of damages, such clauses affect Articles 74-77, 79, 80 of the Convention.
3.2 Legal systems have developed different mechanisms to offer protection for the obligor. These can be summarised as follows: Legal systems may establish specific formal requirements for agreed sums; legal systems may fix the maximum amount of such sums; legal systems may deny enforceability to agreed sums classified as penalties; legal systems may provide for the reduction of excessive sums. Furthermore, the obligor may be protected by general provisions exempting it from liability.
3.3 From the perspective of the CISG, all of these protection mechanisms concern the validity of agreed sums. Where domestic laws establish fixed amounts for agreed sums,[19] these provisions determine to what extent an agreed sum is valid. Where a legal system denies enforceability to agreed sums classified as penalties,[20] the function of the clause determines the validity of the entire clause. Where a legal system provides for the reduction of excessive sums, such provisions determine the extent to which an agreed sum is valid. As the CISG is not concerned with questions of validity � Article 4 sentence 2(a) CISG � domestic protection mechanisms generally remain applicable to agreed sums in CISG contracts.
4.2.2 From this finding it follows that when applying tests such reasonableness, proportionality or whether an agreed sum is a genuine pre-estimate of the loss, these must be assessed against an international standard to be derived from the CISG. To put it in traditional terms of legal systems prohibiting penalties: Whether a sum stipulated is a genuine pre-estimate of the loss � which in the end is always a test of reasonableness � must not be decided in accordance with domestic case law but in light of what is reasonable in international trade. To put it in traditional terms of legal systems employing a reduction mechanism: Whether a clause is excessive under the circumstances and thus to be reduced is not to be decided in light of what is held to be excessive in domestic contracts, but is to be determined by applying an international standard.
4.3.2 The possibility to induce performance by an agreed sum is recognised in most Civil Law legal systems, Mixed Jurisdictions, Nordic legal systems and in international instruments. The mandate of Article 7(1) CISG requires the standard also to be acceptable to those legal systems which take a different stance. This relates to those legal systems that protect the obligor by denying enforceability to clauses classified as penalties. Here, it is justifiable that the test of whether an agreed sum is a genuine pre- estimate of the loss in international sales contracts can also be passed by clauses inducing performance by the respective counter-party.
4.3.3 A closer analysis of the developments in Common Law jurisdictions reveals that the traditional rule has come to be seen as a rare departure from the general principle of freedom of contract and is perceived to be a relic from the age of English courts of equity protecting obligors in penal bonds.[27] The traditional Common Law approach has been labelled an anomaly,[28] with its underlying ratio being 'mysterious'[29] and remaining 'one of the abiding mysteries of the common law'[30] which in the end turns out to be an 'anachronism, especially in cases in which commercial enterprises are on both sides of the contract'.[31] In a similar vein Lord Diplock had stated in Robophone Facilities Ltd v Blank: 'I will make no attempt, where so many others have failed, to rationalise this common law rule. It seems sui generis.'[32] Others speak of an 'accident of legal history'.[33]
4.3.4 Furthermore, there is increasing acceptance of the notion that the law of damages protects the interest in the performance of the contractual obligations owed and not merely the economic balance sheet. In comparative law discussion this development is typically described as a paradigm shift from the 'economic benefits principle' to the 'performance principle'.[34] Under this latter principle the law of damages is considered to function as an enforcement of contractual obligations.[35]
4.3.5 A vivid example is Attorney-General v Blake.[36] The majority of the Law Lords reasoned that 'the law recognises that damages are not always a sufficient remedy for breach of contract. [�] Even when awarding damages, the law does not adhere slavishly to the concept of compensation for financially measurable loss. When the circumstances require, damages are measured by reference to the benefit obtained by the wrongdoer.'[37] One commentator has noted that an agreed sum providing for the disgorgement of benefits derived from breach of contract under the traditional rule would clearly fail to be a liquidated damages clause but that 'it would seem odd to knock out such a clause as a penalty at least in a situation where the courts would otherwise be willing to award an account of profits or restitutionary damages'.[38]
4.3.6 Further evidence for a changing perception of the law of damages � although not directly related to international sales contracts � can be derived from an increasing tendency to either grant or advocate punitive damages also in breach of contract actions.[39]
5.2 Attempts to expressly extend Article 79 CISG to agreed sums at the Vienna Conference were not successful.[40] In court practice on the CISG, this problem has apparently only arisen in one case but was left open by the court as the results would not have differed in that case.[41] Article 7(1) CISG dictates that its interpretation has to give due regard to the international character of the CISG. In light of the fact that Article 5 UNCITRAL Rules, the official Comment 2 on Article 7.4.13 PICC and the vast majority of domestic legal systems hold the obligor only liable for the agreed sum where it is liable for the non-performance, Article 79 CISG should be interpreted � absent any indications by the parties to the contrary � as relieving the obligor from an agreed sum where the requirements of that provision are met.[42]
7.1 Rule 7 deals with the interplay of the general duty to mitigate losses and the agreed sum payable by the breach of the obligor. The CISG clearly distinguishes contribution to breach by the obligee and mitigation of losses incurred. As a starting point � and in contrast to Article 80 � Article 77 does not have any impact on the fact that the agreed sum is triggered in its full amount. Under the CISG the failure to mitigate losses on the side of the obligee does not impact the amount that must be paid by the obligor. Agreed sums are payable upon breach independent of whether an actual loss has occurred. If it is generally irrelevant, whether a loss has occurred it cannot be of relevance, whether that loss is an unmitigated or a mitigated one. Articles 74-77 are rules for calculating damages. Where, however, an agreed sum is stipulated in the contract, the parties have taken care of this necessity in advance. In particular, Article 77 does not contain a reduction mechanism.[43]
8. The relationship of agreed sums to the default remedies of the CISG for breach of contract is primarily a matter of interpretation of the contract under Articles 8 and CISG. Unless otherwise agreed the following rules apply:
(b) Avoidance of the contract does not affect an agreed sum (Article 81(1) CISG). (c) In addition to the agreed sum no further damages may be claimed.
8.1.2 This is not a question of validity [46] and despite recurring statements to the contrary [47] should therefore not be dealt with under domestic law. The CISG is exclusively in charge of determining its sphere of application and thus of its remedies for breach of contract. Naturally, it is first and foremost up to the parties to make provision for the remedies available (Article 6 CISG) [48] subject to the boundaries set by the applicable domestic law (Article 4 sentence 2(a) CISG). The first step is thus always the interpretation of the clause in dispute in accordance with Articles 8, 9 CISG.[49] If this does not lead to a solution the following guidelines apply.
8.4.2 At the domestic level the position among legal systems is split with regard to the relationship of agreed sums to the remedy of damages for breach of contract. One view is that as a general rule the obligee should not be entitled to any additional losses.[53] Exceptions are typically only made where the obligor has acted intentionally or fraudulently.[54] In other legal systems, courts are granted the possibility to increase the sum. In some systems courts seem to enjoy broad discretion, as the right to adjust the agreed sum in question appears not to be subject to any qualifications.[55] Other legal systems granting this possibility to courts, however, require that the agreed sum be disproportionately low ('d�risoire', '�nfimo').[56] In systems prohibiting penalties, the obligor may not be able to invoke an unreasonably low agreed sum on the grounds of unconscionability,[57] thus leaving the obligee with its ordinary claim for damages.
8.4.4 At the international level the UNCITRAL Rules attempt to strike a balance between both positions on the availability of a claim for additional losses. First of all, Article 7 sentence 1 states that no damages may be claimed to the extent the loss is covered by the agreed sum. This is parallel to domestic rules setting off the agreed sum against the damage claim. E contrario � 'to the extent' � it follows that beyond the extent of the loss covered by the agreed sum damages may be claimed. The middle ground approach taken by the UNCITRAL Rules is then evidenced in Article 7 sentence 2. This provision restricts the availability of a claim for additional damages to cases where the loss 'substantially exceeds the agreed sum'.
8.4.5 Also in this context it is up to the parties to make provision for this issue. It is highly advisable that phrases such as �to the exclusion of additional claims� or �without prejudice to other claims� be used. On account of Article 6 CISG, the Convention does not object to either of the two solutions.[59] However, the applicable domestic law may take a different stance and strike down clauses which allow for cumulative requests for the agreed sum and damages for breach of contract.[60]
At its formative meeting in Paris in June 2001, Prof. Peter Schlechtriem of Freiburg University, Germany, was elected Chair of the CISG-AC for a three-year term. Dr. Loukas A. Mistelis of the Centre for Commercial Law Studies, Queen Mary, University of London, was elected Secretary. The founding members of the CISG-AC were Prof. Emeritus Eric E. Bergsten, Pace University School of Law; Prof. Michael Joachim Bonell, University of Rome La Sapienza; Prof. E. Allan Farnsworth, Columbia University School of Law; Prof. Alejandro M. Garro, Columbia University School of Law; Prof. Sir Roy M. Goode, Oxford, Prof. Sergei N. Lebedev, Maritime Arbitration Commission of the Chamber of Commerce and Industry of the Russian Federation; Prof. Jan Ramberg, University of Stockholm, Faculty of Law; Pro f. Peter Schlechtriem, Freiburg University; Prof. Hiroo Sono, Faculty of Law, Hokkaido University; Prof. Claude Witz, Universit�t des Saarlandes and Strasbourg University. Members of the Council are elected by the Council. At subsequent meetings, the CISG-AC elected as additional members Prof. Pilar Perales Viscasillas, Universidad de La Rioja; Professor Ingeborg Schwenzer, University of Basel; Prof. John Y. Gotanda, Villanova University; and Prof. Michael G. Bridge, London School of Economics, Prof HAN Shiyuan, Tsinghua University, Beijing; Prof. Jan Ramberg served for a three-year term as the second Chair of the CISG-AC. At its 11th meeting in Wuhan, People's Republic of China, Prof. Eric E. Bergsten of Pace University School of Law was elected Chair of the CISG-AC and Prof. Sieg Eiselen of the Department of Private Law of the University of South Africa was elected Secretary. At its 14th meeting in Belgrade, Serbia Prof. Ingeborg Schwenzer, University of Basel was elected Chair of the CIG-AC.
1. See Schwenzer/Hachem, in: Schwenzer (ed), Schlechtriem & Schwenzer � Commentary on the UN- Convention on the International Sale of Goods, 3rd edn, Oxford: Oxford University Press (2010), Art 4 CISG, para 17 [hereinafter referred to as �Commentary�]; Ferrari, in Schwenzer (ed), Schlechtriem/Schwenzer � Kommentar zum Einheitlichen UN-Kaufrecht, 5th edn, Munich: C. H. Beck (2008), Art 4 CISG, para 40 [hereinafter referred to as �Kommentar�]; Magnus, in: Staudingers Kommentar zum B�rgerlichen Gesetzbuch, CISG, 13th edn, Berlin: de Gruyter/Sellier (2005), Art 4 CISG, para 61 [hereinafter referred to as �Staudinger�]; Benicke, in M�nchener Kommentar zum Handelsgesetzbuch, Vol 5 � Viertes Buch. Handelsgesch�fte. Erster Abschnitt. Allgemeine Vorschriften �� 343�372, Recht des Zahlungsverkehrs, Effektengesch�ft, Depotgesch�ft, Ottawa �bereinkommen �ber Internationales Factoring, 2nd edn, Munich: C. H. Beck (2009), Art 21 CISG, para 57 [hereinafter referred to as �M�nchKommHGB�].
2. See for Argentina Art 652 CC; Armenia Art 369 CC; Austria � 1336(1) CC; Belarus Art 311 CC; Belgium Art 1226 CC; Bolivia Art 532 CC; Brazil Art 408 CC; Bulgaria Section 92 OCA; Cambodia art 403 CC; Chile Art 1535 CC; China Art 114 Contract Law; Colombia Art 1592 CC; Costa Rica Art 708 CC; Croatia Art 350 Civil Obligations Act; Czech Republic � 544 CC; Ecuador Art 1578 CC; Egypt Art 223 CC; El Salvador Art 1406 CC; Georgia Art 417 CC; France Art 1226 CC; Germany � 339 CC; Greece Art 405 CC; Estonia � 158 Law of Obligations Act; France Art 1226 CC; Italy Art 1382 CC; Iraq Art 170 CC; Iran Art 230 CC; Japan Art 420 CC; Jordan Art 364 CC; Republic of Korea Art 398 CC; Latvia Art 1716 CC; Lebanon Art 266 Code of Obligations and Contracts; Lithuania Art 6.71 CC; Luxembourg Art 1226 CC; Macau Art 799 CC; Mexico Art 1841 CC; Moldova Art 624 CC; Mongolia Art 232 CC; the Netherlands Art 6.91 CC; Nicaragua Art 1985 CC; Panama Art 1039 CC; Paraguay Art 454 CC; Peru Art 1341 CC; Poland Art 481(1) CC; Portugal Art 812 CC; Romania Art 1066 CC; Russia Art 330 CC; Slovakia � 544 CC; South Korea Art 398 CC; Spain Art 1152 CC; Switzerland Art 160 CO; Syria Art 224 CC; Taiwan Art 250 CC; Uruguay Art 1363 CC; Uzbekistan Art 325 CC; Venezuela Art 1257 CC; Vietnam Art 422 CC; Yemen Art 348 CC.
4. See for Argentina Art 656 CC; Armenia Art 372 CC; Austria � 1336(2) CC; Belarus Art 314 CC; Brazil Art 413 CC; Bulgaria Section 92 OCA; Chile Art 1539 CC; China Art 114 Contract Law; Colombia Art 1601 CC; Croatia Art 354 Civil Obligations Act; Ecuador Art 1587 CC; Egypt Art 224(2) CC; El Salvador Art 1415 CC; France Arts 1231, 1152 CC; Georgia Art 420 CC; Germany � 343 CC; Greece Art 4 09 CC; Estonia � 162 Law of Obligations Act; France Art 1152 CC; Italy Art 1384 CC; Iraq Art 171(2) CC; Iran Art 230 CC; Jordan Art 364(2) CC; Republic of Korea Art 398(2) CC; Lebanon Art 266(2) Code of Obligations and Contracts; Lithuania Art 6.73(2) CC; Luxembourg Arts 1231, 1152 CC; Macau Art 801 CC; Mexico Arts 1844, 1845 CC; Moldova Art 630(1) CC; Mongolia Art 232(8) CC; the Netherlands Art 6.94 CC; Panama Art 1041 CC; Paraguay Art 459 CC; Peru Art 1346 CC; Poland Art 484(2) CC; Portugal Art 812 CC; Romania Art 1070 CC; Russia Art 333 CC; South Korea Art 398(2) CC; Spain Art 1154 CC; Switzerland Art 163 CO; Syria Art 225(2) CC; Taiwan Art 252 CC; Uzbekistan Art 326 CC; Venezuela Art 1260 CC; Yemen Art 354 CC.
5. See for Denmark Lookofsky, The Limits of Commercial Contract Freedom: Under the UNIDROIT 'Restatement' and Danish Law, (1998) 46 Am J Comp L 498; for Denmark, Finland, Norway and Sweden Dimatteo, A Theory of Efficient Penalty: Eliminating the Law of Liquidated Damages, (2001) 38 Am Bus L J 655. The rules of the Icelandic Contracts Act correspond almost word for word to those of the Danish Contracts Act.
6. See for Denmark Art 36 Contracts Act; Finland Section 36 Contracts Act; Norway Art 36 Contracts Act; Sweden � 36 Contracts Act; Iceland Art 36 Contracts Act. Cf also Dimatteo, op cit (n. 5), at p 655.
12. See for Israel Art 15 Contracts (Remedies for Breach of Contract) Law which speaks of 'agreed compensation' under the heading of 'liquidated damages'.
17. See Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce in Belgrade, 15 July 2008, CISG-online 1795; Schwenzer/Hachem, Commentary (n 1), Art 4 CISG, para 17; Schwenzer, Commentary, Art 74 CISG, para 58; Honnold/Flechtner, Uniform Law for International Sales under the 1980 United Nations Convention, 4th ed., Alphen an Rijn: Kluwer Law International (1999) para 403; P Huber, in: M�nchener Kommentar zum B�rgerlichen Gesetzbuch, vol 3 � Schuldrecht � Besonderer Teil I �� 433�610, 5th edn, Munich: C. H. Beck (2008), Art 74 CISG, para 57 [hereinafter referred to as �M�nchKommBGB�]; Hachem, Fixed Sums in CISG Contracts, (2009) 13 VJ 219.
24. See for Armenia Art 370 CC; Belarus Art 312(1) CC; Georgia Art 418(2); Kazakhstan Art 294 CC; Kirgizstan Art 321 CC; Lithuania Art 6.72 CC; Moldova Art 625(1) CC; Mongolia Art 232.3 CC; Russia Art 330 CC; Slovakia � 544(2) CC; Tajikistan Art 356 CC; Turkmenistan Art 428 CC; Uzbekistan Art 261 CC.
28. See XCO International, Inc v Pacific Scientific Company, US Ct App (7th Cir), 24 May 2004, 369 F3d 998 at 1001: 'Courts don't review the other provisions of contracts for reasonableness; why this one?' 29. See XCO International, Inc v Pacific Scientific Company, US Ct App (7th Cir), 24 May 2004, 369 F3d 998 at 1001.
31. See XCO International, Inc v Pacific Scientific Company, US Ct App (7th Cir), 24 May 2004, 369 F3d 998 at 1002. Already at p 1001 Judge Posner had pointed out that 'ironically, it is the larger firm, PacSci, that is crying 'penalty clause''.
35. See Coote, Contract Damages, Ruxley and the Performance Interest, (1997) 56 Cambridge L J 541 et seq; Pearce/Halson, op cit (n. 33), (2008) 28 Oxford J Leg Stud 75; Webb, Performance and Compensation: An Analysis of Contract Damages and Contractual Obligation, (2006) 26 Oxford J Leg Stud 43; McKendrick, The Common Law at Work: the Saga of 'Alfred McAlpine Construction Ltd v Panatown Ltd', (2003) 3 Oxford U Commonwealth L J 168.
36. [2001] 1 AC 268 (HL). The spy Blake - In the words of Lord Nicholls of Birkenhead a 'notorious, self- confessed traitor', Attorney-General v Blake [2001] 1 AC 268 (HL) at 275 � had been a member of the Secret Intelligence Service (SIS) between 1944 and 1961. In 1951 he switched sides to the Soviet Union. In 1989 he wrote his autobiography which was published in 1990. In so doing, Blake violated the clause in his contract with SIS obliging him not to divulge any official information gained as a result of his employment. The information revealed by Blake, however, had been no longer confidential and their publishing did not damage public interest. The Crown sued for the 90'000 � which Blake so far had not been paid under his publishing contract and which had by injunction been frozen. With a majority of four to one the Law Lords awarded the claimed sum to the Crown.
39. See for the USA � 355 Restatement (2nd) of Contracts. In Canada the landmark decision is Whiten v Pilot Insurance Co, Can Sup Ct 22 February 2002, [2002] 1 SCR 595, majority vote delivered by Binnie J. The dissenting vote by LeBel J related only to the amount awarded. There were several decisions leading up to this decision, see already Ribeiro v Canadian Imperial Bank of Commerce, Ont Sup Ct, 9 February 1989, 67 OR 2d 385 where punitive damages were awarded for wrongful dismissal by a bank. In Vorvis v Insurance Corporation of British Columbia, Can Sup Ct, 4 May 1989, [1989] 1 SCR 1085 the court explicitly departed from the formula of the US � 355 Restatement (2nd) of Contracts which expressly speaks of 'also a tort'. In her dissenting vote Wilson J even rejected this requirement and stated that it was the nature of the defendant's conduct which was decisive. It was again pointed out in Royal Bank v W Got & Associates Electric Ltd, Can Sup Ct, 15 October 1999, [1999] 3 SCR 408 that � although rare � there are cases in which the circumstances justified punitive damages also in the absence of a tort. In England such statements can be found in Burrows, op cit (n. 40), p 409: 'recent developments suggest that the rule in Addis [�] may require reconsideration in the near future.' Edelman, Exemplary Damages for Breach of Contract, (2001) 117 L Q R 539 also relying on Royal Bank v W Got & Associates Electric Ltd, Can Sup Ct, 15 October 1999, [1999] 3 SCR 408. For New Zealand Tak & Co Inc v AEL Corp Ltd (1995) 5 NZBLC 103: rule of Addis is not absolute.
41. See OLG Hamburg, 25 January 2008, CISG-online 1681.
42. See Schwenzer, Commentary (n 1), Art 79 CISG, para 51; Schwenzer, Force majeure and hardship in international sales contracts, (2009) 39 Vict U Wellington L Rev 719 et seq; Schwenzer, Die clausula und das CISG, in: Wiegand/Koller/Walter (eds), Festschrift f�r Eugen Bucher zum 80. Geburtstag, Zurich: Schulthess (2009), p 734. Contra Mankowski, M�nchKommHGB (n 1), Art 79 CISG, para 15.
44. See for England McGregor, Damages, para 13-015: 'entirely foreign'; Whincup, para 13.34. For the USA Lake River Corp v Carborundum Co, US Ct App (7th Cir), 9 August 1985, 769 F2d 1284 at 1291 per Judge Posner; Oscar de la Renta, Ltd v Mulberry Thai Silks, Inc, US Ct App (SD NY), 17 April 2009, 2009 WL 1054830.
46. Mohs/Zeller, Penalty and Liquidated Damages Clauses in CISG Contracts Revisited, (2006) 21 Mealy's Int Arb Rep 2.
51. See for Austria � 1336(1) sentence 3 CC; Bolivia Art 533(1) CC; Brazil Art 410 CC; Chile Art 1537 CC; Colombia Art 1594 CC; Costa Rica Art 426 Com C; Ecuador Art 1580 CC; El Salvador Art 1408 CC; France Art 1229(2) CC; Georgia Art 419(1) CC; Germany � 340(1) CC; Italy Art 1383 CC; Latvia Art 1718(1) CC; Lebanon Art 266 Code of Obligations and Contracts; Lithuania Art 6.73(1) sentence 1 CC; Mexico Art 1846 CC, Art 88 Com C; Moldova Art 626(1); the Netherlands Art 6.92(1) CC; Paraguay Art 458 CC; Peru Art 1341 CC; Portugal Art 811(1) CC; Spain Art 1153(2) CC, Art 56 Com C; Switzerland Art 160(1) CO; Uruguay Art 288 para. 2 Com C; USA Perillo, Corbin on Contracts. A Comprehensive Treatise on the Rules of Contract Law, vol XI Damages, Newark/San Francisco: LexisNexis Mathew Bender (2005), p 513; Venezuela Art 1258 CC. In China this follows e contrario from Art 114(3) Contract Law.
52. See for Argentina Art 659 CC; Austria � 1336(1) sentence 3 CC; Bolivia Art 533(1) CC; Brazil Art 411 CC; Chile Art 1537 CC; China Art 114(3) Contract Law; Columbia Art 1594 CC; Ecuador Art 1580 CC; France Art 1229(2) CC; Georgia Art 419(1) CC; Germany � 341(1) CC; Italy Art 1383 CC; Latvia Art 1720 No 2 CC; Lebanon Art 266 Code of Obligations and Contracts; Lithuania Art 6.73(1) sentence 1 CC; Mexico Art1846 CC; Moldova Art 626(1) CC; Switzerland Art 160(2) CO; USA Perillo, op cit (n 51), p 513; Art 170(3) ECC.
54. See for Algeria Art 185 CC; Bahrain Art 227 CC; Costa Rica Art 427 Com C; Egypt Art 225 CC; France Steltmann, Die Vertragsstrafe in einem Europ�ischen Privatrecht, Berlin: Duncker & Humblot (2001), p 174 et seq with an overview of the discussion; Iraq Art 171 CC; Kuwait Art 304 CC; Libya Art 228 CC; Qatar Art 267; Syria Art 226 CC; Yemen Art 355 CC.
56. France Art 1152(2) sentence 1 CC; Argentina Alterini, Contratos Civiles � Comerciales � de Consumo � Teor�a General, Buenos Aires: Abeldedo-Perrot (2005), p 602.
58. See for Austria � 1336(3) sentence 1 CC; Bulgaria Section 92 OCA; Estonia � 161(2) Law of Obligations Act; Georgia Art 419(2) CC; Germany � 340(2) sentence 2 CC; Lithuania Art 6.73(1) sentence 3 CC e contrario; Moldova Art 625(2) sentence 1 CC; Switzerland Art 161 CO; Schwenzer, Schweizerisches Obligationenrecht Allgemeiner Teil, 6th edn, Bern: St�mpfli (2012), para 71.12.
60. See for the USA See for the USA H & M Driver Leasing Service, Unlimited, Inc v Champion International Corporation, Il Ct App, 17 March 1989, 536 NE2d 858 at 860: 'Here, the contract expressly provided that the USD 10,000 'liquidated damages' was recoverable in addition to 'any and all actual damages' resulting from breach. As such, that clause imposed a clear penalty which cannot be enforced.' Hachem, op cit (n 7), p 163.
Institute of International Commercial Law - Last updated January 8, 2013