Fundamental Breach of Contract acording Civil Code of Republic of Lithuania
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Abstract
The Civil Code, in comparison with the Code of 1964, expanded and detailed regulation of civil relationships in the Republic of Lithuania. Law on obligations and one of its main institutes, law on contracts, have not avoided material changes as well. Practical importance of law on contracts is undisputed in the contemporary market economy. Therefore, it’s very relevant that the novels of law on contracts, which are established in the Civil Code, were understood and interpreted correctly.
Section XVIII of the Book 6 of the Civil Code regulates grounds and order of termination of contracts and following the principles of international commercial contracts prepared by UNIDROIT on 1994, introduces a term „fundamental breach of a contract“, a concept that is new in the Lithuanian civil system.
This article attempts to reveal the content of a concept „fundamental breach of a contract“ that is established in the Article 6.217 of the Code by pointing out the meaning of each of its criteria as well as to denominate a possible new criterion that would reveal that concept.
In the author’s opinion, a concept „non-performance of a contract“ used in the Article 6.217 of the CC should be interpreted extensively, i.e. in compliance with Article 6.205, as meaning a nonperformance of any obligation under a contract, including improper performance as well as performance behind time. When interpreting criteria set forth in paragraph 2 of the Article 6.217 of the CC, one should not regard a fact of „breach“ of a contractual obligation as a necessary typical characteristic of all criteria provided for in this Article.
Fundamental breach of a contract (non-performance) is a typical example of a evaluative norm; therefore, it has no particular and defined content. Only examples of application of this norm, which were provided in the article, may be prescribed. The author makes a conclusion that the particular content of a fundamental breach of a contract will depend on a particular factual situation.
Referring to the legislative history of the criteria established in the Article 6.217 of the CC as well as to the interests, which they defend, while deciding whether a contract has been validly terminated on the grounds of the Article 6.217 of the CC, the author suggests compulsory evaluation of only two criteria the one of which is in the subparagraph 5 of the paragraph 2 of the Article 6.217 of the CC and another is the very first criteria provided in the subparagraphs 1 of the paragraph 2 of the Article 6.217 of the CC.
Considering that a phrase „intentionally or due to a gross negligence“, which is used in the subparagraph 3 of the paragraph 2 of the Article 6.217 of the CC that repeats the Article 7.3.1 (2) (c) of UNIDROIT Principles, contradicts a provision in Principles that provides for requirement of performance of an obligation without regard to a party’s fault, the author also suggests the following reformulation of the said criterion: „whether a principle of good faith has been materially violated“. According to the article’s author, such formulation should eliminate the established contradiction without lessening the former regulatory scope of the norm.
Section XVIII of the Book 6 of the Civil Code regulates grounds and order of termination of contracts and following the principles of international commercial contracts prepared by UNIDROIT on 1994, introduces a term „fundamental breach of a contract“, a concept that is new in the Lithuanian civil system.
This article attempts to reveal the content of a concept „fundamental breach of a contract“ that is established in the Article 6.217 of the Code by pointing out the meaning of each of its criteria as well as to denominate a possible new criterion that would reveal that concept.
In the author’s opinion, a concept „non-performance of a contract“ used in the Article 6.217 of the CC should be interpreted extensively, i.e. in compliance with Article 6.205, as meaning a nonperformance of any obligation under a contract, including improper performance as well as performance behind time. When interpreting criteria set forth in paragraph 2 of the Article 6.217 of the CC, one should not regard a fact of „breach“ of a contractual obligation as a necessary typical characteristic of all criteria provided for in this Article.
Fundamental breach of a contract (non-performance) is a typical example of a evaluative norm; therefore, it has no particular and defined content. Only examples of application of this norm, which were provided in the article, may be prescribed. The author makes a conclusion that the particular content of a fundamental breach of a contract will depend on a particular factual situation.
Referring to the legislative history of the criteria established in the Article 6.217 of the CC as well as to the interests, which they defend, while deciding whether a contract has been validly terminated on the grounds of the Article 6.217 of the CC, the author suggests compulsory evaluation of only two criteria the one of which is in the subparagraph 5 of the paragraph 2 of the Article 6.217 of the CC and another is the very first criteria provided in the subparagraphs 1 of the paragraph 2 of the Article 6.217 of the CC.
Considering that a phrase „intentionally or due to a gross negligence“, which is used in the subparagraph 3 of the paragraph 2 of the Article 6.217 of the CC that repeats the Article 7.3.1 (2) (c) of UNIDROIT Principles, contradicts a provision in Principles that provides for requirement of performance of an obligation without regard to a party’s fault, the author also suggests the following reformulation of the said criterion: „whether a principle of good faith has been materially violated“. According to the article’s author, such formulation should eliminate the established contradiction without lessening the former regulatory scope of the norm.
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