Commentary On Contracts in Ethiopia

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COMMENTARY
ON
CONTRACI'S IN ETHIOPIA
by Professor Ron6 David, F~t6 de Droit et dea Sciences Economi-

ques de Paria, drafter of the preliminary draft of the Ethiopian Civil
Code.
Submitted to the Imperial Ethiopian Ministry of 1\lStioe in October
and November, 1954, as an explanation and conunentary on the Ethi-
opian Civil Code preliminary draft provisions on contracts which
were later enacted as Title XII of the Civil Code.
Translated into English and edited by Michael Kindred, Faculty of

Law, Haile Scllassie I University, Addis Ababa, Ethiopia (1964-1969),
The Ohio State University College of Law (1969-1970).
Printed with the permission of the Imperial Ethiopian Ministry of

Justice.
January, 1970
TABLE OF CONTENTS
INTRODUCTION 7
CHAPTER I: THE FORMATION OF CONTRACfS 9
SECTION! : CONSENT 9
I The Elements of Consent 9
II The Vices of Consent 20
SECTION II: OBJECT AND CAUSE 28
SECTIONlli: FORM 33
CHAPTER ll: THE EFFECT OF CONTRACTS 36
SECfiONI: THEINTERPRETATIONOF
CONTRACTS 36
SECTION II: THE PERFORMANCE
OF CONTRACTS 39
SECTION ill: VARIATION OFCONTRACTS SI
SECTION IV: NON -PERFORMANCE OF
CONTRACTS 56
CHAPTERID: EXTINCTIONOFOBLIGATIONS 77
SECTION I: INVALIDATION AND
CANCELLATION OF CONTRACfS 78
SECTION II: TERMINATION OF CONTRACfS
AND REMISSION OF DEBT 82
SECfiONIII: NOVATION 84
SECTIONIV: SET~OFF 86
SECTION V: MERGER 88
SECTION VI: LIMITATION OF ACTIONS 89
CHAPTER IV: CONTRACTUAL PROVISIONS 94

SECTION I: TIME PROVISIONS 94
SECTIONll: CONDffiONS 96
SECTION ill: ALTERNATIVE OBLIGATIONS 100
SECTION IV: EARNEST 101
SECTION V: PROVISIONS AS TO LIABILITY 102
INTRODUCflON
(Articles 1675-1677)
Article 1676. The Ethiopian Civil Code deals with obligations

in.two parts. Book IV regulates obligations in general and constructs
a general theory of obligations, while Book V treats various rules
regulating the principal types of contracts. Additional rules concern-
_ing certain specific contracts are found in the Commercial Code.
While this structure of Ethiopian law ressembles that of French
Jaw, Ethiopian law differs from French law, and resembles English,
American, and Brazilian Jaw in disregarding the autonomy of admini-
strative law in the area of obligations. Article 1676 (I). states that in
Ethiopia contracts are regulated by the Civil Code regardless of who
1he parties are. Except where there are specific exceptions, contracts
between the Ethiopian government and private individuals are subject
to the same rules as contracts between private individuals.
Article 1677. Obligati.ons are created both by the law itself and
by contracts and other juridical acts of individuals. There is no real
opposition between these various sources, however, since in a broad
sense even the obligatory force of contracts depends on the law, which
regulates them and ensures their enforcement. Moreover, the law
often supplements the agreement of the parties. It defines the con-
tents of the contract and provides for various problems that may not
be foreseen by the parties at the time of contracting but that may arise
subsequently. Finally, since the legislator is charged. to do justice, he
imposes some contract clauses and certain rules required by equity
and the interest of society.
A,;ticle 1675. The Title on Contracts on General (Title XII)'
begins with a definition of contract: A contract is an agreement
I. Editor's note : The commentary presented here deals only with wh~t later
was enacted and promulgated as Title X II of the Ethiopian Civil Code. Other,
\
\ less detailed explanatory documents were submitted by Professor David with
other parts of the preliminary draft and may be published at a later time.
In this translation, article references have been renumbered to correspond
with the final numbering in the Civil Code, as enacted. Where noted within
we have omitted paragraphs dealing with provisions of the preliminary
draft which were deleted by the Imperial Ethiopian Codification Commission
or the Imperial Ethiopian Parliament prior to enactment of the Code.
whereby two or more persons as between themselves create, vary or

extinguish obligations of a proprietary nature.
The Civil Code tries to present, the rules concerning contracts
in a simple and rational order. It deals first with the simplest case,
where the contract is between only one debto~ and one creditor and
does not contain any unusual provisions. For.this situation, the Code
provides the rules relative to the formation of contracts (Chapter I),
their effects (Chapter II), and the extinction of obligations (Chapter III) ..
Then it regulates certain special contractual provisions (Chapter . IV:
time provisions, conditions, alternative obligations, earnest, and ·pro·
vi,sions as to liability), the possibility that a given obligationmay have
several debtors or several creditors (Chapter V), the position of third
persons in relation to a contract (Chapter VI: representation, as-:
signments of rights and duties, rights and obligations of the · heirs
and creditors of the contracting parties), and finally proof of the con-
clusion and performance of contracts (Chapter VII).
CHAPTER I: THE FORMATION OF CONTRACTS
Article 1678. The requirements for the existence and validity

of contracts are enumerated in Article 1678 of the Code. The ·Sec-
tions of the Chapter then deal with each of these requirements in turn,
with the exception of the requirement that the parties be capable of
contracting, which is regulated elsewhere in the Code.
SECTION r: CONSENT
I. The Elements of Consent
Article 1679. Article 1679 emphasizes the overriding impor-
tance of the parties ' consent for the formation of the contract and
the definition of its contents, but goes further and specifies that in
order for a contract to exist the parties must intend their agreement
to have an obligatory character.
In accordance with Article 1679, there is no legally binding con-
tract in the case of a simulated contract or where declarations are
obviously not intended seriously. A similar provision is found in
the German B.G .B. (Sections 117-118). We will consider later
the extent to which third persons can rely upon the appearance creat-
ed by such a simulated contract, but between the parties the simulated
act is not a contract and produces no effect.
Similarly, two persons might conclude a real agreement, but
want to keep it extra-legal, considering their undertakings simply as
obligations of honour, and thus exclude the possibility for one of the
parties to resort to the courts if the other does not perform his obliga-
tions. Here again the agreement is not, under the Civil Code, a con-
tract. The German B.G.B. (Section 145) provides a similar solution.
Illustrations.
I. A man agrees to give his wife a certain amount of money
each month to cover h,ousehold and personal expenses.
2. A father promises his son a reward if he passes his examina-
tions.
3. A person promises a friend or a neighbour that he will
do something for him.
4. A clause is expressly included in a written agreement,
stating that the agreeme~t cannot give rise to any court
action and that its sole function is to specify how the two
parties intend to act toward each other.
In none of these four cases is there a contract.
Article 1680. . According to Article 1680, the declarations of
the parties are considered in order to discover if they have reached an
agteeDnent. ·
In general, one does not try to discover what one of the parties
internally desired; the erternal manifestations of his intention are
what are legally significant. Only such external signs are considered
in order to determine whether or not a contract has been formed.
There are, however, some exceptions to this principle with respect
to vices (or defects) of consent and the interpretation of contracts.
UlostratiODI.
J. A undertakes to do some work for B ''within six months
from the conclusion of the contract.'' A thinks, in using
this formula, that it means "within six months from the
day work is begun." Therefore, he actually never in·
tended the same thing as B. Nevertheless, a contract
exists, since A's declaration of intention accords with
B's. The internal intention of A is irrelevant_to the for-
mation of the contract.
2. A offers to buy B's automobile from him, and B accepts
his offer. A has frequently seen B driving C's automobile,
and thinks that the automobile he is buying is the one-he
has seen B driving. Still, a contract for the purchase of
B's car has been formed, since the declarations of A and
B indicate agreement .
Article 1681. The intention to conclude a contract can be shown
orally or in writing, but it can also be shown by any other unequiv-
ocal sign or conduct. This rule, set forth by Article 1681 (1), can,
of course, be set aside by another express legal provision, and the
law requires the use of particular forms for the conclusion of some
contracts as a condition of validity. Similarly, the offeror himself,
when he makes his offer, can require that the acceptance of the offer
be made, or communicated to him, in a particular way. Aside from
thc:R two possibilities, the Code only requires that the intention to
contract be unequivocal .
ma~trations.
1. A writes to 8 to order certain goods. B sends tile goods.

A conuact is fonn,d. It · makes no difference whether
or not B writes A and tells him that he is accepting the
offer and is sending the goods. ·
2. A orders goods from B and specifies that the contract
will be concluded only if the goods are delivered to him
in a particular place before a particular date. The Jetter
by which B states that he accepts this offer will not be a
valid acceptance; the goods must be delivered on time
before the contract will exist.
Articles 1682-1686. In general, the silence of a person who has
received' an offer is insufficient as an acceptance of the offer. The
response that the offeree intends to make is uncertain as long as he is
silent, and that equivocal behaviour cannot be interpreted as a tacit
acceptance. One must take care, however, not to confuse si!ence,
which is not sufficient to constitute acceptance, .with outward con-
duct other than speech that can amount to a tacit acceptance. An
oft'er might be accepted, for instance, where the offeree performs the
contract without any reservation.
Articles 1683 and 1684 provide two exceptions to the general
rule ·that silence is not acceptance. Article 1683 deals with persOns:
who are required, by the Jaw or according to the terms of a conces-
sion granted them by the government, to conclude certain contracts
with anyone who makes them an offer. Since the law or concession
requires the offeree to accept the offer, there is no difficulty in decid-
ing that silence; in such a case, amounts to acceptance. The moment
at which the contract is formed is specified in Article 1683 (2). Arti·
cte·t683 will be applicable, in particular, to enterprises which are eo·
trUsted with the management of a public service or the provision of ·
supplies that are necessary to the life of a community. Article 1683
is an innovation by the Ethiopian Civil Code, inspired by the Anglo-
Amenean notion of "public utility." "Imposed contracts" are so
common in all countries these days that it seemed necessary to deal
with them in the Code .
. Article 1684 provides a second exception to the general rule that

silence does not constitute acceptance. This concerns contracting
parties who have on-going business relations and have already con·
eluded a contract. They exchange correspondence and one of them
proposes to the other the renewal of an expired contract, the modi-
fication of an existing contract, or the conclusion of a second contract
supplementing the first. He states that if he does not receive a re-
aponie within a particular period of time, he will consider that his pro-
position has been aecepted. In such a case, the .courts ate to inter-
pret the silence of the offeree as a tacit acceptance.
The conditions in which Article 1'684 is applicable are ·limited.
It is required that: (1) the parties have concluded a prior contract;
(2) one of them propose the renewal or modification of the contract
or. the ·conclusion of a supplementary contract; (3) that one state that
if he does not receive a rejection within a certain.period of time, which
must be a reasonable period, the offer win be considered accepted ;
and ·(4) this offer and ·declaration be made· in a special document.
The iast of these requirements is not satisfied in the case, frequent

in pra9tice, where the seller who has delivered the goods sends to the
buyer an invoice and inserts in the invoice clauses on which the par-
ties had ·not agreed (e.g. arbitration clauses, clauses attributing juris-
diction to a particular court, exclusion of liability clauses). Unlike
the Lebanese Code of Obligations (Article 180), Article 1685 of the
Ethiopian Code. states expressly that such clauses are ineffective. This
inefficacity will result even if the invoice states that in the absence of
protest by the buyer within a certain time limit, the clauses of the in-
voice will be considered accepted. The Code requires that such a
statement be made in a separate document, drafted for this purpose.
The statement in the invoice alone does not alert the buyer adequately
and is considered insufficient. ·
In any case, however, a person who receives an offer that he does

not want to accept is well-advised to reject it expressly, especially 'i f
he has had on-going business dealings with the offeror. He must
fear that if he simply keeps silent the courts will irite'r pret the clause
inserted by the other par1y in the invoice not' as a unilateral proposal
to modify the contract but rather as the expre~sion in w.dting of the
agreement reached by the parties. It will often be difficult for a person
who has not protested to assert later that the agreement reached did
not include the clause inserted in the invoice by the other ·party and
then relied upon by him. -
Article 1686 of the Code deals with the related problem of general
terms of busineSS" applied by a contracting party. The ~le adopted
is ·the same -as-for the clauses inserted in invoices: general terms : of
business ·ordinarily applied by .one of the parties do not obligate the
' other party unless he knew of ·and agreed to them. · An exception
·is proVided;-however, for the case where the. general terms of bu8fuess
were prescribed or approved by a governmental authority, as is some-
times the case for administrative bodies themselves or for.:.Jarge en-
terpriseS ·of particular importance to the national economy fms\u'ance, .
transportation, : etc:): ·General ,terms of business applied by such .a
person will always be obligatory.
m.mrations.
1. A merchant sends goods to someone who did not order
them and later claims the price of the goods. The silence
of the person who received the goods does not constitute
acceptance. He does not owe the price.
2. A subscribes to a periodical for a year. At the end of the
year, the distributor of the periodical continues to send
it although A has not renewed his subscription, and also
writes to A that he will renew A's subscription if A does
not inform him not to~ The price for the subscription
is due if the subscriber does not declare the subscription
terminated within a reasonable time. Here the silence
consitutes consent, since the parties had had earlier busi-
ness relations and the only question was one of renew-
ing an earlier contract.
-3. A buys some beams from B for building co!}struction.
B sends A a bill, which states: "The seller shall not be
liable for any defects in the materials delivered." This
clause had never been considered during negotiations for·
the contract. The buyer accepts the bill without pro-
test. The clause written on the bill does not obligate
him.
4. . A sends goods by rail. The railroad applies a fixed sche-
dule of rates and conditions, which includes the price of
tran_sport, the transit time allowed, clauses limiting their
liability, etc. This schedule has been approved by the
·-government. The general conditions that the railroad
applies are automatically incorporated in the contract;
they bind the sender of the goods, even if he was not fami-
liar with them and had not approved them. ·
Articles 1687..:1688. Articles 1687 and 1688 of the Code specify
three situations in. which there is no contractual offer, in the legal
sense. There is only a non-binding declaration of intention, where
1\ person simply ·indicates that he plans to do sornethin·g or that he
desires to receive offers.
Article 1687 (a) adopts and clarifies a rule of the Moroccan Code
of .Obligations (Article 14), which provides that "a mere promise
creates no obligations." ln order for an obligation to result from a
declaration· of. intention, the declaration must be communicated to
the person for whom it is intended (Compare . Indian Contract Act,
Se<:tions 3-6). This rule is absolute with respect to offers, but fo-r· ac-
ceptances· the rules are more flexible. A "communication" is only
necessary if the offeror has expressly required it. ArtiCle 168-1 ~ (2).
Otherwise, the -judge must determine whether. or not it is. necessary,
in the circumstances of the case, to require that the offeree commu·
nicate his acceptance to the offeror.
Article 1687 (b) specifies that when a person sends out market
prices, price lists, or catalogs, he is only inviting others to make him
offers and is not making an offer himself. This provision is similar
to Article 7 of the Swiss Code of Obligations. When the.person who
receives the catalog or price list sends him an order, he can accept or
reject this offer. Until he does so, the other person cannot require
him to deliver the goods ordered. Contrary to the Swiss Code, the
Ethiopian Code extends this rule to the case where a merchant dis·
plays goods in a store window with an indication of their price.
Article 1688, finally, settles a difficulty that has arisen in various
countries. When a person announces that he ·is put.ting up for auc-
tion something that he owns, he only makes an invitation for ofl:ers,
and not a true offer in the legal sense of the term. The offer is made
when someone bids on the item. The acceptance comes when the
auctioneer says "Sold!" in response to such an offer.
DJustrations.
I. A declares to someone that he intends to give $100,800
to the Red Cross. The Red Cross cannot require him
to keep this promise if tliey find out about it. The offer
can be accepted only after it is communicated to the Red
Cross by A.
2. A transportation company posts its time and rate schedule
for buses. A cannot require the departure of a bus that
has been announced in this way. The posting by the
company is a simple declaration of intention. A ~~ in·
vited to offer himself as a passenger, but no c;ontra~ is
formed until the company accepts his offer.
3. A displays his wares in a window with price tags. This .
is a simple invitation to the public to enter the ·store. If
B is attracted by this display and comes il,lto the store and
says that be wants to buy something from the window, A
can still refuse B's offer to buy.
4. A announces that his bouse is to be sold at public auction.
B bids $5000 and no one overbids ~. bu~ A refuses to
sell B the house at this price. Th.e re iS no contra~~- · ·
Note.: In illustrations .2, 3, and 4, A inay be liable to ·pay am.·
ges, if the . announcement made by. him -caused B to· iiF.
cur expenses. All that is decided by Articles 1687 and
1688. is that there is no contract in such a case.
Article 1689. A person is not bound by his promises as long
as they have not been communicated to the person who is to receive
them. This rule, stated in Article 1687 (a) of the Code, does not
apply to public promises of reward. When a person states his in-
tention to reward whoever does some particular thing and makes
this intention public by using a means of publicity such as posters,
newspaper advertisements, or radio or television announcements,
he is :bound by his offer for the period specified in Articles 1690 and
1691 of the Code. A simple oral declaration, however, even if made
before a fairly large group of people, is not sufficient to constitute
a public promise if a "means of publicity" is not used.
Article 1689 specifies that any person who does the act for which
the reward was publicly offered has a right · to receive the reward,
even if he did not know it had been offered.
The Code does not regulate in detail the relations between the
parties where several persons do the act for which the reward was
offered. It will be for the judges to decide in such cases if the whole
reward should go to one person or if it should be divided among
thcui, and to determine the bases and proportions of the division
if ·there is to be a division.
Wustratioas.
I. A 8ports association establishes a prize of $500 for the
winner of a competition or for anyone who performs a
particular feat. The newspaper of the association pub-
lishes the promise. B wins the competition or does the
feat. He can require that the prize be paid to him.
2. A, a manufacturer of drug products, . promises to pay
$1000 to anyone who, after using one of its products for
15 days according to instructions, contracts a particular
disease. The promise is made public by the newspaper
and, to guarantee its seriousness, A states that he has
deposited $1000 in a special bank account. B, having
followed the instructions perfectly, catches the disease.
· He has a right to the $1000 promised by A.
· Article 1690. Article 1690 of the Code adopts a rule that is
found in all recent codes. An offer with a fixed time limit for ,accep-
tance cannot be revoked by the offeror. By interpretation of the
wiD ·of the offeror and to temper his obligation, Article 1690 (2) ad-
mits ·that in this case the acceptance must be communicated to the
offeror and not simply sent before the expiration of the time limiL
The time and place of conclusion of the contract, however, wiD still
be decided according to Article 1692 of the Code.
mustrations.
1. A offers to sell B his house for $5000, offer to be good
until May 15. B accepts this offer by a letter that is put
in A's postal box on May 14 A does not go to pick up
his mail at the post office until May 16. He cannot
claim that B's acceptance is late. B's letter was not
read until May 16, but it arrived May 14. ·
2. In the same situation, B writes on May 5 to say that the
price proposed is too high. Then, he changes his mind
and, in a letter written May 10, which comes to A before
May 15, accepts A's offer. No contract is formed; A's
offer lapsed when B rejected it on May 5. B 's letter of
acceptance of May 10 is only a new offer (see Article
1694). A can accept or reject that offer.
Article 1691. No rule of the same precision can be formulat-
ed for an offer without a fixed time limit for acceptance. The prin-
ciple adopted is that the offer must be kept open for a reasonable
period of time. The length of this period will depend on the circUm-
stances of the case: kind of business, whether or not the offeree
is a businessman, etc.
The interpretation of the words "reasonable time" may create
difficulties. Hopefully, most of these difficulties will be eliminated
by Article 1691 (2): If the offeror feels that the acceptance was
not made within a reasonable period of time, he must declare this to
the acceptor immediately. Therefore, the question of whether or
not the acceptance was made . within a reasonable time will only
arise if the offeror, having received the acceptance, immediately de-
clares that it is late, and if the acceptor, when so informed, does not
accept this position and protests that his acceptance was timely and
insists that the contract ~ performed.
To determine whether or not the acceptance was timely, judges
must consider, among other things, the way in which the offer was
sent to the offeree. ·The offeror has the right to assume that his
offer will be transmitted to the offeree in the time normally required.
ruu5tratioDS.
I. A writes to B, in the same country, offering him s~
goods at a certain price. His letter is dated January 7,
but is delayed ·as a result of truly ·exceptional circum-
stances and only reaches B on April 2. B immediately
accepts the offer by a letter of April 3. A receives B's
letter on April 5. He sends a telegram immediately say-
ing that the acceptance is late. No cont£act is formed
in these circumstances.
2. In the same situation, B does not write to A that A's

acceptance is late until April 10. His declaration was not
sent immediately, so A and B have made a contract.
3. A .talks to B on the telephone and makes him an offer.

B does not answer immediately, but sends A a letter of
acceprance one hour after the end of their telephone con-
versation. No contract is made. A's offer to B over
the telephone is equivalent to an offer between present
persons and must therefore be accepted immediately
before A and B separate, that is to say, before they end
their telephone conversation. The offer has not been
accepted within a "reasonable time."
Article 1692. In this Article, the Code had to choose, for con-
tracts between separated persons, between the theory of emission
and the theory of reception, each of which has been adopted by some
modern legal systems. It chooses the theory of emission, as do
English, American, Swiss, and Lebanese law. The contract between
separated persons is deemed to be concluded at the time and place
where the acceptance is sent.
Regarding this, it is only necessary to recall Article 1690 (2).
The theory of emission is accepted only in principle and the offeror
may avoid its application. In particular, when an offer is made
with a fixed time limit for a<Xeptance, it is decided, by interpreta-
tion of the will of the offeror, that the acceptance must come to his
attention within the time thus fixed. It is not sufficient that it has
been sent within this time.
Article 1692 may solve some difficulties. It does not, and can-
not, solve them all. It will be very difficult to fix the place where
the contract was concluded if it is the outcome of prologned negotia-
tions, so that it is not clear what is the offer and what is the accep-
tance. It would have been futile to try to solve these difficulties. Only
the parties can resolve them satisfactorily, by stating in their con-
~ precisely when and where the contract was concluded. In
the absence of such declarations, the courts will have to decide doubt-
ful cases, taking into consideration all the circumstances of the case.
Article 1692 (2) deals with contraas made o~ the· teiq)hoJD
and does so on a purely factual basis. One simply alb which .C
the parties called the other for the conversation during which tb
contract was concluded. The contract is deemed to have been com·
eluded at the domicile of the person called. 2
Article 1693. Carried to its logical · conclUsion, the theory C)i
emission would require that both the offer and the acceptance_ pro
duce their full effects from the moment they are sent. For practical
rea..~ns, Article 169) avoids these logical consequences in some circum·
stances, as do a great number of legal systems. The offeror can
revoke his offer if the offeree knows of the revocation before or at
the same time he knows of the offer. Similarly, the acceptance can
be revoked if the revocation reaches the offeror before or at the same
time that he learns that his offer has been accepted; the offeror can-
not validly argue that the contract was irrevocably concluded the
minute the acceptance was sent.
mustratioos.
I. A writes to B and offers to sell him his house for $5000.
After he mails the letter, someone· else offers him $6000
for the house. A sends a messenger to B, or sends him
a telegram, or telephones him, and says that he revokes
his offer before B receives the letter containing the offer:
The revocation of the offer is valid.
2. A writes B and offers to sell him a ho~se for $5000. ·.P.
writes to A on January 10 to accept his offer, but then
changc::s his mind and writes a letter on January 15 re-
voking his acceptance. B establishes .that A did not · go
to his postal box until January 18 and that he received
the two letters simultaneously, although one of the letters
was put in the postal box before the other. D's accep-
tance is validly revoked.
Article 1694. An acceptance which goes beyond the offer or
which includes restrictions or modifications to the offer is in fact a
rejection of the offer accompanied by a new offer (B.G.B., Section
150).
2. Editor's note: Article 1692 (2) simply speaks of "the place where t11o pu11
was called." Professor David's reference to "domicile" seems to be.a alip
of the pen.
. llblltndoas.
I. A ofTen to 5ell . B his house for $5,000 and states that the
offer will be good until May 15. On May 1, B answers
that he accepts this offer, but that he will pay $3000 cash
at the time of the ~le and the remaining $2000 three
months later. B's answer does not amount to an accep-
tance, since it does not agree with the terms of the offer,
which did not include any delayed payment. The con-
tract is not completed.
2. A offers to sell B his house for $5000; the acceptance is
to reach A before May 15. B accepts the offer, but his
acceptance does not reach A until May 16. No con-
tract is formed, but the late acceptance consitutes a new
offer from B,. which A can accept within a reasonable
time.
Article 1695. The conclusion of a contract requires a perfect
concordance between the declarations of intention of the two parties.
Neither of them can claim that a contract exists and require its per-
formance as long as a disagreement continues to exist, even on a point
of secondary importance.
It frequently happens in practice, howev~r, that the parties agree
to begin performance of the contract before they have reached com-
plete agreement on its terms. The essential questions have been
settled and the parties think that they will reach ·agreement on all the
outstanding issues.
Also, it often happens that the agreement between the parties
turns out to be incomplete. They have indeed reached agreement
on what they have discussed, but questions arise that had not been
foreseen by them.
Article 1695 (2) deals with these two situations. Its provisions
are patterned on the German Civil Code (B.G.B., Sections 154-155).
mustratioas.
l. The parties carry on negotiations concerning a contract
for the delivery of goods and finally declare in writing
that they are in agreement on the frequency of deliveries,
the quantities to be delivered, and the price of the goods.
There still is, however, an obvious disagreement concern-
ing the conditions in which the buyer can claim compensa-
tion for inferior quality of goods delivered. The contract
is not complete, even though a document has been accept-
ed that states the agreement of the parties .on the .ques-

-tions that. JDigbt seem , ~ost important.
2. The parties, in the samesituation, agree.to ~gin the per-
formance of their contract without waiting until they
·reach a'n agreement on the points that they are still dis-
cussing. In this case, a contract has been fopned. The
conditions under which the buyer can claim: compensa-
tion for insufficient quality of the goods received by him
will be established, in the absence of agreement between
the parties on this point, on the basis of the supple_!Ory
Code articles dealing with the problem.
D. The Vices of Coasent

Article 1696. Article 1696 simply introduces the articles ~t
follow, enumerating the defects that can vitiate the consent of the
parties and permit them to request the invalidation of the contract.
These causes are mistake, deceit, and duress ...... 3
The vices of consent listed in Article 1696 of the Code are those
familar to all continental legal systems, with some variations inter-
nally. On the ·other hand, the draft is similar in various respects
to the Anglo-American system, in particular in its Articles ·t705 and
1709 (2).
Articles 1697-170 I. The requirements that must be satisfied
in order for a person who has committed a mistake in connection
with a declaration of intention to be able to require the invalidation·
of the declaration are set forth in Articles 1697-1701 of the Code
Article 1697 states the first requirement, which is a subjective
one. The person invoking mistake must prove that he would nQt
have given his consent to the contract if he had known the truth. .
But, for mistake to be invoked it is not enough that it be deter-
minative for the person whose consent is vitiated. To this subjec-
tive element one must add an objective element: The mis~ke
must relate to a circumstance that, in the particular case, was within
the scope of the contract. This happens in two cases. A'i mistake
may relate to something which ordinarily seems to be essential in
the type of contract in question: The identity or price of the object
sold or leased; the identity or special qualifications of the other party
3. Editor's note : A sentence onritted by this translation indicates that a separate

introductory sentence was contained in the preliminary draft for Articles
1708-1710: this sentence was evidently deleted, as superfluous, at a later
stage in the codification process . .
in a ~ntract concluded intuitu per8011ae; nature of the contract; etc.
Or;. it may relate to a point which has a special importance for one
contracting party and has been tacitly accepted by the other .p arty as
an element of the contract. A would no doubt be well advised to
make a fact that is of determining importance for him a condition
of the contract or to request a formal guarantee from B on this point.
Nevertheless, if A has not done this, the law protects him and permits
him to rely upon the principies of good faith to free himself from the
contract that he has concluded because of the mistake.
Article 1698 of the Code expresses this second requirement,
essential if mistake is to be invoked, in a general formula borrowed
from. Article 15, paragraph 1, of the proposed joint Franco-Italian
Code of Obligations. Articles 1699-1701 deal with some categories of
errors, in order to avoid discussion in these cases on the question of
whether or not the mistake relates to a fundamental element of the
contract.
The mistake must have been decisive for the person that invokes
it. In addition, it must relate to an element that falls within the
scope of the contract. These two requirements must be satisfied
in order for a person to be able to invalidate a declaration of inten·
tion on the ground of mistake. These two requirements are neces-
sary and also sufficient. Unlike some legal systems, the preliminary
draft makes no distinction between excusable and inexcusable mistake,
nor between mistake of law and mistake of fact. Nor is any distinc-
tion made . between mutual and unilateral mistake, nor between
mistakes resulting from misrwresentation and those made for some
other reason. Once the mistake satisfies the two requirements set
forth above, the mistaken person can always have the court invali-
date his declaration of intention, as well as the contract that results
from· it. Nevertheless, the fact that the mistake is not excusable is
riot without consequence, since it can lead to the subsequent liability
of the person who invokes it (See Article 1703). Similarly, it is im-
portant to know whether the mistake is unilateral or shared where
this may affect whether or not the mistake relates to an element of
the contract that was within the scope of the contract (Sec iUustra.
tiop number 7 below). For the case where the mistake has been callSCd
by .a misrepresentation of the other party, see Article 170l below.
m.tratioas.
I. A thinks be is signing a petition in favour of a charity
when in fact he is signing a promise to contribute annual~
ly to the charity. This i$ mistake CQoceming the natvrc
of the contract and A can have the~ contract invalidated.
I ~~ · A buys· a tractor from !l and ·ap a contract for 1hi5 .
j purdwe. . He dilcoveta later that tho ·sale price W.. ·
·-stipulated in U.S. dollars, although he had assumed that
the price wa stated iA Ethiopian dollan. The perfor-
mance that he hu undertaken ·to make is subStantially
peater than he intended. He can request the invalida.;
· tion of the contract.
3. · A buys from B some land, subject to a usufruct in C.
Unknown to either A or B, C had died before the con.;
· tract was made. B. can request the invalidation of the
contract.
4. A hires B as his accountant for one year. He does not
know. that B· had previously been convicted of ·breach
of trult. A's mistake relates to a personal quality of the·
other party. which in this case should be·considered fun ..
damontal. A can get out of the contract.
5. If B, in the precccling case, bad been convicted of nca-
lipnt hoJDicide or of assault, the cesult would be different. .
A's ignoranee of tbil fact docs not relate . to a fuoda·
montll personal quality of ~untants. A cannot ba"Yt
tho contract invalidated on the basis of thit miltakc. .
6. A buy• a bouse from B because he thinks his son is goini
to be married. and he wants·to find hiDl a·place to livo. ·
Bvcn if the marriage docs not take place, the contract
willlemain valid. A's mistake only relatol to the motive
that caused hint· to enter into the contract.·
7 A buys a p~ from B, thinking that it is the work ·or .
.,.nicular great artist. In fact the painting i1 only. a
eopy. A Can have the contract invalidated if his boliof
that this was the work of a great artist was sharecl by tbe.
other party. In such a case, this characteris.Uc of. the
painting b., become, in .the eyes of the parties, '- fUDCII·
mental elenlent of the contract. Article 1696. ·
If B, on the other hand, had not considered the paindtlg
be was selling to be a painting of a master, ~uso; ·for
example, he did not know -of the fame of the person wh<*
lignature was on the painting, A's mistake is only mistakt
on the motives that ·caused him to make the · contract.
.\ C0.\114. not rely on it to l.lave Ute ~ontra.ct invalidatod.
Al1i¢le 1701 {1).
I, I. · A buyJ OM h\ID~ typewriters of a parti~r kind frorn .
B at a price of $100 per. machine. In the contract this
price per machine is stated, but the total is stated as S8,000.
..This is a simple arithmetical mistake. It is clear· that ·the
price was fixed. on the basis of a price per piachine. One
should simply · correct the total price in the contract.
Article 1701 (2).
9. A offers to sell B a certain quantity of goods for $6,000

and B accepts the offer. The figure of $6,000 in the offer
was due to a slip of the pen of the offeror, who actually
intended to ask $16,000 for his goods. This mistake
permits A to obtain the invalidation of the cOntract.
10. A miscalculates the cost of production of his goods and

for this reason states the price as $6,000 instead of $16,000.
His mistake does not give him the right to request the
invalidation or correction of the contract. This is neither
the kind of mistake dealt with in Article 1699(b) (A wiJJ
receive the .amount that he had in mind at the time that
he declared his intention), nor the arithmetical mistake
dealt with in Article 1701 (2) (which deals with the IJlis..
take committed in the contract itself, not before the con-
tract). It is a simple mistake concerning· A's motives
and is without effect. Article 1701 (1).
Article 1702. The person who makes a mistake cannot invoke

it in a manner contrary to good faith , and in particular, remains
bound by the contract that he intended to make if the other party
declares his willingness to perform that contract. This provision is
borrowed from the Swiss (Article 25) and Egyptian -(Article 124)
Codes, and is also found in the Codes of Italy (Article 1432) and
Greece (Article 144) . .
· IDostratioa.
A owns two houses and rents the first of them to B for a
certain rent, thinking that he is renting the second house. He
requests the invalidation of the contract on the basis of his
mistake. B offers to substitute, in the contract, the second
house for the first. A must accept this offer.
Article 1703. It has been pOinted out that the Code does not
distinguish between excusable and Inexcusable mistake nor between
mistake of fact and of law, nor between unilateral and mutual mistake,
Because of the overriding importance of the will in the formation
of contract.s Article 1679,_a person should not be bound to a ~n~
when he has only appeared to give his consent because of his mistake.
aw.com
Tbe_declaration.of in~tion that he hu.made, and .that is ~
eel by tbe mistake~ does not bind. the mistaken }Jenon. But it would
be unfair to make the ·other party bear the loss in all cues. 'llt
other party thought the contract valid and, ip .reliaQ<:e· on it, may
have incurred certain expenses or undertaken other obligations. He
who invokes his mistake must compensate the other party for tbe
loS$· be sustains f~om the invalidation of the contract.
. . cOntrary · to Article 26 of the Swiss Code of Obligations, the
Ethiopian Code provides for this obligation even where the mi5take ia
not due to any fault on the part of the mistaken person. The obliga-
tion to make good the damage caused by the invalidation of the con-
tract ·disappears only where the other party knew or should have
kno\vn of the mistake.
Dlultradoal.
L A buys goods from B for a price fixed in Djibouti fraoca,
but A thinks that the price was in rcpalar French franC$.
The contract can be invalidated beca\110 of tho miatake,
but B may already have sent the gm•
from Maneillo,
where they were stored, to Addis Ababa, wbore the con·
tract provided they were to be delivered. · A trt\llt com·
penslltc B for the damage tbtt the invalidation of the
contraet causes him: o~pon5C1 of lbippinJ, atorago, and
of the retum shippins to Marseillo if neceuary. or loa
&uffcred Pn resal~ of the merchandise in Addia Ababa
at a pri® lowor Uum dt~ eontract pri", ud so on •.
2. ·nc correspondence betwocn A and 4
B at thlt' time ·the.
contrJct is made reveals to A the miltako that B ia mak· ·
ins. Ncvertheles•, A allows U to $ip tbe contract -with.
out pointing out his error to him. When B requeltl
the invalidation <>f the contract, A cannot claim eom•
pcnsation, since he knew (or ihould Q.ve known) .of B'a
mistake.
Articles 1704-1705. With JC~~t to ~4 4rtiol~_ 1704 re-
produces the solutions that are accepted jn aU lepl $)'StQms of oon·
tinontal Europe. It distinauiJbcl bmvocn e$$Cntial fraud, which
Ml a determining off~ on the mlkit\1 of tlle CQQnct, and incidcotal
fraud, "' a result Qf which 1 penon jqat JCQCptf more burdentomt
ocmtraot term~. Only OHOndal fraud allow• a pcnoo to. bavt ·hit
4. ~tor'• note: The original lMl of tho (:oplmeatary sap •'m!eiii .0··B/'
· · autclcai'ly~theeontrarywaainteadod. · ·
contract invalidated. NeverJ.heless, in the case of essential fraud
tile defrauded person may, as in the case of incidental fraud, leave
the contract in existence and just require the person who committed
the fraud to compensate him for the damage sustained. It did not
seem necessary to state this expressly in the Ethiopian Civil Code,
altho~gh it is set forth in the Greek Civil Code (Article 149).
The concept of fraud dealt with in Article 1704 requires that

deceitful practices have been utilized by one person in order to induce
an error on the part of another and thus to influence him to enter into
a contract. There is no fraud when someone just makes a false
assertion and still less when he keeps silent although he is aware that
the other person is in error, without expressly lying to him. The in-
validation of the contract can be obtained, however, in several situa-
tions wht.re one of the p.trties has acted on the basis of an incorrect
statement by the other party. First, this is possible where the mis-
taken person required a formal guarantee of the fact incorrectly as-
serted, and also where one ought to consider that this fact is within
the scope of the contract under Article 1698. Apart from these two
situations, it is possible where the requirements of Article 1705 are
satisfied. This Article is patterned after a common law solution and
requires that the parties be united by a relationship giving rise to
special confidence and requiring particular loyalty between them.
Where such a relationship exists, a person can have a contract in-
validated where he concluded it after making an error that was caused
by an incorrect statement of the other party, made in bad faith, with
knowledge that it was incorrect, or as a result of negligence, not hav-
ing taken care to be sure whether it was true or false. The same
rule applies where one person, by his silence, has allowed the other
to believe something that was not true.
The courts wiU have to determine under what circumstances
there is a special confidential relationship that justifies the application
of Article 1705. The special relationship in question is only possible
where there exists between the parties a permanent relationship,
such as that of the family or membership in a close community. The
special confidential relationship foreseen by Article 1705 would also
exist where the parties are, in their relationship to each other, in a
position of superior-inferior, either as a result of the law (policeman
and citizen) or of a contract (master and servant). On the other
hand, it would Bot exist simply because one of the parties said he
would "have confidence in the other" at the time of entering into a
particular contract. lt is up to each person to beware of the other
party when concluding a contract. The law does not ordinarily
~ one against simple misrepresentations of fact, . It is . poly in
~tances unrelated to the contractual negotiations and the <».n.~ .
dlllioo of the contract that the courts may find the special confi.dentia1
relAtionship to which Article 1705 refers.
Illustrations.
J. A sells B some land in a distant province, without B having

seen the land. A shows B what he calls photographs
of the land, which are in fact photographs of a
completely different place. He also uses false documents
to .convince B that a road will soon be built that will in-
crease the value of the land greatly. A's deceitful prac-
tices allow B to have the contract invalidated.
2. ·Af~er buying this land from A, B wants to get a parti-
cularly advantageous position and so buys an adjoining
piece of land from C. Cis not aware of A's fraud. B
cannot have the contract with C invalidated on the basis
of A's fraud.
3. A asserts to B that his land is very fertile and near the
road, whereas in fact it is sterile and inaccessible. This
is a case of simple affirmations where A does not resort
to any deceitful practices to support his affirmations and
malce B believe them. There is no fraud, in the legal
sense, and B cannot require the invalidation of the con-
tract.
4. A exchanges a piece of land that belongs to him for a
piece of land belonging to his brother, B. B tells A that
the exchange was desired by their father, .C, befor~ his
death. A agrees to the exchange because he believes that
statement, which is false. The contract of exchange can
be invalidated.
5, A is . employed by B and buys some stocks from him.
B told A the stocks were valuable, whereas in fact the
partnership that issued them had gone bankrupt. A
can demand the invalidation of the contract. ·
6. A sells to B, the district governor, some cattle because B
. says, or lets A understand, that if he does not sell them
they would be requisitioned by the government at a lower
price. If. the affitT'tation made by B is untrue, the con-
tract will be subject to invalidation.
· .Articles·l1()6.;l 709. The provisions of Article 1706 are in accor..:
daDce ~ With all continental -legal systems. We need only to point
-~ut that ... s the words "position of the parties," in Article 1706 (3)
rCrer not only to social position, _strictly speaking, but also to such
circumstances as level of education (see Article 211, Lebanese Code
of Obligations) or health (see Article 127, Egyptian Civil Code) of
the victim of the _duress.
The provision of Article 1707(1) is similarly common most to
other civil law systems, although not to that of Egypt (Civil Code,
Article 128). Article 1707 (2) is similar to articles in the Swiss Code
of Obligations (Article 29), the Lebanese Code of Obligations (Article
210), and the Greek Civil Code (Article 152); it constitutes an equit-
able counter-balance to the rule of Article 1707 (1).
Article 1708, in confonnity with various codes (Swiss, Article
30 (2); Lebanese, Article 212 (2); Italian, Article 1438), regulates a
pariicuiat: difficulty related to the theory of abuse of rights, and in
particular, to the unjust character that the duress must generally
present.
The provision of Article 1709 (1) is borrowed from the French
(Article 1114) and Italian (Article 1437) Civil Codes. It is temper-
ed by Article 1709 (2), which is borrowed from English law and the
theory of "undue influence" that it has developed.
m..tratioos.
1. A's son signs checks, imitating A's signature. The
payee of these checks, B, _infonns A that if A will not
promise to pay the checks, A's son will be prosecuted
and will be in danger of a serious penal conviction. A
signs a promise to pay. This contract cannot be in-
validated. Article 1708.
2. B, in the same situation, obtains a promise from A to
pay $10,000, when the value of the checks is only $2000.
A's undertaking can be invalidated. Article 1708.
3. A agrees to sell something to B on the insistence of his
superior, C, out of fear of displeasing the latter. The
contract between A and B cannot be invalidated for
duress. Article 1709 (1 ).
4. A, having joined a monastery, sells someun"g: to B, his
superior in the monastery, for a price of less than one-
S. Editor's note: Words from the original Commentary that are omitted here
ia~te .bat Article 1706 ( 1), in the preliminary draft of the Code, ~enecl
prally to persons close to the persou threatened. The provision. aseMCted,
refers to daop to "ascendants, descendants, or spouse." -··
third its value. A- establishes that he did n:ot think he
could refuse to give his conse~t to B became of the re-
verential fear that he had for B. The contract can be
invalidated. Article 1709(2).
Article 1710. Jurists have long been divided over whether or
not lesion should constitute a basis for invalidation of contracts.
France and England give a negative response, in principle, tothis
question. But this position, taken at a time of rampant /aissez-faire
capitalism, has since been repudiated, first in the German Civil Code
(B.G.B., Section 138), and then by all the recent codes (Swiss Code
o(Obligations, Article 21; Lebanese Civil Code, Article 214; Greek
Civil Code, Article 129; Italian Civil Code, Article 1448; Egyptian
Qvil Code, Article _129; Franco-Italian draft code, Articie 22). The
Ethiopian Code joins this general movement.
The Italian Civil Code (Article 1447) provides for the case,
apart from lesion, where a contract has been obtained by exploiting
the state of necessity of one of the . parties. It permits the person
who entered into; the contract because of necessity to get out of it,
.even if the contract is n.ot unfair. The Ethiopian Code does n~t
incorporate this rule. ·
It has followed the Italian Civil Code (Article 1448), on the
other hand, in not excluding the invalidation for lesion with. respect
to a contract involving risk or speculation. The provision of the
Lebanese Civil Code (Article 214) which decides th!s question in the
opposite way did not seem justified. Obviously, whether or not a
contract is lesionary must be judged as of the time the contract was
made. ·· ·
As with the provision of Article 1709(2), Article 1710 will only

come into play in cases of onerous contracts. If the consent of one
of the parties is insp~ by a gratuitous intention, it is obvious that
this person cannot invoke lesion. Gratuitous acts are, without a
doubt, particularly subject to suspicion, since there is reason to fear
that_the consent of the person who gives up something is not always
given in complete freedom. But it is in the rules relating to gifts,
not in those on contracts in general, that one will find the provisions
appropriate to deal with this problem.
SECI'ION ll: OBJECI' AND .CAUSE

(Arttdes _1711-1718) .
. The subjects of the "object" and -"cause'' of CODttacts -have
pwll -rise tocontinUing ~traversies among ~ lepl ·SCho1an,
primarily because different writers use the terms to mean · diffenut

things. For this reason, it i.; necessary at the -outset to define 1tihat
the Code means by the object and cause of a contract. The object
of a ·cOntract is the obligations undertaken by the parties, not tbe
things to which these obligations relate. The object of a contract
of sale, for example, is the seller's obligation to transfer to the buyer
.the ownership of the thing sold and the buyer's obligation to pay
the price; the thing sold, movable or immovable, is not the object
of the contract. The cause of the contract, on the other hand, is the
relationship of the parties' obligations to each other. Articles 1716
(2) and 1717 of the Code show why this notion is useful ~nd how it
is distinguished from the object of the contract and the motives ~f
the contracting parties. 6
Article 1711 of the Code poses a principle with re·spect to the
object of the parties: It is up to the parties to draft their contract,
not lip to the courts to make it for them .
The parties determine freely the object of the contract, the obliga-
tions that each of them is to undertake. The Code accepts, as do
present Western legal systems, the principle of contractual freedom,
which is fundamental to a society and an economy that want to leave
considerable scope to private initiative. In addition to the particular
kinds of contracts regulated by the Code, individuals can devise other
contracts. As long as these contracts do not violate any legal pro-
hibition, the law will sanction them and give effect to the will of the
parties, as manifested by their contract.
Article 1712. There are three categories of obligations that
parties can include in their contracts: obligations to give, where one
party undertakes to transfer all or part of the ownership of something
to the other party; obligations to do, where one party undertakes
to act in a certain way that will benefit the other party; and obliga-
tions not to do, where a person undertakes to abstain from acting in
a particular way.
In obligations to do, there are some cases where a person under-
takes strictly to procure a particular advantage to the other (so-Called
obligations of result). There are others where one undertakes only
to do his best to procure the advantage to the other (so-called obliga-
tions of means). The doctor and the advocate, for example, do nQt
undertake to cure the sick or to win a lawsuit for the client; thej
o~ undertake to do their best to obtain this result. The carrier,
~. . Editor's note: The word ''cause" is not used in the Ethiopian Civil Coda.
u enacted, but the substance of the provisions remains as the)r ~ ia*be
preliminary draft. · ·
on the contary, undertakes to -see to it that the· object sent arrives at

its destination, and in a sense he thus guarantees. its arrival.
Article 1712 of the Code entimerates these various possible

kinds of obligations, inviting the parties to explain as clearly as poss.i:
ble what is the object of their contract.
Article 1713. No matter how detailed the contract is, it is un-

likely that it will deal exhaustively with the obligations of the two
parties. Particularly, the accessory obligations are not likely to be
defined, because they seem so sdf-evident. Not only the letter of
the contraat must be considered; the agreement that._is expressly
articulated by the parties must be supplemented by the incidental
effects that obviously and necessarily follow from it as a result of
custom, equity, and good faith. Article 1713 sets forth this rule, in
conformity with European codes (French Civil Code, Article 1135;
Italian Civil Code, Article 1374; Greek Civil Code, Article 288). It
is als~ found in the section dealiP.g with the interpretation of con-
tracts.
Dlustratious.
I. A sells his bread business to B. He cannot argue that
he can set up a new bread store on the same street in com-
petition with the store that be sold just because the con~
tract is silent on this .point: Good faith is sufficient to
impose on him the acceSsory obligations of not setting
up such a competing enterprise.
2. A sells B goods that are named and that are to be taken
by B in fifteen days. While waiting for .B to take delivery
.of the goods, A must take whatever measures are necess.ary
to. preserve the goods sold in _good condition. This
necessary obligation is imposed"'on him by custom and
good faith. .. ·
Article 1714. The parties must,. however, sufficiently define

the~ respective obligations. By consideting together the contr~
the law's provisions concerning the interpretation of contracts, and ,
its suppletory provisions, the judge must be able to determine tbc .
object of the contract, the obligations that .~e parties have .under-
taken. Article 1714 of the Code reproduces, in this. respect, the rules
already stated in Articles 1679 and I 695. The meaning of Article
1714(1) is stated more explicitly by 1714(2), which sets forth the
formula commonly found in conimon law countries: the eourlS cannot
make a contract for the parties.
DhBtrations.
I. A undertakes to deliver a certain quantity of products
at a stated price "at the end of the rainy season." The
object of the contract and the date at which the obligation
of the seller are to be performed are sufficiently defined.
The contract is valid.
2. A undertakes to deliver "his' crop of sugar cane this year"
at so much per quintal. The amount due by the buyer
is not immediately determined, but it is determinable.
The contract is valid.
3. A promises to give B "a good reward" if he does some
specified work. B does this work. The words "a good
reward" are too imprecise; the object of the contract is
not sufficiently defined. The contract is invalid.
Article 1715. A second requirement in order for there to be a
valid contract is that the object of the contract must be possible. The
performance by the parties, or by one of them, of their obligations
under the contract must not be impossible in itself. H the obligation
undertaken is impossible to perform, the contract is not valid and
no liability is incurred by a failure to perform the obligations created
by it.
To determine whether or not the object of the contract is possible
or not, one must look at the situation at the time the contract was
concluded. If the performance of the contract appeared possible
at that .time, but later becomes iropDssible, the effects of this circum-
stance are regulated in the Chapters dealing with the effects of con-
tracts (Chapter 2, Section 4: Non-performance) and the extinction
of obligations (Chapter 3, Section 1 : Invalidation and Cancellation
of Contracts).
Moreover, the impossibility must exist in itself (Egyptian Civil
Code, Article 132; Lebanese Civil Code, Article 191). It must not
result from the special situation of the debtor, but must exist without
~gard to the person involved; ~e performance of the contract would
be impossible, even if someone other than this particular debtor were
obligated.
mustration.
A sells B a shipment of cotton, loaded on a particular ship. Un-
known to the parties, the ship and cargo have perished before
. the contract is made. The performance of the contract is .iJn...
possible. . A cannot transfer to .B the .ownership of something
that does not exist. The contract is invalid. ·
Article 1716 ( 1). The obligations assumed by the parties mst

not be unlawful or immoral.
For example, a contract will be invalid if the seller undertake!to
transfer to the buyer the ownership of a slave, since slavery is prohitt-
ed by Ethiopian law. Similarly invalid would be a contract by wheh
A promised to pay B for committing a crime or doing some other ct
prohibited by law. The same is true for the contract by which A wolld
restrict his freedom in favour of B, in conditions rejected by Ethiopin
law and morality.
It is up to the courts to decide, in each particular case, whetler
or not a contract should be valid, having regard to morals and te
conception of morality prevalent in Ethiopia.
Article 1716(2). It could happen that, even where the obligatiOls
of each of the parties, considered in isolation, would be perfectly ee-
fined, possible, legal and moral, it would seem that the contract ougLt
to be prohibited by the law, on -the ground that it is tepugnant to IBN
or morality that the obligations of one party have as a counterprt
the obligations of the other. In this case, the contract will be invalii,
because its cause is illegal or immoral.
This will be the case, for example, if one person, A, undertaklS
to pay another, B, a sum of money in order that B not commit a crim.
In themselves, there is nothing illegal or immoral about the ·obligatioiS
of either A or B. What is shocking is that B would take money _for
not doing something that, in any case, he is required to abstain fron
doing. The contract between A and B has an immoral cause; it is
invalid. -
Article 1717. It is essential not to confuse with the cause .of the
contract, understood in this sense, the motive that could make tbe
parties, or one of them, contract. This motive _is legally it:relevent
and does not affect the validity of the contract, regardless _of how
shocking it may be in the light oflaw or morality. The _C ode departs
on this point from the Italian Civil Code (Article 1345) and the Leba-
nese -civil Code (Article 201 ), which provide for the contrary 59lution.
mustrations.
1. A rents a house from B so that he ~n set up a house of
prostitution. The use that A intends to make of the
house, whether or not 'it be known to B. has ilothhtg to
do with the object .of the contract. This motive,' 'Which
impelled A, and perhaps. B, to make the contract does not
make the contract invalid.
2. A loans money to B. B intends to use this moll'ey to buy

a boat and organize a smuggling expedition. The con-
tract is valid without regard to whether or not A knew
B's motive. H will not be invalid, by the application of
Article 1716, unlesS the illegal use to be made by B of the
money lent was a condition of the
loan, B undertaking
to orga.nize the smuggling if he received the money fro.m A. 7
SECI10N ID: FORM

Article 1719 establishes the principle that there are no formal
requirements for the conclusion of contracts: "'the agreement of the
parties is sufficient to form a contract.
This principle, however, is set aside in two cases: where the law
requires that a particular contract be put in a special fonn, and where
the parties themselves have provided that their contract will be con-
cluded in a particular form.
Article I720. If the law or an agreement of the parties provides
that the contract must be concluded in a particular form, the failure
to obseive that form results in the invalidity of the contract. Article
1720 states this rule explicitly, thus eliminating the difficulties that
have arisen in some legal systems, where it has not been clear in all
cases whether the form required by the law was sanctioned by invali-
dity- (ad va/iditatem) or was only a rule of evidence (ad probationem).
The rule of Article 1720 was previously stated in the Swiss Code of
Obligations, (Article ~ 1) and in Greece (Civil Code, Article 159).
Requirements of form must not be confused with tax requirements
such as registration, that may be required by the law at the time of
the conclusion of contracts. Unlike fonnal requirements, tax require-
ments usually are not sanctioned by invalidity of the contract in ques-
tion; non-compliance with them results in other sanctions (fines,
impossibility to enforce the contract through the courts, etc.) that are
stated in the statutes concerned. Article 1720(2) states this rule,
which is of great importance with respe<.:t to international contracts.
Similarly, failure to comply with requirements of publication,
such as the copying or mention of a contract in a public register, does
7. Editor's note: Article 1718 of the Ethiopian Ci~il Code was not contained
in Professor David's preliminary draft and is not commented upon by him
in this Commentary. It was apparently added to the Code at some later
stage, prior to eilll(:tmcnt.
not lead to the invalidity of the contract, unless there i6 an cxpreu ·
contary provision of the law.
Articles 1721 and 1722. Formal requirements for particular
contracts, as a result either of the Ia w or of an agreement of the ~
also apply to preliminary contracts and to modifications that arc to
be made in these contracts. On this point, the Code follows the Greek
Civil Code (Al'ticles 164-166); it was not thought wise to retain the
limitations that are. found in the Swiss code (Article 12, Code of Obliga-
tions) on this point. Nevertheless, the term "modifications" does not
include the various ways of extinguishing contracts; provisions con-
cerning the formal requirements for extinction. are found in Chapter
m of Title XII.
mustratioos.
1. Article 1723 of the Code requires that the sale of an im-
movable be in writing. A agrees with B that he will seU
him an immovable at a particular price if a particular
event occurs. This promise of sale, preliminary contract,
is not valid unless it is in writing .
.2. A gives C a power of attorney to sell B an immovable
belonging to A. This power of attorney, preliminary con-
tract, must be in writing.
3. Article 1725 of the Code requires that the contract of
partnership be in writing. 8 A concludes a contract of
partnership with B. The parties later agree to modify
the provisions of this contract. This modification of their
ori~nal contract must be in writing in order to be valid.
Articles 1723-1725. The principle of freedom from formal re-

quirements stated by Article 1719 is in fact set aside in the case of a
number of contracts, the importance of which must be called to the
attention of interested persons by requiring a wri~ten document.
The importance attached to land by Ethiopians justifies Article
1723, which requires the conclusion in writing of all acts creating or
transferring ownership, usufructs, or servitudes on immovables, as
weU as for contracts of compromise or partition relating to an immov-
able.
8. Editor's note: This rule is not included in Article 172S, as enacted. Pro-
fessor David's comment refers to the preliminary draft of the Civil Code.
See, however, Ethiopian Commercial Code, Article 214, which requires that
contracts to form a business organization be in writing.
Article 1724 requires the written form for all contracts binding
the Government or a public adm1.nisqation.
Article 1725, finally, formulates the same requirement for certain
c::ontracts that establish lasting relatiins between the parties and for
which it thus seems necessary to establish the provisions precisely and
indisputably.
Still other contracts may be subjected to particular formal re-
quirements by provisions of the Code or other special legislation ... .9
It is sufficient to note. here the general approach of the draft While
starting from the principle of the freedom from formal requirements,
it is favourably inclined toward some formalism. -vthich seems tu.
constitute a necessary guarantee of sincere agreements in conditions
presently prevailing in Ethiopia.
Article 1726 requires no comment. It adopts a rule from the
Lebanese code {Article 220), borrowed in its substance from the Swiss
and German codes {Swiss Code of Obligations, Article 16; B.G.B.,
Section 154 {2)).
Articles 1727-1728. These two articles provide ce,rtain clari-
fications concerning the meanil)g of the words "written form" when
the law or an agreement provide that a contract shall follow this form.
The requirement that they be concluded in writing is, in the scheme
of the Code, a requirement of form, not of proof. The requirement
of the law is, therefore, not satisfied by producing letters that the
parties exchanged and that indicate their agreement. It is required
that a special instrument be drafted to express the agreement and that
this special instrument, a solemn manifestation of the agreement of
the parties and of their irrevocable intention to be obligated,· be
signed by them. On this point, the Code differs from French law,
from Swiss Jaw (Code of Obligations, Article 13) and from Greek law
(Civil Code, Article 162).
The signature of the parties must generally ~ handwritten. If
one of the parties does not know how to write or is unable to, his
signature is to be replaced by his fingerprint. The Code found it
appropriate to resort to this method of identification even in the area
of civil law, as it has been used previously in administrative and crimi-
nal law.
Article 1728(3) adopts a provision of the Swiss Code of Obliga-
tions {ArticJe 14), but the Code does n~ include a provision similar
9. Editor's note: At this point, Professor David noted that the legislature.
upon enacting the Civil Cade or at a later time, might wish to subject other
types of contracts to the general formal regulation provided by Articles
1719-1730.
to Article 14(2) of the Swiss 'code, _which pr.ovides that a machiDe-
made signature is sufficient where it is accepted a,.a matter of custom
(particularly in the case. of signatures .on commercial paper issued in
· quantity)• ·H there is need for such a rule, i~ ought to be contained
in the Commercial Code rather f'han the Civil Code. 10
CHAPTER ll: 1liE EFFECI' OF CONTRACI'S

(Articles 1731-i805)
The first Article of the Civil Code Chapter on the effect of eon-
tracts reaflirtns $0lemnly, on the legal plane, the moral rule that a
man's word is his bond. Pacta sunt servanda: contracts legally
formed become law for those who sign them. (Comp. French Civil
Code, Article 1134; Lebanese Civil Code, Article 221; Italian Civil
Code, Article 1372; Egyptian Civil Code, Article 147).
The Chapter is then divided into four Sections, devoted respec-
tively to the interpretation, performance, variation, and non-per-
formance of contracts. The effect of contracts on third · parties is
dealt with in Chapter VI of Title XII.
SECDON 1: THE INTERPRETATION OF CONTRACI'S

A.rticles 1732-1739. There are fairly considerable differences
among Western legal systems in the difficult area of interpretation of
contracts. English and French Law approach the problem from
theoretically conflicting points of view. The English approach says
that cOntracts are to be interpreted strictly, looking only at what· the
parties have said, interpreting their words as objectively as possible
and giving them. the meaning they would have for a "reasonable man. ••
The French approach on the other hand, is to search for the real in-
tention of the parties, correcting imprecise terms or incorrect figures
where necessary. The English approach is primarily concerned
with the economic utility of contracts while the French stresses their
moral basis.
Although the contrast between these two approaches definitely
bas practical consequences, it is clearer in theory than in practice.
Rules of equity in English law allow some correction of contracts to
10. editor's note: Articles 1727 (2), 1729, and 1730 arc not commented upon
by Professor David, since they only appeared at a later stage in the codifica·
tion process. Article 1727(2) is of capital importance; it provides that "(The
written document) shall be of no effect unless it is attested by two witnesses."
pye effect to the true intention of the parties; the difficulty of discover-
ing this true intention, on the other band, leads the French judge to
give primary ~ttention to the declarations of the parties.
No doubt the real reason for the contrast between English and
French law is that French law speaks primarily to the contracting
parties themselves, while in England law is conceived of primarily as
directives to the courts.
In - ~ngland, as in France, one would recommend that the con-
tracting parties conduct themselves properly and thus act according
to what they really intended rather than to the Jetter of the contract.
But, if one considers the courts' problems in interpreting contracts,
one wilt'inevitably pay more attention to what was actually said and
much less to what may have been intended. ·
Because a code is addressed simultaneously to the contracting
parties and the courts, it is. difficult to f9rmulate in a code rules ori
the interpretation of contracts.
Although the parties should be instructed always to act in good
. faith, one mrist beware lest the judges go astray, in the name of good
· faith, on a search for in~ention that can easily become pure specula-
tion. One must keep them from violating the principle, already
stated in Article 1714, that the court is not to make a contract for
the parties under the guise of interpretation.
The Ethiopian Civil Code attempts to balance these two ap-
proaches. Article 1732, in a provision that should be compared to
Article 1713, states the principle that contracts are to be interpreted
according to good faith. It seemed essential to reaffirm this princi-
ple, because it ought always to guide the contracting parties.
For the courts, however, the prinCiple is limited by an exception:
the judge is to interpret the contract only when interpretation is re-
quired, and he is expressly reminded of this by Article 1733, coming
as it does directly after Article 1732. Where the contract is clear,
the court may not depart from it and determine by way of interpreta-
tion the intention of the parties. The courts are not to distort the
contract under the guise of interpretation and make it say something
other than what a reasonable man, knowing the circumstances in
which the contract was made, would understand by reading its terms.
If the tenns of the contract are clear, the judge must give them effect.
The remedy available to a person who claims that his intention was
incorrectly stated is invalidation of the contract for error (Articles
1698 and 1699). The courts may not, under the guise of interpreta-
tion, revise the contract and thus impose on the other party a con-
traCt to which he never agreed.
Contracts reqwre interpretation only when their terms -ate am~
guous (Compare Egyptian Civil Code, Article ISO), but then- it i
proper to ask the courts to seek the parties' common intention. - _a
spite of its difficulties, to search for this Fmmon intention generaJJiy
is the best way to establish the meaning of the contract. It is 1~
artificial than assigning words technical meanings they did not ha~
for the contracting -parties. Article 1734(2), borr<;>wed from tlaJ
Italian Civil Code (Article 1362(2)), enlarges the courts' powers i=:a
looking for the parties' intention. They may even look to events
subsequent to the conclusion of the contract.
Article 1735 states one specific application of the principle tha 1
the courts are to seek the parties' intention. - This provision seem~
particularly useful, since it avoids any possible confusion. An ~x
ample will show that the apparent conflict between Articles -- 1733 and
1735 is only an appearance. Suppose that A sells B "all his immov-
ables" for an overall price. The conditions in which the contract:
is made and all the surrounding circumstances make it perfectly clear,;
however, that the parties mean only A's immovables located in_ Ethi-
opia. B might argue that the term "all his immovables" is a cler.
phrase, with no room for interpretation. Where, as in this case,
the intention of the parties is clear, however, that intention ought
to prevail; the expression "all his immovables'' is actually ambiguous:
Articles 1736 and 1737 give the courts some directives to guide
them in their search for the parties' intention, or independently of
that intention if they cannot determine what the intention was, in
order to settle the meaning and purpose of ~e contract.
A different idea inspired Articles 1738 and 1739. In ambiguous
contracts, they favour one party over the other. The favoured party
is usually the debtor. Where the contract is unclear, he will be con-
sidered not obligated or pbligated to a Jesser degree. Arti~le 1738(2)
provides an exception to this principle: the favoured party in adhesion
contracts is he who simply signed the document drafted by the
other. Where the contract clearly was drafted by one of the partie-s,
the contract is to be interpreted against that party, in favour of the
other. The rule set forth in Article 1738(2) is patterned after the
recent civil codes of Italy (Article 1370), and Egypt (Article 151).
Article 1738(1), on the other hand, adopts the French rule (Civil Code,
Article 1162), which is also found in the Egyptian Civil Code (Article
151). It rejects the Italian rule (Civil Code, Article 1371), which
invites the courts "to conciliate equitably the interests of the parties"
in the ease of ambiguous onerous contracts.
With this single exception, the principle is adopted that ambiguous
contracts are to be interpreted in favour of the debtor. The court:is
to decide that the debtor assumed the minimum obligation compati-
ble with the ambiguous tenns of the contract. ~ .particularly narrow
interpretation is called for, according to Article I 739, when the debtor
derives no economic benefit from the contract.
An example of this is where one persdn, A, agrees to hold some-
a
thing on deposit for second person, B, without compensation. He
is obligated to take care of the thing, but this obligation might be
interpreted with greater or lesser severity. Since it is a gratuitous
contract, A ~s obligation will be very leniently interpreted. A will be
required to care for B 's property as if it were his own, but will not
be required to .use greater diligence than he shows in his own affairs.
SECI10N n:· THE PERFORMANCE OF CONTRACTS

In the Section on performance of contracts, the following ques-
tions are dealt with: Who must perform the contract? To whom
ought payment {performance) 11 be rendered? What constitutes
pc:rformance? To what obligation does a given payment apply? When
is it due? Who bears the costs of payment?
The word ''paiement" is used in French legal language with a
broader meaning than it has in common language. It refers to the
perfonnance of any obligation, not just the obligation to pay money.
Article 1740. Who is to perform the contract? The contract
creates a relationship between a creditor and a debtor, 12 and one
normillly expects the debtor to perform the contract. There are,
however, two questions that arise. First, when can the debtor have
his agent or employee perform the contract for him? And second,
may a third person, in the absence of any agreement with the debtor,
interfere and perform his contract for him? Article 1740 answers
tllese questions. It does not deal, however, with the resulting rela-
tions between the debtor and the third party who performed the
obligation. This problem is dealt with in Chapter VI of Title XII.
II . Editor's note: The French term paiemenr is translated in the Civil Code
most frequently as "payment" and wiU generally be translated in that way
here, but the reader must be aware that the term is being used in a broad,
t~hnical sense explained in the second paragraph of this section.
I2. Editor's note : The French terms "dcbitcur" and "creancier" are translat-
m
ed the Civil Code as debtor and creditor and will be translated that way
here. Again, however, it must be noted that these terms are being used in a
broad, technical sense. There is a debtor and a cred1tor for every obliga-
tion: the debtor is the person obliged; the creditor, the person to whom the
promise is made. Thus, . in a contract of sale both parties are both debtor
. . . l!Jld creditor.: The seller is creditor with respect to the price and debtor with
respect to delivery; the buyer is de_btor for the price and creditor of delivery .
.,0
. Contracts can impose a v~ety of obligations on: . a de~.
This variety requires that one make a distinction in answering tbe
question posed. Sometimes it is important to t~e creditor that tbe
obligation be discharged by the debtor and no one else. This .;is
particularly true for certain obligations to do, in which the debtor-..,
personal qualificati9ns are important. In other cases, it makes 11o
difference who is obligated; the creditor is interested in receiving tbe
thing promised, but not in who performs the obligation. This is
true usually for obligations to give, and in the case of many obliga. _
tions to do.
Although the distinction between these two categories of cases
is clear in principle, it is often difficult to apply. Article 1740, in tlu
Title on Contracts in General, is able t<1do little bt~t state the principle:
The debtor shall personally carry out his obligation where the cred.
itor has a special interest in his carrying it out personally. The cred-
itor must establish that he has a special interest in having the obliga..
tion performed by the debtor himself, that because of the nature of
the obligation, 13 it would not be equivalent to have it performed by
someone else. If, however, the parties have expressly stipulated per-
formance by the debtor himself, the credit~r need not establish this
special interest; he can automatically require ·the debtor to perfonn
the contract. In such a case, the courts h've no power of interpreta-
tion.
Except for these cases, the obligation may be performed by some-
one other than the debtor, by either his delegate or someone authorized
by the courts or the law.
As we have said, the relations between the debtor and the person
who performs the obligation are dealt with in a later Chapter of this
Title. In addition, one will find, in the various Chapters of Book V
of the Code, which is devoted to special contracts, specific provisions
on the personal or non-personal character of the obligations created
by the various contracts.
mustratioos.
·1. A buys five quintals of Dutch seed potatoes from B. Jt
makes little difference to A whether the potatoes are de-
livered by B or C. B can have C discharge his obligations,
2. A is to dig an irrigation canal on B's land. It maO.
little difference to B whether th~ canal is dug by A or by
13. Editor's note : The phrase "il(lfll donne sa nature" appears in the Freucli
version of Article 1740 (1). It is translated in the Amharic venion, but is
completely ·omitted in the English.
C as long as the work is done. A can have C do the
work under his, A's, responsibility.
3. A deposits some valuable objects with B. It is important
to A that the bailee be B, whom he knows personally or
who has a guaranteed solvency, and not C, any other
person. B cannot give over to C the valuables that he
has received by virtue of his contract of bailment with A.
Articles 1741-1744. To whom should performance be tendered?
To whom" should payment be made? The principle stated by Article
1741 requires no comment: Payment shall9e made to the creditor
or a third party authorised by the creditor, the court, or the law to
receive it on his behalf.
The creditor may be incapable of receiving payment because of
minority, for example, or because of a judicial decision taking from
him the administration of his property. In such a case, payment is
to be made to the person designaced by the court or the law to re-
present the creditor, rather than to the creditor himself or someone
designated by him. The debtor who pays the creditor in such a situa-
tion does not inake a valid payment, and he thus exposes himself
to a possible sec~ndclairn. Even so, he will not be required to pay a
second time if he can prove that his payment benefited the creditor
and that the creditor, when he requests the second payment, still has
the enrichment from the first payment. Article 1742 adopts this
provision from the French Civil Code (Article 1241). A similar
provision is found in the Italian Civil Code (Article 1190).
Article 1743 provides for two cases where payment is valid and
the debtor consequently is discharged, even though he has not paid
the person legally entitled to payment.
Article 1743(1) adopts the rule of French Civil Code Article 1239
(2). Payment is valid if ratified by the creditor or if it benefits him,
that is if it has, and to tlie extent that it has, enriched the creditor in
fact.
Article 1743(2), using a formula borrowed from the Italian Civil
Code (Article 1189), states ·a rule that is also found in the Civil Codes
of France {Article 1240), Lebanon (Article 293) and Egypt {Article
333). The debtor is discharged with respect to the true creditor if
he pays in good faith a person who has rio right to receive payment
but who seems unequivocally . to be the creditor. The particular
situation in mind here is that of the apparent heir. It is also the case of
14. · Editor's note: In the original; Freach version of the Colnmentary, tbele
words are •'par 9lli," but the 1ilca.ninc is clearly "a qui."
a person who has improperly taken possession of a bearer note anci
demands payment of the note at maturity. The debtor pays the
person whose position as creditor appears to be established. He i~
discharged and the true creditor bas recourse only against the per.
son who has improperly used his note; the creditor can require the
latter to reimburse the amount improperly collected (See Italian Civil
Code, Article 1189(2)).
Artiele 1744, fim.lly, deals with the situation where the debto.r
cannot be sure who is the creditor. An ·example of this would be
where the succession of the original creditor is in dispute between
two persons, both ofwhpm claim to be the heir. Article 1744 borrows
Article 168 of the Swiss Code of Obligations to solve this problem.
Dlustratioos.
I. A owes B $1000, but B is 15 years old and thus subject

to the incapacity of all minors. Rather than pay B, A
ought to pay C, B's legal. representative.
2. In the same situation, A pays the $1000 to B and B wastes
the money. Since the payment to B is not valid, a second
payment of $1000 can be requested by B after he reaches
majority, or by C, B's legal representative.
3. B, having received the $1000 from A, gives it to C. A is
discharged.
4. B wastes $500, but invests the other $500 in shares that
doubled in value and are worth $1000 at the time B sues
A. A does not have to pay anything. As a result of
A's · payment, B is presently enriched by $1000. It is
irrelevent that B wasted $500 of the $1000 paid him by A.
5.. A owes B $1000. He pays C, who has a mature claim
of $1000 against B. A is discharged.
Article 1745. What things, goods, or services are to be delivered?
Article 1745 first reaffirms the principle already set forth in Article
1731: Contracts are law for the parties. What must be given by
the parties is what they have agreed to give. A cOntracting party
cannot discharge his obligation by offering his creditor something else,
even if the other thing is of incontestably greater value than the thit,lg
promised. The creditor never commits an abuse of right in holding
to the contract and requiring, even if one cannot see why he should,
the exact thing that was a~ to. Article 1745 adopts the rule that
is found i~ the civil. codes of France (Article 1243), Lebanon (Article
299), italy (Article 1197)'and Egypt (Article 341).. .
IDostratfon.
A buys from B a case of Champagne of X brandname. de- a
livers a case of Champagne of Y brand, saying that he does not
have any more bottles of brand X in his storeroom at the moment,
but that brand Y is better and that, as a special favour, he.. will
give A the bottles of brand Y at the price of brand X in order to
keep his promise. In doing this, B is actually offering to modify
the contract; he is not performing the contract that has already
been concluded. A can refuse the delivery tendered by B.
Article 1746. From this principle that the creditor can demand
exactly what was promised follows the creditor's right to refuse a
partial payment. Article 1746 (I) states this rule. Similar provi-
sions are found in the civil codes of France (Article 1244), Germany
(B.G.B., Section 266), Lebanon (Article 300), Italy (Article ll81),
and Greece (Article 316) .
.
The rule of Article 1746(2) is borrowed from the Egyptian Civil
Code (Article 342(2)). It gives the creditor the right to require, as
well as refuse, a payment that he considers partial if part of the debt is
contested by the debtor. The debtor cannot delay payment until
the dispute is resolved, nor subordinate payment to the condition
that the creditor agree not to press his claim to receive more.
Illustrations.
I. A sells B three cases of Champagne. A delivers two
cases. B can refuse to accept this performance.
2. A and B are discussing the amount that B owes A. A
claims it is $1300 ; B claims it is only $1100. A writes
to B, "Send me $1100 now; we will settle our dispute
later." B must send the $1100. 1 s
Article 1747. Where the obligation is to deliver fungible things,
there are other problems. Who has the right to select the thing that
the creditor is to receive? Article 1747 leaves this choice to the debtor
in the absence of agreement to the contrary, as do the Swiss Code
of Obligations (Article 71) and the civil codes of France (Article 1246),
Lebanon (Article 299), Italy (Article 1178), and Greece (Article 289).
But the debtor, in performing his obligation, must choose goods of
at least average quality.
IS. Editor's note: The commentary on the preliminary draft at this point con-
tains several paragraphs discussing an Article 70 of the draft, which W8Sreplac•
.ed at a later stage in the codification process by the present Article 17".
This Jatter Article, unlilce Article 70 of the draft, places the r isle: of deter-
ioration and loss on the debtor, in principle, rather than on the creditor.
Article 1748. What is to happen if the goods that he tenders,

in such a situation, are of less than average quality, or are not strictly
of the quality expressly required by the contract. There is no pro-
blem if the quality delivered is higher than the quality specified;
suffice it to say that in such a case the debtor will be entitled only to
the payment provided in the contract and cannot require more. But
there is a problem when the thing delivered is of a lesser quality than
was due. Can the creditor refuse the performance thus offered or
must he accept it and be satisfied with an indemnity to reestablish the
con~ractual equilibrium 7 Article 1748 adopts the second position.
and extends it to the case where the quantity offered by the debtor
is not in exact conformity with the contract.
The creditor who wants to refuse the performance offered, by
asserting that what is offered is not of the quantity ot quality provided
for in the contract, must show that he has a special interest in receiv-
ing exactly the quantity or quality specified.
.
Usually he will not be able to establish su,·h an interest and he
will have to accept the. performance tendered and may only reduce
his own performance or demand the payment of damages to com-
pensate for the deficiency. The extent to which he can reduce his
own performance or the amount of indemnity he can claim will have
to be fixed by the courts in case of dispute.
The creditor also can stipulate in the contract a right to reject
the other party 's performance if it does not conform strictly in quality
and quantity to the contract provisions. Such a clause obviates
the necessity of showing a special interest in receiving exactly what
was specified.
In addition, the quality of the goods may be so described in the
contract that a tender of non-conforming goods will be of "a different
thing" than that specified. In that case, one would apply Article
1745 rather than Article 1748. Without showing any speci81 in-
terest, he could reject the goods tendered.
One ought also to note the relationship between Article 1748
and Article 1746. Article 1746 applies to a partial performance,
while Article 1748 applies where the debtor pretends to discharge the
whole debt but in fact delivers an insufficient quantity. In the first
case, the creditor can always refuse the psrformance tendered; ~
the second, he must, except in the two cases just dealt with, show
that he has a special interest in receiving exactly the performance
promised.
. 'In W~tem codes, the rule of Article 1748 is \isually found in the
chapter .dealing ; with sale, and it is acee.p ted as current commercial
usage. It seemed desirable to place it in the Title of the Code dealing

with Contracts in General and thus to extend the scope of its applica-
tion.
ruustrations.
1. B sells A 100 liters of olive oil, to be deHvered in Addis
Ababa. When B's shipment comes to A, it contains
only 97 liters. A cannot refuse the shipment.
2. The contract specifies that the oil must be. of a particular
quality. The quality delivered is slightly inferior. A
must still accept the shipment, unless he specified that he
would have the right to refuse anything not satisfying
the contract specifications or can prove that the difference
in quality is sufficiently important that the delivery is
not of value to him.
3. A specifies that he is buying olive oil of a certain brand.
B delivers lOO liters of olive oil of a different brand. Here
it is not just the quality of the goods, but their identity
that is involved. A can refuse the shipment.
4. In place of olive oil, B sent peanut oil. A can refuse the
shipment.
Articles I 749-1750. Money debts are to be discharged in the
currency of the country where payment is to be made. This is so
even where the amount is stated in the contract in another currency,
unless the contract expressly states that payment is to be made in the
foreign currency.
Articles 1749(1) and I 750 formulate these rules in accordance
with Section 244 of the German Civil Code and Article 84 of the Swiss
Code of Obligations.
The Code also provides, in Article 1749(2), that parties may fix
the . amount due by referring to an index made up of the price of
certain goods or services without indicating a specific amount of
currency. This provision seemed desirable to exclude the doubts
that have arisen in other countries where it has been asked whether
sudl clauses, which are aimed primarily at the danger of monetary
instability, were contrary to public policy. The Code recognizes the
validity of such clauses, except where they are regulated or prohibited
by law.
Article 1749 (2) provides for these clauses because monetary
init&bibly and .inflation c,an occur indspendently of 'a ny legislative
decision. No effort was made, on the otl,Jer hand, to specify in the
Code the effects of monetary regulations; these would ·require special

legislative action. The Code, made to last, can only provide prin-
ciples that prevail in normal circumstances and in a time of stability~
When stability is compromised, the legislator must take appropriate
action in the particular circumstances of the moment to concilate
public and private interests. Legislation that devalues the currency
ought to include provisions dealing with contracts in force. Legisla-
tion on control of foreign currency ought to say what happens to
clauses in existing and future contracts that provide for payment in
foreign currency. In any case, the legislator must define what is
meant by "local currency" as that term is used in -Article 1749(1 ).
Provisions nn payment should be put in the Civil Code only if they
reflect permanent monetary concepts or relate to currency pheno-
mena that can occur independently of legislative action.
lllustrations.
I. A owes B E$300, payable in Asmara. A cannot discharge
his debt by paying B the equivalent, in Egyptian pounds,
of E$300. He must pay in bilJs or coins that are legal
tender in Ethiopia.
2. A concludes a contract with B and is to pay B, according

to the contract, 500 pounds sterling. The place of pay-
ment is Asmara. A will discharge his debt by paying
B, in. Asmara, the equivalent in Ethiopian dollars of 500
pounds sterling. ·
3. In the preceding case, it is specified in the contract that

pounds sterling must actually be paid, and not Ethiopian
dollars. A must pay in pounds sterling.
4. A loans B E$1000. It is stipulated that B is to repay a

sum corresponding to the price of X kilograms of butter
or X meters of a particular kind of cloth. This stipula-
tion is valid.
Article 1751. Article 1751 is similar to rules in the codes of

Switzerland (Code of Obligations, Article 73), Germany (B.G.B.,
Section 246), and Italy (Civil Code, Article 1284). It does not specify
in what cases interest is due in the absence of agreement between the
parties or at what time interest payments are to be made. It simply
states the rate of interest that ·is to be paid when interest is due and
the· parties have not fixed the -rate. . The·;pro\'ision of Article 17$t: i&
applicable; -in particular,· where ·one of the parties o~ the .o~ . a
sum_of money; ha$ not paid it, and has been put in default (interest
for-default. dealt with in Article 1803). 16
Articles 1752-1754. When a debtor does not pay all he owes
his creditor, either because he makes a partial payment that is accepted
by the creditor, or because he owes several debts to the creditor and
makes a payment that is insufficient to discharge them all, it is necessary
to determine to what the payment applies.
Article 1752 deals with partial payments and states that it covers
first costs, then interest due, and only finally the principal debt. This
c<>nforms with the rule in various Western legal systems: French
Civil Code (Article 1254), S\\1ss Code of Obligations (Article 85),
Italian Civil Code (Article 1194). The fonnula itself is borrowed
f-rom the codes of Lebanon (Article 308) and Egypt (Article 343).
Articles 1753 and 1754 deal with the case where the debtor is
liable toward a single creditor for several debts. The debtor may
indicate which of the debts he intends to discharge. If he does not,
the creditor may specify in his receipt the debt to which he is applying
the payment; when the debtor receives the receipt he can declare his
opposition to this application of the money and declare which debt '
he has discharged. The provisions of Article 1753 are similar to
rules in the Swiss Code of obligations (Article 86) and the Lebanese
Civil Code (Article 307).
If the debtor does not declare his choice and if the receipt con-
tains no specification, the law itself makes an imputation of the pay-
ment. Article 1754 considers first the date of maturity of the debt
an.d secondly how burdensome the debt is for the debtor. Payments
are applied first to debts that are due ; among debts that are due no
distinction is made on the basis of the date on which they fell due.
For debts that are not due, payments are imputed first to those that
will fall due first. If several debts are already due or will become due
on the same date, the payment is imputed first to the_one most burden-
some to the debtor. If an application of these principles does not
dictate imputation to one debt over another, the payment is to be appli-
ed to all debts in proportion to their amount.
_ · These rules, which apply when neither the debtor nor the creditor
has specified his choice, seemed sufficient and certain distinctions
made in other civil codes (French, Article 1256; Italian, Article 1193;
Swiss, Article 87) have been abandoned.
16~ Editor's note : At this point, Professor David discussed the factors to be
considered in deciding what rate to fix as the legal rate of interest. The rate
finally adopted in the Code is 9 %. ·
Article 1755. This Article determin~s the place where pay·
mcnt is to be made. If the parties determine the place of.Y!Dent,
their agreement will be respected. If the parties hav-e sai<f~ot.hing,
it is provided generally that the payment is to be made at the domicile
of the debtor. 17
There is, however, an exception to this principle under Article
17 55(3): unless otherwise agreed, payment in respect of a definite
thing is to be made at the place where such thing was when the con-
tract was made.
Article 1755 is similar to rules in the civil codes of France (Article
1247), Lebanon (Article 302), and Egypt (Article 347). It differs,
however, from the Swiss Code of Obligations (Article 74), the German
B.G.B. (Section 270), the Italian Civil Code (Article 1182) and the
Greek Civil Code (Article 321), which declare payments of money
due, in general, at the domicile of the creditor. It did not seem
advisable to include in the Code such a provision, which would favour
creditors; if they desire such a clause they should be sure to include
it in the contract.
Nor does the Code contain any provision like Italian Civil Code
Article 1182, which provides that exceptions to this rule may result
from custom, the kind of business involved, or circumstances. A
clear rule seemed preferable; if the parties wish, they can alter these
rules by agreement.
The example of the Greek Civil Code (Article 322) led us to speak
in Article 1755(2) of the place where the debtor had his domicile at
the time the contract was made rather than, as do other codes, simply
at the domicile of the debtor (or creditor). 18
mustratious.
1. A loans B E$l000. Nothing is said about the place
where the money is to be paid. It is to be paid at the
place where B has his domicile at the time the contract
is made. The place where the contract is concluded and
the place where the money is paid to B are irrelevant.
2. A sells B a carpet. The carpet is to be put at B 's disposal
at the place where it is located when the contract is con-
cluded.
17. Editor's note: Here again, Professor David uses the word "domicile" in
a non-technical sense, since the text speaks in terms of "the place where the
debtor had his normal residence." See note 2 above.
18. Editor's note : See note 17 above.
3. A ·undertakes to deliver 10 quintals of ·fiour to-.}J. ·The·
flour is to be delivered at the place where A .has his domi-
cile when the· contract is made.
Articles 1756 and 1757(1). The time when payment is due,
like the place of payment, is to be fixed by agreement between the
parties. Among the possible provisions i.n the contract, the Code
deals in Chapter I~ of Title XII with time provisions and conditions,
both of which are related to this question. ·
Wh~re no time for payment is fixed in the contract, the parties
are normally required to perform their obligations immediately. A
party must perform as soon as the other party giv~ him a notice of
default in the manner prescribed in Section IV of this Chapter.
Performance (in bilateral contracts) should take place, in princi-
ple, simultaneously; he who requires the other par-ty to perform his
obligation should already have performed his own, or should offer to
perform it immediately, unless of course the contract fixes a later time
for performance by him. Article 1757(1) states this rule expressly,
similarly to the codes of Germany (B.G.B., Section 271), Switzer-
land (Code of Obligations, Article 82), Italy (Civil Code, Article
1400), and Egypt (Civil Code, Article 161).
Articles 1757 (2) and 1159. Article 1757 (2) deals with two situa-
tions where one party, although not the beneficiary of a time provi-
sion, can, as an exception to Article 1757(1), refuse to perform his
obligations; This is inspired by the English concept of anticipatory
breach of contract. .
The first situation is that where the other party has clearly shown
that he will not perform his obligations. Article 1757(2) does not
require that this intention be expressed in any particular way nor
that it be communicated to the creditor by the debtor.
The second case is that where the insolvency of the other party
has been established by a court. The Code does not require that
bankruptcy have been declared; an attachment that has been ordered
without success in favour of another creditor of the debtor is sufficient.
In these two situations, a person has the right to refuse to per-
form his obligations; the other party cannot tbed object that his own
obligations need not be performed.
In order to have a clear idea of the rights of the parties, one
should consider together with Article 1757 (2) the provisions in the
Section dealing with the non-performance of contracts that aiiow a
party to declare a contract cancelled in certain cases.
· . The right to suspend performance of the contract in the two
situations outlined in Article 17 57(2) ceases, by virtue of Article 1759,
if the other party produces securities sufficient to guyantee that he
wj]J perform hi,s obligations. A new undertaking by ·the defaulting
party is insufficient; he must provide securities that .guarantee timely
performance of his obligations. 19
lllastratioos.
l. A has undertaken to perform for B a role in B's .theater
in-February. A then undertakes to play another role in
another theater in the same city at the same time. It is clear
that the two undertakings ca.'1not both be performed. B
can refuse to make advance payments that he was to
make to A under the contract.
2. B declares in public that he will not perform his obliga-
tion to A. A can suspend performance of his part of
that contract that B has deciared he will not perform.
3. A concludes a contract with B. He is to deliver to B a
fixed number of cases of beer per month that B will pay
for every three months at a fixed time. B goes bankrupt,
A can stop his deliveries, until he receives a guarantee
that he will be paid.
.4. A is to deliver to B, under a contract, 100 cases of beer,
for which he has already been paid. B negligently in-
jures A in an accident and must pay him compensation
for this. A cannot refuse to deliver the cases of beet
until this compensation has been paid. B's debt is not
connected with the contract from which A's obligations
derive. · ·
Article 1760. 20 Unless otherwise agreed, the debtor is to meet
the costs of payment. This rule is also found in the codes of France
(Article 1248), Lebanon (Article 304), Italy (Article 1196), and Egypt
(Article 348). The costs of payment can be considerable; they in-
clude costs of packaging, transportation to the place of delivery,
and taxes that are collected at the time of this transportation (import
duties in particular). Generally, however, the debtor will not have
to meet most of these expenses anyway because of the way Article
1755 establishes the place of payment. The expenses of payment will
19. . Editor's note: The Commentary on the preliminary draft at this point con·
t ains two paragraphs discussing an Article 83 of the draft, which was omitted
at a later stage in the codification process.
20. Editor's note: Article 1758 was not contained in the preliminary draft of the
C:::ode. It was added at a later stage in the codification process, and so is the
s. ~bject of no comment here.
alwtyt include, on the other hand.. the costs of providing a receipt
and stamp taxes ~t may be collected at ! he time of payment.
Articles 1761-1762. Articles 1761 and 1762 establish the debtor's
right to·require a receipt for payment and, when he has paid the whole
debt, the return of the document evidencing the debt. These Articles
are similar to Articles 88 and 90 of the Swiss Code of Obligations.
Similar articles are found in other codes: Egypt (Civil Code, Article
349); Italy (Civil Code, Article 1199); Lebanon (Civil Code, Article
366), and Germany (B.G.B., Sections 368-371).
SECTION m. VARIATION OF CO NTRACTS 21
Articles 1763-1766. The question of whether the courts should
have the power to modify contracts in certain circumstances has caused
lively discussion since the War of 1914. Writers, courts and legis-
lators have proposed and adopted various solutions to this problem.
The problem of modification of contracts comes up in two different
ways. First, do the courts have a supervisory power over the forma-
tion of contracts so that they can modify its clauses simply because
they seem inequitable, apart from a ny change in circumstances?
Aside from a few specific contracts (contract of assistance at sea,
payment of some agents, and, in France, marriage brokerage), West-
em legal systems have unanimously refused to give courts this power,
which would allow them "to make contracts for the parties." Arti-
cle 1763 states this rule explicitly. The only remedy for a party to
an inequitable contract is to request the invalidation of the contract
on the ground of a defect In consent.
The threat of such an action might lead the other party to com-
promise and modify by agreement the unfair clauses in the contract.
Variation by agreement is, of course, always possible. The courts
themselves can only invalidate an inequitable contract; they cannot
modify it.
The problem of whether a court can modify a contract also
comes up in another context, where circumstances have changed after
the contract was made. The balance in the contract tQat existed
when it was concluded has been upset. The party who is prejudiced
claims either that the contract should be modified or that he should
be released. He asserts the existence of an implied rebus sic stantibus
21. Editor's note: The words "vary" and "modify" are used interchangeably
in the translation of this Section ofthe Commentary, as they are in the Code
articlca themselves. ·
claue. in th~ contract. Or he claims. that it .is impossible to perform
the. original contract; the contract that can be performed, he sap;
was
is a different .c ontract from· the one _the· parties agfeed to~ There
· considerable· division a.niong Western legal systems foHowing the
War of 1914 concerning how this problem should be dealt with.
Article 1764 holds to the traditional position on this point which . ·
was accepted in all countries before 1914 and which still prevmls in ·
France. ·Except where expressly permitted bylaw, the courtS cannot
varj contracts.
The reasons that support this ..solution are o}?vious. First, it
is an attempt to avoid a proliferation of litigation. And secon4,
although courts are .well able to solve legal problems and· state the
law, they are not qualified to deal with questions of economics and
to draft contracts. . For this double reason, it is essential to have the
rule set forth in Article 1764. The parties must know that their con-
tracts bind them; when they conclude a contract of lo~g ~uration,
they should protect themselves against the ·risk of circumstan~s .
changing after the contract is made. This is in fact what happens
in countries like France where the "theory of imprevision" is rejocted.
The rule .provided in Article 1749(2) increases these possibilities in
Ethiopia. ·
The courts cannot modify contracts except in ca5es provided
by law. Article 1764, in stating this rule, calls cOntraCting partie5'
attention to the problem of contract modification and suggests that
they may want to provide for it in their original contract. It also
suggests that even if they did not put such a provision in the contract,
they may want to make a new contract taking account of new circum-
stances where justice so requires. With respect to this latter
possibility, however, one should remember Article 1722: the new
agreement, modifying the earlier one, must be concluded in the same
form L'lat was required for the validity of the oribinal contract.
mustratiom.
1. A contracts with B to have B do some work for a fixed
price. A later learns that this price, which he . freely
agreed to, is terribly high. Another contractor would
have done the same work for one third the price. The
court cannot vary the contract on the grounds of fairness.
2. A agrees to furnish water to B for the irrigation of B's
Jand. The contract is made for 99 years. It is provided
that A wilJ supply B with a certain number of gallons
of water per day ·or per week for a fixcxl total price. The
cost of living increases greatly and the price agreed to
-52-
seems absurdly low. The courts cannot vary the con-
tract in ord_e r to raise the price.
3. A undertakes toward the central, or a provincial, govern-
ment to provide specified transportation services between
two towns for a certain time according to stated condi-
tions. · Circumstances change and the service can no
longer be provided except at a loss under the terms of
the contract. Nevertheless, the contract must be per-
formed. The courts cannot modify it (except in the
circumstances set forth in Article 1767).
Article 1765 again shows the Code's positive attitude toward
the variation of contracts where circumstances have changed, with
the single restriction that the variation is not to be made by the courts.
It allows, and . even suggests, that the parties submit to third party
arbitration in such a case. Article 1765 seemed desirable also to
make it clear that, if there was an arbitration provision in the contract,
no one can claim that the object of the contract is insufficiently defined
and that the contract is therefore invalid by virtue of Article 1714.
A particular use of Article 1765 is shown in the discussion below
of Article 1767.
.-f,rticle 1766. Articles 1766 and following provide four excep-
tions to the general principle that courts cannot modify contracts.
The first exception, provided by Article 1766, deals with certain
contracts where good faith is particularly required of the parties
because there is, independent of the contract, a special relationship
between them. Article 1766 should be seen in conjunction ·Nith
Article 1705(1), which also deals, in connection with vices of consent,
with case8 where there exists between the parties "a special relation-
ship of corifidence that commands particular loyalty in their dealings
with each other." This same kind of relationship justifies the varia-
tion of the contract by the court in certain cases under Article. 1766.
Article 1767. It seemed necessary to provide for court modi-
fication of contracts in a second situation: contracts with the govern-
ment, 22 to which the Civil Code does apply, as we have already point-
22. Editor's note : The French legal term " /'administration " is a particularly
difficult one to translate into English. The term designates one part of the
excecutive branch o.f government. "L'administration" is that part of the
executive which administers, in the strict sense, and is distinguished from
"le gouvernment" which is made up of higher level officials who make the
policies that are administered by "/'administration". "L 'administration" is
ordinarily translated in the Ethiopian Civil Code by the term "the administra-
tive authorities." We will use this translation here, but will also translate
"/'administration" as "the government" in cases where that seems more
clearly what was intended.
ed out. . Contracts:. with . the government pose a special problem
because the government is . significantly ·different from :private per-
sons. In addition to its power to conclude contracts, . the govern-
ment can enact rules that apply to all. It cannot be admitted, in a
_code based on the principle of the equality of contracting parties, that
such general rules could upset the equilibrium of the contract to .·t he
detriment of a person who contracted with the government. . ln
such a case, Article 1767 allows the court to modify the contract.
Article 1769 specifies the basis on which the modification is to be
made: the court is to ensure that the ·equilibrium of the contract,
upset by the u~Jateral act of one of the contracting parties, is re-
established.
Article 1767 presupposes an ·act of the government. This must
be a.regulatory act: statute, decree, or<ler, etc. The general policy.
of the government or its failure to act may make the performance
·of a contract more difficult, but it is not sufficient reason to rilodify
the contract. Moreover, the act in ·question must be ·an ·assertion
of public pawer, that is to say an act that the government could take
only because .it is the government and. thus has. .regulatory ~wer.
The person contracting cannot complain of an act that does not
result frQm · these special prerogatives of public power since he could
have been exposed to ~e same risks if the other party had been some-
one other ~an the government.
The term "a public administration," as used in .Article . J767~
includes the State and jU administrative subdivisions. both on. i gC$>:-
graphical basis (provinces, districts, commune$) and on a -tun~o)\8]
basis (ministries, public schools, publi~ hospitals, · etc.). n ·
. In spite of appearances, Article 1767 does not Constitute in ex~
ception to the general rules on contracts. ln an ordinary private
contract, the rule that contracts are
to be- performed in good faith
would prohibit one party from modifying unilaterally the ronditions
in light of which the contract was concluded, thus making the per-
formance of the contract more onerous for the other party. Such
conduct would amount to a failure to perform the contract and-::the
other party would be able to collect damages or even have tho con·
23. Editor's note: In other words, it rneaos "tile government'~ as that ierm il
used in English, and that stillm 11. very broad sense. This paragraph Wll
intended to clarify the broad scmo in which l'Qt/ministration wu meant bert
in the original, French, preliminary draft of Article 1767. SeeD()~~ above.
. t tract cancelled. The allocation of damages, which is generally avail-
able,- is actually eqUivalent to the variation of the contract provided
for in Article 1167. A special rule for contracts with the government
is useful for two reasons. First, -it is impossible to say that the govern-
ment acts contrary to good faith when it exercises its public power.
And second, it is important to limit the possibilities for variation to
cases ~here there has been an assertion of the public power, which
is here distinguished from the government's general conduct of busi-
ness and its policies.
Article 1767 seems to give the person who contracts with the
government a privileged position, since the right to require modifica-
tion of the contract only operates in his favour. But this is only
appearance, -since the government has the means, when it enacts a
decree or an order, to limit its effects with reference to contracts in
force.
}-iowever justified court modification of contracts may seem in
this situation, it is still desirable to limit this kind of modification to
the minimum required. The best way to avoid the necessity of court
modification of administrative contracts is to include a clause in the
contract providing for third party arbitration in the situation dealt
wi~h by Article 1767: The problem of administrative ·contracts was
the main reason that Article 1765 was included in the Code. 24
Illustrations.
1. A undertakes, in a contract with a provincial government,
to provide transportation between cities X and Y. The
government establishes a new gasoline tax or requires
the payment of a toll for the use of a bridge between X
and Y. A can require the modification of the contract
to compensate him for the damage caused by this general
regulation.
2. In the same situation, A complains that the road is badly
cared for by the province so that his equipment wears
out quickly. Theucontrad cannot .be varied by the court,
since there has been no act of which A can complain.
3. The tax on comme"rcial profits, to which the transporter
is subject, is increased. A cannot require the modifica-
24. Editor's note: Article 176 7 can give an illusion of simplicity. It must be read
together with Article 3179-3193, which provide a complex set ofrul..s concern-
·ing the modification of administrative contracts, a special kind of govem-
me~t contract that is defined in Articles 3131-3132 of the Code.
tion of his contract. The business .,in which he is engaged .
may have become less profitable, but the performance by
A of his obligations under the c.ontract has not becom~
more onerous.
Article 1768. Article 1768 states a rule that bas long beenacccpt~
ed in Western legal systems. It applies where the performance . of
the contract has become partially impossible. The impossibility
may not be sufficient to justify the cancellation of the contract under
Article 1788, but the judge is authorised, in such a case, to modify
the contract and reduce the obligations of th~ party who will not
receive the full performance that was promised him. Court interven,.
tion is not subject to the usual criticism in this case. Here something
affects the very possibility of performing the contract, rather than
being exterior to it, and requires the intervention of the court. In
addition, the court will not be creating a new contract with a new
balance between tpe parties. Rather its attention is to be directed to
reestablishing the equilibrium between the parties that was reflected
in the original contract.
Article 1769 states this explicitly.
Illustrations.
1. A leases land belonging to B. A part of this land is ex-
propriated by the State in order to build a military base.
A only retains 9/ 10 of the land that he leased. The court
may reduce the rent to 9/ 10 of what was provided in the
contract.
2. A undertakes to build a house for B, using a certain kind
of wood for the floors. It becomes impossible to get the
wood specified, and a different wood, of inferior quality,
is substituted. The price agreed to by B may be reduced.
· Article 1770. Article 1770, finally, allows a court to grant the
debtor a period of grace. This possibility is also provided by the civil
codes of France (Article 1244), Lebanon (Article 115), and Egypt
(Article 346). It seems to be unknown in other countries. With
much hesitation it was included in the Code, which did limit it, how-
ever, to six months maximum.
It is possible for the parties to provide that the courts cannot
grant a period of grace.
SECTION IV: NON-PERFORMANCE OF CONTRACI'S

Article 1771. Sometimes a debtor fails to perform his obliga-
tions, either totally or in part, or he may perform them improperly
or late. In all of these cases, the Code speaks of non-perfor;mance

of the . contract.
Article 1771 introduces generally the three possible consequences
of non-performance irrespective of whether or not the debtor
is at fault. They are specific performance, cancellation, and damages.
The subsequent Articles of this Section specify the conditions under
which these various remedies are available.
ArtiCles 1772-1775. Before a person can assert the rights that
arise from non-perforinance of a contract, he must put the other party
in default, that is he must call his attention to the fact that the obliga-
tions are due and to the sanctions the debtor may incur if he does not
perform them. This requirement of putting the other party in default
by notice exists in all Western legal systems: 21 French (Civil Code,
ArtiCle 1139), Swiss (Code of Obligations, Article 102); Lebanese
(Civil Code; Article 257), Italian (Civil Code, Article 1219), Greek
(Civil Code, Article 340) and Egyptian (Civil Code, Article 218)..
No special formality is required to put a person in default. The
notification can be by means of an official summons, or simply by a
letter, even unregistered. The notification of default can be accom-
plished by any act that indicates to the debtor that the time has come
for him to perform his obligation and that indicates the creditor's
intention to require performance. The only condition imposed by
the law concerns the time for notification ; it cannot be given before
the debtor's obligations are due and, thus, enforceable.
The -notification of default has four functions. In obligations
to give, it puts the risk of loss of the thing on the debtor. In obliga-
tions to pay money, it begins the accumulation of interest for delay.
More generally, it reminds the debtor of his obligations and of the
~ctions he will face if he does not perform. And finally, it should
lessen the number of cases that come before the courts ; they will only
get cases in which there is a clear failure to perform.
Where the notification of default cannot serve any of these ends,
the Code does not require the creditor to use it and allows him, in-
stead, to immediately bring a court action against the debtor. Arti-
cle 1775 (a) and (b) enumerate two cases where this is so. Article
1775 (c) adds a third case, where the debtor bas declared in writing
that he Will not perform his obligations. The effects that would
otherWise result froin the notification of default run from the time
when this writtel). declaration is ~ade. Fina.lly, according to Article
2,. Editor's note: By this Professor David means all western ICgal systems of
tbccivillaw type.
1.77S(d), .notification of default is unnecessary when the parties have

expressly so agreed. Other situations in which no notifica.~n bf
default is required are provided for in Article 1780.
Article 1774 adopts a provision from the German Civil Code
(B.G.B., Section 250) and allows the creditor to specify in his noti-
fication of default a time after which he will not accept actual per-
formance of the contract and will insist on cancellation and damages.
The purpose of this provision is to permit, as often as possible, the
settlement outside of court of difficulties that arise at the time of per-
formance of the contract.
The time fixed by the creditor must be reasonable. But if it is
reasonable and has expired, the creditor may unilaterally cancel the
contract without going to court. In such a case, the courts will only
become involved if there is a dispute as to whether the time fixed was
reasonable, or if the creditor also claims damages and the debtor dis-
putes their amount or the fact that they are due.
mustrations.
1. A, who manages a cafe, undertakes to buy beer exclusively
from B's brewery. He then orders beer from C's brew-
ery~ The sanctions for non-performance follow with-
out the necessity of a notification of default, since it is an
obligation not to do something that has been breached.
2. A orders some fire-crackers and dance costumes from B
for a feast or fair. It is obvious that A intends to sell
these items at the feast and that if they are delivered late
he will not be able to sell them for a very long time. B will
be subject to the sanctions for non-performance if he has
not delivered the items before the fair. A notification <>f
default is n~t necessary in such a case.
Article 1776. When a debtor fails to perform his obligations,
one remedy available to the creditor is to request the courts to force
him to perform.
Specific, or forced, performance is usually considered as the
normal remedy in a civil law system. The Anglo-American common
law system, on the other hand, regards this as an exceptional remedy,
available only if damages are inadequate. to satisfy the creditor's
needs.
The Code leans in the direction of the common law solution,
stating tbat specific performance is only available .where it is of speci-
fic interest to the creditor. Even then it must-and this .requirement
is eommon to all Western legal systems-be possible to have speci-
fic performance without affecting the personal liberty of the debtor.
Thus. a contract of employment cannot be the object of a judgment
of specific performance. ·
llhlstratfoas.
1. A manages a factory that runs on electric current. He
contracts with B to furnish the electricity needed. After
a disagreement, B cuts the current to A's factory. The
court will order that the current be turned back on (speci-
fic, or forced, performance), since A has a particular
interest in the performance of the contract.
2. A undertakes to provide B with room and board for a
fixed period of time at a fixed price. A refuses to per-
form the contract. The courts will ordinarily not order
the specific performance of this contract. As an excep-
tion, they may order it if:
a) the performance of the contract is of particular interest
to B, who cannot find any place else to live; and
b) the performance of the contract is possible without A him-
self, acting, such as where other persons in A ' s establish-
ment can provide the services due B.
Both of these two conditions must be satisfied before specific
performance will be ordered.
Articles 1777-1778. Articles 1777 and 1778 deal with several
situations where specific performance of the debtor's obligations
differs little from an award of damages and where, consequently,
the possible objections to specific performance disappear. Where
the debtor has undertaken to do or not to do something, the creditor
can be authorized to have the obligations perfonned at the expense
of the debtor, or to have destroyed at his expense the thing that the
debtor has constructed in violation of their agreement. These two
possibilities are also foreseen by the laws of France (Civil Code,
Articles 1143-1144), Switzerland (Code of Obligations, Article 98),
Lebanon (Civil Code, Article 250), and Egypt (Civil Code, Articles
209-212).
Egyptian Jaw even provides that in case of emergency the credi-
19~. need not obtai~ the e<>urt's authorization, but it did not seem
aclvi$ablc .to include such a provision in the Ethiopian Civil Code.
Forced performance of the obligation presupposes a court decision
in all cases where the debtor was obliged to do or not to do something.
en·
ln the case of obligations relating to fungible goods, ·on the .other-

hand, it seemed useful to make a distinction . in Article 1778.
In principle, the creditor must obtain a court authorization even:
here if he wants to purchase at the expense of the debtor the things
that were supposed to be delivered but were not. A court authoriza-
tion is not necessary, however, where the contract explicitly allows
the creditor to by-pass it. Similarly, it is not necessary if the things
that were to be delivered are quoted on an exchange or have a market
price.26
,-
No article of the Code deals specifically with the situation where
the contract creates an obligation for the debtor to transfer to the
creditor his ownership or some other real right in a specific thing.
Article 1776 is sufficient to deal with this case. If the interest of the
creditor requires, the court can transfer the right to-the creditor and
authorise him to perform all the necessary formalities at the expense
of the debtor.
Dl~ations.
I. A undertakes to maintain in good condition irrigation

ditches belonging to B. If he does not perform his obliga-
tions, B can request court authorization to have C do the
necessary work and send C's bill to A.
2. A, in violation of a contract with B, closes off a passage
that B needs to use. - B can be authorized to dear the
passage at A's expense.
3. A buys 500 kilograms of sugar from B. B does not de~
liver. A can be authorized to buy 500 kilograms of sugar
at B's expense . . ..
Articles 1779-1780. To the rights given the creditor under Arti-
cles 1777 and 1778 there correspond certain rights for the debtor
where the creditor caqnot or refuses to receive _the performance that
is _due . and offered by the debtor. These are specified in Articles
1779 to 1783 ;' where the debtor has put the creditor in default for
not accepting performance, he has the right to deposit the thing the
Creditor refuses without good cause to receive. He has the same
right whenever he -cannot i'erform his obligations -normally, as for
26. E4itor's note ! ~ distinction mentioned by ~essot David ·waa ·rem<Md

froin the preliminary ~ of the Code at a 'later stage in ttio ~tioft
. process. Court authomatim i$--neces5ary ~dcr ·Ai1ic:Jc ,177$. .as. ~i
in all cases. We have, therefore, omitted dourih illustration of the operation
or tl!ese Articles, which dealt with-Che eliminated exception.
example where he does not know who his creditor is or where he is
to be found, where several persons claim to be the creditor, and where
the creditor is incapable of receiving payment and has no represen-
tative. In all these cases, a notification of default to the creditor is
of no use. A notification of default is necessary, however, when the
creditor simply refuses to accept performance, unless this refusal was
declared in writing (Article 1775).
In these two categories of cases, the debtor can exercise his right
to deposit the thing without getting a court authorization. The
deposit is an act that does not prejudice the rights of the creditor,
who can always subsequently dispute whether or not the debtor had
the right to act as he did. If the debtor acted improperly, he will be
liable for non-performance of his obligations, including the expenses
resulting from this deposit. It is important, however, to give him
this right to act without any court decision and thus to permit him to
get rid of the thing without delay.
The deposit of goods is made by the debtor at the place designated

by the court of the place where performance is due. Since this deci-
sion by the court can be made without the creditor being summoned
to court, it does not establish that in fact the debtor has just cause
to deposit the things. The debt or will not need to go to court at all
if there exists, at the place where performance is to be made, a public
warehouse that can receive the thing the debtor is to deliver, or jf it
is a debt of money, a public bank that can receive the money.
illustrations.
1. A transports some coffee for B under contract. The

coffee is to be delivered to B in a specific place on May
1, 1956. B fails to appear and cannot be found. A may
deposit the thing. If there is no public warehouse he
will be wise to ask the court to designate a place of de-
posit. Otherwise, he will be liable if he has chosen the
warehouse poorly.
2.
1'
A owes B some money. A claims he owes $500, while B
claims that $550 is due and refuses to receive the $500 on
the ground that be has the right to refuse a partial pay-
ment. A may deposit the money in the Commc!rcial Bank
of Ethiopia.
3. B, A's creditor, is dead and both C and D claim the in-
heritance. Without waiting for the dispute between C
and D to be settled, A can discharge his debt by deposit-
ing the money due in a public bank.
ArticJq 1781. The deposit of the thing usually safeguards .the
rights of both creditor and debtor. There are cases., .howev.er; ·.where
deposit is impossible or disadvantageous; Article 1781 allows the
debtor in such cases to sell the thing either at public auction or, some-
times,' by private sale. A court authorization is always required .for
such a sale, but here again the role of the judge is limited. He is to
decide .only whether and in what way the thing should be sold, assum~
ing that the debtor has the right to deposit the thing. He is not to
decide whether or not the creditor had good cause to refuse the per-
formance tendered or whether the debtor is properly claiming that he
does not know to whom perfonnance should be made or where some-
one can be found who is authorized to receive performance. The
price received by the debtor when he sells the thing should be deposit-
ed in a public bank. Article 1781, which states these rules, is in-
spired by the Swiss Code of Obligations (Article 93), the Egyptian
Civil Code (Article 337) and the German B.G.B. (Sections : 383-~86).
lllustrations.
I. The goods that B will not accept or which are to b:e de~
livered to either B or C · are perishable: eggs; butter,
fresh vegetables. The debtor can request court authoriza-
tion to sell them.
2. The delivery is of watches, which are not perishab_le and
require minimum expense for deposit. The court can-
opt authorize their sale.
3. Delivery is to be of fixewood, straw, or manure. The
cost of deposit would be quite high relative to the value of
the thing sold. The court should authorize sale.
Articles 1782-1783. As has been explained, the deposit of some-

thing does not itself discharge the debtor. It simply rids the debtor
of the thing and transfers the risk ofits deterioration or destruction
to the creditor. In order for the debtor to be discharged, a court
must decide that his behaviour was justified and this in a hearing to
which the creditor is properly summoned.
The judgment deciding that the deposit was valid. discharges

the debtor, but it does not transfer ownership of the thing to a creditor
who- refuses to accept, is· not in a position to receive, or does not know
of, the deposit. Therefore, even after the judgment recognizing the
validity of ·his . deposit, the tlting continues to ·belong,. t.o · the debtor
and he may retake it. · In such a case, his contractual. obligation of
coqrse revives iinm~diately; but it re.vivcs w.ithout the . seGurities that
may previously have supported it if the deposit was recognhed as
www.abyssinialaw.com -
valid by ·a. court. On this point, Article 1783 has followed the rule
of the civil codes of Egypt (Article 340) and Germany (B.G.B., Sec-
tion 376), rather than that of the Swiss Code of Obligations (Article 94).
Illustrations.
1. A deposits coffee that he owes B in a place fixed by the
judge. B has not taken delivery of it. A can have the
deposit declared valid by a court. Subsequently, B can-
not claim that A has not properly performed his obliga-
tion.
2. Even then, A can retake the deposited coffee in order to
sell it to C. The judgment declaring the deposit valid
will cease to have effect in such a case. B can again claim
that A has not properly performed his obligations to B.
3. The performance by A of his obligations to B was secur~
ed by. C's personal guarantee. C is discharged when the
court declares valid the deposit made by A. He remains
discharged even if A retakes the thing that he deposited.
Articles 1784-1785. The Articles studied so far relate to the
situation where one party has not performed his obligations and the
other holds to the contract and intends to require its performance.
Another remedy av~ilable to a party where the other party has failed
to perform his obligations is to request from the court, or declare
unilaterally in some circumstances, the cancellation of the contract.
Generally, the cancellation of a contract must be requested from
a court. This is an application of the principle that no one may be a
judge. in his own case. Non-performance of a contract, however,
occurs in quite varying circumstances and it would show too great
an attachment to formalities, and involve solutions that are too rigid,
unfair and impractical, if one were always to follow this system.
Although the total and definitive failure to perform a contract ought
automatically to result in the cancellation of the contract, the saiD.e
solution is not always suitable for cases of partial performance, delay
in performance, or defective performance. In the earlier Sections
of this Chapter, we have already seen Articles that take account of
these variations. Article 1748 deals with the situation where t.be
debtor who is obligated to deliver fungible goods delivers a quantity
or quality slightly different from that required by the contract. Arti-
cle l-770 gives the court the power to grant the debtor a period of
grace.
The non-performance of the contract must be of some impor-
tance before it should result in the cancellation of the contract. A.rti-
cle 1785 requires that the very essence of the contract ·be affected ~y
the non-performance. This formula is inspired by the German coii~
cept of Geschaftsgrundlage and the English concept of "frustration''
and should be seen in connection with the provisions concerning error
in the formation of the contract. The cancellation of the contract is
not to be pronounced by the court if the non-performance by one of
the parties is of little importance in relation to the whole contract
(Compare Article 1455, Italian Civil Code, and Article 157(2), Egyp-
tian1 Civil Code). It is not required, on the other hand, that the
contract have lost all interest for the person requesting cancellation.
Cancellation is to be pronounced by the court when the economic
basis of the contract is upset by non-performance and an adjustment of
~he contract to fit the circumstances is no longer possible, because it
would in fact result in making a contract for the parties that is com-
pletely different from that to which they agreed. Cancellation is to
be pronounced also when the psychological basis of the contract is
destroyed, as when the relationship of confidence that is assumed by
the contract, in view of its nature, has been destroyed by the non-
performance and cannot be restored.
In evaluating these circumstances and in deciding whether or not
the contract should be ~~ncelled , the courts have some discretion.
They are to exercise that discretion taking account of the interests of
both parties and the requirements of good faith.
If the court does not declare the contract cancelled, it will still
consider the non-performance of the contract and impose sanctions
for it.
The court may order the performance of the contract if that is
possible. If performance is impossible or undesirable, or if there
has been a loss through delay in performance, the court may modify
the contract in the plaintiff's favour (Article 1768) or require the pay-
ment of damages to him, in accordance with later Articles of the
Code.
illustrations.
I. A undertakes to repair B's house. The work is begun,
but not completed by the agreed date. B requests the
cancellation of the contract so that he can hire another
contractor to finish the work. The court, in deciding
whether or not to cancel the contract, will consider:
a. the importance that seems to have been given to the
time for performance in the negotiations that led to
the conclusion of the contract;
b., ·the state ·of the W{)rk: What bas been done . and
what remains to be done;
c. the damage that the cancellation of the contract will

cause A and the interest that B has in cancellation;
and
.
d. the reasons why the work has not been completed
in the tiine agreed and the additional time that will
be required to finish it.
2. A borrows E$3000 from B at 7% interest for a period of
5 years. Interest was to be paid every three months on
a day specified in the contract. A fails to make a required
payment at the time agreed. B requests the cancella-
tion of the contract. The court must exercise its discre-
tion in this case as in the preceding one. It will deter-
mine the importance that the parties attached, when mak-
ing the contract, to the regularity of interest payments,
considering their profession, their earlier relations, the
amount of the loan, etc. It will determine whether this
is an isolated instance or whether there have been earlier
delays, how the parties in the case have been acting, the
causes of the present delay, the advantages and disadvan-
tages that cancellation, which would require A to immedi-
ately repay the loan, would have for A and B. In view
of all these circumstances, it will grant or refuse, or grant
conditionally, the cancellation requested by B.
Articles 1786-1789. Although cancellation of a contract for

non-performance generally must be pronounced by the court, there
are situations where it is appropriate to give a party the right to de-
clare the cancellation without having to go before a court. Arti-
cles 1786-1789 set forth four cases where the cancellation of the con-
tract may be declared unilaterally by one of the parties.
The first case is where the contract contains an express stipula-

tion that .the contract can be cancelled in certai'l circumstances. The
. contract is law between the parties. Where it is certain that the
specified circumstances have occurred, it is useless to require a person
to go to court to have the contract cancelled.
The second case is where a fixed, rigid time for performance has
been specified in the contract and performance has not taken place
Within this time. In fact, this is only a specific application of the
previous case, but it seemed useful to state it separately. The same
10lution is provided for the situation where the court, acting under
Article 1770, has fixed ~ time for final performance. ~ Some cod.e:==~
(Italian Civil Code, Article 1454; Greek Civil Code, Article 343) pea:
mit one party, even where there is no clause in the contract allowia.-====:
for it, to· set a rigid time limit for performam:e by the other party"_
the duration of which must be at least two weeks, after which tm.~
contract will be automatically cancelled if it has not been performed-
The Code has ·adopted this solution in order to avoid the congestio~
of the courts as much as possible, but it seemed best to speak in Arta-
cle .1774 simply or'"reasonable time'' without specifying any duratiom-
The two other situations, which are dealt with in Articles 1788
and 1789, occur at a different stage from the preceding ones. A..
party may declare a contract cancelled even before there has been an
actual failure to perform, if performance by the other party in con-
formity with the contract has become impossible or. can be regarded
as very unlikely.
Article 1788 provides for the situation where the performance o£

one party's obligation~ has become impossible. The classic situa-
tion is where a specific thing that was essential to performance has
peri bed: the house to be leased was destroyed by fire, the animal to
be delivered has died. Similarly, the performance of an obligation
can become impossible because it is forbidden by a new law: it may
be made ilJegal to manufacture or sell the product that one of the
parties was supposed to manufacture or purchase for the other.
In these situations, the performance of the contract by one of

the parties has become physically or legally impossible. The other
party can declare the contract cancelled, so that he need not perform
his own obligations or so that he can assert his rights after cancella-
tion under Chapter III of Title XII.
One problem can arise with respect to this cancellation. It may

happen that the impossibility of performance is not complete or that
it is not final. One party cannot perform the contract perfectly or
completely, but he can perfopn it in part or late. What should
happen in such a situation? Article 1788 states explicitly that the
other party can declare a contract cancelled in such a situation only
if the very essence of the contract is affected. Naturally, the courts
will have to exercise a control on the judgment of the cancelling party
in this regard. Just as in the case of a request for court cancella-
tion under Article 1785, the judge must consider the impo,tance of
the part of the contract that cannot be performed relative to that
of the part that can, as well as the interests of both parties and the
requirements of good faith.
The .~ther situation, dealt with in Article ,1789, is limiJar to
that dealt with in Articles 1757(2) an~ 1759. . When one party clear-
ly indicates tliat he is not going to perform his obligations, the other
party is authorized immediately to suspend his performance of the
contract (Article 1757(2)). In addition, he can decide whether he
prefers to require the specific performance of the contract as soon
as the obligation is due or to declare the contract cancelled. . Article
1789 allows him to take this latter position without going to court
and without waiting for the debt to become due or to be liquidated
by the court. The conditions laid down by Article 1789(2) for the
exercise of this right of cancellation are in conformity with the rules
stated earlier in Article 1759. The only difference .s that a time was
specified here that did not seem necessary in Article 1759. _Artiele
1789(3) provides a limitation on Article 1789(2), in conformity with
Article 1775(c).
mustratlons.
I. A borrows money from B, and it is stipulated in the con-
tract that, if A does not make interest payments on the
stipulated <lays, B can immediately require the repayment
of the capital loaned. This formal clause must be en-
forced. Since the court has no discretion with respect
to it. the Code authorises the cancellation by B's simple
unilateral declaration. ·
2. The contract contains no such clause. A has not paid

the interest that was due on April 1, and in an action in-
stituted by B, the court has given him until May 15 to
pay it. If he has not paid the interest by May 15, B can
declare the contract cancelled without going to court
again.
3. A is required, under a contract, to 'manufacture machines

for B and to deliver them on a particular date. Political
events (a revolution in A's country, war between B's
country and another country, blockade of the port of
embarkment or destination provided in the contract)
prevents the performance of the contract within the time
stated. The delay in execution is of unpredictable dura-
tion. It had seemed that the contract could be performed
within about a year. but this now appears very unlikely
because of the delay. B would certainly not have con-
cluded the contract in ·such conditions ~nd A knows this
full well. B can declare the contract cancelled in such ·
circumstances.
Article 1790(1). Specific performance and cancellation of the
contract are alternatives, between which a person must choose when
his cocontractant does not perform his obligations. Both of these
remedies may, however, be insufficient. In spite of them, a person
frequently finds himself in a worse position that he would have been
· in if the contract were•properly performed as he had expected it to be.
If the court orders specific performance, it may be effective only after
a delay, so that for a time the ·person is deprived of the enjoyment of
the thing that he had counted on. He may also have lost a good
chance to resell the object if that was his intention. On the other
hand, if the contract is cancelled, the person is deprived of ;the·advan-
tage that he could legitimately expect from it. In both cases,_it is
proper to reestablish the equilibrium established by the contract and
upset by the failure to perform the contract. This is . done by
requiring the person who has not performed his contract, or has per-
formed it incompletely, imperfectly, or late, to pay damages to the
other party.
Article 1790(2). 27 The rules relating to "extracontractual lia-
bility,. apply by analogy in the case of contractual liability. The
Code here reproduced the rule given in the Swiss Code of Obligations
(Article 96(2)). Thus, for example, various rules in the Title on extra-
contractual liability that deal with the evaluation of injury or of the
sharing of a loss between the debtor and the creditor or a thi~d party
are also applicable to contractual liability .
. Articles 1791-1794. In principle, damages are due whenever
the contract has not been performed as it was supposed to be, unless
of cour!\e nothing is due by virtue of the rules that determine the
amount to be paid. 28
Article 1791 provides that there is only one excuse for non-per-
formanc.e. Damages are not due if the debtor can establish that his
non-performance is the result of force majeure. Article 1792 defines
force majeure. There is force majeure only wheri there has been an
occurrence that was unforeseable and insurmountable. With respect
to unforeseeability, the Article considers unforeseeable any event that
could not normally be foreseen. With respect to the. insurmounta-
bility, the Article is more strict and requires that it be absolutely, and
not only normally, impossible to perform the obligation.
27. Editor 's note : The discussion originally referred to an ArticJc: 132 of the
preliminary draft, which came ·at the very end of the Section on Noll-per-
formance of ·c ontracts. This Article was revised somewhat and became
Article 1790 (2)
28. Editor's See Articles 1799 If. in this regard.
In order to make it very clear what is meant by force majeure,
Article 1792 defines it twice, first in a positive formulation and then
in a negative one. The general formula of Article 1792 is supplement-
ed by the two following Articles. Article 1793 suggests certain situa-
tions that, according to the circumstances, may or may not be cases
of force majeure. . Article 1794, on the other hand, enumerates various·
situations and states that in no case may any of them ever be consider-
ed to constitute force majeure. These particulars, more similar to
English legal methodology than to continental, seemed useful. ·What
is essential is to provide rules that can be easily understood. Know-
ing these rules, the contracting parties can always provide for other
cases in which non-performance will be excused, if they so desire.
In this area, the Code deliberately chose a very strict approach.
Its provisions are inspired in this respect by the French Civil <;::ode
(Article Il47), which has been followed also by the Civil Codes of
Italy (Article 1218), Greece (Article 336), and Egypt (Article 215).
The severity of these codes seemed preferable to the greater laxity of
the Swiss Code of Obligations (Article 97) and the German B.G.B.
(Sections 275 and 55), according to which the debtor is discharged
whenever no fault is imputable to him.
In using the stricter approach, the Code has tried to increase the
responsibility of the debtor and · make it more difficult for him to
escape liability when he has not properly performed his obligations.
The approach of the Swiss Code was avoided because of a fear that
it would encourage the courts to be lax. They could easily consider
that the absence of fault, a negative fact, would be established by
proof that the debtor did what he thought he was obliged to do, i.e.
that he acted in good faith. In principle, it did not seem that this
should be sufficient, and only in certain exceptional cases, provided
for in Article 1795, is it allowed. A rule of strict liability seemed
necessary; in principle, the Code favours the party who does not
receive what was promised over the party who cannot do what he has
promised to do. lt therefore defines very narrowly the bases for dis-
charge of the debtor, in conformity with a policy which is also followed
in the common law.
The severity of Article 1791 is attenuated by th~ Code for certain
kinds of contracts (Articles 1795 and 1796), and the parties can always
limit .o r e.ven partly exclude their liability. Provisions as to liability
are dealt witb in the Chapter on ·Speci8.1 temis of COntr&.cts (Chap-
• I~. .
ruustrations.
1.. A sells 100 quintals ofsorghuin 'to ·B. He is:counting oa
his harvest in ,order to. be able··to perform '~s , p~liption.
The harvest is less than 100 quintals. This may be an
event that is exterior to and not imputable to A. But
this event does not prevent A absolutely from performing
his obligations, so long as he "did not promise that the
100 quintals " would come from his harvest.'' Since
sorghum is fungible, he can obtain it elsewhere. He is
liable if he does not perform his obligations.
2. A sells 100 quintals of paper to B. He is counting on C
to provide him with this paper. C does not deliver it and
as a result A cannot keep his promise. In this case, tbe
event is not exterior to A. A must bear the ·· risk of
havmg badly chosen his cocontractant, C. A is Jiable
if he does not perform the contract.
3. A is to transport a trunk .for B. He has his employee~
C, handle the transportation. C breaks into the trunk
and steals things. A is liable. The theft by C is not A's
fault but it is still imputable to him since he should:bave
chosen his employee with greater care.
4.~ A's factory is closed down for two weeks because the
electric current is turned off, and therefore A is late. ill
delivering some merchandise that he has to deliver to B.
B asks for damages for this delay. The court must uk:
a. whether, aceording to the contract, the things promi.sed
... to B had necessarily to come from A's factory that was
shut down. ·
b. whether the circumstances that led to the shutting- doJVD
of the factory were unusual, or whether A should. have-
have foreseen them.
c. whether these circumstances are imputable to A, and
whether they prevented him absolutely from· perfonriing
his obligations.
5. A is to manufacture somet.'ting for B. The ~chin~
used to manufacture these products breaks down and the
products are not ready on time. A is liable and _owei
damages. A cannot be discharged by merely proving
that he always took good care of the machine, that he did
·his best to perform the contract, and that he has committ-
ed no fault. He is responsible for running his factory
and therefore for his failure to perform where that is
caused by a break-down in the factory.
Articles 1795-1796. The formula used by Article 1791 may
appear very . strict for the debtor, but one mvst not forget that this
-70 -
-
sU'i~oess
.
pr_esupposes that the debtgr has .failed to perform his obliga-
tions. Before the debtor will be lia,ble, _it must be established that he
has not performed. In this regard, one must re~ll the distinction
that is made in Article 1712 between obligations of result and simple
9bligations ' of means. If a person has undertaken only an obligation
of means, it is clear that he incurs no liability if he proves that he
acted in good faith and has committed no fault; in such a case, he
has thus fully performed his obligations under the contract.
It can be seen that the rule of Article 1791 is only effective in
cases where a person has promised.a: particular result and this result
has not been achieved: obligations to give, obligations not to do,
and obligations to do that are also obligations of result. But there
are many contracts in which, because the party has not obligated
himself to produce a given result, one must come back to the less ri-
gourous approach of the Swiss Code of Obligations and admit that
damages are not due where one party has not obtained what he ex-
pected from the contract so long as the other party . has done every-
thing that can reasonably be expected of him, in conformity with good
faith, and where he has committed no fault.
In a situation of this kind, there is actually no non-performance
of the contract. Nevertheless, one can expect that the other party,
disappointed in the expectations he had from the contract, will think
otherwise and accuse the first party of not performing his obligations.
For this reason, it seemed desirable to clarify the position of the parties
in the Chapter dealing wi.t h non-performance. This is the purpose of
Article 1795. The provision of this Article applies to contracts where
it has been foreseen by the parties, either explicity or implicitly,
that one of them promised the other only his best efforts, without
guaranteeing the particular result. In addition, it can apply by virtue
of a legal provision to certain kinds of contracts in which the legislator
sees fit t~ attenuate the liability that Article 1791 ordinarily places
upon the debtor.
In addition, a second situation has been dealt with in Article 1796,
that of contracts that are made for the exclusiveadvantage .of one of
the parties. Article 1739 also deals with this kind of coJttract, providing
that in case of ambiguity they are to be interpreted in favour of the
party that derives no advantage from the contract. Article 1796
reenforces that provision, providing .that it is only where there has
been a grave fault that that party will be liable in ·such contracts.
Dlustratioas.
I. A, a surgeon, concludes a contract with B to operate on a
~or. Theoperation does not have the effectexpcctecl, and
B remains diseased. B demands that A . pay him damages,
B wiH get damages only if he proves that A committed a fault.
2. A deposits a suitcase with B. B agrees to take this suitcase as
a favour to A and receives no remuner·ation . The suitcase and
its contents are damaged by water or mice. If A .claims
damages from B, the court must ask whether B has com-
mitted a grave fault.
A grave f1ult will exist only where B takes less care with A's
suitcase than he would have with his own. B's obligation
and his liability, will therefore be considered differently
according to whether or not B knew or should have knoWn
the nature and the value of the objects entrusted to him.
Articles 1797-1798. Where the debtor .proves that his non-perfor-
na.nce was the result of force majeure, this non-performance doea
not expose him to liability. Even in this case, however, there are two
exceptional cases where he will be required to pay damages to the
other party.
The first case arises where he docs not inform tho other party
immediately of the reason why he cannot perform his obligation. The
other party can then, within the limits of Articles 1799 ff., require
compensation for damage that he has suffered and would havo becm
able to avoid had he received timely notice of the non-perfoi'IJ18m'C.
ThC second case is that where the debtor was in default at .the
iune of tite event that prevents him from performing. It makoi
Ji~
cliffcrence that the event is a case of force majeure. lf he had pcrfo~
his · obligation on time, the event would not have obstructed hiJ
p_crf'onUance. This js sufficient to make him compensate the other pi.riy
for tho ~amagcs caused lUm by non-performance.
. Article 1799. With respect to the amount of d.aJnagos ·due. tbo
Code differs from French and French-inspired laws and adopts : a
formula similar to that used in the common law countries.
. '
· ln order to dcci!Je how much must be paid as damages, tluR it
no need to start, as one docs in continental legal systems, from 1he
aclual injury that tho non~porfonnancc caused the othor party. OM
bogjns by asking, more ab~tractly, what inju.ry one would nonnally
'"~Hrom tho failure to perform tho contnct.
This rule ·may ~m. at first glance, harder io apply tbu iM
conanental rule. In fact, it seems to us to be simpler. The con~tal
rult mentioned above is actually temperecl by other rules, whidl require .
that the :injury for which compcrtHtion is demanc;lod be a-direct 1'iiUit
of:::ncm¢01'Dl8nQo.• and· that .it have been foreseeable ·at·tbe timo
.,.,
the contract was .concludcd. Th~ two limitations bring the .continen-
tal rule much closer to the common law rule and that of 1he Ethiopian
Code. They make this latter rule, which allows one to ignore the
exceptions, seem at least as simple, ~d perhaps simpler, than the
continental approach.
There may be many cases in which it is hard to see how Article

1799 would be·applied at all, because it is hard to see how there would
be any ''normally foreseeable" damage that results from non-perfor-
mance. The solution in such a case is simple enough: non-performance
would not necessarily result in the payment ofdarnages. If the parties
want to avoid this situation and give $eir contract more force, they
can do so. Under Article 1801, they can require the debtor to pay
damages for injury that is caused to the other party in the peculiar
circumstances of the case. Or they can fix the amount of damages that
will be due upon failure to perform by inserting a penalty clause in the
contract. Penalty clauses .are dealt with in Chapter IV of Title XII. .
Although the formula of Article 1799( 1) is inspired by the English

rule derived from the case of Hadley v. Baxendale, the Code does
not accept all the consequences that have been dedU:ced from that
rule in England. In particular, it seemed that the "reasonable man"
called to say what injury the non-performance would "normally"
cause the creditor ought to take account not only of the nature of
the contract, but also of all other circumstances known to the two
parties, on the basis of which.it ought to be considered that they
contracted. Article 1799(2) states this explicitly. The illustrations (>f
Articl~ 1799 that arc listed below should serve as a guide to the mean-
ing of this Article.
ruustrations.
.
1. A is to deliver 10 tons of coal to B, a private individual~
on October 15. It is normal to foresee that ifB does not receive
the coal from A, he will buy it from C. A owes B the difference
between the price set in the contract and the price that B
had to pay C.
2. A sells 400 kilos of coffee to B. lt is normal to think that B
is a merchant and that he will resell the coffee at a certain
profit. B will obtain as damages the amount of this profit
that the failure by A to perform the contract has lost him.
3. A undertakes to transport B's trunk to a particular·desti-
nation. The trunk is lost. It is reasonable to think that it has
a .cert.ain value in light of it$ yveight and that it contains per-
sonal effects rather than precio~ objects. :The ~ourt will
award as damages the value of the objects that one could
reasonably expect to find in the trunk or the value of the
objects that B proves to have in fact put in the trunk as long
as it was not unreasonable for him to put them in without
warning A especially.
4. A makes a contract with B for the repair of a turbine. It is
normal to think that if the repairs are not made in time, A
will be injured somewhat: he will have to use more expensive
'machinery or hire additional labourers. But it is not normal
to think that the mill will be totally stopped and that A will
be liable to third persons with whom he ~d contracted who
were in tum prevented from performing their obligations.
The evaluation of the injury for which compensation is due
according to Article I 799 may result in an amount of damages greater
than the actual damage caused to the inj ured party by the non-perfor-
mance. Article 1800 allows the person who did not perform to prove
that this is the case. If he does so, he will only be liable to the extent
of the injury actually suffered by the other party.
One specific case that is often dealt with in Western codes is the
following: The debtor is late in performing his obligations, and after
he is in default an event that is not imputable to him occurs, which
makes it impossible for him to perform. In principle, he is liable in
such a case (Article 1798). He may avoid this liability, however, under
Article 1800, if he proves that the event that prevented him from
performing would have occurred to the detriment of the creditor even
if the contract had been performed, and that the creditor would thus
have been deprived of the benefit of the contract in any case. The
animal or thing that was to be delivered and that perished before
delivery would have perished in the same way if it had been delivered
to the other party on time. This result is expressly stated in various
codes (Article 1302, French Civil Code; Article 103, Swiss Code of
Obligations ; Article 207, Egyptian Civil Code; Article 344, Greek Civil
Code), it follows, without any necessity to state it separately, from
the general rule set forth by Article 1800 of the Ethiopian Code.
lliustrations.
I. A is to send B's trunk by ship X. Breaching his obligation,
he sends it by ship Y and the trunk arrives three weeks
later than the time provided in the contract. Generally
A would owe damages for this delay, but if he proves that
shlp X sank with all its cargo and that B 's trunk would have
been lost if it had been _sent on ship X, he will not be liable
to B for damages.
2. . A is to tum an apartment over to B on October 1. Ho does

not do so until November I. A proves that B would have
left the place unoccupied and would not have used it before
November 1 in any case. A is not required to pay B damages.
Article 1801. On the other hand, it can happen that the injury to
the disappointed party is actually greater than the amount of damages
that a court would award if it applied the rule of Hadley v. Baxendale.
According to Article 1799, the injured party usually cannot claim com-
pensation for the full injury he has suffered. Nevertheless, Article 1801
provides for two cases where he can claim full compensation.
The first case is where the party who has failed to perform the
contract was warned by the other party, at the time they concluded
the contract, of particular circumstances that have the effect of increas-
ing the amount of injury above what it would normally be. In such
a case, we consider that the debtor has accepted the risk of having
to pay the higher damages if he does not perform the contract . pro-
perly. Because this is the basis for the increased liability, it is required
that the circumstances that lead to the increase in the damages due
be pointed out to the non-performing party at the time the contract
is concluded. Liability will be limited to that provid¢ for under
Article 1799 if the non-performing party has been warned of these
circumstances only after the contract w~ made. ·
Even in this latter case, it is true, full compensation may some-
times be required, butf:bis will result from Article 1801 (2),not 1801{1).
Article 1801 (2) provides a second case in which a person who
does not perform his obligations must compensate the other party
fully for the injury he has suffered. This is the case where the failQ.re
to perform can be imputed to an intention to injure, to gross negligence
or to a grave fault on the part of the person who fails to perform. ·
Once one party knows of a special interest ~t the other party
has in the performance of the contract, he cannot ignore that special
interest, and less still can he purposely fail to perform in order to
injure the other party. If a person fails to perform his obligations and
a result of such an intention to injure, or if he shows by his gross .
negligence that he does not care whether or not the other party is ·
spared this loss, Article 1801(2) requires him to pay for !t. He is simi.:
larly liable whenever the failure to perform the contract is the result
of a grave fault on his part, and in this case, even if he did not !mow
the peculiar injury that the failure to perform would cause the other'
party.
IDustratioos
1. A informs B, in giving him a machine part to repair,_ that
this part is of strategic importance and that the whole factory,
or a· part of it, will be shut down until the part has been re-
placed. B undertakes to repair the part within 48 hours.
Instead, he keeps it for four days. He is liable for the injury
caused by the closing of_the factory during the two days of
delay in performing his obligations.
2. B is warned of the same circumstances, but only on the day
after he agreed to his obligations. He is not liable for the
special injury suffered by A, since he, B, could not foresee
it at the time the contract was made.
3. B, warned of these special circumstances the day after he
entered into the contract, gives priority in his work to repairs
that are not urgent, thus showing a disregard for the injury
that will be suffered by A. He must compensate A fully for
the injury suffered.
Articles 1803-1805. 29 With respect to money debts, Article 1803
sets forth special rules.
Article 1803 contains a precise rule to facilitate the application
of .t he principle stated in Article 1799. The injury that failure to pay
ought normally to cause the creditor is here set by the law itself; it is
. generally the legal rate of interest established by Article 1751 of the
Code. A higher rate of interest is due if, during the currency of the
debt, it produced interest at a rate higher than the legal rate.
The rule of Article 1800, moreover, is set aside in the case of mo-
ney debts: the debtor who does not pay his debt owes the legal rate
of interest, or a higher contract rate if there was one, even if the other
party has not suffered any injury as a result of the delay in payment.
S~cial rules are provided in Article 1804 for the case where the
debt that has not been discharged on time is a debt which requires
from the debtor periodical payments and which constitutes for the
creditor an income rather than a return of capital. Where these two
conditions are met, a special, favourable treatment is given the debtor
in conformity with the precedent established in certain Western coun-
tries (Articles 1154-1155, French Civil Code; Article 105, Swiss Code
of Obligations ; Articles 1282-1283, Italian Civil Code; Article 296,
Greek Civil Code; Article 232, Egyptian Civil Code). There is a two-
fold. explanation for this special treatment. First, it is presumed that
tho creditor is in less of a hurry to receive his money, and second, it
29. Editor's note : Article 1802 seems to have been added at a later stage in the
codification process and, therefore, is not discussed in Professor David's
Commentary.
is recognized that there is great danger for a · debtor -in the rapid in•
crease in his debt as a result of the accumulation oLcompoWid interest~
The favour shown the debtor by the Code app~ars, first, in the
provision that inter~st on interest runs only from .the day on
~ .
which.
. . .
legal proceedings for recovery are instituted rather than, as is the
case under Article 1803, from the day when the debtor is put in default.
In addition, a second precondition must be satisfied before interest
on interest begins to run: it is required that the debtor be a full year
in default on his payments.
Article 1804(2) reenforces this protection still more in one partic-
ular case: compound interest itself never produces interest.
An award of damages for delay, of which the amount is fixed
according to the formula just set forth, is ordinarily the only award
of damages that will be given in the case where the obligation that is
not performed is an obligation to pay money. Nevertheless, it might
happen that, in the particular circumstances of the case, the injury
caused by non-performance would be greater than this amount. Article
1805 provides that, in this situation, the debtor will be required to
compensate the creditor fully for the loss sustained by him in the two
cases that are provided, for other kinds of obligations, in Article
1801 of the Code. There is no need to dwell further on these cases,
since they were discussed fully above.
Dlustr~tions.
l. A borrows $1000 from Bat 3% interest and is to repay this

sum on October 1, but he does not do so. A is put in default
on October 15. Starting from October 15, the $1000 bears
interest at the legal rate.
2. If the interest rate is originally 11 %. the debt will continue
to bear II% interest after the debtor has been put in default.
3. A leases a house to B. The rent is to be $2000 per year,
payable in fourths on January 1, Apri! I, July I, and October
1. B does not meet the April 1 payment. A puts him in default
on April 10; the fact that B is in default does not make
interest for delay begin to accumulate. A attaches some
property belonging to B on April 20 ; still interest for delay
does. not accumulate. Th~ interest only begins to run after
the amount in arrears reaches $2000, the amount due by B
for one year of rent.
CHAPTER ill: EXTINCTION OF OBLIGATIONS

Contractual obligations are normally extinguished through
performance in accordance with the contract and the law. There are,
however, other ways in which a contract and the obligations created
by it can come to an end.
The contract, may for instance, be cancelled or invalidated.
Although we have already discussed the circumstances in which
cancellation or invalidation can occur, 30 Section I of this Chapter,
deals with the details of implementation and the effects of invalidation
and cancellation. The five following Sections, as outlined in Article
1807, deal respectively with termination of contracts and remission
of debt (Section II), novation (Section III), set-off (Section IV), merger
(Section V), and limitation of actions (Section VI).
SECTION 1: INVALIDATION AND CANCELLATION

OF CONTRACTS! ·
Article 1808. With respect to invalidation, the Code distinguishes
between two kinds of cases, as do Western legal systems.
Where the contract's invalidity results from a vice in consent,
its purpose is to protect one, and only one, of the contracting parties,
i.e. the victim of error, fraud, or duress, or the person whose want,
simplicity of mind, senility, or manifest business inexperience has
been exploited. In such a case, only the person that the law intends
to protect can invalidate the contract. The other party cannot invalidate
it, and the invalidity of the contract will not be effective for him unless
the victimized party chooses to invoke it.
When the contract is invalid fer some other reason, on the other
hand, the parties' positions are equal; either one of them, or any other
interested person, can invalidate the contract. 31
Dlustrations.
l. A enters into a contract with B because of an error induced
by B's fraud. A can have the contract invalidated, but B can-
not.
2. A and B conclude a partnership contract, but they do not
put the contract in writing as the law requires. Either of them
can assert the invalidity of the contract.
30. Editor's note: For invalidation, see pp. 20-36 above ;

(or cancellation, see pp. 63-67 above.
31. .Editor's note: Professor David's list of case.s in which only one party can
invalidate the contract is not exclusive. Article 1808 (1) also mentions the
case of invalidity resulting from incapacity.
3. A promises to pay B $200 per month if B will prostitute

herself and turn over to him her receipts from prostitution.
Both A and B can assert the invalidity of the contract.
Articles 1809-1810. There may be a time limit for assertion of the
invalidity. As long as the situation is unchanged and the contract has
not been performed, there is no limit. Anyone entitled to assert the
invalidity of the contract may, at any time, refuse to perform it.
If, however, the contract has been performed, it is necessary to
fix a deadline after which invalidation cannot be required . .western
legal systems differ in the time limits that they fix, as well as in the point
from which the limitation is calculated. The Code adopts a very
short time limit, two years from the day on which the ground for
invalidation disappears. In practice, the only case where this limitation
is likely to be important is where the invalidity results from a vice in
consent, since normally this is the only ca~ where the ground for in-
validation would disappear. Since other cases are not covered by
Article 1810, their solution depends on the general provision on limi-
tation of actions. Therefore, the invalidity of acts done in performance
of the contract can be invoked as long as the action to invalidate these
acts is not barred by the limitation that extinguishes all actions. 32
mustratioos.
1. A sells B a picture at a high price, having fraudulently made
him think that this was a masterpiece. B can require the
invalidation of the contract within two years of the time
when he pays the agreed price. 3l If he has not paid, he can
refuse to pay at any time.
2. A and B conclude a partnership contract that is invalid
because not in the proper form. Both A and B can at any time
refuse to carry out the contract. The ground for the con-
tract's invalidity will disappear only in the unlikely event
that a new law is enacted changing the formal requirements
for a partnership contract, allowing it to be made in the
form used by A and B. A and B can require the invalidation
of acts done in performance of the contract at any time prior
to the expiration of the ordinary period of limitation, i.e. at
any time within tenyears of when they took place.
32. Eclitor's note: See Section 6 of Chapter 3 of Title XII.

33. Editor's note: Note that the point of departure under Article 1810 would
seem to be the moment when tlte fraud is discove~ rather than the moii'IOftt ·
of payment, as is suggested here.
Article 1811. In the case of a vice in consent, the person who cat
assert the invalidity may also confirm the contract. This confirmation
can occur only after the cause that vitiated the consent has disappeared.
When the mistake or fraud is discovered or the duress ceases, the
party's will becomes free and informed. When the contract is then
confirmed, the vice in consent disappears and there is nothing wro;ng
with the contract. lf it has not been performed, it must be; if it has
been, invalidation will no longer be granted.
Since confirmation is neither a preliminary contract nor a mod-
ification of the original contract, Articles 1721 and 1722 require no
special form. 'It did not seem necessary to expressly state this rule,
as was done in Germany (B.G.B., Section 144).
The short period of limitation set by Article 1810 where the ground
for invalidity disappears seemed to obviate the need for a provision
that would permit one party to require the other, where the latter
has the right to require invalidation, to state within a certain period
whether he intends to confirm the contract or assert its invalidity. 34
Nor was any rule included in the Code similar to Article 31(3)
of the. Swiss Code of Obligations, which provides that "confirmation
of a contract tainted by fraud or concluded as a result of justifiable
fear does not necessarily imply renunciation of the right to require the
payment of damages." In light of the Code's silence on this point,
the opposite solution should be given to this problem in Ethiopia.
The provisions of Article 1811 apply only to. the case where
invalidity results from a vice in consent. A contract cannot be confirm-
ed where the invalidity results from a deficiency in the object, the
cause, or the form of the contract .
. Article 1812. Article 1812 provides a special defence where the
action for invalidation is based on lesion. 35 This provision is intended
tq _minimize the disturbance to established expectations caused by
such an action. The formula of Article 1812 draws on similar provi-
sions foWld in the civjl codes of Italy (Article 1450) and Egypt (Article
129).
Dlustration
A, taking advantage of B's senility, buys from him a house,
agreeing to pay a life annuity of $100 per year. A «fair price"
34. Editor's note: Although the preliminary draft of the Code did not contain
any provision to this effect, such a provision was inserted at a later stage in
the cod.ifica~on process and is contained in Article 1814 of the Code, as
enacted. ·
3S. Editor's note: See Article 1710.
would have been an a:rumity of $300. B requests ibe invalida-
tion of the contract on the ground that A exploited his senility.
A can ·have this action dismissed by promising to pay B an
annuity of $300 per year in the future and $200 supplement
for each payment already made.
Article 1813. Article 1813 states an express rule concerning inval-
idation of contFacts that finds its parallel for cancellation of contracts
in Articles 1785 and 1788. These latter Articles provide that the other
party's failure to perform does not always justify cancellation; the
non-perfon:D.ance in question must affect the very essence of the
contract. The same principle applies to invalidation. The whole
contract is not necessarily invalid just because some of its clauses are.
The whole contract is invalid only if invalidation of the affected clauses
will upset the very essence of the contract, where enforcement of the
contract without its invalid clauses would be like writing a new
contract for the parties.
Except for a modification at the end, Article 1813 was formulated
on the pattern of Article 20(2) of the Swiss Code of Obligations. It
corresponds to French case law, particularly the court interpretation
of French Civil Code Articles 900 and 1172. One also finds similar
provisions in the civil codes of Germany (B.G.B., Section 139), Italy
(Article 1419), and Egypt (Article 143).
Articles 1815-1817. Articles 1815-1817 indicate the consequences
of inyalidation and cancellation of contracts. 36 In principle, invalida-
tion and cancellation ruive a retroactive effect. AH that has been done
in execution of the contract is to be invalidated. Deliveries made in
performance of the contract are to be returned, so that the parties
are put m the positions they would have held if the invalidated or
cancelled contract had never been concluded.
To this principle, there are two exceptions. First, the retroactivity
of the invalidation or cancellation ought notto affect the rights of third
persons in good faith. If one of the parties has transferred to a third
person in good faith something that he received as a result of a contract
that is being in validated or cancelled, this third person will keep the
thing he thus acquired. The contracting party's obligation to return
the thing does not extend to the third person. By third person in good
faith we mean any person who has acquired his rights without knowing
of the ground for invalidation that tainted the right of his transferor.
More generally, the reestablishment of the status quo and the
restitution of deliveries made by _the parties may be ve'y in'conveniel}t
36. Editor's note : Article 1818 of the Code as enacted was not contained in
the preliminary draft and so i~ the object of no commentary here.
or involved. In such a case, we need not ins1st on restitution. In place
of the restitution provided by Article 1815, the court can order the
payment of damages or some other appropriate remedy.
By stating this general principle, Article 1817 made it unnecessary

to include a special provision for contracts requiring repeated or con-
tinuous performance, as is found in Article 1458 of the Italian Civil
Code.
Where invalidation of the acts done in performance of !tle con-

tract w ould cause considerable inconvenience or serious complications,
the validity of the acts "is maintained." By saying that the validity
"is ma intained," instead of simply that it " rnay be maintained," the
Code indicates that this is not a possibility to be utilized only rarely.
Although Article 1815 is theoretically the principle and Article 1817
the exception, it may well happen in practice for many kinds of con-
tracts that the exception will become the rule and the rule the exception,
particularly in the commercial area.
SECTION II: TERMINATION OF CONTRACTS

AND REMISSION OF DEBT
Articles 1819-1822. "Termination" of a contract indicates that
the parties, or one of them, have put an end to the contract. It is the
opposite of cancellation in that the latter has a retroactive effect, while
termination is only effective prospectively. All that has already been
done in performance of the contract remains effective when the con-
tract is terminated ; the contract simply ceases to be enforccrable or to
produce new effects in the future.
Ordinarily, termination of a contract requires the consen t of both
parties. There are, however, two situations in which the con tract can
be terminated by a simple unilateral declaration.
This can happen if the contract itself foresees the possibility for
one or both of the parties individually to denounce it by a simple
unilateral declaration. Such a stipulation is valid. It seemed unneces-
sary to state this expressly; in such a case, the contract is n ot invalid
as having been contracted under a purely polestative condition.
Although the parties may put an and to the contract a t any time,
until they do so they are bound by the contract and subject to the
obligations ~t it imposes on them.
Similarly, it is possible in multilateral contracts to include a
provision for the expulsion of one of the parties and its continuation
among the remaining parties. Such a clause would seem particularly
·Ulef'ul in such contracts as the contract of association.
The second situation where unilateral termination is possible is
that of contracts of indefinite duration. A hires B, or A leases a field
to B, or A receives something from B on deposit and no time provision
iS included ; the contract does not provide how long. the contract of
employment, or of lease, or of deposit, is to last. If the law itself, in a
suppletory provision, does not fix the duration of the contract, either
party can end the contract unilaterally.
Where either the law or the contract gives one party the right to
terminate a contract, this right cannot be exercised arbitrarily. If there·
are customary periods of notice, they arc to be observed, and the
tenQination is effective only at the expiration of such notice period.
· If there is no such customary period, one must give notice that is
reasonable in the circumstances. By thus expressly forbidding what
would be a clear abuse of right, Article 1822 states a specific applica-
tion of the principle, found in Article 1732, that contracts are to be
interpreted according to good faith.
Articles 1&23-1824. In addition to termination by agreement and

by one person's unilateral declaration, the Code provides for two
cases of judicial termination , where one party can require the court
to terminate a contract he has entered into.
The first case is that of contracts in which the parties do not have
antagonistic interests, but rather have a common interest in the pursuit
of a single objective. Typical contracts of this sort are the contract of
association and the contract of partnership, but other contracts may
have this characteristic as well. An example is the contract of employ-
ment, where often one of the parties is not in a position to supervise
the other and must necessarily have confidence in him. If the confi-
dence, harmony, or cooperation that is essential to such a contract
disappears, either of the parties ought to be able to get out of the con-
tract . Obviously, parties to such a contract would be wise to foresee
this possibjlity and regulate it in their contract. Nevertheless, if they
fail to do so, they should be allowed to appeal to the court, which will
decide whether or not the reason invoked to justify termination is
sufficient and justified, considering the nature of the contract, the
relationship that it requires between the parties, an~ their behaviour.
The second case where the court can terminate a contract, also
provided by Article 1824, is that of gratuitous contracts, entered into
for the exclusive advantage of one of the parties. The Cod"' allows a
person obligated by such a contract to require the judge to free him
for good cause.
The provisions of Articles 1823 and 1824 are inspired principally
by German legal writers.
Article 1825. The termination of a contract puts an end to the
obligations of both parties. The remission of debt, on the other hand,
is wrilateral; .it discharges one party from his obligations without
regard to any performance the other party may have provided or still
owes.
Before a remission of debt can extinguish an obligation, it must
be accepted by the debtor. 0fevertheless, since it is economically advan-
tageous for the debtor, the Code here reverses the traditional rule,
found in Article 1682, that silence does not amount to acceptance of
an offer. If the debtor .intends to reject the remission of debt, he must
so inform the creditor immediately when informed by the creditor of
his intention. The word immediately has been substituted for the phrase
in a reasonable time that is found in the corresponding article of the
Italian Civil Code (Article 1236). If one intends to reject a gift, it is
reasonable that it be done immediately. 37 ·
SECTION lll: NOVATION

Article 1826. Another method of extinguishing obligations is
novation, which consists of replacing an old obligation by a new one.
The new obligation may differ from the old in its object. One might
agree for example that D would work for C for X days instead of
paying him Y Ethiopian dollars as had been agreed in the original
contract. The new obligation may also differ from the original one
by its cause. Suppose, for example, that B owes A $10,000 for some
goods he purchased from him; it is agreed in a new contract that B
will keep the $10,000 as a loan from A. This is novation by change in
the cause: B's debt has the same object, SIO,OOO, but henceforth it has
a different cause. B owes the $10,000 to A because A lent it to him,
not because h~ plJ.Ichased the goods from him. The debt of B the pur-
chaser has been extinguished; it has been replaced by the debt of B
the borrower.
Article 1827. Novation can have several effects. For example,
the new debt is not created at the same time as the old one, and the
period within which it can be extinguished by limitation will, therefore,
have a different starting point and, depending on the kind of obligation
37. Editor's note: The Commentary on the preliminary draft at this point con-
tains two paragraphs discussing an Article 150!of the draft, which was omitted
at a later stage in the codificat{on process. That Article dealt with the
form required for the termination of a contract and a remission of debt.
involved, may even have a different duration. The creditor's original
right may also have been supported by a preferential right, a personal
guarantee, or a pledge. As seller of goods, A had the seller of movables'
preferential right; a surety may have guaranteed that B would pay the
price; D might have given C something as a pledge to ensure the pay-
ment of the debt. In the absence of express agreement to the contrary,
these preferential rights, sureties and guarantees will not be transferred
to the new debt. After the novation, A can no longer invoke his pre-
ferential right as seller, the surety will be released, and D can reclaim
the thing he gave in pledge. Article 1827(1) states this expressly,
similarly to the French Civil Code (Article 1278), the Smss Code of
Obligations (Article 114), and the Italian Civil Code (Article 1232).
Article 1827(2), drawing on the Swiss Code of Obligations (Artic¥e
114(2), eliminates a possible difficulty in interpreting the new agreement
between the creditor and the debtor: the new performance promised
by the debtor replaces, in principle, the performance to which he was
originally held and all his accessory obligations.
Article 1828. The way in which obligations are normally extin-
guished is by the debtor's performance. Novation is therefore an excep-
tional means of extinguishing obligations. Not only is it not presumed,
as the Swiss Code of Obligations provides (Article 116), but it will be
recognized only if the intention of the parties to carry it out and to
extinguish the original obligation in this way is unequivocal. Article
1828 states this principle, in accordance with the civil codes of France
(Article 1273) and Italy (Article 1230).
Article 1829. Article 1829 clarifies the principle formulated in the
preceding Article by specifying three cases of novation, as do the codes
of Switzerland (Code of Obligations, Article 116) and Italy (Civil
Code, Article 1231).
The examples given in Article 1829 illustrate the principle stated
in Article 1828, but the general formula of Article 1828 will help de-
cide cases in many other circumstances as well. For example, unless the
contrary is clearly intended, one o ught not to consider that the parties
intend a novation were they modify the terms of the contract either by
adding or deleting a particular clause.
Again in conformity with the Swiss Code of Obligations (Article
117), Article 1830 provides for the case of the current account. The
inscription of items on a fedger of current account does not act as a
novation, although the acceptance of a specific balance of account
does have that effect. Even in this latter case, however, Article 1830
provides an exception to Article 1827, in that the creditor keeps the
benefit of guarantees that may support one of the items entered in the
current account in order to ensure the payment of the new debt.
SECI10N IV: SET-OFF
.Articles 1831-1834. The Code Articles dealing with set-off are

very similar to corresponcting provisions of Western (:Odes, particu-
larly the French Civil Code (Articles 1289-1299) and the Italian Civil
Code (Articles 1241-1252).
After an introductory Article establishing the principle of set-off,

Articles 1832-1834 define the conditions in which set-off occurs auto-
matically. Article 1832 i.mposes three positive conditions : the debts must
be in money or similar fungibles , they must be liquidated, and they
must be due. With respect to this last requirement, Article 1834 pro-
vides that a grace period granted by a court (see Article 1770)isno bar
to set-off. The debt is considered dc.e even though the debtor has
obtained a period of grace for the performance of his obligation.
To the positive conditions stated in Article 1832, Article 1833 adds

soveral negative conditions. There are some debts that cannot be
set-off against others. In such cases, the obligated person must actually
perform his obligations without regard to the fact that his creditor is
a~ the same time his debtor with respect to another obligation.
The first two cases provided for by Article 1833 are absolute bars
to set-off. The person owed a maintenance allowance must actually
receive the money due him, since he needs it to purchase necessities.
His debtor cannot be allowed to refuse to pay this money and simply
reduce another obligation that the maintenance creditor owes him.
Nor can set-off be allowed when the creditor is the State or one of its
subdivisions; it would run counter to principles of public accounting.
The two cases dealt with in Articles 1833(c) and 1833(d) are per-
haps less clear. They have traditionally been accepted in Western coWl-
tries, and the Code retains them. Article 1833(c) attempts to reenforce
the thief's obligations of restitution, or more generally, that of anyone
who has unjustly deprived another of something. Article 1833(d) is
inspired by the idea that the deposit and the loan for use are generally
gratuitous contracts and thus require a high degree of fiduciary re-
sponsibility.
Article 1835. A owes B $1000 and B owes A $1000. The two
debts are extinguished by set-off. But what is to be done if B owes A
not only this $1000, but another $1000 based on another cause. Assume
tha• B bought $1000 worth of goods from A, and that in addition
he borrowed $1000 from A. All these debts are liquidated and due.
Which one is to be set-off with the debt that A owes B? Article 1835
solves this problem by referring back to Articles I 752- I 754, which deal
with the appropriation of payments.
Articles 1836-1837. The effects of set-off are stated in Articles I 836
and 1837.
The two debts are extinguished reciprocally at the first moment
when they exist simultaneously, up to the amount of the lesser of the
two debts. Three comments need to be made about Article 1836. First,
by "the day when they both exist'' is meant the moment when they both
exist with the characteristics that allow set-off to take pJace between
them. Set-off does not take place, in other words, until both debts are
liquidated and due.!8
Second comment: Set-off is effective from the moment stated by
Article 1836, but it only takes place if it is asserted by one of the parties.
Another Article a bit further on states this explicitly. 39 Finally, we
should observe that although set-off can be analysed as a simplified
double payment, it operates between debts of unequal amount and
thus is an exception, allowed by law, to the principle that the creditor
cannot be required to receive a partial payment.
Whatever resemblance there may be between set-off and a double
payment, set-off is a mode of extinction of obligations distinct from
payment. Just as the rule excluding partial payments does not apply
to set-off, there are other rules concerning payments that are inapplic-
able to it. For example, although it is impossible to make a valid
payment to an incapable person, set-off is available against such a
person. A owes B, a minor, $1000andB owes A $1000. A cannot make
a valid payment to B, and B cannot make a valid payment to A, but
A can refuse to pay his debt to B by asserting that it has been set-off
against the debt owed him by B.
Article 1836 seems to say that set-off occurs automatically. This
notion is not, however, pushed to its logical extreme. Article 1837
states expressly that set-off shall not prejudice the rights of third persons.
Article 1298 of the French Civil Code gives an example of this.
A owes ·B $1000. B's creditor, C, gets a court crder forbidding B to
pay A. Later, A acquires a right against B for $1000. Set-off cannot
take place between this right and B's debt to A. Set-off here would
prejudice the rights of the third person, C, who has acquired a privi-
38. Editor's note: The French version of the Code speaks of '"/'instant ou elles
se trouvent exister a Ia fois," so that Professor David's comment is not
addressed to the difference between the words "day" and "moment", but
rather to the meaning of the word"exist" in Article 1836.
39. Editor's note: See Article 1838.
Ieged position through attachment of the right that B, his debtor, has
against A.
Article 1838. Article 1838 is borrowed from the Swiss Code of
Obligations (Article 124) and the Italian Civil Code (Article 1242).
It eliminates difficulties that exist in French law.
Articles 1839-1840. By agreement, the parties can set aside the
Code provisions on set-off and exclude set-off in their relations.
Inversely, they may liberalize these provisi ons and provide that set-off
will occur between them in situations where, under the Code, the con·
ditions for set-off would not be satisfied.
Such an agreement is of course, as always, subject to the require-
ments of public policy. It would not be possible, for example, to
provide that a right to maintenance would be s~t-off against a debt
owed by the creditor of the maintenance right. This rule will be
stated explicitly in the part of the Code where maintenance rights are
regulated. 40
Article 1841. As a supplement to set-off by virtue of the law and
set-off by agreement, Article 1841 provides for judicial set-off. Gener-
ally, the Code requires that both debts be liquidated before set-off can
occur between them. Nevertheless, Article 1841, which is inspired by
Article 1243 of the Italian Civil Code, allows a loosening of this
rule where only one of the debts is liquidated.
Judges are given two alternatives. lf a part of the debt is indisput-
able, they may declare that part set-off. Or they may delay giving
judgment against the debtor of the liquidated debt until the other debt
has been liquidated, but this is only possible if the liquidation of the
non-liquidated debt can be accomplished easily and quickly. The
Italian Civil Code requires the satisfaction of this last condition before
the judges may utilize either of the two alternatives described above,
·but it seemed better to impose it only in the second case.
SECTION V: MERGER
Articles I S42-1844: Merger occurs when one person, with respect
to a single debt, becomes both creditor and debtor at the same time.
The Code provides for this method of extinction of obligations, as do
Western codes.
In principle, merger extinguishes the obligation, which has
actually become impossible to perform . It does not occur, however,
40. Edi tor"s note : Sec Articles 807-825.

to the prejudice of interests which third persons may have in the right.
Thus, if a third person had a usufructuary right or a pledgee's right on
the credit, he does not loss this right as a result of the merger (See
Italian Civil Code, Article 1253). The same rule will apply where the
creditor inherits from his debtor, or vice versa, as long as the two
patrimonies have not been merged, because for example the creditors
of the deceased have blocked the merger.
· Article 1844 reproduces a provision of the Swiss Code of Obligat-
ions (Article 118). It appl;es where the heir assigns his successoral
rights, among which are found a credit of the deceased against him or
a debt he had toward the deceased.
SECTION VI: LIMITATION OF ACTIONS

Limitation of actions is a means of extinguishing obligations

which all legal systems recognize as necessary. Where a creditor fails
for many years to exercise his rights, it is proper to declare the rights
extinguished. It is probable in fact that this extinction has resulted from
another cause, either payment of the debt by the debtor or remission
of the debt by the creditor. Although there no doubt are cases where
this is not true, they are exceptions and even then the creditor cannot
complain about losing a right that he was in so little a hurry to enforce.
Article 1845. The French Civil Code (Article 2262) sets the time
after which recovery is barred at thirty years, but everyone now agrees
that this is too long. In light of these criticisms, Article 1845 fixes a ten.
year period of limitation, as do the codes of Switzerland (Code of
Obligations, Article 127), Japan (Article 167), Lebanon (Article 349),
and Italy (Article 2946). Longer periods of limitation have been kept
by some codes: 15 years in the Egyptian Civil Code (Article 374), 20
years in the Greek Civil Code (Article 249), 30 years in the German
Civil CoJe (B.G.B., Section 195). The Philippine Civil Code (Article
1149) fixes the general period of limitation at just five years, but pro-
vides for numerous exceptional cases.
In the Ethiopian Civil Code, we have tried to avoid exceptions.
Some exceptions may be desirable and may be included in other Titles
of the Code, but it seemed possible and desirable to avoid any excep-
tions in the Section containing the general rules on limitation. The
Ethiopian Code differs in this way from the civil codes ofFrance,Swit-
zerla.Jlrl, Italy, and other co~tries, which provide a shortened period
of liinitation for certain kinds of debts. Since these shortened periods
were based, according to the commentators, on presumptions of
-~Q -
payment, it seemed better to omit them from this Section and include
them :in a Section dealing with proof of paymcnt. 41
The formula of the French Civil Code is that all acr;ons are·barred
if not brought within the time established by the Code. The Ethiopian
Code preferred the formula found in the Italian Civil Code, which
provides that all rights are subject to a ten year limitation. This makes
it clear that at the end of ten years the possibility of raising a right as
a defence to another action is precluded as well as the possibility of
asserting the .right in an affirmative action. The right created by the
contract disappears by limitation; it cannot be asserted in any way. 42 .
Article 1845 deals only with contractual rights. While the rules
dealing with limitation will no doubt be of use with respect to other
types of problems, it seems that limitation needs to be considered from
different points of view in the areas of property and family law than
in connection with contracts. This fact seems to justify the restrictions
contained in Article 1845.
Articles 1846-1847. The periOd of limitation runs from the day
the obligation falls due and this can
be enforced by the creditor. This
due date is independent of notice putting the debtor in default. 43 Al-
though the creditor may have to serve a default notice before he can
enforce his claim, the obligation is due before notice is given. Indeed,
matwity of the debt is a prerequisite to the creditor's default notice.
(Article 1773(2)).
Article 130 of the Swiss Code of Obligations; after providing
tlult the periOd of limitation runs from the time when the debt can be
enforced, adds: "If the right can be enforced only after notice, the
~riOd of limitation runs from the day when this notice could be given."
Article 1846 covers this same problem by referring to the time when
"the rights under the contract could be exercised." In such a situation,
the creditor loses his right to give the debtor notice ten years after the
day on which he could first have given it.
It seemed unnecessary to provide in the Ethiopian code for the
many special cases enumerated in the French Civil Code (Article 2257),
since they can be dealt with simply by applying Article 1846. Because
41. Editor's n~: See Articles 2023-2024 to this effect.

42. Editot's note : This comment clarifies the meaning of Article 1845, which
in .the French version of the Code is still somewhat ambiguous, since it speaks.
or" the "right to exercise an action' • rather than of "all rights arising from
the contract." The English version speaks only in terms of "actions."
43. Editor's note: See Articles t77i on notice of default.
a conditional right cannot be enforced until the condition is fuifilled,
it is only then that the period of limitation begins to run on such a
right. ~t does not run on a warranty of peaceful enjoyment until after
·eviction. It does not run with respect to an obligation due on a spec-
ified date until that date arrives. It seemed unnecessary to deal specifi-
cally in the Code with these particular applications of the general rule.
!\.. difficulty could have arisen, however, with respect to life and
perpetual annuities, had we not included a special provision for them.
Assume, for example, that the beneficiary can require payments on
April 1 and October l each year throughout his life. How does the
period of limitation work if the debtor makes no payment after October
1, 1954 and the beneficiary waits until 1970 to assert his claim to all
post-1 954 payments. Should he be told that he loses his right to the
payments due between October 1954 and October 1959 because these
payments have been due for more than ten years, but allowed to collect
the money due for 1960 and the years following. Or should we say that
since he has waited more than ten years to assert his right to payments
due, he has lost this right itself and so cannot collect either the past
amounts due or any in the future on this contract ? The Code had to
choose and opted for the second solution, following Article 131 of the
Swiss Code of Obligations: All right to claim payments is barred ten
years after the debtor ceased paying money due under the annuity.
Article 1848. Is the period of limitation calculated hourly or
daily? Article 1848 answers that it is calculated daily. Normally ten
full years must pass before a claim is barred. If a claim is due on March
3, 1955, the period of limitation will be completed on March 4,.
1965 at the very beginning of the day (6 :00a.m. if the present manner
of dividing days into 12 day hours and 12 night hours is kept in
Ethiopia).
If the last day of the period is a holiday, the day when the claim
is barred is delayed until after the first non-holiday. To decide whether
or not a day is a holiday, one must look to the place of performance,
that is, the place where performance is supposed to take place accord-
ing to the contract or to the law. The Ethiopian Code does not require,
as does Article 78 of the Swiss Code, that the holiday be a legal holiday.
In the Ethiopian Code, the question of whether or not a particular
day is a holiday is a question of fact to be determined by the court.
Articles 1849-1850. Articles 1849 a~d 1850 reproduce Articles
133 and 140 of the Swiss Code of Obligations and require no comment.
Articles 1851-1852. The period of limitation is interrupted in two
cases: (I) recognition of the debt ·by the debtor; and (2) the bringing
of an action to enforce the claim or the giving of default notice by the
creditor. Any act of the debtor indicating that he considers himself
bound by the debt will constitute a recognition of the debt.
A court action interrupts the period of limitation .only if the debtor
receives notice of it Where this has happened, it is not essential that
the action have been brought before the proper court. Even if it is
brought in the wrong court, it will serve as notice of default and the
Code. states that default notice is sufficient to interrupt the period of
limitation. 44 This system is similar to that of French law (Civil Code,
Article 2244) and Italian law (Civil Code, Article 2943) and less strict
than the Swiss Code (Code of Obligations, Article 135), whose com-
plications are thus avoided.
The effects of interrupting the period of limitation are indicated
in Article 1852 of the Code, in conformity with the provisions of the
Swiss Code of Obligations (Article 137) and the Italian Civil Code
(Articles 2945 and 2953).
Article 1853. Article 1853 states a rule that is unique to the Ethio-
pian Code; no other code has a corresponding provision.
· Other codes suspend the period of limitation in certain cases,
apart from those where the period i~ interrupted. In the in.terest of
simplification, these special cases of suspension were eliminated from
the Ethiopian CivH Code.
Many Codes .suspend the statute of limitations were a child, wife
or servant is the creditor of his parent or tutor, h1JSband, or master,
since their inaction is explained by their delicate situation iJI relation
to their debtor. 4S Article 1853 allows these cases to be disposed of
satisfactorily without the automatic mechanism of other codes. In
so doing, it makes use of a general concept that is applied elsewhere in
the Code (Articles 1705, 1709, and 1766): Because the law must be
more flexible where a contract exists in special circumstances, as
between persons linked by ~ close relationship of parentage or sub-
ordination, a special approach was needed,
Still, other legal systems do suspend the period of limitation in
other cases as well: the Codes of Switzeriand (Code of Ol>ligations,
Article 134) and Italy (Civil Code, Article 2941) suspend it where the
debtor has a usufructuary interest in the right. The Italian Civil Code
44. Editor's note: No explicjt statement to this effect is contained in Article

1851, but such a position might be seen as a logical elttension of that Article.
45. Editor's note: The original version of the coq:uneotary refers to "leur creanci~
er", but . this is clearJy as ·slip of the pen. Naturally, in bilateral contracts
both parties ar~ bo~ creditor and debtor, bqt in respect to th~ statue of Umi~
tations it is the creditor of the partlcuJar obligation whose right is barred.
also suspends it in relations between an heir and the succession he has
inherited (Article 2941), and in favour of minors or others lacking
capacity who do not have a legal representative (Article 2942). It is
suspended in the Swiss Code of Obligations (Article 134) for as long
as it is impossible to assert the claim before a Swiss court.
In the majority of these cases, one can bar the claim by limitation
without prejudice to the person whose claim is barred, because this
person can require indemnification from someone else for the loss he
suffers. Even in the other cases, it seemed to us that, on balance, it
was better to eliminate suspension of the period of lunitation: This
institution, which undermines that of limitation and impairs its utility,
seems to be far from essential, given the length of the period of limita-
tion. The creditor has ten years to act and should not wait to enforce
his right until the last minute. If a special solution seems desirable in
a particular kind of case, the Code can deal with it when regulating
that situation. The Code achieves a desirable simplification by elimin-
ating the general provisions on suspension of pedods of limitation
that are found in other codes.
Article 1854. Article 1854 states a general principle without which

the whole institution of limitation would be undermined_ An action is
barred even though the debtor is in bad faith. One can only hope that
a debtor who knows he should pay a debt will not invoke limitation.
But should he be without scruples, the most obvious bad faith on his
part will not prevent him from relying op. limitation.
Articles 1855-1856. Limitation is an institution imposed by the

law. 46 One's right to invoke limitation cannot be waived by prior
agreement; an agreement that limitation will bar recovery only after
a period other than the statutory period is ineffective.
Although the parties can achieve a similar result by putting
appropriate clauses in their contract, the imperative rules dealing with
limitation cannot be modified by agreement.
On the other hand, once the period of limitation has expired,

the parties are not required to take advantage of it. The court may
not, of its own motion, reject a claim on the basis of limitation ; they
may only base their decision on this ground if the defence has been
raised by one of the parties. Jr. addition, once the period of limitation
has expired, one may validly agree not to raise it as a defence.
46. Editor's note: "une institution d'ordre public.··
O'l
CHAPTER IV: CONTRACTUAL ·PROVISIONS·"
The Ethiopian Civil Code accepts the principle of freedom of
contract, with the consequence that contracting parties are free to
organize their ·relations as they like, except where the law specifica.Dy
provides otherwise. For this reason, it is impossible to foresee, a.nd
to specify the meaning and elf~ of, all the provisions that one might
include in a contract; and it would be futile to try.
Nevertheless, some provisions are used very frequently, so that

the Code can usefully provide for them. The Code considers five sudl
provisions: the time provision; the condition; the case of alternative
obligations; tl)e payment of earnest, and finally, provisions concerning
liability (particularly, the penalty clause). One . ~oil in Chapter
IV is devoted to each of these five kinds of provisions.
SECTION 1: TIME PROVISIONS

No provision is more frequent than tlie time provi~ion. Orie or
both of the obligations under the contract is not to be performed
immediately. A time is set for performance: the contract may provide
for performance on a given date, or in so many days, weeks or . .montbs,
or at the beginning, middle or end of a particular month, or before a
particuJar date.
Articles 1857-1864. In each of these situations, we need to specify
precisely the moment at which performance is due in order that the
debtor may be clear as to his obligations and so that we know when
the creditor may set in motion the sanctions that fiow from non·
performance and when the period of limitation begins to run.
The provisions of Articles 1857 to 1864 reproduce those·of the r
Swi5s Code of Obligations (Articles 76-80). They were modified in

only one respect, and the text is clear in that case, where the period is
fixed in months (Article 1860).
In that Article, the Swiss Code was copied in the first two para·
graphs to cover cases where tllc period is fixed according to the Gregor-
ian calander. But a new paragraph was added to deal with the case
where a period is fixed according to the Coptic calendar. Article 1860(3)
47. Edltor'a note: In the Civil Code ittdt, tho title of Olapter IV is "Spdll
Terma of Obligations or Cool:l'Wa," thus indkating that various of tbo
proviaioris in the Chapter may apply to obligations other than C011tractual .
obliptlons.
declares that the thirteenth month of the Coptic calendar is to be
ignored.
The meaning of this paragraph is as follows. If a contract was
concluded on Sene 10 and provided that the debtor was to perform
his obligations "in three months," he must perform on Maskaram
10. The 5 or 6 days of Pagume that come between Nahasse and Mask-
aram are not counted.
If a contract is concluded during Pagume, and contains the same
time provision, it will be considered as if concluded on Maskaram 1,
since Pagume is not counted. Performance will be due on Tahsas I.
One should also note the respective positions of Articles 1862 and
1863. Article 1862 provides an exception to the Articles that precede
it. It canqot be invoked by the debtor in the case provided for in Article
1863. If the debtor has undertaken to perform his obligation ·before
July I, he must perform it by June 30 at the latest. He is in default if
he performs on July I, even if June 30 is a holiday.
In Article 1862, the Code speaks of a day that is a holiday at the
place of payment and not, as the Swiss Code does, of a day that is a
legal holiday at that place. The same modification was made with
respect to Article 1848, and it is discussed more fully in connection
with that Article.
Articles 1865-1867. Articles 1865 to 1867 determine the effects of
time provisions. The significance of a time provision differs according
to whether it was included in favour of the debtor, in favour of both
parties, or in favour of the creditor alone.
Article 1865 establishes a presumption that a time provision is
ordinarily included for the benefit of the debtor alone, as do the Civil
Codes of France (Article 1187) and Italy (Article 1184).-This presump-
tion can be rebutted, however, either by invoking an express clause
or J>y proving on the basis of circumstantial evidence that the time
provision was put in exclusively for the benefit of the creditor or for the
mutual advantage of the two parties.
If the provision was included for the benefit of the debtor alone,
he can renounce it and perform his obligation before the due date. But
if he does this, he cannot reclaim the money as an undue payment. 41
If the time provision was included in the parties' mutual interest, or
exclusively for the creditor's benefit, his agreement is necessary before -
advance performance can be given.
If the provision was included for the creditor's exclusive benefit,
he can require that the debtor perform his obligations before .the time
<68. Editor's note: See Article 2164.

fixe4. Otherwise, unless the parties revise the agreement, he must await
the due date; prior to that, he can only act to safeguard his rights
(See Egyptian Civil Code, Article.274). Even where the time provision
is for his benefit, he cannot always require immediate p7rformance;
where it appears necessary, he must give the debtor a reasonable time
for performance. Article 1867(2) specifies this result, which is not ex-
pressly stated in France (Civil Code, Article 1186) or Italy (Civil Code,
Article 1183), although both countries accept it without express legis-
lative provision.
Article 1868. The final Article in this Section provides for the loss
of the benefit of a time provision. This happens when the debtor's
insolvency has been "judicially established," a formula also used in
Article 1757(2). It also happens where the debtor has acted to reduce
the security he gave to the creditor. On this point, the Code is in con-
formity with Articles 1188 of the French Civil Code and 1186 of the
Italian Civil Code.
If the securities given by the debtor have been lost or reduced in
value by something for which the debtor is not responsible, the debtor
does not lose the benefit of the time provision and he does not have
to furnish new securities to the creditor. It did not seem advisable to
follow Article 273 of the Egyptian Civil Code on this point.
SECTION II: CONDITIONS
(Articles 18.69-1879)
Article 1869. Contracting parties may make conditional the
effectiveness or the cancellation of their contract or one of its
clauses. The contract will not have any effect unless the COI)dition
is satisfied, or in the contrary case, will cease having effects if the
condition is satisfied.
The condition must relate to an uncertain· event by definition. But
the uncertainty may relate to whether the event will occur or not
or to the date when it will occur. In addition, the uncertainty may
exist only in the minds of the parties and relate to whether something
did or did not actually happen in the past. The formula of Article
1869 covers all these possibilities. 49
49. Editor's note: Professor David's definition of a conditional obligation in

this paragraph is materially broader than the traditional wncept. Most
legal systems regard as conditional only those obligations whose very exis-
tence is uncertain, because it is dependent on an event whose occurrence is
uncertain. Where only the date of the event is uncertain, as the death of a
specified person, most legal systems consider that there is an uncertain time
for performance, but not a condition.
While the official Amharic version of the Code and the unofficial French text
permit this broader interpretation, the English translation specifically exclud-
es it, since it refers to "an obligation whose existence depends on the occur-
rence or non-occurrence of an uncertain event. (Editor's emphasis)."
_Q,;-
Article 1870. The conditions on which the performance of
contracts are made to depend vary greatly. Some are a matter of pure
chance, while the parties themselves may inftuerlte or determine
whether others are fulfilled. In this latter case, Article 1870 falls back
upon the principle of good faith, which dominates all of the law of
contracts. It uses the principle boldly and provides that, even though
a condition is not fulfilled, one party can consider the contract effective
and thus require its performance where the other party has prevented
the condition 's fulfillment in a manner contrary to good faith. Article
1870 differs from the statement found in the Swiss Code of Obligat-
ions (Article !56) and still more from that of the French Civil Code
(Article 1178) and the Italian Civil Code (Article 1359), as it gives the
person an option, whereas. the other codes seem to require that he
consider the condition fulfilled. There seems to be no justification
for the more mechanical approach.
Article 1871. When a contract is subject to a condition prece-
dent, it has effect only from the time when the condition is fulfilled.
When it is subject to a condition subsequent, it has effect inun.ediately,
but its effects are wiped out if the condition is fulfilled.
Although the parties are to decide whether their contract is
subject to a condition precedent or a condition subsequent, their lan-
guage is not always clear on this point. Article 1871 solves the problem
·by creating a presumption that the parties intended to make their
contract subject to a condition precedent.
Article 1871 also establishes the principle that where a contract
is made subject to a condition precedent, it has no effects until the
condition is fulfilled.
The creditor, therefore, cannot require performance before this
time, nor can the debtor validly tender performance (See Article 268,
Egyptian Civil Code). Article 1871 is similar to Article 151 of the
Swiss Code of Obligations.
Article 1872. Article 1872 provides the inverse rule for contracts
subject to a condition subsequent. Where a contract is concluded
subject to a condition subsequent, performance can be required
immediately: the immovable sold subject to a condition subsequent
is delivered to the buyer; the thing lent subject to such a condition
is g;ven over to the borrower.
When the condition is fulfilled, the contract is cancelled and
ceases to be effective; the immovable sold subject to condition subse-
quent must therefore be returned to the seller. Similarly, the thing lent
subject to condition subsequent must be returned to the lender
without delay.
Articles 1873-1877. The rights of the two parties before the
fulfillment of the condition and the effects of the condition's fulfill-
ment are specified by Articles 1873 to 1877.
Article 1873 is another affirmati : m of the principle of good faith.
The parties are to refrain from any act that would prevent the nonnal
performancP. of the contract upon the fulfillment of the condition.
A. similar express rule is found in the Swiss Code of Obligations
(~rticle i52(I)) and the Italian Civil Code (Article 1358).
This general rule did not seem sufficient, however, and we have
attempted in subsequent Articles to specify the acts thdt parties to a
conditional contract may perform before the condition is fulfilled
and the status of such acts when the rights of the person who perform-
ed them are cancelled by fulfillment of the condition.
The Code decided against simply announcing a general principle
of retroactivity or non-retro.activity to solve these problems. Rather,
it has isolated the various questions that can arise and has provided
a solution for each of them.
Article 1874 deals with the acts of management 50 that the party
holding the right 5 1 can perform prior to the fulfillment of the condit-
ion. These acts are normal for he who does them, because he holds the
right under the conditional contract. Often they are even required
in order to keep the rights from being dissipated. The seller of an
an immovable subject to a condition precedent and the buyer subject
to a condition subsequent conclude contracts for the upkeep, repair.
and leasing of the immovable; where shares are sold subject to a
condition precedent, the seller participates in the deliberations of the
general shareholders' meeting. These acts are valid and enforceable
against the other party, who must respect them once the condition is
fulfilled. Damages can be claimed by him only if these acts cause him
a loss and were done in bad faith, i.e. purposely to injure the other
party or in disregard of his interests.
On the other hand, the holder of a right that has been transferred
by a conditional contract cannot validly conclude acts beyond manage-
50. Editor's note : In this translation, we ha\'e kept the terminology of the English
translation of the Code itself, i.e. acts of management and acts b:>yond man-
agement. The French terms used a1·e acrr?s d'ndministrarion and actes de
disposition.
51. Editor 's note: When us~ng this concept of "holding the right" Professor
David is speaking of the real righ t ro deal with the thing that is being sold, or
whatever, under the conditional contract. The holding of a real right must
be distinguished from the personal riglits that the two contracting par1ies
have against ea.:h other by virrue of the contract.
-9~-
ment with respect to the right until the condition bas been fulfilled.
This.conclusion would result from Article 1873 alone, but Article 1875
·reaffirms it and specifies what happens if the rule is violated. It pro-
vides that the improper acts are subject to invalidation. This invalidity
can be requested only by the other party to the conditional contract;
it cannot be asserted against a third party who has acted in
good faith. It can also disappear as a result of confirmation, which
Article 1875(2) allows any interested third party to insist upon
within a reasonable period of time. The right to invalidate the act
disappears if within a reasonable period of time the person has not
declared his inten!ion to do so. 1}le requests for invalidation and for
confirmation can be made even before the fulfillment of the condition.
This result is dictated by general principles and it seemed unnecessary
to state it expressly in the Code.
Article 1876 deals with the disposition of fruits and profits that
accrue to the right that is the subject of a conditional contract prior
to the fulfillment of the condition. The solution adopted relates only
to fruits and profits collected in good faith. Fruitscollectedpremature-
ly and profits whose accrual was accelerated contrary to good faith
must be returned to the other party, either in kind or by damages.
While Article 1873 requires the holder of the right prior to the
fulfillment of the condition to do whatever is necessary to protect
this right, Articie 1877 expressly gives the other party the right to
take the same protective measures. He can provide for publicity that
will protect him fully against possible acts beyond management by
the other party; he can interrupt the running of a period of limitation
with respect to a right that he has acquired subject to a condition
precedent. Provisions similar to Article 1877 are also found in the
codes of Switzerland (Code of Obligations, (Article 152(2)), France
· (Civil Code, Article 1180), Italy (Civil Code, Article 1356), and Egypt
Articles 1878-1879. Article 1878 deals with impossible, unlawful,
and immoral conditions. Their consequences depend on the importance
of the condition in relation to the whole contract. Article 1878 pro-
vides for the application to this problem, by analogy, of the Code
Articles dealing with clauses of the contract that are impossible,
illegal, or immoraL
Article 1879 establishes the invalidity of an obligation that is
subject to a condition that depends wholly on the person obligated.
For example, a person might undertake an obligation with the stip-
ulation that he will P' {orm if he wants to, or if he judges it fitting.
Since failure to perform an obligation undertaken in this way
would result in no liability, 1t is not an obligation. It is invalid. Article
00
1879 states this rule, in conformity with the Civil Codes of France
(Article 1174), Egypt (Article 267) and Lebanon (Article 84). It did
not seem desirable to include in the Ethiopian Code the reservations
on this subject that are contained in the Lebanese Code. 52
SECTION III: ALTERNATIVE OBLIGATIONS

Articles ISS0-1882. Alternative obligations exist where the
contract says to the debtor: you do either this or that, you rent me
one of these two houses, or you deliver. either so many meters of
material or so many shammas. 53 Articles 1880 to 1882 deal with this
kind of contract. Jt did not seem necessary, on the other hand, to
deal separately with' optional obligations, as various other codes do.
The Ethiopian Code considers optional obligations as a kind of
alternative obligation.
Article I 880 sets forth the basic principle that regulates alterna-
tive obligations: the debtor is discharged by performance of either
of the obligations provided in the contract.
Which of the obligations ought he to perform? Article 1881
states that ordinarily he may decide, but he must make his choice as
soon as the creditor puts him in default to perform his obligation,
assuming performance is due. 1f he does not make his choice imme-
diately, the right to choose passes to the creditor. This latter rule
becomes important if the creditor intends to ask for forced perfor-
mance and in the calculation of damages in case of non-performance.
Where the contract gives the creditor the choice of which obliga-
tion is to be performed, a similar rule applies. The debtor gives
the creditor notice that he must state his choice; if the creditor does
not then choose immediately; the choice passes to the debtor.
On the other hand, if the choice belongs to a third person, the
Code does not provide for a replacem~nt in case he fails to act. ln this
case, one would apply the rules relating to an insufficiently defined
object. If the third party has promised to make the choice, he may
be liable to indemnify the contracting parties for the damage suffered.
The Ethiopian Code does not follow the Italian Civil Code (Article
1287), under which the court chooses which obligation is to be perfor-
med in such a case.
52. Editor 's note: Article 1879 (2) seems to have been added at a later stage of
the codification process and is the subject of no commentary here.
53. Editor's note: The 5hamma is the Ethiopian national dress.

Article 1882, finally' disposes of the case where pe.rformance of one
of the obligations foreseen in the contract is or has become impossible_.
The other obligation must be performed. The party who by his fault .
has deprived the other of his choice can be required to pay damages.
The Ethiopian Code does not adopt the distinctions in this. respect
that are made by the Italian Civil Code (Articles 1288 and 1289).
~een as a whole, the rules provided by Articles 1880 to 1882 are
basically in conformity with the provisions found in the Civil Codes
of France (Article 1189 ff.), Germany (B.G.B., Sections 262-264),
Switzerland (Code of Obligations, Article 72), Egypt (Article 276 ff.)
and Greece (Article 305).
SECTION IV: EARNEST

Articles 1883-1885. It often happens that when a contract is
concluded one party gives the other a sum of money as earnest. But
in spite of how old and how frequent this practice is, there is little
agreement on its nature and significance.
The Civil Codes of Germany (B.G. B. , Section 336) and Switzer-
land (Code of Obligatbns, Article 158), followed generally by the
Italian Civil Code (Article 1385(3)), consider the giving of earnest
as designed to establish clearly that the contract has been concluded;
they state specifically that the giving of earnest does not confer on
the person who has paid it the right to terminate the contract unila-
terally. But it is precisely this latter meaning that is given to earnest
by the Egyptian Civil Code (Article 103), and the same meaning is
given to earnest in the only Article in the French Civil Code that
deals with it (Article 1590), with respect to the option to buy. The
Greek Civil Code (Articles 402-403) also adopts this second approach,
seeing in earnest a kind of penalty clause.
The Ethiopian Code follows the Egyptian Code on this point,
but indicates more clearly the double function of earnest: it establishes
clearly that the contract has been concluded and also gives one party
the right to terminate the contract unilaterally. The first function
exists in all cases, the secqnd exists only in the absence of a contrary
stipulation or usage. A contrary usage must be established beyond
question by the person relying on it, but it may be a local usage or a
usage for a particular trade or kind of contract.
Where earnest has been given, the contract may be performed
or it may be terminated. Where it is performed, a further question
arises: Ought earnest to be considered as a down-payment on the
price owed by the debtor or is it paid in addition to this price? Here
again Western legal systems provide different answers: The CiVil
Codes of Germany (B.G.B., Section 337) and Italy (Article 138S)
adopt the first; the Swiss Code of Obligations (Article 158) adopts
the second. Article 1884 of the Ethiopian Code opts for the first
solutioo, more favourable to the debtor, in conformity with the gen.
era! prindple of inte~re~tion formulate~ by Article 1738. But here
again only a presumptiOn IS created and 1t can be rebutted by provin
. IatJOn
a contrary st1pu . or usage. g
We have seen that ordinarily the party who gives earnest ltla
terminate the contract unilaterally. If he does this, he loses t~e earne~
that" he paid the other party; the latter is allowed to keep it.
May the party who has been paid earnest also tenninate unilate .
ally? Swiss law (Code of Obligations, Article 158(3)) and Egyptia:
law (Civil Code, At1icle 103) allow this with the proviso that in such
a case the cancelling party must pay double the earnest to the othe
party. The same solution was adopted by the Italian Civil Code (1\rt·~
cle 1386) for cases where th~ ~arnest is paid i~ addition ~o the contra~t
price, and by the French CIVll Code for optwns. In sp1te of all Utes
examples, the Ethiopian Code has c~osen the opposite solution, wnic~
seeme4 more in conformity with practice; the person who has received
earnest does not have a right to terminate the contract, in the absenc
of a contrary stipulation or usage .... 5 4 e
SECTION V: PROVISIONS AS TO LIABILITY

Article 1886. Clauses extending contractual liability are ·pelll:tis •
ible. Article 1886 of the Code recognizes their validity, as does Artie~
211· of the Egyptian Civil Code. e
A·rticles 1887-1888. Clauses limiting or excluding liability are
matter for greater concern. One can fear that the beneficiary of s1.1c~
a clause bas imposed them on the other party. In addition, in extl"eln.
cases, they destroy the very essence of the obligation and contract~
a person who incurs liability is not legally obligated. The Cotte ,~
54. Editor's note : It should be remembered that the present " comment ,.
was written as a memorandum to the Codification Commission pri~
enactment of the Ethiopian Civil Code. Article 1885 (2) expressly provi<t to
contary to Professor David's provisional recommendation, that the ~·
~ving earnest can cancel the contract by repaying double that eal't\e Y
Pres~bly, thi~ change ~as ~ade after :r~ressor David's proposal 1~:~
been discussed m the Codification Comrrussion. In a sentence omitte<j .
this translation, Professor David suggested that the Codification Comrniss· 10
consider this question 'fith especial care. •on
approach to these problems has already been indicated by Articles
1679 and 1879.
Nevertheless, it is desirable to permit certain clauses limiting
liability. ThusArticles 1887 and 1888 allow two kinds ofprovisions.
Article 1887 allows clauses limiting the liability of the parties or of
one of them to the case where non-performance is due to his fault.
Ordinarily the Code provides for liability for non-performance even
in the absenet> of fault (Article 1791 ), but contracting parties ought
to be able to stipulate that liability arises only in case of fault, with
the burden of proof of fault on the person who asserts liability.
The parties cannot, however, provide that they will not be liable
even in case of fault. We have not adopted the distinction made in
some codes between serious and slight faults in this respect: compare
the Italian Civil Code (Article 1229), the Egyptian Civil Code (Article
217(2)), and the Swiss Code of Obligations (Article 100). It did not
seem desirable to include this distinction here.
In addition, the parties can limit their liability by providing tha:t
they will not be liable, even in case of a fault, where the fault is
committed not by themselves but by one of their employees. Article
1888 gives them this possibility, in conformity with the Swiss Code of
Obligations (Article 101) and the Egyptian Civil Code (Article 217).
The second paragraph of Article 1888 is patterned after the Swiss
Code of Obligations (Article 101 {3) and, for certain cases, prohibits
this exclusion of liability where one's employees or auxiliaries are at
fault.
Article 1889. The parties agree that if one of theni does not
perform his obligations, he will have to pay the other $1000. Or they
agree that if performance is late, $20 per day will have to be paid for
delay. Such stipulations are called penalty clauses, and the payment
required is called the penalty. Penalty clauses are frequent in contracts
and are provided for and regulated in the various Western civil codes:
France (Civil Code Article 1226), Switzerland (Code of Obligations,
Article 160), Lebanon (Code of Obligations, Article 266), Italy (Civil
Code, Article I 382), Greece (Civil Code, Article 404), and Egypt
. Arti~/e 1890. A first question 5.oncerning penalty clauses is to know
how to mterpret them. When contracting parties include a penalty
clause in their contract do they intend to give the debtor a choice
~tWeen perfo~nce of his obligation and payment of the penalty
stipulated? Or ts the penalty clause only a fixed evaluation of damages,
so that the creditor can still insist on forced performance of the con-
-t? .
The penalty clause definition given by Article 1889 should answer
this question, but it seemed desirable to be more explicit. Article 1890
provides expressly that, unless otherwise agreed, the creditor may
insist upon performance of a contract even though it includes a pen- ~
alty clause. This solution is in accordance wi th French law (Civil Code,
Article 1228), German (B.G .B., Section 340), and Sv.·iss (Code of
Obligations, Article 160). ·
As in French law, penalty provisions are thus treated differently
than earnest, for which the opposite solution is provided. Where
earnest is paid the person who has paid it ca n ordinarily terminate
the contract unilaterally (sec Article 1885). But where a penalty
clause has been stipulated, the debtor is irrevocably bound by his
contractual obligations. Unless it is agreed that the penalty is an
alternative obligation, he cannot extinguish his obligation by paying
the amount stated in the penalty clause.
There is no difficulty in allowing these two solutions simultaneously.
A penalty clause is easy to distinguish from earnest since the latter is
paid at the time the contract is concluded, whi le the penalty clause
is not effective until later. lt may be more difficult to distinguish
between a penalty clause and a lternative obligations, but Article 1890
(1) helps solve the problem by establishing a presumption in favour
of the penalty clause. A clear stipulation i<; required before a contract
will be interpreted to include alternat ive obligations.
Article 1890 (2) abo dcJincs the creditor's rights, by sta ting that
ordinarily he cannot require both performance and payment of the
penalty. The only case in which he can do so is where the penalty
was intended to penalize a mere delay in performance or the non-
performance of an accessory obligation. Article 1890(2) is in accor-
dance with French law (Civil Code, Articie 1229), Lebanese Ia w (Code
of Obligations, Article 266), and I tali an law (Civil Code, Article 1383).
Illustration.
A purchases some wool from 8, with the stipulation that 8
1~ to deliver wool of a particu la r quali ty. It isagreed thatif, upon
inspection of a bale to be chosen by th< purchaser, the wool
is shown to be of a quality inferior to that p.romi~sed, 8 will pay A
a compensation equal to 10~~ of the s:J!e price. In such a case, A
can require both the performance of the contract and the pay-
ment of the penalty, since the penalty related only to the seller's
accessory obligation to guaran tee the quality of the goods sold.
Arricle 1891. Where a penalty has been stipulated, should a
debtor who fails to perform, or performs late, be excused and thus
not have to pay the penalty, where he can show that his delay or ~on
performance was caused by for example, force majeure?
Article 1891 deals with this question and simply refers back to
the general rilles on non-performance of contracts, which determine
the circumstances in which damages are due for non-performance. ·
The penalty clause determines the amount of damages to be paid, but
it has no effect on the rules that determine when damages are due.
This solution is in accordance with French law, but contrary to
German law (B.G.B., Section 340).
Article 1892. Where there is a failure to perform a contract and

the debtor is liable as a result of Articles 1791-1798, the penalty
clause constitutes a definitive liquidation of the damages that are to be
paid.
This liquidation excludes the application of Articles 1799 ff. In

particular, Article 1800 is no longer available to the debtor; the
penalty is due even if the creditor has suffered no damage at all. The
same solution is found in Article 161 of the Swiss Code of Obligations,
Article 1382 of the Italian Civil Code, and Article 405 of the Greek
Civil Code. Egyptian law . provides the contra ry solution (Civil Code,
Article 224).
Article 1801 is similarly excluded except that Article 1892(2)
permits the applicability of Article 180 l (2) in cases where there is a
penalty clause. The Code has followed the Egyptian Civil Code
(Article 225) on this point. It does not go as far as German law
(B.G.B., Section 340), however, which permits the debtor to claim
damages in excess of the amount stipulated in the penalty clause when-
ever non-performance is due to fault of the debtor without n~gard to
the seriousness of the fault.
Article 1893. Western legal systems are divided on the question
of whether the courts have the right to reduce an excessive penalty.
Courts are given such a right in Lebanon (Code of Obligations, Arti-
cle 266), Italy (Civil Code, Article 1384), Egypt (Civil Code, Article 224),
Germany (B.G.B., Section 343), and Greece (Civil Code, Article 409).
The_ Swiss Code of Obligation~ (Artic!e 163) even imposes a duty
upon the court to do so. On the other hand, French and English
case-law deny to the courts any power to reduce a penalty, even where
it is -excessive., ·
· The Code adopts the latter approach. The court may not reduce
the amount of the penalty in case of non-performance of the obligation
that the penalty was designed to sanction, unless there has been a
partial performance. This provision, similar to Article 1231 of the
F~ C~ Code. is in accordance with the ~ spirit. -Of tbl
Etbiopian Code. ss
Article 1894. Article 1894 is a reproduction of Article 1227 Oftbe
F~h. Civil Code .. It .actually is nothing _more than a ~ific appli-
cation of general prmc1ples already stated tn the Code. Arti<:le 18~2),
in particular, is a simple application of the principle found in Aniqe
1813, since the invalidity of a penalty clause could never be consiclencl
to affect the very essence of the contract." -
55. Editor's note: See, however, Article 1710(2).
56. . Editor_'s note: The present Article 1895 was not contained in the preli~
draft, and so is .the subject of no ccmentary ih!rc. A different Article 1895.
copied from Article 162 of the Swiss Federal Code of Obligations, waa in-
_eluded in the preliminary draft and was subsequently deleted. Considerable
research indicates that 110 commentary exists on the last three chapter. of
· Title Xll. These Chapter are entitled respectively, with "Plurality of~ors .
and Creditors~" "Third Parties in Relation to Contract,'' and "PrOof iD llelat- ·
~to P,nt-racts.

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www.abyssinialaw.

by Professor Ron6 David, F~t6 de Droit et dea Sciences Economi-

Translated into English and edited by Michael Kindred, Faculty of

Printed with the permission of the Imperial Ethiopian Ministry of

CHAPTER ll: THE EFFECT OF CONTRACTS 36

CHAPTER IV: CONTRACTUAL PROVISIONS 94

Article 1676. The Ethiopian Civil Code deals with obligations

whereby two or more persons as between themselves create, vary or

Article 1678. The requirements for the existence and validity

1. A writes to 8 to order certain goods. B sends tile goods.

. Article 1684 provides a second exception to the general rule that

The iast of these requirements is not satisfied in the case, frequent

In any case, however, a person who receives an offer that he does

2. In the same situation, B does not write to A that A's

3. A .talks to B on the telephone and makes him an offer.

ed that states the agreement of the parties .on the .ques-

D. The Vices of Coasent

3. Editor's note : A sentence onritted by this translation indicates that a separate

9. A offers to sell B a certain quantity of goods for $6,000

10. A miscalculates the cost of production of his goods and

Article 1702. The person who makes a mistake cannot invoke

The concept of fraud dealt with in Article 1704 requires that

J. A sells B some land in a distant province, without B having

As with the provision of Article 1709(2), Article 1710 will only

SECI'ION ll: OBJECI' AND .CAUSE

primarily because different writers use the terms to mean · diffenut

on the contary, undertakes to -see to it that the· object sent arrives at

Article 1712 of the Code entimerates these various possible

Article 1713. No matter how detailed the contract is, it is un-

Article 1714. The parties must,. however, sufficiently define

Article 1716 ( 1). The obligations assumed by the parties mst

2. A loans money to B. B intends to use this moll'ey to buy

SECI10N ID: FORM

Articles 1723-1725. The principle of freedom from formal re-

CHAPTER ll: 1liE EFFECI' OF CONTRACI'S

SECDON 1: THE INTERPRETATION OF CONTRACI'S

SECI10N n:· THE PERFORMANCE OF CONTRACTS

I. A owes B $1000, but B is 15 years old and thus subject

Article 1748. What is to happen if the goods that he tenders,

usage. It seemed desirable to place it in the Title of the Code dealing

Code the effects of monetary regulations; these would ·require special

2. A concludes a contract with B and is to pay B, according

3. In the preceding case, it is specified in the contract that

4. A loans B E$1000. It is stipulated that B is to repay a

Article 1751. Article 1751 is similar to rules in the codes of

SECTION m. VARIATION OF CO NTRACTS 21

SECTION IV: NON-PERFORMANCE OF CONTRACI'S

or late. In all of these cases, the Code speaks of non-perfor;mance

1.77S(d), .notification of default is unnecessary when the parties have

ln the case of obligations relating to fungible goods, ·on the .other-

I. A undertakes to maintain in good condition irrigation

26. E4itor's note ! ~ distinction mentioned by ~essot David ·waa ·rem<Md

The deposit of goods is made by the debtor at the place designated

1. A transports some coffee for B under contract. The

Articles 1782-1783. As has been explained, the deposit of some-

The judgment deciding that the deposit was valid. discharges

c. the damage that the cancellation of the contract will

Articles 1786-1789. Although cancellation of a contract for

The first case is where the contract contains an express stipula-