such a position was intended by the parties,12 preferring to hold, in cases of doubt, that, where simultaneous performance is possible, the parties must have intended concurrent performance (unless a promise is very minor, in which case it may be classified as an independent promise13). This preference,­ in cases of doubt, for favouring an interpretation of intended simultaneous performance is also the position adopted in §234(1) of the US Restatement (Second) of Contract.

(b)  Mixed legal systems

The mixed legal systems, drawing upon their civilian heritage, operate local forms of the exceptio non adimpleti contractus. Its use is subject to control, either by reference to the severity of the breach of the party in default or by reference to an equitable control which is not unlike the restraints on withholding of performance which applies in civilian countries as a result of the doctrine of good faith.

In Scotland it is is generally asserted that onerous contracts are governed by the principle of mutuality, but the issue of whether a specific obligation of a contract is the counterpart of a specific obligation on the other side is a question of the intention of the parties. There has been some debate over the past fifteen years or so as to whether or not a presumption of general mutuality of terms exists in respect of all onerous contracts. In a decision of the House of Lords in 1998, Bank of East Asia Ltd v. Scottish Enterprise,14 no such presumption was held to exist. However, more recently, following a number of judgments in favour of such a presumption15 and another against,16 the Supreme Court reassessed the earlier view of the House of Lords and held in its decision in Inveresk plc v. Tullis Russell Papermakers Ltd17 that in every case ‘the analysis should start from the position that all the obligations that [a contract] embraces are to be regarded as counterparts of each other unless there is a clear indication to the contrary’.18 The judges however reasserted that there may be contracts, such as that which arose in the Bank of East Asia case,

12See Peel, Treitel on Contract, para. 17–020.

13Huntoon Co. v. Kolynos (Inc.) [1930] 1 Ch 528. 14 1997 SLT 1213 (HL).

15See the judgments of Lord Drummond Young in: A v. B 2003 SLT 242, 249; Hoult v. Turpie 2004 SLT 308, 312–316; Purac Ltd v. Byzak Ltd 2005 SLT 37, 40. See also the judgment of Lord Marnoch in Macari v. Celtic Football & Athletic Co. Ltd 1999 SC 628, 655.

16Robertson Construction Central Ltd v. Glasgow Metro LLP [2009] CSOH 71, per Lord Hodge at para. 30.

17[2010] UKSC 19, 2010 SCLR 396, [2010] All ER (D) 18.

18Ibid., per Lord Hope at para. 42.

where the presumption will not apply, but a more specific pairing of duties on each side will operate given the staged nature of performance by each party.19 The right to withhold performance for a breach of this mutuality principle, that is for defective or non-performance on the other side, may be exercised (it seems) for any failure of the reciprocal performance which is more than trivial.20

Withholding of performance by A of a duty due by it in favour of B under one contract may be exercised in respect of a failure by B of its duty due to A under another contract if the two contracts are so closely related that they form part of one overall transaction.21 A similar result may be reached by different means in English law, where a cross-claim may give rise to an equitable set-off if it flows out of and is inseparably connected with the dealings and transactions which give rise to the claim: there can be a sufficiently close connection even though the claim and cross-claim arise out of two different contracts.22

An apparent limitation on the right to withhold performance in Scotland is that there is no authority for its use otherwise than where the whole of the obligation due is to be retained: in other words, there is no authority for a combination (at common law) of part-withholding and part-performance of an obligation due under a contract. By contrast, the DCFR specifically permits such part-withholding.23

The Scottish approach is somewhat similar to that taken in South Africa. Mutuality is presumed in bilateral contracts, such as sale, exchange, letting and hire.24 This presumption – that, in bilateral contracts, the obligations will be reciprocal – is, however, only a presumption, and the determining factor is, as Cloete JA noted in Man Truck & Bus v. Dorbyl,25 the intention of the parties:

19Ibid., per Lord Hope at para. 43.

20Judgment of Lord Hope, ibid., para. 43; McBryde, Contract, paras. 20–47, 20–60.

21Inveresk plc v. Tullis Russell Papermakers Ltd [2010] UKSC 19, 2010 SCLR 396, [2010] All ER (D) 18.

22Per Lord Collins in Inveresk plc v. Tullis Russell [2010] UKSC 19, citing Bank of Boston Connecticut v. European Grain & Shipping Co. [1989] AC 1056, 1102, and BIM Kemi AB v. Blackburn Chemicals Ltd (No. 1) [2001] 2 Lloyd’s Rep 93 (CA).

23DCFR Art. III.-3:401(4).

24‘Where a contract is bilateral the obligations on the two sides are prima facie reciprocal, unless the contrary intention clearly appears from a consideration of the terms of the contract’ (per Cloete JA, in Man Truck & Bus (SA)(Pty) Ltd v. Dorbyl Ltd t/a Dorbyl Transport Products & Busaf 2004 (5) SA 226, 233 (SCA)).

25Man Truck & Bus (SA)(Pty) Ltd v. Dorbyl Ltd t/a Dorbyl Transport Products & Busaf

2004 (5) SA 226 (SCA).

The overriding consideration is the intention of the parties; and the question whether the performance of respective obligations was reciprocal, depends upon the intention of the parties as evident from the terms of their agreement seen in conjunction with the relevant background circumstances.26

The Man Truck case concerned facts where the appellant and defendant had entered into a risk-sharing agreement. Under this agreement, the appellant had undertaken to maintain a number of buses (which it had leased to a third party), while the defendant had agreed, if the third party defaulted on the lease agreement, to make certain guaranteed payments to the appellant. The third party defaulted under the lease, and the appellant sued the defendant for the guaranteed payments it claimed were therefore due. One of the questions for the court was whether the defendant’s duty to make the payments was the reciprocal counterpart of the duty to maintain the buses, the court holding that it was.

As in Scotland, the right of a contracting party under South African law to withhold its performance for the non-performance of the other party’s mutual undertaking is designed to act as a spur to the other party to perform, without providing any guarantee of the remedying of that non-performance. It thus acts as a ‘self-help’ means to protect the performance interest,27 but other solutions will evidently require to be called in to play if the defaulting party does not cure its default. The right to withhold counter-performance is in principle not tied to any requirement as to the degree of non-performance on the other party’s part, so the withholding of performance can in theory occur even for minor defects in the other party’s performance.28 In order to prevent abuse of the right, however, an equitable control of the right may be exercised by the courts in cases where B has utilised A’s defective performance to its advantage.29 Where the discretion is exercised, and the right of B to withhold performance denied, there are thus two conceivable outcomes for B: (i) if A’s performance can be rectified, the contract price less the cost of remedying the defect will be awarded to A; or (ii) if defective performance cannot be rectified, then, rather than a claim for a reduced contract price being awarded to A, an equitable award will be made to give A a fair recovery

26Ibid., 233.

27‘A general opinion is that [the right to withhold counter-performance] is an instrument for enforcing specific performance’ (Van der Merwe et al., Contract, p. 390).

28BK Tooling (Edms) Bpk. v. Scope Precision Engineering (Edms) Bpk. 1979 (1) SA 391 (A).

29Ibid.

for the performance rendered.30 While it might be argued that, by conceivably forcing B to perform even where it has not received the precise mutual performance for which it bargained, this equitable control fails fully to respect the promissory undertakings of the parties, it is surely hard to refer the circumstances arising in such cases to any promises actually made by the parties: as they evidently did not consider possible non-conforming outcomes (or else they would have provided for them in the contract), the court simply has to fashion a solution to the problem. The South African approach has at least the merit that it does not purport to operate by way of the artificial device of presumed promises.

As for Louisiana, the Civil Code provides for a category of ‘commutative’ contracts, these being contracts in which ‘the performance of the obligation of each party is correlative to the performance of the other’.31 Is a contract presumed to be commutative when there are obligations to be performed on each side? Though the Code does not make this clear, the courts have had occasion to express an opinion of the matter. In Stockstill v. Byrd, it was said that

The courts at the present day incline strongly against the construction of promises as independent; and, in the absence of clear language to the contrary, promises which form the consideration for each other will be held to be concurrent or dependent, and not independent, so that a failure of one party to perform will discharge the other, [and] so that one cannot maintain an action against the other without showing the performance or tender of performance on his part.32

This view has been approved of in subsequent cases, including by the US Court of Appeals,33 which, applying this approach to litigation before them, concluded that it meant that the plaintiffs’ and defendant’s several undertakings ‘would therefore be considered as dependent and part of the whole agreement absent language indicating the contrary’.34 The logical result of a contract’s being commutative is spelt out in a codal expression of the right to withhold performance: ‘Either party to a commutative contract may refuse to perform his obligation if the other has failed

30See Van der Merwe et al., Contract, p. 396. There is a similarity here with the Scottish approach to awarding price less cost of cure in cases of non-material defects, but utilising an unjustified enrichment award in cases of material defects: see Hogg, Obligations, paras. 4.175–82.

31 CC Art. 1911. 32 132 La. 404, 407, 61 So. 446, 447 (1913).

33Gregory v. Popeyes Famous Fried Chicken and Biscuits Inc. 857 F 2d 1474 (1988).

34Ibid., para. 14 of the Court’s judgment.