to perform or does not offer to perform his own at the same time, if the performances are due simultaneously.’35

As will be appreciated from the above, the law in the three mixed systems­ on this topic is broadly similar.

(c)  German law

The German law of justified withholding of performance is split between two central provisions of the BGB, §§320 and 273. The first of these creates a right similar to the right to withhold performance which operates in other jurisdictions; the latter goes further than such a comparative right, as it provides for a right to withhold performance even in respect of nonsynallagmatic or non-mutual obligations.

§320(1) BGB provides that a party to a reciprocal (or ‘mutual’ or ‘synallagmatic’) contract may refuse to perform his part until the other party tenders performance, unless advance performance has been stipulated. What the provision is thus essentially dealing with is reciprocal obligations, rather than reciprocal contracts, as the focus is on specific pairings of obligations rather than the nature of the contract as a whole. Though the provision provides for what is called a right of retention in some other jurisdictions (Scotland being one), in German law the term ‘right of retention’ is usually reserved for the more general right of retention provided for under §273(1) applicable not just in cases of synallagmatic obligations.36 §273 provides that, if a debtor (A) has a claim against a creditor (B) arising out of the same legal relationship as that on which A’s debt is based, then A may refuse to perform the duty until the performance due to him by B is tendered. This provision, it will be noted, stipulates no requirement that the two duties be synallagmatic, so that performance of an independent obligation of A can be withheld because of the non-performance by B of its independent obligation under the same relationship. This section is thus noteworthy in providing for a much wider right of justified nonperformance than exists in most jurisdictions.

How do §§320 and 273 interact? §273 can conceivably operate in respect of any contract, as a contract with no reciprocal obligations would still be subject to §273. However, if a contract has both reciprocal and non- ­reciprocal obligations, the former obligations are governed by the regime of §320, the latter by that of §273. This means that, in contracts with at least some reciprocal obligations, it is necessary to determine which obligations

35 CC Art. 2022. 36 §273 also provides for a right of lien: see §273(2).

on the one side are the synallagma, or counterpart obligations, of which obligations on the other side, and which obligations (if any) on either side are free-standing, independent obligations. There is thus, in contracts with reciprocal obligations, no assumption of ‘general mutuality’ (as it was termed earlier), the question on which reciprocal pairings exist being a matter of fact to be determined in the circumstances of the case and by reference to the intentions of the parties. For those obligations which are deemed synallagmatic, the §320 regime is triggered, this providing for somewhat different conditions under which the right to withhold performance may be exercised than does the more general right granted by §273. For instance, whereas under §273 the right of retention may be excluded by a debtor through the provision of security, this does not apply to the synallagmatic duties which are the subject of §320.37 Some types of contract are not considered to give rise to synallagmatic obligations at all (unless exceptionally provided for), an example being the contract of mandate, where the mandatory’s duty to act on behalf of the mandant in relation to the specified matter is not reciprocal to the mandant’s duty to reimburse expenses incurred by the mandatory.

The effect of §320 is to provide for a default rule requiring contemporaneous performance of synallagmatic obligations, though the default position can be varied by a requirement in the contract that one of the parties perform first. The BGB also contains a number of exceptions to the default rule. Some of these are in precisely the areas where non-­codified systems have generated case law on the question of whether retention is justified. So, for instance, in building contracts under which the work is to be performed in stages, the remuneration due for each stage of the works falls due at the time the work is ‘accepted’.38 This will be deemed to be the point when the customer physically receives the work with the express or tacit declaration that it constitutes performance,39 unless the contract stipulates some other point. Standard form building contracts usually regulate the matter more precisely, and make it clear which part of the overall remuneration is applicable to the various stages of the work. In such a case, performance of a specific stage of the work is seen as the mutual counterpart of the duty to pay the relevant specific portion of the price. One protection for a party obliged to perform first is that, if, after the contract is entered into, it becomes apparent that his entitlement to consideration is jeopardised by the inability to perform of the other party, performance by the party obliged to perform first may be refused.40

37 §320(1). 38 §641(1). 39 RGZ 110, 404, 406–7. 40 §321(1).

Under §320(2), if withholding performance would be in bad faith, this is not permitted. When bad faith might preclude the right to withhold being exercised is not specified, save that such bad faith is specified as particularly including the case where a defaulting party is in default in only a ‘relatively trivial’ way. That would seem to result in an identical practice to that operating in the mixed legal systems, where trivial defective ­performance will also prevent the exercise of the right to terminate.

Considered overall, the German rules in §§320 and 273 provide for one of the most pro-creditor regimes in respect of withholding of performance. Not only may performance of a promise be withheld if the reciprocal promise for which it was given is not performed, but, under the general provision of §273, performance of an independent obligation may be withheld if any non-reciprocal duty of the other party is unfulfilled. This latter entitlement causes problems from a theoretical promissory point of view: if a promise is made unconditionally, one would expect it to be enforceable regardless of whether the promisee fails to fulfil an independent promise of its own. One way to attempt to justify §273 would be to see it as a kind of set-off, though this is not an entirely convincing explan­ ation given that the operation of set-off in the Common law requires the relative value of each performance to be weighed, whereas the German rule would allow A to withhold performance even where its duty was of a far lesser value than B’s duty.

(d)  Model law

The article of the DCFR specifically dealing with withholding of performance of a reciprocal obligation must be read in conjunction with earlier provisions on the concept of reciprocity and the time for performance of obligations. Article III.-1:102 defines an obligation as reciprocal if

(i) performance of the one obligation is due in exchange for performance of the other obligation, (ii) it is an obligation to facilitate or accept performance of the other obligation, or (iii) it is so clearly connected to the other obligation or its subject matter that the performances can be regarded as interdependent.41 There is nothing in this definition to prevent an obligation from one contract being the reciprocal of an obligation in another contract. The DCFR also provides that, unless there is a stipulation to the contrary, parties are bound to perform reciprocal obligations simultaneously.42 Taken together these provisions mean that there is no

41 DCFR Art. III.-1:102(4). 42 DCFR Art. III.-2:104.