performance already tendered, short of substantial performance, survives dissolution of the contract.273

In judicial proceedings, the defaulting party may be allowed a second chance to perform, because ‘according to the circumstances’ the court may grant it an additional time to perform. Evidently, such an additional time would not be granted where, for instance, the defective performance could not be remedied. In addition, where dissolution is sought as a selfhelp remedy, without recourse to the courts, a notice is to be issued by the innocent party to the defaulting party upon the latter’s non-performance requiring performance within a specified reasonable time, and warning that if such performance is not forthcoming the contract shall be deemed to be dissolved.274 The issuing of this notice is a necessary step if dissolution by the party, rather than the court, is sought, though an exception is made where delayed performance would no longer be of value to the innocent party or when it is evident that the party in default will not perform.275 Though the requirement for a compliance notice evidently acts as a break on what is otherwise a clearly party-centred, will-based remedy, such a requirement is not unusual in a comparative context: the provisions of the Louisiana Code bear strong comparisons with German law’s Nachfrist, discussed in the following section.

(d)  German law

The relevant portion of the BGB for present purposes concerns the right of termination for non-performance in §§323–6.276 The principal section on termination, §323, is, it should be noted, only applicable to mutual or reciprocal contracts: it has no application to gratuitous contracts, which has a certain logic to it given that in such gratuitous contracts the promisee has no duties the breach of which might mandate conferral of the right to terminate on the promisor.277 Unlike the right to claim damages or to enforce penalty clauses, there is no requirement that the right to

273CC Art. 2018: ‘If partial performance has been rendered and that performance is of value to the party seeking to dissolve the contract, the dissolution does not preclude recovery for that performance.’

274 CC Art. 2015. 275 CC Art. 2016.

276Rescission for mistake has been dealt with earlier in Ch. 4, under the section on error.

277On the other hand, why should not, in theory, the promisee under a gratuitous contract have the right to terminate the contract for breach? Admittedly, it might seem that such a promisee does not need the protection of the right to terminate, given such a promisee has no duties which it might be compelled to undertake, but might there not be other valid reasons why such a promisee might wish to terminate the contract?

through defining any breach of contract as serious and thus as triggering a right to terminate.280 By comparison then, the default rule in Germany is that all breaches other than trivial ones give a right to terminate, while in England only material breaches give such a right. The difference thus lies in the treatment of the middle ground, that being the treatment of non-material but more than trivial breaches.281

As in the Common law and mixed systems, termination is available for anticipatory breach: a creditor may terminate the contract before performance becomes due if it is obvious that the requirements for termination will be met.282 An obvious case would be a statement of the debtor ahead of the due date for performance that it will not perform when such performance falls due, but other objective indications of unwillingness or inability to perform would also trigger the right to terminate ahead of time. In the German law however, unlike the English law, any claim for damages following anticipatory termination must await the due date for performance.

Termination has only an ex nunc effect, so any performances due which have already been rendered are unaffected by termination and are not subject to the restitutionary regime considered in the next principal section of this chapter.

(e)  Model law

In the introduction to the DCFR, the opportunity is taken to affirm the important point made earlier in this chapter that, where breach of contract gives rise to a right to terminate, it is not the contract as a whole which is terminated but only specific rights and obligations arising under it.283 This statement is a crucial reminder that termination for breach does not affect accrued rights, but has only an ex nunc or prospective effect.284 The DCFR approach in relation to the right to

280So, for instance, though late performance of a duty to pay may not usually amount to a material breach of contract, the parties may agree that ‘time is of the essence’, meaning that exact conformity with the timetable must occur, and may provide that any failure in this respect will confer a right to terminate: see, for instance, Union Eagle v. Golden Achievement [1997] AC 514.

281This is on the assumption that such a thing as non-material but non-trivial breaches exist, which it is argued they do.

282§323(4) BGB. 283 DCFR, Introduction, para. 51.

284The same position prevails in relation to termination by agreement: see Art. III.-1: 108(2)(a).

terminate is, rather than to talk loosely of ‘material breach’ or ‘fundamental breach’ as some systems do, to specify four different grounds justifying termination:

(1)fundamental non-performance;285

(2)non-fundamental delay in performance, following expiry of a period of notice requiring performance;286

(3)anticipated fundamental non-performance;287 and

(4)inadequate assurance of due performance, following expiry of a period of notice requiring such assurance.288

What these grounds mean is fleshed out in the relevant article governing each ground. Importantly, ‘fundamental non-performance’ is not defined in terms which limit it to a culpable non-performance; rather, non-performance is fundamental if it ‘deprives the creditor of what the creditor was entitled to expect under the contract’, unless such a result was unforeseeable to the debtor at the time of contracting. This strict liability basis of the right to terminate is consistent with a law of contract which permits parties (if they wish) to promise that a specific end will be achieved, and not simply that best efforts will be employed in an attempt to achieve that end. A failure of a promise to achieve a specific end ought properly to give rise to a right to terminate for any failure to so achieve, and the DCFR provisions reflect this by giving a wide general right to terminate for non-performance. Consistent with the position in national systems relating to termination by the innocent party (rather than by a court), a notice of termination must be issued to the debtor.289

Not every circumstance where termination is permitted requires the party in default to be given a second chance to perform: of the four grounds of termination listed above, only termination under grounds

(2) and (4) involve the innocent party first giving the party in default a period of time to remedy the problem. The DCFR has thus chosen to limit the ‘second chance’ approach (or Nachfrist in German terms) to a limited ­category of case.290

290Though in fact, in relation to ground (4), it is not so much that the debtor has breached the contract and is being asked to correct this, it is rather that a debtor who has shown signs of being unlikely to perform when the due time falls has been unable to give an adequate assurance of performance.