value to the party seeking to dissolve the contract, Article 2018 adds that dissolution of the contract does not preclude recovery for that performance ‘whether in contract or quasi-contract’.

(c)  German law

In German law, following termination of contract a so-called ‘obligational restitutionary relationship’ (Rückgewährschuldverhältnis) comes in to being. This regime is considered contractual in nature, and its operation precludes the use of unjustified enrichment remedies to adjust the parties’ positions. The restitutionary regime applicable following termination is governed by §346 BGB. Restitution of any performance received is the first duty mandated by the provision,308 though if that is not possible then monetary compensation is to be provided (this is not the same as damages for loss).309 In addition to performance received, restitution must also be effected of ‘emoluments’ (or ‘benefits’) derived from such performance, such as use of an object. Restitution in forma specifica evidently cannot be effected in some cases, three being listed on §346(2) as being where: (i) the nature of the performance is incompatible with such restitution – usage of an object being just such a case, as evidently past usage of an object cannot be transferred; (ii) the object transferred has been consumed, disposed of, encumbered, processed, or redesigned; or (iii) the object transferred has deteriorated (ordinary wear and tear excepted) or been destroyed. Assessment of the appropriate monetary compensation uses the contract price (if one is specified) as the starting point, with appropriate modification (so, if a one-month hire of an object for €300 is terminated after only half a month, €150 would be an appropriate sum for the usage).310 There is, furthermore, no duty to effect compensation in monetary terms as a substitute for restitution in forma specifica in three stated circumstances: (i) if the defect justifying termination only became apparent during processing or transformation of the object; (ii) if the party in breach was responsible for the deterioration or destruction, or the damage would have happened in any event if the object had stayed with that party; or (iii) in cases of a statutory right of termination (i.e. for breach of contract under §323), if the deterioration or destruction occurred in the terminating party’s hands but that party showed the same care he customarily

took in relation to his own affairs. The only duty in such cases is to return any ‘remaining enrichment’.

These provisions would make solution of circumstances such as those raised in the South African case Hall Thermotank v. Hardman,311 discussed above, relatively straightforward under the German regime. Actual restitution of the refrigeration facilities would clearly be excluded by their destruction, making the defendant theoretically liable to compensate the plaintiff monetarily.312 However, given that it appears that the defendant in Hall acted with customary care while the goods were in its possession (the loss of the refrigerator facilities and the ship being due to a storm), such a duty to make monetary compensation would be excluded. Furthermore, given complete loss of the ship and the refrigeration facilities, there would be no ‘remaining enrichment’ for the defendant to restore. On these facts then, the supplier would be entitled to nothing. From the customer’s point of view however, the supplier would be required to return the advance payment to the customer.313 German law would thus provide for the same solution as reached by the South African court, but the route to that conclusion in Germany would be much clearer than was the case in the South African decision, given the rules set out in §346 BGB.

An important exception to restitution following termination of contract in German law applies in the case of so-called ‘continuing contracts’ (Dauerschuldverhältnis), those being contracts where the parties are under a continuing, repeated obligation of performance. Examples of such contracts (regulated by §314 BGB) include lease, partnership and employment, though any contract which imposes continued performance will fall within the regime. Such contracts may be terminated without notice under §314(1) so long as a ‘compelling reason’ exists for their termination, the requirement of a compelling reason being explained as meaning circumstances where ‘the terminating party, taking into account all the circumstances of the specific case and weighing the interests of both parties, cannot reasonably be expected to continue the contractual relationship until the agreed end or until the expiry of a notice period’. Damages are available following such termination, but not the restitutionary regime described above. So, past mutual performance under a continuing contract, for instance mutual performance in relation to rental periods now passed, would not be disturbed by means of restitution, but accrued and unfulfilled rights could still be claimed (for instance a claim for payment

311 1968 (4) SA 818 (D). 312 §346(2)(3) BGB. 313 §346(1) BGB.