Sunday, March 28, 2021

Time of Performance of Contracts

Time of performance is very important to determine transfer of risk (in case of contract that transfer ownership such as sales and donation see Art.1758), cost of maintenance and preservation (see Art.1779-1783) and most importantly to claim damage for non-performance. Although time is not the only cause for non performance, when we think of non-performance the first thing that comes to our mind is probably time of performance. Time of performance greatly affects the benefit parties expect to derive from the contract.

This is especially true when there is market instability which has become the feature of modern economy. The importance of time also depends on the nature of the contract or obligation of the parties. Time of performance generally reminds us an Amharic saying which goes as follows; ‘I am dying this evening but the harvest is in the coming summer.’ 

Like in place of performance, parties are advised to determine time of performance. So performance should be made at agreed time (Art.1756 (1). However the law still plays the gap filling role. As indicated under Art. 1695(1) the law remedies the deficiency of the agreement of the parties. Therefore; where there is no contractually agreed time, contract should be performed when either the debtor Art.1756 (2) or the creditor demand performance (Art.1756 (3). 

This means, once the contract is concluded, time of performance can be determined either by the debtor or creditor. If both of them determine date of performance the earliest date is performance date. The debtor demands earliest performance either to avoid cost of maintenance and preservation or to transfer risk or to relieve him self from psychological burden of debt. Earliest performance can also have its own advantages and disadvantages to the creditor. As indicated under Art. 1756(2) by the phrase forthwith the creditor must take delivery just at the time he is informed to take delivery. Otherwise the debtor may exercise his right under Art. 1779. 

Notice that Art.1756 (3) does not contain the phrase forthwith (see Tilahun, 1989, p.99). Instead it contains the phrase whenever which is retranslated as as soon as by G. Krzeczunowicz (G. Krzeczunowicz 1983, p.104). This means the idea intended to be conveyed by Art. 1756(2) is different from that of Art 1756(3). Therefore; although the creditor may be required to receive payment just at the moment the debtor wants to make payment, the creditor is expected to give reasonable time to the debtor. A creditor never invoke non-performance without giving default notice (Art.1772) and in his default notice he may fix a reasonable period that enables the debtor to carry out his obligation (Art.1774). If he has not fixed time in his default notice or the time is unreasonable he may resort to the remedy provided under Art.1785.  

In conclusion, time of performance is determined either by contract or unilaterally by any party to the contract and the mere failure to indicate time of performance never makes the contract incomplete. However in the following four cases the debtor may unilaterally postpone time of performance indefinitely (Art.1757 cum.1759, see also G. Krzeczunowicz 1983, p.108-9). This is to reduce the risk of non-performance by the opposite party. As a result Art. 1757 and 1759 exclusively relate to bilateral contracts (see also Girma 2002, p130).

Simultaneous Performance

It is the corollary of unilateral declaration of time of performance. By exercising their right both side of the parties may determine time of performance and that time of performance may be coincided thereby implying simultaneous performance. Even in cases when time of performance for one side of the obligation has been fixed by contract time of performance for the other side of the obligation fixed unilaterally may coincide with contractually fixed time. For example, assume Abrehet and Yitayal entered into a contract of hiring whereby Abrehet agreed to give combiner and harvester to Yitayal for two months and Yitayal agreed to pay a lump sum of birr 5000. Further assume that time of delivery of the combiner and harvester and time of payment of the rent has not been indicated in the contract. Yitayal may demand the delivery of the combiner and harvester and Abrehet has to deliver soon. But Abrehet has also the right to claim payment of the rent at the time Yitayal claims delivery. So coincidence of time of payment is created leading to simultaneous performance. If time of delivery of the combiner and the harvester was contractually agreed to be August 24, Abrehet may unilaterally decide that payment the rent should also be made on August 24, which leads to simultaneous performance. 

However, if time of performance of both sides of the obligation is contractually determined, there is no concept of simultaneous performance; both sides of the obligation should be performed on the date fixed by the contract                          (Art.1757 (1). For example, in the above case if the date of delivery of the combiner and harvester contractually fixed to be May 23 and date of payment agreed to be two months after delivery there is no concept of simultaneous performance.

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