Thursday, April 1, 2021

Enforcement of Contracts

  Enforcement of Contract

The enforcement of contract is sometimes referred to generally as literal performance or specific performance. Enforcement takes place through court order. Its purpose is to allow the creditor the benefit he expects from performance of the contract. It may take place either through Forced performance or substituted performance. 

Forced performance

 

The word ‘forced performance’ implies the compelling of the debtor to discharge his obligation. It refers to performance directly imposed on the debtor through the execution process. Thus, it take place through court order/judgement. However, it is important to note that the court may not order forced performance merely because the creditor has requested. The court has the power to order forced performance or decline considering the requirements set by the law. Article 1776 provides the conditions for ordering forced performance or otherwise. It reads as follows;

Specific performance of a contract shall not be ordered unless it is of special interest to   the party requiring it and the contract can be enforced without affecting the personal liberty of the debtor.

 

Pursuant to this provision the requirements for the application of forced performance are (1) the creditor’s special interest, and (2) the preservation of the debtor’s personal liberty. These requirements are cumulative not alternative.

 

The first thing that the court shall determine is whether performance is ‘of special interest to the creditor’.  The presence of special interest can be inferred form the  importance of the obligation required to be discharged towards the creditor and its possibility of being discharged otherwise. If forced performance has no special advantage to the creditor, then the court may not order it.

 

 Then, the court shall consider whether forced performance affects the personal liberty of the debtor. As discussed elsewhere contracts are to affect the proprietary interest of parties not their liberty. A person cannot be deprived of his liberty for failure to discharge contractual obligations. Thus, if forced performance affects the personal liberty of the debtor, the court shall not order it.

 

The two conditions must be fulfilled for the court to order forced performance. Here are some examples. Assume, a monopolistic entity which supplies vital goods (e.g water or electricity) or services (eg postal or telecommunication) to a customer cuts of its supplies. In this case the goods or services are so essential, and the customer cannot get them from other sources. Thus, it may be said forced performance is of special interest to the creditor, i.e., customer. At the same time, order the entity to provide these goods or services cannot deprive the entities liberty (as only physical persons enjoy liberty).  So, in this case the court may order forced performance.  Another example: an artist who has agreed to present his songs on a certain occasion in consideration of payment fail to discharge at the agreed time. It may arguably said, the contract is entered in to in consideration of his talents and that his performance of the obligation is of special interest to the creditor. However, to order the artist to sing with out his will amounts to deprivation of his liberty. Thus, in such cases, forced performance cannot be ordered even if it is of special interest to the creditor

Substituted Performance

 

In addition to forced performance, the law provides substituted performance as a remedy for non-performance under articles 1777 and 1778. Substituted performance is made at the expense and cost of the debtor.

 

Art. 1777. –Obligation to do or not to do.

(1)    The creditor may be authorized to do or to cause to be done at the debtor’s expense the acts which the debtor assumed to do.

(2)    The creditor may be authorized to destroy or to cause to be destroyed at the debtor’s expense the things done in violation of the debtor’s obligation to refrain from doing such things.

 

Pursuant to sub-article 1 the court may, upon creditor’s application, authorize the creditor to do or to employ third person to do what the debtor has failed to do at the cost and expense of the debtor. Pursuant to sub-article 2 the creditor may be authorized to destroy or to employ third person to destroy the things done by the debtor in violation of his obligation not to do such things. The cost and expense of such destruction shall be borne by the debtor. Court authorization is, however, indispensable for substituted performance. With out such authorization, the creditor can not recover the costs and expenses from the debtor.  Articles 2330 and 2333 on law of sales are in the same line with concepts under Arts.1776 and 1777(1). Under Art. 2330, the buyer may not demand forced performance in conditions where purchase in replacement is possible for the buyer. The same is true for the seller when the buyer refuses to take delivery and pay the price. Here, the seller may not demand forced performance in circumstances a thing in respect of which a compensatory sale is imposed by custom.

 

Sub article (2) of this provision confirms substitute performance of obligation not to do.  The creditor can destroy or get destroy the things made in violation of the obligation to refrain from doing such things with court authorizations at the debtors expense.

 

If for instance, Ato Belay fails to dig a well, the debtor can have dug the well by any one at Ato Belay's expense up on court authorization.

 

If Ato Belay's obligation was to refrain from erecting a building and fail to do so by erecting a building, the creditor can have the building destroyed or destroy himself. Such act shall be made upon court authorization at the expense of the debtor.

 

Article 1778 also deals with substituted performance in respect of obligation to deliver fungible things. It reads:

Where fungible things are due, the creditor may be authorized by the court to buy at the debtor’s expense the things which the debtor assumed to deliver.

 

Where the fungible things are due the debtor may have substituted performance be made up on court authorization to buy the thing at the debtors expense.

 

If Mr. A fail to perform his obligation of delivering 500 quintal of sugar in due time, the creditor may buy the agreed amount of sugar from the market upon court authorization. The increased cost due to non-performance of the first contract of the sugar would then be covered by the debtor if any.

 

The provisions of Articles 1779-83 also are aspects of substituted performance but they apply in different circumsatances; when the debtor is ready to perform but unable to discharge his obligation either because the creditor refuse to accept performance or the creditor is unknown or uncertain or where delivery cannot be made for any reason personal to the creditor. In all these situations, the debtor has no fault; ready to perform but prevented from performing. Thus, the law allows him to discharge his obligations by depositing the thing or money at such place as instructed by the court. This will relieve the debtor from his obligations. However, the deposit shall be made upon court order and the debtor shall obtain a court confirmation as to the validity of the deposit.

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