Civil Code > TITLE XII CONTRACTS IN GENERAL 3

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Chapter 3. Extinction of obligations

Art. 1806. Obligation performed.

An obligation shall be extinguished where it is performed in accordance with the contract.

Art. 1807. Other causes of extinction.

An obligation shall be extinguished where:

(a) the contract in which it is provided is invalidated or cancelled; or

(b) the parties or one of them enforce a provision made in the contract for the termination of the contract; or

(d) the debtor's obligation is set off by an obligation owing from the creditor to the debtor; or

(e) tile positions of creditor and debtor are merged in the same person; or

(f) performance of the contract has not been demanded within a fixed period.

Section 1. Invalidation and cancellation of contracts

Art. 1808.Who may require invalidation.

(1) A contract which is affected by a defect in the consent or by the incapacity of one party way only be invalidated at the request of that party.

(2) A contract whose object is unlawful or immoral or a contract not made in the prescribed form may be invalidated at the request of any contracting Party or interested third party.

Art. 1809. Party may refuse performance.

A party who is entitled to require the invalidation of the contract may at any time refuse to perform it.

Art. 1810. Action for invalidation.

(1) No contract shall be invalidated unless an action to this effect is brought within two years from the ground for invalidation having disappeared.

(2) Where a contract is unconscionable and tile party injured was of age, the action shall be brought within two years from the making of the contract.

Art. 1811. Confirmation of contract.

(1) The party whose consent was vitiated may waive his right to require tile invalidation of the contract where the cause which vitiated his consent has disappeared.

(2) Where the contract was made in a special form, waiving as mentioned in sub art. (1) shall be made in the same form.

Art. 1812. Putting an end to action.

Where a party requires the invalidation of an unconscionable contract. the other party may put an end to the action by offering to make good the injury.

Art. 1813. Partial invalidation.

Where part only of the contract is vitiated, only that part shall he in validated unless such invalidation affects the essence of the contract.

Art. 1814. Duty to opt.

(1) The party who is entitled to require the invalidation of the contract or to c4neel the contract shall, where he is so asked by the other party, without delay answer whether he intends to confirm or to cancel the contract.

(2) Notwithstanding any proof to the contrary, the contract shall be deemed to be cancelled where answer is not given in due time.

Art. 1815. Effect of invalidation or cancellation.

(1) Where a contract is invalidated or cancelled, the parties shall as far as possible be reinstated in the position which would have existed, had the contract not been made.

(2) Acts done in performance of the contract shall be of no effect.

Art. 1816. Rights of third parties.

Acts done in. performance of the contract shall not be invalidated where the interest of third parties in good faith so requires.

Art. 1817. Restoring previous position not possible.

(1) Acts done in performance of the contract shall not be invalidated where such invalidation is not possible or would involve serious disadvantages or inconveniences.

(2) The parties shall as far as possible be reinstated in the position which would have existed, had the contract not been made, by the payment of damages or any other remedy which the court thinks fit.

Art. 1818. Expenses.

Where a party who is to restore a thing following invalidation or cancellation of the contract has altered such thing or incurred expenses in relation thereto, the provisions of the Chapter of this Code relating to "Unlawful Enrichment" (Art. 2168 2178) shall apply in settling the rights or obligations arising out of such alterations or expenses.

Section 2. Termination of contracts and remission of debt

Art. 1819. — Consent of the parties.

(1) A contract may terminate where the parties so agree.

(2) A contract which is terminated shall no longer be performed.

(3) Termination shall have no retrospective effect.

Art. 1820. — Termination by one party.

(1) Provisions may be made in the contract to the effect that the patties or one of them may terminate the contract on notice.

(2) Where more than two persons enter into a contract, provisions may be made to the effect that the contract shall terminate with regard to one of them and remain in force with regard to the other parties.

Art. 1821. — Contracts for an. undefined period of time.

Where a contract is made for an undefined period of time, both parties may terminate it on notice.

Art. 1822. — Period of notice.

(1) The party who terminates a contract shall comply with legal or customary periods of notice.

(2) Where the period of notice is not fixed by the law or by custom, it shall be reasonable having regard to the circumstances.

Art. 1823. — Special relations between the parties.

A party may apply to the court to order the termination of a contract which requires a special confidence, cooperation or community of views between the parties, where such requirements are no longer present.

Art. 1824. — Gratuitous contracts.

The court may order the termination of a contract made for the exclusive advantage of one party where the other party for good cause so requires.

Art. 1825. — Remission of debt.

Where the creditor informs the debtor that he regards him as released, the obligation shall be extinguished unless the debtor forthwith informs the creditor that he-refuses his debt to be remitted.

Section 3. Novation

Art. 1826. — Principle.

An obligation shall be extinguished where the parties agree to substitute therefor a new obligation which differs from the original one on account of its object or nature.

Art. 1827. — Effect of novation.

(1) Unless otherwise expressly provided, securities or privileges attaching to the original obligation shall not be transferred to the new obligation.

(2) Unless otherwise expressly provided, interest due prior to novation may not be recovered thereafter.

Art. 1828. — Intention to extinguish original obligation.

Novation shall not occur unless the parties show the unequivocal intention to extinguish the original obligation.

Art. 1829. — Absence of novation.

Unless otherwise agreed, novation shall not occur where:

(a) a new document is prepared to support an existing debt; or

(b) the debtor signs a promissory note or bill of exchange in respect of an existing debt; or

Art. 1830. — Current account.

(1) Novation shall not result from the entry of credit or debit items in a current account.

(2) Novation shall occur where the balance of an account is finalised and admitted.

(3) Unless otherwise agreed, the creditor shall retain such securities as may attach to one of the items entered in a current account notwithstanding that the balance of the account has been finalised and admitted.

Section 4. Set-off

Art. 1831. — Principle.

Where two persons owe debts to one another, set-off shall occur and the obligations of both persons shall be extinguished in accordance with the provisions of the following Articles.

Art. 1832. — Positive conditions.

Set-off shall not occur unless both debts are money debts or relate to a certain quantity of fungible things of the same species and both debts are liquidated and due.

Art. 1833. — Negative conditions.

Set-off shall occur regardless of the cause of either, obligation except where:

(a) the special nature of the obligation requires that the creditor be actually paid, as in the case of maintenance or wages necessary for the livelihood of the creditor and his family; or

(b) the obligation is owing to the State or municipalities; or

(d) the obligation is to return a thing deposited.

Art. 1834. — Period of grace.

The granting of a period of grace shall be no bar to a set-off,

Art. 1835, — Appropriation, of payments.

Where several debts liable to set-off are owing from the same person, the set-off shall be made in accordance with the provisions of Chapter 2 of this Title relating to appropriation of payments (Art. 1752-1754).

Art. 1836. — Effect of set-off.

The debts shall extinguish each other as from the day when they both exist and to the extent of the amount of the lesser debt.

Art. 1837. — Rights of third parties.

Set-off shall not affect the rights which a third party may have in respect of one of the debts.

Art. 1838. — Intention, to set-off.

(1) Set-off shall not occur unless the debtor informs the creditor that he intends to make a set-off.

(2) The court shall not have regard to set-off unless raised.

Art. 1839. — Waiving of right to set-off.

The debtor may in advance waive his right to make a set-oft.

Art. 1840. — Contractual set-off.

(1) Set-off may occur in cases not provided by law where the parties agree.

(2) The parties may in advance specify the conditions of a set-oft.

Art. 1841. — Set-off by the court.

(1) Where one of the debts is not liquidated, the court may hold that a set-otf has been made to the extent of such amount of the debt as is admitted.

(2) Where one of the debts is not liquidated but can be liquidated without delay, the court may suspend judgment against the debtor whose debt fs liquidated until the other debt is liquidated.

Section 5. Merger

Art. 1842. — Principle.

Merger shall occur and the obligation shall be extinguished where the positions of creditor and debtor are merged in the same person.

Art. 1843. — Rights of third parties.

Merger shall not affect the rights which a third party may have in respect of the obligation.

Art. 1844. — End of merger.

The obligation shall revive where merger comes to an end.

Section 6. Limitation of actions

Art. 1845. — Period of limitation.

Unless otherwise provided by law, actions for the performance of a contract, actions based on the non-performance of a contract and actions for the invalidation of a contract shall be barred if not brought within ten years.

Art. 1846. — Beginning of period.

The period of limitation shall ran from the day when the obligation is due or the rights under the contract could be exercised.

Art. 1847. - Annuities.

In respect of annuities, the period of limitation shall run from tee day when the first payment not made was due.

Art. 1848. — Calculation of period.

(1) The period of limitation shall not include the day from which such period begins to run. .

(2) The action shall be barred where the last day of the period of limitation has expired without having been used.

(3) Where the last day of the period of limitation is a holiday at the place of payment, the action shall be barred on the next working day.

Art. 1849. — Collateral claims.

Interest and collateral claims shall be barred where the principal claim is barred.

Art. 1850. — Pledge.

A creditor whose claim is secured by a pledge may exercise the rights arising out of the pledge notwithstanding that the -claim is barred.

Art 1851 — Interruption.

The period of limitation shall be interrupted where:

(a) the debtor admits the claim, in particular by paying interest or instalments or by producing a pledge or guarantees; or

(b) the creditor brings an action for the debtor to discharge his obligation.

Art. 1852. — Effect of interruption.

(1) A new period of limitation shall begin to run upon each interruption.

(2) Such period shall be of ten years where the debt has been admitted in writing or established by a judgment.

Art. 1853. — Special relations between the parties.

(1) The court may set aside a plea based on limitation where it is of opinion that the creditor failed to exercise his rights in due time on account of the obedience he owed to or tear he felt of the debtor to whom he is bound by family relationship or subordination.

(2) In such a case, third parties who guaranteed the payment of the debt shall however be released.

Art. 1854. — Bad faith.

A party may plead limitation notwithstanding that he is in bad faith.

Art. 1855. — Contrary provisions.

The parties may not in advance waive limitation nor may they fix periods of limitation other than those fixed by law.

Art. 1856. — Waiving of limitation.

(1) A party may waive limitation after it has become effective.

(2) The court shall not have regard to limitation unless pleaded.

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