In the field of contracts, the Romanian private law system underlines the presence of the principle of good faith in each phase of a contract, starting with the negotiation and ending with the performance of the obligations. Moreover, the Civil Code and doctrine also talk about good faith in the context of termination of the contract, when the parties have to choose between legal remedies. When it comes to breaking this public order obligation doctrine brings into question the existence of abuse of right.
The delimitation between the normal exercise of a right and the abusive one is clear, but since the abuse of right must be punished, there are difficulties regarding the nature of the liability (i.e. the legal obligation to repair the damages caused by a tort). The main difficulty is caused by the fact that in the majority of cases the source of the right that is brought into discussion is a contract. Since, in our legal system, parties cannot choose between tort and contract law (the tort law is considered subsidiary), this study aims to clarify whether the abuse of right is a matter of tort law or a case of breach of contract.
1. The principle of good faith and the abuse of right
Compared to the Civil Code from 1864, our New Civil Code contains regulations regarding the abuse of right, as a result of inspiration coming from the Civil Code of Québec. The 5th Article from our code was copied exactly after the 7th Article from the Code of Québec and it states that no right can be used with the aim of causing one harm or in an excessive and unreasonable manner, contrary to good faith.
It might be useful to conclude that the abusive exercise of a right does not always require the intention of causing harm as fundamental criteria. According to the legal doctrine, the simple lack of good faith when the right is being exercised can be sufficient (Reghini and Diaconescu, 2013, p. 376).
Although, the abuse of right and good faith are independent legal concepts, the legislation and the case law tend to refer to both of them when trying to explain them separately. The legal obligation of good faith, mentioned in the 14th article of our Civil Code, represents the criteria used in assessing the legal behavior that is thought to be abusive. In deciding whether the parties have exercised their rights in an abusive manner or not, the court will apply a test based on the obligation of good faith. It must be kept in mind that the source of the right which is being exercised in an abusive manner is irrelevant, because the principle of bona fides is fundamental for the evaluation of the abuse of rights whether we talk about a breach of contract or tort law.
The importance of assessing the abuse of right through the concept of good faith is materialized in keeping a balance between the performances and counter-performances of the parties in a contract, since a strict application of the principle of pacta sunt servanda could cause serious imbalances (Popa, 2014, p. 179). Bona fides also aims to protect the legitimate interests that could be harmed by an abusive exercise of a subjective right. Moreover,: Article 1183 from the Civil Code imposes this obligation during the negotiations between the parties before an agreement is reached and in the Article 1170 it is mentioned that the parties must respect the bona fides principle during the formation phase of the contract, before the offer is accepted. This last article also specifies that good faith is a legal obligation with a mandatory content, so it cannot be limited or removed by simple will of the parties under any circumstances.
2. The abuse of right – a cause of liability based on tort law
In the Romanian private law system, the breach of contract represents an exception to tort law, which becomes subsidiary and can be raised as a basis of the liability only if the parties are not bound by a contractual agreement. Therefore, if all the legal conditions are fulfilled, one party must base his or her request for the compensation of the damage on the breach of contract, given that our legislation leaves no option between tort law and contract law (Pop, Popa and Vidu, 2015, p. 430). Knowing the nature of the liability is a fundamental matter, since, in our legal system, the unpredictable damages can only be repaired in the context of tort law.
In order to decide the nature of the liability, one should also take into consideration the nature of the good faith obligation. The legal regulation from the Civil Code gives us a clue: good faith is an obligation of public order, which means the parties cannot agree in any valid manner to limit it. When the parties are not bound by a contract, it is clear that the judge will apply the rules that govern the tort law and that the compensation for the tort will consist in damages (i.e. an amount of money). The difficulties will show up when the parties already signed an agreement., since this situation will question the nature of the liability and we would be tempted to consider that the breach of contract theory will be applied in all these cases.
The doctrine mentions that the good faith is an expression of an obligation that transcends the limits of a contract because it represents more than just a clause of an agreement, being a general and universal obligation in every field of private law (Floare, 2015, p. 103). Thus, the contract is not the base for good faith, but only a context in which it must be applied and respected. Breaking this obligation cannot be seen as a direct non-performance or a defective performance of the contract (Floare, 2015, p. 151).
It is not only the intention of limiting or removing bona fides from a contract that becomes irrelevant, but the expressed inclusion of it among other contractual clauses as well. Good faith governs all legal relationships, no matter if the parties choose to mention it or not.
A famous French author wrote that, although the right that is used in an abusive manner finds its legal source in an agreement, the delict should be punished according to the rules of tort law (Stoffel-Munck, 2007, p. 2844). He based his argumentation on the fact that, when it comes to an abusive exercise of a right, the creditor invokes a right that has its source in the contract, but uses it with a different goal than the one that was given to it by the agreement. The exercise of the right is conducted in the area of civil delicts and the legal liability has the purpose to keep the creditor’s abusive behavior between its normal and legal limits. As a result, the tort law shall be the only approach to provide the effectiveness and the efficiency of the good faith obligation.
3. The correlation between the abuse of right and breach of contracts
Firstly, we must insist on the necessity of a delimitation between rights that have their sources in a contract and are exercised abusively and an abusive refusal to perform or defective performance (in this last case, the remedies are specific to the breach of contract, as included in the Civil Code at Article 1516). Although in both cases it is a matter of breaking the obligation of good faith, the remedies shall be different.
As examples for the first case, the following could be mentioned: the abusive use of an agreement clause which subordinates the debitor’s possibility to assign his contractual rights to the creditor’s agreement (Chirică, 2008, p. 121), a clause that allows one party to establish a price in an unilateral manner (Stoffel-Munck, 2007, p. 2843) or the abusive use of a clause that allows one party to decide on the termination of the contract. This last example refers to the possibility of the parties to agree over the defective performances that will lead to the termination of the contract if there is no interest left to maintain it. When the creditor and the debitor choose to include such a clause in their agreement, they must describe in a precise manner the defective performances of the failures to perform that will give to the other party the ability to end the contract. As an example, let’s suppose that company A signs a contract with company B for the installation of a new software. When parties agree upon the price, they also stipulate in the contract that the price must be paid in several installments as the work progresses. They also include in their agreement a clause which states that if the software is not installed until the agreed date, company A may decide over the termination of their contract, without the legal condition of setting an additional time for the performance. Another example of such a clause could be the stipulation that allows company B to terminate the contract if company A refuses to pay for the first installation of the software because the refusal to conterperform is described precisely.
As a remedy for all these situations mentioned above, the judge shall often decide to paralyze the exercise of the right, refusing to guarantee protection to these abusive behaviors. Although this remedy is not specific to the breach of contracts, examples in which other remedies will be applied could be imagined: one party establishes the price of a good in an abusive manner. The aim of this defective performance of the contract is to obtain an unjust financial advantage (De Vincelles, 2006, p. 2634). In the legal doctrine, it is specified that in this case, the remedy could be chosen between the adjustment of the price and the termination of the contract (Popa, 2014, p. 186). In order to clarify, it must be said that establishing the price is a contractual obligation, therefore its source is the agreement between the parties. Thus, the judge has the possibility of applying one of the remedies that were proposed in our doctrine.
To conclude, the fact that the abuse of right can exist even in the context of an agreement, of a negotiation or performance of the obligations in a contract does not remove the liability based on tort law. The good faith is a legal obligation that maintains its independence from the contract, therefore breaking it shall allow the judge to apply the remedies specific to tort law.
By Alexa Francesca Lara Buta
This article has been originally published in issue 5.1 of the magazine, which can be found here. All references used can be found at the end of that issue.