EU funded project managed by the EUO in Kosovo and
implemented by a Consortium led by GIZ IS
Support to Civil Code and Property Rights (CCPR)
Contract Number: 2014/344-574
Recommendations regarding the harmonisation,
simplification, modernisation, and approximation to EU
standards of the law of obligations in Kosovo
___________________________________________________________________________
Component B, Activity B.4: “Provide advice to the MoJ on the simplification
and harmonisation of existing civil code related legislation” (ToR, Activity 2.4)
Sub-component: “Law of obligations”
Pristina, November 2015
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DISCLAIMER
This Report has been prepared by the Law of Obligations Team. The findings, conclusions and
interpretations expressed in this document are those of the authors alone and should in no
way be taken to reflect the policies or opinions of the European Union Office in Kosovo.
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Table of Contents
Abbreviations............................................................................................................................. 6
Introduction ............................................................................................................................... 8
1. Recommendations based on the Impact Assessment Report (Act. B.2) ............................. 9
1.1. Recommendations regarding the LOR ........................................................................... 9
A.
General provisions ...................................................................................................... 9
B. Conclusion of contracts ................................................................................................ 11
C. Offer to the public, display of goods and catalogues or advertisements .................. 12
D.
Cause of contract ...................................................................................................... 13
E. Capacity to conclude contracts .................................................................................... 13
F. Form of contract (termination by agreement; agreed form; sanctions for lack of
required form) ..................................................................................................................... 14
G.
Representation (general principles; contemplatio domini; verification; revocation
or modification; conflict of interest; etc.) .......................................................................... 17
H.
Interpretation of contracts ....................................................................................... 20
I.
Nullity and annullability ............................................................................................... 21
J.
Liability for causing the invalidity of the contract ....................................................... 22
K. Annulment of voidable contract .................................................................................. 23
L.
Non-contractual liability ............................................................................................... 25
M.
Self-defence............................................................................................................... 26
N.
Liability arising from damages caused by motor vehicles ....................................... 26
O.
State liability ............................................................................................................. 29
P. Moral damages ............................................................................................................. 29
Q.
Unjustified enrichment ............................................................................................. 32
R. Termination of obligations and statutes of limitation ................................................ 33
S.
Performance of obligations .......................................................................................... 34
T. Creditor’s default (‘mora creditoris’) ........................................................................... 34
U.
Set-off of claims ........................................................................................................ 36
V.
Novation of obligations ............................................................................................ 36
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W.
Periods of limitation (‘prescription’) ........................................................................ 37
X. Default and contractual interest .................................................................................. 38
Y. Usurious interest .......................................................................................................... 40
Z.
Sale of disputed right and conditional fee agreement................................................ 42
AA. Sales contract (notification in case of defects; partial defects; loss of withdrawal
right; sale with documentary credit) .................................................................................. 42
BB. Donations mortis causa and distribution of property before death. Contract of
lifelong maintenance ........................................................................................................... 44
CC.
Contract for work ...................................................................................................... 46
1.2. Recommendations related to special laws .................................................................. 46
DD.
Self-defence............................................................................................................... 46
EE.
Pledge ........................................................................................................................ 47
FF.
Pre-emption .............................................................................................................. 47
GG.
Partnerships .............................................................................................................. 48
HH.
‘Communio’ ............................................................................................................... 49
II. Leasing and other ‘modern’ contracts ......................................................................... 49
JJ.
Lease of agricultural land.......................................................................................... 49
KK.
Notarisation .............................................................................................................. 50
LL.
Motor liability insurance .......................................................................................... 51
MM.
NN.
Defamation and insult........................................................................................... 51
Financial Services: Banking and Insurance ............................................................... 51
2. Recommendations based on the EU legal assessment report (Activity B.3) .................... 52
A.
Anti-discrimination ................................................................................................... 52
B. Consumer protection .................................................................................................... 52
C. Information Society (e-Commerce and Digital Signatures) ........................................ 56
D.
Unfair Trade Practices. Advertising and Information. ............................................. 57
E. Product Liability ............................................................................................................ 58
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This Report has been prepared by the Law of Obligations Team. The findings, conclusions and
interpretations expressed in this document are those of the authors alone and should in no
way be taken to reflect the policies or opinions of the European Union Office in Kosovo.
Abbreviations
A-DL
ADR
BGB
B2B
B2C
CC
CISG
CLDI
CN
DCFR
EC
e.g.
EU
i.e.
IL
LAL
LBO
LCMLI
LCP
LISS
LL
LN
LOR
LPRR
LT
MoJ
PC
PECL
PETL
P2P
The Anti-Discrimination Law of Kosovo (Law No. 2004/3)
Alternative Dispute Resolution
German Civil Code (Bürgerliches Gesetzbuch)
Business-to-business
Business-to-consumer
Italian Civil Code (Codice civile)
UN Convention on Contracts for the International Sale of Goods
Civil Law against Defamation and Insult (Law No. 02/L-65)
French Civil Code (Code Napoléon)
Draft Common Framework of Reference
European Community
Exempli gratia (for example)
European Union
Id est (that is)
Law on Inheritance in Kosovo (Law No.2004/26)
Law on Agricultural Land (Law No. 02/L-26)
Law on Business Organizations (Law No. 02/L-123)
Law on Compulsory Motor Liability Insurance (Law No. 04/L-018)
Law on Consumer Protection (Law No. 04/L-121)
Law on the Information Society Services (Law No. 04/L-094)
Law on Leasing (Law No. 03/L-103)
Law on Notary (Law No. 03/L-10)
Law on Obligational Relationships (Law No. 04/L-077)
Law on Property and Other Real Rights (Law no. 03/L-154)
Law on Tourism (Law No. 04/L-176)
Ministry of Justice
Italian Criminal Code (Codice penale)
Principles of European Contract Law
Principles of European Tort Law
Private-to-private
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ToR
Terms of Reference
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Introduction
The present report has been drawn up in the framework of Activity B.4: “Provide advice
to the MoJ on the simplification and harmonisation of existing civil code related
legislation” (ToR, Activity 2.4). Activity B.4 aims to provide advice to the Ministry of
Justice (MoJ) on practical solutions on how to address problems affecting civil code
related legislation, with specific regard to the sub-component of the law of obligations.
The ultimate goal is to achieve, first of all, the technical improvement of the Law on
Obligational Relationships (LOR), with a view to removing inconsistencies with other
existing legislation (‘harmonisation’); secondly, the ‘modernisation’ and ‘simplification’
of the law by writing off out-dated and unnecessary/redundant legal provisions; and
thirdly, the ‘approximation’ of the law to the acquis communautaire in order to bring it
in line with EU legal standards.
Based on the findings of this report and the previous reports from Activities B.3 and
B.4, the Project will implement the logically and temporally consecutive Activities B.5:
“Assist the MoJ in drafting of an overall plan of the Civil Code of Kosovo indicating the
changes and amendments needed” (ToR, Activity 2.5) and B.6 “On the basis of the
overall plan developed under activity 2.5, assist the MoJ and other stakeholders to
produce a Civil Code Action Plan”.
This report was originally drafted by the Law of Obligations Team (hereafter, the
“Team”), composed of two (2) Senior Law of Obligations Experts, namely Prof. Helmut
Ruessmann and Prof. Marko Brus, and two (2) Law of Obligations Experts, namely Prof.
Nerxhivane Dauti and Mr. Sefadin Blakaj, under the supervision of Key Expert 1 (Team
Leader / Law of Obligations Expert), Dr. Victor Chimienti. The report was further
reviewed and revised by the Team Leader together with Prof. Cristina Poncibò, the
newly appointed Senior Law of Obligations Expert, after the first meeting of the Law of
Obligations Subgroup of the Commission for the Drafting of the Civil Code took place on
9 October 2015 to discuss the findings of the Impact Assessment Report and EU Legal
Assessment Report. As far as practicable, the views expressed by the subgroup
members during the meeting have been incorporated into the final version of this
report.
This report is divided in two parts. Part 1 deals with recommendations stemming from
the Impact Assessment Report drafted as an output of Activity B.2, whereas Part 2
present recommendations based on the findings of the EU Legal Assessment Report
produced as an output of Activity B.3. Part 1 is further divided in two sections: 1.1)
Recommendations regarding the LOR, and 1.2) Recommendations concerning other
legislation related to the law of obligations.
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1. Recommendations based on the Impact Assessment Report (Act. B.2)
1.1. Recommendations regarding the LOR
A. General provisions
I.
Recommendation no. 1
The formulation of Art. 2 LOR on the autonomy of will is unclear and should be
revised. For example, par. 2 provides that parties may regulate their relations
differently from what is provided by the LOR, unless it results otherwise from the
provisions of the LOR or from their meaning and purpose. However, the LOR does not
specify if a certain provision is mandatory. On the contrary, it specifies when a
provision can be derogated, i.e. the parties may agree otherwise. Besides, the focus
should be on the freedom of parties to conclude contracts other than those provided
by law, since the concept of freedom of will is already stated in general terms under
par. 1 of the same article. Reference to the meaning and purpose of the provisions of
law is also unnecessary. It is recommended that par. 1 is redrafted as follows:
“Participants in obligational relationships are free to regulate their relations
according to their will within the limits established by law.” Par. 2 may also be
redrafted as follows: “They may also conclude contracts other than the typical
contracts foreseen by law, provided that such contracts do not conflict with binding
provisions of law, public order or good custom.”
II.
Recommendation no. 2
Art. 5 LOR provides for the obligation of the participants in obligational relationships
to act with due diligence. The article distinguishes between ordinary and professional
care. However, the provisions are not so well formulated1 and may be improved in
light of European best practices. It is recommended to redraft the text as follows:
“Participants in obligational relationships must perform their obligations with the
care and skill which a reasonable person would exercise under the circumstances.
When fulfilling obligations deriving from their professional activity, participants in
obligational relationships must exercise the higher standard of care required by
law. If they are members of a group of professionals for which standards have been
set by a relevant authority or by the group itself, they must exercise the care and
skill expressed in those standards.”
1
"In the fulfillment of their obligations, participants in obligational relationships are obliged to act with the care
which is required in legal transactions of such particular obligational relationship (the care of a good economist
or the care of a good housekeeper)".
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III.
Recommendation no. 3
According to European best practices, contractual security is enhanced by the
imposition of an obligation to co-operate. Such an obligation is only partially
foreseen by Art. 6 LOR, which prohibits the misuse of rights (and thus imposes a
‘negative obligation’) but does not impose a positive obligation to cooperate. Sample
provisions can be found in Art. III. – 1:104 DCFR and Article 1:202 PECL. It is
recommended redrafting Art. 6 par. 1 as follows: “Participants in obligational
relationships are obliged to cooperate with each other when this is necessary or can
reasonably be expected for the performance of their obligations.”
IV.
Recommendation no. 4
Art. 7 LOR requires the value of respective obligations of parties to bilateral
contracts to be equal. This article is ‘ideological’ and contradicts the principle of
freedom of contract. A mechanism to redress ‘laesio enormis’ situation is provided by
Art. 122 LOR. It is recommended deleting Art. 7 from the Civil Code. Art. 9 LOR
sounds paternalistic in affirming the obvious principle that a person should refrain
from actions causing damages to another. Moreover, the ‘neminem laedere’
principle should be inferred from Art. 136 LOR. It is recommended that Art. 9 is
deleted from the Civil Code. Art. 10 LOR encourages the amicable settlement of
disputes which is not a matter of substantive law but rather of procedural law. It is
recommended to delete Art. 10 from the Civil Code.
V.
Recommendation no. 5
Art. 12 LOR makes the LOR applicable both to contractual relationships among
private individuals (‘private-to-private’ contracts: P2P) and contractual relationships
among commercial companies (‘commercial contracts’, also known as ‘business-tobusiness’ contracts: B2B)2. This article was not present in the old Yugoslav LOR but
was inserted in the Slovenian Code of Obligations to formalise a general rule that had
not been codified in the Yugoslav LOR. By pasting out the Slovenian Code of
Obligations, this article is now part of the Kosovo legal system. However, it is
questionable whether such an article should be left in the future Civil Code. Other
Civil Codes do not contain a similar rule and silently imply that the rules governing
obligations are applicable to both commercial and non-commercial contracts.
Besides, if consumer contract law is to be integrated into general contract law, it will
not be sufficient to differentiate ratione personae between B2B and P2P (like Art. 12
2
However, the specific nature of economic relations is not completely disregarded. A number of provisions
either stipulate that the rules contained therein are not to be applied to commercial contracts or provide some
special solution for such contracts. See Art. 310 par. 2, Art. 355, Art. 381 par. 2, Art. 397, Art. 420 par. 4, Art.
445 par. 2, Art. 464 par. 1, Art. 465 par. 1, Art. 476 par. 1, Art. 521 par. 1, Art. 568 par. 2, Art. 1016 par. 4, and
Art. 1046 LOR.
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LOR currently does), as there will clearly be additional types of contracts to be taken
into consideration: not only business-to-consumer contracts (B2C) but also so-called
‘consumer-to-consumer’ contracts (C2C), of which the contracts concluded through
online auction and bidding providers (e.g. ebay) are typical examples. With the
possible incorporation of the EU acquis on consumer contracts in the Civil Code, the
only relevant distinction left to be drawn should be between contracts involving
consumers, i.e. B2C and C2C contracts, on the one hand, and all other contracts (such
as P2P and B2B contracts), on the other hand. An additional concern is that the
definition of commercial companies provided by Art. 12 may not be fully in line with
Kosovo corporate law, and in particular with the types of business organisations
defined by the Law on Business Organizations (LBO). For the above-mentioned
reasons, and for the sake of simplification, it is recommended removing the
present content of Art. 12, which may be reworded to stipulate that the provisions
of the Book on Obligations shall apply to all types of contract, unless provided
otherwise by law.
VI.
Recommendation no. 6
Art. 14 provides for the application of the LOR by analogy. This provision may be
transferred to the General Part of the Civil Code. It is recommended that Art. 14 is
removed from the Book on Obligations and included in the General Part of the Civil
Code.
B. Conclusion of contracts
VII.
3
Recommendation no. 7
Art. 15 LOR provides that “A contract shall be deemed concluded when the
contracting parties agree upon essential elements of the contract”3; however, it does
not specify what the essential elements of a contract are (e.g. agreement of the
parties, object, form required by law, etc.). Also, the concept that a contract is
considered concluded only when the essential elements exist is fallacious. A contract
may have been concluded, in the sense that the parties have reached an agreement,
but such contract may be null and void for the lack of another essential element,
such as the form prescribed by law, or simply voidable because the will of one of the
contracting parties is vitiated. In fact, Art. 15 LOR makes confusion between two very
different concepts: the conclusion of the contract (usually based on the
‘consensualistic principle’), on the one hand, and the notion of essential elements
(which relates to the valid formation of the contract), on the other hand. It is
recommended that Art. 15 is amended to stipulate that a contract is concluded
based on the model of offer and acceptance, which is universally accepted in both
civil law and common law jurisdictions. A possible formulation may be as follows:
The essential elements of a contract are also referred to in Art. 23 LOR regarding the offer.
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“The contract is concluded when the party who made the offer is made aware of
the acceptance of the other party” (cfr. Art. II. – 4:205 DCFR and Art. 1326 of the
Italian Civil Code (CC)). This provision should be linked to Articles 28 ff. LOR. Art. 16
LOR may be removed because Art. 46 LOR already governs ‘significant mistake’ as a
cause of voidability. Prior to addressing the conclusion of contracts, the Civil Code
may additionally provide a definition of contract4 and list the essential elements of
the contract (see, for instance, Art. 1326 CC).
C. Offer to the public, display of goods and catalogues or advertisements
VIII.
Recommendation no. 8
An offer does not have to be directed towards a specific person. It can also be
addressed to the general audience. While the English version of Art. 22 par. 3 LOR
provides the same rule as Art. 35 par. 3 of the Slovenian Code of Obligations, which
removes the binding effect of an offer to the public, the Albanian text of the same
provision (which is the official one) reverts back to the old Yugoslav rule stating that a
proposal made to an undetermined number of persons and containing the essential
elements of a contract shall account as an offer, unless it follows otherwise from the
circumstances or usages. The main question which arises is whether and how this
provision should be reconciled with Art. 24 LOR which, along the same lines of the
old Yugoslav LOR (and based on the Swiss law of Obligations), provides that
catalogues, price-lists, tariffs and other notices shall not be deemed offers for the
conclusion of a contract, but merely invitations to make an offer. As evidenced by
Yugoslav doctrine, these two provisions are (partially) incompatible where the abovementioned notices contain all essential elements of a contract. Moreover, in some
cases the advertiser may simply want to be bound to its proposal by the mere
acceptance of somebody else without the need to negotiate. Furthermore, prior to
the advent of Internet, customers had to physically visit a shop in order to buy a
product. In the era of e-commerce, one can buy from home with a simple click
of a mouse, and e-commerce platforms can be regarded as ‘virtual shops’ in
which the goods shown with their prices are comparable to the goods displayed
on the shelves of a traditional store. It is therefore recommended to remove Art.
23 and redraft Art. 24 along the lines of Article II. – 4:201(3) DCFR, which expresses
the general European rule, based on French, Italian and Dutch law.5 A possible
formulation may be as follows: “The display of goods labelled with a price or the
proposal to supply goods from stock at a stated price made in a catalogue or a
4
Art. II-1:101(1) DCFR states: “A contract is an agreement which is intended to give rise to a binding legal
relationship or to have some other legal effect (…)”. According to Art. 1321 CC, the contract is defined as an
“agreement among two, or more parties, aiming to set up, regulate or extinguish a patrimonial (economically
valuable) relationship among themselves”.
5
See also Art. 2:201(3) PECL.
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public advertisement, whether in print or broadcast media or by other means such
as the Internet, is treated as an offer to supply at that price until the stock of goods
is exhausted, unless the circumstances indicate otherwise.”
D. Cause of contract
IX.
Recommendation no. 9
Art. 39 LOR refers to the “permissible basis” (“baza e lejueshme”, in Albanian) as
a constituent element of “each contractual obligation”. This definition is
conceptually flawed because it misconstrues the concept of ‘cause of contract’.
Not all legal systems embrace such an ancient concept of Roman law (e.g. the
concept is no longer found in German law but is it still applied in most European
codifications of civil law and finds its alter ego in the concept of ‘consideration’
under Common Law). In those legal systems where the cause of contract is still
relevant, it is generally regarded as the economic function of a contract. It must
not only be lawful, i.e. not against mandatory rules of law, public order and
moral costumes, but also (sometimes) worthy of protection by the legal system.
The cause cannot and should not be confused with the legal ‘basis’ of a contract,
i.e. the general principle ‘pacta sunt servanda’ (Latin for ‘agreements must be
kept’), which is a basic rule of law and is codified under Art. 8 LOR. The
formulation of Art. 39 may actually mislead the reader into thinking that only
typical contracts may be concluded by the parties. However, Art. 2 LOR
guarantees the freedom of contract and the right of individuals to conclude
contracts other than those typified by the law. It would therefore be preferable
to use the Albanian term “shkaku” or, more correctly perhaps, the word “causa”
(which appears to be more in line with Kosovo legal terminology). Furthermore,
the concept of cause should not be referred to each contractual obligation but
to the contract as a whole. It is recommended to revise the formulation of Art.
39 in order to bring it fully in line with the traditional features of the Roman
law concept of cause by which Art. 39 LOR is clearly inspired.
E. Capacity to conclude contracts
X.
Recommendation no. 10
The LOR lacks general rules on the capacity to conclude contracts. Art. 41 par. 1 LOR
merely stipulates that “A contracting party must have the capacity to contract
required for the conclusion of the contract for the contract to be valid.” However, this
requirement is not specified any further. Additional rules may be found in the Family
Law: for instance, Art. 15 deals with the capacity for marriage. This article stipulates
that full capacity to act is acquired upon reaching majority, which is obtained upon
the completion of the 18th year of age (or by entering into wedlock prior to this age,
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if allowed by the court owing to justifiable reasons). Similar provisions are laid down
in Art. 7 of the Law on Labour. It is recommended that general rules on capacity to
act and contract are codified and placed in the General Part of the Civil Code6.
Paragraphs 2 and 3 of Art. 41 are also problematic. In fact, the use of the expression
“persons with limited capacity to contract” does not cover the case when a person is
legally capable of contracting but at the moment of concluding a contract is
incapable of discernment due to a particular state of mind or abuse of substances7. It
is recommended that limited capacity due to external transitory causes is expressly
provided.
F. Form of contract (termination by agreement; agreed form; sanctions for lack of
required form)
XI.
Recommendation no. 11
Art. 53 LOR provides that it is possible to terminate formal contracts through an
informal agreement. For the sake of legal certainty, formal contracts should be
terminated in the same form prescribed by law for their conclusion. This
solution would also be more coherent with the provision of Art. 51 par. 2 LOR,
which stipulates that the form prescribed by law for a specific contract shall
apply to all subsequent amendments or additions thereof. It is also
recommended to delete the last sentence of Art. 53 (“… unless the purpose
owing to which a form is prescribed for the conclusion of the contract requires
the same form for the rescission of the contract”), which is equivocal and
leaves too much room to personal interpretation. De iure ferenda, it is not
advisable to require courts to continually assess the purpose of a specific legal
form because such an assessment may easily result – due to the absence of any
guidance – in the unpredictability and inconsistency of judicial practice.
XII.
Recommendation no. 12
Art. 54 par. 3 LOR covers situations where the parties agree on specific terms
but decide that their contract will be later formalised in writing or be subject to
some other formality. There is no need for such an issue to be specifically
addressed by the law of obligations. Besides, the whole provision seems way too
obvious and descriptive. In some other respects, it could also sound vague and
undetermined. Furthermore, how can the court determine if the contracting
6
The general rules should inter alia stipulate that: a) the age of majority is fixed upon reaching 18 years; b)
upon reaching the age of majority the capacity to act is acquired; c) the capacity to act entails the capacity to
perform any act or conclude any contract which does not require a different age; d) the rules above shall apply
without prejudice to the special laws which require a lower age for the provision of work or services pursuant
to an employment contract, in which case the minor has the capacity to acquire the rights and assume the
obligations deriving from such contract.
7
See, for example, Art. 428 and 1425 par. 2 CC.
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parties agreed upon a specific form solely in order to ensure that there was
proof of the conclusion or content of the contract? This would be problematic
especially when the agreement on the form of the future contract was only
verbal. For the sake of simplification, it is recommended to remove entirely
par. 3 from Art. 54.
XIII.
Recommendation no. 13
Art. 55 LOR provides that a contract which is not concluded in the form
prescribed by law (par. 1) or in the form agreed by the parties as a condition for
the validity of the contract (par. 2) has no legal effect. However, while failure to
use the agreed form will always result in the contract’s lack of effects (par. 2),
the same ‘automatism’ is not contemplated in the case where the form
breached is prescribed by law. In fact, the court may still determine otherwise
“from the purpose of the provision by which the form is specified” (par. 1).
Within the European Union, the principle of freedom of form is becoming
obsolete. Due to the ‘neo-formalism’ of EU contract law today, an increasing
importance is attached to the written form as an element for the validity of
contracts. This is because the contract law is becoming more and more a means
for market regulation, being there a growing need to protect the weaker party,
which can only be achieved through a written contract. Having said that, we are
of the opinion that the wording of par. 1 may contribute to ambiguity and
unpredictability in contractual relationships simply because the actual
understanding of the purpose of a written form may vary significantly from case
to case and from court to court. The determination as to whether a written form
is relevant for the validity of a contract should be made a priori by the legislator
and should not be left to the particular opinion and discretion of each judge. It
is recommended that the sentence “unless it follows otherwise from the
purpose of the provision by which the form is specified” be deleted. The legal
consequence that the contract lacking the necessary form “has no legal effect”
draws criticism too. While the lack of legal effects may make sense in par. 1,
which seems to treat the agreed form as a suspensive condition the contract is
subject to, par. 2 should more properly refer to the nullity of the contract. It is
recommended to revise the wording in Art. 55 par. 1 so as to stipulate that the
contract which is not concluded in the form required by law shall be null and
void.
XIV.
Recommendation no. 14
Art. 58 LOR provides that “A contract for which the written form is required shall
be valid even if not concluded in this form if the contracting parties fully or
mostly perform the obligations arising therefrom, unless it clearly follows
otherwise from the purpose for which the form was prescribed.” Art. 73 of the
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Yugoslav LOR contained a similar provision. This rule is inspired by the favour
contractus. However, it is prone to criticism because neither it addresses
bilateral contracts nor does it demand full performance. It is recommended that
the wording of the provision be revised to ensure that in the event of a
bilateral contract both parties have performed their obligations 8. Secondly, the
wording should make clear that each party (of a bilateral contract) must have
fully performed its obligations 9. In fact, a party should not be expected to hold
on to an invalid contract which is mostly – yet not entirely – implemented by the
other party. Thirdly, the provision that the contract is valid “unless it clearly
follows otherwise from the purpose for which the form was prescribed” leaves
again too much room for discretion to the courts. We recommend replacing
reference to the purpose of the formal requirement with a general reference
to the law (e.g. “… unless the law provides otherwise”). This would link court
interpretation to more objective elements such as the letter and spirit of the
law.
XV.
Recommendation no. 15
Art. 58 LOR does not address the situation where the contract (e.g. salepurchase contract of immovable property) lacks a legal requirement other than
the written form, such as, for instance, notarisation. A similar problem has
arisen in the past with regard to court verification of sale-purchase agreements
of immovable property. The Supreme Court interpreted Art. 73 Yugoslav LOR as
meaning that the contract for the transfer of immovable property is valid if the
obligations arising therefrom have been performed, even where the contract
was not certified in the competent court as prescribed by law (Rev.nr. 58/2007,
15.03.2010). Although circumstances have changed and court verification is no
longer required (having been replaced by notarisation), there is a risk that
courts, when applying Art. 58 LOR, may follow the same ratio decidendi and
argue that an immovable property transaction is valid regardless of not being
notarised by a public notary. In other words, modern notarisation may be
associated with the old concept of court verification. It is recommended that
Art. 58 LOR is supplemented with rules addressing the situation where a
8
If this was not the case, the provision would produce questionable results. For example, if a party performs
the contract and the other party does not, the contract may still be regarded as valid. As a result, the
performing party may be entitled to request performance of the other party but not the termination of the
contract and the restitution of what performed. This deprives the performing party of a remedy when
termination of the contract is preferable due to the formal defect, e.g. the contract cannot be registered for
specific ends.
9
If a dispute arises, it is sensible that the party which has fully performed the contract is given the possibility to
invoke the invalidity of the contract, even if the other party has performed its obligations in most part. In fact,
partial performance is equivalent to non-performance. As a general rule, the creditor is always entitled to full
performance. See Art. 288 LOR.
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contract lacks the required notarisation. Different solutions may be explored in
this regard. An ideal option would be to specify that a contract cannot be
treated as a valid contract under Art. 58 if it lacks the notarial act required by
law. This solution would be in line with Art. 30 of the Law on Notary (LN).
Another solution (more inspired by favour contractus) could be providing that
the nullity of the contract owing to the lack of notarisation shall neither be
invoked by the parties nor ascertained ex officio by the court where the
parties have fully implemented their obligations arising from the contract.
However, in the event of a contract of sale-purchase of immovable property,
registration may still be problematic. In order to allow registration of the
contract in the immovable property rights register, the Civil Code may provide
that such contract may be validated by the court upon request of a party or
both parties, and that the court decision shall serve as legal title for
registration of the contract in the immovable property rights register.
G. Representation (general principles; contemplatio domini; verification; revocation or
modification; conflict of interest; etc.)
XVI.
Recommendation no. 16
Art. 72 par. 2 LOR stipulates: “The authorisation to representation shall be based
on the law, the general act of a legal person, the act of the competent organ, or
the declaration of intention of the person represented (proxy).” (Albanian
version). The expression “general act of the legal person” is technically
questionable and may more correctly be replaced with reference to the act of
the competent organ of a business organisation or other legal person (business
organisations may or may not have legal personality). Reference to an express
“declaration of intention” is at odds with the possibility for the power of
representation to be implied (see recommendation below) and may be
replaced with the following sentence: “… or the will of the person represented
(proxy)”.
XVII.
Recommendation no. 17
Art. 73 par. 3 LOR provides that: “The representative must notify the other party
regarding the representative’s appearance on behalf of the represented person;
however, the contract shall also have legal effect for the represented person and
the other party if the representative fails to do so if the other party knew or
should have known from the circumstances that the representative was
appearing as a representative.” This provision codifies the formal requirement
of the contemplatio domini for the agent’s act directly to bind the principal. In
other words, the representative must expressly act in the name and interest of
another person, otherwise he will acquire the rights and assume the duties
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deriving from the contract or other act concluded (‘indirect representation’). At
the same time, the case-law of those countries where the contemplatio domini
may also be implicitly inferred from acta concludentia is also taken into account
(tacit contemplatio domini). However, the provision above contradicts Art. 78
LOR (“The form prescribed by law for a specific contract or any other legal
transaction shall also apply to the authorization for concluding such a contract
or transaction.”) because it fails to make an exception for the contracts that
require a specific form (e.g. written form). In this case, the legal appearance
should not – and cannot – override the need for the proxy to follow the same
form of the contract to be concluded by the representative and the third party.
In essence, the scope of application of the rule laid down in Art. 73 par. 3 should
be restricted to verbal contracts only (for instance, contracts concluded in a
shop). It is recommended adding at the end of Art. 73 par. 3 the following
sentence “... unless a specific form is prescribed by law for the contract
concluded by the representative”.
XVIII.
Recommendation no. 18
Under the heading “Issuance of proxy” (Albanian version), Art. 77 LOR reads: “1.
Proxy contains the authorisation to representation conferred upon the
authorised person by the authoriser via a legal transaction. 2. The existence and
extent of an authorisation shall be dependent on the legal relationship upon
which it is based. 3. Legal persons may also be authorised persons.” The
formulation of Art. 72 LOR is rather unclear. It is recommended redrafting par.
1 as follows: “Proxy is the juridical act through which a person confers upon
another person the authorisation for representation in the conclusion of
contracts or other legal acts”. Par. 2 is unnecessary and may be removed. The
specification under par. 3 that legal persons may also be authorised (to act on
behalf of others) may be rephrased as follows: “Legal persons may also be
authorised to represent”.
XIX.
Recommendation no. 19
The LOR’s rules on proxy (Articles 72 to 84) do not foresee that a third party
who is contracting with a representative may always demand that the
authorisation to represent be proven and, if the proxy is based on a written act,
that a copy signed by the represented person is shown10. It is recommended
that a specific provision is introduced to this effect. In addition, the same
article may provide that the third party which fails to ask for proof of
representation shall not be bound by the contract concluded by an
unauthorised person acting as if was authorised to represent (‘apparent
proxy’). As regards the represented person, Art. 76 par. 1 LOR stipulates that
10
For a similar provision, see Art. 1393 CC.
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the contract concluded by a person on behalf of another without the latter’s
authorisation shall be binding for the person represented without authorisation
only if subsequently approved. It is recommended, however, adding a provision
according to which the person represented without authorisation shall be
bound by the contract if he culpably ingenerated in the third party the belief
that he conferred an authorisation to the (apparent) representative, provided
that11 the third party incurred an error which is excusable (‘culpable legal
appearance’)12.
XX.
Recommendation no. 20
Art. 80 par. 2 LOR provides that the represented person may revoke or narrow
down the scope of any authorisation through a declaration of no special form.
Although it is common practice not to require that revocation or modification
has the same form as the proxy at the time of its issuance, the mechanism
foreseen in the law to prevent the third party who is unaware of the revocation
or modification from being bound by the contract (concluded with the person
whose authorisation was revoked or narrowed) is inadequate. In particular, Art.
81 par. 1 stipulates that the revocation or narrowing of an authorisation shall
have no effect in respect of a third party that did not know and was not obliged
to know that the authorisation had been revoked or narrowed. However, this
provision has two flaws. Firstly, it does not provide an obligation to inform the
third party (or to otherwise publicise) the modification or revocation of the
proxy. Examples may be found in comparative law (Art. 1396 CC)13 and the
DCFR, Book II, Chapter 6, Art. II. – 6:112. It is recommended adding a provision
based on which revocation and modification of the proxy must be brought to
the third party’s notice by appropriate means. Secondly, it does not consider
the possibility that a person may not be under a legal obligation to know;
nonetheless, he/she could reasonably be expected to have known that the
authorisation was revoked or narrowed. It is recommended to that Art. 81 is
redrafted to refer to the circumstance that the third party did not know nor
should have reasonably known / should have known through the exercise of
due care14 that the authorisation was revoked or narrowed. Possible solutions
may be found in the 2004 Draft Law (Art. 135 par. 1) and in the DCFR, Book II,
Chapter 6, Art. II. – 6:112.
11
This is the Italian case law approach (see Cass. 26052/2008; Cass. 408/2006; Cass. 15743/2004. Contra: Cass.
23199/2004).
12
For example, an error would not be excusable if the proxy required the written form.
13 "Modifications to and revocation of the proxy must be brought to the third party’s notice by appropriate
means. Failing this, they cannot be invoked against third parties ...".
14 See bonus pater familias-test foreseen by Art. 5 LOR.
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XXI.
Recommendation no. 21
Provisions on conflict of interest are missing from the LOR. A conflict of interest
exists when the representative is acting on both sides of the contract, for
instance selling the good in the name of the seller and buying the good himself
(in his own name or on behalf of someone else). It is recommended adding
specific provisions on conflict of interest under Section II of Sub-Charter 2 of
Chapter 1 of the LOR (Articles 77 – 82). Model solutions may be taken from the
CC (Articles 1394, 1395), the 2004 Draft Law (Articles 122, 123) and in the DCFR
Book II, Chapter 6, Art. II. – 6:109.
XXII.
Recommendation no. 22
There is no provision governing ‘collective’ proxy. It is recommended adding
wording in Art. 72 that the representative may act on behalf of more than one
person.
XXIII.
Recommendation no. 23
Art. 83 LOR regulates the scope of authorisation of salespeople and other
employees. This article is quite poor in its formulation and should be
supplemented with additional rules concerning the authorities of commercial
representatives. Besides, it is not very well coordinated with the LBO, under
which the simplest form of business structure foreseen is not the “sole trader”
(as referred to in Art. 83) but the “personal business enterprise”. It is
recommended that the wording of Art. 83 is supplemented and improved by
removing reference to the “company or sole trader”, which may be replaced
with the broader expression “business organisation”, in accordance with the
LBO.
H. Interpretation of contracts
XXIV.
15
Recommendation no. 24
The rules on interpretation of contract are deficient (Articles 85 ff. LOR).
Shortcomings can be summarised as follows: 1) The formulation of Art. 85 is
overworded and may be simplified. It should be sufficient to say that in
interpreting a contract it is necessary to ascertain the common intention of the
contracting parties and to not adhere to the literal meaning of the words.
Besides, it does not refer to the conduct of the parties, even subsequent to the
conclusion of the contract 15; 2) Rules on interpretation of contracts in good
See Art. 1362 CC and Art. II. – 8:102(1)(b) DCFR.
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faith16, interpretation of the contract as a whole 17, preference for interpretation
which gives terms effect 18, interpretation according to usages19, interpretation
according to practices which the parties have established between themselves20,
and interpretation according to the nature and purpose of the contract 21 are all
missing; 3) Art. 88 is unnecessary since the matter can be regarded as covered
by the legislation on ADR. It is recommended to reword Art. 85 to say that in
interpreting a contract it is necessary to ascertain the common intention of the
contracting parties rather than adhering to the literal meaning of the words.
The common intention of the parties may be inferred from the conduct of the
parties, even subsequent to the conclusion of the contract. It is also
recommended to add specific rules on interpretation of contracts in good faith,
interpretation of the contract as a whole, preference for interpretation which
gives terms effect, interpretation according to usages, interpretation according
to practices which the parties have established between themselves, and
interpretation according to the nature and purpose of the contract. Art. 88
may be deleted.
I. Nullity and annullability
XXV.
Recommendation no. 25
Art. 89 LOR provides that a contract which contravenes the public order,
mandatory rules or moral principles shall be deemed null and void unless the
purpose of the contravened rule does not allow any other sanction or if the law
does not prescribe otherwise. Art. 89 is the sole rule of general application on
nullity in the whole LOR. Unfortunately, it fails to consider all other general
grounds of nullity that are scattered across the law22. It is interesting to note
that with the exception of cause (rectius, legal basis)23, the lack of an essential
element of the contract, i.e. agreement of the parties, cause, object, and the
16
Section 157 BGB provides that “Contracts are to be interpreted as required by good faith…”. Likewise, Art.
1366 CC stipulates that “The contract must be interpreted in good faith”. A reference to the good faith and fair
dealing is also foreseen in Art II. – 8:102(1)(g) DCFR.
17
See Art. II. – 8:105 DCFR. See also Art. 1363 CC and Art. 1161 Code Napoléon (CN).
18
See Art. II. – 8:106 DCFR. See also Art. 1367 CC and Art. 1157 CN.
19
See Art II. – 8:102(1)(f) DCFR, Art. 157 BGB, Art. 1368 CC and Art. 1159 CN. See also Articles 8-9 CISG.
20
See Art. II. – 8:102(1)(c). See also Articles 8-9 CISG.
21 See Art II. – 8:102(1)(e) DCFR, Art. 1369 CC and Art. 1158 CN.
22
For instance, the lack of cause or an unlawful cause (rectius, legal basis) as a ground for nullity is referred to
under Art. 39. Unlawful motives are provided as grounds of nullity in Art. 40. The nullity of a contract owing to
an impossible, unlawful, undetermined or undeterminable object is regulated under Art. 35. Furthermore, Art.
61 deals with the voidness of a contract as a result of a suspensive or resolutive condition in contravention of
the public order, mandatory rules or public morality, or due to an impossible suspensive condition (the
contract subject to an impossible dissolving condition should be deemed non-existent instead).
23
See Art. 39 LOR.
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form when required by law, is not regarded as a ground for nullity of the
contract. Failing an essential element, the contract is simply deemed as not
concluded (Art. 15 LOR) or with no legal effect (Art. 55 LOR). Finally, the
sentence “if the purpose of the contravened rule does not assign any other
sanction” is unclear and not necessary. It is recommended that the text of Art.
89 is replaced with a list of the main grounds of nullity of the contract (see,
e.g., Art. 1418 CC). This provision may specify that the lack of an essential element
of the contract is a ground for nullity of the contract. It may also provide that a
contract is null and void in any other case provided by law 24. The sentence “… if
the purpose of the contravened rule does not assign any other sanction or if the law
does not prescribe otherwise” may be removed.
J. Liability for causing the invalidity of the contract
XXVI.
Recommendation no. 26
Pursuant to Articles 94 and 100 LOR, the party that caused the invalidity of the
contract shall be liable pay to the other party the damages owing to the nullity
or annulment of the contract if the latter did not know and was not obliged to
know of the grounds of invalidity of the contract. These provisions present
several shortcomings. First, they do not consider that a person may not be
under a legal obligation to know; however, he/she could reasonably be expected
to have known of the grounds of invalidity of the contract. Second, Art. 100 fails
to specify that only the person that culpably caused the invalidity of the
contract should be liable to compensate. Third, the two provisions do not state
which damages the liability extends to. As in any case of pre-contractual liability
(culpa in contrahendo), the liability for the annulment of the contract should be
limited to the ‘negative interest’ only, i.e. the expenses and losses suffered by
the contracting party by relying on the contract, so that the aggrieved party is
put in the position in which it would have been if it had not concluded the
contract (Jhering, 1861; Articles 129 and 179 of the German Civil Code (BGB)). It
is recommended that Art. 94 is reformulated to provide that the party culpable for
the conclusion of a null and void contract shall be liable pay to the other party the
damages for losses suffered as a result of the nullity of the contract if the latter
party did not know nor should have reasonably known / should have known
through the exercise of due care 25 of the grounds of nullity. It is also
24
Within the LOR, ad hoc provisions on nullity of contracts include the following: Art. 123 (usurious contract);
Art. 441 (sales contract with an unmarketable object); Art. 442 (destroyed object before sales contract is
concluded); Articles 919, 965 and 968 (nullity of insurance contract); Articles 1054-1055 (nullity of settlement).
Some of these provisions refer to grounds of nullity which are obvious in light of general principles, and may
therefore be removed (e.g. Art. 441 and Art. 442). Other grounds of nullity are provided by other areas of law
falling within the scope of the Civil Code or by special legislation.
25
On the concept of due care, see Art. 5 LOR.
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recommended amending the wording of Art. 100 to provide that the party that
culpably caused the voidability (annullability) of the contract shall be liable
pay to the other party the damages for losses suffered as a result of the
annulment of the contract if the latter party did not know nor should have
reasonably known / should have known through the exercise of due care 26 of
the grounds of voidability of the contract.
XXVII.
Recommendation no. 27
Articles 94 and 100 LOR do not foresee that a party may not have caused the
invalidity of the contract but may have only known (or should have known) of the
grounds of invalidity (either nullity or voidability). In this case, the party should bear
liability for damages if the other party was not put on notice and should not have
known of the grounds of invalidity (see, for instance, Art. 1338 CC). It is
recommended that an ad hoc provision is added after Section II of Sub-Charter 4.
K. Annulment of voidable contract
XXVIII.
Recommendation no. 28
Art. 97 LOR provides that: “A contract shall be voidable if concluded by a party that
has limited capacity to contract, if during conclusion there were errors regarding the
parties’ intention, or if so stipulated in the present Law or any other act of law.” This
provision does not provide a comprehensive regulation of the grounds of voidability
of a contract. For instance, defective will (threat, mistake, fraud, etc.) is not regulated
here but under Section V of Sub-Chapter 1 on the conclusion of contracts (Articles 45
ff.). This approach may be regarded as technically incorrect because it results in a
fragmented approach to the issue of voidability. Systematically speaking, defective
should be regulated under the section on voidability of contracts (Articles 97 ff.), just
after the rules on contracts concluded by a person without capacity. In addition, the
sentence “if during conclusion there were errors regarding the parties’ intention, or if
so stipulated in the present Law or any other act of law” should be deleted, having
little or no meaning whatsoever. It is actually confusing because the issue of mistake
is already covered by Articles 46 ff. LOR. It is recommended moving Articles 45 ff.
upwards after Art. 97. It is also recommended deleting the sentence: “… if during
conclusion there were errors regarding the parties’ intention, or if so stipulated in
the present Law or any other act of law” from Art. 97.
XXIX.
Recommendation no. 29
The rules on voidability do not contemplate any mechanism for confirmation or
validation of the voidable contract. The only relevant provision is Art. 98 par. 2 LOR:
“The other contracting party may request that the first contracting party declare,
26
See footnote above.
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within a set period that may not be shorter than thirty (30) days, whether the latter is
adhering to the contract, otherwise the contract shall be deemed to have been
annulled.” Par. 3 adds that “If the related contracting party fails to declare or declares
that such party is not adhering to the contract the contract shall be deemed to have
been annulled.” This article is badly formulated both in English and Albanian and
interferes with Art. 41 LOR which provides only for the legal representative the right
to validate the contract concluded by a person without capacity. It is recommended
removing par. 2 and par. 3 from Art. 98 and making provision for a validation or
confirmation mechanism in line with European best practices. For an example of
validation, see Art. 1444 CC; for a confirmation mechanism, see Section 141 BGB. As
regards European civil law, important sources of reference may be found in Art. II. –
7:211 DCFR and Art. 4:114 PECL (both referring to confirmation).
XXX.
Recommendation no. 30
Art. 102 LOR specifies the timeframes within which a contracting party can take
action to annul a voidable contract. While par. 1 foresees a period of limitation of 1
year from the day the person entitled to claim annulment learnt of the grounds for
annulment or after the end of threat (relative term), par. 2 provides that in any event
this right shall expire 3 years after the day the contract was concluded (absolute
term). The provision of an absolute limitation period ensures certainty of law but
may not always be in the interest of justice. There are circumstances where the
contracting party has limited capacity to contract (for instance, in the case of a minor
or a person subject to interdiction). In such circumstances, the prevailing need of
protecting the minor or an incapacitated person from the consequences of a contract
concluded in a weaker position should advise providing special rules on prescription.
The person incapable of contracting or with limited capacity to contract will most
typically have a legal representative who may annul the contract concluded without
his permission based on Art. 97 LOR, or may approve it pursuant to Art. 42 par. 3
LOR. Problems arise when the person without capacity is without a legal
representative. In this case, the period of limitation should run from the day the
minor reaches the age of majority or incapacity otherwise ends 27 or, in the
alternative, should not expire until a certain time has passed (from 6 months to 1
year, at least) after either the incapacity has ended or a legal representative has been
appointed28. It is recommended revising the period of limitation for claiming
annulment of a contract concluded by a person without capacity in order to reflect
best European practices. The prescription should run from the day incapacity
ceased to exist or, alternatively, should not expire after some time has elapsed
27
See, for example, Art. 1442 par. 2 CC.
For this approach, see also Section 210 BGB (“Suspension of expiry of the limitation period in the case of
persons without full capacity to contract”). In the same sense, see Art. III. – 7:305 DCFR (“Postponement of
expiry in case of incapacity”).
28
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after unlimited capacity is acquired or lack of representation is remedied,
regardless of when the contract was actually concluded.
L. Non-contractual liability
XXXI.
Recommendation no. 31
The general rules of the LOR on extra-contractual liability are traditionally anchored
to a regime based on the proof of fault (see Art. 136 par. 1). Pursuant to Art. 140,
culpability occurs when the injurer inflicts damage intentionally or as a result of
negligence. However, the LOR fails to introduce – like most modern codifications do29
– a selective filter of the interests worthy of legal protection. By contrast, Art. 137
attempts to provide an ‘illustrative’ definition of damage, which includes property
damage, physical and mental harm, or injured reputation. In accordance with a
concept of compensation (of penalistic connotation) as a means of punishment
rather than reparation, this definition tends to reflect the old understanding of
‘legally relevant’ damages as those arising from the violation of specific provisions
conferring rights or imposing duties (non iure approach)30. However, this approach
has been superseded by more modern theories according to which any interest
worthy of legal protection may be compensated irrespective of whether or not a
specific legal provision has been violated (contra ius approach). As such, the number
of legally relevant interests may expand considerably to include many other
personality rights such as privacy, dignity, dwelling, etc. A similar approach is
followed by Art. VI. – 2:101 ff. DCFR. However, in order to prevent an excessive
expansion of civil liability, most jurisdictions require that the judge, when
determining if an interest is worthy of legal protection, must assess the interest of
the injured party against the interest of the injurer; considerations of public policy
may also be relevant. See, for instance, Art. VI. – 2:101, Section 1(2)(3) DCFR and Art.
2:102(6) PETL. It is recommended adopting a more modern concept of extracontractual liability. In particular, the words “legally relevant” may be added prior
to the word “damage” in Art. 136 par. 1. The text of Art. 137 may be replaced by a
definition of ‘legally relevant damage’ along the lines of Art. VI. – 2:101 DCFR. Art.
138 should be deleted. It should also be considered whether to insert additional
rules to mitigate the risk of potential undue extension of civil liability.
29
Art. 2043 CC reads as follows: “Any intentional or negligent act that causes an unjust injury to another obliges
the person who has committed the act to pay damages.” Reference to an “undue damage” appears in Art. 24 of
the Oviedo Convention on Human Rights and Biomedicine (4.IV.1997). European private law harmonisation
projects are also enlightening: for example, the PETL use the expression “legally protected interest” (Art.
2:101), whereas Chapter 2 of Book VI of the DCFR is entirely dedicated to the concept of “legally relevant
damage”.
30
Such a conceptual model implies that only the breach of legal norms ensuring the protection of ownership
and other personal rights modelled on the property right (e.g. physical integrity, name, honour or reputation),
can give rise to an obligation to compensate.
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M. Self-defence
XXXII.
Recommendation no. 32
Art. 143 par. 1 LOR addresses the typical situation of ‘self-defence’ (= the exemption
from liability of whom causes injury in defending himself from an assault or
aggression) and ‘state of necessity’ (= the exemption from liability of whom causes
injury in the emergency of saving himself from an imminent danger). Par. 2 envisions
a system where the person compelled to cause an injury in a state of necessity is
liable vis-à-vis the injured person as is the person who caused the danger. It is
understandable that, differently from the case of self-defence (par. 1), a residual
liability may arise for the person acting in a state of necessity, given that in such case
a third party is injured rather than the same party giving rise to the danger. However,
in some countries the injurer would only be liable to pay an ‘indemnity’ in an amount
equitably established by the court31. It is recommended that Art. 143 par. 2 is
amended to mitigate the liability of the person compelled to cause an injury in a
state of necessity.
XXXIII.
Recommendation no. 33
The sentence included in par. 2 of Art. 143 LOR that the injured may not request
compensation from the injurer “greater than the benefit they had therefrom” makes
no sense32. It is recommended that this sentence be removed.
XXXIV.
Recommendation no. 34
Art. 143 LOR does not foresee the case of a person causing damage in the defence of
another nor does it provide for the circumstances where the person causing injury
was compelled by the necessity of saving others from a danger. It is recommended
that these issues are specifically addressed in the text of the provision.
XXXV.
Recommendation no. 35
The relationship between Art. 143 LOR above and Art. 144 LOR, which deals with
‘allowed self-help’, is rather unclear. Besides, the two provisions sound redundant. It
is recommended that Art. 144 be deleted for the sake of simplification.
N. Liability arising from damages caused by motor vehicles
31
See Art. 2145 CC. Likewise, Art. VI. – 5:202(3) DCFR provides that the person causing the damage is not liable
to make reparation beyond providing reasonable recompense. A different approach is followed by the BGB: "If
the person acting in this manner caused the danger, he is obliged to pay damages." (Section 228).
32
This provision seems to look at the problem of compensation from the wrong perspective of unjustified
enrichment.
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XXXVI.
Recommendation no. 36
Art. 159 LOR regulates the liability arising from damages caused by motor vehicles.
This article should be revised for a number of reasons. To start with, it only refers to
“moving” motor vehicles while it should be sufficient for liability to arise that the
vehicle is simply circulating, that is, even only parked on a road (e.g. in the wrong
place). It is recommended that Art. 159 is amended so as to refer to vehicles put
into circulation.
XXXVII.
Recommendation no. 37
Another problem relates the subject of liability: Art. 159 LOR does not refer to the
owner of the motor vehicle but rather to his “holder” (in Albanian, “zoterues”), which
is commonly understood as the person who has the physical control over something.
In this respect, the LOR follows the old Yugoslav LOR’s (Art. 178). However, the use of
the term “holder” in the specific context of third-party motor liability does not match
with the current insurance law and practice of Kosovo, which revolves around the
concept of ownership33. Besides, this term is conceptually vague and ambiguous.
Lacking a definition of holdership in the LOR, it is unclear what this expression
actually means and how to assess who has the physical control of the car. In addition,
the court would have to investigate for each accident who has physical control over
the car, regardless of the title of (registered) ownership. As a result, it would be
rather difficult to implement such a provision in practice. Not only for reasons of
coherence with existing rules on compulsory insurance, but also for the sake of
certainty of law, it would be preferable to clearly predicate the liability of the owner
(and eventually, that of the driver34). It is therefore recommended to abandon the
use of the concept of ‘holder’s liability’. A regime of strict/objective liability of the
owner for the driver’s fault may be reintroduced. Alternatively, the law may
provide for the joint and several liability of the owner and the driver. In either case,
33
The “registered owner of a motor vehicle” is clearly identified as the person bound by law to contract the
insurance for covering third-party liability (Art. 3 par. 1). In this regard, Kosovo’s current insurance practices are
aligned with those of most other countries where the car owner is liable for damages caused to third parties.
Typically the owner will be the driver of the vehicle causing an accident. However, a car owner may let another
person drive his car. Some jurisdictions treat the car owner as sharing liability for any accident caused by the
borrower driver, although the solutions vary across jurisdictions. As a rule, owner liability involves the
permissive use of a vehicle, so the owner must give the borrower permission to use the car, or must knowingly
acquiesce to it (owner liability is therefore excluded if the car is stolen or used against the owner’s will). Kosovo
follows a similar principle of law under Art. 2 par. 1(7) LCMLI.
34
Art. 2 par. 1(7) LCMLI stipulates that a natural or legal person may drive the motor vehicle upon the owner’s
authorisation (i.e. “motor vehicle possessor”), whereas the “unauthorised driver” is defined as the person who
at the time of the accident was found driving a motor vehicle without the motor vehicle owner’s authorisation
(Art. 2 par. 1(6)). Both the owner and the possessor shall be covered; however, in the case of an unauthorised
driver the insurance company will have a right to a regress action towards the responsible person for the paid
compensation (Art. 14 par. 3).
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the owner should be exempt from liability where he proves that the vehicle was
used against his will (e.g. theft or unauthorised use).
XXXVIII.
Recommendation no. 38
The Law on Compulsory Motor Liability Insurance (LCMLI) does not address the
leasing of motor vehicles. Should the leasing company (lessor), which owns the motor
vehicle, be exempt from liabilities caused by it when operated by a client (lessee)?
Another issue is whether the holder of a usufruct right should be liable to pay
damages jointly with, or alternatively to, the owner. The same problem arises with
regard to the contract of conditional sale, i.e. a contract by which the title to the
motor vehicle remains in the seller until the purchaser becomes the owner upon full
payment of price). It is recommended to address expressly these situations in the
Civil Code.
XXXIX.
Recommendation no. 39
The rules on ‘culpable liability’ (Articles 140 ff.) apply to an incident involving motor
vehicles caused by the fault of one vehicle driver only (Art. 159 par. 1 LOR), whereas
in the case of mutual fault the drivers shall both be liable in proportion to each
other’s fault (Art. 159 par. 2 LOR). It is unclear why the concept of culpable liability is
referred to with respect to the first case scenario and not in regards to the second
one, as both situations imply a liability which is attributable to fault, although with a
different gradation – exclusive or concurrent – depending on the circumstances. In
addition, it may not be possible in practice to ascertain to which extent each driver
has contributed with his fault to cause the damage. Unfortunately, Art. 159 par. 1
LOR does not state that in the case of collision of vehicles it is presumed, until proof
to the contrary is offered, that each driver contributed equally toward causing the
damage suffered by each vehicle35. Par. 3 of the same article only provides that “If
nobody is at fault the holders shall be equally liable, unless justice demands
otherwise.” This wording is fallacious because if a traffic accident occurred, then it
must have been someone’s fault (in which case it is just a matter of allocating the
relative faults, if possible), unless the accident is the outcome of an event beyond the
control of each driver (force majeure) so that there is no fault at all, in which case
none of the drivers should be held liable36. Another type of no-fault accident occurs
when the fault is attributable to third parties (e.g. public body in charge of road
maintenance, incautious pedestrian or bicycle rider, etc.). In such cases, the third
party should bear the liability to compensate. In addition, the expression “unless
justice demands otherwise” is too vague and imprecise. As a result, Art. 159,
35
A good example is Art. 2054 CC.
This would, in fact, configure a case of strict (or objective) liability in contradiction with Art. 158 LOR on
exemption of liability (and which would not be even covered by the insurance contract). See Art. 11 par. 1(5)(4)
LCMLI.
36
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paragraphs 1 and 3 in particular, may turn out to be not implementable in practice. It
is recommended to redraft Art. 159 par. 1 to codify the general rule that the owner
of a motor vehicle shall be liable to compensate damages culpably caused to
persons or things. This article may then presume concurrent liability equally
divided between the two owners involved in the accident unless proof to the
contrary is offered. It is further recommended to specify that, except in the case of
exclusive fault of one vehicle, each owner shall be liable in proportion to his
respective fault. The expression “… unless justice demands otherwise” should be
deleted.
XL.
Recommendation no. 40
Art. 3 par. 1 LCMLI provides: “Prior to using a motor vehicle, the registered owner of a
motor vehicle shall contract the insurance for covering the liability for damages
caused to the third parties in case of death, bodily injuries, affecting health or
damaging property”. However, this principle is of such importance that it should not
be omitted from the general rules governing civil liability enshrined in the Civil Code
of Kosovo. It is recommended to codify under Art. 159 the principle that motor
vehicles shall not be put into free circulation (i.e. shall not be used on the road)
without the third-party insurance required by law.
XLI.
Recommendation no. 41
It is recommended to include in Art. 159 LOR a rule of strict liability, according to
which the owner should be liable for damages arising from defects in the
maintenance or the manufacture of the vehicle, without prejudice to the right of
redress against the manufacturer37.
O. State liability
XLII.
Recommendation no. 42
Art. 161 LOR is closely connected to state liability. Most Civil Codes in Europe do not
include principles on state liability, which is usually governed by case law or special
legislation (e.g. civil responsibility of judges, civil responsibility of public bodies and
agents, compensation of damages suffered by armed forces owing to the use of
depleted uranium weapons, mass environmental torts, etc.). We recommend
removing Art. 161 from the Civil Code.
P. Moral damages
XLIII.
37
Recommendation no. 43
For a similar provision, see e.g. Art. 2054 par. 4 CC. Germany law has a similar rule.
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The rules on moral damages raise several concerns (see Articles 182 ff. LOR). The
question arises as to whether the non-material damage should be compensated per
se (which would be too-far reaching and unfeasible) or whether compensation should
more realistically be granted only under specific circumstances. The LOR codifies
certain situations where the compensation of moral damages may take place, such as
the loss caused to a person due to another’s personal injury or death (Art. 184
LOR)38, or the loss arising from a sexual criminal act (Art. 185 LOR). However, given
the broad formulation of Art. 183, such situations must be seen as exemplifications
of conduct that the legislator felt the need to expressly address and should not be
interpreted restrictively as the only types of behaviour giving rise to an obligation to
compensate. Compensation of non-pecuniary damage may be justified where the
victim has suffered personal injury, or injury to human dignity, liberty, or other
personality rights. However, the Civil Code should not list every single type of legally
relevant non-material damage like Art. 183 LOR currently does. Such list is not and
cannot be exhaustive. On the other hand, the undesirable results of a certain part of
the case law in Slovenia, where damages can be even collected for ‘suffering
mentally’ simply because of a breach of contract, would advise specifying when
moral damages are worthy of compensation. It is recommended to amend Art. 183
in line with Art. III. – 3:701 DCFR to provide that the non-economic damage
resulting from suffering and the impairment of the quality of life shall be
compensated. In cases of personal injury, non-pecuniary damage corresponds to
the suffering of the victim and the impairment of his bodily or mental health.
Article 185 may be replaced with the general rule that any suffering of the victim
which is the result of a criminal offense should be compensated by the offender 39.
The selective filter of interests worthy of legal protection, which may be introduced
under Articles 136 ff. LOR, would be applicable to moral damage as well40. For
losses suffered by third persons as a result of another’s personal injury or death, a
specific provision would still be needed and Art. VI. – 2:202(1) DCFR may be used as
a model provision to replace the current formulation of Art. 184.
XLIV.
Recommendation no. 44
The LOR does not provide clear rules on the amount of monetary compensation to be
granted for non-economic loss. The wording of Art. 183 par. 2 is inadequate and
would appear to suggest that the court shall only evaluate the importance of the
violation and the purpose for which compensation shall be awarded. Some guidance
38
This provision fails to specify that the compensation of such a moral damage may only occur where the injury
or death of a close relative is the result of a criminal act, either negligent or intentional.
39
Under Article 185 par. 2 of the Italian Penal Code (CP), the perpetrator of a criminal act and the persons who,
in civil law, are liable for the perpetrator’s acts are required to compensate the victim in respect of any offence
which gives rise to pecuniary or non-material damage.
40
See Art. VI. – 2:101: "(1) Loss, whether economic or non-economic, or injury is legally relevant damage if: ...".
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is offered by Art. 10:301 PETL. It is recommended to redraft Art. 183 par. 2 to
stipulate that in the assessment of moral damages, all circumstances of the case,
including the gravity, duration and consequences of the injury, have to be taken
into account. In assessing damages similar sums should be awarded for objectively
similar losses. The law may determine how compensation for non-economic loss is
to be quantified.41
XLV.
Recommendation no. 45
The restitutio ad integrum principle laid down in Art. 182 LOR, rather than listing
concrete examples of restoration measures, should in more abstract terms stipulate
that the injured person may request restoration of the original situation, provided
that reintegration of the status quo ante is totally or partially possible42. Besides, it
should be noted that the refutation of defamatory or insulting information, which is
briefly mentioned therein is already regulated in great detail by the Civil Law against
Defamation and Insult (CLDI). It is recommended to redraft Art. 182 to provide that
the injured person may request restoration of the original situation, provided that
reintegration of the pre-existing condition is totally or partially possible. It is also
recommended to remove the reference made to the retraction of a statement
because it overlaps with the CLDI.
XLVI.
Recommendation no. 46
Art. 183 par. 1 LOR provides for the monetary compensation of damages
resulting from the “defamation of good name or reputation”. However, the CLDI
goes much further than that with regard to redress mechanisms. It also includes
detailed rules on other forms of reparation as well such as, for instance,
publishing the refutation of defamatory or insulting information. It is
recommended to remove the injury of reputation from the list of causes giving
rise to legally relevant moral damages and to expressly state that the matters
of compensation of damage arising from the act of defamation or insult shall
be regulated by law.
XLVII.
Recommendation no. 47
Art. 187 LOR specifically provides for the compensation of injury to the
reputation of legal persons. However, Art. 3 CLDI already states that a person
entitled to compensation may either be a physical person or a legal entity. We
recommend deleting Art. 187 from the Civil Code.
41
See DCFR, Art. VI – 6:203: “National law determines how compensation for personal injury and non-economic
loss is to be quantified.”
42 See Art. 2058 CC.
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Q. Unjustified enrichment
XLVIII.
Recommendation no. 48
Art. 194 par. 1 reads as follows: “Any person that without a legal basis becomes
enriched to the detriment of another shall be obliged to return that which was
received or to otherwise compensate the value of the benefit achieved.” This
definition refers to enrichment without a “legal basis” (bazë ligjore); however,
the payment of a sum of money or other good can be undue owing to the lack of
any justification, either contractual or legal. An enriched person may be entitled
to the enrichment by virtue of a contract or other juridical act, a court order or a
provision of law. It is recommended to replace the expression "without a legal
basis" with broader expressions such as "unjustified (enrichment)" or "unjust
(enrichment)"43.
XLIX.
Recommendation no. 49
Although condictio indebiti is the typical situation of an unjustified enrichment,
it does not appear at all in the above definition. Under the influence of German
law (Art. 812 BGB), the LOR articulates a general rule that does not distinguish
between unjustified enrichment and condictio indebiti. The same approach is
followed in book VII of the DCFR on “Unjustified Enrichment” 44. Due to the lack
of this distinction, the LOR fails to differentiate between ‘objective enrichment’
(= when the debt is paid on the basis of a non-existent or invalid cause, or is
paid to a person other than the creditor) and ‘subjective enrichment’ (= when a
person pays the debt of another in the wrong assumption that he is the debtor).
The subjective enrichment, in particular, raises some questions that remain
unaddressed in the LOR. For example, if a person paid another’s debt by error,
should he always be entitled to restitution? Or should the right of restitution be
restricted to a mistake meeting certain requirements, e.g. reasonable mistake?
It is recommended to address these questions by differentiating between
unjustified enrichment and condictio indebiti, a distinction which is well
known to French and Italian law45.
43
DCFR uses the expression "unjustified enrichment". BGB, CC and PETL refer instead to "unjust enrichment" (or
"without a just cause").
44
Scholars have criticised this approach arguing that the DCFR rule ignores a dogmatic distinction which not
only has ancient roots in European law history but can also be perceived in the nature of things: the problem of
restituting what was received by someone else does not overlap entirely with the problem of restituting what
was autonomously taken from others. It was also pointed out that the (DCFR) rule on unjustified enrichment is
vitiated by excessive abstraction. As a result, it formalises a general principle of conduct rather than a
prescriptive norm.
45 See, e.g., Articles 2033 ff. CC. Actually, under Italian law the unjustified enrichment is a ‘residual’ action
because recourse can be made to it only if the condictio indebiti and no other action are available to the
creditor by law. See Art. 2041 CC.
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L.
Recommendation no. 50
Art. 194 par. 2 LOR clarifies that “The term enrichment also covers the
acquisition of benefit through services.” However, it fails to consider that a
person may be enriched owing to work performed by another and not only
because of services received. The same line of reasoning is followed by Art VII. –
3:101 DCFR which – when defining enrichment – stipulates that a person is
enriched by, inter alia, “(b) receiving a service or having work done”. Art. 194
par. 2 LOR should also specify that enrichment may consist in an increase in
assets or a decrease in liabilities. It recommended modifying Art. 194 par. 2
accordingly.
LI.
Recommendation no. 51
While Art. 197 LOR addresses the return of monies in terms of accrued fruits and
interest by distinguishing between good and bad faith of the debtor, a
distinction of consequences for bona fide or mala fide debtors is lacking for the
restitution of things. It is obvious that a bona fide debtor should be under a
lower ‘liability’ than a mala fide debtor. For example, a debtor for restitution of
a thing who reasonably believes that the thing in question belongs to him, may
freely dispose of the good, deteriorate or even destroy it. His duty to restitute
should therefore be limited to an obligation to restitute in kind what is still
present in his assets (or, in case of deterioration or destruction of the good, to
an obligation to compensate within the limits of his enrichment, i.e. the value of
the benefit achieved). By contrast, a debtor in bad faith should be obliged to pay
the equivalent value if he destroys the thing to be restituted in kind (or,
alternatively, to restitute in kind and pay an indemnity for the loss of value) 46. It
is recommended to differentiate under Art. 197 between a bona fide and a mala
fide debtor for the restitution of things.
LII.
Recommendation no. 52
Art. 197 LOR mistakenly refers to “penalty interest”. Penalty interest (also
known as ‘default rate’) is payable when a party fails to make a payment when
its debt falls due. However, in the context of unjustified enrichment no payment
is due as there is neither a legal nor a contractual basis (or, at least, a valid
contractual basis) for it. It is recommended amending this provision to refer to
(compensative) interest only.
R. Termination of obligations and statutes of limitation
LIII.
46
Recommendation no. 53
For a similar provision, see Art. 2037 CC.
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Part IV of the LOR (Articles 276 ff.) is headed “Termination of Obligations” and
contains Chapter 4 (Statute-Barring), which carries provisions on statute of
limitations (‘prescription’). However, a statute of limitations does not terminate
an obligation, as clearly shown by Art. 341 LOR, which implies that statutes of
limitation are more correctly concerned with the right to demand performance
of an obligation, and with the judicial enforceability of such right in particular.
This should be reflected in the structure of the Civil Code, which may address
the institute of prescription in the General Part, following the approach of the
BGB (Sections 194 ff.). The CC does not have a general part; however, it still
does not include prescription in the Book on Obligations but in the last Book,
dealing more generally with the protection/implementation of rights (Articles
2934 ff.). The rationale is that both in German and Italian law prescription is not
confined to claims within the law of obligations but to all types of claims,
whether they are based on an obligations or not. It is recommended to remove
Articles 276 ff. from the Book on Obligations and transfer those provisions to
the General Part of the Civil Code.
S. Performance of obligations
LIV.
Recommendation no. 54
Art. 288 LOR reads as follows: “1. Performance is the execution of the content of the
obligation; therefore, the debtor may not perform it with anything else, and the
creditor may not demand anything else. 2. Performance shall not be deemed valid if
what the debtor delivered as the owed thing and the creditor accepted as such is not
in fact such; the creditor shall have the right to return what was delivered and to
demand the owed thing.” This provision gives rise to some concerns. While the first
paragraph is too descriptive, the second paragraph is problematic both from the
conceptual and terminological point of view. Firstly, performance cannot be regarded
valid or invalid but more properly executed or not executed. Secondly, the sentence
“and the creditor accepted as such” is logically at odds not only with the remainder
part of the same paragraph (which assumes that the creditor did not accept aliud pro
alio) but also with the datio in solutum principle stated under Art. 289 par. 1: the
debtor’s obligation shall terminate if the creditor accepts something else in place of
what was originally agreed. It is recommended (in par. 1) that the wording
“therefore, the debtor may not perform it with anything else, and the creditor may
not demand anything else” is deleted from par. 1. It is also recommended that in
par. 2 the word “valid” is replaced with “executed” and the sentence “and the
creditor accepted as such” is deleted.
T. Creditor’s default (‘mora creditoris’)
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LV.
Recommendation no. 55
Art. 306 par. 1 LOR defines mora credendi as the situation where the creditor
refuses to accept performance or prevents it by means of an action (commissive
conduct); however, no provision is made for when the debtor is unable to
perform the obligation because the creditor does not do what is necessary to
allow the debtor to perform his obligation (omissive conduct) 47. In addition,
Paragraphs 2 and 3 of the same article are obvious and/or unnecessary and
should be deleted. It is recommended that the concept of mora creditoris is
expanded by including omissive conduct. Paragraphs 2 and 3 may be deleted.
LVI.
Recommendation no. 56
Looking at the consequences of the creditor’s default, one may observe four
different deficiencies. First of all, the typical effects of the creditor’s default 48
equally arise in connection with the creditor’s delay per se, i.e. the mere fact of
the creditor refusing or preventing performance of the debtor’s obligation, and
the deposit procedure (see, respectively, Art. 307 paragraphs 1, 2 and 3, and
Art. 312 paragraphs 2, 3 and 4). In both cases the debtor’s delay is regarded as
terminated (see, respectively, Art. 307 par. 1 and Art. 312 paragraph 2). The
only difference is that the debtor can be fully discharged from his obligation
solely through the deposit procedure (Art. 312 par. 1). The second shortcoming
is that there is no procedure which the debtor must follow, prior to depositing
the owed thing, in order to formalise the offer of performance 49. Another
problem is the fact that while the deposit of “things” (movable assets, monies,
etc.) is provided, no mechanism equivalent to the deposit of movables is
specifically foreseen for the debtor to formally offer the delivery of immovable
property (e.g. intimation by the bailiff). The courts' competence over the
deposit procedure can be mentioned as an additional flaw of creditor’s default
rules: in other countries the competence to conduct the deposit or intimation
procedure is more efficiently delegated to public officials such as notaries and
bailiffs, depending on the object of the obligation. A further weakness of mora
creditoris-related rules is that there is no provision that the creditor shall not
47
A similar provision is foreseen, for example, under Art. 1206 CC and Art. 6:58 of the Dutch Civil Code.
These include: the debtor’s release from the obligation to compensate the damages suffered by the creditor
due to the delay; the transfer of the risk of accidental destruction or damage of the due thing onto to the
creditor; and the compensation for damages arising from the creditor’s default and for costs incurred in due to
the safekeeping of the due thing.
49 A formal offer through a public notary or bailiff, depending on the circumstances, as a prerequisit to the
deposit (and, therefore, the full discharge from the obligation), is foreseen by Art. 1210 CC. According to this
provision, the debtor may ask the deposit of things, or intimation to receive them, only after the creditor has
refused to receive such things being offered to him formally or has not appeared to receive them. However,
pursuant to Art. 1220 the debtor may still not be deemed to be in delay if he promptly offered ‘informally’ the
owed thing, unless the creditor refused it on legitimate grounds (e.g. partial performance).
48
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take enforcement measures during the time he is in default 50, or at least after
the owed thing has been deposited and the debtor has been discharged from his
obligation 51. It is recommended to redesign the whole creditor’s default system
in such a way that: 1) the termination of the debtor’s delay would be the (sole)
effect of the creditor’s delay per se, i.e. cease of interest accrual, unless the
creditor refused performance on legitimate grounds; 2) the typical effects of
the creditor’s default would be (only) triggered by the debtor’s formal offer of
performance in front of a notary or bailiff; 3) the deposit procedure – through
which the debtor would be fully discharged from his obligation – may only
take place after the debtor’s formal offer of performance; 4) notaries and
bailiffs would be entrusted by law with the competence to carry out the
deposit or intimation procedure; 5) the creditor should not take enforcement
measures when he is in default (i.e. a formal offer has been made).
U. Set-off of claims
LVII.
Recommendation no. 57
The regulation of set-off under Articles 317 to 324 LOR is unsatisfactory . It is
recommended to include a definition of set-off and to specify the requirements,
while taking into consideration some of the relevant provisions of the DCFR
(Articles III. – 6:101 ff.).
V. Novation of obligations
LVIII.
50
51
Recommendation no. 58
Under the LOR, novation of obligations is regulated separately in two different
parts of the law: on the one hand, ‘objective’ novation is governed by Articles
329 ff. as a modality of termination of obligations other than performance,
together with compensation, release from debt, etc.; on the other hand,
‘subjective’ novation – both on the active (creditor) and passive (debtor) side –
is regulated in the end of the general part of the LOR (Articles 420 ff.). It is
however unclear why the change of creditor or debtor is not treated as well as a
form of novation (hence, termination of obligations), since the debtor may as
well be released from his obligation (see Articles 420 par. 4, Art. 422 par. 2, Art.
432 paragraphs 1 and 2). It is recommended to remove Part VI: Change of
creditor or debtor (Articles 420 ff.) and incorporate it under Chapter 3 of Part IV:
Other ways for an obligation to terminate (Articles 317 ff.).
An example is Art. 6:62 of the Dutch Civil Code.
This is the Italian case law approach (see Cass. 8711/15).
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W. Periods of limitation (‘prescription’)
LIX.
Recommendation no. 59
Art. 352 LOR provides a general term of 5 years for the prescription of claims.
The rules on prescription should be designed to promote efficiency by
encouraging the prompt making of claims before evidence becomes difficult and
expensive to provide and by freeing assets which might otherwise be held from
circulation due to old claims being made. However, a 5-year term for an
ordinary statute of limitation may be too short for the satisfaction of certain
claims. This is particularly true for claims under family law and inheritance law,
or for claims related to property. Some European countries provide a longer
term for the general statute of limitation 52. Others contemplate a short general
term of prescription in combination with more extended limitation periods
concerning specific claims 53. It is recommended to revise Art. 352 in light of
European best practices. The Civil Code may return to the old rule envisaged in
the former Yugoslav LOR, which originally provided a general statute of
limitation of 10 years, or may alternatively keep the general term of 5 years
but introduce longer limitation periods for certain types of claims.
LX.
Recommendation no. 60
Art. 355 LOR provides a statute of limitation of 3 years for commercial contracts,
that is contracts entered by and between commercial enterprises. The
distinction between civil and commercial contracts has already been criticised in
this report. It is recommended removing Art. 355 from the Civil Code.
LXI.
Recommendation no. 61
Art. 359 addresses compensation claims for reason of corruption. This article
implements Art. 7 of the Civil Law Convention on Corruption of the Council of
Europe (4.XI.1999), which is not in force in Kosovo (unlike in Slovenia). It is
recommended removing Art. 359 from the Civil Code.
LXII.
Recommendation no. 62
Art. 361 LOR does not specifically refer to arbitral awards. It is recommended
amending this provision to include a specific reference to (final) arbitral awards54.
52
See e.g. Art. 2946 CC; Art. 2262 CN (30 years); Article 114 of the Albanian Civil Code (10 years).
For example, Section 195 of the BGB stipulates that the standard limitation period is 3 years (see, similarly,
Art. III. – 7:201 DCFR). However, Section 197 BGB provides that a number of claims are statute-barred after 30
years! These include: claims for return based on ownership and other real rights; claims that have been
declared final and absolute; claims under enforceable settlements or enforceable documents; claims that have
become enforceable in insolvency proceedings; and claims to reimbursement of the costs of execution.
54
See, e.g., Art III. – 7:202 DCFR.
53
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X. Default and contractual interest
LXIII.
Recommendation no. 63
Art. 378 LOR contains a definition of interest which is unnecessary and duplicative of
the definitions of penalty interest and remunerative interest provided by Art. 382
and 385 LOR, respectively. It is recommended that this provision is removed from
the Civil Code.
LXIV.
Recommendation no. 64
Art. 379 LOR concerns the prohibition of interest on interest for late payment (socalled anatocism or compound interest). It is recommended moving this article
upwards after Articles 382 ff. on penalty interest.
LXV.
Recommendation no. 65
Art. 380 LOR contains a principle unknown to most jurisdictions according to which
interest shall cease to run when the amount of penalty interest that has not been
paid reaches the principal. A similar rule existed in former Yugoslavia but was later
abandoned55. It is questionable whether such a provision is in compliance with the
Constitution and international/European standards on protection of creditors
because it may be seen as an incentive to delay in payments, especially after interest
has reached the same amount of the principal debt. It is recommended that Art. 380
is deleted from the Civil Code.
LXVI.
Recommendation no. 66
Art. 382 par. 1 LOR provides that a debtor who is late in performing a pecuniary
obligation shall owe penalty interest in addition to the principal. This provision
fails to specify that: a) interest shall be owed on the unpaid part of the debt
over the time that the debtor is in default of complying with his obligation; b)
the rate of the interest payable on a debt shall be the statutory interest rate; c)
the law or agreement of the parties may provide that interest is not payable on
a debt. It is recommended to reformulate par. 1 of Art. 382 as follows: “A
debtor who is in delay in the payment of a sum of money or any part thereof
shall owe penalty interest to the creditor on the unpaid part of that sum from
the time when payment is due to the time of payment, unless otherwise agreed
or provided by law”.
LXVII.
Recommendation no. 67
Par. 2 of Art. 382 LOR is copied from the Slovenian Code of Obligations (see Art.
378 par. 2). Pursuant to this provision, “The interest rate for penalty interest
55
Art. 401 of the old Yugoslav LOR was repealed in 1989. See Official Gazette of SFRY no. 57/89.
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shall amount to eight percent (8%) per annum, unless stipulated otherwise by a
separate act of law.” A fixed penalty interest rate system is therefore foreseen
but fixed rates are unable to reflect economic reality. In Slovenia, a separate law
was thus enacted in 2003 (i.e. Law on the Interest Rate of the Default Interest),
whose provisions have superseded the article above. This law stipulates that the
default interest rate shall be periodically linked to the reference rate of the
interest rate applied by the European Central Bank. More particularly, the legal
default interest rate is equal to the sum of the ‘reference rate’ and eight
percentage points. This method of calculation is in compliance with Directive
2011/7/EU of 16 February 2011 on combating late payment in commercial
transactions. Other countries from the region have introduced similar
mechanisms, sometimes within the same law of obligations (Croatia), but more
often in the context of a special law (Serbia). It is recommended that the
provision in question is amended to provide that the penalty interest rate shall
be determined by law. In particular, the law should contemplate a method of
calculation similar to that foreseen by Directive 2011/7/EU 56 . However,
transitional provisions should be used to prevent the occurrence of legal gaps:
Art. 382 par. 2 should continue to be applicable until such law is adopted,
however no later than one or two years from the entry into force of the Civil
Code.
LXVIII.
Recommendation no. 68
Art. 385 LOR refers to “contractual interest” but penalty interest can be contractually
agreed too (see Art. 383). It would be preferable to use the expression ‘remunerative
interest’ (e.g. interest to be paid for a loan) in order to distinguish it from ‘penalty
interest’ (i.e. interest to be paid due to default or delay in payment). Besides, the
formulation of par. 1 does not adhere to best practices. In addition, par. 2 provides
that contractual interest rate shall be 6% per annum unless otherwise agreed. As in
the case of penalty interest, a fixed remunerative interest rate is not advisable. It is
recommended redrafting Art. 385 paragraphs 1 and 2 as follows: a) “1. The
contracting parties may agree that in addition to the principal debt the debtor shall
owe interest to the creditor at the rate specified in the contract. 2. If the contract
does not stipulate otherwise, the interest shall be payable at the rate determined
by law.” Again, transitional provisions should be used to avoid giving rise to legal
gaps.
LXIX.
Recommendation no. 69
Art. 386 LOR stipulates that the provision of the LOR on contractual interest apply to
fungible obligations as well. This principle makes no sense because pecuniary
56
The Commission’s proposal for a Regulation on the Common European Sales Law (Articles 166-171) may
provide some model clauses which meet the standards of the acquis communautaire.
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obligations only can accrue interest. It is recommended that Art. 386 is deleted from
the Civil Code.
Y. Usurious interest
LXX.
Recommendation no. 70
The provision on the usurious interest rate (Art. 381 par. 1 LOR) stipulates that if
the agreed rate for (contractually agreed) penalty interest or for contractual
interest is more than 50 percent higher than the legal default interest rate (=
8%), the contract providing such an interest rate shall be considered an
“usurious contract”. The permitted interest rate is therefore the interest rate
which does not exceed 150% of the legal default interest rate (8%, pursuant to
Art. 382), i.e. 12%. The legal consequence of an usurious contract is that it is null
and void (see Art. 123 paragraphs 1 and 2 LOR). This provision is not in
accordance with European best practices: a fixed usurious interest rate is
neither in the interest of the creditors nor in that of the debtors as it does not
take into account the fluctuations of the economy. Most countries define the
usurious interest rate in terms of percentage (between 25 and 100%) of the
average rate charged by banks for operations of a similar kind issued during the
period of reference (last 3 to 6 months). In addition, Art. 381 par. 2 only
stipulates a legal presumption of usury, in the sense that the creditor may avoid
the consequences of having agreed an usurious interest rate by proving certain
circumstances. This is due to the fact that the LOR does not seem to distinguish
between an usurious contract (= providing an usurious penalty or remunerative
interest rate) and a contract made under duress (= when one party exploits or
takes advantage of the situation of economic distress or other weakness of the
other party, which results in a disproportion between the obligation of the
former and that of the latter) 57: both contracts are considered as two different
species of the same genus of the usurious contract, and subject as such to the
penalty of voidness (Articles 123 and 381 LOR). Such an approach is questionable
because the contract made under duress is generally not void but voidable
(rectius, ‘rescindable’) by the injured party against the other contracting party,
whereas the usurious contract is typically regarded as (partially) null and void. It
is so owing to the fact that: (a) from a public policy view usury amounts to a
criminal offense, and (b) in the case of usury the exploitation of another is today
considered to be in re ipsa. It is recommended to introduce a mechanism of
calculation of the usurious interest which is not linked to a fixed interest rate.
This may be done by a special law which the Civil Code may simply refer to.
However, as in the case of penalty and remunerative interest, transitional
57
Art. 122 LOR addresses the disproportion in mutual performance but makes no reference to the duress or
weakness of the party.
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provisions may be needed. It is also recommended to keep the usurious
contract and the contract made under duress distinct and separate and to
regulate their consequences differently, i.e. the presumption may be removed
for usurious contracts, which should be null and void (see infra for more
details), and the contract made under duress may be merely voidable.
LXXI.
Recommendation no. 71
Neither Art. 381 nor Art. 123 LOR clarify the legal consequences of the penalty
of nullity for the usurious contract. Shall the whole contract or only the usurious
clause be null and void? If the usurious clause alone is null and void, should
interest be still owed and at what rate? Although solutions differ across
jurisdictions, the majority of legal systems provide for the partial nullity of the
contract in order to ensure that the part of the contract that is unaffected
remains in effect. The rationale behind this is to protect the debtor from the
effects of the annulment of the whole contract: the debtor would be required to
immediately return the principal received, which in turn would aggravate his
situation even further, despite the fact that he represents the weaker
contractual party requiring protection. Besides, in order to avoid restitution the
debtor may be persuaded to refrain from claiming the nullity of the contract at
all. It is recommended to provide that the agreement on the excessive part of
the interest rate is null and void, whereas the agreement on the interest rate
up to the permitted interest rate remains valid. Alternatively, the Civil Code
may provide that if usurious interest rates are agreed upon, the relative clause
is void and no interest whatsoever must be paid. In this way, the (usurious)
interest clause is entirely removed from the contract. Such a solution aims to
strengthen the fight against the crime of usury through an afflictive and
punitive sanction 58.
LXXII.
Recommendation no. 72
Art. 381 LOR does not specify when the test of usury rates should be made, i.e.
at the time of the contract or at the time of the payment? What is to happen in
the case of ‘supervened usury’, that is where parties agree on a lawful interest
rate (so, one that is lower than the threshold applicable at the time the contract
is entered into), but, later on, during the term of the contract, thresholds go
down and as a result the agreed rate becomes higher than the new thresholds?
It is recommended that the principle is provided that the test for usury rates
should be made at the moment interest is promised or agreed, regardless of
the time of payment, so that the ‘supervened’ breach of usur y thresholds
should have no consequences. Alternatively, the Civil Code may stipulate that
although an interest clause cannot be deemed void (as it had originally
58
Such an innovative solution is contemplated, for example, by Art. 1815 par. 2 CC.
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complied with the applicable thresholds), interest rates that exceed a new
lower threshold cannot be legally enforced and should be automatically be
reduced within the new threshold applicable when the interest falls due.
Z. Sale of disputed right and conditional fee agreement
LXXIII.
Recommendation no. 73
Art. 444 LOR has been inspired by Articles 1261 and 2233 (old version) of the CC.
Par. 1 codifies a general principle on the transfer of contested rights, whereas
par. 2 provides an exception: the first sentence provides that the agreement
whereby a lawyer or any other person who is entrusted with the realisation of a
contested right purchases such a right shall be null and void. This provision aims
to protect clients, avoid conflicts of interest and preserve the dignity of the legal
profession. However, its wording is rather unclear due to the use of foggy
expressions such as “any other recipient of instructions”, “realisation” [of a
contested right”], etc. The second sentence provides the same penalty of nullity
in relation to the agreement by which any of the above persons negotiates for
himself a share in the amount awarded to his client by the court. So, par. 2 puts
together two different issues: the prohibition for a lawyer to purchase a
contested right (which makes sense in the context of rules governing sales
contracts) and the prohibition to agree as fee a share of the amount obtained by
the client (which is not related to sale contracts). Furthermore, it is questionable
whether provisions related to the legal profession should be in the Civil Code.
Ideally, this provision should be deleted and codified in the Law on Bar or other
similar law. However, if the decision is not to remove it, then one should
consider that such agreements with attorneys are common in the practice of
many European countries. What should not be allowed is for the lawyer to agree
on the transfer of a share of the disputed property or asset if the case is
successful. It is recommended that the wording of the first sentence is
improved and that the second sentence of Art. 444 par. 2 is amended to permit
conditional fee agreements under certain circumstances. For instance, the
agreement should be written; the lawyer should not acquire a share of the
disputed property or asset; and/or the conditional fee should be reasonable.
AA.Sales contract (notification in case of defects; partial defects; loss of withdrawal right;
sale with documentary credit)
LXXIV.
Recommendation no. 74
Articles 464 and 465 LOR provide the duty of the buyer to inspect the goods and
notify the seller of any defects. Such articles differentiate between commercial
contracts and non-commercial contracts. Within the meaning of the LOR,
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commercial contracts are nothing else than business-to-business (B2B) contracts
(see Art. 12). If the Civil Code is to incorporate the EU acquis on consumer
contracts, the application of those provisions could be restricted to any contract
of sale other than a consumer sale 59. But reference to commercial contracts
should be removed. As a result, B2B contracts would be regulated by default by
Articles 464 and 465 LOR, whereas B2C contracts would be regulated by special
rules to be codified in accordance with Art. 5 par. 2 of Directive 1999/44/EC on
certain aspects of the sale of consumer goods and associated guarantees. It is
recommended restricting the application of the Articles 464 and 465 to any
contract of sale other than a consumer sale and to provide special rules for
consumer sales in compliance with Directive 1999/44/EC.
LXXV.
Recommendation no. 75
Articles 464 and 465 LOR differentiate between ‘patent’ and ‘latent’ defects. The
buyer must inspect the goods and notify the seller of any defects within 8 days
or, in the case of a commercial contract, immediately, if the defect is patent, or
within 8 days or, in the case of a commercial contract, without delay, if the
defect is latent. The terms foreseen do not always make sense and the
regulation is unnecessarily complex and sometimes unreasonable. For example,
the 8-day deadline provided by Art. 464 par. 1 and 465 par. 1 LOR seems too
long when the defects are noticed during the inspection. It is recommended to
simplify the legal regime by merging the existing rules for both types of
defects into one single article and revising the periods of limitation. In
particular, if defects are noticed during the inspection, notification should take
place ‘immediately’ – when inspection is conducted in the presence of both
parties – or ‘without delay’ – in all other cases. If otherwise defects come to
light subsequently, then it makes sense to give to the buyer some reasonable
time to make the notification, preferably in writing. In this scenario, the 8 -days
deadline from the day the defects were noticed should suffice.
LXXVI.
Recommendation no. 76
Art. 475 LOR deals with partial defects. This article can be criticised for at least
two reasons. Systematically, liability for material defects is governed by Articles
461 to 470 LOR, so if any rules on partial defects were to be provided the right
place would be there. Conceptually, it does not make sense that in the event of
partial defects the buyer may only withdraw from the contract partially (…
unless the agreed thing constitutes a whole or the buyer has a justifiable
59
The same happens in other EU members states. In Italy, for instance, the guarantees associated to an
ordinary sale are still regulated by Articles 1490 ff. of the Civil Code, whereas the guarantees associated to a
consumer sale are regulated separately (originally, by the Civil Code itself, and as of 2005, by a new Consumers
Code).
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interest in accepting only the thing as agreed). If a part of the delivered thing is
defective, the functionality of the thing is most likely impaired. The idea that the
buyer may withdraw from the contract solely in respect of the defective part not
only restricts the rights of the buyer to an unfair degree but is also incompatible
with the underlying principles of the LOR, including those that partial
performance is equivalent to non-performance and the creditor is always
entitled to full performance (see e.g. Art. 288). In addition, there are no specific
rules on how to perform the partial withdrawal and what would be the legal
consequences for it. It is recommended that Art. 475 is revised as follows: in
primis, the sentence “If only a part of the delivered thing has defects or…” may
be removed from par. 1. As a result, this article should be left to deal only with
partial performance, i.e. ‘quantitative’ non-performance. In secundis, with a
view to allowing the buyer to freely choose whether to accept partial
performance or not, the sentence under par. 1 “only in respect of the part that
has the defects or the part or quantity that is missing” and par. 2 as a whole
may both be deleted.
LXXVII.
Recommendation no. 77
Art. 478 LOR foresees the loss of the buyer’s right to withdraw from the contract
because of a defect in the goods if these cannot be returned in the state in
which they were received, unless very specific circumstances occur. This seems
to be impracticable in the case of normal use of goods. It is recommended that
this provision is deleted.
LXXVIII.
Recommendation no. 78
Art. 530 LOR regulates sale with documentary credit. However, international
players like the International Chamber of Commerce (ICC) have already
addressed the needs of this contractual practice through a comprehensive set of
uniform rules of practice on documentary credits. It is recommended removing
this provision from the Civil Code.
BB. Donations mortis causa and distribution of property before death. Contract of lifelong
maintenance
LXXIX.
Recommendation no. 79
Art. 548 LOR concerns donations mortis causa, i.e. donations that are to be
performed after the donor’s death. This article reiterates a provision of the Slovenian
Code of Obligations which did not exist in the old Yugoslav LOR. It states that such
donations shall only be valid if the relevant deed is notarised and delivered to the
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donee. However, the Law on Inheritance (IL) makes already provision for the
possibility to transfer the ownership of a property or asset to heirs at law or other
persons through a testamentary disposition. Moreover, Art. 548 may be used to
circumvent the provisions of the IL on compulsory shares. It is recommended that
this provision is removed to ensure consistency between the inheritance law and
law on obligations within the overall framework of the Civil Code.
LXXX.
Recommendation no. 80
The LOR contains provisions in relation to the delivery and distribution of property of
the decedent before his death (Articles 550-559). The IL provides rules as well on
transactions inter vivos in view of future succession (Articles 58-68). Despite some
differences in terminology, the respective scope of application of these two sets of
provisions overlaps significantly. Moreover, important inconsistencies can be noticed
between the two laws. Firstly, different requirements are set forth as regards the
conditions for validity of such a contract (e.g. who shall consent to it). Secondly, while
the Inheritance Law identifies the court as the competent authority for the
verification of the contract, the LOR prescribes that the contract must be notarised.
One may further note the different position of the spouse under the two laws, which
would seem to be much weaker in the LOR (cfr. Art. 64 IL and Art. 555 LOR). In
addition to the fact that the two laws regulate the same type of agreement, and in
some respects they even contradict each other, there are some other considerations
that must be taken into account when codifying the Civil Code, which are related to
the problems that many women face in inheriting property in Kosovo. In practice, the
contract above is often used by fathers to transfer properties to their son/s prior to
their death so as to avoid the restrictions that inheritance rules impose in respect of
heirs at law and compulsory shares, especially with regard to their spouses and
daughters60. Leaving such provisions in the Civil Code may eventually nullify the
positive effects of any other action aimed at preventing women from renouncing to
inheritance under Articles 130 ff. IL. There is, in fact, a concrete risk that many
women may continue to lose their inheritance rights because the male members of
their family would still be entitled by law to avail themselves of this type of
agreement to achieve the same result of renunciation. It is recommended removing
from the LOR the contract of delivery and distribution of property of the decedent
before his death.
60
This is possible because Art. 61 par. 1 IL and Art. 552 par. 1 LOR affirm the same principle that if such an
agreement is entered into, the inheritance of the decedent will only consist of the property not already
allocated or of any property acquired after such allocation. The practical outcome is, as expressly foreseen by
Art. 61 par. 2 IL and Art. 552 par. 2 LOR, that the property received as a result of the agreement in question
shall neither be counted towards the inheritance share of the descendant, nor shall it be taken into account
when determining the value of the hereditary property.
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LXXXI.
Recommendation no. 81
Art. 560 par. 1 LOR regulates the contract of lifelong maintenance, i.e. the contract
through which a contracting party (maintaining party) undertakes to support the
other party (maintained party), while this latter declares that he will leave to the
former all or part of his property after his death. In the presence of compulsory heirs
of the maintained party (for instance, a descendant), this type of contract may give
rise to conflicts with the IL due to an infringement of the compulsory share. The
regulation of this contract may also violate the legal provisions of the Family Law
relating to marriage, and Art. 42 in particular, which describes the lifelong rights and
obligations of spouses. It is recommended removing this contract from the Civil
Code or, alternatively, regulating it within the frame of the inheritance law rather
than the law of obligations.
CC. Contract for work
LXXXII.
Recommendation no. 82
The regulation of work contracts (Articles 615 to 644 LOR) is mainly based on
Articles 2222 ff. CC. However, there is no provision like Art. 2226 CC to deal with
the defects or non-conformity with the contract of the work delivered. It is
recommended that specific rules on legal effects of non-conformity are added
to the existing ones, along the lines of the rules governing other contracts, and
the sales contract in particular. These additional rules may define the legal
consequences of acceptance of the work done by the contractor, the duty of
the ordering party to notify of non-conformity or defects within a certain
deadline 61 , the consequences of having fraudulently concealed the nonconformity or defects, the rights of the ordering party and the duties of the
contractor, the statute of limitation for legal action, etc.
1.2. Recommendations related to special laws
DD.
LXXXIII.
Self-defence
Recommendation no. 83
Art. 20 of the Law on Property and Other Real Rights (LPRR) provides that the person
who damages or destroys movable property belonging to another person is not liable
61
The trade section of German law contains a provision which is similar to that of Article 39 CISG, namely HGB
§ 377, which provides that notice of non-conformity be given within a “reasonable time”. In contrast to this,
Art. 1495 par. 1 CC provides a duty to notify of non-conformity within 8 days. This difference in domestic laws
could make an Italian seller more accustomed to having the right to be properly notified of any non-conformity
within a fixed narrow timeframe, whereas the German buyer according to his domestic law has a more flexible
timeframe.
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to compensate if this was necessary to defend himself or a third person against an
imminent danger deriving from such movable property. Article 20 appears to be
redundant because such matters are already covered by the general conduct
described by Article 143 LOR. Besides, matters of exemptions from liability are
usually addressed by the law of obligations. It is recommended to regulate the right
to self-defence and state of necessity only once, in the law of obligations of the
Civil Code, under the notion of extra-contractual liability (Articles 136 ff.). The
equivalent norms laid down by the LPRR should be removed.
EE. Pledge
LXXXIV.
Recommendation no. 84
Articles 133 to 171 LPRR regulate the pledge. Among these rules, Articles 136 and
137 regulate specifically the “pledge agreement”. However, the LOR also addresses
certain aspects of collateral over movable property. The English unofficial translation
of the law either refers to “pledge” (see e.g. Articles 228, 230, 276, 283, 319, 326,
331, 347, 349, 421, 433, 975, 977, 1024 and 1053 LOR) or to “lien” (see e.g. Articles
643, 693, 694, 750, 777, 800, 826, 867 and 874 LOR). However, the difference
between the pledge and the lien (an institute originating mainly from the Common
Law tradition) seems to be only a terminological one. In the official Albanian version
of the law the word ‘peng’ is always used. The English version of the law should
therefore consistently use the word “pledge”. It is recommended to review carefully
the English version of the LOR in order to ensure that terminology is used
consistently in the English translation of the Civil Code.
FF. Pre-emption
LXXXV.
Recommendation no. 85
The LOR refers to pre-emption rights in general terms, whilst the LPRR regulates such
rights with specific regards to immovable property. The right of pre-emption in the
case of a sale contract is regulated by both laws (respectively, Articles 510 to 516 LOR
and 44 to 50 LPRR). These provisions do not necessarily contradict each other;
however, some provisions might be repetitive (see e.g. Article 516 par. 1 LOR and
Article 44 par. 2 LPRR regarding statutory pre-emption), or may concurrently regulate
contractual aspects of pre-emption (see e.g. Articles 44.2 LPRR/Art. 510 LOR, and Art.
45 LPRR/Art. 511 par. 1 LOR). The provisions on pre-emption are usually designed to
be applicable to the sale of land, and rural land in particular. Hence, they are mostly
part of property law. In contract law, the pre-emption agreement falls under the
parties’ autonomy and the breach of such an agreement is subject to the general
rules of the breach of contract. It is recommended to review carefully the two sets
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of provisions to ensure that there is no unnecessary duplication or fragmentation in
the future Civil Code. Cross-references may be required in the Book on obligations.
GG.
LXXXVI.
Partnerships
Recommendation no. 86
The old Yugoslav LOR did not regulate the contract of partnership. When the
Slovenian Code of Obligations was drafted, new articles were inserted to govern the
contract of partnership. The new LOR has fully reproduced the above provisions
under Articles 987 to 999. As a result, the LOR overlaps now with the LBO, which
regulates the ‘general partnership’ as a basic type of business organisation (Articles
49 to 65). These two sets of provisions seemingly regulate the same type of contract.
Both of them imply that two or more persons and/or organisations agree to
cooperate to achieve a common goal using their own contributions which can consist
in property, assets, monies, services or labour (see Art. 988 LOR and Art. 54 LBO). The
only noticeable difference is that the LBO places emphasis on a cooperation aimed at
conducting a “business activity” (Art. 49 par. 1), whereas the LOR refers more
generically to a “common purpose permitted by law” (Art. 987). This difference,
however, does not seem of crucial importance for definition purposes, given that the
LBO adopts a very wide definition of business activity, which is intended as any
(regular or repeated) activity involving the offer, provision or production of goods,
services, property and/or works to or for any person or organisation in return for or
in expectation of any type of payment or compensation62. The only type of situation
left outside the scope of the LBO is where the property is not purchased, acquired or
shared with the object of earning profits. This is perfectly normal as an overview of
the practice of partnership agreements across Europe shows clearly that partnership
is commonly understood both in common law and civil law systems as an agreement
between two or more individuals or companies to form and carry on a for-profit
business. If a partnership does not have a business purpose then it is not a
partnership but something else which is subject to different rules and regulations 63. It
62
Any economic activity which is profitable may therefore be subsumed under the concept of business activity,
which, as a consequence, also covers activities that are not properly of a trade nature – agriculture, property
management, joint exercise of free professions, leisure services, etc. For example, the provision of services by
free professionals (e.g. lawyers) would qualify as a business activity as well within the meaning of the LBO, and
such professionals may accordingly be eligible to enter into a partnership agreement to provide their services
as associated lawyers, i.e. practice in the form of a ‘joint law firm’.
63
For instance, co-ownership, as a form of joint enjoyment of property, whether based on a contractual
relationship or arising by operation of law, is regulated in a different place (e.g. Art. 51 LPRR on joint
ownership). Likewise, Articles 58 ff. of the Family Law provide rules for both marital and extra-marital
partnerships. Another example is represented by non-profit partnerships, e.g. associations or foundations,
which are governed by special law (Law No. 04/L –057 On Freedom of Association in Non-governmental
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is recommended removing the provisions on partnership agreements from the Civil
Code.
HH.
LXXXVII.
‘Communio’
Recommendation no. 86
Articles 1000 to 1008 LOR on common ownership appear to be a duplication of
similar provisions laid down by the LPRR (in particular, Articles 43, 51-56, 57-62). The
English version of the LOR improperly uses the word “community” instead of
‘communion’. It is recommended that common ownership rights, including coownership and condominium, are regulated in the LPRR and that the related
provisions in the LOR are repealed.
II. Leasing and other ‘modern’ contracts
LXXXVIII.
Recommendation no. 88
Financial and operational leasing is regulated by the Law on Leasing (LL). Many
countries which have adopted a Civil Code have opted to codify ad hoc rules on
leasing. Other countries have regulated leasing with special laws. In the impact
assessment we argued that it would be advisable for the contract of leasing to be
regulated, together with other ‘modern contracts’ (factoring, franchising, etc.), in the
law of obligations as part of the future Civil Code. However, after careful thought, we
believe that this may not be the best approach. In fact, the Kosovo economy is not of
such complexity yet to justify introducing contracts such as factoring or franchising.
The fact that only the contract of leasing has been codified so far seems to confirm
such an understanding. Usually, modern contracts are introduced in economies in
transition and developing countries with the assistance of the World Bank. This was
the case, for instance, of the LL. If any financial institution active in the area of legal
reform was of the opinion that other modern contracts should be codified in Kosovo
then they would have provided technical assistance to do so. Furthermore, the
introduction of (additional) modern contracts implies a choice between different
models and approaches which requires a lengthy debate that may temporally stretch
beyond the timeframe of the project. In light of the above, it is recommended
neither to incorporate the contract of leasing nor to codify any other modern
contract in the Civil Code.
JJ. Lease of agricultural land
LXXXIX.
Recommendation no. 89
Partnerships. More in general, Art. 2 LOR acknowledges the freedom of will, which should also be intended as
the freedom of parties to conclude contracts other than those provided by law.
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The Law on Agricultural Land (LAL) deals with the use, protection, regulation and
lease of agricultural land. It comprises a mixture of administrative and civil law.
The LAL includes a comprehensive set of rules regarding the lease of agricultural
land (Chapter V, Articles 30 to 37). It is recommended that the practice of other
European countries (e.g. Germany, Italy, Netherlands, and Slovenia) is
followed and that the matters related to the leasing of agricultural land
continue to be regulated by special legislation.
KK. Notarisation
XC.
Recommendation no. 90
Art. 30 LN specifies which contracts must be notarised. However, the LOR
contains as well some rules concerning the notarisation of contracts (e.g. Art.
523 par. 2, Art. 548, Art. 550 par. 2, and Art. 561). Other laws to be codified
within the Civil Code include provisions on the notarisation of specific contracts.
For instance, the LPRR provides in Art. 36 par. 2 that real estate contracts must
be concluded before a competent office, i.e. the public notary. Some of these
provisions are redundant. The notarisation-related provisions existing within
the LOR and other special laws which duplicate provisions of the LN may be
removed from those laws. In fact, the LN groups (most) contracts requiring
notarisation in one article (which does not adhere to a rigid numerus clausus
principle). An alternative may be to leave those provisions in the LOR and
other laws where the substance of the contract is regulated, regardless of any
possible duplication by the LN; however, Art. 52 LOR (which currently requests
the written form only) should be revised to require the notarisation of the
contract for the transfer of an immovable property. However, the best
approach would probably be to specify in a dedicated article of the LOR the list
of the contract(s) subject to notarisation.
XCI.
Recommendation no. 91
Art. 30 par. 1 LN requires notarisation for real estate contracts. Similarly, Art. 36
par. 2 LPRR provides that the contract for the transfer of ownership of an
immovable property must be concluded before a competent office, e.g. public
notary. However, Art. 52 LOR merely provides that such contracts shall be
concluded “in written form”. It is recommended that Art. 52 LOR is removed
from the law of obligations of the Civil Code since the written requirement is
subsumed in the notarial form requirement.
XCII.
Recommendation no. 92
With regard to notarisation, the English expression used in the LOR is “notarial
protocol”; in Albanian, “akt noterial”. However, the LN adopts a different
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terminology. While the English expression chosen is “notarized deed”, the
Albanian text refers to “Dokumentet e noterizuara” or, sometimes, “veprimet e
noterizuara”. It is recommended that the terminology on the notarisation of
contracts is used consistently. The drafters of the Civil Code should decide
which technical terms are to be used in the Civil Code and those terms should
be adhered to by special laws, including the LN.
LL. Motor liability insurance
XCIII.
Recommendation no. 93
The LCMLI regulates the liability insurance for damages caused to third parties
from the circulation of motor vehicles. Given its nature of lex specialis, this law
should not be incorporated in the Civil Code.
MM. Defamation and insult
XCIV.
NN.
XCV.
Recommendation no. 94
The CLDI de-criminalises defamation and insult and provides for mechanisms to
ensure effective and appropriate compensation for persons whose reputation
has been harmed as a result of defamation and insult. This law represents a lex
specialis of tort law which regulates a sui generis situation that would typically
involve the dissemination of defamatory or insulting information in written or
spoken form through print or broadcast media or by other means, which is
heard or read by at least one other person. It is recommended not to
incorporate this law in the Civil Code.
Financial Services: Banking and Insurance
Recommendation no. 95
Upon entry into force of the LOR, the old Yugoslav LOR ceased to apply, with the
exception of the Titles XXXI to XXXIX (Articles 1035 ff.) on banking contracts which
will continue to be applicable until replaced by Kosovo laws or sub-legal acts (see Art.
1058 par. 3 LOR). Insurance contracts are regulated by Articles 918 ff. LOR. However,
the old Yugoslav regulatory framework on financial contracts may be not up to date
(if not obsolete). As such, banking and insurance contacts may need to be addressed
and re-regulated with a view to ensuring that the new legal framework provides
higher standards of commercial banking and insurance practices and consumer
protection. The question then arises as to whether contracts related to financial
services (banking, insurance, etc.) should be regulated at all in the law on obligations
of the Civil Code. Regulating this type of contracts in the future Civil Code would
avoid ‘fragmentation’ of the framework related to contract law. However, such
contracts require a huge amount of highly technical provisions which could drag the
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Civil Code into dimensions not suitable for practical needs. It would therefore seem
more sensible to let the matters of contract law concerning financial services be
governed by special legislation on banking and insurance matters. This would ensure
a more comprehensive approach to such matters and an in-depth regulation of
contractual issues. It would also mean that the approximation to EU standards
(especially, consumer-related) existing in the area of banking and insurance contract
law should not be carried out in the Civil Code but should be accomplished by using
special laws and regulations. It is recommended that the matters of contract law
concerning financial services are governed by special laws and regulations on
banking and insurance matters. Transitional provisions should however be
designed to prevent a legal vacuum arising in the regulation of such contracts in
case ad hoc legislation is not enacted or delayed.
2. Recommendations based on the EU legal assessment report (Activity B.3)
A. Anti-discrimination
XCVI.
Recommendation no. 96
The Anti-Discrimination Law of Kosovo (“A-DL”) covers all issues addressed by
Directives 2006/54/EC, 2004/113/EC and 2000/43/EC, including consequences in civil
law such as reimbursement of costs and damages. Since the consequences for civil
law obligations (reimbursement, damages) form only a minor part of the A-DL, it is
recommended that integration of the A-DL into the Civil Code is not pursued.
B. Consumer protection
XCVII.
Recommendation no. 97
European legal scholars broadly acknowledge the central position of the ‘Consumer
Acquis’ 64 in European contract law. Even though there are exceptions, undoubtedly
the core of EU contract law primarily consists of directives in the area of consumer
law. The question is how to implement consumer law regulation affecting the legal
relationship between parties. In civil law countries that have a tradition of
codification, the question arises, in the first place, whether implementation should
take place within the framework of the Civil Code, or whether the European
consumer legislation should be kept apart, in order to leave the Civil Code free from
64
The concept indicated the accumulated legislation, legal acts, and court decisions which constitute the body
of European Union law in the field of consumer law.
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contamination65. In 2012 Kosovo enacted the Law on Consumer Protection (LCP),
thus introducing some principles of EU consumer contract law into its legal system.
However, the LCP presents several gaps and shortcomings. In addition, EU consumer
contract law is developing rapidly and the LCP does not include all the fundamental
provisions of EU law. Therefore, the first and fundamental question is whether the
provisions of the LCP have to be, entirely or partially, incorporated into the Book on
Obligations of the Civil Code. The drafting ex novo of the Civil Code offers the
opportunity of proceeding to a consolidation and simplification of the existing legal
framework. At the same time, it may serve the purpose of filling in the gaps and
eliminate the shortcomings by transposing the most recent legal developments
occurred in EU contract law into the law of Kosovo. In the light of the above, it is
recommended to introduce a dedicated Sub-Chapter 7 titled ‘Consumer Contracts’
into Chapter 1 (‘Contracts’) of Title II (Sources of Obligations) of the Book on
Obligations of the Civil Code, which may incorporate the relevant provisions of the
EU acquis. We propose to distinguish the provisions of general application
(‘horizontal rules’) from those provisions that are applicable only to specific market
sectors (e.g. banking, insurance, tourism). Only the provisions of general
application should be included into ‘Consumer Contracts’ sub-chapter of the Civil
Code. In this way, it will be possible to consolidate the core of consumer contract
law into the Civil Code. The Table below shows which provisions of the LCP may be
taken into consideration for the purposes of drafting the sub-chapter on consumer
contracts66:
Sections of the new Sub-Chapter
‘Consumer Contracts’
‘Definitions’
‘Consumer rights’
‘Sale of consumer goods and
associated guarantees’
‘Unfair contract terms’
‘Specific contracts’
Existing provisions of the LCP
Articles 1-3
Article 4
Article 5
Chapter II ‘Sale of Products and provision of
services’
Chapter III ‘Notification for the commodity’
Chapter X (Articles 50- 51)
Chapter IV ‘Sale by action, discount, sale at
outdoor markets and sale of defective
65
The latter approach has been taken in France, where all consumer legislation, whether of a domestic or
European origin, has been taken out of the Civil Code and has been placed in a separate Consumer Code, the
Code de la Consommation. Italy adopted a similar solution by passing the Codice del consumo. The situation in
Germany and The Netherlands is quite different: there is a strong tradition in both countries of implementing
the private law part of consumer law in the Civil Code.
66
However, such provisions need to be revised and updated, and new provisions have to be inserted to fill in
the existing gaps. The LCP should be repealed accordingly after the entry into force of the Civil Code.
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Consumer law enforcement
commodities’
Chapter V ‘Public services provided to the
consumer’
Chapter VII ‘Contracts signed outside the
seller’s premises’
Chapter VIII ‘Contract concluded in distance’
Chapter XV ‘Purchase and sale through the
Internet’
Chapter XVI ‘Bearers of consumer
protection’
XCVIII.
Recommendation no. 98
Kosovo law does not transpose Directive 2011/83/EU on consumer rights (“Consumer
Rights Directive”) but its predecessors, i.e. Directive 85/577/EEC on contracts
negotiated away from business premises and Directive 97/7/EC on distance
contracts. The matters covered by such Directives have been addressed in part in the
LCP67 and in part in the Law on the Information Society Services (LISS). The Consumer
Rights Directive has repealed and changed the Directives transposed by Kosovo
lawmakers at the time of drafting the LCP and LISS. It is recommended that Kosovo
law is changed with respect to out-of-business premises contracts and distance
contracts (while the provisions transposing the old directives may be removed from
the LCP and LISS). It is recommended to regulate sales by Internet together with
distance contracts, by introducing a sub-division.68 These provisions have to be
redrafted to comply with the principles of the Directive 2000/31/EC on electronic
commerce.
XCIX.
Recommendation no. 99
There is no law in Kosovo addressing timeshare contracts and other contracts alike as
regulated by Directive 2008/122/EC. Should Kosovo lawmakers decided to regulate
such contract (which is however losing significance in the EU), then the most
appropriate place for introducing it would be the Law on Tourism (LT). It is therefore
67
The LCP addresses issues such as consumer credit contracts; unfair consumer contract conditions; unfair,
misleading, and aggressive commercial practices; comparative and misleading advertising; purchase and sale
through the Internet. However, some consumer contracts have been regulated in other laws: e.g. distance
contracts are regulated both in the LCP (just defined in Articles 36 and 37) and the LISS (substantive rules
foreseen under Articles 29 ff.). Another example is travel packages contracts which are regulated in the Law
No. 04/L176 on Tourism.
68
The ‘hot button issue’: according to the new Article 8(2) of the EU Consumer Rights Directive, businesses
throughout the European Union will not only have to disclose the total cost of the goods, services or digital
content (including taxes) upfront, but also make sure that consumers are aware that they will enter into a
contract with a payment obligation by labelling the confirm order button accordingly.
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recommended that timeshare contracts and other contracts alike are not regulated
in the law of obligations of the Civil Code.
C.
Recommendation no. 100
Directive 1999/44/EC on the sale of consumer goods and associated guarantees
provides buyers in consumer contracts with legal remedies and regulates how and
within which time limits these remedies can be used. This Directive is not
incorporated in the LOR. On the other hand, the LCP contains few provisions relating
to this Directive, such as Art. 5 – Obligations of the Seller. This article, however, falls
short of what a consumer may expect under the Directive69. It is recommended that
Directive 1999/44/EC is transposed in the Civil Code (whereas any provisions
partially implementing it may be removed from the LCP).
CI.
Recommendation no. 101
Directive 98/6/EC on the indication of the prices of products offered to consumers
does not really relate to the law of obligations. It is rather part of public law
regulating traders’ businesses. This Directive seems to have been implemented by
the LCP in Articles 9 and 10. It is recommended that this Directive is not
incorporated into the Civil Code.
CII.
Recommendation no. 102
Directive 93/13/EEC on unfair terms in consumer contracts has been implemented in
Chapter X of the LCP (Articles 50 and 51). We recommend transposing this Directive
in the law of obligations of the Civil Code and removing any related provisions from
the LCP70.
CIII.
Recommendation no. 103
Following the distinction between provisions of general application in consumer
contracts and sector-specific rules, it is recommended to not incorporate Directive
2008/48/EC (Consumer Credit Directive), Directive 2014/17/EU (Mortgage Credit
69
The remedies are not regulated in a clear and understandable way. The central notions of conformity and
non-conformity are not defined. The consumer shall be entitled to have the goods brought into conformity free
of charge by repair or replacement, or to have an appropriate reduction made in the price, or the contract
rescinded with regard to those goods. In addition, time limits for the enforcement of rights and remedies (2
years) and the notification of defects (2 months) are not regulated. As a result, the time limits of the LOR apply:
1 year from notification for the exercise of buyer’s rights and remedies (Art. 483 LOR) and 8 days for the
notification (Articles 464 and 465 LOR). This clearly violates EU consumer standards. A presumption of nonconformity at the time of delivery of the goods if the defect is detected within 6 months of delivery is also
lacking (see Article 5(3) of the Directive).
70
It is to be added that Art. 50 par. 6 and Art. 51 incorporate almost identical provisions, perhaps with different
legal consequences. The indicative and non-exhaustive list of terms which may be regarded as unfair (see the
Annex to the Directive) is reproduced with a slightly different wording under both articles, thus giving rise to an
unnecessary duplication.
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Directive), Directive 2002/65/EC (Distance Marketing Directive), Directive
2007/64/EC (Payment Services Directive), and Directive 2002/92/EC (Insurance
Mediation Directive) in the law of obligations of the Civil Code. The provisions
regarding consumer protection in financial and banking services should be included
in the main law(s) of Kosovo regulating these services71.
CIV.
Recommendation no. 104
The LOR includes rules on travel packages (see Articles 880-905 LOR on the contract
of organised travel). These rules, however, do not provide for the security against the
insolvency of the travel organiser as required by Art. 7 of Directive 90/314/EEC
(Package Travel Directive). Besides, the LT regulates the travel package contract
regardless of almost identical provisions in the LOR. This law is apparently influenced
by the Package Travel Directive72. It is recommended that the package-related
provisions of the LOR are not included in the Civil Code and that travel package
contracts continue to be regulated only by the LT (which may subsequently be
amended and brought in line with the future Package Travel Directive) 73. This
recommendation follows the distinction between provisions of general application in
consumer contracts and sector-specific rules.
C. Information Society (e-Commerce and Digital Signatures)
CV.
Recommendation no. 105
71
This seems to be largely the case already in Kosovo. For instance, the Consumer Credit Directive has been
transposed in the LCP (notably, Chapter IX ‘Consumer financial services’, Articles 38 to 49) as well as in the CBK
Regulation on Effective Interest Rate and Disclosure Requirements of 29 November 2012. The Mortgage Credit
Directive is fully transformed into Kosovo law by another regulation of the CBK, i.e. Regulation on Mortgage
Lending of 26 February 2015, entering in force on 1 October 2015. The LCP has also transposed at large the
requirements of the Distance Marketing Directive, which deals with the selling of financial services on the
Internet. Law No. 04/L-155 on Payment System is in accordance with Directive 2007/64/EC on payment
services. There is a regulation of the CBK for insurance intermediaries which has partially transposed Directive
2002/92/EC (Insurance Mediation Directive). However, as noted in the EU legal assessment report, some of
these legal instruments present shortcomings and may be improved to be brought fully in line with the EU
acquis.
72
Yet, there is nothing again in this law reflecting Art. 7 of the Directive. Art. 20 par. 1 of the Law on Tourist
Services provided that the tourist agency, for each package arrangement, “is required to ensure a bank
guarantee to reimburse the passengers for: 1.1. expenses incurred, in case the touristic agency fails to offer
contracted services; 1.2. damages resulting from the non-fulfilment of the programme in its entirety, in
accordance to the type, quantity, quality and the methods provided for in the programme; …”. However, this
law was repealed in 2013.
73
On 28 May 2015, the EU Council backed the new Package Travel Directive to bring it up to date with the
developments in the travel market in order to meet the needs of consumers and businesses in the digital era.
The text will undergo a legal-linguist revision before the Council can formally approve it. It should be published
in the Official Journal of the EU before end of 2015.
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Directive 2000/31/EC on electronic commerce and Directive 1999/93/EC on
electronic signatures are largely implemented in Kosovo through the LISS. However,
overlapping provisions exist in the LISS and LCP (both address Internet contracts, for
example). In addition, certain provisions are lacking from both laws (for instance, the
rules on pre-contractual information duties). A mixture of public and private law
provisions can also be noted in the LISS (e.g. public law issues of implementing digital
signatures, establishing supervisory bodies, and electronic invoicing, on the one
hand, and private law issues of electronic documentation, distance contracts, formal
requirements and signature requirements on the other hand). It is recommended
that certain key principles on electronic contracts such as Art. 1174 LISS are codified
within the law of obligations of the Civil Code (among the rules on the conclusion of
contracts: Articles 15 ff. LOR).
D. Unfair Trade Practices. Advertising and Information.
CVI.
Recommendation no. 106
Directive 2005/29/EC (Unfair Commercial Practices Directive) is implemented in the
LCP, Chapters XI-XIII. Integration into the law of obligations of the Civil Code is not
required since the provisions of this Directive apply to commercial practices which
take place prior to the negotiation and conclusion of a contract. Besides, unfair trade
practices are already regulated in Kosovo by Law No. 2004/18 On Internal Trade
(16.06.2004), as amended and supplemented by Law No. 04/L-005 (23.06.2011). We
recommend not transposing the Unfair Commercial Practices Directive in the Civil
Code.
CVII.
Recommendation no. 107
Directive 2006/114/EC (Misleading and Comparative Advertising Directive) is
implemented in the LCP, Chapter XIV. Integration into the law of obligations of the
Civil Code is not appropriate because this Directive regulates unfair practices such as
misleading and unlawful comparative advertising which represent a public law rather
than a private law matter as they may distort competition, be detrimental to
competitors and have an adverse effect on consumer choice. It is recommended not
to transpose the Misleading and Comparative Advertising Directive in the Civil
Code.
CVIII.
Recommendation no. 108
Directive 2004/39/EC on markets in financial instruments addresses investment
companies. Only a small part deals with the relationship between the costumer and
74
Art. 11 LISS states that an electronic contract shall not be denied legal effect, validity or enforceability solely
on the grounds that it is wholly or partly in electronic form or has been entered into wholly or partly by way of
electronic communications.
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the investment company. That is a special contract which needs not to be regulated
in the Civil Code. It is recommended that this Directive is not be transposed in the
Civil Code.
E. Product Liability
CIX.
Recommendation no. 109
The LCP does not regulate matters related to product liability. Product liability is
poorly addressed in Art. 160 LOR which does not meet the standards of Directive
85/374/EEC (Product Liability Directive). It is recommended that Art. 160 is
amended in accordance with the provisions of the Product Liability Directive. In
particular, it should be clearly stated that “producers shall be liable for any
damages caused by product defects”. These provisions are of general application
given that their scope is not limited to consumers.
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