| ||In bilateral contracts, where each of the parties has an obligation towards the other, the basic but complex question arises of which party is to perform first. If the parties have not made any specific arrangements, then in practice much will depend on usages and it must also be recalled that there are often several obligations on each side which may have to be performed at different times.
This Article states two broad principles, while recognising that in both cases the circumstances may indicate otherwise. In effect, the main purpose of this Article is to draw the parties’ attention to the problem of order of performance, and to encourage them, where necessary, to draft appropriate contractual provisions.
A distinction is drawn between cases where the parties’ performances can be rendered simultaneously and those where the performance of only one party requires a period of time.
1. Simultaneous performance to be made when possible
In the first situation, the rule is that the parties are bound to perform simultaneously (paragraph (1)). A seller is entitled to payment on delivery but circumstances may indicate otherwise, for example any exception originating from the terms of the contract or from usages which may allow a party to perform some time after the other.
1. A and B agree to barter a certain quantity of oil against a certain quantity of cotton. Unless circumstances indicate otherwise, the commodities should be exchanged simultaneously.
2. Exception where performance requires a period of time
If the performance of only one party’s obligation by its very nature requires a period of time, for example in construction and most service contracts, the rule established in paragraph (2) is that that party is bound to render its performance first. Circumstances may frequently however indicate the contrary. Thus, insurance premiums are normally paid in advance, as also are rent and freight charges. In construction contracts, payments are usually made in agreed instalments throughout the duration of the work.
2. A promises to write a legal opinion to assist B in an arbitration. If no arrangement is made as to when A should be paid for the services, A must prepare the opinion before asking to be paid.
3. Relation of order of performance to withholding of performance
This Article sets out the rules which will condition the application of Article 7.1.3 concerning the withholding of performance.