Official Comments
 Article #  

 
1.11
(Definitions)

In these Principles
- "court" includes an arbitral tribunal;
- where a party has more than one place of business the relevant "place of business" is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
– “long-term contract” refers to a contract which is to be performed over a period of time and which normally involves, to a varying degree, complexity of the transaction and an ongoing relationship between the parties;
– “obligor” refers to the party who is to perform an obligation and “obligee” refers to the party who is entitled to performance of that obligation;
– “writing” means any mode of commun-ication that preserves a record of the information contained therein and is capable of being reproduced in tangible form.


 
Official Comment
 1. Courts and arbitral tribunals

The importance of the Principles for the purpose of the settlement of disputes by means of arbitration has already been stressed (see above the Comments on the Preamble). In order however to avoid undue heaviness of language, only the term “court” is used in the text of the Principles, on the understanding that it covers arbitral tribunals as well as courts.

2. Party with more than one place of business

For the purpose of the application of the Principles a party’s place of business is of relevance in a number of contexts such as the place for the delivery of notices (see Article 1.10(3)); a possible extension of the time of acceptance because of a holiday falling on the last day (see Article 1.12); the place of performance (Article 6.1.6) and the determination of the party who should apply for a public permission (Article 6.1.14(a)).
With reference to a party with multiple places of business (normally a central office and various branch offices) this Article lays down the rule that the relevant place of business should be considered to be that which has the closest relationship to the contract and to its performance. Nothing is said with respect to the case where the place of the conclusion of the contract and that of performance differ, but in such a case the latter would seem to be the more relevant one. In the determination of the place of business which has the closest relationship to a given contract and to its performance, regard is to be had to the circumstances known to or contemplated by both parties at any time before or at the conclusion of the contract. Facts known only to one of the parties or of which the parties became aware only after the conclusion of the contract cannot be taken into consideration.

3. Long-term contracts

The Principles, both in the black-letter provisions and the comments, refer to “long-term contracts” as distinguished from ordinary exchange contracts such as sales contracts to be performed at one time. Three elements typically distinguish long-term contracts from ordinary exchange contracts: duration of the contract, an ongoing relationship between the parties, and complexity of the transaction. For the purpose of the Principles, the essential element is the duration of the contract, while the latter two elements are normally present to varying degrees, but are not required. The extent to which, if at all, one or the other of the latter elements must also be present for the application of a provision or the relevance of a comment referring to long-term contracts depends on the rationale for that provision or comment. For instance, Comment 2 on Article 5.1.3 presupposes an ongoing relationship between the parties and a transaction involving performance of a complex nature.
Depending on the context, examples of long-term contracts may include contracts involving commercial agency, distributorship, out-sourcing, franchising, leases (e.g. equipment leases), framework agreements, investment or concession agreements, contracts for professional services, operation and maintenance agreements, supply agreements (e.g. raw materials), construction/civil works contracts, industrial cooperation, contractual joint-ventures, etc.
Provisions and comments of the Principles that explicitly refer to long-term contracts are the Preamble, Comment 2; Article 1.11 and Comment 3; Article 2.1.14, Comments 1, 3, and 4; Article 2.1.15, Comment 3; Article 4.3, Comments 3 and 4; Article 4.8, Comments 1, 2 and 3; Article 5.1.3, Comment 2; Article 5.1.4, Comment 3; Article 5.1.8 and Comment 2; Article 6.2.2, Comment 5; Article 7.1.7, Comment 5; Article 7.3.5, Comment 4; Article 7.3.6, Comment 1; Article 7.3.7 and Comment 1.
Several other provisions and comments are also particularly relevant in the context of long-term contracts. See Articles 1.7; 1.8; 2.1.1, Comment 2; 2.1.2, Comments 1 and 2; 2.1.6; 2.1.13 to 2.1.18; 3.3.1; 3.3.2; 5.1.2; 5.1.7, Comment 3; 5.1.8; 5.3.1, Comment 5; 5.3.4; 6.1.1; 6.1.4; 6.1.5; 6.1.11; 6.1.14 to 6.1.17; 6.2.1 to 6.2.3; 7.1.3 to 7.1.7; 7.3.5.

4. “Obligor” – “obligee”

Where necessary, to better identify the party performing and the party receiving performance of obligations the terms “obligor” and “obligee” are used, irrespective of whether the obligation is non-monetary or monetary.

5. “Writing”

In some cases the Principles refer to a “writing” or a “contract in writing” (see Articles 2.1.12, 2.1.17 and 2.1.18). The Principles define this formal requirement in functional terms. Thus, a writing includes not only a telegram and a telex, but also any other mode of communication, including electronic communications, that preserves a record and can be reproduced in tangible form. This formal requirement should be compared with the more flexible form of a “notice” (see Article 1.10(1)).