- Supreme Court
LOAN CONTRACT - BETWEEN GEORGIAN BANK AND SEVERAL GEORGIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES IN SUPPORT OF APPLICABLE DOMESTIC LAW (GEORGIAN LAW)
JOINT AND SEVERAL OBLIGATIONS - REFERENCE TO ART. 11.1.1 UNIDROIT PRINCIPLES TO INTERPRET ART. 463 OF CIVIL CODE OF GEORGIA
PRINCIPLE OF GOOD FAITH – ACCORDING TO ART. 8 OF THE CIVIL CODE OF GEORGIA PARTIES TO A LEGAL RELATIONSHIP MUST EXERCISE THEIR RIGHTS AND DUTIES IN GOOD FAITH – REFERENCE TO ART. 1.7 OF UNIDROIT PRINCIPLES AND TO ART. 1:201 OF THE PRINCIPLES OF EUROPEAN CONTRACT LAW TO CONFIRM THAT SOLUTION ADOPTED BY APPLICABLE DOMESTIC LAW IN IN CONFORMITY WITH INTERNATIONAL STANDARDS
In the case at hand a dispute arose between a Georgian bank and several Georgian companies with respect to a loan agreement they had entered into.
One of the issues at stake was whether the obligations of the obligors vis-à-vis the bank were joint and several or separate. In deciding that the obligors were not jointly and severally bound, the Supreme Court relied on Article 463 of the Civil Code of Georgia, which sets out the requirements for obligations to be joint and several and which were not met in the case at hand. In support of its decision the Court also referred to Article 11.1.1 of the UNIDROIT Principles which lays down substantially the same requirements.
Another issue at stake was the duty of the parties to act in good faith in performing their obligations under the contract. In recalling that the principle of good faith is expressly stated in Article 8 of the Civil Code of Georgia, the Court stressed its importance in particular in a legal system based on a market economy such as that of Georgia. Indeed, it imposes on all the economic actors, be they individuals or companies, a duty to act with proper responsibility and respect of each other’s rights. Moreover, good faith permits to fill in gaps in both the law and in contracts. In support of its findings the Court recalled that the principle of good faith is recognized in Article 1.7 of the UNIDROIT Principles stating that “Each party must act in accordance with good faith and fair dealing in international trade. The parties may not exclude or limit this duty.”And it is also provided in the Principles of the European Contract Law, in particular in Article 1:201 stating that “Each party must act in accordance with good faith and fair dealing“.