Date: Final Award, 2011

Origin of the parties: Europe

Applicable substantive law: Romanian law

The Prohibition against Abuse of Legal and Contractual Rights (interdiction de l'abus de droit)

180. Whenever the record discloses that the Parties did in fact agree on the additional nature of a particular item and/or on the manner in which the additional cost was to be computed or on the amount of the additional cost, then the question arising for determination is whether the Respondent is estopped from going back on such agreement …

Such agreement may well be an ancillary or a collateral agreement that is not yet embodied in a [within] the terms of [the Contract]. Particularly in such case, the question is whether the Respondent's insistence on the terms of the Contract is in accordance with the basic requirements of good faith, or whether the Respondent is estopped by the rules of good faith from going back on a promise which was intended to be binding, be relied upon and acted upon.

181. The need for the protection of the bona fide reliance which a contracting party has placed on an agreement reached with the other, or on representations made by the other, and which is intended to be relied and acted upon reflects a general principle of contract law. Such principle is expressed in civil law jurisdictions by the rules of good faith on the one hand, and the prohibition against abuse of legal and contractual rights (interdiction de l'abus de droit) and in particular against inconsistent conduct to the detriment of the other contracting party (interdiction de se contredire au détriment d'autrui). The rules of good faith and the prohibition against abuse of right are the two sides of the same coin; the rules of good faith are the general principle, the prohibition is a corollary of such general principle. These rules are broadly accepted not only throughout the civil law tradition (both in the French tradition which has greatly influenced the Romanian legal system and the law of contracts in particular, and the German legal tradition), but also in the common law tradition, in which unconscionable conduct by a contracting party may be sanctioned by equitable remedies such as estoppel, in particular promissory estoppel. Articles 1.7 and 1.8 of the UNIDROIT Principles restate these fundamental principles. These principles, it should be stressed, are rooted in the duty imposed by law on the contracting parties to act in a manner which is not unconscionable or contrary to good faith, the two concepts being synonymous. Romanian law is in line with the civil law tradition in this respect: on the one hand, the rules of good faith (bunacredinta) feature prominently in the Romanian Civil Code (in particular in Article 970(1) Civ. C.), and, on the other, it is accepted that a party cannot rely on a contract right in a manner which runs counter to the rules of good faith, in particular because it contradicts the conduct of such party and is therefore inconsistent (the prohibition against abuse of a legal or contract right is regarded by commentators to be set out in Article 1 of Decree No. 31 of 30 January 1954 on natural and legal persons, interpreted a contrario).

182 …

183 …

184. Arbitral Tribunal's Finding. The Respondent will be estopped in principle from relying on the time limits in [the Contract], or on a term of the Contract, a provision of law or a Romanian norm, whenever the Parties reached a collateral agreement on matters relating to [a particular item] which was intended to be binding, to be relied upon and acted upon by the [Respondent] and where insistence by the Respondent on such contract term or provision is unconscionable under the circumstances of the particular [item] found by the Arbitral Tribunal.