Date: Final award, 2016

Origin of the parties: Europe

Applicable substantive law: Romanian law

A. Issue No. 1: Legal Nature and Binding Force of the Contractual Addenda

185. The first issue to be decided by the Tribunal concerns the legal nature and binding force of Addenda … which were incorporated in the [Contract]. For the reasons set below the Tribunal finds that Addenda [is] binding upon the Parties.

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200. …

201. An Addendum is, thus, an integral part of the Contract and as such must be observed and honoured by the Parties. Indeed, contracts are an outcome of process of mutual commitment for a certain period of time and conceived mainly as an instrument of cooperation between Parties; they are a device, designed first and foremost, to manage and allocate risk.

202. A contract is an expression of the Parties' free will or choice. It is an exercise of the Parties' freedom and autonomy, and as such it must be honoured in respect of the security of economic transactions.

203. The Tribunal notes that the Romanian Law prohibits inconsistent behaviour of the Parties in particular during the execution of the Contract.

204. According to Stefan Dinu:1

Some authors consider that the parties are also bound by an obligation of contractual consistency, which requires for one party to act within the reasonable expectations of the other, once a certain conduct has been established. Non-compliance with this obligation is described as venire contra factum proprium in civil law jurisdictions or as estoppel in the common law world. In Romanian law a breach of this obligation may amount to an abuse of contractual rights, which usually gives a right to claim damages.

205. The principle of the prohibition of inconsistent behaviour is widely accepted in international arbitration2 and corresponds to what it is acknowledged in civil law systems under the concept of venire contra factum proprium.

206. By virtue of this principle Parties are bound by their own acts; they should act in good faith, and consequently cannot set themselves in contradiction to their previous conduct vis-a-vis the other Party particularly when those acts have enabled a Party legitimately to acquire rights.

207. Moreover, under Romanian Law, a breach of this obligation may amount to an abuse of contractual rights, which usually gives a right to claim damages.3

208. In conclusion, the Tribunal is of the opinion that the Respondent is not in a position to assert legal rights, in particular, in circumstances, as here, where to do so would be acting inconsistently with its own previous conduct.

209. For the reasons stated above, and in view of the principle of the protection of acquired rights, legal certainty and the protection of legitimate expectations, the Tribunal considers that Addenda … of the [Contract] [is] binding upon the Parties.

B. Issue No. 2: Interpretation of [the Addenda] …

210. The second issue to be decided by the Tribunal concerns the interpretation to be given to [the Addenda] which [was] incorporated in the Contract and for the reasons set below the Tribunal finds that by signing [the Addenda] the Parties only intended to increase the Accepted Contract Amount and not the mechanism of Sub-Clause …

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225. …

226. Although there was a fundamental error with the Agreement, the Parties' expectations were, however, founded on that Agreement and the moment the Agreement was settled and signed became Law between the Parties.

227. The Tribunal firstly observes that under Romanian Law:

Contracts shall be construed according to the common intention of the parties which is given priority rather than the literal meaning of the terms (Art. 1156 Code civil). When a common intention cannot be established, reference is made to the understanding, which a reasonable man would have of the disputed term. Ambiguous clauses shall be given the meaning which allows them [to] have some effect and not the contrary (Art. 1157 Code civil); they should be taken in the meaning which best suits the subject matter of the contract (Art. 1158 Code civil). It should be noticed that in case of doubt, an agreement shall be interpreted against the one who has stipulated, and in favour of the one who has contracted the obligation (Art. 1162 Code civil). It is also provided that interpretation has to be in accordance with good faith and fair dealing.

228. Although under Romanian Law the intention of the Parties prevails over the literal meaning of the terms, when such common intention cannot be ascertained, as it is the present case, reference is made to what is reasonable in view of the particular nature of the commercial transaction and the circumstances, notably the economic interests and expectations of the Parties.

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230. The "reasonable man" objective test, which derives from the principles of good faith and fair dealing, is, therefore, employed as a means against abuse of rights, and in court as in Arbitration proceedings the Judge or Arbitrator personifies the "reasonable man".

231. In conclusion, and based on the above considerations, the Arbitral Tribunal is of the opinion that by signing [the Addenda], the Parties intended to change the Accepted Contract Amount only.

1
Dinu, Stephan, Lawyer, MA student, King's College London, Implied terms in English and Romanian law. Available at .

2
Berger, K.P., The Creeping Codification of the Lex Mercatoria, p. 221.

3
Dinu, Stefan. Lawyer, MA student, King's College London, citing Liviu Pop, Ionut-Florin Popa, Stelian loan Vidu, Curs de drept civil: obligațiile (Civil law: the law of obligations) (Universul Juridic 2015) p. 111.