Release

From Max-EuP 2012

by Jens Kleinschmidt

1. Object, purpose and terminology

A valid release extinguishes an obligation in part or in full. This makes release a sub-category of renunciations in general, if renunciation is defined as the voluntary giving up of a right (by means of a juridical act). Originating in the parties’ private autonomy, release can be distinguished from concepts such as Verwirkung, estoppel, personal bar or venire contra factum proprium, which are essentially based on the creditor’s conduct, and from prescription, which is based on the mere fact that the creditor has not pursued a claim of his. Compared with both Verwirkung and prescription, a release has the advantage that both parties, creditor and debtor, can benefit from the debtor being able to rely on the extinction of the claim. A release also has to be distinguished from a pactum de non petendo which does not extinguish the claim but merely grants the debtor a (temporary) defence against its enforcement.

Taken as such, a release is a mere disposition over a right and does not say anything about its purpose, which rather requires a separate underlying transaction providing the explanation why the release has been effected. Strictly speaking, it is therefore not the release but the underlying transaction that can be referred to as ‘gratuitous’ or ‘onerous’ (ie ‘for value’). Under German or Spanish law, for instance, the release is also regarded as being ‘abstract’ from the underlying transaction: even if the latter is invalid, the release can in principle be upheld—subject, of course, to possible claims based on unjustified enrichment. Swiss law, by contrast, always ties the two together in their validity. However, these different approaches are of minor relevance since, even where release is generally given an abstract nature, the validity of a release can be made dependent on the underlying transaction in an individual case, eg as one element in a complex settlement. A release typically occurs in the context of a settlement or a compromise agreement to accept part payment in satisfaction of the whole. It is thus also a means to adapt a contract to a change of circumstances. But a release can just as well be the object of a donation. Historically, release and donation have therefore time and again been confused.

Any discussion about release is complicated by the fact that the terminology is not entirely clear. Many legal systems employ one term for the relinquishment of a right in general and another for the relinquishment of a claim (renonciation/remise de dette, Verzicht/Erlass, rinuncia/ remissione del debito, afstand van recht/kwijtschelding, renuncia/condonación de la deuda). Sometimes, differences in substance are linked to this terminological distinction. This can be illustrated with the example of German law where it is argued that Erlass is not a case of Verzicht because it is said to have different requirements. In particular, authors in several legal systems submit that the two are separate concepts since a relinquishment is generally a unilateral act, while the discharge of a debt requires participation of the debtor. This terminological distinction is not convincing because it unnecessarily mixes up terminology with substance. By means of an Erlass a creditor relinquishes his claim. The requirements for this relinquishment should not be determined by the words used to describe the event. Modern doctrine therefore sometimes suggests a fusion of the different terms by referring to Erlass as Forderungsverzicht, ie Verzicht of a claim. Similar difficulties exist in English where the general term ‘renunciation’ connotes a unilateral act in the ears of many and therefore apparently excludes the relinquishment of a claim which is referred to most commonly as ‘release’ or ‘discharge’ (although the latter seems to be a more general concept). The alternative term ‘waiver’ appears to be too enigmatic and may also denote estoppel-like concepts. These terminological uncertainties have provoked vivid discussions among the authors of Art 5.1.9 UNIDROIT Principles of International Commercial Contracts (PICC) who finally opted for ‘release’.

2. Trends of international legal development

Even if it goes without saying that, in principle, a creditor may release his debtor, it is far from clear what is required for a valid release. Is the creditor’s unilateral expression of his intention to release his debtor sufficient to bind him to his release? Or does the debtor have to participate in one way or another if he wants to be sure that the creditor may not change his mind later on and insist on performance? In other words: is the release of a claim a unilateral act (promise, unilateral) or a contract? It should be borne in mind that this question will only gain practical relevance where the debtor’s participation is not needed in any event; for instance, when the release is embedded in a more complex bilateral transaction such as a settlement, or when the debtor promises a counter-performance. However, if the question actually does become relevant, most non-lawyers would expect that the debtor will normally agree to the benefit conferred upon him and therefore does not need to consent. But in fact a comparative study has concluded that the release of an obligation ‘is a transaction with an ambiguous nature, somewhat like a contract and somewhat like a unilateral renunciation of rights’ (Rodolfo Sacco).

In Roman law, release was a bilateral act. Two different instruments were available: a pactum de non petendo, which did not require any form, left the obligation intact and only granted the debtor a defence (exceptio) against enforcement. To extinguish an obligation, one needed an acceptilatio. Characterized by Gaius as an ‘imaginaria solutio’, acceptilatio had developed out of the performance of an obligation created by means of a stipulatio: originally, such an obligation not only came into existence by the formal interplay of question and answer, but also had to be extinguished by question and answer accompanying its fulfilment (solutio). But soon, when performance as such was regarded as sufficient for the termination of the obligation and therefore severed from these formalities, acceptilatio began a life of its own as a convenient means for a creditor to discharge his debtor without actual performance, ie to release him from the obligation. What had remained was the character of acceptilatio as actus contrarius to the creation of an obligation. Incidentally, this proved to be an important argument in legal development later on. Whether a unilateral release was also known to post-classical Roman law is not entirely clear, but is improbable.

Thereafter, stimulated by the enforceability of all pacta, the informal pactum de non petendo rose in importance compared with the more cumbersome acceptilatio. Whether such a pactum extinguished the debt or just temporarily barred its enforcement was up to the parties’ agreement. However, in the era of natural law, if not earlier, lawyers discussed the question whether a release required a contract at all. They put the individual freedom of each legal subject at the centre of attention; not surprisingly, this emphasis on private autonomy inspired reflections on the binding effect of a unilateral promise. Why should a creditor, it was asked, be kept to his claim against his will? Congruence of creation and extinction of a right was no longer considered a valid argument. Practice in 18th-century Germany as well as Germanic law are said to have regarded a unilateral release as sufficient.

Today, the dispute is reflected in the different approaches to be found in national legal systems; it has been and still is a matter of controversy across Europe. The dispute found an immediate expression in the drafting process of the Allgemeines Bürgerliches Gesetzbuch (ABGB) in Austria, where even today it is controversial whether the relevant code provision (§ 1444) actually establishes the requirement of a contract (as the predominant opinion propounds). To the drafters of the ABGB, release and donation were interrelated, so that they added a reference to the rules on donation; a similar mélange had previously been enacted in the Prussian Allgemeines Landrecht. French law also inclines towards a contractual release; the dispute among the natural lawyers had not been able to inspire a provision in the Code civil to settle the issue. To the draftsmen of the German Bürgerliches Gesetzbuch (BGB), release was decidedly of a contractual nature: the debtor needs to accept the creditor’s offer of release. This firm position may be explained as a reaction to the re-awakened interest in the unilateral promise witnessed by the late 19th century. In the view of the draftsmen, release was an actus contrarius mirroring the creation of an obligation—delictual obligations were apparently lost sight of. Another argument they expressly rejected as irrelevant was that the benefit of a release may not be forced upon a debtor against his will (beneficia non obtruduntur). Incidentally, it is precisely this argument that today not only dominates the discussion about the nature of release in Germany but also appears in other countries and in the deliberations on the provision on release in the UNIDROIT PICC. The approach of the BGB is criticized by many authors who advocate the introduction of a unilateral release de lege ferenda. The contract requirement is attacked as being inconsistent with a number of other cases, such as the relinquishment of a defence or of a property right, which is unilateral; in certain, albeit limited situations even obligations can be discharged without the consent of the debtor. The reasons advanced by the BGB’s draftsmen are not regarded as convincing because a principle of actus contrarius does not carry a justification in itself. The protection from an unwanted benefit, the critics of the BGB solution submit, is unnecessary; rather, the real issue that calls for regulation is binding a creditor to his release to prevent him from subsequently changing his mind. The codes in Switzerland and in the Netherlands also establish a contract requirement (Art 115 Swiss Code of Obligations (OR); Art 6:160 Burgerlijk Wetboek (BW)). Likewise, a release is a bilateral transaction under English law since it requires consideration to be binding.

Other legal systems (eg the Nordic countries, Scotland, Spain), on the other hand, regard the unilateral declaration of release by the creditor as sufficient. However, the difference between the two positions is not as great as one might assume. Many legal systems that advocate a contract requirement operate with a fictitious acceptance if the debtor does not react to the declaration by the creditor, who, after all, only confers a benefit upon him. Statutory provisions to this effect exist in Dutch and Swiss law; a similar approach has been developed by the courts in Austria, France and Germany. Thus, silence amounts to acceptance. The debtor need not fear a change of mind of his creditor; at the same time, he has the chance to reject the release. This deviation from the usual rules of offer and acceptance is justified by the merely beneficial character of a release. In Italy the debtor’s right to reject a release has found its way into the Codice civile (Art 1236). But, in contrast to the Dutch or Swiss approach, Italian law does not take a contract requirement as the starting point. It therefore does not supplant acceptance by a fiction. Rather, an invalid acceptance would be innocuous under the Italian model.

A strict standard, by contrast, is applied to the declaration of the creditor. In many legal systems (eg Austria, France, Germany, Switzerland), a rule of interpretation demands that an intention of release has to be unambiguously recognizable and must not be presumed (renuntiatio non praesumitur; this maxim has historical roots). Some countries, however, admit exceptions from this rule: return of a promissory note operates as a presumption of an intention of release (France, Italy, Spain; this rule also has predecessors in Roman law and the ius commune). The draftsmen of the BGB expressly opted against such an exception and left the interpretation in each individual case to the courts. Generally, no form is required for the creditor’s declaration. However, historically, and eg in Spain even today, the absence of a separation between the release as the act of disposition and the underlying transaction becomes apparent when the formal requirements existing for donative contracts are applied to the release of an obligation as well. The majority of legal systems in Europe does not follow this approach; however, some apply to a release the formal requirements established for proving a transaction in court (France, Italy). From a functional perspective, the consideration requirement in English law can also be classified as a formal requirement (indicia of seriousness).

Unanimity exists concerning the effects of a release: the obligation is extinguished. However, difficult problems may ensue if the creditor releases only one of a plurality of debtors (solidary obligations) or if a security has been granted for the debt.

3. Approaches in the European and international model rules

This comparative survey reveals a clear trend. A release is effected by a unilateral declaration by the creditor (which the debtor may possibly reject); it does not require any form, but it needs an underlying (possibly bilateral) transaction to explain its purpose. Despite this trend, the European and international model rules so far do not show a common regulatory structure.

The Principles of European Contract Law (PECL) do not address the issue of release explicitly. Still, they can be described as probably providing the most straightforward approach: there is no reason not to fit the release under the general provision on unilateral promises, which holds a promise to be binding that is intended to be legally binding without acceptance (Art 2:107). Only from the official Comment of the PECL does it become apparent that the addressee of such a promise may reject the benefit conferred upon him.

With this last addition in mind, the approach of the PECL is not so far away from the rule in Art 131(2) of the Code Européen des Contrats (Avant-projet). This provision is expressly modelled on Italian law and thus permits a release by unilateral act, with a right of rejection for the debtor. Moreover, the Avant-projet expressly provides for what—in all jurisdictions—would go without saying: the possibility of a unilateral release does not preclude a release from being effected by contract.

The UNIDROIT Principles of International Commercial Contracts (PICC) seem somewhat more attached to the idea of the debtor’s participation in the release. The solution provided by Art 5.1.9 UNIDROIT PICC is derived from Dutch law: generally, there is the requirement of a contract of release which is intended to protect the debtor from being compelled to accept an unwanted benefit. However, an ‘offer to release a right gratuitously shall be deemed accepted if the debtor does not reject the offer without delay after having become aware of it’. This distinction is based on the idea that the debtor has to participate in a release for value anyway by obliging himself to some kind of counter-performance, while in the case of a gratuitous release the participation of the debtor is not necessary. This idea, however, confuses the release and its underlying transaction by apparently assuming that the two always coincide.

The position of the Draft Common Frame of Reference (DCFR) is far from being unambiguous. Surprisingly, in view of the diverging national laws, it does not contain a special rule on the release of an obligation or the renunciation of a right in general. Therefore, one has to look to the general provisions of the DCFR. According to Arts III.-1:108 ff, the variation of a right or obligation generally requires a contract. A unilateral variation by simple notice is only possible where this is provided for by the terms regulating the right or obligation. Arguably, this may render the variation of an obligation more difficult than its creation because, at the same time, Art II.-1:103(2) has taken over the PECL rule granting binding force to a promise (called a ‘unilateral undertaking’) if it is intended to be legally binding without acceptance. Hence, it might be argued that the reasoning developed in the context of Art 2:107 PECL also applies to the DCFR, so that Art II.-1:103(2) could be read as a provision permitting a release by unilateral act. The text of the DCFR alone does not help decide which standard prevails. The only instance where the word ‘release’ is expressly mentioned is in the context of pluralities of creditors and debtors, where the language of Arts III.-4:109 (‘the creditor releases’) and III.-4:207 (‘release granted to the debtor’) seems to connote a unilateral act. In any event, unlike the PECL, the DCFR contains an explicit rule on the rejection of a unilateral promise according to which the beneficiary of a unilateral release may be granted the right to reject the benefit without undue delay (Art II.-4:303).

4. Uniform law

Both EU legislation and case law presuppose that private autonomy comprises the possibility of extinguishing a claim by a voluntary act. However, the release of an obligation and its requirements have not been specifically regulated. Explicit mention in EU private law can only be found in a few instances where it is provided that a release is not permitted. An example would be the right of an author or performer to obtain an equitable remuneration for the rental of a phonogram or a film. The many instances where derogations from rights granted to a consumer are considered to be non-binding for the consumer are quite different in nature: they do not concern a release, but instead serve to establish the mandatory character of the provisions granting such rights. Finally, it should be noted that EU private law is receptive to the idea of a binding unilateral promise as can be seen in the way guarantees in transactions for the sale of consumer goods or prize notifications are dealt with.

Literature

Rodolfo Sacco, ‘Legal Formants: A Dynamic Approach to Comparative Law (Instalment II of II)’ (1991) 39 Am J Comp L 343, 350 ff (a more detailed version can be found in Rodolfo Sacco, Einführung in die Rechtsvergleichung (2001) 79 ff); Hansjörg Peter, ‘Verzicht auf Rechte und Befugnisse, insbesondere im Obligationenrecht’ (2000) 200 AcP 149; Jens Kleinschmidt, Der Verzicht im Schuldrecht: Vertragsprinzip und einseitiges Rechtsgeschäft im deutschen und US-amerikanischen Recht (2004); Caroline Cauffman, De verbindende eenzijdige belofte (2005) no 1220; Reinhard Zimmermann, ‘Vertrag und Versprechen’ in Festschrift Andreas Heldrich (2005) 467; Jens Kleinschmidt, ‘§ 397. Erlass’ in Mathias Schmoeckel, Joachim Rückert and Reinhard Zimmermann (eds), Historisch-kritischer Kommentar zum BGB, vol II/2 (2007); Jörg Benedict, ‘Das Versprechen als Verpflichtungsgrund? Oder: Gibt es einen einseitigen Verzicht im Schuldrecht?’ (2008) 72 RabelsZ 302; Filippo Ranieri, Europäisches Obligationenrecht (3rd edn, 2009) 1849 ff; Stefan Vogenauer, ‘Article 5.1.9’ in Stefan Vogenauer and Jan Kleinheisterkamp (eds), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC) (2009) 571; Stefan Vogenauer, ‘Verzicht auf eine vertragliche Forderung im Europäischen Vertragsrecht und im Recht der internationalen Handelsverträge’ in Festschrift Klaus J Hopt (2010) 247; Martin Hogg, Promises and Contract Law: Comparative Perspectives (2011) ch 7.

Retrieved from Release – Max-EuP 2012 on 26 June 2022.

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