Supervisors: dr iur dots. Karin Sein ja dr iur dots. Kalev Saare. Opponent: prof. Dr. Martin Schmidt-Kessel Bayreuthi ülikoolist
Price reduction as a remedy is found in many international instruments and legal traditions of various countries. This remedy originating from Roman law has been carried forward to modern Continental legal orders. At the same time, price reduction is less eminent in Common law countries. Thus, it can be concluded that it is a historical remedy recognised and frequently applied in the majority of legal orders while being a relatively unknown institute in others. In addition, price reduction belongs to the system of remedies acknowledged in international or EU legislation and other model regulation. For instance, price reduction is provided for as a remedy in the Directive 1999/44/EC of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees (Consumer Sales Directive), United Nations Convention on Contracts for the International Sale of Goods (CISG), Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (CESL), Principles of European Contract Law (PECL) and as well in the Draft Common Frame of Reference (DCFR). However, there are international instruments which make no mention of such a remedy e.g. UNIDROIT Principles of International Commercial Contracts (PICC).
The nature of price reduction can differ grately under various legal instru- ments, concerning e.g. preconditions, consequences and status in the system of remedies, etc. For instance, some regulations offer price reduction only in cases of breach of some particular types of contracts (e.g. BGB, CISG) while others treat price reduction as a generally available remedy (e.g. Estonia, PECL, DCFR). Moreover, in the Anglo-American system it is believed that there is no need for price reduction as a remedy because a set-off between claim for damages and claim for payment would produce a similar outcome.
In view of the recent developments in the European contract law evident e.g. in the Consumer Sales Directive, CESL, PECL as well as DCFR, price reduction as a remedy and its position in the general system of remedies is considered a topical issue. First a question arises whether providing for price reduction as a remedy is justified and should this be the case, can it be applicable only in cases of breach of some particular types of contracts or does it deserve wider application. Secondly, the issue related to the position of price reduction among other available remedies is no less important.
These issues clearly call for further study also in the Estonian context. With the adoption of the Law of Obligations Act (LOA) in 2002, price reduction has assumed its place in the general system of remedies (§ 101(1) of the LOA). Price reduction was regulated already in the Civil Code of the former Soviet
Socialist Republic of Estonia but only in respect of particular contract types. However, so far in practice price reduction has been resorted to in a relatively limited number of instances of breach of contract. Furthermore, according to the Estonian case law as well as legal literature, it has become apparent that the regulation of price reduction contains some matters subject to a debate and thus warranting more in-depth analysis of the subject.
Due to the above, this dissertation tests three main hypotheses and address the following research issues. The first hypothesis submits that it is justified and necessary to provide for price reduction as a generally available remedy for breaches of any type of contract (i.e. as a general remedy). The aim of the current thesis is to prove that there is no reason to limit the right of recourse to the remedy of price reduction in cases of particular types of contracts only.
The second hypothesis submits that recognizing price reduction as a separate and independent remedy is justified and needed. The objectives of price reduction cannot be achieved by using any other remedies. Thus, by comparison of the preconditions and consequences of price reduction and other applicable remedies, this thesis aims to assert that price reduction differs to a considerable degree from other remedies and as such requires separate regulation.
As the third hypothesis, the author proposes that price reduction constitutes a remedy that is generally not positioned hierarchically in relation to other remedies set forth in § 101(1) of the LOA. This means that in case of the obligor's breach of contract the obligee is entitled to reduce the price provided that all the relevant preconditions laid down in § 112 of the LOA are met. The recourse to other remedies (e.g. claiming performance) before price reduction is not a precondition stipulated under the LOA.
This PhD thesis concentrates mainly on the following research questions:
a) what aim is to be achieved by applying price reduction as a remedy;
b) which method should be used to determine the reduced price so that the aim
of price reduction could be achieved;
c) if and under which circumstances can price reduction be applied to breach of
any type of contract;
d) which criteria distinguish price reduction from other similar remedies (e.g.
damages, termination of a contract, withdrawal from a contract and with-
e) whether a hierarchy between remedies exists in the LOA and if so then
which position is accorded to price reduction within this system.
The above hypotheses underpin the structure of this paper. Chapter I focuses on the purpose and nature of the remedy of price reduction. In Chapter II the author analyses the substantive and formal requirements of the remedy. This is needed first and foremost to establish whether it would be conceivable to provide for the use of price reduction as a general remedy or perhaps it would 158 be more practical to allow it only with regard to breach of particular.