Consequences Of Debtor Default
OVERALL RESULTS
1) PERFORMANCE IN KIND AND DELAY COMPENSATION
The creditor, who still has an interest in the performance of the obligation, shall demand full performance from the debtor and compensation for the damage suffered due to the late performance of the obligation. Unless the defaulting debtor proves that he is not at fault in defaulting, he shall be obliged to compensate the damage suffered by the creditor due to the late performance of the debt. (TCO Art. 118)
2) LIABILITY FOR CONTINGENCIES
The defaulting debtor is liable for the damage arising from the contingency (TCO Art. 119/1). The debtor may be relieved from this liability by proving that he is not at fault for defaulting or that the damage would have occurred even if he had performed the obligation on time (TCO Art.119/2).
RESULTS ON MONEY DEBTS
1) DEFAULT INTEREST:
Even if the creditor has not suffered any loss, it may demand compensation for the loss it has suffered due to the deprivation of money during the default period. Unlike delay compensation, default interest does not require fault. The debtor is obliged to pay default interest whether he is at fault or not.
2) EXCESSIVE DAMAGES (ADDITIONAL DAMAGES):
If the creditor suffers a loss in excess of the default interest, the debtor is obliged to compensate for this loss unless he proves that he has no fault (Art. 122/I of the TCO). If the amount of damage in excess of the default interest can be determined in the pending lawsuit, upon the request of the plaintiff, the judge shall also rule on the amount of this damage when deciding on the merits (Art. 122/II TCO).
CONSEQUENCES FOR CONTRACTS WITH CONTINUOUS PERFORMANCE
In case of default of the debtor in continuous performance contracts, the creditor may demand performance in kind and delay compensation, as well as termination of the contract and compensation for the damages incurred due to the premature termination of the contract (Art. 126 TCO).
SPECIAL CONSEQUENCES OF MUTUAL OBLIGATION CONTRACTS (OPTIONAL RIGHTS)
1) PERFORMANCE IN KIND AND COMPENSATION FOR DELAY:
If the defaulting debtor fails to fulfill his/her obligation within the given time period or if there is a situation that does not require the granting of a time period, the creditor may always demand full performance of the obligation and compensation for the damage incurred due to the delay (Art. 125/I of the TCO).
2) REFUSAL OF PERFORMANCE IN KIND AND COMPENSATION FOR LIQUIDATED DAMAGES:
The creditor may request compensation for the damages arising from the non-performance of the obligation by immediately notifying that he renounces his right to demand full performance and delay compensation. ( TCO Art.125/II)
3) RESCISSION OF THE CONTRACT AND COMPENSATION FOR NEGATIVE DAMAGES:
The creditor may rescind the contract. In the event of rescission of the contract, the parties are mutually released from the obligation to perform and may demand the performance of the obligations they have already performed. In this case, if the debtor cannot prove that he is not at fault for defaulting, the creditor may also request the compensation of the damage suffered due to the nullity of the contract (Art. 125/III of the TCO).
– The creditor must notify the debtor immediately at the end of an appropriate period of time which of the optional rights granted under Article 125 of the TCO the creditor will exercise. Otherwise, it shall be deemed that the creditor requests performance in kind and delay compensation in ordinary business transactions; and in fixed-term and commercial sales, it shall be deemed that the creditor refuses performance in kind and requests compensation for the consequential damages, unless otherwise stated.
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