09 February 2012 Written by  Tefera Eshetu and Mulugeta Getu


Compromise in General

The fact that we do not have a consolidated legal document to regulate ADR matters does not mean that we do not have any laws to regulate the matter. Thus, we have got lots of provisions and principles regulating the issues related with ADR. These principles, however, are scattered through out of different substantive as well as procedural enactments. In this sub section we will try to look at those legal provisions which govern compromise without specific reference to any of the types of ADR. In doing so the civil code and civil procedure code provisions will be assessed.


Gilbert’s Law Dictionary defines the term compromise as “An agreement to settle differences by making mutual concessions; it can be made in or out of court.”

Not far different from the above documents our civil code under Article 3307 defines compromise as "A compromise is a contract whereby the parties, through mutual concessions, terminate an existing dispute or prevent a dispute arising in the future".

These different definition shows as that we have common practice and more or less similar attitude towards the concept compromise. Before rushing in to the next sub section it will be important to answer the following questions about the definition of compromise and its relation with other kinds of ADR like conciliation and arbitration.

Nature and effect of Compromise

We have got articles in the civil code and civil procedure code dealing with compromise and in the next part we will see them in detail.  When we see the part of the civil code where compromise and arbitral submission are discussed, it is under Book V - Special Contract. It is not expected for this part of the code to deal compromise as well as other like the kinds of ADR. This part of the book is meant to incorporate only the contract aspect of those concepts though some times it goes beyond its scope. Even from the contract part of these concepts only special and peculiar elements which have not been dealt in the Contract in General part of the civil code. That may be one of the reasons for non exhaustiveness of the law regulation the matter.

Article 3308 seems to speak about "Form of Contract" as the title indicates but it, in fact, speaks about what matters can be dealt by compromise. Thus, it seems it is speaking about the object of compromise. Any ways, parties, based on the subject matter at their hand and their pre existing relation, can conclude a compromise contract to create legal rights and obligations; to modify the existing rights and obligations; and possibly to extinguish or terminate the already existing relation among themselves. As to the renunciation (which means voluntary abandonment of his right) made by one party, it will be interpreted restrictively and so that such renunciation extinguishes the right which has been mentioned in the compromise in his relation with the contracting party. But if he acquires the same right from other person, he will not be bound by the renunciation he did.

The other effect of compromise is that the parties will bind only to the extent they have agreed and also it will not have an effect to other parties alien to the contract, i.e. principle of Privity of Contract (Art. 3311). Further, compromise is more than a contract in a sense that "it will have the force of res judicata with out appeal". But it may be contested on the ground of fundamental mistake if any of the following conditions are fulfilled;

  1. The instrument for the performance of which it is made is void, or one or both of the parties was due to the existence of a document which is shown to be false, and (in both of the above cases) where the parties have no doubt as to the possible voidability or falsification of the documents at the time of contracting (Art 3313), or
  2. The dispute they regulated has been already settled by a judgment having the force of res judicata of which both of the parties are unaware and no appeal has been started against this judgment (3314), or
  3. A document unknown to any of the parties at the time of the contract have subsequently been discovered and if this document were willfully withheld by one of the parties and if the contract is of a general settlement on all matters they have in common (3315).

Article 3316 seems the other version of Arts 1714 - 1716 which determines that the object of a contract should be lawful, moral, possible and defined though the former speaks only about legality and morality.


Compromise before a Court of law

The above are not the only provision regulation compromise but we got some more provisions in the civil procedure code from article 274 onwards though they are far from being exhaustive. We have seen that most subject matters of disputes can be safely settled by compromise up on the parties' willingness. This analysis applies even after a case has been instituted before a court of law on the same subject matter (274). This part of the civil procedure code provision gives the parties the right to terminate all or part of the claim (including accessory matters like cost, damage and execution 276) for which a substantive litigation has been instituted and proceed with compromise.

After a case has been instituted before a court of law compromise can be made in two different ways; one during the hearing before the court of law and the other is out of court. In both ways the content of agreement is advised to be drafted in line with the Art 276(1).

Compromise in a pending case can be initiated by either of the disputant by their on motion or possibly by the court in the attempt of reconciling the disputants. In any of these cases, however, the willingness and consent of the disputants is mandatory and the court, in no way, can force them to do so. If they agreed to reconcile the matter, they can do it at the hearing before the court of law. This agreement will be made in written form and signed by both of the parties. The court after being satisfied that the contract is not contrary to law and public moral will entered the compromise in the case file and make a decision or judgment accordingly. And this will end up the litigation between the parties (277).

The other alternative is the parties can make the compromise out of the court room. Is such come to happen, the court shall be informed of such a matter and the plaintiff may apply to the court for permission to withdraw from the suit (277(3)). The permission granted by the court will enable the plaintiff to institute a fresh suit in respect of the same subject matter of the suit in case if they failed to agree and end up the dispute in compromise (278(2)).

Last modified on Wednesday, 02 May 2012 13:05