Online Legal Resources

A to Z is a collection of resources for Ethiopian's legal profession, students, academics and the public. These links have been collected so that users with an interest in the law and Ethiopia may be able to access the Ethiopian legal information they require more quickly. The site is organized simply into an alphabetical list of law subjects. This link is a very helpful source for students who want to study online as teaching materials written by different university teachers under the sponsorship of Justice and Legal System Research Institute are included in the list. Moreover, Training materials prepared by different Proffessionals under the sponsorship of Federal Justice Organs Professionals Training Centerare also in our list. 

 

One of the crucial issues that the draftsperson had to resolve before he set out to work on the project was as to whether the Commercial Code should be subjective or objective. A subjective Commercial Code is one which regulates a community of persons designated as “traders”. It considers above all the traders, but in order for the legislature to decide which persons have the status of a trader she must take into consideration the profession or activities which she deems to have a commercial character. Whereas, an objective commercial code regulates acts known as “acts of commerce”, as opposed to persons. The scope of application of such commercial code is determined entirely by the enumeration of these acts.

 

Business organizations had gone through various stages throughout the centuries before they came to acquire characteristics which have made up distinct organizational forms prevalent in Ethiopia today. They grew from a single individual to a group of individuals organized, first in some sort of partnerships, then in a more refined type of partnership and finally to a corporate form.

 

The era of Emperor Menelik II witnessed the first business organization- the Franco- Ethiopian Railway Company. And the company came about by virtue of an imperial  concession granted to Alfred Ilg in 1894 with a view to constructing a railway from Djibouti to Ethiopia via Harar to Entoto and then to the White Nile. Since it was incorporated in France in pursuance of French company law, coupled with the fact that its head office was in Paris, it remained a French company for all practical purposes, nonetheless. In exchange for the concession, several shares had been assigned to the Emperor. The concession was for 99 years and, upon expiry, ownership of the company was to be conveyed to the Imperial Ethiopian Government.

 

The second company to appear was the Bank of Abyssinia which was formed in 1905 as a branch of the National Bank of Egypt. This company came into being, like the Franco-Ethiopian Railway Company, by virtue of a concession granted by the Emperor. Its total subscribed capital was $500,000 of which $100,000 was to be paid after the company commences business. With respect to share in the profits, the Imperial Ethiopian Government was entitled to 20% while the other shareholders were entitled 70%. The legal existence of the company was fixed at 50 years from the date of its formation, without any stipulation as to the company’s fate upon its expiry. Nevertheless, in 1931, the government of Ethiopia bought the company and renamed it as “Bank of Ethiopia”.

 

The next company that was formed in Ethiopia was the Agricultural and Commercial Development Company of Ethiopia. Unlike its predecessors, the company was incorporated in Ethiopia, and thus, it was the first Ethiopian company, though its incorporation had not been made in compliance with no existing law other than an imperial decree issued to that effect.

 

The formation of the afore mentioned companied and the general trend would seem to have prompted promulgation of the following commercial laws: the Law of Loans of 1924, the Decree of Concessions of 1928, the Law of Bankruptcy of 1931, and the Company Law of 1933.

 

The Company Law of 1933 provides for various forms of business organizations, namely, share companies, joint stock companies, private limited companies, ordinary partnerships, and limited partnerships. It also contains several provisions pertaining to the formation, operation, and dissolution of companies.

 

In 1960, a more comprehensive commercial code was enacted. With respect to the drafting history of this code a few words were in order. Having accepted an invitation from the Imperial Ethiopian Government to draft a Commercial Code and a Maritime Code for Ethiopia, Professor Jean Escarra made several trips to Ethiopia in 1954, during which time he consulted with the Codification Commission and submitted to it the bulk of the texts later promulgated as Books II, IV, and V of the Commercial Code together with their exposes des motifs. Unfortunately, the work on the Commercial Code was interrupted due to the death of Professor Escarra in 1955.  Then, the Imperial Ethiopian Government sent an invitation to Professor Alfred Jauffret to complete the unfinished draft Code by preparing the texts of Books I and III as well as to revise Prof. Escarra’s work. Prof. Jauffret submitted his draft texts along with a Final Report on March 1, 1958. The Amharic version of these texts was then submitted to the parliament, which in early 1960 approved the draft with several amendments. The final draft text of the Commercial Code was promulgated on May 5, 1960 and the Code came into force on September 11, 1960.

Arbitration in general

Arbitration is one of the alternative dispute resolution mechanisms that we have. When we say it is part of the Alternative Dispute Resolution (ADR) mechanism, we do not forget the controversy behind arbitration and the categorization of the same as Alternative Dispute Resolution mechanism. Some, taking arbitration by its outcome, resist accepting that it is really an alternative since it does not give the chance to the parties as to its execution.  In this sense, we are saying that arbitration is one of the Alternative Dispute Resolution mechanisms by taking the fact that it is optional for the parties whether to take their case to a judge appointed by the state or judge appointed by them. Arbitration is reference of a dispute to an impartial person or persons, called arbitrators, for a decision or award based on evidence and arguments presented by the disputants. The parties involved usually agree to resort to arbitration in lieu of court proceedings to resolve an existing dispute or any grievance that may arise between them. Arbitration may sometimes be compelled by law, particularly in connection with labor disputes involving public employees or employees of private companies invested with a public interest, such as utilities or railroads. Amicable settlement is a desirable solution for business disputes and differences.  It can occur before or during the litigation or arbitration of a dispute and can often be facilitated through the aid of third party (the neutral) acting in accordance with these rules.

In the first place, arbitration is a contract by which parties decide to resolve their disputes by a person duly appointed by them. Despite litigation, arbitration has different advantages. Arbitration is more flexible and adaptable as well as quicker as and more efficient than litigation.

Economically, ADR mechanisms including arbitration significantly reduce case congestion in courts. Out of court resolution of disputes reduces burdens both of courts as well as judges’. Hence arbitration saves the state’s resources as well as the judge’s time.

The economic and social implication of arbitration makes it more preferable than litigation. Especially in Ethiopia, the experience is native so it needs no further domestication. The society’s way of life i.e. its communal nature makes ADR mechanisms preferable than litigation. In communal societies where the face-saving practice has a wide speared acceptance, litigation has undesired consequences. Here the group is more important and indeed fundamental than the individual. The group is the refuge of the individual and it is protected at any cost. Conciliation plays a very important part in African law since the community life and group isolation give rise to a need for solidarity. As a result Africans always seek unanimity through dialogue, since only conciliation can put an end to disputes.

A society with a face –saving value wants to solve disputes in a win-win condition. The win-lose arrangement has negative implication on the status quo ante of such a society. From this point of view, ADR should be harnessed. . The recourse to legal actors and proceedings is costly emotionally debilitating, and potentially counterproductive .It is to meant that now it is a common knowledge that existing justice system is not able to cope up with the ever increasing burden of civil and criminal litigation . The problem is not of a load alone. The deficiency lies in the adversarial nature of judicial process which is time consuming and more often procedure oriented.  There is growing awareness that in the bulk of cases court action is not appropriate recourse for seeking justice. Alternative Dispute Resolution mechanism  is a process where disputes are settled with the assistance of a neutral third party generally of parties own choice: where the neutral is generally familiar with the nature of the dispute and the context in which such a dispute normally arise; where the proceedings are informal, devoid of procedural technicalities and are conducted, by and large, in the manner agreed by the parties; where the dispute is resolved expeditiously  and with less expenses: where a decision making process aims at substantial justice, keeping in view the interests involved and the contextual realities. In substance the ADR process aims at rendering justice in the form and content which not only resolves the dispute but tends to resolve the conflict in relationship of the parties which has given rise to that dispute.

Arbitrability: What is it?

Fortunately or unfortunately all matters submitted to arbitration may not be arbitrated. There is a further distinction between matters that cannot be arbitrated. This will lead us to one other discussion in arbitration called the arbitrability of matters.

Matters amenable to arbitration are called arbitrable matters and those not amenable as non-arbitrable matters. What do you think is the importance of such distinction?

The concept of arbitrability is in effect a public policy limitation upon the scope of arbitration as a method of setting disputes. Each country may decide, in accordance with its own public policy considerations, which matters may be settled by arbitration and which may not.  Often the arbitration clause is ineffective since it will be unenforceable. Moreover, recognition and enforcement of an award may be refused if the subject matter of the difference is not arbitrable under the law of the country where enforcement is sought.

Arbitration purely is a policy consideration. It is however also a private consideration. The law may clearly prohibit arbitration of a matter. The contract of arbitration might even do the same. Even when the contract authorizes arbitration, if the law prohibits arbitration, the same may not take effect.

What is the position of Ethiopian law from this angle?

No matter how careful you might be in drafting contracts you cannot totally avoid disputes especially in complex contractual undertakings. In such cases, the questions, whether or not we may submit the dispute to an arbitral tribunal? Can we allot a place in the contract to regulate its arbitration?  Are there special conditions which necessitate extra- judicial adjudication of administrative contracts? are of paramount importance.

The next discussion will therefore be devoted to consider the above questions.

In Ethiopia there are legal documents appropriate to consider the legality of the arbitration of administrative contracts. One is the Civil Code and the other is the Civil Procedure Code. Finally we have Proclamation No. 430/2005.

According to the civil procedure code, administrative contracts are not amenable to arbitration. Article 315(2) reads: “No arbitration may take place in relation to administrative contracts as defined in article 3132 of the civil code or in other case where it is prohibited by law in the civil procedure code”. But nothing to that effect or even similar to that is stated in anyone of Articles 3325-3346 of the civil code dealing with arbitration in general.

Article 315(4) of the civil procedure code further says “nothing in this chapter shall affect the provisions of Articles 3325 – 3346 of the civil code”.

Confusingly, those provisions embodied in Articles 3325 -3346 do not mention anything about the arbitrability of administrative contracts. To be clear Articles 3325 – 3346 are silent on the issue. If so, what is the implication of the reference made to them by the civil procedure code? Does it mean that administrative contracts are not subject to arbitration because nothing allowing their arbitration is said in the civil code provisions? Or does it mean that the silence in the law is acceptance of their arbitrability?

Please consider this excerpt from THE FORMATION, CONTENT AND EFFECT OF AN ARBITRAL SUBMISSION UNDER ETHIOIAN LAW (Bezzawork Shimelash, Journal of Ethiopian Law, Vol. XVII, 1994)

Effects of Non-Performance

The general effects of non-performance are dealt with when we discussed generally “non performance of administrative contracts”. Non-performance of contract of public works occurs when parties default in different ways. The section dealing with non-performance in our civil code magnifies the contractor as the only defaulting party. But because of the nature of the obligation that the contractor assumes, a special section for non-performance is important. Because the special section dealing with administrative contracts does not regulate the default on the part of authorities, it does not mean that the law does not regulate them generally. The presumption is the obligations assumed on their part is not that special which will not require special regulation other than the one we have under the general part. So it is reasonable to avoid any confusion that the code invites you in. Non-performance ensues when the contractor fails to undertake the obligations that he assumed under the contract. Basically, the obligation of the contractor is to construct, maintain or repair a public work. If he/she fails to do one of the things he undertook to do under the contract, we say there is non-performance. Non-performance has two special consequences. In the first place it results in the state control of the project. On the other hand, it may result in re-allocation of the work to another contractor. Let us briefly see these two effects.

  1. State Control-This is a process where works began by a contractor are placed under the domain of the state. It is possible to infer this from Art 3288 (1) which says partly “… declaration of state control may be made where the contractor fails to perform his obligation.”

A state control is on the other hand a decision, next to being a process. So it is a declaration to the effect that contract of public works shall become under state control. Mostly order of state control presupposes failure to carry out obligations as a result of lack of resource. Inadequate resource to carry out the works within a given time is a ground for authorities to assume the full responsibility of carrying out the work.

What comes under state control is the project. The ground of making the declaration on the other hand is the non-performance evidenced by the contractor.

Declaration of state control must be made after putting the contractor in default. After ten day’s of summoning the contractor to perform his obligations, administrative authorities may make the declaration.

The effects of state control are two fold. From the start, the declaration will temporarily deprive the contractor of contract. What does this mean? The effect of depriving one’s contract may even be prohibition of exercising one’s rights in a contract. Is this fair?

On the other hand, the declaration will force the contractor to bear the expenses of control. What possible expenses can you guess? Such expenses may include costs of administering the remaining work, cost of preservation or any other related cost.

State control is not permanent. Especially Art.3289 (1) which explains on the effects of state control tries to tell us that the declaration is temporary. This nature however is conditional on one thing:

“[Showing] that he has the necessary means to resume the works and    to carry them out to completion.” (Art 3290).

Under such a condition, the contractor may be allowed to resume the work. Such a decision by the administrative authority is called an order of cessation.

  1. The Allocation -The other effect of non-performance is re-allocation. As the name itself implies, reallocation is giving the work away to other person than the contractor. As to Art 3291, reallocation presupposes different conditions. One such prerequisite is the foreseeability of the matter. This is to mean that the contract should expressly foresee the possibility of reallocating the contract .Foreseeability may involve the situation in which the authorities are in. For example, the conditions may convince the authorities that they should not put the contract under state control. This again may be based on a cost-benefit analysis that a rational authority will make.  Secondly, reallocation presupposes cancellation. It is only contract that is cancelled that can be reallocated (Art. 3291 (1)).

Another condition which is worth considering is the “new contractor” requirement. The purpose of reallocation is to allow new contractors to take the work and act accordingly. Reallocation should not be in favor of the old contractor. The possibility of participation in the reallocation is barred by Art 3291 (1).

Reallocation may be made in two ways. Auction may be one option. Agreement on the other hand is also possible to effect reallocation.  Such a procedure has a different consequence than that of state control. Reallocation affects the arrangement in a permanent way, while state control has a temporary effect. In terms of effect, reallocation imposes a burden of bearing consequences, while state control involves costs and risks (Art 3291(2). We have two consequences (burdens. One is the burden of bearing the consequences of the transaction. But which transaction is the provision referring to? As you might observe from Art. 3291 (1), administrative authorities will enter into a transaction when they decide to reallocate the contract. They are forced to reallocate either by auction or private arrangement. Such transactions have consequences as well as costs. The code prefers consequences rather than costs here. Do not forget that consequences are wider than costs Can you show this? Among others, consequences may mean those side effects that the new contract will bring about.

Delay of Construction and Its Effect

Construction contracts stand on three pillars namely quality, price and time. Unless the contract proceeds compromising the disparities among these pillars, it will be terminated somewhere in point of time.  FIDIC contract has devised its own way to compromise the possible disparities. As such a mechanism of evaluating the problems that may ensue and proposing a plan that enables increase or decrease in time and price are some of the solutions that FIDIC has come up with. Concerning time, if the time fixed to conclude the project lapses, the contractor shall pay a liquated damage to the owner of the work.

Unilateral Modification: The Contractor

The right to unilaterally modify the contract is not a privilege operative in favor of the contractor. In the strict sense our civil code does not provide such a right i.e. a right to unilaterally modify a contract to the contractor. Even under normal course of things, a contract can be varied only by a court of law (Art 1763). What we have under Art 3268 is not unilateral modification of the contract. Rather the contractual right extends only to requiring the revision of the contract. Even this right of requiring revision is conditional upon other issues mentioned under Art. 3286(1). Hence, the contractor should encounter material difficulties of an absolutely abnormal nature, unforeseeable at the time of the contract.

What makes the modification unilateral probably is the fact that the administrative authorities are placed in a situation they cannot question the validity of the request. If the conditions mentioned under 3286(1) are fulfilled, Art.3286 (2) obliges administrative authorities to bear part of the exceptional expenses. However, administrative authorities have one choice -preferring to cancel the contract.

If the difficulty is not that much material or of an abnormal nature i.e. if it simply compels the contractor to perform a supplementary work not mentioned in the contract, in this case he may initiate the work after having obtained a requisition order. However, if the supplementary work is very necessary in the absolute sense, and of an urgent nature, the contractor should initiate the work without a requisition order. In this case, administrative authorities will not have the chance of canceling the contract. They would rather simply compensate the contactor.

Example

The Ministry of Defense has entered in to a contract with a domestic construction company to construct a military complex which incidentally involves the residents of over twelve hundred military officers. After the completion of the significant portion of the complex, the contractor came across a silly still critical omission in the building- the complex has no stairs. Because the contract was a build- only contract, the design was made by another contractor to whom the contractor at hand has no legal relation. And it was in the design that the stairs were missing. Now the contractor wants to know your position as to the possibility of constructing the stairs as of self help. What will be your position?

Unilateral Modification: The administrative Authorities

This right of administrative authorities makes them special parties to a contractual arrangement. This is a prerogative in two senses.

  1. “During the currency of the contract… the administrative authorities may impose unilaterally upon the contractor changes in the original conditions of the contract” (Art 3283 (1). They may even order the contractor to perform works not even mentioned in the contract. There however reservations held by the law with this respect. Accordingly:

1.1.      the changes under Art.3283(1) may affect only the provisions which affect the arrangement of the public works,

1.2.      those changes under Art.3283(1) may not affect the financial position of the contractor,

1.3.      new works under Art.3284 involve payment of compensation and they are conditioned on the same

1.4.      new works may not imply imposing tasks which completely differ in terms of object from the work mentioned in the contract,

1.5.      new works may not dictate new ways of performing them,

1.6.      Unilateral revisions may entitle the contractor to cancel the contract “where the increase or reduction of the work required by the administrative authorities involves a variation of more than one-sixth of the cost mentioned in the contract.”

  1. The imposition by the administrative authorities is irrevocable even by an otherwise stipulation in a contract. The contracting parties may not agree to the effect that the administrative authority cannot unilaterally modify the contract.

Revision by a Court

Courts may vary a contract based on different considerations. For equity considerations variations may be made. On the other hand, courts are entitled to vary administrative contacts. This is an exception to the rule under Art 1764(1). Thus, a contract cannot be varied simply because it has become more onerous. The law holds “A contract shall remain in force notwithstanding that the conditions of its performance have changed and the obligations assumed by a party have become more onerous than he foresaw.” Furthermore, the law is explicit with regard to the limitations that we have against courts with relation to contracts. As such courts shall not make contracts for parties under the guise of variation. The effect of economic changes must be regulated by the parties and not by courts. However, under Art.1767 (1) an administrative contract may be varied even when it is made more onerous than before. But, the court may vary the contract only when the contract was made onerous because of an official decision. This “official decision” should not be any type of official decision. For sure, an official decision is a measure taken by a grant of compensation. Does this mean that the official decision may not entitle the court to vary the contract? See Article 1767 (2) with Art 3193 (1) and Art 1767 (1) with Art.3193 (1). It is wise to consider the reference Art. 1767(2) makes to Articles 3191-3193. These three articles further elaborate on the exception under Art.1767. Read the articles and discuss whether they return us back to the rule under Art.1764?

Administrative contracts highly involve the public interest. Quality of the service that we have to provide to the public really matters. The inverse relation often times, between quality and price makes attaining quality a difficult task. The basic consideration of our law is quality. That is why under Art. 3246 competition will be waged among skilled persons or among specialized undertakings. Skill and specialization are therefore the ground rules to pick-up possible contractors.

Still, Art 3246 is cognizant enough of the role of competition. In normally operating economy, competition leads to efficiency. It is even possible to reverse the relationship between quality and price. This is so because Art 3246 authorized administrative authorities to “put up for competition the working out of a project of a work…”

The relevance of projects is many folds. On the part of administrative authorities, it helps them to assess the cost that a specific project will consume and the quality of the work resulting from the project.

The possible competitors will be screened out and the authorities will “freely choose the persons whom they admit to take part in the competition.” (3247/3/).

These are only procedures, because simple admission of persons to participate in competition in no way is indicative of the conclusion of the contract. It is one step ahead in the contract. After the preparation of the list, the authorities will announce the winner and allot the contract to such a winner. Reasons of selection need not be explicit. The authorities should allot the contract to the competitor they think fit.

The” fitness” standard we have is a default standard: applicable only in the absence of express undertaking to choose the competitor who is ranged first. Selecting the person who is ranged first corresponds to the fitness standard because this competitor stood first based on some standards of fitness. The proviso “to whom they think fit” must by itself have a standard. The administrative authorities must have an express standard to adjudge a competitor as fit and unfit. By doing so, the authorities will comply with one of the constitutional principle called transparency. This is a logical continuation of Art 3248 under which administrative authorities are obliged to be strictly bound to respect the rules of the competition made by them.

Try to justify how Art 3249, second sentence, is a logical continuation of Art 3248?

The contract will be concluded only after application of Art. 3249.

Contract Procurement Alternatives

The process of selecting the contractor and entering into an arrangement with the same is tantamount to procurement of work thereby necessitating as the case may be procurement by open bidding, restricted tendering or direct procurement.

4.2 Performance of the Contract

The normal performance of contract of public works involves three elements on the part of both parties. Generally, direction of work, payment of price and acceptance of work are the elements. Some correspond to administrative authorities and others to the contractor. Let us begin with the first.

4.3.1 Rights of Administrative Authorities

In aggregate the basic rights take two shapes. One is the right to direct the work. The other is the right to supervise the contractor. Art. 3250 (1) establishes this right of supervision as “The administrative authorities may supervise the performance of the works”.

As to the direction right, Art 3250 (2) says” they may also prescribe to the contractor the manner of performance of his work”.

4.3.1.1 Right to Supervise

This right involves two things on the part of the contractor and also the administrative authorities. Administrative authorities may directly supervise the works of the contractor. To this end, they may enter the yards at any time and require the contractor the information necessary for their control. (3251 (1)) Authorities may also make regulations that ensure good order and security in the yards.

The consequent obligations on the contractor are observing the regulations made and furnishing the necessary information to administrative authorities. (3251/2/).

These arrangements are mandatory to the extent that no one party to the contract may agree to the contrary.

The supervisory role of administrative authorities is not limited to supervise only works and yards but also the personnel of the undertaking. In addition to this, materials may also be supervised. With relation to personnel, the authorities may require that employees be changed or dismissed. The quality of materials shall also be controlled by administrative authorities.

4.3.1.2 Right to Direct

This right to direct involves regulating the development of the works and prescribing to the contractor the manner of performance of such works. This involves the how of the work.

To this end, administrative authorities may give plans and models. Not only this, administrative authorities have the right to arrange the rhythm of works. This is to mean that the authorities may fix the period of time for the performance of the work. A general period may be fixed to this end. Or special periods for each work might still be fixed.

Fixing a general period by administrative authorities entails another responsibility of “specifying the time at which the works shall begin.”

But arranging the rhythm of the work is not only about fixing general and special periods. It is also about “regulating the order, sequence and the rhythm of the works within the general period laid down in the contract”.

On default of fixed periods indicating the starting point, the law provides us with one:

A/ periods shall run from the date of notification of the contract.

(See Art. 3254(1) cum 3249).

B/ periods shall run from the materialization of a condition.

4.3.1.3 Right to Demolish (3256)

Administrative authorities have this right of ordering the demolition and the reconstruction of any defective work at the expense of the contractor. This is usually the case in contracts of measurement or re-measurement where the contractor agrees only to build while the administrative authorities undertake to provide the design and model of the work. Otherwise, the situation is rare. We can raise questions concerning the validity of a demolition order. Can the authorities order the demolition of a work without any condition? Who should decide whether a work is defective or not? What type of defect justifies demolition? Does the magnitude have any contribution to the decision the authorities make?

4.3.2 Rights & Duties of the Contractor

It will not be a hard remark to say contractors have very limited right with relation to administrative authorities. Even the way in which the article is devised to confer rights on contractors is negative. It magnifies than ever the administrative prerogatives of administrative authorities.

As such, contractors are prohibited from demanding compensation from administrative authorities save for the fault that the latter might commit. (3259(2)).

What rights do contractors have? Art 3259 gives them the right to demand compensation, but only after observing certain legal considerations.

Under normal course of things compensation cannot be demanded as of right (see Art.3259 (1)) Compensation however is due when:

A/ damage is caused due to the fault of administrative authorities by either making abusive requirements or by postponing the performance of the contract (3259(2)). Abusive requirements show the malicious intent of administrative authorities. Postponing the performance of the contract makes things more burdensome on the contractor.

Contractors in need of compensation must establish many things.

I. The existence of damage: to get compensation, proving injury to a legitimate interest is a requirement.

II. The existence of fault: the contractor must prove the existence of fault on the part of the authorities. The usual types of faults are those related with abuse of power.

III. Violation of the contract: the terms of the contract must be violated to get compensation from the authorities.

B/ damage is caused, regardless of fault, by the aggravation of the normal conditions of performance of the contract. (3259(3)) The first rule is partly based on the principle that no one should benefit from his/her fault. This one is based on the idea that persons should make good what they have made bad. When the administrative authorities make the performance of the contract more burdensome, they are those which should make the ways of performing the contract suitable to the contractor.

. When parties enter in to a contract, they foresee expenses and costs. Parties make a risk assessment plan and agree or disagree to enter in to a venture. When a party is forced to bear what he/she has not foreseen before, this will completely ruin the plan of such a party. It will also make parties skeptical of the system there by to withdraw from engaging in similar activities in the future. It is because of this and other reasons the law protects from unreasonable shift in the balance of the contract as sponsored the authorities.

4.3.3 Payment: Modalities and Time

Payment is performance or only part of it. While generally it is indicative of the conclusive performance of the contract sometimes, at times like this, payment is only the performance. When we started discussing about contract of public works, we defined the same under Art.3244 making reference to “price”. Contract of public works is a contract in “consideration of a price.” Specifically the contractor binds himself in favor of administrative authorities so that the latter will pay him a price.

Thus, under our current discussion, we will try to see how this issue is regulated. 

4.3.3.1
Modalities

Different types of payment are recognized. We have contract with a fixed price under which contractors will get their payment in a lump sum. (3261) On the other hand, we have contract with series of prices. Here without determining the extent of the work, price is fixed based on the different types of work that the contract envisages. We have different prices for different works. (3262).

It is also possible to determine the extent of the final work and determine the services of prices applicable to each kind of work. The type of contracts determines the form of payment that a system follows. In the case of measurement contract for example, lump sum payment is unthinkable. The construction cost of the project is disbursed on the basis of each work accomplished. The basis of payment is unit rate as determined by the contract. The price will be multiplied by the quantity of the work. The total amount of the work during the allocation of the contract may increase or decrease during the actual accomplishment of the work. The price of the work is payable periodically usually on a monthly basis. Payment is made after the measurement made by the architect or the concerned expert. The payment is registered on a document called certificate of payment. Arithmetic errors, if any, may be corrected in the next payment. That is why measurement contract is also called re-measurement contract. The total cost of the project can be known only after the completion of the work.  What we have to know however is the truism that Ethiopian law acknowledges both forms of payment. Between the extremes, parties have the freedom to adhere to anyone form. It is however advisable parties agree to one of the forms of payment depending on the exigencies of the project and other rational considerations which relate to the advantages and disadvantages of each form of payment.

Do you see the difference between Art 3262 and Art 3263? Can you appreciate the relevance of each? Which one is more important? On what basis?

Parties are given the mandate to fix by their contracts the manner in which payment of price is to be undertaken. That is what we can gather from the provisions that we previously considered and others which generally relate to the manner of effecting payment.

The freedom of parties on the modality of effecting payment is not without any control. Art 3267 comes up with a standard. No contract will arrange a clause of deferred payment. Even so, it can be only by bills of exchange or by annual installments.

4.3.3.2 Time of Payment

The time fixed by parties and conditions fixed by them as well are crucial to determine time of payment. Art.3268 (1) says “where the ascertainment of the services performed constitutes a preliminary condition for the determination of the price, such ascertainment shall be made within the periods specified in the contract”.

One thing we have to know here is we cannot fix the time of payment without first fixing what is going to be paid. What if the contract does not regulate such issues? Art 3268(2) raises more questions than it answers. Let us see this.

We can imagine two defaults:

1/ when the contract generally defaults to regulate the issue under Art.3268 (1).

2/ when one of the parties defaults to undertake the requirements envisaged under Art.3268 (1) even when the contract is not defaulting.

4.3.4 Acceptance of Work

As the contractor has a right to payment, the administrative authorities have the right of taking possession of the work done.

4.3.4.1 What is Acceptance?

Acceptance is not merely taking possession of the work. Rather it is the delivery of the work. Acceptance is “a joint ascertainment of the works made immediately after the completion of the works”. As such it is an examination of the works by the contractor and the administrative authorities.

Generally we have two types of acceptance- Provisional acceptance and final acceptance. Even though both involve in the ascertainment of the works, there are areas of departure between the two ways of acceptance.

  1. Provisional Acceptance

This involves the ascertainment of the works both by the contractor and the authorities. What makes provisional acceptance special, among other things, is that it is made under reservation. Though it involves the effective taking of possession, the acceptance is made under reservation.

A/ Effects

On the other hand, the effects of provisional acceptance are different from that of final acceptance. The effects of provisional acceptance are two fold. In the first place provisional acceptance does not imply the exoneration of the contractor from any defect (Art 3275(1)).In the second place, it shall amount to a tacit acceptance of the modifications  there under.(3275)2(2).

More informally, provisional acceptance marks the beginning of the period of warrant whose expiry marks the final acceptance of the work. (3275(3)).

B/ Risks

Provisional acceptance is a critical decision which will help us determine transfer of risk.

What is the rule?

Art. 1758 (1) reads: “The debtor bound to deliver a thing shall bear the risk of loss of or damage to such thing (until delivery) is made in accordance with the contract”.

Art 3276 (1) is not different from Art 1758 (1) in stating the rule. But one thing you should question is “is it only when the loss or damage results from force majeure that the contractor will bear the costs? Why? Why not?”

Sticking to Art 3276 (1) leads us to an affirmative determination. But one can question the soundness of Art 3276 (1) taken lightly. If the contractor bears the damage or loss caused  by force majeure before the making of provisional acceptance, even for a stronger reason he can bear the damage caused regardless of the cause( i.e. for damages caused while he was able to avoid or defer them).

  1. Final Acceptance

This is the definite appropriation of the works after ascertaining that the contractor has performed his obligations in their entirety (Art. 3279(1)).

The definiteness of the appropriation strengthens this assertion. In addition, the effect of final acceptance is evidence to the validity of the assertion we made.

Final acceptance involves both parties in the ascertaining procedure. Art.3279 is strict in this sense. It requires the joint presence of the parties and the making of record as well. Therefore, the issue is clear with regard to the absence of the administrative authorities during the

Just like any other rule of payment on the event of contestation or doubt as to the creditor (see Art.1744), Art 3280(1) authorizes the contractor to require the court to ascertain that the works are in a condition to be accepted.

Unlike the situation under Art.1744, ascertainment by the court will not automatically result in a conclusive acceptance of the work. If a period of warranty is fixed, the expiration of such period marks the final acceptance of the work. Otherwise, final acceptance will be deemed to have taken place when the day fixed by the court arrives.

4.3.4.2 Effect of Acceptance (Art.3281)

Final acceptance relieves the contractor from his obligation of maintaining the works. Before the final acceptance of the work, the contractor has the obligation of maintaining the work. What is this obligation? This obligation refers to the fact of preserving the work in a purposive manner. Before delivering the work, the contractor must ascertain that the work is fit for the purpose it is made. He/she can meet this end if the same can maintain the work in every manner.  The acceptance will irrevocably place the works in the hands of administrative authorities. The same will put such an obligation in the hands of the authorities. It will also entitle the contractor to payments that are due to him but still not made waiting the arrival of this date.