md.rks-gov.netmd.rks-gov.net/desk/inc/media/D24CE144-B527-4DF3-8… · Web viewThis report was originally drafted by the Law of Obligations Team (hereafter, the “Team”), composed

EU funded project managed by the EUO in Kosovo and implemented by a Consortium led by GIZ IS

Support to Civil Code and Property Rights (CCPR)

Contract Number: 2014/344-574

Recommendations regarding the harmonisation, simplification, modernisation, and approximation to EU

standards of the law of obligations in Kosovo___________________________________________________________________________

Component B, Activity B.4: “Provide advice to the MoJ on the simplification and harmonisation of existing civil code related legislation” (ToR, Activity 2.4)

Sub-component: “Law of obligations”

Pristina, November 2015

This project is implemented by a consortium led by GIZ

International Services

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DISCLAIMER

This Report has been prepared by the Law of Obligations Team. The findings, conclusions and interpretations expressed in this document are those of the authors alone and should in no way be taken to reflect the policies or opinions of the European Union Office in Kosovo.



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Table of ContentsAbbreviations........................................................................................................................... 6

Introduction..............................................................................................................................8

1. Recommendations based on the Impact Assessment Report (Act. B.2).............................9

1.1. Recommendations regarding the LOR..........................................................................9

A. General provisions.....................................................................................................9

B. Conclusion of contracts...............................................................................................11

C. Offer to the public, display of goods and catalogues or advertisements...................12

D. Cause of contract.....................................................................................................13

E. Capacity to conclude contracts...................................................................................13

F. Form of contract (termination by agreement; agreed form; sanctions for lack of required form)....................................................................................................................14

G. Representation (general principles; contemplatio domini; verification; revocation or modification; conflict of interest; etc.)..........................................................................17

H. Interpretation of contracts......................................................................................20

I. Nullity and annullability..............................................................................................21

J. Liability for causing the invalidity of the contract......................................................22

K. Annulment of voidable contract.................................................................................23

L. Non-contractual liability..............................................................................................25

M. Self-defence.............................................................................................................26

N. Liability arising from damages caused by motor vehicles......................................26

O. State liability............................................................................................................29

P. Moral damages............................................................................................................29

Q. Unjustified enrichment............................................................................................32

R. Termination of obligations and statutes of limitation................................................33

S. Performance of obligations.........................................................................................34

T. Creditor’s default (‘mora creditoris’)..........................................................................34

U. Set-off of claims.......................................................................................................36

V. Novation of obligations...........................................................................................36



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W. Periods of limitation (‘prescription’).......................................................................37

X. Default and contractual interest.................................................................................38

Y. Usurious interest.........................................................................................................40

Z. Sale of disputed right and conditional fee agreement...............................................42

AA. Sales contract (notification in case of defects; partial defects; loss of withdrawal right; sale with documentary credit).................................................................................42

BB. Donations mortis causa and distribution of property before death. Contract of lifelong maintenance..........................................................................................................44

CC. Contract for work.....................................................................................................46

1.2. Recommendations related to special laws.................................................................46

DD. Self-defence.............................................................................................................46

EE. Pledge.......................................................................................................................47

FF. Pre-emption.............................................................................................................47

GG. Partnerships.............................................................................................................48

HH. ‘Communio’..............................................................................................................49

II. Leasing and other ‘modern’ contracts........................................................................49

JJ. Lease of agricultural land.........................................................................................49

KK. Notarisation.............................................................................................................50

LL. Motor liability insurance.........................................................................................51

MM. Defamation and insult..........................................................................................51

NN. Financial Services: Banking and Insurance..............................................................51

2. Recommendations based on the EU legal assessment report (Activity B.3)....................52

A. Anti-discrimination..................................................................................................52

B. Consumer protection...................................................................................................52

C. Information Society (e-Commerce and Digital Signatures)........................................56

D. Unfair Trade Practices. Advertising and Information.............................................57

E. Product Liability...........................................................................................................58



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DISCLAIMER



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This Report has been prepared by the Law of Obligations Team. The findings, conclusions and interpretations expressed in this document are those of the authors alone and should in no way be taken to reflect the policies or opinions of the European Union Office in Kosovo.

Abbreviations

A-DL The Anti-Discrimination Law of Kosovo (Law No. 2004/3)ADR Alternative Dispute ResolutionBGB German Civil Code (Bürgerliches Gesetzbuch)B2B Business-to-businessB2C Business-to-consumer CC Italian Civil Code (Codice civile)CISG UN Convention on Contracts for the International Sale of GoodsCLDI Civil Law against Defamation and Insult (Law No. 02/L-65)CN French Civil Code (Code Napoléon)DCFR Draft Common Framework of ReferenceEC European Communitye.g. Exempli gratia (for example)EU European Unioni.e. Id est (that is)IL Law on Inheritance in Kosovo (Law No.2004/26)LAL Law on Agricultural Land (Law No. 02/L-26)LBO Law on Business Organizations (Law No. 02/L-123)LCMLI Law on Compulsory Motor Liability Insurance (Law No. 04/L-018) LCP Law on Consumer Protection (Law No. 04/L-121)LISS Law on the Information Society Services (Law No. 04/L-094)LL Law on Leasing (Law No. 03/L-103)LN Law on Notary (Law No. 03/L-10)LOR Law on Obligational Relationships (Law No. 04/L-077)LPRR Law on Property and Other Real Rights (Law no. 03/L-154)LT Law on Tourism (Law No. 04/L-176)MoJ Ministry of JusticePC Italian Criminal Code (Codice penale)PECL Principles of European Contract LawPETL Principles of European Tort LawP2P Private-to-private



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ToR Terms of Reference



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Introduction

The present report has been drawn up in the framework of Activity B.4: “Provide advice to the MoJ on the simplification and harmonisation of existing civil code related legislation” (ToR, Activity 2.4). Activity B.4 aims to provide advice to the Ministry of Justice (MoJ) on practical solutions on how to address problems affecting civil code related legislation, with specific regard to the sub-component of the law of obligations.

The ultimate goal is to achieve, first of all, the technical improvement of the Law on Obligational Relationships (LOR), with a view to removing inconsistencies with other existing legislation (‘harmonisation’); secondly, the ‘modernisation’ and ‘simplification’ of the law by writing off out-dated and unnecessary/redundant legal provisions; and thirdly, the ‘approximation’ of the law to the acquis communautaire in order to bring it in line with EU legal standards.

Based on the findings of this report and the previous reports from Activities B.3 and B.4, the Project will implement the logically and temporally consecutive Activities B.5: “Assist the MoJ in drafting of an overall plan of the Civil Code of Kosovo indicating the changes and amendments needed” (ToR, Activity 2.5) and B.6 “On the basis of the overall plan developed under activity 2.5, assist the MoJ and other stakeholders to produce a Civil Code Action Plan”.

This report was originally drafted by the Law of Obligations Team (hereafter, the “Team”), composed of two (2) Senior Law of Obligations Experts, namely Prof. Helmut Ruessmann and Prof. Marko Brus, and two (2) Law of Obligations Experts, namely Prof. Nerxhivane Dauti and Mr. Sefadin Blakaj, under the supervision of Key Expert 1 (Team Leader / Law of Obligations Expert), Dr. Victor Chimienti. The report was further reviewed and revised by the Team Leader together with Prof. Cristina Poncibò, the newly appointed Senior Law of Obligations Expert, after the first meeting of the Law of Obligations Subgroup of the Commission for the Drafting of the Civil Code took place on 9 October 2015 to discuss the findings of the Impact Assessment Report and EU Legal Assessment Report. As far as practicable, the views expressed by the subgroup members during the meeting have been incorporated into the final version of this report.

This report is divided in two parts. Part 1 deals with recommendations stemming from the Impact Assessment Report drafted as an output of Activity B.2, whereas Part 2 present recommendations based on the findings of the EU Legal Assessment Report produced as an output of Activity B.3. Part 1 is further divided in two sections: 1.1) Recommendations regarding the LOR, and 1.2) Recommendations concerning other



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legislation related to the law of obligations.

1. Recommendations based on the Impact Assessment Report (Act. B.2)

1.1. Recommendations regarding the LOR

A. General provisions

I. Recommendation no. 1 The formulation of Art. 2 LOR on the autonomy of will is unclear and should be revised. For example, par. 2 provides that parties may regulate their relations differently from what is provided by the LOR, unless it results otherwise from the provisions of the LOR or from their meaning and purpose. However, the LOR does not specify if a certain provision is mandatory. On the contrary, it specifies when a provision can be derogated, i.e. the parties may agree otherwise. Besides, the focus should be on the freedom of parties to conclude contracts other than those provided by law, since the concept of freedom of will is already stated in general terms under par. 1 of the same article. Reference to the meaning and purpose of the provisions of law is also unnecessary. It is recommended that par. 1 is redrafted as follows: “Participants in obligational relationships are free to regulate their relations according to their will within the limits established by law.” Par. 2 may also be redrafted as follows: “They may also conclude contracts other than the typical contracts foreseen by law, provided that such contracts do not conflict with binding provisions of law, public order or good custom.”

II. Recommendation no. 2 Art. 5 LOR provides for the obligation of the participants in obligational relationships to act with due diligence. The article distinguishes between ordinary and professional care. However, the provisions are not so well formulated1 and may be improved in light of European best practices. It is recommended to redraft the text as follows: “Participants in obligational relationships must perform their obligations with the care and skill which a reasonable person would exercise under the circumstances. When fulfilling obligations deriving from their professional activity, participants in obligational relationships must exercise the higher standard of care required by law. If they are members of a group of professionals for which standards have been

1 "In the fulfillment of their obligations, participants in obligational relationships are obliged to act with the care which is required in legal transactions of such particular obligational relationship (the care of a good economist or the care of a good housekeeper)".



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set by a relevant authority or by the group itself, they must exercise the care and skill expressed in those standards.”

III. Recommendation no. 3 According to European best practices, contractual security is enhanced by the imposition of an obligation to co-operate. Such an obligation is only partially foreseen by Art. 6 LOR, which prohibits the misuse of rights (and thus imposes a ‘negative obligation’) but does not impose a positive obligation to cooperate. Sample provisions can be found in Art. III. – 1:104 DCFR and Article 1:202 PECL. It is recommended redrafting Art. 6 par. 1 as follows: “Participants in obligational relationships are obliged to cooperate with each other when this is necessary or can reasonably be expected for the performance of their obligations.”

IV. Recommendation no. 4 Art. 7 LOR requires the value of respective obligations of parties to bilateral contracts to be equal. This article is ‘ideological’ and contradicts the principle of freedom of contract. A mechanism to redress ‘laesio enormis’ situation is provided by Art. 122 LOR. It is recommended deleting Art. 7 from the Civil Code. Art. 9 LOR sounds paternalistic in affirming the obvious principle that a person should refrain from actions causing damages to another. Moreover, the ‘neminem laedere’ principle should be inferred from Art. 136 LOR. It is recommended that Art. 9 is deleted from the Civil Code. Art. 10 LOR encourages the amicable settlement of disputes which is not a matter of substantive law but rather of procedural law. It is recommended to delete Art. 10 from the Civil Code.

V. Recommendation no. 5 Art. 12 LOR makes the LOR applicable both to contractual relationships among private individuals (‘private-to-private’ contracts: P2P) and contractual relationships among commercial companies (‘commercial contracts’, also known as ‘business-to-business’ contracts: B2B)2. This article was not present in the old Yugoslav LOR but was inserted in the Slovenian Code of Obligations to formalise a general rule that had not been codified in the Yugoslav LOR. By pasting out the Slovenian Code of Obligations, this article is now part of the Kosovo legal system. However, it is questionable whether such an article should be left in the future Civil Code. Other Civil Codes do not contain a similar rule and silently imply that the rules governing obligations are applicable to both commercial and non-commercial contracts. Besides, if consumer contract law is to be integrated into general contract law, it will

2 However, the specific nature of economic relations is not completely disregarded. A number of provisions either stipulate that the rules contained therein are not to be applied to commercial contracts or provide some special solution for such contracts. See Art. 310 par. 2, Art. 355, Art. 381 par. 2, Art. 397, Art. 420 par. 4, Art. 445 par. 2, Art. 464 par. 1, Art. 465 par. 1, Art. 476 par. 1, Art. 521 par. 1, Art. 568 par. 2, Art. 1016 par. 4, and Art. 1046 LOR.



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not be sufficient to differentiate ratione personae between B2B and P2P (like Art. 12 LOR currently does), as there will clearly be additional types of contracts to be taken into consideration: not only business-to-consumer contracts (B2C) but also so-called ‘consumer-to-consumer’ contracts (C2C), of which the contracts concluded through online auction and bidding providers (e.g. ebay) are typical examples. With the possible incorporation of the EU acquis on consumer contracts in the Civil Code, the only relevant distinction left to be drawn should be between contracts involving consumers, i.e. B2C and C2C contracts, on the one hand, and all other contracts (such as P2P and B2B contracts), on the other hand. An additional concern is that the definition of commercial companies provided by Art. 12 may not be fully in line with Kosovo corporate law, and in particular with the types of business organisations defined by the Law on Business Organizations (LBO). For the above-mentioned reasons, and for the sake of simplification, it is recommended removing the present content of Art. 12, which may be reworded to stipulate that the provisions of the Book on Obligations shall apply to all types of contract, unless provided otherwise by law.

VI. Recommendation no. 6 Art. 14 provides for the application of the LOR by analogy. This provision may be transferred to the General Part of the Civil Code. It is recommended that Art. 14 is removed from the Book on Obligations and included in the General Part of the Civil Code.

B. Conclusion of contracts

VII. Recommendation no. 7 Art. 15 LOR provides that “A contract shall be deemed concluded when the contracting parties agree upon essential elements of the contract”3; however, it does not specify what the essential elements of a contract are (e.g. agreement of the parties, object, form required by law, etc.). Also, the concept that a contract is considered concluded only when the essential elements exist is fallacious. A contract may have been concluded, in the sense that the parties have reached an agreement, but such contract may be null and void for the lack of another essential element, such as the form prescribed by law, or simply voidable because the will of one of the contracting parties is vitiated. In fact, Art. 15 LOR makes confusion between two very different concepts: the conclusion of the contract (usually based on the ‘consensualistic principle’), on the one hand, and the notion of essential elements (which relates to the valid formation of the contract), on the other hand. It is recommended that Art. 15 is amended to stipulate that a contract is concluded based on the model of offer and acceptance, which is universally accepted in both

3 The essential elements of a contract are also referred to in Art. 23 LOR regarding the offer.



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civil law and common law jurisdictions. A possible formulation may be as follows: “The contract is concluded when the party who made the offer is made aware of the acceptance of the other party” (cfr. Art. II. – 4:205 DCFR and Art. 1326 of the Italian Civil Code (CC)). This provision should be linked to Articles 28 ff. LOR. Art. 16 LOR may be removed because Art. 46 LOR already governs ‘significant mistake’ as a cause of voidability. Prior to addressing the conclusion of contracts, the Civil Code may additionally provide a definition of contract4 and list the essential elements of the contract (see, for instance, Art. 1326 CC).

C. Offer to the public, display of goods and catalogues or advertisements

VIII. Recommendation no. 8 An offer does not have to be directed towards a specific person. It can also be addressed to the general audience. While the English version of Art. 22 par. 3 LOR provides the same rule as Art. 35 par. 3 of the Slovenian Code of Obligations, which removes the binding effect of an offer to the public, the Albanian text of the same provision (which is the official one) reverts back to the old Yugoslav rule stating that a proposal made to an undetermined number of persons and containing the essential elements of a contract shall account as an offer, unless it follows otherwise from the circumstances or usages. The main question which arises is whether and how this provision should be reconciled with Art. 24 LOR which, along the same lines of the old Yugoslav LOR (and based on the Swiss law of Obligations), provides that catalogues, price-lists, tariffs and other notices shall not be deemed offers for the conclusion of a contract, but merely invitations to make an offer. As evidenced by Yugoslav doctrine, these two provisions are (partially) incompatible where the above-mentioned notices contain all essential elements of a contract. Moreover, in some cases the advertiser may simply want to be bound to its proposal by the mere acceptance of somebody else without the need to negotiate. Furthermore, prior to the advent of Internet, customers had to physically visit a shop in order to buy a product. In the era of e-commerce, one can buy from home with a simple click of a mouse, and e-commerce platforms can be regarded as ‘virtual shops’ in which the goods shown with their prices are comparable to the goods displayed on the shelves of a traditional store. It is therefore recommended to remove Art. 23 and redraft Art. 24 along the lines of Article II. – 4:201(3) DCFR, which expresses the general European rule, based on French, Italian and Dutch law.5 A possible formulation may be as follows: “The display of goods labelled with a price or the proposal to supply goods from stock at a stated price made in a catalogue or a public advertisement,

4 Art. II-1:101(1) DCFR states: “A contract is an agreement which is intended to give rise to a binding legal relationship or to have some other legal effect (…)”. According to Art. 1321 CC, the contract is defined as an “agreement among two, or more parties, aiming to set up, regulate or extinguish a patrimonial (economically valuable) relationship among themselves”.5 See also Art. 2:201(3) PECL.



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whether in print or broadcast media or by other means such as the Internet, is treated as an offer to supply at that price until the stock of goods is exhausted, unless the circumstances indicate otherwise.”

D. Cause of contract

IX. Recommendation no. 9 Art. 39 LOR refers to the “permissible basis” (“baza e lejueshme”, in Albanian) as a constituent element of “each contractual obligation”. This definition is conceptually flawed because it misconstrues the concept of ‘cause of contract’. Not all legal systems embrace such an ancient concept of Roman law (e.g. the concept is no longer found in German law but is it still applied in most European codifications of civil law and finds its alter ego in the concept of ‘consideration’ under Common Law). In those legal systems where the cause of contract is still relevant, it is generally regarded as the economic function of a contract. It must not only be lawful, i.e. not against mandatory rules of law, public order and moral costumes, but also (sometimes) worthy of protection by the legal system. The cause cannot and should not be confused with the legal ‘basis’ of a contract, i.e. the general principle ‘pacta sunt servanda’ (Latin for ‘agreements must be kept’), which is a basic rule of law and is codified under Art. 8 LOR. The formulation of Art. 39 may actually mislead the reader into thinking that only typical contracts may be concluded by the parties. However, Art. 2 LOR guarantees the freedom of contract and the right of individuals to conclude contracts other than those typified by the law. It would therefore be preferable to use the Albanian term “shkaku” or, more correctly perhaps, the word “causa” (which appears to be more in line with Kosovo legal terminology). Furthermore, the concept of cause should not be referred to each contractual obligation but to the contract as a whole. It is recommended to revise the formulation of Art. 39 in order to bring it fully in line with the traditional features of the Roman law concept of cause by which Art. 39 LOR is clearly inspired.

E. Capacity to conclude contracts

X. Recommendation no. 10 The LOR lacks general rules on the capacity to conclude contracts. Art. 41 par. 1 LOR merely stipulates that “A contracting party must have the capacity to contract required for the conclusion of the contract for the contract to be valid.” However, this requirement is not specified any further. Additional rules may be found in the Family Law: for instance, Art. 15 deals with the capacity for marriage. This article stipulates that full capacity to act is acquired upon reaching majority, which is obtained upon the completion of the 18th year of age (or by entering into wedlock prior to this age,



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if allowed by the court owing to justifiable reasons). Similar provisions are laid down in Art. 7 of the Law on Labour. It is recommended that general rules on capacity to act and contract are codified and placed in the General Part of the Civil Code6. Paragraphs 2 and 3 of Art. 41 are also problematic. In fact, the use of the expression “persons with limited capacity to contract” does not cover the case when a person is legally capable of contracting but at the moment of concluding a contract is incapable of discernment due to a particular state of mind or abuse of substances7. It is recommended that limited capacity due to external transitory causes is expressly provided.

F. Form of contract (termination by agreement; agreed form; sanctions for lack of required form)

XI. Recommendation no. 11 Art. 53 LOR provides that it is possible to terminate formal contracts through an informal agreement. For the sake of legal certainty, formal contracts should be terminated in the same form prescribed by law for their conclusion. This solution would also be more coherent with the provision of Art. 51 par. 2 LOR, which stipulates that the form prescribed by law for a specific contract shall apply to all subsequent amendments or additions thereof. It is also recommended to delete the last sentence of Art. 53 (“… unless the purpose owing to which a form is prescribed for the conclusion of the contract requires the same form for the rescission of the contract”), which is equivocal and leaves too much room to personal interpretation. De iure ferenda, it is not advisable to require courts to continually assess the purpose of a specific legal form because such an assessment may easily result – due to the absence of any guidance – in the unpredictability and inconsistency of judicial practice.

XII. Recommendation no. 12 Art. 54 par. 3 LOR covers situations where the parties agree on specific terms but decide that their contract will be later formalised in writing or be subject to some other formality. There is no need for such an issue to be specifically addressed by the law of obligations. Besides, the whole provision seems way too obvious and descriptive. In some other respects, it could also sound vague and undetermined. Furthermore, how can the court determine if the contracting

6 The general rules should inter alia stipulate that: a) the age of majority is fixed upon reaching 18 years; b) upon reaching the age of majority the capacity to act is acquired; c) the capacity to act entails the capacity to perform any act or conclude any contract which does not require a different age; d) the rules above shall apply without prejudice to the special laws which require a lower age for the provision of work or services pursuant to an employment contract, in which case the minor has the capacity to acquire the rights and assume the obligations deriving from such contract.7 See, for example, Art. 428 and 1425 par. 2 CC.



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parties agreed upon a specific form solely in order to ensure that there was proof of the conclusion or content of the contract? This would be problematic especially when the agreement on the form of the future contract was only verbal. For the sake of simplification, it is recommended to remove entirely par. 3 from Art. 54.

XIII. Recommendation no. 13 Art. 55 LOR provides that a contract which is not concluded in the form prescribed by law (par. 1) or in the form agreed by the parties as a condition for the validity of the contract (par. 2) has no legal effect. However, while failure to use the agreed form will always result in the contract’s lack of effects (par. 2), the same ‘automatism’ is not contemplated in the case where the form breached is prescribed by law. In fact, the court may still determine otherwise “from the purpose of the provision by which the form is specified” (par. 1). Within the European Union, the principle of freedom of form is becoming obsolete. Due to the ‘neo-formalism’ of EU contract law today, an increasing importance is attached to the written form as an element for the validity of contracts. This is because the contract law is becoming more and more a means for market regulation, being there a growing need to protect the weaker party, which can only be achieved through a written contract. Having said that, we are of the opinion that the wording of par. 1 may contribute to ambiguity and unpredictability in contractual relationships simply because the actual understanding of the purpose of a written form may vary significantly from case to case and from court to court. The determination as to whether a written form is relevant for the validity of a contract should be made a priori by the legislator and should not be left to the particular opinion and discretion of each judge. It is recommended that the sentence “unless it follows otherwise from the purpose of the provision by which the form is specified” be deleted. The legal consequence that the contract lacking the necessary form “has no legal effect” draws criticism too. While the lack of legal effects may make sense in par. 1, which seems to treat the agreed form as a suspensive condition the contract is subject to, par. 2 should more properly refer to the nullity of the contract. It is recommended to revise the wording in Art. 55 par. 1 so as to stipulate that the contract which is not concluded in the form required by law shall be null and void.

XIV. Recommendation no. 14 Art. 58 LOR provides that “A contract for which the written form is required shall be valid even if not concluded in this form if the contracting parties fully or mostly perform the obligations arising therefrom, unless it clearly follows otherwise from the purpose for which the form was prescribed.” Art. 73 of the



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Yugoslav LOR contained a similar provision. This rule is inspired by the favour contractus. However, it is prone to criticism because neither it addresses bilateral contracts nor does it demand full performance. It is recommended that the wording of the provision be revised to ensure that in the event of a bilateral contract both parties have performed their obligations8. Secondly, the wording should make clear that each party (of a bilateral contract) must have fully performed its obligations9. In fact, a party should not be expected to hold on to an invalid contract which is mostly – yet not entirely – implemented by the other party. Thirdly, the provision that the contract is valid “unless it clearly follows otherwise from the purpose for which the form was prescribed” leaves again too much room for discretion to the courts. We recommend replacing reference to the purpose of the formal requirement with a general reference to the law (e.g. “… unless the law provides otherwise”). This would link court interpretation to more objective elements such as the letter and spirit of the law.

XV. Recommendation no. 15 Art. 58 LOR does not address the situation where the contract (e.g. sale-purchase contract of immovable property) lacks a legal requirement other than the written form, such as, for instance, notarisation. A similar problem has arisen in the past with regard to court verification of sale-purchase agreements of immovable property. The Supreme Court interpreted Art. 73 Yugoslav LOR as meaning that the contract for the transfer of immovable property is valid if the obligations arising therefrom have been performed, even where the contract was not certified in the competent court as prescribed by law (Rev.nr. 58/2007, 15.03.2010). Although circumstances have changed and court verification is no longer required (having been replaced by notarisation), there is a risk that courts, when applying Art. 58 LOR, may follow the same ratio decidendi and argue that an immovable property transaction is valid regardless of not being notarised by a public notary. In other words, modern notarisation may be associated with the old concept of court verification. It is recommended that Art. 58 LOR is supplemented with rules addressing the situation where a

8 If this was not the case, the provision would produce questionable results. For example, if a party performs the contract and the other party does not, the contract may still be regarded as valid. As a result, the performing party may be entitled to request performance of the other party but not the termination of the contract and the restitution of what performed. This deprives the performing party of a remedy when termination of the contract is preferable due to the formal defect, e.g. the contract cannot be registered for specific ends.9 If a dispute arises, it is sensible that the party which has fully performed the contract is given the possibility to invoke the invalidity of the contract, even if the other party has performed its obligations in most part. In fact, partial performance is equivalent to non-performance. As a general rule, the creditor is always entitled to full performance. See Art. 288 LOR.



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contract lacks the required notarisation. Different solutions may be explored in this regard. An ideal option would be to specify that a contract cannot be treated as a valid contract under Art. 58 if it lacks the notarial act required by law. This solution would be in line with Art. 30 of the Law on Notary (LN). Another solution (more inspired by favour contractus) could be providing that the nullity of the contract owing to the lack of notarisation shall neither be invoked by the parties nor ascertained ex officio by the court where the parties have fully implemented their obligations arising from the contract. However, in the event of a contract of sale-purchase of immovable property, registration may still be problematic. In order to allow registration of the contract in the immovable property rights register, the Civil Code may provide that such contract may be validated by the court upon request of a party or both parties, and that the court decision shall serve as legal title for registration of the contract in the immovable property rights register.

G. Representation (general principles; contemplatio domini; verification; revocation or modification; conflict of interest; etc.)

XVI. Recommendation no. 16 Art. 72 par. 2 LOR stipulates: “The authorisation to representation shall be based on the law, the general act of a legal person, the act of the competent organ, or the declaration of intention of the person represented (proxy).” (Albanian version). The expression “general act of the legal person” is technically questionable and may more correctly be replaced with reference to the act of the competent organ of a business organisation or other legal person (business organisations may or may not have legal personality). Reference to an express “declaration of intention” is at odds with the possibility for the power of representation to be implied (see recommendation below) and may be replaced with the following sentence: “… or the will of the person represented (proxy)”.

XVII. Recommendation no. 17 Art. 73 par. 3 LOR provides that: “The representative must notify the other party regarding the representative’s appearance on behalf of the represented person; however, the contract shall also have legal effect for the represented person and the other party if the representative fails to do so if the other party knew or should have known from the circumstances that the representative was appearing as a representative.” This provision codifies the formal requirement of the contemplatio domini for the agent’s act directly to bind the principal. In other words, the representative must expressly act in the name and interest of another person, otherwise he will acquire the rights and assume the duties



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deriving from the contract or other act concluded (‘indirect representation’). At the same time, the case-law of those countries where the contemplatio domini may also be implicitly inferred from acta concludentia is also taken into account (tacit contemplatio domini). However, the provision above contradicts Art. 78 LOR (“The form prescribed by law for a specific contract or any other legal transaction shall also apply to the authorization for concluding such a contract or transaction.”) because it fails to make an exception for the contracts that require a specific form (e.g. written form). In this case, the legal appearance should not – and cannot – override the need for the proxy to follow the same form of the contract to be concluded by the representative and the third party. In essence, the scope of application of the rule laid down in Art. 73 par. 3 should be restricted to verbal contracts only (for instance, contracts concluded in a shop). It is recommended adding at the end of Art. 73 par. 3 the following sentence “... unless a specific form is prescribed by law for the contract concluded by the representative”.

XVIII. Recommendation no. 18 Under the heading “Issuance of proxy” (Albanian version), Art. 77 LOR reads: “1. Proxy contains the authorisation to representation conferred upon the authorised person by the authoriser via a legal transaction. 2. The existence and extent of an authorisation shall be dependent on the legal relationship upon which it is based. 3. Legal persons may also be authorised persons.” The formulation of Art. 72 LOR is rather unclear. It is recommended redrafting par. 1 as follows: “Proxy is the juridical act through which a person confers upon another person the authorisation for representation in the conclusion of contracts or other legal acts”. Par. 2 is unnecessary and may be removed. The specification under par. 3 that legal persons may also be authorised (to act on behalf of others) may be rephrased as follows: “Legal persons may also be authorised to represent”.

XIX. Recommendation no. 19 The LOR’s rules on proxy (Articles 72 to 84) do not foresee that a third party who is contracting with a representative may always demand that the authorisation to represent be proven and, if the proxy is based on a written act, that a copy signed by the represented person is shown10. It is recommended that a specific provision is introduced to this effect. In addition, the same article may provide that the third party which fails to ask for proof of representation shall not be bound by the contract concluded by an unauthorised person acting as if was authorised to represent (‘apparent proxy’). As regards the represented person, Art. 76 par. 1 LOR stipulates that the contract concluded by a person on behalf

10 For a similar provision, see Art. 1393 CC.



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of another without the latter’s authorisation shall be binding for the person represented without authorisation only if subsequently approved. It is recommended, however, adding a provision according to which the person represented without authorisation shall be bound by the contract if he culpably ingenerated in the third party the belief that he conferred an authorisation to the (apparent) representative, provided that11 the third party incurred an error which is excusable (‘culpable legal appearance’)12.

XX. Recommendation no. 20 Art. 80 par. 2 LOR provides that the represented person may revoke or narrow down the scope of any authorisation through a declaration of no special form. Although it is common practice not to require that revocation or modification has the same form as the proxy at the time of its issuance, the mechanism foreseen in the law to prevent the third party who is unaware of the revocation or modification from being bound by the contract (concluded with the person whose authorisation was revoked or narrowed) is inadequate. In particular, Art. 81 par. 1 stipulates that the revocation or narrowing of an authorisation shall have no effect in respect of a third party that did not know and was not obliged to know that the authorisation had been revoked or narrowed. However, this provision has two flaws. Firstly, it does not provide an obligation to inform the third party (or to otherwise publicise) the modification or revocation of the proxy. Examples may be found in comparative law (Art. 1396 CC) 13 and the DCFR, Book II, Chapter 6, Art. II. – 6:112. It is recommended adding a provision based on which revocation and modification of the proxy must be brought to the third party’s notice by appropriate means. Secondly, it does not consider the possibility that a person may not be under a legal obligation to know; nonetheless, he/she could reasonably be expected to have known that the authorisation was revoked or narrowed. It is recommended to that Art. 81 is redrafted to refer to the circumstance that the third party did not know nor should have reasonably known / should have known through the exercise of due care14 that the authorisation was revoked or narrowed. Possible solutions may be found in the 2004 Draft Law (Art. 135 par. 1) and in the DCFR, Book II, Chapter 6, Art. II. – 6:112.

XXI. Recommendation no. 21

11 This is the Italian case law approach (see Cass. 26052/2008; Cass. 408/2006; Cass. 15743/2004. Contra: Cass. 23199/2004).12 For example, an error would not be excusable if the proxy required the written form.13 "Modifications to and revocation of the proxy must be brought to the third party’s notice by appropriate means. Failing this, they cannot be invoked against third parties ...".14 See bonus pater familias-test foreseen by Art. 5 LOR.



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Provisions on conflict of interest are missing from the LOR. A conflict of interest exists when the representative is acting on both sides of the contract, for instance selling the good in the name of the seller and buying the good himself (in his own name or on behalf of someone else). It is recommended adding specific provisions on conflict of interest under Section II of Sub-Charter 2 of Chapter 1 of the LOR (Articles 77 – 82). Model solutions may be taken from the CC (Articles 1394, 1395), the 2004 Draft Law (Articles 122, 123) and in the DCFR Book II, Chapter 6, Art. II. – 6:109.

XXII. Recommendation no. 22 There is no provision governing ‘collective’ proxy. It is recommended adding wording in Art. 72 that the representative may act on behalf of more than one person.

XXIII. Recommendation no. 23 Art. 83 LOR regulates the scope of authorisation of salespeople and other employees. This article is quite poor in its formulation and should be supplemented with additional rules concerning the authorities of commercial representatives. Besides, it is not very well coordinated with the LBO, under which the simplest form of business structure foreseen is not the “sole trader” (as referred to in Art. 83) but the “personal business enterprise”. It is recommended that the wording of Art. 83 is supplemented and improved by removing reference to the “company or sole trader”, which may be replaced with the broader expression “business organisation”, in accordance with the LBO.

H. Interpretation of contracts

XXIV. Recommendation no. 24 The rules on interpretation of contract are deficient (Articles 85 ff. LOR). Shortcomings can be summarised as follows: 1) The formulation of Art. 85 is overworded and may be simplified. It should be sufficient to say that in interpreting a contract it is necessary to ascertain the common intention of the contracting parties and to not adhere to the literal meaning of the words. Besides, it does not refer to the conduct of the parties, even subsequent to the conclusion of the contract15; 2) Rules on interpretation of contracts in good faith16, interpretation of the contract as a whole17, preference for interpretation

15 See Art. 1362 CC and Art. II. – 8:102(1)(b) DCFR.16 Section 157 BGB provides that “Contracts are to be interpreted as required by good faith…”. Likewise, Art. 1366 CC stipulates that “The contract must be interpreted in good faith”. A reference to the good faith and fair dealing is also foreseen in Art II. – 8:102(1)(g) DCFR.17 See Art. II. – 8:105 DCFR. See also Art. 1363 CC and Art. 1161 Code Napoléon (CN).



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which gives terms effect18, interpretation according to usages19, interpretation according to practices which the parties have established between themselves 20, and interpretation according to the nature and purpose of the contract 21 are all missing; 3) Art. 88 is unnecessary since the matter can be regarded as covered by the legislation on ADR. It is recommended to reword Art. 85 to say that in interpreting a contract it is necessary to ascertain the common intention of the contracting parties rather than adhering to the literal meaning of the words. The common intention of the parties may be inferred from the conduct of the parties, even subsequent to the conclusion of the contract. It is also recommended to add specific rules on interpretation of contracts in good faith, interpretation of the contract as a whole, preference for interpretation which gives terms effect, interpretation according to usages, interpretation according to practices which the parties have established between themselves, and interpretation according to the nature and purpose of the contract. Art. 88 may be deleted.

I. Nullity and annullability

XXV. Recommendation no. 25 Art. 89 LOR provides that a contract which contravenes the public order, mandatory rules or moral principles shall be deemed null and void unless the purpose of the contravened rule does not allow any other sanction or if the law does not prescribe otherwise. Art. 89 is the sole rule of general application on nullity in the whole LOR. Unfortunately, it fails to consider all other general grounds of nullity that are scattered across the law22. It is interesting to note that with the exception of cause (rectius, legal basis)23, the lack of an essential element of the contract, i.e. agreement of the parties, cause, object, and the form when required by law, is not regarded as a ground for nullity of the contract. Failing an essential element, the contract is simply deemed as not concluded (Art. 15 LOR) or with no legal effect (Art. 55 LOR). Finally, the sentence “if the purpose of the contravened rule does not assign any other sanction” is unclear and not necessary. It is recommended that the text of Art.

18 See Art. II. – 8:106 DCFR. See also Art. 1367 CC and Art. 1157 CN.19 See Art II. – 8:102(1)(f) DCFR, Art. 157 BGB, Art. 1368 CC and Art. 1159 CN. See also Articles 8-9 CISG.20 See Art. II. – 8:102(1)(c). See also Articles 8-9 CISG.21 See Art II. – 8:102(1)(e) DCFR, Art. 1369 CC and Art. 1158 CN.22 For instance, the lack of cause or an unlawful cause (rectius, legal basis) as a ground for nullity is referred to under Art. 39. Unlawful motives are provided as grounds of nullity in Art. 40. The nullity of a contract owing to an impossible, unlawful, undetermined or undeterminable object is regulated under Art. 35. Furthermore, Art. 61 deals with the voidness of a contract as a result of a suspensive or resolutive condition in contravention of the public order, mandatory rules or public morality, or due to an impossible suspensive condition (the contract subject to an impossible dissolving condition should be deemed non-existent instead). 23 See Art. 39 LOR.



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89 is replaced with a list of the main grounds of nullity of the contract (see, e.g., Art. 1418 CC). This provision may specify that the lack of an essential element of the contract is a ground for nullity of the contract. It may also provide that a contract is null and void in any other case provided by law 24. The sentence “… if the purpose of the contravened rule does not assign any other sanction or if the law does not prescribe otherwise” may be removed.

J. Liability for causing the invalidity of the contract

XXVI. Recommendation no. 26 Pursuant to Articles 94 and 100 LOR, the party that caused the invalidity of the contract shall be liable pay to the other party the damages owing to the nullity or annulment of the contract if the latter did not know and was not obliged to know of the grounds of invalidity of the contract. These provisions present several shortcomings. First, they do not consider that a person may not be under a legal obligation to know; however, he/she could reasonably be expected to have known of the grounds of invalidity of the contract. Second, Art. 100 fails to specify that only the person that culpably caused the invalidity of the contract should be liable to compensate. Third, the two provisions do not state which damages the liability extends to. As in any case of pre-contractual liability ( culpa in contrahendo), the liability for the annulment of the contract should be limited to the ‘negative interest’ only, i.e. the expenses and losses suffered by the contracting party by relying on the contract, so that the aggrieved party is put in the position in which it would have been if it had not concluded the contract (Jhering, 1861; Articles 129 and 179 of the German Civil Code (BGB)). It is recommended that Art. 94 is reformulated to provide that the party culpable for the conclusion of a null and void contract shall be liable pay to the other party the damages for losses suffered as a result of the nullity of the contract if the latter party did not know nor should have reasonably known / should have known through the exercise of due care25 of the grounds of nullity. It is also recommended amending the wording of Art. 100 to provide that the party that culpably caused the voidability (annullability) of the contract shall be liable pay to the other party the damages for losses suffered as a result of the annulment of the contract if the latter party did not know nor should have

24 Within the LOR, ad hoc provisions on nullity of contracts include the following: Art. 123 (usurious contract); Art. 441 (sales contract with an unmarketable object); Art. 442 (destroyed object before sales contract is concluded); Articles 919, 965 and 968 (nullity of insurance contract); Articles 1054-1055 (nullity of settlement). Some of these provisions refer to grounds of nullity which are obvious in light of general principles, and may therefore be removed (e.g. Art. 441 and Art. 442). Other grounds of nullity are provided by other areas of law falling within the scope of the Civil Code or by special legislation.25 On the concept of due care, see Art. 5 LOR.



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reasonably known / should have known through the exercise of due care 26 of the grounds of voidability of the contract.

XXVII. Recommendation no. 27 Articles 94 and 100 LOR do not foresee that a party may not have caused the invalidity of the contract but may have only known (or should have known) of the grounds of invalidity (either nullity or voidability). In this case, the party should bear liability for damages if the other party was not put on notice and should not have known of the grounds of invalidity (see, for instance, Art. 1338 CC). It is recommended that an ad hoc provision is added after Section II of Sub-Charter 4.

K. Annulment of voidable contract

XXVIII. Recommendation no. 28 Art. 97 LOR provides that: “A contract shall be voidable if concluded by a party that has limited capacity to contract, if during conclusion there were errors regarding the parties’ intention, or if so stipulated in the present Law or any other act of law.” This provision does not provide a comprehensive regulation of the grounds of voidability of a contract. For instance, defective will (threat, mistake, fraud, etc.) is not regulated here but under Section V of Sub-Chapter 1 on the conclusion of contracts (Articles 45 ff.). This approach may be regarded as technically incorrect because it results in a fragmented approach to the issue of voidability. Systematically speaking, defective should be regulated under the section on voidability of contracts (Articles 97 ff.), just after the rules on contracts concluded by a person without capacity. In addition, the sentence “if during conclusion there were errors regarding the parties’ intention, or if so stipulated in the present Law or any other act of law” should be deleted, having little or no meaning whatsoever. It is actually confusing because the issue of mistake is already covered by Articles 46 ff. LOR. It is recommended moving Articles 45 ff. upwards after Art. 97. It is also recommended deleting the sentence: “… if during conclusion there were errors regarding the parties’ intention, or if so stipulated in the present Law or any other act of law” from Art. 97.

XXIX. Recommendation no. 29 The rules on voidability do not contemplate any mechanism for confirmation or validation of the voidable contract. The only relevant provision is Art. 98 par. 2 LOR: “The other contracting party may request that the first contracting party declare, within a set period that may not be shorter than thirty (30) days, whether the latter is adhering to the contract, otherwise the contract shall be deemed to have been annulled.” Par. 3 adds that “If the related contracting party fails to declare or declares that such party is not adhering to the contract the contract shall be deemed to have

26 See footnote above.



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been annulled.” This article is badly formulated both in English and Albanian and interferes with Art. 41 LOR which provides only for the legal representative the right to validate the contract concluded by a person without capacity. It is recommended removing par. 2 and par. 3 from Art. 98 and making provision for a validation or confirmation mechanism in line with European best practices. For an example of validation, see Art. 1444 CC; for a confirmation mechanism, see Section 141 BGB. As regards European civil law, important sources of reference may be found in Art. II. – 7:211 DCFR and Art. 4:114 PECL (both referring to confirmation).

XXX. Recommendation no. 30 Art. 102 LOR specifies the timeframes within which a contracting party can take action to annul a voidable contract. While par. 1 foresees a period of limitation of 1 year from the day the person entitled to claim annulment learnt of the grounds for annulment or after the end of threat (relative term), par. 2 provides that in any event this right shall expire 3 years after the day the contract was concluded (absolute term). The provision of an absolute limitation period ensures certainty of law but may not always be in the interest of justice. There are circumstances where the contracting party has limited capacity to contract (for instance, in the case of a minor or a person subject to interdiction). In such circumstances, the prevailing need of protecting the minor or an incapacitated person from the consequences of a contract concluded in a weaker position should advise providing special rules on prescription. The person incapable of contracting or with limited capacity to contract will most typically have a legal representative who may annul the contract concluded without his permission based on Art. 97 LOR, or may approve it pursuant to Art. 42 par. 3 LOR. Problems arise when the person without capacity is without a legal representative. In this case, the period of limitation should run from the day the minor reaches the age of majority or incapacity otherwise ends27 or, in the alternative, should not expire until a certain time has passed (from 6 months to 1 year, at least) after either the incapacity has ended or a legal representative has been appointed28. It is recommended revising the period of limitation for claiming annulment of a contract concluded by a person without capacity in order to reflect best European practices. The prescription should run from the day incapacity ceased to exist or, alternatively, should not expire after some time has elapsed after unlimited capacity is acquired or lack of representation is remedied, regardless of when the contract was actually concluded.

27 See, for example, Art. 1442 par. 2 CC.28 For this approach, see also Section 210 BGB (“Suspension of expiry of the limitation period in the case of persons without full capacity to contract”). In the same sense, see Art. III. – 7:305 DCFR (“Postponement of expiry in case of incapacity”).



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L. Non-contractual liability

XXXI. Recommendation no. 31 The general rules of the LOR on extra-contractual liability are traditionally anchored to a regime based on the proof of fault (see Art. 136 par. 1). Pursuant to Art. 140, culpability occurs when the injurer inflicts damage intentionally or as a result of negligence. However, the LOR fails to introduce – like most modern codifications do 29 – a selective filter of the interests worthy of legal protection. By contrast, Art. 137 attempts to provide an ‘illustrative’ definition of damage, which includes property damage, physical and mental harm, or injured reputation. In accordance with a concept of compensation (of penalistic connotation) as a means of punishment rather than reparation, this definition tends to reflect the old understanding of ‘legally relevant’ damages as those arising from the violation of specific provisions conferring rights or imposing duties (non iure approach)30. However, this approach has been superseded by more modern theories according to which any interest worthy of legal protection may be compensated irrespective of whether or not a specific legal provision has been violated (contra ius approach). As such, the number of legally relevant interests may expand considerably to include many other personality rights such as privacy, dignity, dwelling, etc. A similar approach is followed by Art. VI. – 2:101 ff. DCFR. However, in order to prevent an excessive expansion of civil liability, most jurisdictions require that the judge, when determining if an interest is worthy of legal protection, must assess the interest of the injured party against the interest of the injurer; considerations of public policy may also be relevant. See, for instance, Art. VI. – 2:101, Section 1(2)(3) DCFR and Art. 2:102(6) PETL. It is recommended adopting a more modern concept of extra-contractual liability. In particular, the words “legally relevant” may be added prior to the word “damage” in Art. 136 par. 1. The text of Art. 137 may be replaced by a definition of ‘legally relevant damage’ along the lines of Art. VI. – 2:101 DCFR. Art. 138 should be deleted. It should also be considered whether to insert additional rules to mitigate the risk of potential undue extension of civil liability.

M. Self-defence

29 Art. 2043 CC reads as follows: “Any intentional or negligent act that causes an unjust injury to another obliges the person who has committed the act to pay damages.” Reference to an “undue damage” appears in Art. 24 of the Oviedo Convention on Human Rights and Biomedicine (4.IV.1997). European private law harmonisation projects are also enlightening: for example, the PETL use the expression “legally protected interest” (Art. 2:101), whereas Chapter 2 of Book VI of the DCFR is entirely dedicated to the concept of “legally relevant damage”.30 Such a conceptual model implies that only the breach of legal norms ensuring the protection of ownership and other personal rights modelled on the property right (e.g. physical integrity, name, honour or reputation), can give rise to an obligation to compensate.



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XXXII. Recommendation no. 32 Art. 143 par. 1 LOR addresses the typical situation of ‘self-defence’ (= the exemption from liability of whom causes injury in defending himself from an assault or aggression) and ‘state of necessity’ (= the exemption from liability of whom causes injury in the emergency of saving himself from an imminent danger). Par. 2 envisions a system where the person compelled to cause an injury in a state of necessity is liable vis-à-vis the injured person as is the person who caused the danger. It is understandable that, differently from the case of self-defence (par. 1), a residual liability may arise for the person acting in a state of necessity, given that in such case a third party is injured rather than the same party giving rise to the danger. However, in some countries the injurer would only be liable to pay an ‘indemnity’ in an amount equitably established by the court31. It is recommended that Art. 143 par. 2 is amended to mitigate the liability of the person compelled to cause an injury in a state of necessity.

XXXIII. Recommendation no. 33 The sentence included in par. 2 of Art. 143 LOR that the injured may not request compensation from the injurer “greater than the benefit they had therefrom” makes no sense32. It is recommended that this sentence be removed.

XXXIV. Recommendation no. 34 Art. 143 LOR does not foresee the case of a person causing damage in the defence of another nor does it provide for the circumstances where the person causing injury was compelled by the necessity of saving others from a danger. It is recommended that these issues are specifically addressed in the text of the provision.

XXXV. Recommendation no. 35 The relationship between Art. 143 LOR above and Art. 144 LOR, which deals with ‘allowed self-help’, is rather unclear. Besides, the two provisions sound redundant. It is recommended that Art. 144 be deleted for the sake of simplification.

N. Liability arising from damages caused by motor vehicles

XXXVI. Recommendation no. 36 Art. 159 LOR regulates the liability arising from damages caused by motor vehicles. This article should be revised for a number of reasons. To start with, it only refers to “moving” motor vehicles while it should be sufficient for liability to arise that the

31 See Art. 2145 CC. Likewise, Art. VI. – 5:202(3) DCFR provides that the person causing the damage is not liable to make reparation beyond providing reasonable recompense. A different approach is followed by the BGB: "If the person acting in this manner caused the danger, he is obliged to pay damages." (Section 228).32 This provision seems to look at the problem of compensation from the wrong perspective of unjustified enrichment.



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vehicle is simply circulating, that is, even only parked on a road (e.g. in the wrong place). It is recommended that Art. 159 is amended so as to refer to vehicles put into circulation.

XXXVII. Recommendation no. 37 Another problem relates the subject of liability: Art. 159 LOR does not refer to the owner of the motor vehicle but rather to his “holder” (in Albanian, “zoterues”), which is commonly understood as the person who has the physical control over something. In this respect, the LOR follows the old Yugoslav LOR’s (Art. 178). However, the use of the term “holder” in the specific context of third-party motor liability does not match with the current insurance law and practice of Kosovo, which revolves around the concept of ownership33. Besides, this term is conceptually vague and ambiguous. Lacking a definition of holdership in the LOR, it is unclear what this expression actually means and how to assess who has the physical control of the car. In addition, the court would have to investigate for each accident who has physical control over the car, regardless of the title of (registered) ownership. As a result, it would be rather difficult to implement such a provision in practice. Not only for reasons of coherence with existing rules on compulsory insurance, but also for the sake of certainty of law, it would be preferable to clearly predicate the liability of the owner (and eventually, that of the driver34). It is therefore recommended to abandon the use of the concept of ‘holder’s liability’. A regime of strict/objective liability of the owner for the driver’s fault may be reintroduced. Alternatively, the law may provide for the joint and several liability of the owner and the driver. In either case, the owner should be exempt from liability where he proves that the vehicle was used against his will (e.g. theft or unauthorised use).

XXXVIII. Recommendation no. 38

33 The “registered owner of a motor vehicle” is clearly identified as the person bound by law to contract the insurance for covering third-party liability (Art. 3 par. 1). In this regard, Kosovo’s current insurance practices are aligned with those of most other countries where the car owner is liable for damages caused to third parties. Typically the owner will be the driver of the vehicle causing an accident. However, a car owner may let another person drive his car. Some jurisdictions treat the car owner as sharing liability for any accident caused by the borrower driver, although the solutions vary across jurisdictions. As a rule, owner liability involves the permissive use of a vehicle, so the owner must give the borrower permission to use the car, or must knowingly acquiesce to it (owner liability is therefore excluded if the car is stolen or used against the owner’s will). Kosovo follows a similar principle of law under Art. 2 par. 1(7) LCMLI.34 Art. 2 par. 1(7) LCMLI stipulates that a natural or legal person may drive the motor vehicle upon the owner’s authorisation (i.e. “motor vehicle possessor”), whereas the “unauthorised driver” is defined as the person who at the time of the accident was found driving a motor vehicle without the motor vehicle owner’s authorisation (Art. 2 par. 1(6)). Both the owner and the possessor shall be covered; however, in the case of an unauthorised driver the insurance company will have a right to a regress action towards the responsible person for the paid compensation (Art. 14 par. 3).



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The Law on Compulsory Motor Liability Insurance (LCMLI) does not address the leasing of motor vehicles. Should the leasing company (lessor), which owns the motor vehicle, be exempt from liabilities caused by it when operated by a client (lessee)? Another issue is whether the holder of a usufruct right should be liable to pay damages jointly with, or alternatively to, the owner. The same problem arises with regard to the contract of conditional sale, i.e. a contract by which the title to the motor vehicle remains in the seller until the purchaser becomes the owner upon full payment of price). It is recommended to address expressly these situations in the Civil Code.

XXXIX. Recommendation no. 39 The rules on ‘culpable liability’ (Articles 140 ff.) apply to an incident involving motor vehicles caused by the fault of one vehicle driver only (Art. 159 par. 1 LOR), whereas in the case of mutual fault the drivers shall both be liable in proportion to each other’s fault (Art. 159 par. 2 LOR). It is unclear why the concept of culpable liability is referred to with respect to the first case scenario and not in regards to the second one, as both situations imply a liability which is attributable to fault, although with a different gradation – exclusive or concurrent – depending on the circumstances. In addition, it may not be possible in practice to ascertain to which extent each driver has contributed with his fault to cause the damage. Unfortunately, Art. 159 par. 1 LOR does not state that in the case of collision of vehicles it is presumed, until proof to the contrary is offered, that each driver contributed equally toward causing the damage suffered by each vehicle35. Par. 3 of the same article only provides that “If nobody is at fault the holders shall be equally liable, unless justice demands otherwise.” This wording is fallacious because if a traffic accident occurred, then it must have been someone’s fault (in which case it is just a matter of allocating the relative faults, if possible), unless the accident is the outcome of an event beyond the control of each driver (force majeure) so that there is no fault at all, in which case none of the drivers should be held liable36. Another type of no-fault accident occurs when the fault is attributable to third parties (e.g. public body in charge of road maintenance, incautious pedestrian or bicycle rider, etc.). In such cases, the third party should bear the liability to compensate. In addition, the expression “unless justice demands otherwise” is too vague and imprecise. As a result, Art. 159, paragraphs 1 and 3 in particular, may turn out to be not implementable in practice. It is recommended to redraft Art. 159 par. 1 to codify the general rule that the owner of a motor vehicle shall be liable to compensate damages culpably caused to persons or things. This article may then presume concurrent liability equally divided between the two owners involved in the accident unless proof to the contrary is

35 A good example is Art. 2054 CC.36 This would, in fact, configure a case of strict (or objective) liability in contradiction with Art. 158 LOR on exemption of liability (and which would not be even covered by the insurance contract). See Art. 11 par. 1(5)(4) LCMLI.



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offered. It is further recommended to specify that, except in the case of exclusive fault of one vehicle, each owner shall be liable in proportion to his respective fault. The expression “… unless justice demands otherwise” should be deleted.

XL. Recommendation no. 40 Art. 3 par. 1 LCMLI provides: “Prior to using a motor vehicle, the registered owner of a motor vehicle shall contract the insurance for covering the liability for damages caused to the third parties in case of death, bodily injuries, affecting health or damaging property”. However, this principle is of such importance that it should not be omitted from the general rules governing civil liability enshrined in the Civil Code of Kosovo. It is recommended to codify under Art. 159 the principle that motor vehicles shall not be put into free circulation (i.e. shall not be used on the road) without the third-party insurance required by law.

XLI. Recommendation no. 41 It is recommended to include in Art. 159 LOR a rule of strict liability, according to which the owner should be liable for damages arising from defects in the maintenance or the manufacture of the vehicle, without prejudice to the right of redress against the manufacturer37.

O. State liability

XLII. Recommendation no. 42 Art. 161 LOR is closely connected to state liability. Most Civil Codes in Europe do not include principles on state liability, which is usually governed by case law or special legislation (e.g. civil responsibility of judges, civil responsibility of public bodies and agents, compensation of damages suffered by armed forces owing to the use of depleted uranium weapons, mass environmental torts, etc.). We recommend removing Art. 161 from the Civil Code.

P. Moral damages

XLIII. Recommendation no. 43 The rules on moral damages raise several concerns (see Articles 182 ff. LOR). The question arises as to whether the non-material damage should be compensated per se (which would be too-far reaching and unfeasible) or whether compensation should more realistically be granted only under specific circumstances. The LOR codifies certain situations where the compensation of moral damages may take place, such as the loss caused to a person due to another’s personal injury or death (Art. 184 LOR)38, or the loss arising from a sexual criminal act (Art. 185 LOR). However, given the broad

37 For a similar provision, see e.g. Art. 2054 par. 4 CC. Germany law has a similar rule.



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formulation of Art. 183, such situations must be seen as exemplifications of conduct that the legislator felt the need to expressly address and should not be interpreted restrictively as the only types of behaviour giving rise to an obligation to compensate. Compensation of non-pecuniary damage may be justified where the victim has suffered personal injury, or injury to human dignity, liberty, or other personality rights. However, the Civil Code should not list every single type of legally relevant non-material damage like Art. 183 LOR currently does. Such list is not and cannot be exhaustive. On the other hand, the undesirable results of a certain part of the case law in Slovenia, where damages can be even collected for ‘suffering mentally’ simply because of a breach of contract, would advise specifying when moral damages are worthy of compensation. It is recommended to amend Art. 183 in line with Art. III. – 3:701 DCFR to provide that the non-economic damage resulting from suffering and the impairment of the quality of life shall be compensated. In cases of personal injury, non-pecuniary damage corresponds to the suffering of the victim and the impairment of his bodily or mental health. Article 185 may be replaced with the general rule that any suffering of the victim which is the result of a criminal offense should be compensated by the offender39. The selective filter of interests worthy of legal protection, which may be introduced under Articles 136 ff. LOR, would be applicable to moral damage as well40. For losses suffered by third persons as a result of another’s personal injury or death, a specific provision would still be needed and Art. VI. – 2:202(1) DCFR may be used as a model provision to replace the current formulation of Art. 184.

XLIV. Recommendation no. 44 The LOR does not provide clear rules on the amount of monetary compensation to be granted for non-economic loss. The wording of Art. 183 par. 2 is inadequate and would appear to suggest that the court shall only evaluate the importance of the violation and the purpose for which compensation shall be awarded. Some guidance is offered by Art. 10:301 PETL. It is recommended to redraft Art. 183 par. 2 to stipulate that in the assessment of moral damages, all circumstances of the case, including the gravity, duration and consequences of the injury, have to be taken into account. In assessing damages similar sums should be awarded for objectively similar losses. The law may determine how compensation for non-economic loss is to be quantified.41

38 This provision fails to specify that the compensation of such a moral damage may only occur where the injury or death of a close relative is the result of a criminal act, either negligent or intentional.39 Under Article 185 par. 2 of the Italian Penal Code (CP), the perpetrator of a criminal act and the persons who, in civil law, are liable for the perpetrator’s acts are required to compensate the victim in respect of any offence which gives rise to pecuniary or non-material damage.40 See Art. VI. – 2:101: "(1) Loss, whether economic or non-economic, or injury is legally relevant damage if: ...".41 See DCFR, Art. VI – 6:203: “National law determines how compensation for personal injury and non-economic loss is to be quantified.”



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XLV. Recommendation no. 45 The restitutio ad integrum principle laid down in Art. 182 LOR, rather than listing concrete examples of restoration measures, should in more abstract terms stipulate that the injured person may request restoration of the original situation, provided that reintegration of the status quo ante is totally or partially possible42. Besides, it should be noted that the refutation of defamatory or insulting information, which is briefly mentioned therein is already regulated in great detail by the Civil Law against Defamation and Insult (CLDI). It is recommended to redraft Art. 182 to provide that the injured person may request restoration of the original situation, provided that reintegration of the pre-existing condition is totally or partially possible. It is also recommended to remove the reference made to the retraction of a statement because it overlaps with the CLDI.

XLVI. Recommendation no. 46 Art. 183 par. 1 LOR provides for the monetary compensation of damages resulting from the “defamation of good name or reputation”. However, the CLDI goes much further than that with regard to redress mechanisms. It also includes detailed rules on other forms of reparation as well such as, for instance, publishing the refutation of defamatory or insulting information. It is recommended to remove the injury of reputation from the list of causes giving rise to legally relevant moral damages and to expressly state that the matters of compensation of damage arising from the act of defamation or insult shall be regulated by law.

XLVII. Recommendation no. 47 Art. 187 LOR specifically provides for the compensation of injury to the reputation of legal persons. However, Art. 3 CLDI already states that a person entitled to compensation may either be a physical person or a legal entity. We recommend deleting Art. 187 from the Civil Code.

Q. Unjustified enrichment

XLVIII. Recommendation no. 48 Art. 194 par. 1 reads as follows: “Any person that without a legal basis becomes enriched to the detriment of another shall be obliged to return that which was received or to otherwise compensate the value of the benefit achieved.” This definition refers to enrichment without a “legal basis” (bazë ligjore); however, the payment of a sum of money or other good can be undue owing to the lack of any justification, either contractual or legal. An enriched person may be entitled

42 See Art. 2058 CC.



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to the enrichment by virtue of a contract or other juridical act, a court order or a provision of law. It is recommended to replace the expression "without a legal basis" with broader expressions such as "unjustified (enrichment)" or "unjust (enrichment)"43.

XLIX. Recommendation no. 49 Although condictio indebiti is the typical situation of an unjustified enrichment, it does not appear at all in the above definition. Under the influence of German law (Art. 812 BGB), the LOR articulates a general rule that does not distinguish between unjustified enrichment and condictio indebiti. The same approach is followed in book VII of the DCFR on “Unjustified Enrichment”44. Due to the lack of this distinction, the LOR fails to differentiate between ‘objective enrichment’ (= when the debt is paid on the basis of a non-existent or invalid cause, or is paid to a person other than the creditor) and ‘subjective enrichment’ (= when a person pays the debt of another in the wrong assumption that he is the debtor). The subjective enrichment, in particular, raises some questions that remain unaddressed in the LOR. For example, if a person paid another’s debt by error, should he always be entitled to restitution? Or should the right of restitution be restricted to a mistake meeting certain requirements, e.g. reasonable mistake? It is recommended to address these questions by differentiating between unjustified enrichment and condictio indebiti, a distinction which is well known to French and Italian law45.

L. Recommendation no. 50 Art. 194 par. 2 LOR clarifies that “The term enrichment also covers the acquisition of benefit through services.” However, it fails to consider that a person may be enriched owing to work performed by another and not only because of services received. The same line of reasoning is followed by Art VII. – 3:101 DCFR which – when defining enrichment – stipulates that a person is enriched by, inter alia, “(b) receiving a service or having work done”. Art. 194 par. 2 LOR should also specify that enrichment may consist in an increase in

43 DCFR uses the expression "unjustified enrichment". BGB, CC and PETL refer instead to "unjust enrichment" (or "without a just cause").44 Scholars have criticised this approach arguing that the DCFR rule ignores a dogmatic distinction which not only has ancient roots in European law history but can also be perceived in the nature of things: the problem of restituting what was received by someone else does not overlap entirely with the problem of restituting what was autonomously taken from others. It was also pointed out that the (DCFR) rule on unjustified enrichment is vitiated by excessive abstraction. As a result, it formalises a general principle of conduct rather than a prescriptive norm.45 See, e.g., Articles 2033 ff. CC. Actually, under Italian law the unjustified enrichment is a ‘residual’ action because recourse can be made to it only if the condictio indebiti and no other action are available to the creditor by law. See Art. 2041 CC.



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assets or a decrease in liabilities. It recommended modifying Art. 194 par. 2 accordingly.

LI. Recommendation no. 51 While Art. 197 LOR addresses the return of monies in terms of accrued fruits and interest by distinguishing between good and bad faith of the debtor, a distinction of consequences for bona fide or mala fide debtors is lacking for the restitution of things. It is obvious that a bona fide debtor should be under a lower ‘liability’ than a mala fide debtor. For example, a debtor for restitution of a thing who reasonably believes that the thing in question belongs to him, may freely dispose of the good, deteriorate or even destroy it. His duty to restitute should therefore be limited to an obligation to restitute in kind what is still present in his assets (or, in case of deterioration or destruction of the good, to an obligation to compensate within the limits of his enrichment, i.e. the value of the benefit achieved). By contrast, a debtor in bad faith should be obliged to pay the equivalent value if he destroys the thing to be restituted in kind (or, alternatively, to restitute in kind and pay an indemnity for the loss of value) 46. It is recommended to differentiate under Art. 197 between a bona fide and a mala fide debtor for the restitution of things.

LII. Recommendation no. 52 Art. 197 LOR mistakenly refers to “penalty interest”. Penalty interest (also known as ‘default rate’) is payable when a party fails to make a payment when its debt falls due. However, in the context of unjustified enrichment no payment is due as there is neither a legal nor a contractual basis (or, at least, a valid contractual basis) for it. It is recommended amending this provision to refer to (compensative) interest only.

R. Termination of obligations and statutes of limitation

LIII. Recommendation no. 53 Part IV of the LOR (Articles 276 ff.) is headed “Termination of Obligations” and contains Chapter 4 (Statute-Barring), which carries provisions on statute of limitations (‘prescription’). However, a statute of limitations does not terminate an obligation, as clearly shown by Art. 341 LOR, which implies that statutes of limitation are more correctly concerned with the right to demand performance of an obligation, and with the judicial enforceability of such right in particular. This should be reflected in the structure of the Civil Code, which may address the institute of prescription in the General Part, following the approach of the BGB (Sections 194 ff.). The CC does not have a general part; however, it still does

46 For a similar provision, see Art. 2037 CC.



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not include prescription in the Book on Obligations but in the last Book, dealing more generally with the protection/implementation of rights (Articles 2934 ff.). The rationale is that both in German and Italian law prescription is not confined to claims within the law of obligations but to all types of claims, whether they are based on an obligations or not. It is recommended to remove Articles 276 ff. from the Book on Obligations and transfer those provisions to the General Part of the Civil Code.

S. Performance of obligations

LIV. Recommendation no. 54 Art. 288 LOR reads as follows: “1. Performance is the execution of the content of the obligation; therefore, the debtor may not perform it with anything else, and the creditor may not demand anything else. 2. Performance shall not be deemed valid if what the debtor delivered as the owed thing and the creditor accepted as such is not in fact such; the creditor shall have the right to return what was delivered and to demand the owed thing.” This provision gives rise to some concerns. While the first paragraph is too descriptive, the second paragraph is problematic both from the conceptual and terminological point of view. Firstly, performance cannot be regarded valid or invalid but more properly executed or not executed. Secondly, the sentence “and the creditor accepted as such” is logically at odds not only with the remainder part of the same paragraph (which assumes that the creditor did not accept aliud pro alio) but also with the datio in solutum principle stated under Art. 289 par. 1: the debtor’s obligation shall terminate if the creditor accepts something else in place of what was originally agreed. It is recommended (in par. 1) that the wording “therefore, the debtor may not perform it with anything else, and the creditor may not demand anything else” is deleted from par. 1. It is also recommended that in par. 2 the word “valid” is replaced with “executed” and the sentence “and the creditor accepted as such” is deleted.

T. Creditor’s default (‘mora creditoris’)

LV. Recommendation no. 55 Art. 306 par. 1 LOR defines mora credendi as the situation where the creditor refuses to accept performance or prevents it by means of an action (commissive conduct); however, no provision is made for when the debtor is unable to perform the obligation because the creditor does not do what is necessary to allow the debtor to perform his obligation (omissive conduct) 47. In addition, Paragraphs 2 and 3 of the same article are obvious and/or unnecessary and

47 A similar provision is foreseen, for example, under Art. 1206 CC and Art. 6:58 of the Dutch Civil Code.



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should be deleted. It is recommended that the concept of mora creditoris is expanded by including omissive conduct. Paragraphs 2 and 3 may be deleted.

LVI. Recommendation no. 56 Looking at the consequences of the creditor’s default, one may observe four different deficiencies. First of all, the typical effects of the creditor’s default 48 equally arise in connection with the creditor’s delay per se, i.e. the mere fact of the creditor refusing or preventing performance of the debtor’s obligation, and the deposit procedure (see, respectively, Art. 307 paragraphs 1, 2 and 3, and Art. 312 paragraphs 2, 3 and 4). In both cases the debtor’s delay is regarded as terminated (see, respectively, Art. 307 par. 1 and Art. 312 paragraph 2). The only difference is that the debtor can be fully discharged from his obligation solely through the deposit procedure (Art. 312 par. 1). The second shortcoming is that there is no procedure which the debtor must follow, prior to depositing the owed thing, in order to formalise the offer of performance 49. Another problem is the fact that while the deposit of “things” (movable assets, monies, etc.) is provided, no mechanism equivalent to the deposit of movables is specifically foreseen for the debtor to formally offer the delivery of immovable property (e.g. intimation by the bailiff). The courts' competence over the deposit procedure can be mentioned as an additional flaw of creditor’s default rules: in other countries the competence to conduct the deposit or intimation procedure is more efficiently delegated to public officials such as notaries and bailiffs, depending on the object of the obligation. A further weakness of mora creditoris-related rules is that there is no provision that the creditor shall not take enforcement measures during the time he is in default 50, or at least after the owed thing has been deposited and the debtor has been discharged from his obligation51. It is recommended to redesign the whole creditor’s default system in such a way that: 1) the termination of the debtor’s delay would be the (sole) effect of the creditor’s delay per se, i.e. cease of interest accrual, unless the creditor refused performance on legitimate grounds; 2) the typical effects of the creditor’s default would be (only) triggered by the debtor’s formal offer of

48 These include: the debtor’s release from the obligation to compensate the damages suffered by the creditor due to the delay; the transfer of the risk of accidental destruction or damage of the due thing onto to the creditor; and the compensation for damages arising from the creditor’s default and for costs incurred in due to the safekeeping of the due thing.49 A formal offer through a public notary or bailiff, depending on the circumstances, as a prerequisit to the deposit (and, therefore, the full discharge from the obligation), is foreseen by Art. 1210 CC. According to this provision, the debtor may ask the deposit of things, or intimation to receive them, only after the creditor has refused to receive such things being offered to him formally or has not appeared to receive them. However, pursuant to Art. 1220 the debtor may still not be deemed to be in delay if he promptly offered ‘informally’ the owed thing, unless the creditor refused it on legitimate grounds (e.g. partial performance).50 An example is Art. 6:62 of the Dutch Civil Code.51 This is the Italian case law approach (see Cass. 8711/15).



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performance in front of a notary or bailiff; 3) the deposit procedure – through which the debtor would be fully discharged from his obligation – may only take place after the debtor’s formal offer of performance; 4) notaries and bailiffs would be entrusted by law with the competence to carry out the deposit or intimation procedure; 5) the creditor should not take enforcement measures when he is in default (i.e. a formal offer has been made).

U. Set-off of claims

LVII. Recommendation no. 57 The regulation of set-off under Articles 317 to 324 LOR is unsatisfactory . It is recommended to include a definition of set-off and to specify the requirements, while taking into consideration some of the relevant provisions of the DCFR (Articles III. – 6:101 ff.).

V. Novation of obligations

LVIII. Recommendation no. 58 Under the LOR, novation of obligations is regulated separately in two different parts of the law: on the one hand, ‘objective’ novation is governed by Articles 329 ff. as a modality of termination of obligations other than performance, together with compensation, release from debt, etc.; on the other hand, ‘subjective’ novation – both on the active (creditor) and passive (debtor) side – is regulated in the end of the general part of the LOR (Articles 420 ff.). It is however unclear why the change of creditor or debtor is not treated as well as a form of novation (hence, termination of obligations), since the debtor may as well be released from his obligation (see Articles 420 par. 4, Art. 422 par. 2, Art. 432 paragraphs 1 and 2). It is recommended to remove Part VI: Change of creditor or debtor (Articles 420 ff.) and incorporate it under Chapter 3 of Part IV: Other ways for an obligation to terminate (Articles 317 ff.).

W. Periods of limitation (‘prescription’)

LIX. Recommendation no. 59 Art. 352 LOR provides a general term of 5 years for the prescription of claims. The rules on prescription should be designed to promote efficiency by encouraging the prompt making of claims before evidence becomes difficult and expensive to provide and by freeing assets which might otherwise be held from circulation due to old claims being made. However, a 5-year term for an ordinary statute of limitation may be too short for the satisfaction of certain claims. This



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is particularly true for claims under family law and inheritance law , or for claims related to property. Some European countries provide a longer term for the general statute of limitation52. Others contemplate a short general term of prescription in combination with more extended limitation periods concerning specific claims53. It is recommended to revise Art. 352 in light of European best practices. The Civil Code may return to the old rule envisaged in the former Yugoslav LOR, which originally provided a general statute of limitation of 10 years, or may alternatively keep the general term of 5 years but introduce longer limitation periods for certain types of claims.

LX. Recommendation no. 60 Art. 355 LOR provides a statute of limitation of 3 years for commercial contracts, that is contracts entered by and between commercial enterprises. The distinction between civil and commercial contracts has already been criticised in this report. It is recommended removing Art. 355 from the Civil Code.

LXI. Recommendation no. 61 Art. 359 addresses compensation claims for reason of corruption. This article implements Art. 7 of the Civil Law Convention on Corruption of the Council of Europe (4.XI.1999), which is not in force in Kosovo (unlike in Slovenia). It is recommended removing Art. 359 from the Civil Code.

LXII. Recommendation no. 62 Art. 361 LOR does not specifically refer to arbitral awards. It is recommended amending this provision to include a specific reference to (final) arbitral awards54.

X. Default and contractual interest

LXIII. Recommendation no. 63 Art. 378 LOR contains a definition of interest which is unnecessary and duplicative of the definitions of penalty interest and remunerative interest provided by Art. 382 and 385 LOR, respectively. It is recommended that this provision is removed from the Civil Code.

LXIV. Recommendation no. 64

52 See e.g. Art. 2946 CC; Art. 2262 CN (30 years); Article 114 of the Albanian Civil Code (10 years).53 For example, Section 195 of the BGB stipulates that the standard limitation period is 3 years (see, similarly, Art. III. – 7:201 DCFR). However, Section 197 BGB provides that a number of claims are statute-barred after 30 years! These include: claims for return based on ownership and other real rights; claims that have been declared final and absolute; claims under enforceable settlements or enforceable documents; claims that have become enforceable in insolvency proceedings; and claims to reimbursement of the costs of execution.54 See, e.g., Art III. – 7:202 DCFR.



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Art. 379 LOR concerns the prohibition of interest on interest for late payment (so-called anatocism or compound interest). It is recommended moving this article upwards after Articles 382 ff. on penalty interest.

LXV. Recommendation no. 65 Art. 380 LOR contains a principle unknown to most jurisdictions according to which interest shall cease to run when the amount of penalty interest that has not been paid reaches the principal. A similar rule existed in former Yugoslavia but was later abandoned55. It is questionable whether such a provision is in compliance with the Constitution and international/European standards on protection of creditors because it may be seen as an incentive to delay in payments, especially after interest has reached the same amount of the principal debt. It is recommended that Art. 380 is deleted from the Civil Code.

LXVI. Recommendation no. 66 Art. 382 par. 1 LOR provides that a debtor who is late in performing a pecuniary obligation shall owe penalty interest in addition to the principal. This provision fails to specify that: a) interest shall be owed on the unpaid part of the debt over the time that the debtor is in default of complying with his obligation; b) the rate of the interest payable on a debt shall be the statutory interest rate; c) the law or agreement of the parties may provide that interest is not payable on a debt. It is recommended to reformulate par. 1 of Art. 382 as follows: “A debtor who is in delay in the payment of a sum of money or any part thereof shall owe penalty interest to the creditor on the unpaid part of that sum from the time when payment is due to the time of payment, unless otherwise agreed or provided by law”.

LXVII. Recommendation no. 67 Par. 2 of Art. 382 LOR is copied from the Slovenian Code of Obligations (see Art. 378 par. 2). Pursuant to this provision, “The interest rate for penalty interest shall amount to eight percent (8%) per annum, unless stipulated otherwise by a separate act of law.” A fixed penalty interest rate system is therefore foreseen but fixed rates are unable to reflect economic reality. In Slovenia, a separate law was thus enacted in 2003 (i.e. Law on the Interest Rate of the Default Interest), whose provisions have superseded the article above. This law stipulates that the default interest rate shall be periodically linked to the reference rate of the interest rate applied by the European Central Bank. More particularly, the legal default interest rate is equal to the sum of the ‘reference rate’ and eight percentage points. This method of calculation is in compliance with Directive 2011/7/EU of 16 February 2011 on combating late payment in commercial

55 Art. 401 of the old Yugoslav LOR was repealed in 1989. See Official Gazette of SFRY no. 57/89.



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transactions. Other countries from the region have introduced similar mechanisms, sometimes within the same law of obligations (Croatia), but more often in the context of a special law (Serbia). It is recommended that the provision in question is amended to provide that the penalty interest rate shall be determined by law. In particular, the law should contemplate a method of calculation similar to that foreseen by Directive 2011/7/EU56. However, transitional provisions should be used to prevent the occurrence of legal gaps: Art. 382 par. 2 should continue to be applicable until such law is adopted, however no later than one or two years from the entry into force of the Civil Code.

LXVIII. Recommendation no. 68 Art. 385 LOR refers to “contractual interest” but penalty interest can be contractually agreed too (see Art. 383). It would be preferable to use the expression ‘remunerative interest’ (e.g. interest to be paid for a loan) in order to distinguish it from ‘penalty interest’ (i.e. interest to be paid due to default or delay in payment). Besides, the formulation of par. 1 does not adhere to best practices. In addition, par. 2 provides that contractual interest rate shall be 6% per annum unless otherwise agreed. As in the case of penalty interest, a fixed remunerative interest rate is not advisable. It is recommended redrafting Art. 385 paragraphs 1 and 2 as follows: a) “1. The contracting parties may agree that in addition to the principal debt the debtor shall owe interest to the creditor at the rate specified in the contract. 2. If the contract does not stipulate otherwise, the interest shall be payable at the rate determined by law.” Again, transitional provisions should be used to avoid giving rise to legal gaps.

LXIX. Recommendation no. 69 Art. 386 LOR stipulates that the provision of the LOR on contractual interest apply to fungible obligations as well. This principle makes no sense because pecuniary obligations only can accrue interest. It is recommended that Art. 386 is deleted from the Civil Code.

Y. Usurious interest

LXX. Recommendation no. 70 The provision on the usurious interest rate (Art. 381 par. 1 LOR) stipulates that if the agreed rate for (contractually agreed) penalty interest or for contractual interest is more than 50 percent higher than the legal default interest rate (= 8%), the contract providing such an interest rate shall be considered an

56 The Commission’s proposal for a Regulation on the Common European Sales Law (Articles 166-171) may provide some model clauses which meet the standards of the acquis communautaire.



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“usurious contract”. The permitted interest rate is therefore the interest rate which does not exceed 150% of the legal default interest rate (8%, pursuant to Art. 382), i.e. 12%. The legal consequence of an usurious contract is that it is null and void (see Art. 123 paragraphs 1 and 2 LOR). This provision is not in accordance with European best practices: a fixed usurious interest rate is neither in the interest of the creditors nor in that of the debtors as it does not take into account the fluctuations of the economy. Most countries define the usurious interest rate in terms of percentage (between 25 and 100%) of the average rate charged by banks for operations of a similar kind issued during the period of reference (last 3 to 6 months). In addition, Art. 381 par. 2 only stipulates a legal presumption of usury, in the sense that the creditor may avoid the consequences of having agreed an usurious interest rate by proving certain circumstances. This is due to the fact that the LOR does not seem to distinguish between an usurious contract (= providing an usurious penalty or remunerative interest rate) and a contract made under duress (= when one party exploits or takes advantage of the situation of economic distress or other weakness of the other party, which results in a disproportion between the obligation of the former and that of the latter)57: both contracts are considered as two different species of the same genus of the usurious contract, and subject as such to the penalty of voidness (Articles 123 and 381 LOR). Such an approach is questionable because the contract made under duress is generally not void but voidable (rectius, ‘rescindable’) by the injured party against the other contracting party, whereas the usurious contract is typically regarded as (partially) null and void. It is so owing to the fact that: (a) from a public policy view usury amounts to a criminal offense, and (b) in the case of usury the exploitation of another is today considered to be in re ipsa. It is recommended to introduce a mechanism of calculation of the usurious interest which is not linked to a fixed interest rate. This may be done by a special law which the Civil Code may simply refer to. However, as in the case of penalty and remunerative interest, transitional provisions may be needed. It is also recommended to keep the usurious contract and the contract made under duress distinct and separate and to regulate their consequences differently, i.e. the presumption may be removed for usurious contracts, which should be null and void (see infra for more details), and the contract made under duress may be merely voidable.

LXXI. Recommendation no. 71 Neither Art. 381 nor Art. 123 LOR clarify the legal consequences of the penalty of nullity for the usurious contract. Shall the whole contract or only the usurious clause be null and void? If the usurious clause alone is null and void, should

57 Art. 122 LOR addresses the disproportion in mutual performance but makes no reference to the duress or weakness of the party.



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interest be still owed and at what rate? Although solutions differ across jurisdictions, the majority of legal systems provide for the partial nullity of the contract in order to ensure that the part of the contract that is unaffected remains in effect. The rationale behind this is to protect the debtor from the effects of the annulment of the whole contract: the debtor would be required to immediately return the principal received, which in turn would aggravate his situation even further, despite the fact that he represents the weaker contractual party requiring protection. Besides, in order to avoid restitution the debtor may be persuaded to refrain from claiming the nullity of the contract at all. It is recommended to provide that the agreement on the excessive part of the interest rate is null and void, whereas the agreement on the interest rate up to the permitted interest rate remains valid. Alternatively, the Civil Code may provide that if usurious interest rates are agreed upon, the relative clause is void and no interest whatsoever must be paid. In this way, the (usurious) interest clause is entirely removed from the contract. Such a solution aims to strengthen the fight against the crime of usury through an afflictive and punitive sanction58.

LXXII. Recommendation no. 72 Art. 381 LOR does not specify when the test of usury rates should be made, i.e. at the time of the contract or at the time of the payment? What is to happen in the case of ‘supervened usury’, that is where parties agree on a lawful interest rate (so, one that is lower than the threshold applicable at the time the contract is entered into), but, later on, during the term of the contract, thresholds go down and as a result the agreed rate becomes higher than the new thresholds? It is recommended that the principle is provided that the test for usury rates should be made at the moment interest is promised or agreed, regardless of the time of payment, so that the ‘supervened’ breach of usury thresholds should have no consequences. Alternatively, the Civil Code may stipulate that although an interest clause cannot be deemed void (as it had originally complied with the applicable thresholds), interest rates that exceed a new lower threshold cannot be legally enforced and should be automatically be reduced within the new threshold applicable when the interest falls due.

Z. Sale of disputed right and conditional fee agreement

LXXIII. Recommendation no. 73 Art. 444 LOR has been inspired by Articles 1261 and 2233 (old version) of the CC. Par. 1 codifies a general principle on the transfer of contested rights, whereas par. 2 provides an exception: the first sentence provides that the agreement

58 Such an innovative solution is contemplated, for example, by Art. 1815 par. 2 CC.



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whereby a lawyer or any other person who is entrusted with the realisation of a contested right purchases such a right shall be null and void. This provision aims to protect clients, avoid conflicts of interest and preserve the dignity of the legal profession. However, its wording is rather unclear due to the use of foggy expressions such as “any other recipient of instructions”, “realisation” [of a contested right”], etc. The second sentence provides the same penalty of nullity in relation to the agreement by which any of the above persons negotiates for himself a share in the amount awarded to his client by the court. So, par. 2 puts together two different issues: the prohibition for a lawyer to purchase a contested right (which makes sense in the context of rules governing sales contracts) and the prohibition to agree as fee a share of the amount obtained by the client (which is not related to sale contracts). Furthermore, it is questionable whether provisions related to the legal profession should be in the Civil Code. Ideally, this provision should be deleted and codified in the Law on Bar or other similar law. However, if the decision is not to remove it, then one should consider that such agreements with attorneys are common in the practice of many European countries. What should not be allowed is for the lawyer to agree on the transfer of a share of the disputed property or asset if the case is successful. It is recommended that the wording of the first sentence is improved and that the second sentence of Art. 444 par. 2 is amended to permit conditional fee agreements under certain circumstances. For instance, the agreement should be written; the lawyer should not acquire a share of the disputed property or asset; and/or the conditional fee should be reasonable.

AA.Sales contract (notification in case of defects; partial defects; loss of withdrawal right; sale with documentary credit)

LXXIV. Recommendation no. 74 Articles 464 and 465 LOR provide the duty of the buyer to inspect the goods and notify the seller of any defects. Such articles differentiate between commercial contracts and non-commercial contracts. Within the meaning of the LOR, commercial contracts are nothing else than business-to-business (B2B) contracts (see Art. 12). If the Civil Code is to incorporate the EU acquis on consumer contracts, the application of those provisions could be restricted to any contract of sale other than a consumer sale59. But reference to commercial contracts should be removed. As a result, B2B contracts would be regulated by default by Articles 464 and 465 LOR, whereas B2C contracts would be regulated by special

59 The same happens in other EU members states. In Italy, for instance, the guarantees associated to an ordinary sale are still regulated by Articles 1490 ff. of the Civil Code, whereas the guarantees associated to a consumer sale are regulated separately (originally, by the Civil Code itself, and as of 2005, by a new Consumers Code).



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rules to be codified in accordance with Art. 5 par. 2 of Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees. It is recommended restricting the application of the Articles 464 and 465 to any contract of sale other than a consumer sale and to provide special rules for consumer sales in compliance with Directive 1999/44/EC.

LXXV. Recommendation no. 75 Articles 464 and 465 LOR differentiate between ‘patent’ and ‘latent’ defects. The buyer must inspect the goods and notify the seller of any defects within 8 days or, in the case of a commercial contract, immediately, if the defect is patent, or within 8 days or, in the case of a commercial contract, without delay, if the defect is latent. The terms foreseen do not always make sense and the regulation is unnecessarily complex and sometimes unreasonable. For example, the 8-day deadline provided by Art. 464 par. 1 and 465 par. 1 LOR seems too long when the defects are noticed during the inspection. It is recommended to simplify the legal regime by merging the existing rules for both types of defects into one single article and revising the periods of limitation. In particular, if defects are noticed during the inspection, notification should take place ‘immediately’ – when inspection is conducted in the presence of both parties – or ‘without delay’ – in all other cases. If otherwise defects come to light subsequently, then it makes sense to give to the buyer some reasonable time to make the notification, preferably in writing. In this scenario, the 8-days deadline from the day the defects were noticed should suffice.

LXXVI. Recommendation no. 76 Art. 475 LOR deals with partial defects. This article can be criticised for at least two reasons. Systematically, liability for material defects is governed by Articles 461 to 470 LOR, so if any rules on partial defects were to be provided the right place would be there. Conceptually, it does not make sense that in the event of partial defects the buyer may only withdraw from the contract partially (… unless the agreed thing constitutes a whole or the buyer has a justifiable interest in accepting only the thing as agreed). If a part of the delivered thing is defective, the functionality of the thing is most likely impaired. The idea that the buyer may withdraw from the contract solely in respect of the defective part not only restricts the rights of the buyer to an unfair degree but is also incompatible with the underlying principles of the LOR, including those that partial performance is equivalent to non-performance and the creditor is always entitled to full performance (see e.g. Art. 288). In addition, there are no specific rules on how to perform the partial withdrawal and what would be the legal consequences for it. It is recommended that Art. 475 is revised as follows: in primis, the sentence “If only a part of the delivered thing has defects or…” may



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be removed from par. 1. As a result, this article should be left to deal only with partial performance, i.e. ‘quantitative’ non-performance. In secundis, with a view to allowing the buyer to freely choose whether to accept partial performance or not, the sentence under par. 1 “only in respect of the part that has the defects or the part or quantity that is missing” and par. 2 as a whole may both be deleted.

LXXVII. Recommendation no. 77 Art. 478 LOR foresees the loss of the buyer’s right to withdraw from the contract because of a defect in the goods if these cannot be returned in the state in which they were received, unless very specific circumstances occur. This seems to be impracticable in the case of normal use of goods. It is recommended that this provision is deleted.

LXXVIII. Recommendation no. 78 Art. 530 LOR regulates sale with documentary credit. However, international players like the International Chamber of Commerce (ICC) have already addressed the needs of this contractual practice through a comprehensive set of uniform rules of practice on documentary credits. It is recommended removing this provision from the Civil Code.

BB. Donations mortis causa and distribution of property before death. Contract of lifelong maintenance

LXXIX. Recommendation no. 79 Art. 548 LOR concerns donations mortis causa, i.e. donations that are to be performed after the donor’s death. This article reiterates a provision of the Slovenian Code of Obligations which did not exist in the old Yugoslav LOR. It states that such donations shall only be valid if the relevant deed is notarised and delivered to the donee. However, the Law on Inheritance (IL) makes already provision for the possibility to transfer the ownership of a property or asset to heirs at law or other persons through a testamentary disposition. Moreover, Art. 548 may be used to circumvent the provisions of the IL on compulsory shares. It is recommended that this provision is removed to ensure consistency between the inheritance law and law on obligations within the overall framework of the Civil Code.

LXXX. Recommendation no. 80 The LOR contains provisions in relation to the delivery and distribution of property of the decedent before his death (Articles 550-559). The IL provides rules as well on



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transactions inter vivos in view of future succession (Articles 58-68). Despite some differences in terminology, the respective scope of application of these two sets of provisions overlaps significantly. Moreover, important inconsistencies can be noticed between the two laws. Firstly, different requirements are set forth as regards the conditions for validity of such a contract (e.g. who shall consent to it). Secondly, while the Inheritance Law identifies the court as the competent authority for the verification of the contract, the LOR prescribes that the contract must be notarised. One may further note the different position of the spouse under the two laws, which would seem to be much weaker in the LOR (cfr. Art. 64 IL and Art. 555 LOR). In addition to the fact that the two laws regulate the same type of agreement, and in some respects they even contradict each other, there are some other considerations that must be taken into account when codifying the Civil Code, which are related to the problems that many women face in inheriting property in Kosovo. In practice, the contract above is often used by fathers to transfer properties to their son/s prior to their death so as to avoid the restrictions that inheritance rules impose in respect of heirs at law and compulsory shares, especially with regard to their spouses and daughters60. Leaving such provisions in the Civil Code may eventually nullify the positive effects of any other action aimed at preventing women from renouncing to inheritance under Articles 130 ff. IL. There is, in fact, a concrete risk that many women may continue to lose their inheritance rights because the male members of their family would still be entitled by law to avail themselves of this type of agreement to achieve the same result of renunciation. It is recommended removing from the LOR the contract of delivery and distribution of property of the decedent before his death.

LXXXI. Recommendation no. 81 Art. 560 par. 1 LOR regulates the contract of lifelong maintenance, i.e. the contract through which a contracting party (maintaining party) undertakes to support the other party (maintained party), while this latter declares that he will leave to the former all or part of his property after his death. In the presence of compulsory heirs of the maintained party (for instance, a descendant), this type of contract may give rise to conflicts with the IL due to an infringement of the compulsory share. The regulation of this contract may also violate the legal provisions of the Family Law relating to marriage, and Art. 42 in particular, which describes the lifelong rights and obligations of spouses. It is recommended removing this contract from the Civil

60 This is possible because Art. 61 par. 1 IL and Art. 552 par. 1 LOR affirm the same principle that if such an agreement is entered into, the inheritance of the decedent will only consist of the property not already allocated or of any property acquired after such allocation. The practical outcome is, as expressly foreseen by Art. 61 par. 2 IL and Art. 552 par. 2 LOR, that the property received as a result of the agreement in question shall neither be counted towards the inheritance share of the descendant, nor shall it be taken into account when determining the value of the hereditary property.



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Code or, alternatively, regulating it within the frame of the inheritance law rather than the law of obligations.

CC. Contract for work

LXXXII. Recommendation no. 82 The regulation of work contracts (Articles 615 to 644 LOR) is mainly based on Articles 2222 ff. CC. However, there is no provision like Art. 2226 CC to deal with the defects or non-conformity with the contract of the work delivered. It is recommended that specific rules on legal effects of non-conformity are added to the existing ones, along the lines of the rules governing other contracts, and the sales contract in particular. These additional rules may define the legal consequences of acceptance of the work done by the contractor, the duty of the ordering party to notify of non-conformity or defects within a certain deadline61, the consequences of having fraudulently concealed the non-conformity or defects, the rights of the ordering party and the duties of the contractor, the statute of limitation for legal action, etc.

1.2. Recommendations related to special laws

DD. Self-defence

LXXXIII. Recommendation no. 83 Art. 20 of the Law on Property and Other Real Rights (LPRR) provides that the person who damages or destroys movable property belonging to another person is not liable to compensate if this was necessary to defend himself or a third person against an imminent danger deriving from such movable property. Article 20 appears to be redundant because such matters are already covered by the general conduct described by Article 143 LOR. Besides, matters of exemptions from liability are usually addressed by the law of obligations. It is recommended to regulate the right to self-defence and state of necessity only once, in the law of obligations of the Civil Code, under the notion of extra-contractual liability (Articles 136 ff.). The equivalent norms laid down by the LPRR should be removed.

61 The trade section of German law contains a provision which is similar to that of Article 39 CISG, namely HGB § 377, which provides that notice of non-conformity be given within a “reasonable time”. In contrast to this, Art. 1495 par. 1 CC provides a duty to notify of non-conformity within 8 days. This difference in domestic laws could make an Italian seller more accustomed to having the right to be properly notified of any non-conformity within a fixed narrow timeframe, whereas the German buyer according to his domestic law has a more flexible timeframe.



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EE. Pledge

LXXXIV. Recommendation no. 84 Articles 133 to 171 LPRR regulate the pledge. Among these rules, Articles 136 and 137 regulate specifically the “pledge agreement”. However, the LOR also addresses certain aspects of collateral over movable property. The English unofficial translation of the law either refers to “pledge” (see e.g. Articles 228, 230, 276, 283, 319, 326, 331, 347, 349, 421, 433, 975, 977, 1024 and 1053 LOR) or to “lien” (see e.g. Articles 643, 693, 694, 750, 777, 800, 826, 867 and 874 LOR). However, the difference between the pledge and the lien (an institute originating mainly from the Common Law tradition) seems to be only a terminological one. In the official Albanian version of the law the word ‘peng’ is always used. The English version of the law should therefore consistently use the word “pledge”. It is recommended to review carefully the English version of the LOR in order to ensure that terminology is used consistently in the English translation of the Civil Code.

FF. Pre-emption

LXXXV. Recommendation no. 85 The LOR refers to pre-emption rights in general terms, whilst the LPRR regulates such rights with specific regards to immovable property. The right of pre-emption in the case of a sale contract is regulated by both laws (respectively, Articles 510 to 516 LOR and 44 to 50 LPRR). These provisions do not necessarily contradict each other; however, some provisions might be repetitive (see e.g. Article 516 par. 1 LOR and Article 44 par. 2 LPRR regarding statutory pre-emption), or may concurrently regulate contractual aspects of pre-emption (see e.g. Articles 44.2 LPRR/Art. 510 LOR, and Art. 45 LPRR/Art. 511 par. 1 LOR). The provisions on pre-emption are usually designed to be applicable to the sale of land, and rural land in particular. Hence, they are mostly part of property law. In contract law, the pre-emption agreement falls under the parties’ autonomy and the breach of such an agreement is subject to the general rules of the breach of contract. It is recommended to review carefully the two sets of provisions to ensure that there is no unnecessary duplication or fragmentation in the future Civil Code. Cross-references may be required in the Book on obligations.

GG. Partnerships

LXXXVI. Recommendation no. 86 The old Yugoslav LOR did not regulate the contract of partnership. When the Slovenian Code of Obligations was drafted, new articles were inserted to govern the contract of partnership. The new LOR has fully reproduced the above provisions under Articles 987 to 999. As a result, the LOR overlaps now with the LBO, which



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regulates the ‘general partnership’ as a basic type of business organisation (Articles 49 to 65). These two sets of provisions seemingly regulate the same type of contract. Both of them imply that two or more persons and/or organisations agree to cooperate to achieve a common goal using their own contributions which can consist in property, assets, monies, services or labour (see Art. 988 LOR and Art. 54 LBO). The only noticeable difference is that the LBO places emphasis on a cooperation aimed at conducting a “business activity” (Art. 49 par. 1), whereas the LOR refers more generically to a “common purpose permitted by law” (Art. 987). This difference, however, does not seem of crucial importance for definition purposes, given that the LBO adopts a very wide definition of business activity, which is intended as any (regular or repeated) activity involving the offer, provision or production of goods, services, property and/or works to or for any person or organisation in return for or in expectation of any type of payment or compensation62. The only type of situation left outside the scope of the LBO is where the property is not purchased, acquired or shared with the object of earning profits. This is perfectly normal as an overview of the practice of partnership agreements across Europe shows clearly that partnership is commonly understood both in common law and civil law systems as an agreement between two or more individuals or companies to form and carry on a for-profit business. If a partnership does not have a business purpose then it is not a partnership but something else which is subject to different rules and regulations63. It is recommended removing the provisions on partnership agreements from the Civil Code.

HH. ‘Communio’

LXXXVII. Recommendation no. 86 Articles 1000 to 1008 LOR on common ownership appear to be a duplication of similar provisions laid down by the LPRR (in particular, Articles 43, 51-56, 57-62). The English version of the LOR improperly uses the word “community” instead of

62 Any economic activity which is profitable may therefore be subsumed under the concept of business activity, which, as a consequence, also covers activities that are not properly of a trade nature – agriculture, property management, joint exercise of free professions, leisure services, etc. For example, the provision of services by free professionals (e.g. lawyers) would qualify as a business activity as well within the meaning of the LBO, and such professionals may accordingly be eligible to enter into a partnership agreement to provide their services as associated lawyers, i.e. practice in the form of a ‘joint law firm’.63 For instance, co-ownership, as a form of joint enjoyment of property, whether based on a contractual relationship or arising by operation of law, is regulated in a different place (e.g. Art. 51 LPRR on joint ownership). Likewise, Articles 58 ff. of the Family Law provide rules for both marital and extra-marital partnerships. Another example is represented by non-profit partnerships, e.g. associations or foundations, which are governed by special law (Law No. 04/L –057 On Freedom of Association in Non-governmental Organisations). A comprehensive regulation of PPPs can be found in Law No. 03/L-090 On Public-Private-Partnerships. More in general, Art. 2 LOR acknowledges the freedom of will, which should also be intended as the freedom of parties to conclude contracts other than those provided by law.



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‘communion’. It is recommended that common ownership rights, including co-ownership and condominium, are regulated in the LPRR and that the related provisions in the LOR are repealed.

II. Leasing and other ‘modern’ contracts

LXXXVIII. Recommendation no. 88 Financial and operational leasing is regulated by the Law on Leasing (LL). Many countries which have adopted a Civil Code have opted to codify ad hoc rules on leasing. Other countries have regulated leasing with special laws. In the impact assessment we argued that it would be advisable for the contract of leasing to be regulated, together with other ‘modern contracts’ (factoring, franchising, etc.), in the law of obligations as part of the future Civil Code. However, after careful thought, we believe that this may not be the best approach. In fact, the Kosovo economy is not of such complexity yet to justify introducing contracts such as factoring or franchising. The fact that only the contract of leasing has been codified so far seems to confirm such an understanding. Usually, modern contracts are introduced in economies in transition and developing countries with the assistance of the World Bank. This was the case, for instance, of the LL. If any financial institution active in the area of legal reform was of the opinion that other modern contracts should be codified in Kosovo then they would have provided technical assistance to do so. Furthermore, the introduction of (additional) modern contracts implies a choice between different models and approaches which requires a lengthy debate that may temporally stretch beyond the timeframe of the project. In light of the above, it is recommended neither to incorporate the contract of leasing nor to codify any other modern contract in the Civil Code.

JJ. Lease of agricultural land

LXXXIX. Recommendation no. 89 The Law on Agricultural Land (LAL) deals with the use, protection, regulation and lease of agricultural land. It comprises a mixture of administrative and civil law. The LAL includes a comprehensive set of rules regarding the lease of agricultural land (Chapter V, Articles 30 to 37). It is recommended that the practice of other European countries (e.g. Germany, Italy, Netherlands, and Slovenia) is followed and that the matters related to the leasing of agricultural land continue to be regulated by special legislation.

KK. Notarisation

XC. Recommendation no. 90



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Art. 30 LN specifies which contracts must be notarised. However, the LOR contains as well some rules concerning the notarisation of contracts (e.g. Art. 523 par. 2, Art. 548, Art. 550 par. 2, and Art. 561). Other laws to be codified within the Civil Code include provisions on the notarisation of specific contracts. For instance, the LPRR provides in Art. 36 par. 2 that real estate contracts must be concluded before a competent office, i.e. the public notary. Some of these provisions are redundant. The notarisation-related provisions existing within the LOR and other special laws which duplicate provisions of the LN may be removed from those laws. In fact, the LN groups (most) contracts requiring notarisation in one article (which does not adhere to a rigid numerus clausus principle). An alternative may be to leave those provisions in the LOR and other laws where the substance of the contract is regulated, regardless of any possible duplication by the LN; however, Art. 52 LOR (which currently requests the written form only) should be revised to require the notarisation of the contract for the transfer of an immovable property. However, the best approach would probably be to specify in a dedicated article of the LOR the list of the contract(s) subject to notarisation.

XCI. Recommendation no. 91

Art. 30 par. 1 LN requires notarisation for real estate contracts. Similarly, Art. 36 par. 2 LPRR provides that the contract for the transfer of ownership of an immovable property must be concluded before a competent office, e.g. public notary. However, Art. 52 LOR merely provides that such contracts shall be concluded “in written form”. It is recommended that Art. 52 LOR is removed from the law of obligations of the Civil Code since the written requirement is subsumed in the notarial form requirement.

XCII. Recommendation no. 92 With regard to notarisation, the English expression used in the LOR is “notarial protocol”; in Albanian, “akt noterial”. However, the LN adopts a different terminology. While the English expression chosen is “notarized deed”, the Albanian text refers to “Dokumentet e noterizuara” or, sometimes, “veprimet e noterizuara”. It is recommended that the terminology on the notarisation of contracts is used consistently. The drafters of the Civil Code should decide which technical terms are to be used in the Civil Code and those terms should be adhered to by special laws, including the LN.

LL. Motor liability insurance

XCIII. Recommendation no. 93 The LCMLI regulates the liability insurance for damages caused to third parties



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from the circulation of motor vehicles. Given its nature of lex specialis, this law should not be incorporated in the Civil Code.

MM. Defamation and insult

XCIV. Recommendation no. 94 The CLDI de-criminalises defamation and insult and provides for mechanisms to ensure effective and appropriate compensation for persons whose reputation has been harmed as a result of defamation and insult. This law represents a lex specialis of tort law which regulates a sui generis situation that would typically involve the dissemination of defamatory or insulting information in written or spoken form through print or broadcast media or by other means, which is heard or read by at least one other person. It is recommended not to incorporate this law in the Civil Code.

NN. Financial Services: Banking and Insurance

XCV. Recommendation no. 95 Upon entry into force of the LOR, the old Yugoslav LOR ceased to apply, with the exception of the Titles XXXI to XXXIX (Articles 1035 ff.) on banking contracts which will continue to be applicable until replaced by Kosovo laws or sub-legal acts (see Art. 1058 par. 3 LOR). Insurance contracts are regulated by Articles 918 ff. LOR. However, the old Yugoslav regulatory framework on financial contracts may be not up to date (if not obsolete). As such, banking and insurance contacts may need to be addressed and re-regulated with a view to ensuring that the new legal framework provides higher standards of commercial banking and insurance practices and consumer protection. The question then arises as to whether contracts related to financial services (banking, insurance, etc.) should be regulated at all in the law on obligations of the Civil Code. Regulating this type of contracts in the future Civil Code would avoid ‘fragmentation’ of the framework related to contract law. However, such contracts require a huge amount of highly technical provisions which could drag the Civil Code into dimensions not suitable for practical needs. It would therefore seem more sensible to let the matters of contract law concerning financial services be governed by special legislation on banking and insurance matters. This would ensure a more comprehensive approach to such matters and an in-depth regulation of contractual issues. It would also mean that the approximation to EU standards (especially, consumer-related) existing in the area of banking and insurance contract law should not be carried out in the Civil Code but should be accomplished by using special laws and regulations. It is recommended that the matters of contract law concerning financial services are governed by special laws and regulations on banking and insurance matters. Transitional provisions should however be designed



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to prevent a legal vacuum arising in the regulation of such contracts in case ad hoc legislation is not enacted or delayed.

2. Recommendations based on the EU legal assessment report (Activity B.3)

A. Anti-discrimination

XCVI. Recommendation no. 96 The Anti-Discrimination Law of Kosovo (“A-DL”) covers all issues addressed by Directives 2006/54/EC, 2004/113/EC and 2000/43/EC, including consequences in civil law such as reimbursement of costs and damages. Since the consequences for civil law obligations (reimbursement, damages) form only a minor part of the A-DL, it is recommended that integration of the A-DL into the Civil Code is not pursued.

B. Consumer protection

XCVII. Recommendation no. 97 European legal scholars broadly acknowledge the central position of the ‘Consumer Acquis’ 64 in European contract law. Even though there are exceptions, undoubtedly the core of EU contract law primarily consists of directives in the area of consumer law. The question is how to implement consumer law regulation affecting the legal relationship between parties. In civil law countries that have a tradition of codification, the question arises, in the first place, whether implementation should take place within the framework of the Civil Code, or whether the European consumer legislation should be kept apart, in order to leave the Civil Code free from contamination65. In 2012 Kosovo enacted the Law on Consumer Protection (LCP), thus introducing some principles of EU consumer contract law into its legal system. However, the LCP presents several gaps and shortcomings. In addition, EU consumer contract law is developing rapidly and the LCP does not include all the fundamental provisions of EU law. Therefore, the first and fundamental question is whether the provisions of the LCP have to be, entirely or partially, incorporated into the Book on Obligations of the Civil Code. The drafting ex novo of the Civil Code offers the opportunity of proceeding to a consolidation and simplification of the existing legal

64 The concept indicated the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law in the field of consumer law.65 The latter approach has been taken in France, where all consumer legislation, whether of a domestic or European origin, has been taken out of the Civil Code and has been placed in a separate Consumer Code, the Code de la Consommation. Italy adopted a similar solution by passing the Codice del consumo. The situation in Germany and The Netherlands is quite different: there is a strong tradition in both countries of implementing the private law part of consumer law in the Civil Code.



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framework. At the same time, it may serve the purpose of filling in the gaps and eliminate the shortcomings by transposing the most recent legal developments occurred in EU contract law into the law of Kosovo. In the light of the above, it is recommended to introduce a dedicated Sub-Chapter 7 titled ‘Consumer Contracts’ into Chapter 1 (‘Contracts’) of Title II (Sources of Obligations) of the Book on Obligations of the Civil Code, which may incorporate the relevant provisions of the EU acquis. We propose to distinguish the provisions of general application (‘horizontal rules’) from those provisions that are applicable only to specific market sectors (e.g. banking, insurance, tourism). Only the provisions of general application should be included into ‘Consumer Contracts’ sub-chapter of the Civil Code. In this way, it will be possible to consolidate the core of consumer contract law into the Civil Code. The Table below shows which provisions of the LCP may be taken into consideration for the purposes of drafting the sub-chapter on consumer contracts66:

Sections of the new Sub-Chapter ‘Consumer Contracts’

Existing provisions of the LCP

‘Definitions’ Articles 1-3‘Consumer rights’ Article 4‘Sale of consumer goods and associated guarantees’

Article 5Chapter II ‘Sale of Products and provision of services’Chapter III ‘Notification for the commodity’

‘Unfair contract terms’ Chapter X (Articles 50- 51)‘Specific contracts’ Chapter IV ‘Sale by action, discount, sale at

outdoor markets and sale of defective commodities’Chapter V ‘Public services provided to the consumer’Chapter VII ‘Contracts signed outside the seller’s premises’Chapter VIII ‘Contract concluded in distance’Chapter XV ‘Purchase and sale through the Internet’

Consumer law enforcement Chapter XVI ‘Bearers of consumer protection’

XCVIII. Recommendation no. 98

66 However, such provisions need to be revised and updated, and new provisions have to be inserted to fill in the existing gaps. The LCP should be repealed accordingly after the entry into force of the Civil Code.



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Kosovo law does not transpose Directive 2011/83/EU on consumer rights (“Consumer Rights Directive”) but its predecessors, i.e. Directive 85/577/EEC on contracts negotiated away from business premises and Directive 97/7/EC on distance contracts. The matters covered by such Directives have been addressed in part in the LCP67 and in part in the Law on the Information Society Services (LISS). The Consumer Rights Directive has repealed and changed the Directives transposed by Kosovo lawmakers at the time of drafting the LCP and LISS. It is recommended that Kosovo law is changed with respect to out-of-business premises contracts and distance contracts (while the provisions transposing the old directives may be removed from the LCP and LISS). It is recommended to regulate sales by Internet together with distance contracts, by introducing a sub-division.68 These provisions have to be redrafted to comply with the principles of the Directive 2000/31/EC on electronic commerce.

XCIX. Recommendation no. 99 There is no law in Kosovo addressing timeshare contracts and other contracts alike as regulated by Directive 2008/122/EC. Should Kosovo lawmakers decided to regulate such contract (which is however losing significance in the EU), then the most appropriate place for introducing it would be the Law on Tourism (LT). It is therefore recommended that timeshare contracts and other contracts alike are not regulated in the law of obligations of the Civil Code.

C. Recommendation no. 100 Directive 1999/44/EC on the sale of consumer goods and associated guarantees provides buyers in consumer contracts with legal remedies and regulates how and within which time limits these remedies can be used. This Directive is not incorporated in the LOR. On the other hand, the LCP contains few provisions relating to this Directive, such as Art. 5 – Obligations of the Seller. This article, however, falls short of what a consumer may expect under the Directive69. It is recommended that

67 The LCP addresses issues such as consumer credit contracts; unfair consumer contract conditions; unfair, misleading, and aggressive commercial practices; comparative and misleading advertising; purchase and sale through the Internet. However, some consumer contracts have been regulated in other laws: e.g. distance contracts are regulated both in the LCP (just defined in Articles 36 and 37) and the LISS (substantive rules foreseen under Articles 29 ff.). Another example is travel packages contracts which are regulated in the Law No. 04/L176 on Tourism.68 The ‘hot button issue’: according to the new Article 8(2) of the EU Consumer Rights Directive, businesses throughout the European Union will not only have to disclose the total cost of the goods, services or digital content (including taxes) upfront, but also make sure that consumers are aware that they will enter into a contract with a payment obligation by labelling the confirm order button accordingly. 69 The remedies are not regulated in a clear and understandable way. The central notions of conformity and non-conformity are not defined. The consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement, or to have an appropriate reduction made in the price, or the contract rescinded with regard to those goods. In addition, time limits for the enforcement of rights and remedies (2



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Directive 1999/44/EC is transposed in the Civil Code (whereas any provisions partially implementing it may be removed from the LCP).

CI. Recommendation no. 101 Directive 98/6/EC on the indication of the prices of products offered to consumers does not really relate to the law of obligations. It is rather part of public law regulating traders’ businesses. This Directive seems to have been implemented by the LCP in Articles 9 and 10. It is recommended that this Directive is not incorporated into the Civil Code.

CII. Recommendation no. 102 Directive 93/13/EEC on unfair terms in consumer contracts has been implemented in Chapter X of the LCP (Articles 50 and 51). We recommend transposing this Directive in the law of obligations of the Civil Code and removing any related provisions from the LCP70.

CIII. Recommendation no. 103 Following the distinction between provisions of general application in consumer contracts and sector-specific rules, it is recommended to not incorporate Directive 2008/48/EC (Consumer Credit Directive), Directive 2014/17/EU (Mortgage Credit Directive), Directive 2002/65/EC (Distance Marketing Directive), Directive 2007/64/EC (Payment Services Directive), and Directive 2002/92/EC (Insurance Mediation Directive) in the law of obligations of the Civil Code. The provisions regarding consumer protection in financial and banking services should be included in the main law(s) of Kosovo regulating these services71.

years) and the notification of defects (2 months) are not regulated. As a result, the time limits of the LOR apply: 1 year from notification for the exercise of buyer’s rights and remedies (Art. 483 LOR) and 8 days for the notification (Articles 464 and 465 LOR). This clearly violates EU consumer standards. A presumption of non-conformity at the time of delivery of the goods if the defect is detected within 6 months of delivery is also lacking (see Article 5(3) of the Directive).70 It is to be added that Art. 50 par. 6 and Art. 51 incorporate almost identical provisions, perhaps with different legal consequences. The indicative and non-exhaustive list of terms which may be regarded as unfair (see the Annex to the Directive) is reproduced with a slightly different wording under both articles, thus giving rise to an unnecessary duplication.71 This seems to be largely the case already in Kosovo. For instance, the Consumer Credit Directive has been transposed in the LCP (notably, Chapter IX ‘Consumer financial services’, Articles 38 to 49) as well as in the CBK Regulation on Effective Interest Rate and Disclosure Requirements of 29 November 2012. The Mortgage Credit Directive is fully transformed into Kosovo law by another regulation of the CBK, i.e. Regulation on Mortgage Lending of 26 February 2015, entering in force on 1 October 2015. The LCP has also transposed at large the requirements of the Distance Marketing Directive, which deals with the selling of financial services on the Internet. Law No. 04/L-155 on Payment System is in accordance with Directive 2007/64/EC on payment services. There is a regulation of the CBK for insurance intermediaries which has partially transposed Directive 2002/92/EC (Insurance Mediation Directive). However, as noted in the EU legal assessment report, some of these legal instruments present shortcomings and may be improved to be brought fully in line with the EU



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CIV. Recommendation no. 104 The LOR includes rules on travel packages (see Articles 880-905 LOR on the contract of organised travel). These rules, however, do not provide for the security against the insolvency of the travel organiser as required by Art. 7 of Directive 90/314/EEC (Package Travel Directive). Besides, the LT regulates the travel package contract regardless of almost identical provisions in the LOR. This law is apparently influenced by the Package Travel Directive72. It is recommended that the package-related provisions of the LOR are not included in the Civil Code and that travel package contracts continue to be regulated only by the LT (which may subsequently be amended and brought in line with the future Package Travel Directive) 73. This recommendation follows the distinction between provisions of general application in consumer contracts and sector-specific rules.

C. Information Society (e-Commerce and Digital Signatures)

CV. Recommendation no. 105 Directive 2000/31/EC on electronic commerce and Directive 1999/93/EC on electronic signatures are largely implemented in Kosovo through the LISS. However, overlapping provisions exist in the LISS and LCP (both address Internet contracts, for example). In addition, certain provisions are lacking from both laws (for instance, the rules on pre-contractual information duties). A mixture of public and private law provisions can also be noted in the LISS (e.g. public law issues of implementing digital signatures, establishing supervisory bodies, and electronic invoicing, on the one hand, and private law issues of electronic documentation, distance contracts, formal requirements and signature requirements on the other hand). It is recommended that certain key principles on electronic contracts such as Art. 1174 LISS are codified within the law of obligations of the Civil Code (among the rules on the conclusion of contracts: Articles 15 ff. LOR).

acquis.72 Yet, there is nothing again in this law reflecting Art. 7 of the Directive. Art. 20 par. 1 of the Law on Tourist Services provided that the tourist agency, for each package arrangement, “is required to ensure a bank guarantee to reimburse the passengers for: 1.1. expenses incurred, in case the touristic agency fails to offer contracted services; 1.2. damages resulting from the non-fulfilment of the programme in its entirety, in accordance to the type, quantity, quality and the methods provided for in the programme; …”. However, this law was repealed in 2013.73 On 28 May 2015, the EU Council backed the new Package Travel Directive to bring it up to date with the developments in the travel market in order to meet the needs of consumers and businesses in the digital era. The text will undergo a legal-linguist revision before the Council can formally approve it. It should be published in the Official Journal of the EU before end of 2015.74 Art. 11 LISS states that an electronic contract shall not be denied legal effect, validity or enforceability solely on the grounds that it is wholly or partly in electronic form or has been entered into wholly or partly by way of electronic communications.



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D. Unfair Trade Practices. Advertising and Information.

CVI. Recommendation no. 106 Directive 2005/29/EC (Unfair Commercial Practices Directive) is implemented in the LCP, Chapters XI-XIII. Integration into the law of obligations of the Civil Code is not required since the provisions of this Directive apply to commercial practices which take place prior to the negotiation and conclusion of a contract. Besides, unfair trade practices are already regulated in Kosovo by Law No. 2004/18 On Internal Trade (16.06.2004), as amended and supplemented by Law No. 04/L-005 (23.06.2011). We recommend not transposing the Unfair Commercial Practices Directive in the Civil Code.

CVII. Recommendation no. 107 Directive 2006/114/EC (Misleading and Comparative Advertising Directive) is implemented in the LCP, Chapter XIV. Integration into the law of obligations of the Civil Code is not appropriate because this Directive regulates unfair practices such as misleading and unlawful comparative advertising which represent a public law rather than a private law matter as they may distort competition, be detrimental to competitors and have an adverse effect on consumer choice. It is recommended not to transpose the Misleading and Comparative Advertising Directive in the Civil Code.

CVIII. Recommendation no. 108 Directive 2004/39/EC on markets in financial instruments addresses investment companies. Only a small part deals with the relationship between the costumer and the investment company. That is a special contract which needs not to be regulated in the Civil Code. It is recommended that this Directive is not be transposed in the Civil Code.

E. Product Liability

CIX. Recommendation no. 109 The LCP does not regulate matters related to product liability. Product liability is poorly addressed in Art. 160 LOR which does not meet the standards of Directive 85/374/EEC (Product Liability Directive). It is recommended that Art. 160 is amended in accordance with the provisions of the Product Liability Directive. In particular, it should be clearly stated that “producers shall be liable for any damages caused by product defects”. These provisions are of general application given that their scope is not limited to consumers.



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Documents

md.rks-gov.netmd.rks-gov.net/desk/inc/media/D24CE144-B527-4DF3-8… · Web viewThis report was originally drafted by the Law of Obligations Team (hereafter, the “Team”), composed