Scope of the new regime
These provisions are intended to apply to restitution which may arise from: 1° annulment of the contract (Article 5.62 NCC), 2° termination of the contract for non-performance (Article 5.95 NCC), 3° impossibility of performance of the contract which is not attributable to the debtor (Article 5.101 NCC on the theory of risk) and 4° fulfilment of the resolutory condition. This regime also applies to the restitution of undue payment governed by Article 5.134 of the NCC.
Subject and form of restitution
Restitution applies in principle to everything that has been received under the contract (not only to things received in performance of a contractual obligation but also to things delivered for the formation of a real contract).
Restitution is in principle made in kind. However, it will be made "in value" if the parties agree or in cases where restitution in kind proves unreasonable or impossible (Article 5.119 NCC). In the case of restitution “in value”, the performance to be returned is in principle valued on the day of restitution (Article 5.119 NCC), i.e., as a rule, on the day the judgment ordering restitution is handed down, so that restitution “in value” and restitution in kind produce the same result.
Damage to the thing to be returned
Article 5.120, para. 1, of the NCC provides that the debtor, even if not at fault, must bear any loss, total or partial (including wear and tear), incurred by the thing. However, two clarifications must be made.
Firstly, the partial loss of the thing should not be confused with the diminution in value. If the value of the thing has decreased due to obsolescence or a change in the market price, there is no damage to the substance of the thing and the debtor is not liable for it. It is the creditor who has to bear it, without being able in principle to claim compensation for it.
Secondly, the debtor of the restitution will not be liable for the total or partial loss of the thing due to force majeure (Article 5.120, para. 2, NCC), provided (s)he is in good faith, it being understood that the debtor of restitution ceases to be in good faith, in case of nullity of the contract, from the moment (s)he has actual knowledge of the cause of nullity of the contract and, for other causes of restitution, after having been put on notice by the creditor (subject to the exceptions to the notice of default provided for in Article 5.233 NCC) (Article 5.117). In such a case, the debtor is discharged accordingly (in whole or in part depending on whether the force majeure has caused the total or partial loss of the thing, at least insofar as the performance is divisible). When the performances are in a reciprocal relationship (rapport synallagmatique / wederkerige rechtsverhouding), the release of the debtor of the restitution then entails the correlative release of his/her co-contractor. The rule res perit debitori (and not res perit domino) is therefore enshrined in this field. Conversely, if the debtor of restitution is in bad faith, (s)he remains bound to make restitution in value; conversely, the creditor remains bound by his/her own obligation of restitution.
Improvements made to the thing to be returned by the debtor
If the debtor has made necessary or useful improvements to the thing to be returned (impenses néessaires et utiles / noodzakelijke en nuttige uitgaven), the creditor must compensate the debtor for them, irrespective of the latter’s good faith. Sumptuary expenses (impenses somptuaires / overbodige uitgaven), on the other hand, must be borne by the debtor.
The fate of the fruits and proceeds of the thing to be returned
The restitution includes the proceeds, fruits, interest at the legal rate or the value of the enjoyment it has given, since the debtor ceased to be in good faith within the meaning of Article 5.117 of the NCC (Article 5.122 NCC). The legislator has therefore decided to impose the restitution of fruits and proceeds only if and when the debtor of the restitution is in bad faith (mala fides superveniens nocet). Indeed, the legislator considered that it would be unfair to oblige a possessor in good faith to give back the fruits that (s)he was not supposed to keep (assuming, of course, that (s)he was entitled under the contract to use the thing or to collect the fruits).
If the performance of each party has produced fruits, each party must return what the thing has produced, and a set off will be made only to the extent of the amount.
Order of restitution
Under Article 5.118(1) of the NCC, restitution must be made in the reverse order in which the performances to be returned were to be made. For example, in the case of a sale where the parties had agreed that the price would be paid before the seller delivered the thing, the seller may require the thing to be returned to him/her before reimbursing the price. If the performances to be returned were in a reciprocal relationship (rapport synallagmatique / wederkerige rechtsverhouding), Article 5.118, para. 2, of the NCC provides that the creditor of the restitution may decide to suspend his/her own obligation to return the thing under the conditions set out in Article 5.239 of the NCC (exception d’inexécution / niet-uitvoeringsexceptie). The case law of the Court of Cassation in this respect is thus enshrined. Hence, in the above-mentioned example of the sale, if the buyer refuses to return the thing before receiving his/her money first (in violation of Article 5.118, para. 1, the seller may refuse to return the money to the buyer).
Recognition of the adage "in pari causa"
The adage "in pari causa turpitudinis cessat repetitio" allows a judge to refuse a claim for restitution made by a party to an unlawful contract where (s)he considers in fact that this would compromise the preventive role of the sanction provided for the unlawful cause agreement or that social order requires that the impoverished party should be more severely sanctioned (Cass., 15 February 2016, No. C.14 0048.F).
This adage has been heavily criticized because it establishes a penalty within the meaning of the European Convention on Human Rights. However, a penalty must be established by law (nulla poena sine lege). The conditions of application of this rule have also been intensely debated.
The legislator has attempted to remedy these difficulties by giving an express legal basis to the in pari causa rule and clarifying the conditions of its application. Article 5.123 of the NCC provides that the court may refuse, in whole or in part, the restitution due to the party guilty of an intentional violation of public policy at the time of the conclusion of the contract. This provision refers exclusively to restitution following the annulment of the contract, to the exclusion of other grounds for restitution, and requires an (i) intentional (ii) violation of public policy (which includes morality according to the parliamentary documents), to the exclusion of mandatory rules, committed (iii) at the time of the conclusion of the contract, to the exclusion of those committed during the performance of the contract.
The legislator retains the optional nature of the adage in pari causa by leaving the judge a wide discretion in deciding whether or not to apply the rule, in whole or in part. The judge is invited to take into account in this respect all the circumstances of the case as well as the greater or lesser degree of culpability of the party or parties to whom the sanction is applied. If both parties are guilty of such intentional misconduct, the judge may decide to refuse restitution to each of them.
The right to restitution is limited by 10 years from the day when the cause of termination of the contract occurred, even when the cause of termination is retroactive - such as annulment or termination for non-performance. However, the right to restitution of undue payments is in principle time-barred from the day following the day on which the payment was made (except where the undue nature of the payment results from a retroactive annulment of an administrative act by the Council of State, in which case the limitation period may only start running on the day following the day of that annulment) (Article 5.116 NCC).