(1) The party required to take the measures necessary to obtain the permission shall do so without undue delay and shall bear any expenses incurred.
(2) That party shall whenever appropriate give the other party notice of the grant or refusal of such permission without undue delay.
1. Time for filing an application
The party under an obligation to obtain a public permission must take action immediately after the conclusion of the contract and pursue this action as necessary under the circumstances.
According to Article 6.1.11, each party shall bear the costs of performance of its obligations. This rule has been restated in paragraph (1) of this Article for the sake of clarity.
3. Duty to give prompt notice of the grant or refusal of the permission
The parties to the contract need to know as soon as possible whether the permission can be obtained. Accordingly, paragraph (2) of this Article provides that the party required to take the necessary measures must inform the other of the outcome of the application. This duty of information extends to other relevant facts, such as for example the timing and outcome of the application, whether a refusal is subject to appeal and whether an appeal is to be lodged.
4. Duty to give notice “whenever appropriate”
The “appropriateness” of giving notice of the grant or refusal refers to the need to give notice and the manner of providing it. The necessity of giving notice obviously exists where such notice is required by law, but may also be inferred from the mere fact that a permission requirement is referred to in the contract.
The “appropriateness” of the duty to give notice is also related to the relevance of the information to be provided. Accordingly, the applying party is not bound to inform the other party of the outcome of that application in cases where the latter party obtains the information from the granting authority, or where applications for permissions are regularly granted. The fact that the permission is, contrary to normal practice, refused in a given case makes the obligation to inform more compelling.
This Article does not establish particular requirements concerning the formalities relating to the communication (see Article 1.10).
5. Consequences of the failure to inform
Failure to provide information regarding the grant or refusal of the permission amounts to non-performance. Accordingly, the general consequences of non-performance, as set forth in Chapter 7, apply. The duty to give notice of the grant of the public permission is a contractual obligation arising at the time the contract comes into existence. The duty to give notice of the refusal of the permission is part of the duty to take the “necessary measures” to obtain the permission under Article 6.1.14 (see Comment 4).
1. A, whose place of business is in country X, and B, a contractor, enter into a contract for the construction of a plant in country X. The parties agree that B is not bound to begin the construction and A’s advance payments are not due until the grant of a permission by the authorities of country X.
A applies for and obtains the permission but fails to inform B that the permission has been granted. Two months later, B learns through inquiries with the authorities of country X that the permission has been granted and begins work on the construction of the plant.
Although the parties had agreed that their performances were due as of the time of the granting of the permission, A’s failure to inform B that the permission has been granted precludes A from relying on B’s failure to perform as of that date (see Article 7.1.2). Thus, the contractual period begins to run for B as from when it learns of the granting of the permission.
Moreover, B may also claim damages if it is able to establish, for example, damage resulting from failure to use its production capacity, additional costs arising from storing raw materials during that two-month period, etc. (see Article 7.4.1 et seq.). A, who from the very beginning had notice of the grant of the permission, must observe the original date of its performance, as provided for in the contract. If A fails to make an advance payment due four weeks after the granting of the permission, A must pay interest as from that date.
2. The facts are the same as in Illustration 1, except that the proper authority simultaneously informs A and B that the permission has been granted. B may not avail itself of A’s failure to inform in order to postpone its performance, nor is it entitled to damages for A’s failure to inform.