Explanation of Article 108
The subject of this article is the consensual termination, i.e., termination by virtue of a resolutory condition, which is when the contracting parties agree that the creditor has the right to terminate the contract if the debtor breaches his obligations without the need for a judicial ruling. In this case, the termination occurs at the creditor's discretion, and it is not necessary to file a lawsuit as it takes effect once the condition is fulfilled. If practical necessities require the creditor to resort to the judiciary to obtain a termination ruling, the judge's ruling will confirm the termination rather than create it.
The consensual termination requires the four conditions shared with judicial termination mentioned in the introduction of this section (Third - Termination for Breach of Obligation).
It is clear from the article that consensual termination does not occur by the force of law as is the case with dissolution due to impossibility of performance, but the creditor must assert it, and the debtor cannot assert the termination if the creditor does not. The existence of the resolutory condition does not prevent the creditor from requesting the execution of the contract instead of its termination.
Consensual termination differs from judicial termination in that judicial termination assumes the existence of an implied resolutory condition in the contract based on the interdependence of reciprocal obligations in the contract without the contracting parties mentioning the resolutory condition. Therefore, this condition does not necessarily require termination; rather, it is subject to the judge's discretion regarding the extent of the breach's qualification for termination. The judge may grant the debtor a grace period even after a termination lawsuit is filed, and the debtor may avoid termination by fulfilling his obligation before the termination ruling if such late fulfillment does not harm the creditor. However, termination by the resolutory condition necessarily requires termination once the creditor asserts it; the judge has no discretion regarding the breach's qualification for termination concerning the debtor's obligation, nor can he grant the debtor a grace period; nor can the debtor avoid termination. The judge's authority is limited to verifying the availability of the consensual termination conditions and the occurrence of the breach warranting the application of that condition, and the debtor may dispute the fulfillment of the condition.
In consensual termination, the contract's wording must indicate that the creditor has the right to terminate the contract upon the debtor's breach of his obligation without the termination being contingent on a request submitted to the court for a ruling, such as stating that the contracting party has the right to terminate the contract or the right to terminate the contract and similar expressions indicating that termination does not depend on a court ruling. No specific wording is required for this agreement, as anything indicating this meaning achieves the intended purpose. However, if the contract's wording only implies the assumed resolutory condition present in all contracts or indicates that the creditor may request termination from the court upon the debtor's breach, a termination lawsuit must be filed, and the court's ruling will create the termination rather than reveal it, with full authority to assess its occurrence, and the debtor may avoid it before issuance if the court does not find that such late fulfillment harms the creditor.
The existence of the resolutory condition does not exempt from notifying the debtor upon breach unless the contracting parties agree to waive it or one of the cases mentioned in Article (176) is met. This agreement, i.e., the waiver of notification, must be explicit; it cannot be implicit. This is an exception to what is contained in paragraph (A) of the mentioned article, which allowed the waiver agreement to be explicit or implicit; thus, the waiver agreement for notification can be explicit or implicit for entitlement to compensation or transfer of risk of loss, but for the waiver of notification for consensual termination, it must be explicit.
There is no conflict between notifying the debtor and demanding execution even if the waiver of notification is explicitly stipulated and subsequent termination by virtue of the resolutory condition; this does not constitute a waiver by the creditor of his right to terminate.
Limiting consensual termination to some obligations does not extend it to others, nor does it deprive the creditor of the right to assert judicial termination for others.
The resolutory condition cannot be applied if it is found that the creditor has waived it explicitly or implicitly, nor does it prevent its valid application that asserting it is permissible for the creditor alone, as he retains the option between applying its effect and demanding execution.
Related To
Article 108
A creditor may, by agreement, have the right to terminate a contract upon the debtor’s breach of his obligations without a judicial ruling. The creditor shall, despite the agreement, notify the debtor of his intention to terminate the contract, unless the contracting parties explicitly agree otherwise.