Breach of Contract in Switzerland: Legal Consequences

Debtor's Default (art. 102-109 CO)

The debtor is in default when they fail to perform at the agreed due date. Without a fixed term, default requires a demand from the creditor (art. 102 para. 1 CO). With a fixed term, default is automatic (art. 102 para. 2 CO).

Consequences: liability for all damage caused by delay (art. 103 CO), liability for fortuitous events unless proving the delay is not causal (art. 103 para. 1 CO). For monetary obligations, default interest of 5% per annum (art. 104 para. 1 CO).

Creditor's Options (art. 107-109 CO)

After fixing a reasonable additional deadline (art. 107 para. 1 CO) and the debtor's failure to perform:

Specific performance: maintain the contract and demand performance with damages for delay.

Contract termination: waive late performance and claim damages for non-performance (art. 107 para. 2 CO). Retroactive effect: performances already rendered must be returned.

Replacement: waive the debtor's performance and obtain substitute performance from a third party at the debtor's expense.

Defective Performance (art. 97 CO)

The debtor must compensate the resulting damage unless proving no fault. Burden of proving absence of fault lies with the debtor. Compensable damage: loss suffered (damnum emergens) and lost profit (lucrum cessans).

Additional Deadline (art. 107-108 CO)

In principle required before termination. Not required when: debtor's attitude shows it would be useless, performance has lost interest for the creditor, or a fixed-date performance was agreed (art. 108 CO).

Penalty Clause (art. 160-163 CO)

Parties may agree a liquidated damages clause (art. 160 CO). Due regardless of actual damage. The court may reduce excessive penalties (art. 163 para. 3 CO).