Article 106

What it means when you sign

This article says that a person who exercises a right unlawfully is liable. It then lists when the exercise of a right counts as unlawful: when there is an intent to cause harm; when the interests sought go against the law, public order or public morals; when the benefit expected is out of proportion to the harm done to others; and when the exercise goes beyond what custom and usage establish.

When you are about to sign, this article is relevant to clauses that give one side a strong right, such as to terminate at will, to impose penalties, to refuse approval or to change terms. It means that a right written into a contract is not unlimited. A party who uses such a right to cause harm, or in a way that is badly out of proportion to the benefit, or that exceeds custom, may be held liable even though the contract gives the right. A clause that grants a very wide right may be read against these four tests.