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This Article refers only to contracts to be performed at one time. A different regime applies to contracts under which the characteristic performance is to be made over a period of time (see Article 7.3.7). The most common example of a contract to be performed at one time is an ordinary contract of sale where the entire object of the sale has to be transferred at one particular moment. This Article however refers also to, e.g. construction contracts in which the contractor is under an obligation to produce the entire work to be accepted by the customer at one particular time. A turnkey contract provides an important example.

Under a commercial contract one party will usually have to pay money for the performance received. That obligation is not the one that is characteristic of the contract. Thus, a contract of sale where the purchase price has to be paid in instalments, will fall under this Article provided that the seller's performance is to be made at one time.

Paragraph (1) of this Article gives each party a right to claim the return of whatever the party has supplied under the contract provided that that party concurrently makes restitution of whatever it has received.

This rule also applies when the aggrieved party has made a bad bargain. If, in the case mentioned in Illustration 1, the real market value of the shares is GBP 1,200,000, A may still require the return of the shares.

This Article also applies to the situation where the aggrieved party has supplied money in exchange for property, services, or other performances which the party has not received or which are defective.

As regards the costs involved in making restitution, Article 6.1.11 applies.

Restitution must normally be made in kind. There are, however, instances where instead of restitution in kind, an allowance in money has to be made. This is the case first of all where restitution in kind is not possible. The allowance will normally amount to the value of the performance received.

An allowance is further envisaged by paragraph (2) of this Article whenever restitution in kind would not be appropriate. This is so in particular when returning the performance in kind would cause unreasonable effort or expense. The standard, in that respect, is the same as under Article 7.2.2(b).

The purpose of specifying that an allowance has to be made in money ‘whenever reasonable’ is to make it clear that an allowance only has to be made if, and to the extent that, the performance has conferred a benefit on its recipient. That is not the case, for example, where the defect which gives the recipient of the performance a right to terminate has only become apparent in the course of processing the object of that performance.

The rule contained in paragraph (2) implies an allocation of risk: it imposes a liability on the recipient of the performance to make good the value of that performance if it is unable to make restitution in kind. The rule in paragraph (2) applies even if the recipient was responsible for the deterioration or destruction of what it had received. Such allocation of the risk of deterioration or destruction is justified, in particular, because the risk should lie with the person in control of the performance. On the contrary, there is no liability to make good the value where the deterioration or destruction is attributable to the other party: either because it was due to the other party's fault, or because it was due to a defect inherent in the performance. Hence the rule in paragraph (3).

The recipient's liability to make good the value of the performance received is not excluded in cases where the deterioration or destruction would also have occurred had the performance not been rendered.

The question of the recipient's liability to pay the value of the performance only arises in cases where the deterioration or destruction occurs before termination of the contract. If what has been performed deteriorates or is destroyed after termination of the contract, the normal rules on non-performance apply, as after termination the recipient of the performance is under a duty to return what the recipient has received. Any non-performance of that duty gives the other party a right to claim damages according to Article 7.4.1, unless the non-performance is excused under Article 7.1.7.

The recipient of a performance may have incurred expenses for the preservation or maintenance of the object of the performance. It is reasonable to allow the recipient to claim compensation for these expenses where the contract has been terminated and where, therefore, the parties have to return what they have received.

This rule applies only to reasonable expenses. What is reasonable depends on the circumstances of the case. In Illustration 10 it would matter whether the horse had been sold as a race horse or as an ordinary farm horse.

Compensation cannot be claimed for other expenses linked to the performance received, even if they are reasonable.

The Principles do not take a position concerning benefits that have been derived from the performance, or interest that has been earned. In commercial practice it will often be difficult to establish the value of the benefits received by the parties as a result of the performance. Furthermore, often both parties will have received such benefits.

In common with other Articles of the Principles, this Article deals with the relationship between the parties and not with any rights on the goods concerned that third persons may have acquired. Whether, for instance, an obligee of the buyer, the buyer's receivers in bankruptcy, or a purchaser in good faith may oppose the restitution of goods sold is to be determined by the applicable law.