Although the dispute was between two companies, article 17 of Decree 446/85 of 25 October stipulated that the law governing unfair terms in the Decree applied in this case. The question to be considered by the court centred on whether the term restricting application of the law applied, since the defendant was arguing that the compensation term was invalid because it contravened article 19 (c), which bans compensation that is disproportionate to the damages incurred. In the view of the Supreme Court, any interpretation and assessment of the validity of contract terms subject to Decree 446/85 must be in line with the bona fides principle (articles 15 and 16). By applying the bona fides principle to the case under examination, the court was able to conclude that there was no breach of article 19 (c). In fact, this provision merely places a ban on compensation that is disproportionate to the damages incurred (the question of proportionality being assessed according to the bona fides principle). Setting compensation at one fifth of the charges outstanding could not be regarded as disproportionate. Even if the compensation were regarded as disproportionate, it would not be for the court to declare the term invalid, but rather to determine a fair reduction, as per article 812 of the Civil Code. As such and because the contract term under examination was setting a level of compensation, the creditor was entitled to terminate the contract (article 801 no. 2 of the Civil Code) when the debtor defaulted on the contract. At the same time, he was entitled to compensation, as laid down in the contract, to offset any damages he had incurred. Furthermore, this provision stipulated that it was not the injured party who carried the burden of proof. Rather, the other party had prove that no damages had been incurred.
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