The Law Of Contract

Front 1

Types of contracts / Two

Back 1

1. Consumer
2. Commercial

Front 2

Exchange

Back 2

- Core of a typical contract
- Prompted by the belief that both parties will benefit from it

Front 3

Contract / Three basic questions

Back 3

1. Formation
2. Content
3. Remedies

Front 4

Contract law /definition

Back 4

A set of rules and principles
that governs transactions among parties,
thereby setting the rights & obligations of these parties

Front 5

Rules relevant to Contract law / 3 types

Back 5

1. Rules made by the contracting parties
2. Rules emerging from official national, European & supranational sources
3. Informal rules

Front 6

Freedom of contract / Entails

Back 6

1. Willingnes to contract
2. with whom
3. contents

Front 7

General conditions

Back 7

Standardized sets of rules

i.e. used by supermarkets and retailers so they do not have to draft contract conditions for every new contract

Front 8

Official National, European and Supranational Rules /2 types

Back 8

1. Default (facilitative) rules

2. Mandatory rules

Front 9

Default rules

Back 9

Rules that are automatically applicable if the parties have not made any other arangements

Front 10

Mandatory rules

Back 10

Declare a contract contrary to law or morality void or avoidable by one of the parties

Front 11

Source of competence for the EU
to create rules regarding Contract law

Back 11

Directives

Art. 114. Treaty on the Functioning of the EU

/harmonising for the establishment and functioning of the internal market/

Front 12

Most important int. convention regarding supranational rules

Back 12

1980 UN Convention on Contracts for the International Sale of Goods (CISG)

- rules apply to commercial cross-border transactions

Front 13

Informal rules / definition

Back 13

Not officially binding,
but have the status of soft law.

Can take the form of model rules

Front 14

Informal rules / purpose

Back 14

- to influence the setting of norms or
deciding of cases by the formal insts.

- source of inspiration for parties having to draft a contract

Front 15

Criteria for the legal enforceability of promises

Back 15

1. Intention of the parties to enter into a legal relationship

Front 16

A contract is concluded if…
/PECL/

Back 16

1. The parties intend to be legally bound and

2. Reach a sufficient agreement

Front 17

Principles regarding the enforceability of contracts

Back 17

- Civil: pacta sunt servanda (on the basis of consent, in Roman law)

- Common: consideration (present if a promise met all the requirements for its enforceability)

Front 18

The questions whether there is an intention to be bound is…

Back 18

… a legal question => the law decides when such intention exists

Front 19

Consideration requires that there is a …

Back 19

… quid pro quo:

promise must be given for a promise of counterperformance by the other party

Front 20

2 kinds of promises surely not enforced

Back 20

- Social
- Domestic sphere

Front 21

Elements of consent

Back 21

Offer + acceptance

Front 22

‘A proposal amounts to an offer if:
/PECL Art. 2:201/

Back 22

a. It is intended to result in a contract if the other party accepts it, and

b. It contains sufficiently definite terms to form contract

Front 23

If a proposal qualifies as an offer then…

Back 23

… a binding contract comes into being upon the mere acceptance of the offer by the offeree

Front 24

Questions about offer & acceptance

Back 24

1. When does a proposal become an offer?

2. Revocation ( going back on an offer) possible before acceptance?

3. When does acceptance lead to a binding contract?

Front 25

Revocation
/G,N,UK,F/

Back 25

- G+N: offer is irrevocable!
- UK: revocable at all times (consideration) :)
- F: revocable, but liable in tort if the offeree acted in justified reliance

Front 26

Acceptance
/PECL Art. 2:205 s.1/

Back 26

‘If an acceptance has been dispatched by the offeree
the contract is concluded
when the acceptance reaches the offeror.’

Front 27

Rules to protect the 'weak' consumer

Back 27

- Contract in writing

- Information duties

- Legal incapacity (young children&mentally ill)

Front 28

Withdrawal rights

Back 28

- Allow the cancellation of a contract
without giving a reason =>> cooling off-period

- Deviation from traditional contract law

Front 29

Precontractual liability

Back 29

A party might justifiably rely on the conclusion of the contract, but subsequently disappointed in this reliance because the other party breaks off the negotiations. Some jurisdictions allow for compensations. (Civil, rather)

Front 30

Problems regarding the contents of a contract

Back 30

1. What was agreed
2. Refusal to perform due to unfairness of one of the parties
3. Contents are considered illegal or immoral by the state

Front 31

Interpretation of contracts / Two starting points

Back 31

1. (Subjective) Intention of the promisor – Civil law

2. (Objective) Declaration (external expression) – Common law

Front 32

Interpretation / is aimed at

Back 32

- Ascertaining the meaning which the text would convey to a reasonable person,

- having all the knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract

Front 33

Læsio enormis

Back 33

Enormous injury.

Made contracts void before. (19th)

Front 34

Procedural unfairness /Contract law

Back 34

- Exists if a party is not able to form its will in a manner that is sufficiently free

i.e. Threat, incapacity, fraud, mistake

- Leads to an avoidable contract

Front 35

Directive 93/13

Back 35

Directive issued by the European legislature on unfair terms in consumer contracts.

- imbalance in the parties' rights --> contract is invalid ==> test of SUBSTANTIVE fairness

Front 36

'Good faith'

Back 36

The notion of 'fairness and reasonableness' referred to in Directive 93/13 (Civil law)

Front 37

Prohibited contracts

Back 37

Contrary to law, public order or morality.

Front 38

Non-performance

Back 38

Party does not perform the contract;

-does not perform at all
-delay
-defective performance (in the wrong way)

Front 39

Remedies of the parties in the case of non-performance

Back 39

1. Action for performance
2. For damages
3. For termination of the contract

Front 40

Performance /2 approaches

Back 40

1. Civil law:

- G+F+Poland: party forced to perform by an official (bailiff) - takes from the defaulting party and gives to creditor
BUT not always! (objective impossibility&when it requires specific personal qualities of the debtor)

Common law:

- Action for damages - economic device - Judge Holmes

Front 41

Damages for Non-Performance

Back 41

1. Common law:

- Nicolene Ltd v, Simmonds (1952): only fact of performance matters

2. Civil law:

-

Front 42

Problem with general conditions

Back 42

Fairness – consumers cannot influence their contents

Directive 93/13 & substantive fairness

Front 43

Directive 96/13

Back 43

Allows courts to hold a standard clause invalid if,
contrary to the requirement of good faith,
it causes a significant imbalance in the parties’ rights and obligations under the contract.

= test of substantive fairness

Front 44

Morality & law

/ Freedom of contract /

Back 44

Balancing personal freedom and the responsibility of the State to guard people against themselves.

Front 45

Non-performance

/ Reasons /

Back 45

- other party is not performing at all
- performs too late / delay
- in a wrong way / defective performance

Front 46

Examples of objective impossibility

/ Performance - civil/

Back 46

• Good is stolen before exchange
• Useful only before a fixed date
• Unreasonable effort or expense for the debtor
• Requires specific personal qualities
(slavery & unwillingness)

Front 47

Performance in specie

/Common law/

Back 47

Damages are inadequate - objects with unique qualities (e.g. land, artefacts)

Front 48

Damages for Non-Performance

/ principle/

Back 48

An aggrieved party should be brought as much as possible in the position in which it would have been if the contract had been properly performed.

Front 49

Damages for Non-Performance

/ two ways to reason /

Back 49

1. Common law: irrelevant whether the party was at fault or not

2. Civil law: only if the party in breach was at fault or is responsible (force majeure)

Front 50

Force majeure

Back 50

A party is freed from any liability if it can prove that it used its best efforts in performing the contract.

Front 51

Implied condition

/ Common Law /

Back 51

Parties are excused in case performance becomes impossible through no fault of their own

Front 52

Guarantee

/ Civil Law /

Back 52

A debtor is liable even though there was
no fault on its part.

Front 53

Termination for Non-Performance

Back 53

If the other party loses confidence altogether.

Only in respect of sufficiently/essentially/fundamentally serious breaches

Front 54

Summa Divisio

Back 54

...