Flashcards in 3rd Test Deck (45)
What is a contract?
An agreement between two or more parties which give rise to obligations and rights which are enforced and recognized by law.
It requires and offer and acceptance
may create a lawful expectation in third parties that law has to protect.
ej: Bank guarantee.
Difference between contract and obligation
An obligation is a result of a contract.
General Principles of contract laws
- Freedom of contract.
- Binding force.
- Privity of contracts.
- Good faith.
- Good faith in practice.
Freedom of contract
Decide to enter/ not enter freely and voluntarily into contracts and its terms and conditions.
Each party is free to:
- Enter or not enter a contract.
- Decide which type of contract they are entering.
- Decide to enter into contracts that are not regulated.
- Decide to amend the terms and conditions of a regulated contract.
Qualifications of Freedom of contract
- Contracts can't be against law, morality or public deed.
- Gives protection to the party that has less power to negotiate or requires special protection.
- The contract is binding the parties of the contract.
- The contract is equivalent to law among parties of the contract.
- Normally the binding force of the contract is less protected.
What is binding?
- Civil laws: "Specific performance" --> Party can request a court to oblige the other party to perform what the breaching party has committed.
- Common law: "Damages" --> Party can freely decide not to perform a contract, non breaching party can only seek for economic compensation.
Privity of contracts
Contracts give rise to rights ONLY for the parties involved in the contract.
- 3rd parties may have lawful interests in the performance of the contract --> contract may produce effects on 3rd parties only if they consent to these effects.
- Civil law: usual to consider that parties are under a general obligation of "good faith" when engaging in negotiations or when performing a contract.
- Common law: judges tend to follow literal interpretation of the contract and not attempt their effects.
Good faith in practice
- Civil law: contracts tend to be less detailed. (Rely more on GF).
- Common law: contracts tend to be much more detailed.
- Spain: rights performed in accordance with the requirements of GF.
Civil law countries
- Tend to regulate general categories and take into account general principles.
- Tend to provide specific regulations for specific categories contract.
Common law countries
- Tend to regulate contracts in general, without providing for specific regulations for each type of contract.
- Tend to follow the literal interpretation of the contract, contracts are much more detailed.
Elements of a contract
When 2 more more parties agree to these 3 elements, there is a contract:
- Free consent.
- Subject matter.
- Parties have agreed to same terms and conditions.
- Is evidence of acceptance of a party's offer by the other party.
- Lack of capacity of 2 party.
- Fraudulent misrepresentation.
Matter to which the obligations refer.
They have to be:
- Lawful: not beyond the bounds of commerce and not contrary to law and morality.
- Determined: no need for more agreements.
Usual economic reason/ aim of parties when entering into a particular type of contract.
Form of the contract
- It requires no specific form.
- Entered in writing or orally.
- Formal requirements.
- Notaries and public deeds.
* Agreement entered in public deeds.
* Benefits of public deed: evidence of agreement, express enforcement.
How are contracts regulated?
- Commercial code.
- Civil code: matters not regulated by Commercial code.
- Special laws: Agencies contract act, insurance contract act.
- Consumer protection: legislation on consumer protection.
- General terms and conditions.
- Regulated by Commercial and Civil code.
- Parties may enter into contracts not specifically regulated (ej: franchising agreements).
- Parties are generally free to provide specific terms and conditions they think appropriate.
- Law provides regulation.
- Legal regulation applies only if there is no regulation by the parties.
- Limited number of mandatory provisions.
- Law does not provide any regulation.
- Parties regulate all terms and conditions in the contract.
Conflict of law
- Occurs when the parties of a contract are in different jurisdictions or contract has to be performed in different jurisdictions.
- Transactions are linked to the laws of different countires.
Which law applies in conflict of interest?
- Party may freely choose the law applicable to the contract.
- In Europe a solution was given by Rome I Regulation.
Rome I Regulation
- Contract governed by law chosen by the parties.
- Choice shall be made expressly and clearly demonstrated.
What is the CISG
Is a treaty that has uniform international sales law.
Uniform Commercial Code of USA
Several organizations wrote a code of laws for dealing with personal property.
There were no laws in any state until the state adopted them.
Structure of CISG
- Part I: Scope of application and general provisions.
- Part II: Formation of contract.
- Part III: Sale of goods.
- Part IV: Passing of risk.
- Other provisions.