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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


Unilateral promises

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.


Binding force

- 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.


Good faith

- 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.
- "Causa".


Free consent

- Parties have agreed to same terms and conditions.
- Is evidence of acceptance of a party's offer by the other party.


Vitiating factors

- Lack of capacity of 2 party.
- Violence.
- Intimidation.
- Fraudulent misrepresentation.
- Mistake.


Subject matter

Matter to which the obligations refer.
They have to be:
- Possible,
- Lawful: not beyond the bounds of commerce and not contrary to law and morality.
- Determined: no need for more agreements.


Considerations/ "Causa"

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.


Business contracts

- 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.


Contratos típicos

- Law provides regulation.
- Legal regulation applies only if there is no regulation by the parties.
- Limited number of mandatory provisions.


Contratos atípicos

- 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.


Part I: Application

The CISG applies when contracts of sale of goods between parties are in different countries.
- CISG could be applied even if one of the parties is located in a country that is not part of the CISG.
- Law of contracting state is applicable, parties can choose which laws to apply in the contract.