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Summary -Contract Law: a comparative introduction- 2e by Jan M Smits
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Lecture notes obligations & contract law + practice questions and tutorials
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Summary obligations & contract law book
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Chapter 1:Introduction, Contract Law, ISBN: 9781785368776 Comparative Contract Law (Law3011/2020-200)
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CONTRACT LAWA COMPARATIVE INTRODUCTION
JAN M. SMITS
,CONTENTS
PART 1 -CONTRACTS-
1. Introduction………………………………………………………………………………………2
2. Sources of law…………………………………………………………………………………….5
PART 2 -THE FORMATION OF A CONTRACT-
3. Offer and acceptance………………………………………………………………………..……8
5. Legal capacity of the parties………………………………………………………..…………..14
6. Formalities………………………………………………………………………...……………..18
PART 3 -THE CONTENTS OF THE CONTRACT-
7. The party agreement: interpretation and gap filling…………………………………………22
8. The principle of good faith and policing unfair contract terms……………………………...26
PART 4 -VITIATING FACTORS-
9. Defects of consent and misrepresentation………………………………………………….….29
PART 5 -CONTRACTUAL REMEDIES-
11. Performance……………………………………………………………………………………34
12. Damages for non-performance………………………………………………………………..37
13. Termination of contract……………………………………………………………………….43
1
,PART 1 -CONTRACTS-
1. INTRODUCTION
In a given jurisdiction, contracts are defined as legally binding agreements, irrespective of whether
they are written down or not. This means that, in law, people conclude contracts when they buy
products, take out insurance, download software, are treated by the doctor or go to the hairdresser.
Contracts can even come about in cases where no word is spoken at all, as in case of putting money
into a machine to buy a cup of coffee and of computerized derivatives trading.
Why contract law?
A market economy is based on the premise that people and companies should make their own
bargains on the basis of a voluntary exchange of goods and services. It is not the government that
decides how many goods are produced or how much money a person is to pay for the product they
desire. Instead, within certain limits, it is left to the needs of the people and therefore to the
market’s price mechanism to ensure that supply and demand correspond to each other. Such a
market economy cannot do without contracts.
Contract law in turn ensures that these contracts are binding, and can therefore be enforced in the
courts in case that other party does not perform. This turns contract law into the cement of modern
society: it enables market actors to participate in economic and social life.
Types of contracts:
Most rules and principles of contract law are designed to apply to any contract, regardless of the
type of party and of obligations the parties take. The implicit assumption it is that the law must treat
all contracts and parties equally, no matter what they contract about, or who they are.
Despite this general character of contract law, lawyers usually distinguish between different types
of contracts:
1. On the basis of who concludes them. Commercial contracts (between two or more
commercial parties, B2B) thus stand next to consumer contracts (between a business and a
consumer, B2C). Contracts concluded between two individuals (not a business) are
sometimes referred to as C2C.
2. On the basis of their main characteristics: what parties need to do under the contract depends
on the type of contract they concluded. The seller and buyer in a contract for sale of goods
need to do something different than the employer and employee in employment contract.
These specific contracts are all governed by their own specific rules, laid down in national
civil codes or developed by the courts. Typical specific contracts are sale of goods, barter,
lease, mandate, donation and employment.
3. On the reason why parties want to be bound. Contracts in which each party assumes an
obligation in order to obtain the performance to which the other party, in exchange, obliges
itself towards the first party are bilateral contracts, while contracts in which a party is not
promised anything in return for its performance are unilateral contracts.
Contract law as a part of private law:
In the civil law tradition, to which most countries on the european continent belong, contract law is
seen as only one part of a more comprehensive system of private law. Private law consists of the
rules and principles that deal with the relationships between private actors such as individuals and
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, companies. Next to contract law, also the fields of tort law, restitution, property, trust, inheritance,
family and company law are part of the overall system of private law.
The law of contract, tort and restitution are often lumped together under the heading of “law of
obligations”. This is because they can all give rise to so called “obligations”, a legal term indicating
that an enforceable duty exists of one person vis-à-vis another person or several other persons.
In a bilateral contract, like sale, typically two obligations come into begin: the obligation of the
buyer to pay the price and the obligation of the seller to deliver the good.
While in case of a contract, this obligation arises voluntarily because a party intends to be legally
bound, in case of a tort the obligation is imposed upon a person independent of its intention. Typical
tort cases concern victims claiming damages for personal injury or for defamation.
This classification of different areas of law into one system of private law is typical for the civil law
tradition, which is different in the English common law, in which such scientific rationalization has
long been absent. The first comprehensive book on the English law of obligations was only
published in 2010.
Main principles of contract law:
When lawyers say that a field of law is governed by certain principles, they intend to refer to the
main values or goals that underlie this fields. It may be that these principles are laid down in
legislation or court cases, but this need not be the case. Some principles are seen as so self-evident
that the official institutions do not bother to put them into writing. Thus, both French and Dutch
constitution lack an explicit provision on the rule of law, while the German Civil Code does not
codify the binding force of contract. As principles all refer to fundamental standards, it is difficult to
prioritize one principle over another: they can contradict each other. In addition, principles are so
broad that they are never without exceptions.
Given the meaning, we can say that contract law is governed by four principles:
1. Freedom of contract is an essential part of the liberal politics of the laissez-faire: it gives
legal application to the idea that each individual should be allowed the autonomy to make
the choices they desire. If parties are best able to decide what is in their own interest, they
are also in the best position to make the contract they prefer: the law presumes that a party
will not choose contract terms that are unfavorable to it.
But the principle of freedom of contract not only entails that a person is allowed to conclude
a contract on whatever terms it deems fit (choice of contents), but also whenever it desires
(freedom to contract at all) and with whomever it wants (freedom to choose the other party).
This principle can never be applied across the board. In the reality of daily life, many parties
do not have the bargaining power needed to choose the terms they like best. The reality is
that consumers, buyers, insurees, tenants, employees and smaller businesses often simply
have to accept the terms dictated to them by their economically stronger and more
experienced counterparts. Often, these terms are general conditions that the other party is
indifferent about and simply accepts without bothering to read them. This is why legislators
and courts tend to intervene to protect the interests of the weaker party. Sometimes so little
is left of the freedom to contract that one speaks of regulated contracts.
2. The second main principle is that the contract is binding upon the parties (binding force).
Each party has to perform the obligations it took upon itself and if it fails to do so, the court
can intervene at the request of the other party. The law can react in different ways to ensure
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