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Obligations and Contract Law I (OCLI) - Lecture Notes (1-9)
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Lecture 1The Life of the Contract
Focuses on the elements necessary for a valid contract.
1. Contract Formation
Discusses what must be present for a contract to be legally formed.
Contract Examines the duties and rights of the parties involved.
2.
Performance Explores what the parties have agreed to do.
Addresses situations where performance is improper or refused.
3. Breach of Contract
Discusses remedies available to the affected party.
What Is a Contract?
A contract is an agreement or promise that is legally binding between parties. It doesn't always need to be in
written form; verbal agreements can also be contracts.
E.g., Using public transport (checking in with a card or buying a ticket)
E.g., University enrollment (paying tuition for a program)
Contracts are legally enforceable, unlike informal agreements between friends or family.
E.g., Getting fined for not having a ticket on public transport.
Contracts don't always require a physical document. Electronic transactions (like using a transit card) can also
form contracts.
Not all legal systems have explicit definitions in their codes (e.g., English law).
Definitions: Art 1101 Code civil, Art 6:213 BW
Contract as Juridical Act
Friedrich Carl von Savigny, a prominent 19th-century German jurist, developed the doctrine of juridical acts.
This theory sought to categorize and explain legal actions that create, modify, or extinguish legal relationships.
A juridical act is defined as a voluntary action that has legal consequences because the person acting intends
to create these consequences.
The act must be performed willingly.
Key characteristics The actor must intend to create specific legal effects.
The intention must be expressed, either through words or actions
Juridical acts hold a significant place in many civil codes.
Contracts are categorized as a type of juridical act.
Voluntary agreement between parties
Key elements Intention to create legal obligations
Expression of this intention through offer and acceptance
,While contracts are the most common and prominent type, there are other types of juridical acts besides con-
tracts:
Testament A unilateral juridical act that determines the distribution of one's assets after
(will) death.
Establishing a legal entity
A decision that creates a new legal entity with its own rights and obligations.
(company)
Recognizing a child A juridical act that establishes legal parenthood and associated responsibilities.
Resigning from a job A unilateral act that terminates an employment contract.
These juridical acts are characterized by creating, modifying, or extinguishing legal consequences without nec-
essarily involving two parties agreeing to mutual obligations.
What is Contract Law?
Set of rules & principles that govern transactions among parties establishing those parties’ enforceable rights
& obligation.
Assessing the validity of contracts.
Determining the legal consequences when parties enter into a contract.
Contract law provides
guidance on
Addressing situations where contracts are not properly executed.
Procedures for terminating contractual relationships.
Why Do We Need Contract Law?
• Contracts are essential for obtaining goods and services in today's society. They have replaced the older
system of direct exchange (bartering).
• We often enter into contracts without realizing it, such as when using public transportation. Many
transactions in daily life involve contracts, even if not explicitly labeled as such.
• It allows market actors (e.g. individuals, companies, governments, municipalities, NGOs) to participate in
the economic & social life
• It ensures that contracts (agreements/promises) parties concludes are binding & can be enforced in
courts if non-performance by one of the parties. They clarify what parties are agreeing to or promising.
• They provide a basis for requesting performance or damages if one party fails to fulfill their obliga-
tions.
• They allow for termination of relationships when performance becomes impossible or undesirable.
• Used to illustrate how contracts handle situations where performance becomes impossible.
E.g., if the house burns down before the sale is completed.
• Contracts help in planning and allocating resources efficiently.
E.g., Adjusting the number of buses or trains based on expected demand.
E.g., Allocating appropriate resources (staff, rooms) based on student enrollment.
• Contracts help clarify what each party is supposed to get (rights) and what they're supposed to do (du-
ties).
, Sources of Contract Law
Contract law varies significantly across different legal systems, with the course focusing on four main systems:
English common law, French civil law, German civil law, and Dutch law (a hybrid system).
The sources of contract law are diverse and can differ by country. These sources may include single codes like
the Dutch Civil Code or Italian Codice Civile, multiple codes, constitutions, EU law (such as the Unfair Terms
Directive), specific acts (e.g., the Indian Contract Act of 1872, Consumer Act, or Sales of Goods Act), guide-
lines, agreements between parties, and principles chosen by the parties.
There is typically a hierarchy among these sources. General rules are often found in civil codes, followed by
specific legislation for particular areas like labor law.
You need to consider diverse principles that may affect contracts, such as Sharia law's prohibition of interest in
financial contracts (riba).
Start with the code if one is available.
• Dutch Civil Code (Burgerlijk Wetboek):
Organized into books, titles, and articles5.
1. • French Civil Code (Code Civil):
Similar structure with books, titles, and articles.
• German Civil Code (Bürgerliches Gesetzbuch):
Also divided into books, sections, and paragraphs.
Look for specific laws dealing with the type of relationship in question.
• Always refer to the original (most recent) legal text, paying attention to
titles and specific provisions.
• Consult legal texts and being aware of any amendments or changes over
time. Always verify the relevant legal text rather than relying solely on
secondary sources or interpretations provided by scholars or practition-
When approaching ers.
2. • Consider national laws, European regulations, and international treaties
contract law in any
system like the CISG (United Nations Convention on Contracts for the Interna-
tional Sale of Goods).
• Case laws are particularly important in common law traditions. Supreme
Court and Constitutional Court interpretations in civil law systems. Also
the decisions from the Court of Justice of the European Union are bind-
ing on EU Member State courts and must be considered and followed in
relevant contract law matters.
Consider any rules particular to the specific type of contract.
Informal Rules and Soft Law Instruments:
• UNIDROIT Principles of International Commercial Contracts (PICC)
3. • Principles of European Contract Law (PECL)
• Draft Common Frame of Reference of European Private Law (DCFR)
These are inspirational not mandatory sources unless specifically chosen by
the contracting parties. They can provide guidance for drafting contracts and
understanding common practices across jurisdictions.
When dealing with contract law, you need to consider all these sources hierarchically, starting with mandatory
national and EU laws, followed by case law and international treaties, and only then considering soft law in-
struments if applicable.
, Types of Contracts
Business-to-Business (B2B): Contracts between two businesses.
Business-to-Consumer (B2C): Contracts between a business and a consumer. These
Type of
often have more protective measures for consumers, who are considered to be in a
parties
weaker position.
Consumer-to-Consumer (C2C): Contracts between individual consumers.
Specific/Nominate Contracts: These are common contract types that are explicitly
defined and regulated in legal codes or specific legislation.
E.g., sale contracts, rental agreements, and employment contracts
Type of
performance
Innominate Contracts: These are less common or specialized contracts that may not
have specific provisions in legal codes.
E.g., university exchange agreements and research collaboration contracts
Bilateral Contracts: These involve mutual obligations between two or more parties.
E.g., In an employment contract, the employer agrees to pay a salary, and the employ-
ee agrees to perform specific duties.
E.g., In a sale contract, the seller agrees to transfer ownership of a good, and the buyer
agrees to pay the price.
Unilateral Contracts: These are contracts where one party makes a promise or un-
dertakes an obligation that affects other parties.
E.g., someone offers a reward for finding a lost item. The contract is formed when
someone finds and returns the item.
E.g., the insurer promises to pay if a specific event occurs, while the insured only pays
the premium.
Reason for
performance Some unilateral contracts can have consequences for third parties, and their effects
may depend on acceptance by those parties once they become aware of the con-
tract.
E.g., In a will or testament, the testator makes provisions that affect beneficiaries, who
may need to accept the terms once they become aware of them.
E.g., in a trust agreement, the settlor (the person creating the trust and transfers assets
to it) establishes obligations for the appointed trustee to manage these assets (ac-
cording to the trust's terms) for the benefit of beneficiaries. Beneficiaries are not in-
itially parties to the trust agreement. They become aware of their potential benefits
when informed about the trust. Beneficiaries may have the option to accept or re-
ject the benefits. Acceptance can be explicit (formally agreeing) or implicit (by re-
ceiving benefits). So, it allows the settlor to create obligations that affect third par-
ties (beneficiaries) without their initial involvement, making it a form of unilateral
contract with potential consequences for others.
Main Principles of Contract Law
• Parties are free to decide whether to enter into a contract.
Freedom of • Parties can select who they want to contract with.
1. • In theory, parties can choose contract clauses, but this is often limited in
contract
practice.
• In practice, businesses often have stronger negotiating power compared to
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