Notes on the chapter of "Law of Contract" additional final questions to test your knowledge and a quick final resume capturing the essential points of the chapter. Impossible to not understand the chapter after reading these notes!
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THE LAW OF CONTRACT
1.Introduction
Contracts allow businesses to trade goods and offer services; they are also
used by citizens to pursue the things they are after (buying products in a
supermarket, renting an apartment, taking out insurance, opening a bank
account…
Law of contract governs consumer contracts (see above) and commercial
contracts (contracts for the sale of goods, franchising, distribution
contracts, investment in foreign countries…)
Exchange = core (noyau) of a typical contract, where one party gives
something to another party and receives something in return.
Belief from both parties that they benefit from the contract, but not the
case for gratuitous contracts (promise of making a gift) where only one-
party benefits from it.
Questions to ask:
- When exactly is there a binding contract?
- Can any promise to do or to give something (or to abstain from
something) be enforced in the courts?
- What exactly should the parties do as a result of this contract?
- What right does a party have if the other party does not perform?
- Can a contracting party always claim performance of the contract?
Can it bring a claim for damages? Or is it even possible for it to claim
termination of the contract, meaning that the frustrated party no
longer has to perform itself?
questions on formation, contents, and remedies
1
, 2.Sources of Contract Law
Contract law = set of rules and principles that governs transactions among
parties, thereby setting the rights and obligations of these parties
Distinction made on the basis of the origins of these rules 3 types of
rules relevant to contract law:
- Rules that are made by the contracting parties themselves
- Rules that emerge from the official national, European, and
supranational sources
- Informal rules that are made by others (including non-State
organizations and academics)
2.1. Rules Made by the Contracting Parties
Freedom of Contract:
The question of what the law is (in the sense of the enforceable rights and
obligations of the parties) can, to a large extent, by decided by the party
themselves.
Freedom of contract: parties are free to decide whether they want to
contract at all and with whom, and they can also determine the contents
of their contract = no one is obligated to enter into a contract, but if one
does, one is bound by it in the same way as if the rules had been made by
the legislature
General Conditions:
Contractual rules don’t need to be made for one contract only hence the
use of standardized sets of rules = general conditions
Advantages:
- It saves a party from having to draft contract conditions for every
new contract it want to conclude (more efficient)
2
, 2.2. Official National, European, and Supranational Rules
Default and Mandatory Rules:
- Default (or “facilitative”) rules: rules that are automatically
applicable if the parties have not made any other arrangements and
such matters are not covered by general conditions.
This happens when the parties only discuss the elements of the contract
that they consider essential, but not many other aspects (such as what will
happen if the other party does not perform the contract)
- Mandatory rules: rules that declare contracts void or at least
avoidable by one of the parties when they are contrary to law or
morality (such as hiring someone to steal a painting)
these facilitative and mandatory laws flow from “official”
National Rules:
National level: official contract law produced by the legislature and the
courts
Contract law = field of law in which we find the most commonalities
among the world’s jurisdictions
European Rules:
Unlike national contract law, European legislature can only create law in so
far as it has the competence to do so provided by one of the European
treaties
Source of this competence for contract law found in TFEU, in which the
European legislature is allowed to adopt measures harmonizing national
rules result: fragmented European contract law
Supranational Rules:
- Supranational rules = 3rd source of official contract law
- United Nations’ Convention on Contracts for the International Sale
of Goods (CISG) = most important international convention, ratified
in 85 countries, contains rules that apply to commercial cross border
transactions
3
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