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Summary European Contract Law Revision Notes
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- Contract Law
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- Universitat Pompeu Fabra (UPF)
European Contract Law Revision Notes
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CONTRACT LAW – REVISION NOTESWhat is a contract?
- An agreement between two parties
- Property law assets
- Tort law negative consequences – involuntary
- Contract law exchange of the assets – voluntary transactions
o Governing principle: Freedom of contract
Freedom to enter
Freedom to decide the terms, content and duties/rights
No numerus clausus in contract law
- Default rules majority of the civil codes govern with contracts and such provisions
are default rules
- Elements of a contract:
o Agreement -> offer and acceptance
o Consideration
o Intention to be legally binding
o Formalities
o Capacity
o Consent
Why do we need contract law?
- Containing opportunism in non-simultaneous exchanges – ie to protect the party
that suffered the loss
- To safeguard against incomplete contracts – not rational to consider every possible
outcome of a transaction so all contracts are incomplete
- Reduce transaction costs
- Disclosure of relevant information
Formation
- Contracts are commitment devices
- Contract law only works when it is non-universal
- Works on the shadow on the freedom of contract
- Commodification some assets which are allocated in society outside of contract
law eg auctions, legal rights, giving
- Some voluntary exchanges imply negative externalities – explains why freedom of
contract is limited
When does the contract start to exist?
- One of the purposes of contract law is to define the initial moment the contract
comes into existence
- Initial stages: Negotiations, bargaining process, exchange of information
Specified and Incomplete Contracts:
- A contract is said to be completely specified (complete) if the list of conditions on
which the actions are based is explicitly exhaustive. Would then have to include an
, explicit provision for each of these possible conditions pertaining to the agreement –
contracts are far from being complete (inefficient to put every provision in the
contract)
- A contract will be said to be incomplete if it is not completely specified = does not list
explicitly all the possible conditions in the universe under consideration. Note that
even though incomplete, they do implicitly provide complete instructions for what
the parties are to do under all conditions.
- OFFER AND ACCEPTANCE = agreement
o Contract comes into force once the offer is accepted
o Initial stages of negotiation are not relevant once the agreement is final
(rights and duties depend on the final agreement; negotiation period does
not impose any legal duties or rights on the parties)
Debate about whether precontractual negotiations help to better
understand the duties and rights under a contract
Precontractual liability – problematic
1. General principle is that the agreement is consensual and
there are no formalities
2. Legal nature: Not contractual
3. Information -> dealing in good faith and fair terms
o Private information – duty to disclose information for
fair dealing (if one party knows more than the other –
to avoid fraud)
o Public information – publicly available or cost of getting
this information is the same for everyone
Lying /misrepresentation in the precontractual period creates a legal
liability once the contract is completed – breach of dealing in good
faith
- Article 15: An offer becomes effective when it reaches the offeree
o An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches
the offeree before or at the same time as the offer
- Article 16: An offer may be revoked any time before acceptance (see exceptions
Art16 (2))
- A proposal itself is not an offer eg I want to sell my house invitation to treat
o Not binding – no price, no negotiation, no time frame etc
o Article 14: A proposal for concluding a contract constitutes an offer only if it
is sufficiently definite and indicates thee intention of the offeror to be bound
in the case of acceptance. A proposal is sufficiently definite if it indicates the
goods and expressly/implicitly fixes or makes provision for determining the
quantity and the price.
(2) a proposal other than one addressed to one or more specific
persons is to be considered merely as an invitation to make offers.
, - Acceptance must be communicated – silence or inactivity does not in itself amount
to acceptance
- Acceptance becomes effective at the moment of indication of assent reaches the
offeror – acceptance must reach the offeror within the appropriate timeframe
otherwise ineffective.
o Article 18: a statement made by or other conduct of the offeree indicating
assent to an offer is an acceptance.
An oral offer must be accepted immediately unless the
circumstances indicate otherwise.
- Article 19: A reply to an offer which purports to be an acceptance but contains
additions, limitations or other modifications is a rejection of the offer and
constitutes a counter-offer – if the reply does not materially alter the terms of the
offer, it can still constitute an acceptance.
- Article 21: A late acceptance can be effective if without delay the offeror orally
informs the offeree or dispatches a notice to that effect.
- Article 22: Acceptance may be withdrawn if the withdrawal reaches the offeror
before or at the same time as the acceptance would have become effective
- Article 23: a contract is concluded at the moment when an acceptance of an offer
becomes effective
- Silence
o Article 18: Silence does not amount to acceptance
o To what extent does silence amount to acceptance or protection?
o General rule: acceptance must be communicated to the offeror and must
reach the offeror – silence and inactivity does not mean acceptance
o Exception: If there is an already existing contract between the parties eg
frequent and regular transactions, silence/inactivity can amount to
acceptance on the basis of good faith (conduct based) without the
requirement of additional formalities – eg habitual/frequent/periodical
exchanges between the parties eg subscription.
- Negotiations between parties located in different places
o Developments in technology and communication has made contracting easier
and faster – can negotiate and contract with people from all over the world
at any time
o In the past contracts used to be drafted through post – mailbox rule:
Offer sent by post is binding on the offeror until it is either rejected or
revoked
Acceptance becomes valid at the moment the indication of assent is
sent to the offeror – independent of the fact the offeror knows the
fact that the offer is accepted
The earliest acceptance takes precedence
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