Obligations and Contract Law
Week 1
1st part formation
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Structure of the course: The Life of the Contract
1. Formation (of Contract)
2. Performance
3. Remedies of Breach
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1. Formation
★ What is a contract?
● Contract = An agreement (promise) that is legally binding on the parties
○ Written or not
○ Contracts can even come about in cases where no word is spoken (e.g.
putting money into a machine)
○ contract is the most important example of a juridical act
★ How can contracts be classified?
➔ Juridical act:
◆ “Acts that are intentionally performed by a person to bring about a sought legal
effect are called 'juridical acts' (or sometimes also 'legal acts' or 'acts of law').
Juridical acts always include (and must include) the intention of the acting person
to create a particular legal effect.”
◆ ‘legal transaction’= contract
◆ making of a will (‘testament’)
◆ decision to start a company
◆ Decision to quit one’s job
◆ decision to legally recognise a child
⇒ only have legal consequences because these are intended
● Dutch Code:
○ whole title (Arts. 3:32–59) is devoted to the rechtshandeling, dealing with
questions of its formation and validity
● German Code:
○ places the Rechtsgeschäft even in the very first Book, devoting almost
100 articles to it
● French Code:
, ○ codifies the concept in Art. 1100-1.
★ Why do we need contracts?
○ “Contract society”
■ Contract became the main way of necessities in society
○ Division of labour
★ Why do we need contract law?
○ Result of society we live in
○ Market economy determines prices
○ Promises are binding
○ Ensured that the contracts (agreements/promises) parties concludes are binding
& can be enforced in courts if non-performance by one of the parties
■ Damages (common law)
■ Forcing to do what was promised (civil law)
○ Allows market actors (e.g. individuals, companies, governments, municipalities,
NGOs) to participate in the economic & social life
★ What is Contract Law?
○ Result of societies / market economy
○ Set of rules and principles that governs transactions among parties establishing
those parties’ rights & obligation
○ Contract law = the rules and principles that govern transactions among parties
■ thereby establishing those parties’ enforceable rights and obligations
■ ensures that these contracts are binding, therefore can be enforced in the
courts in case the other party does not perform
■ enables market actors (individuals and companies, but also government
bodies, municipalities, NGOs, charities, etc.) to participate in economic
and social life
★ Contract Law as Part of Private Law
○ Private Law
■ Gathers together rules and principles that deal with relationships between
private actors (e.g. individuals, companies, NGOs)
■ Different areas like: contract law, tort law, restitution, inheritance, property
law, family law, company law
○ Law of Obligations: contract law, tort law, restitution
■ Obligation= an enforceable duty that one party has vis-a-vis another or
several others
○ Classification of different areas of law in one system of private law and different
type of obligations into law of obligations is typical for civil law traditions
○ Why are contracts enforced?
○ Civil Law: private law (consists of the rules and principles that deal with the
relationships between private actors such as individuals and companies)
, ● Obligations Law= contract, tort law and restitution
○ Contract: obligation arises voluntarily because a party intends to be legally
bound; voluntary (self-imposed) obligations
○ Tort: the obligation is imposed upon a person independent of its intention, usually
because the law wants to attach consequences to wrongful behaviour causing
damage to the victim; non-voluntary obligations
● Most rules and principles of contract law are designed to apply to any contract,
regardless of the type of party and the type of obligations the parties take upon them
● law must treat all contracts and parties equally
● Freedom of contract was seen as the necessary tool to make this laissez-faire possible
Example: second hand bicycle
● Relationship between private actors = Private Law
Example: registering
● Public power, public law
1. Contract: terms, incl. Price
2. Property: transfer of ownership
3. Tort: obligations arising from unlawful events (e.g. if you ride into someone with your
bike)
Contract as a Juridical Act
• Doctrine of juridical act→Friedrich Carl Von Savigny (1779-1861)
• A juridical act is an act that has legal consequences because the person
acting intends to create these consequences
• Prominent place in civil codes
• Contract is the most important example of a juridical act
• Other: making of a will, decision to establish a company, recognizing a child, quit one’s job
Type of Contracts
Different classification criteria:
● Type of parties ● Type of performance ● Reason for
○ B2B ○ Specific/ performance
○ B2C Nominate ○ Bilateral
○ C2C ○ Innominate ○ Unilateral
1. contracts are usually distinguished on the basis of who concludes them
, ○ Commercial contracts (contracts between two or more commercial parties,
sometimes also referred to as business-to-business or B2B-contracts) thus
stand next to
○ consumer contracts (contracts between a business and a consumer, or B2C-
contracts)
○ Contracts concluded between two individuals (not a business) are sometimes
referred to as consumer-to-consumer (or C2C-contracts)
2. Contracts can also be distinguished on the basis of their main characteristics:
what parties need to do under the contract depends on the type of contract they
concluded
○ Specific contracts / Nominate
■ governed by their own specific rules
■ laid down in national civil codes or developed by the courts
■ civil codes are sale of goods, barter, lease, mandate, donation and the
employment contract
■ E.g. in a sales contract, the seller needs to deliver the good and the buyer
undertakes to pay the price, an employment contract requires the
employee to perform the contractually agreed work and the employer to
pay the required remuneration
3. contracts based on the reason why parties want to be bound
○ bilateral contracts
● 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
● two obligations come into being: the obligation of the buyer to pay
the price and the obligation of the seller to deliver the good
● ⇒ party A only wants to be bound to party B because party B is
also willing to oblige itself towards party A
○ unilateral contracts
=contracts in which a party is not promised anything in return for its performance
■ French (Art. 1106 Code Civil: contrat synallagmatique and unilatéral)),
■ German (gegenseitiger (§ 320 BGB) and einseitiger Vertrag)
■ Dutch (Art. 6:261 Dutch Civil Code: wederkerige and eenzijdige
overeenkomst)
Main Principles of Contract Law
4 main principles:
1. Freedom of contract
