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Samenvatting European Contract Law masterfase compleet UvA
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European Contract Law masterfase compleet UvA
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Voorbeeld van de inhoud
European Contract Law masterfasecompleet
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Week 1:
Conclusion of contracts
There is no uniform definition of a contract. All countries have in common that at a
minimum there should be a meeting of minds between parties where they intend to be
bound by certain legal aspects. This is usually done by offer and acceptance, even though
those may not always be clearly identifiable. The definition of contract in ITA and FRA is
referred to as an agreement. In GER and NL the contracts are focussed on the form of
‘judicial act’, which changes or shapes a legal relationship between parties. In common
law systems contract is formed by the consequences and remedies by parties which are
enforceable.
A second aspect of the contract is its content. In order to enforce a contract it is needed
that certain essential elements are agreed upon by the parties. Essential element of the
contracts is the subject. In some countries the price is essential and needs to be
determined, in other countries legal systems state that the parties intend on the price
to be determined later.
European law
In the Common European Sales Law (CESL) the conditions for a contract are given by
art. 30 (1). There are three conditions given:
1. Parties need to reach an agreement – giving an intention to sell or buy
something does not suffice for offer and acceptance.
2. They have the intention for the agreement to have legal effect – it shouldn’t be
based on a social agreement.
3. The agreement is sufficient.
There are no further requirements under the CESL. Additional specific requirements
are given in national laws. Two of these additional requirements will be discussed.
Consideration – UK common law
Consideration is a historically developed additional requirement under the very
commerce oriented English law. It means that there needs to be an exchange of
performances in order for a contract to be legally effective, which means that there
needs to be a counterweight for every performance. E.g. in bilateral contracts it’s the
service or good traded for money.
a. Problems occur in unilateral contracts. In the carbolic smoke balls case a product
is marketed as curing flu, and whoever gets sick after using the ball for two weeks
can receive 100 GBP. One customer claims the money after getting ill, but the
company refuses because the advertisement is not a contract but a simple promise in
exchange for which the customer doesn’t need to do anything and therefore it is not
enforceable. UK Court finds the solution of consideration in the fact that the
customer inconvenienced herself. The consideration has to have economic value,
but it does not need to be monetary. Objective criteria of exchange including
inconveniences are seen as having economic value. On the other hand gratuitous
promises are not enforceable.
b. Furthermore there is no consideration when someone is already obliged to do
something, which can lead to problems under UK law. For example if money is
offered for a witness to testify when he is reluctant, this contract is not enforceable
since the witness was already obliged to testify in court. In another example, giving a
contractor extra money in order to paint the house in a shorter amount of time is not
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enforceable since he was already obliged to paint the house. There is no
consideration. The courts find a solution in the promissory estoppel. For example
in the high trees case a 99 year lease (rent) to a building was given to a party which
consequently acted as a sort of broker and subleased the units in the building to
tenants. When the war broke out the prices in London fell sharply and the owner of
the building – in realizing that otherwise the leaser wouldn’t be able to pay its lease –
changes the lease to half of the original lease price. After the war ends the owner
claims full rent for the period of time in which only half was paid, claiming that there
was no consideration for his promise to the leaser to pay only half. The UK courts
here create the promissory estoppel doctrine, which prevents a party from going
back on what he promised on the means of there being no consideration. Therefore
the promissory estoppel is used as a shield against the argument that there is no
consideration. It cannot be used as a means to enforce the promise (sword).
Promissory estoppel is restricted in that it cannot create a new right and it
required detrimental reliance which means they relied on the promise which
was detrimental (e.g. renting out apartments at half price instead of full price).
c. Consideration can never be moral, e.g. feeling gratitude or to feel owing to someone.
d. The promise that an offer is irrevocable is not enforceable since there is no
consideration, unless there is a payment or deed. The latter solution means that
parties will go to a notary to form a deed on the subject. A consideration is no
longer required. The disadvantage is that a deed costs money and is very formal.
Causa – French legal systems
An additional requirement in France and Italia is the causa, which is a motive or reason
for entering into a contract. Every party has a subjective reason to enter into a
contract, but under French law there is a list of objective causa. Every contract needs
to fall within a category including a objective causa, otherwise the contract or its
specific provisions are considered void. Bilateral contracts have the causa of
prospect of counter performance. A party enters into a contract because they will
receive something in return. Unilateral contracts have the causa of providing
something without demanding anything in return.
Causa is used by the court to determine the contents of the contract and the furnace
of the contract.
a. In the cancellation charge on option case parties agree upon the sale of a
bakery. However, since buyer wasn’t confident about his finances to do so he
was given an option to enter into agreement of 1.5 months time in which the
other party was not allowed to sell the bakery to someone else. If after 1.5
months the buyer would cancel the deal, he had to pay a cancellation charge.
When demanded to pay for cancelling the agreement, the buyer stated that he
did not have a causa for agreeing to the cancellation charge. The court
disagrees and finds the causa for cancellation charge in the fact that the offer is
tied up for a certain period of time and therefore buyer’s motive is found in
having an extended period of time to consider the offer.
b. Chronopost case – Chronopost promised to deliver envelops with tenders,
which have the characteristic of having to be delivered within a deadline and if
this deadline is missed the application of the tender will not be accepted. A
company sues Chronopost for delivering the application of a tender too late and
resulting in a loss of the bid. Chronopost has a limited liability clause, limiting
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claims to the amount of cost of delivery to the certain place. The court finds that
the causa for entering into contract with Chronopost was not transportation
to a certain place but the promise of transportation thereof in a timely
manner. Therefore, this important reason for entering into the contract meant
that when timely manner didn’t happen the whole contract was devoid of
reason of entering into it, and any clause which takes away liability for not
fulfilling the contractual obligation is invalid.
Catala report suggest additional causa situations to the list and more specific
rules so it is better to find a motive. This is criticized for making the legal system
too formalistic. The justice ministry on the other hand wants to change causa to
interest of contract. Instead of looking for a motive they should look at the
interest and achievement of a contract. It is criticized for being new and not
possible to be interpreted easily.
Exercise in difference between causa and consideration
Are these grounds possible under French and UK law?
a. Exchange
b. Good reason
c. Moral cause
d. Principle of objectiveness
e. Gratuitous promise
Offer & acceptance
Offer (art. 31 CESL)
An offer is made when parties make it clear that they intend to be bound by an
agreement. Generally the intention to be bound is often proven by objective criteria in
the circumstances of the case. The text in the contract – the words and statements in the
agreement – are not decisive. They can be used as a factor but other circumstances
might point to the contrary. The content should be sufficiently clear, made in a legal
context (not a social one). Stating options or possibilities are often not seen as an
offer but are regarded as an invitation to an offer, for example in case certain products
and prices are displayed in a supermarket the invitation to an offer is made by the
customer in bringing it to a register. Alternative way is a delayed acceptance when
paying for the product. This way the sales of alcohol and other products can be refused.
The only different legal system is France, where a product is accepted as soon as it is
picked up by the customer. Therefore damages arising from picking up the product
could already be qualified as a potential contractual liability.
Acceptance
The offer is specific enough for the counterparty to be able to say yes. If he agrees it
becomes an agreement and the contract is concluded (art. 30 (2) CESL). If the
counterparty states that it wants an element of the contract to be changed – for example
faster delivery – this is regarded as a counteroffer. Acceptance does not always have to
be stated in words. It may also be accepted in conduct. However, acceptance has to
always be explicit. Silence is usually not amounting to acceptance as it could lead to
abuse.
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Revoking offer
UK law – In the Dickinson v. Dodds case Dodds wants to sell his property to Dickinson.
They agree on a price and the seller states explicitly to the buyer that the offer will be
left open until that Friday 9 am. On Thursday afternoon it comes to the buyers attention
that the seller is talking to a third party in regards to the sale of the house. The same day
the buyer goes out and gives a letter to the mother of the seller that he is going to accept
his offer (mother forgets to give it) and on Friday morning he hands a formal letter of
acceptance to the seller. The seller then states that he already sold it to the third party.
The court rules that the offer (promise) not to revoke did not have a consideration
and that the promise is not enforceable. The general rule under English law is that
every offer is revocable unless there is a deed or consideration stipulated.
FR law – in the Chalet for Sale case a letter was sent stating that a certain chalet was
for sale for a certain price. The potential buyer wrote that he was interested in buying
but wanted to see the place first. After visiting the chalet the buyer sends a telegram a
day later stating that he accepts the offer. The very next day he sends a formal letter of
acceptance. A month later – when getting ready to move in – the seller says that he had
already sold the chalet a day before the ‘buyer’ came to inspect the chalet.
In this case there is an implicit time stipulation where an offer was valid, by acting in a
way in which the potential buyer could come and inspect the house at the given period.
Seller did not state that he should come earlier or anything of the sorts, implying that
he will not sell the house in the days before. The court rules that even though under
French law an offer may be revoked, but in practice there are lots of limitations
because of unfairness and insecurity consequences in the trade market. So in principle
the UK and French law are the same in that an offer can be revoked. However if
there is an explicit or implicit period for acceptance then the offer under French law
cannot be revoked. If revoked this leads to damages under tort law.
DE law – An offer cannot be revoked, unless the offer includes a statement that it is
freibleibend (art. 145 BGB). Revocation has no legal effect, therefore acceptance is
still valid and can still lead to a contract (unlike France where it leads to damages).
This is problematic if already sold to a third party.
CESL (art. 32) – In principle there is a right to revoke, but there are limitations in
cases where there is a fixed time for acceptance, an indication that the offer is
irrevocable or reasonable reliance on irrevocable.
Rights of withdrawal
Normally when an offer is accepted a contractual agreement is formed. This contract has
a binding force under the principle of pacta sund servanda. Under certain
circumstances parties may have a right of withdrawal after concluding the contract,
which can be regarded as an exception to the abovementioned principle.
The right of withdrawal is justified by the fact that there is a certain information
asymmetry between parties, for example in case of doorstep selling, distance sales,
consumer credits and timesharing. In theory, the right of withdrawal gives consumers
more trust as they are able to inspect and value the goods and will result in more
cross-border transactions. Critics state that other aspects such as language barriers
and delivery costs are disregarded and also the different directives in acquis have
differences in periods, consequences and so on.
a. ECJ Travel Vac - An example of the right of withdrawal in European
perspective is the Travel Vac case. A buyer of a timeshare property withdraws
from the contract as is stipulated for 7 days in the contract. The right of
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withdrawal means that one can withdraw without any reason. The ECJ rules
that it is irrelevant whether or not the seller pretended to offer something
else or manipulated the consumer. Even without such circumstances, a buyer
can withdrawal without giving any reason. The contract also stipulated a
penalty clause for termination. The ECJ states that the right of withdrawal
means terminating effectively without any costs and termination may not be
prevented by a penalty or any other instrument. The clause is invalid and the
seller cannot ask for anything other than costs made for returning the goods.
Consumer rights directive (applicable for contracts after June 2014)
In the consumer rights directive the right of withdrawal (art. 9) is harmonized for
doorstep selling (off-premise sales) and distance selling, and is set at 14 days. In case
of omission to inform about the right of withdrawal, the right of withdrawal is set at 1
year plus the original 14 days. The rights are fully harmonized and member states on
a national level cannot offer more protection. For example, the German rule in case of
omission that withdrawal is always possible will not be possible under the new
directive. The right of withdrawal is exercised in any form. There is a model form in
the directive (under annex B). Under the new directive both the consumer and seller
have 14 days instead of 30 days after withdrawal to return the goods and give
restitution of the purchase price. The trader does not have to pay until he receives the
goods, so he is allowed to prolong the payment for more than 14 days. Ancillary
contracts such as loan contracts are automatically terminated if they are closely
connected.
Reimbursement after withdrawal
a. present directive - consumers will receive full reimbursement including the
delivery costs when realising their right of withdrawal. The only payment made
by the consumer is the postage costs for sending the goods back.
a. ECJ Messner – A consumer buys a laptop online but is not informed on
the right of withdrawal. When her laptop breaks down 8 months later
she learns and effectuates her right of withdrawal, which under
German law is extended indefinitely when seller doesn’t inform the
buyer about it. The seller in return relies on a German law which allows
for a compensation of use, and claims a rental price as compensation.
ECJ states that consumer in general cannot be required to compensate
the seller for its right of withdrawal, because the seller can protect
himself by informing the consumer of her right. In light of good faith and
unjust enrichments, an exception is made in cases where the use of
goods went beyond what was required for testing the goods (good
faith). The seller who proves this can claim a balanced compensation for
the use (instead of testing) of the goods. Allowing such a
compensation depends on the case.
b. Under the new consumer rights directive consumers can be called to pay for
the diminished value of the goods, as stated in art. 14 (2). The burden of proof
is harder for the seller. He needs to establish that there is liability for both the
use of goods and the consequent diminished value. In all cases, there is no
liability if the seller didn’t inform the buyer about his right to withdrawal. The
calculation methods and applicable situations are at this point hard to predict.
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CESL – The right to withdrawal are set in art. 40-47 CESL. Art. 45 (4) provides that a
consumer is not liable to pay for any compensation for the use of goods during the
withdrawal period. The only compensation the seller can claim is the diminished value
due to the use of goods.
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