1 - 2: Intro and Sources of Contract Law

Question 1

1.1) What is contract law?

Answer 1

• Branch of law
• Establishes rules and principles that make a promise legally binding on those making it
• Makes the existence of our market economy possible

Question 2

1.2) What is a contract?

Answer 2

• Legally binding agreement that gives obligations to the parties involved, putting them in a legal relationship
• We enter into contracts daily (ordering food, taking a taxi, use an app)

Question 3

1.3) How do different legal traditions regard contract law?

Answer 3

Civil law:
- Section within broader field (private law)
- Part of a group within private law along with torts and restitution, law of obligations, concept that explains how one person can have an enforceable duty to another person
- Falls under the civil law doctrine of the “juridical act”, it is a manifestation of will with the force of law behind it

Common law:
- No legal system/order rationalized
- No explicit contract law, torts, property, etc.

Question 4

1.4) What are the three principles of contract law?

Answer 4

1 - Principle of freedom of contract
- Freedom to choose the contents of a contract (parties can choose terms they please, within limits of the law)
- Freedom to choose the other party (you can contract with whomever you want)
- Freedom to contract at all (one is free to enter or not enter into a contract, cannot be forced to consent)
- Limitations (mandatory rules [no ignore], default rules [placeholders])

2 - Principle of binding force
- Parties are bound by the contract, they must perform the obligations they agreed to
- If parties fail to perform obligations, a court can intervene on behalf of the aggrieved party
- Court can force failing party either to perform the obligation or to pay damages for their failure

3 - Principle of informality
- Contracts do not require a specific form
- Intention of the parties to be legally bound by their agreement is enough
- In the past, certain formalities were demanded to ensure the existence of a contract (witness, writing, solemn words [stipulatio], etc.)
- Limitations (formalities required for some contracts today)

Question 5

1.5) What are the three categories of contracts?

Answer 5

1 - By the nature of the parties
- Commercial contracts (two or more commercial parties, business:business B2B)
- Consumer contracts (business:consumer B2C)
- Private contracts (two private individuals consumer:consumer C2C)

2 - By the type of performance
- Sale contract (delivery and payment)
- Employment econtract (work and salary payment)
- Civil codes and case law state specific requirements for different kinds of performances/transactions and thus contracts (sale, barter, lease, mandate, donation)

3 - By the reason for performance
- Bilateral contracts (each party assumes an obligation), a party’s reason to contract is that they know the other is willing to perform an obligation as well, element of exchange/trust
- Unilateral contracts (only one party assumes an obligation), a party does not receive anything in return for their actions. Ex: if you donate something, you do not receive anything in return, the other party does not agree to anything, only one obligation

Question 6

2.1) What is the first source of contract law?

Answer 6

• The parties’ agreement
• Parties can determine, to an extent, what contract law is
• Principle of freedom of contract allow parties to establish the contents of the contract and thus be a source of contract law

Question 7

2.2) What are other official sources of contract law?

Answer 7

1 - Default and mandatory rules
- Parties must abide by mandatory rules, like those that specify when a contract is void or voidable
- Parties can also abide by default rules, they are placeholders that are there unless the parties agree otherwise, they are useful because parties will typically establish clauses that are essential to their contract (price, delivery, etc.), everything else that has not been mentioned within the contract is handled by default rules

2 - National law
- Civil law: civil codes are the predominant source of contract law, case law is important when judges must make interpretations in times where the civil codes are not enough, statutes can also contain contract law (Ex: French Consumer Code)
- Common law: case law developed by courts is the primary source, statutes exist to amend or standardize existing case law on a certain matter (English Misrepresentation Act 1967)

3 - EU law
- Different contract laws in different EU countries disrupts the EU’s goal of creating a free market, thus, EU hopes to harmonize certain aspects of contract law across all its members
- EU does this through directives, binding goals whose form of achievement is left up to the national authorities, 15 directives have been sent out in the last 25 years, directives tartet specific contracts or aspects of contracts (usually consumer protection) in hopes that they can be standardized across all the members

Question 8

2.3) How does international law like the CISG act as a source of contract law?

Answer 8

• Convention on Contracts for the International Sale of Goods (CISG), made to promote harmonization and unification of international trade law
• Includes 101 articles outlining rights and duties of the parties, general obligations of the seller and buyer, delivery of goods, payment of the price, remedies for breach, damages, etc.
• Applies to sale of goods (with some exceptions), not to sale of services, or consumer sales (goods bought for household use), or contract validy, or other effects caused by a contract
• Applies between parties which are businesses located in different CISG states (German company selling to a Chinese one) or for parties that explicitly chose to have the CISG as the governing standard for their contract
• Parties can choose to exclude CISG application or change the effect of most of its provisions
• Criticized for not having an international court that interprets it uniformally, thus, CISG states’ national courts’ interpretation of it varies widely across jurisdiction

Question 9

2.4) What is soft law and how is it a source of contract law?

Answer 9

• Soft law are rules that are not legally binding (guidelines, codes of conduct, model laws, etc.)
• Soft law acts as a source of contract law when it is as a set of principles to help interpret, update, and improve statutes and case law
• Soft law principles are gathered by experts who find rules that are common to all jurisdicitons and are thus deemed as the “best rule”. For instance:
• UNIDROIT Principles of International Commercial Contracts (PICC): General rules for international commercial contracts, created by UNIDROIT, similar to CISG in providing neutral set of rules for two businesses of different nations
• Principles of European Contract Law (PECL): Private initiative that means to restate the contract laws of EU member states, it is a study of all EU contract laws and subsequent synthesis into a set of principles, aim is to become a European Civil Code of Contract Law, so far has helped influence legal reforms in Europe
• Draft of Common Frame of Reference of European Private Law (DCFR): Successor to creators of PECL, covers many more fields of private law not just contract law like the PECL, also covers specific contracts the PECL does not, aims to help harmonize civil codes in Europe
• Overall, soft laws like the PICC, PECL, and DCFR are used as non-binding tools for comparison for national laws and thus can act as sources of contract law