chapter 8

Question 1

contract

Answer 1

an agreement between two (or more) parties, in which the contracting parties promise to do something in exchange for something in return.

Question 2

doctrine of consideration

Answer 2

the principle that in a contract something of legal value must be exchanged for something else of legal value. (1) the promise should represent something of legal value, eg. money, property, and (2) the value does not have to be fair or in balance with the counter promise.

Question 3

quid quo pro agreement

Answer 3

when one exchanges something for something else.

Question 4

bargain theory

Answer 4

implies that consideration exists when the promise and return promise are bargained for. it emphasises a causal link between two promises.

Question 5

principle of promissory estoppel

Answer 5

implies that a one-sided promise is enforceable when the promisor should reasonably expect the promisee to rely on the promise. it is applied in most common law countries.

Question 6

contractual intention

Answer 6

willingness of the contracting parties to be bound to an agreement. this is emphasised in civil law systems. a valid contract is the result of two parties expressing their will to be bound by their promises. thus, the intention and its expression must be the same for a legal act to be considered valid.

Question 7

Anglo/American model

Answer 7

originates in the UK and is applied in common law countries. an offer is revocable until accepted. also, the receiver of the offer may accept the offer once the offer is arrived until the moment it transpires.

Question 8

Romanistic model

Answer 8

originates in France and is applied in countries that use the French Civil Code as a model. it holds a middle ground between Anglo/American and Germanic. the offer is revocable until accepted, but when the offeror revokes the offer before it expires, the other party may claim damage compensation. the offer can accepted from the moment it is received and expires as stated or within a reasonable period established by court. a contract is legally valid when the offering party is aware of the fact an acceptance has been sent.

Question 9

Germanic model

Answer 9

originates in Germany and is applied in those countries that used the German Civil Code as a model. the offer is in principle irrevocable, meaning that an offer may not be revoked until it transpires. if there is no specified date, a reasonable period applies. an offer has legal effect when received by the other party.

Question 10

Chinese contract law

Answer 10

combines elements of the Anglo/American and the Germanic model. an offer may be revoked before acceptance is sent. when the offeror includes a time limit for acceptance, the offer may not be revoked until this period transpires.

Question 11

contractual freedom

Answer 11

in most legal systems, contract parties are in principle free to choose what they agree upon.

Question 12

freedom of contract

Answer 12

means (1) freedom to enter into a contract, (2) freedom to choose the contracting party, and (3) freedom to determine the content of a contract.

Question 13

oral contracts

Answer 13

have the same legal weight as written contracts, but the evidence that is exists will be harder to deliver than in the case of a written agreement. however, they are everyday business, eg. ordering a drink of purchasing something in a supermarket.

Question 14

internal factors

Answer 14

the unfairness is created by something that happens in the sphere of the disadvantaged party.

Question 15

external factors

Answer 15

the unfairness is created by something external to the disadvantaged party.

Question 16

null and void

Answer 16

means that a contract has never existed by law, as a result of a factor affecting the validity of a contract. this means that the contracting parties have to accept the fact that their contract never existed; the contract is a nullity.

Question 17

voidability

Answer 17

means that a contract that is lawfully concluded may be rescinded by the disadvantaged party as a result of a factor affecting the validity of a contract. this has to be actively communicated. the legal effect is reversed; parties have to undo what they have done to fulfill their obligations.

Question 18

legal capacity

Answer 18

for certain individuals, concluding contracts is restricted because they are considered to be incapable to close a contract, eg. minors, mentally ill people, prisoners.

Question 19

unilateral mistake

Answer 19

a one sided mistake in concluding a contract. only one party errs in the interpretation or understanding of a contract. in common law, a contract will be voided if it obvious that the other party could have known a mistake was made. in civil law, if intention and expression are different.

Question 20

ostensible authority

Answer 20

when the powers of a representative of a company reasonably appear from the circumstances. thus, a contract in which a company representative exceeded his power may only be rescinded when the other party should have known this.

Question 21

bilateral mistake

Answer 21

occurs when both parties of a contract are mistaken regarding the nature or content of a contract. so, both parties had a different understanding. this is usually distinguished between a common mistake and a mutual mistake. it is typically a common law construction.

Question 22

common mistake

Answer 22

the contracting parties are mistaken in a similar way.

Question 23

mutual mistake

Answer 23

contracting parties are mistaken in different ways.

Question 24

misrepresentation

Answer 24

occurs when the disadvantaged party is mistaken regarding the nature or scope of a contract while this is caused by the action of another party. ‘action’ can also refer to absence of action.

Question 25

fraudulent misrepresentation

Answer 25

when the misrepresenting party is dishonest on purpose. often regulated under a different name, eg. ‘deceit’.

Question 26

negligent misrepresentation

Answer 26

when the misrepresenting party is not necessarily dishonest, but certainly negligent in providing information about the contract.

Question 27

innocent misrepresentation

Answer 27

when the misrepresenting party is not dishonest nor negligent, but provides for false information nevertheless.

Question 28

duress

Answer 28

the situation in which a party consents to a contract under threat, eg. violence or blackmailing.

Question 29

‘undue influence’

Answer 29

when one person abuses his power position over the other in the conclusion of a contract, eg. employeer - employee, guardian - child, doctor - patient relation.

Question 30

abuse of circumstances

Answer 30

when someone knows or should have known that another person might be induced to perform a juridical act because he is under the influence of particular circumstances, eg. state of emergency, dependency, etc. nevertheless, has stimulated this person to perform this act.

Question 31

principle of good faith

Answer 31

means that the contracting parties have the responsibility to deal with one another in an honest and fair way. this includes fulfilling obligations in good faith towards one another. it is however not always respected.

Question 31

UNIDROIT principles of international commercial contracts

Answer 31

offer one set of contract rules in international B to B markets.

Question 32

Contracts for the International Sales of Goods (CISG)

Answer 32

offer one set of contract rules in international B to B markets.

Question 33

International Commercial Terms (INCOTERMS)

Answer 33

established by the International Chamber of Commerce. standard rules that regulate the liability between sender and receiver during international transport in a B to B contract.

Question 34

ICC Model Contracts

Answer 34

single formats that can be used in different kinds of B to B settings, if contracting parties choose to use it. it is adopted by the International Chamber of Commerce.