Contract Law Part II

Question 1

Time Performance

Answer 1

Refers to the period which is mentioned or determined in the contract.

The time of performance is a crucial element of any contract. If there isn’t a time specified, parties can expect reasonable performance in a reasonable time after the conclusion of the contract. What constitutes “reasonable” depends on what a reasonable third person would do or expect in the same situation. If the contract specifies a performance date, it must be respected

Question 2

Reasonable Time Performance

Answer 2

if there isn’t a time specified, parties can expect reasonable performance in a reasonable time after the conclusion of the contract. What constitutes “reasonable” depends on what a reasonable third person would do or expect in the same situation. If the contract specifies a performance date, it must be respected

Question 3

Early Performance

Answer 3

Early performance refers to the act of performing contractual obligations before the performance date specified in the contract.
* The other party can refuse early performance if it is not reasonable or goes against their interests.
* Refusal of early performance must be reasonable and cannot be arbitrary.
* Early performance does not impact the other party’s obligation to perform on the specified date.
* Early performance can bring additional risks such as storage problems, additional expenses, etc.

Question 4

Partial Performance

Answer 4

Partial performance refers to the act of performing only a portion of the contractual obligations instead of the full performance as agreed upon in the contract. For example, delivering 10 out of 20 laptops ordered.
* Partial performance can always be refused by the other party.
* The buyer can demand “all or nothing” and refuse to accept partial performance.
* Parties cannot push each other to renegotiate the contract terms by offering partial performance instead of full performance.
* If one party has already performed partially, the other party is not obligated to pay until full performance is completed.
* Partial performance can result in breach of contract and may lead to damages or penalties.

Question 5

Good faith

Answer 5

The doctrine of good faith is a law system based on French civil codes. In contrast, it does not exist in common law, which is based on English law. Good faith is essentially a way to include fairness in contract law and the possibility to impose solidarity. In civil law, there is a general presumption that parties to a contract will deal with each other in good faith and consider each other’s interests. Good faith also takes into account additional measures regarding contracts, such as not only explicit terms, but also consequences and measures based on custom and/or certain usages.

Noteworthily, good faith only comes into account in very specific situations, and it does not come into account unless it is breached. Even then, it is still very subjective.

Question 6

A contract can impose several (commonly expected/logical) duties

Answer 6

> Duty to be loyal: requires the parties to a contract to act in a loyal and honest manner towards each other, and to avoid any conflicts of interest that may arise in the course of their dealings.
Sense of responsibility requires the parties in a contract to act with a sense of responsibility towards each other, and to take into account the possible (and foreseeable) consequences of their actions or inactions.
Duty to inform and advise if necessary: Parties in a contract have a duty to inform and advise (e.g., through guidance) each other as needed. If one party has information the other doesn’t, they must share it.
Duty to cooperate and negotiate: Refers to both parties needing to work together to achieve the objectives of the contract, and if there are any issues, they should attempt to resolve them through discussion and compromise.
Duty to provide evidence: The duty to provide evidence in good faith law means that each party has an obligation to provide evidence (e.g., documents, records) or information that is relevant to the contract or dispute in order to clarify.

Question 7

supplemental effect

Answer 7

The theory of good faith has a supplemental effect on expressed agreements by imposing extra meaning and implied terms, such as a duty of care to act reasonably. In civil law, good faith can be used to hold someone liable if it is not followed, but it should be used as a last resort and may not always set new obligations. It is binding and has an effect, but it must be what every reasonable person would do.

Question 8

derogating effect

Answer 8

The derogating effect of the theory of good faith requires a sense of proportionality in assessing the seriousness of a breach of contract. For example, if something happens after the conclusion of a contract that makes it impossible for one party to deliver goods on time or it would cost them significantly more, good faith allows for some leniency in the strictness of the contract. Instead, the actual loss (e.g., expectations, costs, etc.) is considered, and rights cannot be exercised in a disproportionate way. Ultimately, each case must be assessed individually.

Question 9

implied contract terms (UK)

Answer 9

Under English law, there is something like implied contract terms - not expressed directly by the parties in the contract, but assumed as it is a standard practice, known to everyone in this sector.There is no implied term to perform a contract in good faith.
Implied terms are restricted to certain transactions, in which there are some standard practices involved, that everyone knows of relating to this specific transaction type; under Good Faith, we look at every case, we do not group them into certain types of transactions.

Example:
If a customer enters a restaurant and orders food, for example, an implied contract is created. The restaurant owner is obligated to serve the food, and the customer is obligated to pay the prices listed on the menu for it.

Question 10

in contract law, interpretation is important because:

Answer 10

• The meaning of contract terms is often unclear and requires interpretation.
• Parties cannot always predict future developments, making interpretation necessary.
• Interpretation methods differ throughout the world, which can complicate global contracts.
• Increasing use of foreign legal concepts in contracts makes interpretation crucial.
• Proper interpretation ensures that the parties’ intentions are understood and applied correctly.

Question 11

Subjective Theory of Interpretation- civil continental law

Answer 11

Focuses on determining the true and common meaning of parties regarding terms in a contract. It considers all surrounding elements, such as negotiation process, draft agreements, correspondence, and parties’ conduct, to conclude the meaning if there is doubt. However, it does not involve gap filling (i.e., supplying non-agreed terms in contract) and avoids hindsight bias (i.e., post-contracting hindsight biases).

Relevant elements:

Negotiation process
Draft agreements
Correspondance: emails, sticky notes…, internal affairs between the parties
Parties’ conduct ex post & ex ante, etc.

More linked to the civil law
basically looks at the whole process holistically

Question 12

Hindsight bias

Answer 12

know-it-all, thinking things were more predictable (from the past)
The tendency to overestimate the foreseeability of an outcome once it is known. This bias has implications for decisions made within the legal system, ranging from judgments made during investigations to those in court proceedings. Legal decision makers should only consider what was known at the time an investigation was conducted or an offense was committed; however, they often review cases with full knowledge of a negative outcome, which can affect their judgments about what was knowable in the past.

Question 13

Hindsight bias

Answer 13

know-it-all, thinking things were more predictable (from the past)
The tendency to overestimate the foreseeability of an outcome once it is known. This bias has implications for decisions made within the legal system, ranging from judgments made during investigations to those in court proceedings. Legal decision makers should only consider what was known at the time an investigation was conducted or an offense was committed; however, they often review cases with full knowledge of a negative outcome, which can affect their judgments about what was knowable in the past.

Question 14

The objective theory

Answer 14

The objective theory in English common law asserts that the text of a contract is more important than the intentions of the parties involved. It is not possible to give words in a contract another meaning, and if parties want to make their intentions clear, they can put them in the contract, often in a preamble. Relevant elements include textual interpretation, the preamble (i.e., preliminary statement or introductory part of a contract), and plausible legal consequences.

Under English Law you only rely on the objective interpretation of the provided text —> what is written is what the party meant

Relevant elements:

Textual interpretation
Preamble
Plausible legal consequences

Question 15

contra proferentem

Answer 15

In the case of remaining doubt or ambiguity about a contract term, contra proferentem applies. When there is remaining doubt, you always interpret against the person/party who came up with the term and in benefit of the other person.

Question 16

In favorem consumentis

Answer 16

In B2C agreements we assume that the consumer never comes up with his own terms, therefore we favorite him and interpret it to his advantage

Question 17

Language rule

Answer 17

If the version is drafted in French, you always adhere to the French version, even if you sign the contract in English

Question 18

additional interpretation rules

Answer 18

• Place preference on negotiated terms.
• Interpret considering the contract as a whole.
• In case of doubt, favor terms that try to keep the contract alive. If someone wants to avoid a contract based on a term, give it a meaning that can let the contract withstand.
• In case of language/translation difficulties, preference goes to the version in which the original is drafted.

Question 19

Force Majeure

Answer 19

The impossibility to perform.
Force majeure is a legal concept that excuses a party from performing under a contract due to an unforeseeable and unavoidable event outside of their control (e.g., war, natural disaster, governmental action).
* It can provide relief to the non-performing party, but it must be explicitly invoked and does not operate automatically.
* If the non-performing party chooses to continue with the contract without invoking force majeure, they risk being held liable for any failures to perform. In other words, even suffering consequences from force majeure, you will be liable for any problems post-start since the non-performing party failed to exercise their right.
Exp:
The relief is not automatical - you have to ask for it, otherwise you will be held liable for non-performance even if you had an excuse no to do so

If there is a war but you think that the performance of the contract will be unaffected and you start to perform, then you are liable for the situation in which something happens in the end that makes the performance impossible

we give relief to the party who cannot perform the contract due to an event which is out of his error and which could not be foreseen from the beginning

but if you dont ask for the relief you HAVE to perform —> you have to ask yourself for an excuse and otherwise you are liable

Question 20

is it force majeure?
A, a manufacturer in country X, sells a nuclear power station to B, a utility company in country Y. Under the terms of the contract A undertakes to supply all the power station’s requirements of uranium for ten years at a price fixed for that period, expressed in US dollars and payable in New York. The following separate events occur:

(i) After five years the currency of country Y collapses to 1% of its value against the dollar at the time of the contract

Answer 20

B is not discharged from liability as the parties have allocated this risk by the payment provisions.

1. Event - in the contract there has been settled that there will be a fixed price payed in US dollars, hence force majeure is not applicable

Force majeure means that the event is unforeseen and you shouldn’t allocate the risk in the contract to one of the parties

Question 21

is it force majeure?
A, a manufacturer in country X, sells a nuclear power station to B, a utility company in country Y. Under the terms of the contract A undertakes to supply all the power station’s requirements of uranium for ten years at a price fixed for that period, expressed in US dollars and payable in New York. The following separate events occur:

(ii) After five years the Government of country Y imposes foreign exchange controls which prevent B paying in any currency other than that of country Y

Answer 21

. B is excused from paying in US dollars. A is entitled to terminate the contract to supply uranium.

Event - unforeseen, outside of the B’s control and will, and the risk that dollars are useless was not allocated in the contract, hence B has an excuse not to perform and Force Majeure applies

Question 22

is it force majeure?
A, a manufacturer in country X, sells a nuclear power station to B, a utility company in country Y. Under the terms of the contract A undertakes to supply all the power station’s requirements of uranium for ten years at a price fixed for that period, expressed in US dollars and payable in New York. The following separate events occur:
(iii) After five years the world uranium market is cornered by a group of speculators. The price of uranium on the world market rises to ten times the contract figure.

Answer 22

A is not excused from delivering uranium as this is a risk which was foreseeable at the time of making the contract
Event is foreseeable, bc when you trade commodities you have to expect certain scenarios to happen, hence A is not excused from delivering uranium as this risk was foreseeable

Question 23

Conditions for Force Majeure

Answer 23

1. Event/circumstance has to happen outside the control of the affected party.
   (“acts of god”)
2. It must be unforeseeable (at the moment of contracting)
   if you have a contract that is a bit speculative, you cannot complain if a financial crisis were to happen, this is foreseeable.
3. You may not have allocated the risk.
   For example, if you included a price in the contract that fluctuates based on market rates instead of a fixed price, then you have included the risk of price fluctuations in the contract and thereby allocated the risk.

If you are signing contract for trading financial instruments, the market collapse is foreseeable and you can expect it to happen

Question 24

ask someone about slide 33 comments idk

Question 25

Definite vs. Temporary Impediment in Force Majeure:

Answer 25

• If definite you have a valid excuse for non-performance
• If temporary “suspension/extension” of obligations of the affected party

Examples:
If you have an assignment with a deadline at 5 certain day, and then a strike happens which makes you unable to submit it, it’s not force majeure, since you had the strict deadline - you could have performed earlier if you wanted to

Lawyers have to send certain documents with a strict deadline, and if a cyber attack or an internet blackout happens, it is not an excuse and hence there is no force majeure, unless the cyber attack concerned the whole country

You could include different clauses in the contract, which would basically mean that you include force majeure in it, otherwise you will have to rely on what the court says, which is treated very restrictively

Suspension is not to be seen as 1-on-1 -> if you have a contract in which it states that you do not perform from January-June, and in your country a war breaks out on 15th of December and it lasts a month, which basically means that your performance is suspended until 15th of January, and on 15th you have to perform again - but then in your contract you had it settled that you don’t perform from January till June. So your general suspension can be longer than the suspension caused by the unforeseen event

the strike is usually not a force majeure

Question 26

Hardship

Answer 26

impediment beyond my control which is unforeseen at the moment of contracting which was not allocated by the parties (until this point the same as force majeure), making the performance not impossible, but only economically harder (the last line makes it a hardship)

In most, Hardship can lead only to renegotiations, not to non-performing or suspended performance

Question 27

Hardship vs Force Majeure

Answer 27

Force Majeure is kind of part of Hardship:
Hardship makes performance economically harder but not impossible while force majeure makes is impossible

Question 28

Hardship vs Force Majeure

Answer 28

Force Majeure is kind of part of Hardship:
Hardship makes performance economically harder but not impossible while force majeure makes is impossible

You have to notify the other party in both

Example: Monetary debtors
MONEY CAN NEVER BECOME A LOSS SO ITS ALWAYS A HARDSHIP - its impossible not to find a generic good

Question 29

Can the non-performance be excused?

Answer 29

If its not hardship or force majeure (unforseen events) then in case one party does not perform their part of the contract, the other party can either request forced performance or impose certain sanctions

Question 30

Can the non-performance be excused?

Answer 30

If its not hardship or force majeure (unforseen events) then in case one party does not perform their part of the contract, the other party can either request forced performance or impose certain sanctions

Question 31

performance in natura

Answer 31

the request for the contract to stay as it was supposed to: if the contract stipulates the delivery of a laptop, I want the laptop - so I Hope that the judge will oblige or put some pressure on the other party so that I get the laptop

Question 32

Exceptio non adimpleti contractus- remedy

Answer 32

Defence /remedy which can be raised in a reciprocal agreement (sales agreement ex.)
Even if you are a debtor, you do not perform without receiving what’s rightfully yours

if I sign a contract to buy a laptop and it says that I have 14 days to pay the price, and the laptop is not delivered after 14 days, I can still wait with the payment to the moment I receive the laptop; according to the contract, the laptop has to come first before I have to pay

Question 33

When can you terminate a contract?

Answer 33

not when you are not “performing on detail” lol

but when there is a fundamental breach :
when the termination happens, it is a severe measure, and it requires a severe misconduct, such as fundamental breach

again it does not operate automatically you have to notify the other side that I will terminate the contract

1) the other side might be triggered “it’s happening, I have to deliver the laptop”; 2) I have to justify that it was a fundamental breach to the court

ex. Imagine the laptop was deliver but a free USB stick wasn’t there is no fundamental breach (bc u received the essential part of the contract)

Question 34

When is non-performance fundamental?

Answer 34

When we stipulate very clearly a specific result, then not delivering it is a fundamental breach (ex. duty to achieve a specific result)

f the aggrieved party does not get what was their main reason for entering the contract then it is a fundamental breach ( laptop was not delivered )

ntentional non-performance - when Im intentionally willingly not performing, then it is a fundamental breach :gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance ex. fraud

Question 35

When can Contractual clauses restrict or limit the right to invoke remedies

Answer 35

• within the limits of good faith and fair dealing ( ex. f I add a clause to the contract that the contract may arrive in pieces and not as a whole and the other party may not invoke the remedies -> it is against the good faith, and cannot be valid )
  Or within the limits of unfair contract terms

within the limits of unfair contract terms:

For example, if a contract between a consumer and a business includes a clause that limits the consumer’s right to sue for damages, that clause may be considered unfair and unenforceable if it significantly reduces the consumer’s ability to seek redress for harm caused by the business’s actions. On the other hand, a limitation on liability may be considered reasonable and enforceable if it is proportional to the risks involved in the contract.

Question 36

when can Contractual clauses restrict damages

Answer 36

within the limits of good faith and fair dealing / unfair term
And which is foreseeable at time of conclusion

ex. can restrict that the other party may not ask damages, only price reductions; or that I restrict things that are not essential, or the number of damages you can get is restricted to a certain lump sum

Question 37

What does termination mean under English law

Answer 37

if there is a breach of contract with a supplier of laptops, and 1 laptop delivery is due, it has to be performed, but the rest in the future cannot be performed : meaning if you signed a contract to deliver laptops to the university and you missed the first due date, the sanction is that you need to deliver that undelivered laptop but after that contract is determinated

Question 38

What does termination mean under civil law (continental)

Answer 38

you terminated the contract immediately in the present- we try to get back to the INITAL position

The retroactive effect applies, unless there is a very impractical situation and getting back to original positions is not possible or desirable - then we either terminate the contract for the future, or settle that we are gonna put ourselves back in our positions only for the last year etc.

Ex.
We have a long-term agreement for laptops deliveries for 10 years, and on year 10 I do not deliver, which is a fundamental breach, then I have to give back the laptops back, and you give the money back

However, the court can say 1) “okay, you give the money back but the laptops stay” or 2) “we only give back the laptops from year 9 as it would be too difficult to send all 10-years worth of laptops back”

Question 39

what clauses apply under termination

Answer 39

If we terminate the contract, the contractual clauses do not longer apply, unless they are dispute resolution clauses

Question 40

Price reduction ( as remedy)

Answer 40

A party who accepts a tender of performance not conforming to the contract may reduce the price.

Proportionate decrease: to the decrease in the value of the performance at the time this was tendered compared to the value which a conforming tender would have had at that time

If choosen: no extra damages for the reduction of value!: f you ask for the price reduction, you cannot ask for extra damages

However, damages could be collected for other losses
E.g. recovery costs, costs for enforcing its claim

Question 41

Remedies for non performance

Answer 41

Specific performance - you want the actual good
Termination - you stop
Price reduction - you are happy with the goods, but you want to pay less
Repair or replacement - if something is not working, eg. The tyre in a car is damaged

Question 42

Damages

Answer 42

compensation of the losses caused by the non-performance by the other side

damages is the only remedy that you can combine with all of the other remedies -> WHY? The other remedies they tackle the actual performance of the good or service, but they may be other losses, cost of going to court, to hire lawyers

Question 43

Non-pecuniary losses

Answer 43

• damages or losses that cannot be easily quantified or measured in monetary terms. These losses are typically associated with personal injuries, emotional distress, or other intangible harms that result from an accident, incident, or event.

Question 44

Mitigate harm

Answer 44

Aggrieved party is not entitled to damages for loss suffered to the extent that the harm could have been reduced by the latter party’s taking reasonable steps

The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the harm.

Example:
I expected the delivery of 1000 laptops. For some reason only 100 of those were delivered (fundamental breach). I, as the creditor, already have sold these 1000 laptops to sb else, I’m a reseller, so if I don’t deliver those 1000, I will have losses. I have a different client, who asks for 100 laptops. It would be unwise to tell to the debtor that I still want the 1000 laptops, and I don’t want 100 laptops, cuz I will have extra losses, provided that there is a client to buy those 100 only. Then, I say to the debtor, that he still is in a breach of contract, but I can use these 100 laptops to sell to the client and mitigate my harm

Question 45

Cumulation of remedies

Answer 45

If not incompatible, remedies can be culmulated

Late payment interest and a damages clause

Late payment interest compensates the financial losses which are the result of the non-performance

Damages clause compensates the costs of administration linked to the non-performance

E.g. costs relating to the notices sent to the non-performing party

Late payment interest and a damages clause - if I borrowed the money and I haven’t paid off my monthly reimbursement, then what is asked: 1) pay the sum,- specific performance
2) late payment interest (compensation for lost chances) -compensation for the financial loss

, 3) administration costs, such as sending mails to the debtor, reminders etc. (you can expect damages) <- different costs, not contradicting, hence you can combine compensation for the administrative costs and procedural costs