Mid-term

Question 1

Organization of states (trias politica)

Answer 1

In most democratic countries there are 3 distinct branches of power:
1) A legislature - responsible for making the country’s laws
2) An executive - responsible for the governance of the states (executing the laws created). Can also enforce the laws. Issue certain types of regulation (law on financial institutions)
3) A judiciary - enforces the law/legal rights and obligations.
Different courts - Civil courts (overlook private person relations, if your goal is to seek personal compensation), Commercial courts (deals between businesses and persons, in this context, they address issues related to the dissolution of contracts and attempt to resolve such questions. ), Administrative courts (administrative law such as rejection of a license, contest the actions of supervisory authorities, such as appealing against the revocation or approval of a bank license), Constitutional courts (conflict regarding the rules of the state), Criminal courts (regarding the societal norms of behavior).

In case of conflict between legislature and executive, the legislature takes the upper hand.

Question 2

The two categories of law:

Answer 2

Public law - rules that regulate markets, the system, the state and access to the market

Private law - rules that regulate agreements between legal subjects and establish business relationships

Question 3

Market protection:

Answer 3

Party autonomy and competition law.

Party autonomy - is the of a subject to self govern his own legal position within legal limits (if you do not want to enter contract you do not have to)

Question 4

Freedom of contract:

Answer 4

1) Freedom to enter into agreements
2) Freedom to choose contracting parties
3) Freedom to determine the content of the contract

Question 5

Compensatory rules:

Answer 5

Based on the need for restoring balance - compensatory rules, for parties that are in a weaker position.
For example:
1) Duties to inform
2) Right of withdrawal
3) Substantive contractual justice

Question 6

Socialization of contract law:

Answer 6

Make someone behave in a way that is acceptable to society

Restrictions:
1) Rules of Public Order - social norms of specific country
2) Rules about the validity of contract
3) Protection of fundamental rights of others
4) Principle of non-discrimination

Question 7

Rules established after establishment of socialization of contract law:

Answer 7

To protect certain categories of people:
1) Employees (labor law)
2) Tenants (specific Contract law)
3) Consumers (Consumer law)
4) Small and medium sized companies/start-ups.

Specific rules:
1) Prohibition to enter into an agreement (insolvent borrowers)
2) Obligation to enter into an agreement (car insurance)
3) Mandatory information disclosure
4) Rules against unfair trading practices:
B2C (consumer law)
B2B
P2B

Question 8

Public vs Private Law:

Answer 8

Public law:
1) Constitutional law (organization of states)
2) Administrative law - regulates the relation between states and legal subjects, functioning of market
3) Criminal law - protects society and its values
4) Procedural law - procedures before courts and tribunals

Private law:
1) Law of obligations and Contract law - regulates unilateral (1 subject has obligation) and multilateral (several subjects) agreements and obligations
2) Property law - regulates ownership and possession and security rights.
3) Commercial law - regulates the relationship between businesses
4) Consumer law - regulates the relations between businesses and consumers.

Question 9

Sources of commercial (contract) law:

Answer 9

Hard law (necessary to obey):
1) International Conventions and model laws (CISG, Unidroit Model Franchise Disclosure law)
2) EU law:
Primary EU - law: 4 freedoms (movement of goods, capital, services, persons)

Secondary EU - law: directives - the member countries first have to implement it into their legislation - directly applicable (GDPR, Commercial agency directive, etc.)

3) Domestic legislation:
Sales of Goods Act

4) Contract:
Expressed terms, implied terms, principle of good faith

5) Uncodified customary law and trade practices:
Informal rules of evidence, unmentioned rules;
Absence of protest

6) Codified customary law and trade practices:
ICC uniform rules for collections
ICC rules for multimodal transport

Soft law (good practice, but is not binding):
1) Voluntary codes of best, good practices, codes of conduct (CSR; Corporate governance codes)
2) Transnational contract law:
PICC; PECL; DCFR.

Question 10

Consumer Notion and Consumer Image:

Answer 10

Consumer notion - any natural person who is acting for purposes that are outside his trade, business, craft, or profession.
SME’s even though facing similar difficulties are not considered consumers.

Consumer image - an average consumer who is reasonably well-informed, reasonably observant, and circumspect.
However, we can give special attention to certain groups of consumers (e.g., children).

Question 11

Directives vs Regulations:

Answer 11

The key difference between a directive and a regulation is that a directive needs implementation by member states, while a regulation is directly applicable without the need for national transposition.

Question 12

Two main types of rights in property law:

Answer 12

1) Right in or over and identifiable asset (ownership of a good)
2) Claims/rights on a person (right to get back money that you lent)

Question 13

Ownership:

Answer 13

The most important real right, can also be vested in multiple people (co-ownership)

Owner - full legal power over a good (not necessarily physical)
Possessor - has physical power over a good, can become an owner
Custodian - keeps the goods for someone else for a certain time and agrees to return them to the owner, can never become an owner

Question 14

Real rights:

Answer 14

Real rights are fundamental legal concepts in property law that grant individuals rights in or over
identifiable assets, irrespective of who currently possesses those assets. These rights are inherent to the assets themselves and remain attached to them regardless of changes in ownership or possession.

Question 15

Real Rights of use (easements):

Answer 15

Ground lease - getting a good for a minimum of 25 yrs up to 99 yrs. During this, the holder can use the goods and enjoy its benefits. The holder has to pay the lease and cannot sell it

Right of usufruct - separation of the bare ownership from the person who has the right to use it (person with the usufruct)

Question 16

Real security rights (attached to an object):

Answer 16

A security right is a right/claim which a creditor can exercise in case the debt is not repaid by the debtor. It is an accessory to the main claim the creditor has on the debtor and can be executed only if the debtor does not fulfill his obligations.

Real security rights include:
Pledge, lien, civil law mortgage, common law mortgage, charge.

Question 17

Pledge:

Answer 17

The owner of an object entrusts the object to his creditor as a security. It is created by contract, on moveable goods, and it requires the transfer of possession. A pledge is a security right on goods, documents, and instruments embodying a money obligation.

Nowadays, a non-possessory pledge is possible if the object is needed for business. In this case, the pledge is in the register.

If debt is paid or cannot be paid the pledge is terminated. An object returned or sold by the creditor, surplus given back to the debtor.

Question 18

Constructive possession:

Answer 18

Constructive possession is a legal construct that arises when the possession of an object is transferred to a third party, typically referred to as a custodian or trustee, while the original owner maintains ownership rights. This arrangement is particularly relevant in situations where the owner seeks to secure an object, often valuable or significant, without relinquishing complete control over its use.

Question 19

Lien:

Answer 19

Right given to a creditor to detain goods of the debtor until debt is fully repaid or performance of some other obligation is done.

Possession is required for a lien.

Question 20

Civil law mortgage:

Answer 20

Is a security right on an immovable object (also valuable movable property, such as ships and planes). The mortgagee is not a legal owner, but has the right on the good via the public register.

Question 21

Common law mortgage:

Answer 21

Transfer of ownership to creditor by a security upon the expressed or implied conditions. A possible surplus of trade also belongs to the mortgagee.

Question 22

Charge:

Answer 22

Is a right of the creditor to have a designated asset of assets of the debtor appropriated to discharge the debt. It is neither a transfer of ownership or possession. Created by statue (civil law) or contract (common law).

Fixed charge - is attached as soon as created in the specific assets that will be charged. Debtor cannot dispose of assets without consent.

Floating charge - applies to a designated class of assets in which the debtor has interest. Charge has to keep floating while the debtor disposes of the assets. Can be crystalized and become fixed.

Question 23

Personal rights:

Answer 23

Rights or claims on a person, often referred to as personal rights or personal claims, are legal entitlements that one individual (the creditor) holds against another individual (the debtor). These rights typically arise from contractual agreements, obligations, or legal responsibilities between parties. Unlike real rights, which pertain to tangible assets, personal rights are intangible and involve obligations or duties owed by one party to another.

Also considered as relative rights, while property law is absolute rights (enforceable to all).

Question 24

Legal subjects vs Legal objects:

Answer 24

Legal subjects (persons):
1) Natural persons - acting for private purposes; acting for business purposes (one-man business, craftmanship, liberal professions)
2) Legal persons -
Without legal personality (partnerships) - no full separation of personal assets and business assets)
With legal personality (companies) - limited liability or not (depends on whether personal assets of shareholder can be seized)

Legal objects (assets):
1) Goods -
Tangible vs Intangible (includes documentary and rights)
Moveable vs Immovable
Generic (grain, bulk goods, money) vs Specific goods (100kg of grain)
2) Animals
3) Services - building a house, and installing solar panels.

Question 25

Legal facts vs Legal acts:

Answer 25

Legal facts - every fact to which the law applies legal consequences, happens unintended. Legal fact can be an event (death), omission (accident), action, or condition (insanity).

In some cases, tort law applies. Its the branch of law that protects people who suffered from injuries from negligence, etc. It includes precontractual liability. To be applied there needs to be:
Damages, fault and link between them.

Legal acts - actions/omissions that were intentionally taken considering the legal consequences. Can be:
Unilateral (1 person)
Multilateral (2 or more persons)

Question 26

Conditions for legal acts to be valid:

Answer 26

1) Consent
2) Object (what?)
3) Cause (Why?)
4) Ability

Validity refers to the existence of a contract, while enforceability to the performance.

Enforceability: Enforceability pertains to the ability to compel the parties to perform their obligations under a valid contract. It depends on various factors, including the presence of conditions and the intention of the parties.

Question 27

Consent:

Answer 27

Free will or clear intention to be bounded.
To be determined by:
Party’s statements, conduct or omissions;
The fact that it was reasonably understood by another party;
The fact that consent may not be defected (no vices).

Consent is assessed case-by-case.

Question 28

Vices in consent:

Answer 28

1) Mistakes:
About the core of the claim known or ought to have been known by the other party.
Excusable (because other reasonable people would have made the same mistake).
Happened at the moment the legal act was concluded.

2) Fraud:
About the core of the claim or asset.
Fraudulent representation, by words or conduct, or fraudulent non-disclosure of any information.
Fraudulent intention.
At the moment the legal act is concluded.
Civil law encompasses a broader spectrum, acknowledging that silence can also be deceptive, especially when there’s an obligation to disclose information in good faith.

3) Threat:
Towards a person or close relatives.
An imminent and serious threat which is wrongful in itself tr to apply (against the law)
At the moment the legal act is concluded.

4) Exploiting unfair advantages:
One party was dependent or had a relationship[ of trust with another, and the party had urgent needs or was in financial distress.
Another party knew or should have known about these circumstances and took excessive advantage of the situation to its own benefit which was extremely unfair.
At the moment the legal act was concluded

Question 29

Object:

Answer 29

For the legal act to be valid, the object should be:
Clearly defined or can be determined;
Permissible by law;
On the market (future goods are also possible when they are clearly defined/ can be determined)
Enforcability on future goods is examined at the moment when being enforced.

Question 30

Cause:

Answer 30

The reason parties decided to enter into the agreement. It cannot be against public policy or mandatory law.

Question 31

Ability:

Answer 31

A party must have the ability to enter an agreement for a valid legal act to happen.
Two types of capacity:
Legal capacity (to have the possibility to hold certain rights) - from birth.
Personal capacity (to have the ability to exercise these rights), for example, minors don’t have the capacity to execute certain rights.

Regarding legal persons, such as companies or associations, their capacity to act is defined by their articles of association or incorporation. These documents outline the scope of their legal capacity and the extent to which they can enter contracts or engage in other legal transactions.

Question 32

Sanctions that can be applied to legal acts in case of errors/vices:

Answer 32

Sanctions the parties involved if rules were breached:
1) Retroactive effect - returns the legal act back to its original position as if the legal act never existed).
2) Avoided (court is needed for the sanction) or void (terminated automatically).

Question 33

Two types of avoidance/nullity:

Answer 33

1) Absolute nullity - a sanction for acts that violate rules of public order. Anyone at any stage can invoke it. The protected party cannot waive the sanction, because the act was against the essence of society, culture, economy etc.
2) Relative nullity - A sanction that violates the rules of mandatory law. Only a protected party can invoke it, and they need to invoke it at the beginning of the dispute (first stages of court). Waiver is conditionally possible for the protected party, if they are aware of the protection given to them by law, aware of waiving the sanction and they to clearly express the waiver.

Question 34

Freedom of contract exceptions:

Answer 34

1) Rules related to validity
2) Minors
3) Mental capacity
4) Mandatory law - in place to protect certain categories of people, such as consumers, who may be in a vulnerable position due to information imbalances or other factors (if law allows it can be that terms govern the contract, but these terms must be legal and abide by mandatory law).
5) Public order (can evolve with time; cannot be waived)
6) Conflicting fundamental rights - no discrimination).

Question 35

When an Offer is made:

Answer 35

The offer must outline the essential terms of the agreement, such as price, quantity, and subject matter, so that the offeree can understand and accept the offer.

An offer may be made to one or more specific people or to the public at large. For example, a professional supplier’s advertisement or catalogue offering goods or services at stated prices is generally presumed to be an offer until the stock of goods is exhausted.

Question 36

Can offer be withdrawn:

Answer 36

An offer becomes effective when it reaches the offeree, which marks the beginning of the period during which the offeree can accept or reject the offer. However, until the offeree receives the offer, the offeror retains the right to withdraw or revoke the offer.

Can be revoked before offeree dispatches its acceptance, or, in case of acceptance by conduct, before the contract has been concluded.

Question 37

Can offer be revoked:

Answer 37

Offer can be revoked before acceptance reaches offeror, however there are cases when offer cannot be revoked even if this condition is met.

When offer cannot be revoked:
The offer indicates that it cannot be revocked;
The offer states fixed time for its acceptance;
It was reasonable for the offeree to rely on the offer as being irrevocable.

Question 38

When is offer accepted:

Answer 38

When a declaration of an offeree reaches offeror within a reasonable or fixed time.

Declaration by the offeree can be any form of statement or conduct if it shows assent to the offer.

Silence is not enough for acceptance, as well as late acceptance.

If a reply to an offer has acceptance, but it contains modifications to essential terms of the contract, it counts as rejection and constitutes a counter-offer.

Question 39

When is contract concluded:

Answer 39

In case an acceptance has been dispatched by the offeree, the contract is concluded when acceptance reaches offeror

If the acceptance happens by conduct, the contract is concluded when the notice of conduct reaches offeror.

Question 40

Types of agreements:

Answer 40

Consensual agreements - validity consists of 4 conditions mentioned previously (general rule)

Formal agreement - requires formal requirement (for example civil law mortgage)

Real agreements - when asset is being handed over to another party (deposit agreement)

Agreements can be:
Unilateral (only one party has obligation)
Reciprocal (both parties have obligations to perform)

Question 41

Pivity/Relativity of a contract:

Answer 41

Only the parties involved have the contractual obligations, the only exception is when there are legal claims by the third party (beneficiary of life insurance).

Third parties must know and respect the existance of the contract not its content.

Question 41

Personal agreements:

Answer 41

Intuitu Personae

Agreements stand or fall with the person of one of the contracting parties

Namely, closely linked to the person of the debtor

If the person dies the contract is terminated.

Question 42

Sanctions when contract is breached:

Answer 42

1) Formal notice
2) Force performance
3) Termination of the contract (retroactive effect)
4) Replacement
5) Repair

However must consider can the contracting party in breach be excused. Was there an event of “force majeure” (acts of God) or “hardship” (under common law: frustration)

Question 43

Types of obilgations:

Answer 43

1) Obligation to give something:
For example to deliver goods and services

2) Obligation to do something:
For example to build a house

3) Obligation not to do something:
For example not to engage in unfair competition

Question 44

Types of duties:

Answer 44

Duty to achieve a specific result (minority of cases):
To deliver goods before certain dates

Duty of best efforts:
duty of a painter of house, to do his best.

specific result duty has lower degree of proof needed from the victim, thus easier to prove.

Best effort is compared to reasonable person (normal person) if the intended outcome is not reached. Victim has to prove that other person did not act as a reasonable person.

The quality that the contractor must expect if it is not determined, then it has to be reasonable or at least average.

Question 45

What kind of duty:

Answer 45

In order to identify what kind of duty, you have to look at surrounding circumstances.

Must consider the following:
The way in which the obligation is expressed in the contract;
The price and other terms of the contract (specific result has higher price)
The degree of risk involved in achieving expected result
The ability of other party to influence the performance of obligation.

Question 46

Price determination:

Answer 46

There usually is a fixed price or calculation method embedded in the contract. The price determination can be also left to one party; however, if the price is completely unreasonable, reasonable price will be substituted despite any contract term stating differently.

In common law contract does not necessarily need price, but in civil law it is necessarily to state a price or method in the contract.

Question 47

Conditioned agreement:

Answer 47

Under this type of agreement, the performance of contract is conditioned to a future uncertain event:

Suspensive condition - a valid agreement where the performance is suspended until an event occurs (clearance from a competition’s authorities)

Resolutive condition - a valid agreement where the contract is terminated ipso iure if the event occurs (the company loses its trading license)

Such agreements are only valid if both of the parties are involved in the condition, not completely up to the will of the debtor.

Question 48

Agreement under terms:

Answer 48

The performance is dependent on a certain term, that will happen in the future (fixed date or certain event).

Suspensive term - performance is suspended until the date mentioned in the contract

Resolutive term - contract is performed until a date, after that date the contract is terminated.

Question 49

Time of performance:

Answer 49

The time of performance is a period of time which is determined in the contract. If it is not mentioned, reasonable time is assumed after the conclusion of the contract

Early performance can be refused unless it is not reasonable. Partial performance can also be refused.

An early performance by the debtor does not impact the timing of the other party.