Week 4 Flashcards
What is the concept of Good faith in Civil law?
Good faith helps parties and courts impose an agreement of action. It is an extra limit to party autonomy and freedom of contract.
What are the 2 functions of good faith in Civil law?
- A corrective function of good faith. It moderates the strictness of what parties agreed upon. So the court has power to correct the strict application of the contractual agreement.
- A supplementing function of good faith
Looks at:
- Duty to inform
- duty to safeguard confidentiality
- duty to cooperate and re-negotiate in events of unforeseen circumstances
It is essentially have an extra duty that is technically not mandatory
How is good faith applied in Civil law?
Good faith is a general rule that applies to everyone and all types of contracts.
What is the principle of good faith in common law?
There is no implied term to perform a contract in good faith. But many courts have acted on good faith and developed solutions to provide fairness to parties
What does interpretation concenr?
Interpretation means we agreed on something, but the issue is now that different parties may have different understandings of certain agreements.
What are the types of difficulties when reading a contract?
- The meaning of words - indicating the intention of parties - is not always clear. Certain terms can have specific meanings depending on the context of the situation or perspective of individuals. Thus, the court takes a law-based perspective
- Parties cannot predict futute developments
- methods of interpretation differ throughout the world
- the increasing use of foreign legal concepts
What are the 2 methods of interpretation?
- subjective interpretation
- Objective interpretation
What is subjective interpretation?
This is “will theory” and looks at the true subjective, common meaning of the parties. To do this, we look at all relevant elements of the contract:
1. Negotiation process
2. Draft agreements
3. correspondence meaning internal affairs
4. parties’ conduct ex post and ex ante
What is the objective interpretation?
This is the “declaration theory”, and it looks at what is the objective meaning of a contract, based on all relevant information available for an objective 3rd person?
It considers the meaning of the words used, not the intentions.
Relevant elements include:
1. Textual interpretation
2. preamble (prepratory statement)
3. plausible legal consequences
So what to do if there is still doubt of interpretation on contractual cause after the 2 method of interpretation?
Contra Proferentem: we interpret against the party who wrote/inserted the contractual clause. This is because the one who wrote the clause will most likely draw benefits from it so we interpret it against that party.
What are the 2 types of Contra proferentem?
- When there is doubt about the meaning of a contract term not individually negotiated, the interpretation of the term against the party who supplied it is preferred.
- If contract terms supplied by one party are unclear, an interpretation against that party is preferred
In consumer law, who do we favor?
We favor the interpretation in favor of the consumer
what are other rules of contract interpretation?
- we give preference for negotiated terms
- in light of the contract as a whole
- we favor those terms that give the contract legal effect
- we prefer the version of language in which the original is drafted
What are the 2 things that could excuse the party who breached the contract? (3rd one for common law)
- Force Majeure
- Hardship
- frustration
What is force majuere?
When the performance becomes impossible due to an external unforeseen event that could not be considered at the time of the conclusion of the contract. It is the highest threshold to prove it is impossible.
What is given when force majuere occurs?
Relief is given to the affected party.
What must the party do if they find out performance is impossible?
They must notify the other party immediately and not try to perform. If the affected party starts to perform, and then concludes they cannot fully perform, they could be held liable, as partial performance is not accepted.
What are the conditions to give relief in Force Majeure?
Non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.
- Beyond control
- Performance -> impossible
- Unforeseeable
- Unavoidable
Key takeaways of Force Majeure
- Burden of proof lies in affected party
- Impediment must be beyond the control of affected party
- Affected party must give notice to the other party
- unforeseen circumstances at the moment of conclusion of contract
What are the consequences/outcomes of force majeure?
If definite (meaning the impediment made it impossible to ever perform under the contract), the party is excused for the non-performance and full relief is given
If temporarily unable to perform, the impediment only suspends performance for the time the impediment exists
