Week 4 The content of the contract

Question 1

supplementary interpretation

Answer 1

If a party didn’t consider a matter the court construes what they would have said e.g France, Germany

Question 2

ad hoc gap filling

Answer 2

terms implied in fact –> the party agreement is supplemented with terms that follow from the hypothetical will of the parties in the circumstances of the case

Question 3

gap filling through default rules

Answer 3

Provides standard solutions for problems typical to a certain type of contract.

Civil law: gap filling through default rules
Common law: terms implied in law

Question 4

subjective interpretation

Answer 4

give preference to the „real“ intention of the parties —> words the parties used are only an expression of their intention —> meeting of the minds
Example: Whale-Shark meat case subjective approach

Question 5

objective interpretation

Answer 5

give priority to the declaration and therefore to the external expression of the intention —> meaning of the word

Question 6

Interpretation PECL

Answer 6

Art. 5:101 PECL

Question 7

A wrong description does not harm

Answer 7

Shark meat case (Germany highest court) “falsa demonstratio non nocet”

Question 8

Bürgschaft auf erstes Auffordern

Answer 8

the position of the parties matters: What knowledge and experience can be expected from them Art. 5:102 PECL

Question 9

England: parol evidence rule

Answer 9

letters, statements by witnesses or documents from the precontractual negations do not play a role in interpretation

Question 10

Words

Answer 10

Verba

Question 11

Intention

Answer 11

Voluntas

Question 12

Contra proferentem rule

Answer 12

Ambiguity (Mehrdeutigkeit) in a written contract must be interpreted against the person who drafted it

Question 13

Clauses claires et précises France

Answer 13

the court is not allowed to interpret if the document is clear in itself

Question 14

terms implied in fact E

Answer 14

terms implied in fact –> terms that are not explicitly laid down in the contract, but of which it is assumed that parties would have included them if they had directed their minds to do so

Question 15

Test for terms implied in fact

Answer 15

1. officious bystander test: something so obvious that it goes without saying –> an bystander would suggest it
2. business efficacy test: “warning of danger”

Question 16

Objective good faith

Answer 16

reasonableness and fairness is a norm for the contracting parties: it sets a standard of conduct that requires each party to take the interests of the other party into account

Question 17

Subjective good faith

Answer 17

subjective state of mind of a person who does not know no has reasons to know of a certain facts, and therefore acts in good faith

Question 18

Norm is open-ended

Answer 18

It depends on the circumstances of the case how the norm is applied, giving much discretionary power to the courts. e.g unfair contracts

Question 19

Three functions

Answer 19

1. supplementing function
2. the interpretative function
3. restrictive function

Question 20

Supplementing function

Answer 20

allows the court to fill gaps in the party agreement —> Before and after performing the contract Art. 1:202 PECL

Question 21

Interpretative function

Answer 21

Parties are also bound by the principle of good faith when they interpret the contract

Question 22

Restriction

Answer 22

to restrict the exercise of contractual rights —> Allows a party to escape from a binding contract

Question 23

Doctrine of unforeseen circumstances or hardship

Answer 23

In highly exceptional circumstances some jurisdictions allow a party to escape from the contract in cases where its performance would be excessively onerous because of an unforeseen and unforeseeable change of circumstances —> good faith principle: in case of a truly fundamental change of circumstances, a reasonable party cannot hold the concluded contract (Not in English and French law)

European principle: Art. 6:111 PECL —> Adaptation left to the parties, the court is only allowed to step in if they do not reach agreement about new conditions

Question 24

UK: Red hand rule

Answer 24

Require the user of general conditions to take reasonable steps to bring them to the notice of the recipient