Week 4 The content of the contract Flashcards
supplementary interpretation
If a party didn’t consider a matter the court construes what they would have said e.g France, Germany
ad hoc gap filling
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
gap filling through default rules
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
subjective interpretation
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
objective interpretation
give priority to the declaration and therefore to the external expression of the intention —> meaning of the word
Interpretation PECL
Art. 5:101 PECL
A wrong description does not harm
Shark meat case (Germany highest court) “falsa demonstratio non nocet”
Bürgschaft auf erstes Auffordern
the position of the parties matters: What knowledge and experience can be expected from them Art. 5:102 PECL
England: parol evidence rule
letters, statements by witnesses or documents from the precontractual negations do not play a role in interpretation
Words
Verba
Intention
Voluntas
Contra proferentem rule
Ambiguity (Mehrdeutigkeit) in a written contract must be interpreted against the person who drafted it
Clauses claires et précises France
the court is not allowed to interpret if the document is clear in itself
terms implied in fact E
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
Test for terms implied in fact
- officious bystander test: something so obvious that it goes without saying –> an bystander would suggest it
- business efficacy test: “warning of danger”
Objective good faith
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
Subjective good faith
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
Norm is open-ended
It depends on the circumstances of the case how the norm is applied, giving much discretionary power to the courts. e.g unfair contracts
Three functions
- supplementing function
- the interpretative function
- restrictive function
Supplementing function
allows the court to fill gaps in the party agreement —> Before and after performing the contract Art. 1:202 PECL
Interpretative function
Parties are also bound by the principle of good faith when they interpret the contract
Restriction
to restrict the exercise of contractual rights —> Allows a party to escape from a binding contract
Doctrine of unforeseen circumstances or hardship
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
UK: Red hand rule
Require the user of general conditions to take reasonable steps to bring them to the notice of the recipient
