Rechtswissenschaftliches Institut Seite 1 Comparative Private Law Theories and Technique of Contract...

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Comparative Private Law

Theories and Technique of Contract in EuropeProf. Dr. Ulrike Babusiaux

20th October 2014

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Preliminaries

- Teaching in English without being a native speaker:

a very difficult task both for speaker and listeners; please, don’t hesitate to ask for further explanation (or vocabulary); the slides are designed in order to facilitate understanding

- Master course, not a beginner course:

students are kindly requested to play an active part, i.e. to prepare the texts in the handout at home, to answer my questions and to express their ideas on a topic

Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux Seite 2

Preliminaries…


Gary Larson, The Far Side.


Theories and Techniques of Contracts in Europe

I. The Place and Sources of Contract Law

II. Definitions of Contract – Offer and Acceptance

III. Additional Requirements


I. The Place and Sources of Contract LawFrance:

- Basically in the Code civil (1804)

- Some provisions in the Code de commerce

- Growing number of provisions in the Code de la consommation (since 1993)

Germany:

- Bürgerliches Gesetzbuch (German Civil Code, 1900)

- special legislation on consumer protection was incorporated in the Code in 2002 («Schuldrechtsmodernisierung»)

England:

- Common law

- legislation: Misrepresentation Act 1967, Unfair Contract Terms Act 1977, Contracts Rights of Third Parties Act 1999


The French Civil Code (Reader p. 6f.)

Structured in three books:

Book I: Of Persons

Book II: Of Property and of Various Modifications of Property

Book III: Of the Various Ways, how Ownership is acquired

[Book IV: Of Securities

Book V: Provisions applicable in Mayotte]


The Place of Contracts in French Law

• Contract law is part of book III: Of the Various Ways How Ownership is acquired

Title 1: Of Successions

Title 2: Of Gifts inter vivos and of Wills

Title 3: Of Contracts and of Conventional Obligations in General (art. 1101 to 1369-11)

Title 4: Of undertakings formed without an agreement…

• And so are the special types of contract:

Title 6: Of Sales (art. 1582 to 1701)

Title 7: Of Exchanges (art. 1702 to 1707)

Title 8: Of Hiring (art. 1708 to 1831)…


Observations:- the place of contract is not prominent in the French Code:

it only appears in book III

it is one way to acquire ownership

- Code civil is often described as «the owners‘ code»

a very old model, already known in Roman Law (Gaius‘ Institutes are divided in personae, res,

actiones)

indeed property is in the centre of this codification, not contract

- unchanged since 1804 until recently projects for a major reform of the law of obligations were proposed

- reform projects are a consequence of the vivid discussion about the European Civil Code

pressure to modernise the old Civil Code


Change of paradigms in French law projects:

Ex.: Avant-Projet «Catala» (name of the president: Pierre Catala)

new title to book III: «obligations» and

a completely changed structure of book III :

Preliminary Chapter: The sources of obligations

Sub-Title I: Contracts and Obligations Created by Agreement in General

Chapter I: General Provisions

Section 1: Definitions

Section 2: Formation of Contract

Chapter II: The essential conditions for the validity of Contracts

Chapter III: The effects of Contracts (….)


The Place of Contracts in German Law (Handout p. 1/2)

- the German Civil Code consists of five books:

Book 1: General Part

Book 2: Law of Obligations

Book 3: Law of Property

Book 4: Family Law

Book 5: Law of Succession

-contract law is dealt with in Book 1 and Book 2, Sect. 3

- peculiarity of the German Law to divide contractual consent according to the general idea of «legal transaction/juridical act» (Rechtsgeschäft) and «declaration of intent» (Willenserklärung)


The theory of „legal transaction/ juridical act“: Bernhard Windscheid (1906)

The four characteristics of the juridical act:

(1) Synonym to declaration of intention (“Willenserklärung”)

(2) Private declaration (private, not public law)

(3) Declaration aiming for the creation of legal effects

(4) Not necessarily an (immediate) creation of the legal effects

this theory is still dominant in German Law and has been adopted by other European civil law systems (Austria, France, Switzerland, Italy)

its abstraction – juridical act is a kind of substrate of the contractual agreement – explains its success even in the German Law of Property (transfer of ownership is due to tradition and joining of the parties’ juridical acts)


The «General Part» (Allgemeiner Teil)(book 1 of the German Civil Code, Reader p. 7)-structure:

Section 1: Persons

Section 2: Things

Section 3: Legal transactions/ Juridical acts

Title 1: Legal capacity

Title 2: Declaration of Intent

Title 3: Contract

Title 4: Condition and stipulation as to time

Title 5: Agency and grant of authority

Title 6: Consent and ratification (…)

- contract is seen as a sub-division of legal transactions!

- in the general part, the focus is laid on legal transactions, not on contracts


The Law of obligations (Book 2 of the German Civil Code, Reader p. 7)

-structure:

Section 1: Content of Obligations

Section 2: Shaping contractual obligations by means of standard business terms

Section 3: Contractual Obligations

Section 4: Extinction of Obligations

(…)

Section 8: Particular kinds of obligations

Title 1 Sale, exchange

Title 2 Time-share agreements

(…)

contracts are a predominant figure in the German Civil Code; the idea of contract is no longer linked to property

but the theoretical idea of legal transaction / juridical act is even more important than the contract itself


English Law / Common Law (Reader p. 9)

- contract is a not a precise concept in English law, which prefers to speak of a «promise»

- contracts and the law of obligations (even later concept) are separated areas of law

- Roman law had less influence in the Common Law

- it was Pothier, the intellectual father of the Code civil, who influenced the modern english discussion about contracts (and who is cited in judgments at the end of the eighteenth century)

- in the centre of the English doctrine is the notion of a «promise» and the famous theory of consideration.


II. Definitions of Contract (Reader p. 11):

- art. 1102 Code civil:

A contract is an agreement (convention) by which one or several persons bind themselves, towards one or several others, to transfer, to do or not to do something.

- § 311 BGB: Obligations created by legal transaction and similar obligations

(1)Unless otherwise provided by statute, a contract between the parties is necessary in order to create an obligation by legal transaction or to alter the content of an obligation (…)

- Treitel (Common Law): «an agreement giving rise to obligations which are enforced or recognised by law.»


Basic elements (Reader p. 11-15):

- agreement = offer and acceptance

in all European systems

concepts of offer and acceptance (by the offeree)

- sufficent agreement = it must be clear, what obligations are agreed upon

differences at least in terminological concepts

- validity of a contract


Conditions of contracts in French Law, Reader p. 16

Art. 1108 Code civil

Four conditions:

(1) consent = intention to be legally bound

(2) capacity to contract, cf. Art. 1223 Code civil

(3) object = an ascertained object as subject matter of the promise

(4) causa = the foundation of a contract

the theory of offer and acceptance is a creation of the French doctrine

a good summary of this doctrine can be found in the avant-projet «Catala»


Offer and acceptance in French Law: Avant-Projet Catala

Offer:

Art. 1105

The formation of a contract requires the meeting of the definite and certain will to be bound on the part of more than one person.

Art. 1105-1

An offer is a unilateral act defining the essential elements of the contract which the person making it proposes to a particular person or to persons generally, and by which he expresses his will to be bound if it is accepted.

Art. 1105-2

An offer may be revoked freely as long as it has not come to the knowledge of the person to whom it was addressed, or if it has not been validly accepted within a reasonable period.

Art. 1105-3

An offer lapses if it is not accepted within the period fixed by the person who makes it or in the case of his incapacity or death before its acceptance. It is also extinguished if the offeree rejects it.

(…)


Avant-Projet Catala:

Acceptance:

Art. 1105-5

Acceptance is a unilateral act by which a person expresses his will to be bound on the terms of the offer.

An acceptance which does not confirm to the offer has no effect, apart from constituting a new offer.

Art. 1105-6

In the absence of legislative provision, agreement between the parties, business or professional usage or other particular circumstances, silence does not count as acceptance.

Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux Seite 20Prof. Dr. Ulrike Babusiaux, Universität Zürich

In comparison: The German Civil Code (BGB)

§ 145: An offeror is bound to his offer, unless he excluded the binding effect of it.

§ 146: An offer ceases to be binding, if it is declined by the offeror or if it is not accepted in due time (…)

§ 147: An offer made to a person who is present may only be accepted there and then. (…)

An offer made to a person who is not present may only be accepted within the time the offeror may expect to receive an answer under ordinary circumstances.


III. Additional Requirements (with Case study)

1. The doctrine of cause (French Law, Reader p. 16)

- Art. 1108 Code civil object and cause

- Art. 1131: An obligation without cause or with a false cause, or with an unlawful cause, may not have any effect.

- Art. 1132: An agreement is nevertheless valid, although its cause is not expressed.

- Art. 1133: A cause is unlawful where it is prohibited by legislation, where it is contrary to public morals or to public policy.

2. The doctrine of consideration (English Law, Reader p. 19f.)

- the original writ system did not contain a general action for contracts (only for contract under seal)

- contractual liability developed from tortious liability (action of assumpsit)

- a contract is only legally binding (within this action), if there is consideration


(1) The theory of cause (Reader p. 16f.)Two aspects of cause:

objective aspect: abstract reason behind the promise of the debtor

– e.g.: synallagmatic contracts = the expectation of the performance of the obligation by the other party

subjective aspect: the main individual motive behind the promise

– e.g.: to control the lawfulness / morality of contract (common cause)

Cause and object of the contract:

- the object must exist, be determined or determinable and lawful, Art. 1126-30 C. civ.

e.g.: the good that is sold; the machine that is to be repared.

- cause is the link that exists between this object and the counterpart:

e.g.: if the good does not exist, the payment of the price has no counterpart, i.e. is without cause.


Cour de cassation on cause:(1) Cass. Civ. 12 July 1989 Hocus pocus (Reader, p. 16f. )

a traditional application of the condition of cause

Facts: A professional soothsayer sells to his successor his occult paraphernalia, then contested the validity of the sale

Cour de cassation:

«Whereas one (…) established that the impelling and determining cause of a contract for the sale of various works on the occult and associated paraphernalia was to enable the buyer to engage in the occupation of soothsayer and fortune teller, which is an offence under (…) the Criminal Code, the lower courts correctly inferred that a cause of that kind originating in a criminal offence, is unlawful»

(2) Cass. Com. 22. Oct. 1996 Chronopost (Reader, p. 17f. )

recent development of the cause-doctrine

ethical control of contract


Cass. com. 22 october 1996 «Chronopost»:

Facts:

- Chronopost is a company which delivers mail on time.

- Banchereau, a company, which was twice handed an envelope containing a bid in a tendering procedure [hier: öffentliche Ausschreibung; im Original: «soumission a une adjucation»]

- these envelopes had to be delivered before midday, but Chronopost failed to do so (twice) .

- As a consequence Banchereau did not participate in the tendering procedure and brought an action for damages against Chronopost in respect of the sustained loss.

- Chronopost invoked a clause in the contract limiting compensation for delay to the cost incurred by it in transporting the packet.


Cour de cassation:«Under article 1131 of the Civil Code: (…)

Whereas in dismissing Bandereau‘s claim (…) the court of appeal infringed the above-mentioned provision; as Chronopost a specialist in swift transport guaranteeing the reliability and speed of its service, undertook to deliver the envelopes (…) within a specific period; as owing to its failure to perform that fundamental duty, the contractual clause limiting liability, which contradicted the scope of the obligation entered into, was deemed not to have been incorporated in the contract».

the payment for the transport service is without cause, because the transporter did not perform the fundamental duty

the cause is applied furthermore in the definition of the fundamental duty under the contract («obligation essentielle»)

(2) Common Law: the theory of Consideration

Consideration is a bargained-for promise to provide something of legal value to another.

promise of legal value:

– to do something the actor had no prior legal duty to do

– not to do something the actor had a prior legal right to do (or had no prior legal duty to refrain from doing it)

bargained-for :

– the legal value given is that which the other party requested, i.e. that there has been communication about who gives or does what for whom.

– the parties are in a “contract-making state of mind” – not a gift-giving state of mind.


Different Types of consideration:

- benefit and detriment: the idea of reciprocity:

the contract must either be to the benefit of the promisor or to the detriment of the promisee

- existing duties as consideration

in principle no valid consideration: if you are already obliged to do or to refrain from doing something, the contract concerning this duty is invalid.

- bargain-theory:

the contract is valid, if the parties view the contract as being a result of an exchange or a bargain.

if a deal does not give you any new legal rights, but relief, it may be that there is consideration.



Applications of the doctrine of consideration in English Law:

(1) Carlill v Carbolic Smoke Ball Co, 1893 (Reader, p. 19f.)

consideration in unilateral contracts


Carlill v Carbolic Smoke Ball Co (Reader, p. 19f.)Facts: - The carbolic Smoke Ball Company had advertised that it would pay £ 100 to any person who used the Smoke Ball for two weeks and nonetheless caught influenza.

- Mrs Carlill purchased a carbolic Smoke Ball from a third party and used it. She caught a flue but the company refused to pay.

[the case is to be seen in the context of a flu pandemia; the smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a user's nose and squeezed at the bottom to release the vapours. The nose would run, flushing out viral infections.]

Judgement: «Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think therefore that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them, because the use of the smoke ball would promote their sale (…) If you once make up your mind that there was a promise made to this lady who is the plaintiff (…) she should have £ 100, it seems to me that her using the smoke ball was sufficient consideration.»

At home:

(1)Consider the place of contract in the modern society. Does the contract as described by offer and acceptance still fit with our economic system and the modern distribution of goods? Is contract still a central element of our legal system?

(2)Please compare the theory of consideration and the doctrine of cause! Is it right to call them functional equivalents? What are the main differences between the two concepts? Can you name a functional equivalent in Swiss Law?

Students are kindly requested to prepare an answer (about 1 page) to one of the questions for the next meeting (10/11/2014). They will be asked to read their answer aloud to the others and/or to comment on the work presented by others.


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