Contract Law

Chapter 1
 Formation of • Definition
contracts • Components of a contract

• Contract terms: express and implied

Contractual terms
• Exclusion clauses

Breach of contract • Breach of contract

and its associated
• Damages’ payment
remedies

Contract law includes:

• Unit 1  Identifying contracts
• What is a contract?
• It is an AGREEMENT
• That creates an OBLIGATION
• The common law system has identified the analysis of 2
stages to define if there is a contract or not:
• Has there been an offer?
• And has there been an acceptance consecutive to this offer?

PREVIOUSLY IN
BUSINESS LAW…
• We will first analyze the requirements to be able to enter
into a contract
• we will then identify the elements of a valid contract

UNIT 2 – Components of a
contract
• The requirements to be able to enter into a contract are
CAPACITY and CONSENT
• And then in order to be valid a contract needs to have an
OBJECT and a CAUSE

Requirements and Elements

of a valid contract
• Capacity is the ability of a person to have right and to
exercise them
• Under Tunisian Law it’s conditions are regulated by Art 3
and 17 of COC (code des obligations et des contrats) and
153 of CSP (code du statut personnel)
• Art 3 states that any person shall be entitled to bind itself
unless that person is declared incapable by the law.

1st Requirement:
CAPACITY
• Any person, male or woman, above 18 is considered adult
under Tunisian Law.
• Now this is not the same in all countries of the world :
• Saudi Arabia, Yemen  bulugh up to 15 Palestine  16
• Algeria  19 or United States of America  21
• It is 18 in the majority of the countries in the world
• There are however exceptions provided in art 5 and 6 of
COC…

Basic rule: Majority

• All individuals under 13 and all adults declared mentally
insane are deemed INCAPABLE - Unable
• Individuals between 13 and 18 as well as feeble minded
and prodigal individuals are considered to benefit from
LIMITED ABILITY
• So what happens to the acts performed by these people?

Exceptions:
• All acts performed by incapable individuals are deemed VOID
• Transactions made by an individual under 13 can all be
cancelled
• What about the mentally insane adult? All acts are VOID even
if they were performed before he was declared as such
• Acts performed by individuals with limited liability have a
different fate: if the act brought a benefit to the person between
13 and 18, it can be confirmed, if it did not and is deemed
harmful for the individual, it is void.
• In all cases these acts have to be confirmed by the legal
guardian
• Concerning the feeble minded, all acts they perform can
be void and cancelled if the reason of their incapacity
already existed when the acts were performed
• As for the prodigals, acts performed before there were
declared as such are valid but can be challenged in court,
and any act performed after has to be confirmed by the
legal guardian.

How about the others?

• The expression of agreement does not suffice per se to
determine the existence of a valid contract – there must
be consent in accordance with the principle of “Freedom
of contract”, which means it has to be exempt from any
defect, it has to be free and not vitiated
• COC in article 43 provides 3 cases where consent can be
void:
• - Mistake – Fraud – Duress

2 Requirement:
nd

CONSENT
• Mistake (“erreur”) is believing that what is “wrong is
right and what is right is wrong”, not all mistakes lead to
a vitiated or imperfect consent…
• There are three types of mistakes: legal mistake,
substantial mistake and personal mistake (articles 44 to
47 COC)

MISTAKE
• Fraud, which is called « dol » in French, is when one of
the parties in a contract intentionally takes a fraudulent
action to make the other party enter into an agreement
with him (art 56 COC) –
• In other terms it is the use of deceit to mislead a party to
make the transaction.
• There are 2 elements of fraud: the objective element
which is the faulty behavior of a contractor, and the
subjective element which is the mistake of the other party

FRAUD
• Duress (« violence » in French) is the coercion exercised
without any rule of law to make an individual perform an act
without his consent (art 50 COC).
• 2 elements of duress: the physical element of duress, which is
the means used to exercise this coercion and the moral element
which is the will to force someone into something.
• Duress can be exercised against a person directly, against his
patrimony or against any blood relative of the person (parents,
children, partner…)
• Finally duress must be illegitimate: threatening to sue someone
is not duress.

DURESS
• There are 2 main element that determine the validity of a
contract:
• The Object
• The Cause

Elements of a valid
contract
• For a contract to be validly formed, it has to bear an
object (art 62 to 66 COC)
• Even though the object does not have a definition under
the Tunisian Law, it has been widely explained by the
legal doctrine
• In a bilateral contract there are 2 obligations and each one
has its object: delivering the goods is one part’s object,
paying the price is the other part’s object.
• The object has to EXIST and to be LAWFUL

Object
• The object must be something possible, and any
obligation regarding something physically impossible is
void.
• You can NOT: sell the sun, promise to deliver a
teleportation machine or sell a potion that brings back the
dead.
• The object must be certain : you can not sell something
that does not exist (for example a house that you have not
inherited yet)
• The object must be determined

Existence of the object

• The object must be compliant with the law, it can not be forbidden –
The COC even talks about “things that are usually found in stores –
one can only sell in stores things that are not forbidden by the law”
(art 62)
• You are free to enter into any transaction…as long as it only concerns
lawful objects.
• Two things are not considered lawful because they are not found in
stores:
• - things that can’t be sold by nature (the air you breathe, the sunrise,
the water in the sea…) or which can’t be delivered by the seller (birds
in the sky, fish in the water…)
• - things that are excluded from trade for reasons of public order even
though they bear an economic value (drugs, human beings,
weapons…)

Lawfulness of the object

• Article 67 of COC provides that any obligation that does
not have a cause or based on an unlawful cause is void. A
cause is deemed unlawful when it is contrary to morality,
public order or the law

Cause to contract
• Depending on the type of contract, we will generally
consider that the cause of an obligation in a bilateral
contract is the consideration, i.e what is the other party
supposed to perform in exchange of the first party’s
performance.
• Usually when judges control the validity of a contract,
they will always check the existence of a second
obligation, even if it is not very important.

Existence of the cause

• A cause is considered unlawful when it is contrary to
morality, public order or the law
• This is something very hard to determine, given that you
can not determine what is in the minds of the parties to a
contract when they sign it

Lawfulness of the cause

• IMPLIED AND EXPRESS TERMS
• EXEMPTION CLAUSES (AKA exclusion clauses)

NEXT WEEK IN BUSINESS

LAW…