What is a contract ?

• An agreement + Intention to be legally bound

↳Generates rights and obligations

☞Art 1101 CC-agreement of will to create, modify or extinguish obligations

☞Art 2:101 PECL - contract is concluded if the parties intended to be legally
bound and reach a sufficient agreement without further requirements

Topics that contract law deals with:

CONTRACT FORMATION
-How do we know that there is an agreement? (offer and acceptance model)
-How do we know that there is intention? (objective and subjective perspective)
-Defects of consent (mistake, fraud, threat)
-Other requirements ? (consideration, causa)
-Legal capacity? (minors, incapacitated adults)

CONTENT OF CONTRACT
-Rights and obligations under the contract? (interpretation, gap filling, default rules)
-Fairness of the contractual terms?
-Illegal and immoral contracts ?

REMEDIES
-Remedies in case of non-performance? (circumstances and conditions)

Offer and Acceptance

☞Art 1101 CC - Meeting of the offer and acceptance, will to be bound

☞Art 6:217 BW - Offer and acceptance thereof
☞German law-Offer and acceptance

• Has one party intentionally made an offer with a view to make a contract and the other has
accepted that offer ?

What is an offer ?

☞Art 2:201 PECL-intended to result in a contract + sufficient definite terms

☞Art 1114 CC-essential elements of the contract+ will to be bound
☞English law-requires expression of willingness to be bound by the terms
of the contract+ essential terms
☞Dutch law: offer is a legal act (3:33) (6:213 contract is a multilateral legal
act (legal act of offer + legal act of intention)
☞German law: offer is a declaration of intention

• Common elements: proposal from offeror with sufficient definite terms + intention to be legally
bound

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 What is an acceptance ?

☞Art 2:204 PECL-any form of statement or conduct by offeree is an

acceptance if it indicates a scent to the offer
☞Art 1118 CC-expression of will to be bound under the terms of the offer
☞English law: unequivocal expression of consent made by the offeree to the
of the offer
☞Art 3:33 BW, legal act requires will directed towards legal effect
manifested through declaration

▶︎Relativity of the offer and acceptance model: may be out of date, difficult to identify which party
made the offer and which party accepted

Display of goods and advertisements

Display of goods:

☞Dutch and French law: it is an offer

↳Doctrine in the NL, Lemonade bottle case in FR

☞English and German law: it is an invitation to treat

↳Pharmaceutical Society v Boots in ENG, Doctrine in GER

Adverts:

☞Dutch and French law: it is an offer

Exception for intitue personae
↳Holfand v Hennis case for NL, Maltzkorn v Braquet case for FR

☞English and German law: it is an invitation to treat

↳Partridge v Crittenden for ENG, doctrine for GER

Withdrawal and Revocation of the offer

▶︎Distinguish between withdrawal (before offer takes effect) and revocation (before acceptance)

▶︎REACH: Art 1:303 PECL, reaches when it is delivered, not necessary to have red the offer,
sphere of influence, within the possibility to become aware of the withdrawal

Effect:
☞Art 3:37 (3) BW- effective when it reaches the addressee
☞§130 BGB, the declaration of intention takes effect when reaching the
addressee

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 Withdrawal:
☞Art 3:37 (5) BW-before or at the same time than offer reaches
☞Art. 1115 FCC-can be withdrawn as long as it has not reach the offeree
☞Art. 1116 FCC, cannot be withdrawn before expiry of a reasonable time or
of the time set
↳Even if the offeror is not permitted to withdraw the offer, it is still
effective if he does so, offeror remains liable extra contractually for
many loss (damages, compensation)

☞§130 BGB-no effect if withdrawal is sent before or at the same time as the
offer

Revocation:
☞ Art 6: 219 BW-offer may be revoked
↳unless the offer includes time period for acceptance or the
irrevocability of the offer follows from the offer itself

☞§145 BGB- no revocation possible

↳ unless stated explicitly that it is revocable

☞An offeror is free to withdrawn an offer at any time before acceptance -

Offord v Davies (1862) (even if it is stated that it is not revocable)

↳Doctrine of consideration: quid pro quo/

If promise to make the offer irrevocable, it is only valid if some
consideration exists

↳Revocation needs to be communicated, revocation needs to meet

the offer before the acceptance of the contract

The Lapse of an Offer

How long does the offer remain valid?

▶︎4 situations in which the offer lapses : revocation, rejection, counter-offer (changes elements of
the offer), time period for acceptance

☞Rejection: §146 BGB, Art 6:221 BW, Art 1118 FCC, Hyde v Wrench (1840)

☞Counter-offer:Art 1118 FCC, Art 6:225 BW, §150 (2) BGB, Hyde v Wrench (1840)

☞Time Period for acceptance (expiry): §148BGB, Art. 1117 FCC, english case law

▶︎When there is no time period ?

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 ☞Face to face: must be accepted immediately-§147 (1) BGB, Art. 6:221 BW,
english case law

☞Not instantaneous: after a reasonable time period (reasonableness depends of

circumstances) - Art. 6:221 BW, §147 (2) BGB, Art. 1117 FCC, english case law

Acceptance

Effect?
☞In general, when it reaches the offeror

☞Civil law: Receipt theory - acceptance becomes effective when acceptance

reaches the addressee- Art. 1121 FCC, §130 BGB, Art. 3:37 (3) BW

☞Common law: Need communication by the offeree to the offeror

Practical issues: differences between instantaneous communications and distance
communications

Instantaneous: when it come to the offeror’s intention, can identify if the other party is
aware - Brinkibon Ltd v Staff Stahl GmbH (1983)

Non-instananeous communications: postal rule applies, acceptance takes effect when

offeree posts the acceptance (dispatch theory)- Adams v Lindsell (1818) & Household Fire
and Carriage Accident Insurance Co Ltd v Grant (1879)
Exceptions to dispatch theory: Holwell Securities Ltd v Hughes (1974) - rule does
not apply when the offer states that the acceptance has to be communicated to the
offereror, no room for this rule if it is too inconvenient or absurd, difficult with new
technologies

Silence and Inactivity

▶︎Silence or inactivity is ambiguous

☞Art. 2:104 (2) PECL- silence is generally not an acceptance

☞Art 1120 CC- not an offer
☞Felthouse v Bindley (1862)

▶︎Not an absolute rule : certain circumstances (custom, general practice)

☞Art 1120 FCC, §151 BGB

Subjective v Objective Approaches

▶︎2 different approaches- subjective v objective

↳subjective-the party actual state of mind ↳objective-how a reasonable person would interpret
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 ▶︎Balancing interests- it is a spectrum

☞France: Art. 1101 CC - subjective approach (meeting of minds)

↳it has to be established that there is a dissensus (stands as a protection of
the other party), if contracting party would have relied on intention of the
other party, this party is liable on basis of tort law

☞Germany: K speditionsgesellschaft case (1956)

↳question should be decided by whether the recipient should have
concluded that there was no such intention given to circumstance (how
actions appeared) objective approach (through the lens of good faith)

§119 BGB (subjective approach)

↳one party can argue for a misalignment between the declaration and the
intention (dissensus)-avoid contract, if avoidance leads to damages, tort law
is used

☞The Netherlands: Art 3:33 BW (subjective approach)

↳if there is no underlying intention, there is no legal act thus no contract

Art 3:35 BW (objective approach)

↳if the other party could reasonably have understood the declaration to
reflect the intention of the party making it - not avoidable

☞English law: Smith v Hughes (1871) (objective approach)

↳ courts are not concerned with subjective view, what is relevant is the
reasonable appearance (reasons for adoption: accessibility (subjective is not
accessible), legal certainty)

Intention to create legal relations:

▶︎Distinguishing factor between promises and contract

▶︎Presumptions: domestic and social settings→ no intention to be legally bound

commercial agreements→ intended to be legally binding

▶︎Reasons for social and domestic presumptions -policy reasons (not the role of court to resolve
dispute in such a setting), logistically impossible

▶︎These presumptions can be set aside is sufficient evidence is found

▶︎The weaker the familiar relationship-the less strong the presumption

Domestic settings:

☞Balfour v Balfour (1919) — an agreement made in a domestic setting between a

husband and wife, is presumed to be not legally binding unless stated
explicitly

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 ☞Merritt v Merritt (1970) - presumption is not enforced, the spouses are not in an
amicable relationship anymore

Social agreements:

☞Contractual relations are not intended, presumption that agreements are not
binding in parties

Commercial agreements :

☞Presumption to be legally binding, lies within the nature of commercial parties that
they make contracts, must explicitly state the lack of legal effect (the parties are
bound in honour, gentleman agreements)

Causa

▶︎Old article : art. 1108 CC (until 2016)

▶︎New article: art. 1128 CC - abolition of cause

▶︎Can be found in civil codes inspired by french jurisdiction

▶︎Function: distinguish between contracts and other agreements, shows the motivating/underlying
purpose on the side of the debtor

▶︎In an absence of.a cause, not lawful cause= no contract

▶︎Cause= underlying reason on the side of the debtor

▶︎Reasons for abolishment of cause : historical relic, does not align with modern developments of
contract law, exact function is unclear, overlap with many other legal doctrines (mistakes, illegality,
…), intention of the parties is sufficient to enforce a contract

Subjective cause:
☞concrete, determining motive, reason for contract (if unlawful)

Objective cause:
☞abstract, legal, formal reason for imposition of the obligation, type of contract (absence of
cause)

Bilateral contract:
☞the objective cause of one party generally lies in the other party’s obligation (from an
objective approach)

Consideration

▶︎Main requirement in English contract law

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 ▶︎Consideration: contract as bargain, exchange, requires quid pro quo

▶︎Function: Distinguishing between enforceable contracts and mere agreements, make contract
credible, exchange over gifts, mistrust of agreements, gratuitous promises are suspicious

Detailed rules:

1. Consideration must move from the promisee- needs to be a causal link between the
parties and their undertaking

2. Consideration must be even in return for the promise - needs to happen in return, some
sort of connection

3. Past consideration is not good consideration - cannot be done before the promise is to
be made

4. Consideration need not be adequate but it must be sufficient-Currie v Miss (1875)

valuable consideration in he sense of the law-something of value in the eyes of the law -
Peppercorn theory, even a peppercorn is enough-Chappell and Co v Nestlé Ltd (1960)

Controversial aspect:
• Performance of a pre-existing duty

• Pre-existing statutory duty- invalid consideration, already required by law to do something,

cannot be used as consideration, nothing new is received - Stilk v Myrick (1809)

• Pre-existing from another contract - valid consideration, he party benefits from the
performance of the contract with the 3d party

• Williams v Roffey Bros (1990)- practical benefit by offering this additional money

Deeds and Promissory Estoppel

▶︎Exceptions to consideration: putting a promise in a deed or doctrine of promissory

estoppel

▶︎No quid pro quo needed

Deed:
☞shows evidence that agreement is serious - s1(2&3) Law of Property Miscellaneous
Provisions act 1989

Requirements:
1. Clear on its face that it is a deed
2. Validly executed (signed + witness)

Promissory Estoppel:
☞Central London Property Trust Ltd v High Trees House Ltd (1947)

Legal Capacity
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 Minors:
▶︎Freedom of contract -Art 1102 CC

▶︎Differences in legal techniques and in establishing whether or not the contract is beneficial to the
minor

▶︎Legal Capacity: limitations - Art 1145 CC, Art 3:32 BW, §104 BGB, s.3 SofGA

▶︎Generally : if the contract is to the benefit or generally accepted practice — valid

☞England-contract is unenforceable against the minor

↳Section 3 Sales of Goods Act 1979 - sale of necessaries-contract is valid (on a
basis of a reasonable price)
↳Necessaries = goods suitable and to the requirements of the minor
↳Apprenticeship, training = may enter into such a contract only if it beneficial to the
minor as a whole - Proform Sport Management Ltd v Proactive Sport Management
Ltd

☞France: Art 1146 CC - minor does not have legal capacity

↳Art 388-1 CC
↳Except Art 1148 CC - valid for common transactions made under normal
circumstances
↳Can be annulled if lésion occurs - Art 1149 CC
↳Cannot invalidate if useful and no lesion - Art 1151 CC
↳If not a common transaction, the contract cannot be invalidated if minor has
profited from it - Art 1151 CC
UNLESS CONSENT

☞German law : consent is needed

↳§104 — minor under 7 - no legal capacity
↳§106-113-minor can entered when the minor only receives a legal benefit (without
consent)
↳§108-parents can agree later on the contract made by the minor (ratification)
↳§110-pocket money theory-minor can enter into a contract with money given by
parents
↳§113-employment contracts entered by minors are valid

☞The Netherlands : Art 1:234 - consent is important

↳Art 1:234 (1)-minor can enter with approval
↳Art 1:234 (2)- approval might be given for a specific contract or a specific purpose
↳Art 1:234 (3)- presumed consent where it concerns generally accepted practice

Incapacitated adults:

Legally incapacitated individuals:

☞Curatelle: 440 CC, 1:378BW

☞Betreuung : §1896

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 ☞Mental Capacity Act 2005

▶︎Contract can be invalidated by legal representative-does not exist when legal representative
gave consent for the contract

☞France: person under curatelle can conclude day to day transaction- Art 1148 CC, if
contract is useful and no lesion , no grounds to invalidate - Art 1149 CC if the protected
person benefits from the contract - Art 1151 CC , reliance of the other party is irrelevant

Other adults:

▶︎Trying to restrict legal incapacity at the maximum

▶︎Number of interests need to be taken into account :

-Protecting from complex legal consequences
-Promoting personal autonomy
-Protecting the interests of the other party

☞France : Art 414 CC - can avoid contract if proving the mental impairment at the time of
the contract, reliance of the other party is irrelevant

☞Germany: §105 (2) can invalidate, unless it is an everyday transaction, reliance of the
other party is irrelevant

☞English and Dutch law: reasonable reliance of the other party plays a role

↳English: person is not bound unless necessaries (+ reasonable price)- section 3

of sales of goods Act , binding when other party did not know or did not have to
know about the mental impairment-Hart v O’Connor (1985)

↳Dutch: 3:34 BW-when it is disadvantageous, presumed to have entered under

mental impairment thus can be invalidated, Art 3:35-when other party could
reasonably not have known about the mental impairment then it is valid.

Formalities

▶︎Principle of informality - no requirement of form to be binding, intention is sufficient

Exceptions to this principle:

Types of formalities:

☞Common law:
↳Deed- s1(2&3) Law of Property Miscellaneous Provisions act 1989 - must be
signed, and witnessed and put into formal

☞Civil law:

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 ↳Notarial Deed: drafted by a notary (warning role of notary)-required for donations,
marriage

Writing requirements:
• to attach validity to contract+ evidence of the existence of the contract

Electronic contracts (E-Commerce):

• law recognises it
↳condition is that it is on a durable medium

The functions of formality:

1. warning function
2. informative function
3. evidentiary function

Sanctions for informality:

• Contract is void, voidable (when formality is only required to protect one’s interests),
cure a lack of formality

Consumer Right Directive

↳Art 1 CRD-facilitate the proper functioning of the internal market

↳Art 3 (1) CRD - mandatory rules for B2C contracts
↳Art 4 CRD - maximum harmonisation (member states cannot go above or below
the directive)
↳Art 3 (6) CRD - traders are allowed to compete for consumers by providing with
higher protection

▶︎Member states are obligated to implement into their national legislation (in their own way as it is
a directive)

Applicability:

↳Art 3 (1) CRD - shall apply to any B2C contract

↳Art 2 CRD - what is a consumer (1), a trader (2), goods (3) ?
↳Art 2 (7) CRD - distance contract
↳Art 2 (8) CRD - off premises contract
↳Art 2 (9) CRD - business premises

▶︎Remedy for informational asymmetry-weaker party is consumer

Informational duties:

↳Art 6 CRD - list of informations for distance and off-premises

↳Art 5 CRD - list of informations for other contracts
↳Art 7 CRD - how to provide information for off promises contracts, must be given
on durable medium
↳Art 8 CRD - how to provide information in distance contracts, provided in a
appropriate way and on a durable medium
↳Art 2 (10) CRD - definition of a durable medium

Effectiveness:
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 • Information overload-myth of the active consumer

Right to withdraw for consumer:

↳Art 9 CRD - right to withdraw for off premises and distance contracts (14 days),
no costs for withdrawal
↳Art 13 (2)& 14 CRD - cases in which costs exist
↳Art 16 CRD - exceptions in which withdrawal does not exist (personalised,
service, goods that expire)

↳Art 9 (2) (a) CRD - withdrawal period expires from the day of the contract
(service)
↳Art 9 (2) (b) CRD - expires on the day on which the consumer acquires physical
possession of the goods (sales)
↳Art 10 CRD - extension for 14 days period for example if Art 6 (1) (h)CRD
(informational duty) has not been respected

↳Art 11 CRD - consumer has to inform the withdrawal to the trader (model form in
Annex - not mandatory as Art 11(1)(b) explains )

Consequences of withdrawal:

↳Art 12 CRD - general consequences-termination of contract

↳Art 13 CRD - obligation of trader to reimburse (delivery costs)
↳Art 13 (2) CRD - exception if consumer has chosen for express delivery type
↳Art 14 CRD - consumer is required to send the goods back without undue delay
(who bares which costs ? Diminished value ?)

Justification for right of withdrawal:

▶︎Exception to binding force: protection of the consumer, facilitating internal market

▶︎For distance selling: balancing informational asymmetry

▶︎For off-remises contracts : balancing psychological strength

Content of the contract

▶︎1st look at the contract, then default rules apply

Interpretation:
▶︎2 approaches: objective v subjective
▶︎General rule : Art 5:101 PECL

☞France: Art 1188 CC-preference given to common intention of the parties

as opposed to the literal interpretation
↳when it cannot be established → through the eyes of the
reasonable person

☞Germany: §133BGB-preference given to common intention of the parties

as opposed to the literal interpretation

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 §157 BGB-contracts are interpreted through the lens of good faith and
common practice

☞Netherlands: Haviltex case — we are not looking for a literal interpretation

of the words used in the contract instead we do have to look at how the
parties understood the words used and whether or not they could reasonably
expect the other party to have attributed the same meaning to the words
used in the contract

☞England: four corners of the contracts: traditionally objective-plain ordinary

meaning, recent shift from objective to broader context
↳Rainy Sky SA v Kookmin Bank: determine what the parties
meant which involves the eyes of a reasonable person,
↳Investors Compensation Scheme v West Bromwich
Building Society: reasonable person to interpret the contract,
preliminary statements are not binding,

➡General rule : Art 5:101 PECL:

① Common intention

② Particular meaning if the party could not have been unaware

③ Meaning of reasonable person in the same position

Circumstances for interpretation:

☞Art 5:102 PECL : preliminary conversation, custom, place of

contract, standard industry interpretation,
usages, good faith

▶︎Arnold v Britton: necessary to focus on the meaning of the relevant words in their documentary,
factual and commercial context

1. Natural meaning
2. Relevant provisions in the contract
3. Purpose of the contract
4. Facts and circumstances
5. Commercial common sens
6. Disregarding subjective evidence

Gap Filling

▶︎Art 6:248(1) BW: fill gaps with law, custom, good faith

Law:
☞Civil Law: provides a set of default rules (general or specific) that can be used if
there is a gap to fil

☞Common law: terms implied in law (general or specific)

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 ↳Liverpool City Council v Irwin: it is possible to create default rules for particular
types of contract when necessary

Custom: a given in a particular situation

Good faith:
☞Art 6:248 BW, rights and obligations can arise from the principle of good faith,
open norm to fill open gaps

☞Common law: no principle of good faith-terms implied in fact: ad hoc gap filling

Unfair Contract terms Directive (1993)

↳Art 1 UCTD: unfair terms in B2C contracts

Scope →Art 2 UCTD: (b)=consumer, (c)=seller, (a)=unfair terms

↳Art 3(1) UCTD: test for unfair terms that are ‘not individually negotiated terms’, contrary
to good faith, it creates a significant imbalance to the detriment of the consumer
↳Art 3(2) UCTD: not individually negotiated terms
↳Annex: list of contract terms that may be regarded as unfair
↳Art 3(3) UCTD : annex is indicative and non-exhaustive

↳Art 4(1) UCTD: unfairness is assessed regarding the nature of good and service and all
the relevant circumstance and all the other terms = holistic approach, contract as a whole
↳Art 4(2) UCTD: unfairness is assessed without taking into account the price and the
definition

↳Art 6 UCTD: unfair term is not binding on the consumer, unfair term is not part of the
contract anymore
↳Art 5 UCTD: contra proferentem rule: when doubt, the interpretation most favourable to
the consumer must prevail, burden on drafting party
↳Art 8 UCTD: minimum harmonisation : obligated to implement at least this level of
protection but may go over and above in national legislation

Black and grey lists:

▶︎Black: always unfair
▶︎Grey: presumption of unfairness

Defects of Consent

▶︎2 categories of vitiating factors: party’s consent is impaired due to some deficiency in that party
knowledge or judgment, the other party to the contract behave inappropriately to deceive the first
party

Threat/Duress:

☞France: Art 1140 CC-duress is present where one party enters into a contract under the
pressure of the fear that his person, property or the person or property close to him will be
harmed.
↳Art. 1130 CC-duress vitiates consent where its nature is such that without it, the
party would not have entered into the contract or under substantially different
conditions
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 ↳Art. 1142 CC-duress is a cause for nullity

☞Germany: §123 BGB, a person who has been induced to make a declaration unlawfully
by threat may avoid the declaration

☞Netherlands:Art. 3:44(2) BW-a threat consists of a person inducing another to person

certain legal act by wrongfully threatening this or any third party with any disadvantage to
person or property. The threat is such that a reasonable human being could be influenced
thereby
↳ Art. 3:44(1) BW - a legal act is avoidable where it has been brought about by
threat

☞English-Duress/threat is ground to avoid a contract

↳Universe Tankships Inc of Monrovia v International Transport Workers
Federation(1983)- there must be some kind of illegitimate pressure, that induce the
party to enter into a contract, the third party does not see an alternative but entering
into the contract.

Fraud:

▶︎Different definitions for different jurisdictions - causal link is present

☞France: Art 1137 CC - fraud is the act of obtaining the other party’s consent through
intrigue or lies, intentional concealment of relevant information in order to bring about the
contract with the other party.
↳Art.1330 CC - fraud vitiates consent where its nature is such that without the
fraud, the party would not have not entered into the contract or under substantially
different terms
↳Art. 1339 CC-fraud constitutes a cause for nullity-contract is avoidable

☞Germany: §123 BGB- a person who has been induce to make a declaration of intent by
wilful deceit may avoid the declaration

☞Netherlands: Art. 3:44(3) BW-deceit consists of a person inducing another to perform a

legal act by intentionally incorrect statement made for that purpose or by withholding any
fact for that purpose, which he who withheld with was obligated to disclose or by any other
rule. Fraud can come about to incorrect statement or by intentionally withholding important
information or any other ruse.
↳Art. 3-44(1)BW-legal act brought by deceive is voidable

☞English: Fraudulent Misrepresentation

↳Derry v Peek : what constitutes a deceit is where the representation made a
knowingly false statement or a false statement made recklessly (gross carelessness)- there
must be a causal link between false statement and contract

Undue influence/ Wrongful exploitation:

▶︎One of the party exploits the circumstances to induce them to enter into a contract, law tries to
protect exploited party.

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☞France: Art 1143 CC - abuses of state of dependency, abusing party obtains a
commitment the latter would not have made, excessive advantage
↳Art 1330 CC - duress vitiates consent where its nature is such that without it, the
party would not have entered into the contract or under substantially different
conditions
↳Art 1142 CC-duress is a cause for nullity

☞Germany: §138(2)-void if a party exploits in the view to obtain an advantage when party
shows vulnerability , contrary to good morals

☞Netherlands: Art 3:44(4)BW-situations and special circumstances with a character of

vulnerability and that it requires the other party to use the circumstances to bring bout a
declaration of intention. Declaration can be avoided, contract is avoided

☞English: Doctrine of undue influence - one party exploits a relationship of influence to

obtain an undue advantage
↳ Royal Bank of Scotland v Etridge (2001), Allcard v Skinner (1887): court
recognises that they are two classes on undue influence:
1. actual undue influence ( evidence of exploitation),
2. presumed undue influence (special relationship(can be fiduciary) of trust and
confidence, the transaction is manifestly disadvantageous)

Mistake:

☞France: Art 1132CC-error of law, unless excusable, when it is related to the essential
characteristics of the performance or essential characteristics of the other party.
↳Art 1133 CC - essential characteristics of the performance, the essence of the
contract, this is where the error must relate to
↳Art 1136 CC - mistake about the value of the performance does not constitute
ground for nullity
↳Art 1134 CC - when the party is mistaken about the identity and it is essential, it
can lead to nullity of the contract
↳Art 1135 CC - minor error does not constitute a ground for nullity
↳Art 1130 CC - error vitiates consent where its nature is such that without it, the
party would not have entered into the contract or under substantially different
conditions (causal link needed)
↳Art 1333 CC - mistakes leads to nullity

☞Germany: §119 BGB - possibility to avoid a contract when entered on the basis of a
mistake on its consent and the party would rationally not entered into the contract

☞Netherlands: Art 6:228(1) BW-conditions to avoid a contract under mistake: False

information/failure to disclose/common mistake
↳Art 6:228(2) BW-if the risk of the mistake lies with party, then it is unavoidable

☞English: Only common mistake, both parties are mistaken about an essential
characteristic of the contract/other possibility would be misrepresentation.

General requirements for a mistake:

→Art.4:103 PECL

1. Contract
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 2. Misapprehension of fact or law act the time of contracting
3. Causal Link
4. Category of Mistake (incorrect info, non-disclosure, common mistake)
5. Apparent Importance
6. Excusability

Disclosure and Misrepresentation:

▶︎In civil law, the contractual relationship (+pre-contractual) is governed by good faith

↳Art 1104CC: contract must be negotiated, entered into and performed in good faith.

▶︎Might be a duty to disclose information (Consumer Rights Directive)

☞France: Art 1112-1 CC-general rule, during the negotiations phase, to provide important
informations essential to forming consent when one party has information and the other
does not

☞Art 4:107(3) PECL : general factors inform us when duty of disclosure might arise:
expertise, cost of acquiring information, reasonableness of acquiring the information,
apparent importance to the information for the other party

☞English law: no general duty of disclosure-no good faith, silence does not generate
liability
↳Smith v Hughes-caveat emptor “buyer be aware”

Exceptions: - uberimae fidei (utmost good faith)

- fiduciary relationship (relationship of trust)
- statutes (Consumer Right Directive)

▶︎Misrepresentation: unambiguous false statement of existing fact, made to a claimant, induces

that person to enter into a contract

- 3 types :
1. Innocent: innocent misrepresentation of the facts
2. Negligent: careless about whether the information provided is true
3. Fraudulent: intention to deceive, false information or gross negligence

Prohibited contracts:

▶︎Limitation to freedom of contract

☞France: Art 6 CC, Art 1162 CC - contracts derogating form public order are not
possible

☞Germany: §134BGB-refers to statutory law that prohibits certain transactions

↳§138(1)BGB-legal transactions violating good morals are void

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 ☞Netherlands : Art 3:40BW-legal act contrary to good moral is void, violation of a
provision renders legal at void, need to take a look at the statutory provision to see if
its aim is to protect only one of the parties

☞English: Holman v Jonhson-party relying on an immoral legal act cannot get that
contract enforced in court, illegal contract are not enforceable

▶︎Open-ended norm — the judges have discretionary power, taking into account norms and values
of society

Prohibited contract: statutory:

Contracts contrary to public policy (common law): criminal and civil wrongs, contracts
prejudicial to the state, prejudicial to family life, prejudicial to personal liberty, prejudicial to
the existence of a competitive market

Consequence of a prohibited contract: void

↳ Art 3:40(2)BW applies
↳Saunders v Edwards: tension between freedom of contract and illegality
↳§817BGB: in pari delicto: both parties have unclean hands, they cannot recover
anything under the void contract,

Consumer Sales Directive-Scope and Conformity

▶︎B2C contracts, give a number of rights

CSD:

↳Art 1 CSD-contract of sale between consumer and seller

↳Art 1 (2)(a) CSD-consumer: not relate to trade business or profession
↳Art 1 (2)(c) CSD-seller: relate to trade business or profession
↳Art 1 (2) (b) CSD-consumer goods-any tangible, moveable items (not water, electricity,
gas)

Conformity:

↳Art 3 CSD - remedies for consumer if good lacks conformity

↳Art 2 (2) CSD - presumptions for conformity
(a)= conformity with definition or sample or model, (b)= fit for any purpose required,
(c)= fit for purposes of their normal use , (d)= show the quality and performance
expected by that good, complying with public statements made about the
characteristics of the good
↳Art 2 CSD - duty of seller
↳Art 2 (3) CSD - seller has duty to deliver goods in conformity, if consumer knew or could
not have been unaware of the lack of conformity, he cannot claim lack of conformity

↳Art 2 (4) CSD - Seller is not always bound by public statement if he shows that he could
not have been reasonably aware of the public statement, by the time of conclusion the
statement had been corrected or if decision of the consumer could not have been
influenced by the statement.

↳Art 2 (5) CSD-where goods are incorrectly installed and installation is part of the contract,
or incorrect installation due to shortcoming of information for instalment-> lack of conformity

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 Remedies:

↳Art 3 (1) CSD-seller is liable to consumer for lack of conformity (legal right of consumer )
↳Art 3 (2) CSD - consumer is untitled to have goods repaired or replaced, price reduction,
termination of the contract
↳Art 3 (3) CSD-hierarchy of remedies
1st repair or replacement (free of charge) unless impossible or disproportionate , 2nd price
reduction and termination
↳Art 3 (5) CSD - price reduction when seller has not completed of repair or replacement
into reasonable time, without inconvenient to consumer
↳Art 3 (6) CSD - termination is not possible if lack of conformity is minor

Guarantees:

↳Art 5 CSD-Seller is liable under art. 3 where the lack of conformity is apparent upon 2
years, consumer must notify within 2 months

↳Art 5 (3) CSD - presumption in favour of consumer : any lack of conformity after 6 months
after delivery is liable to seller

↳Art 6 CSD - contractual guarantees, additional undertaking given by seller

↳Art 6 (2) CSD-plain, intelligible language, the content of guarantee

↳Art 7 CSD - not possible for the seller to derogate from legal rights of consumer in the
selling of consumer goods

Remedies

Remedies : Performance - Civil Law:

▶︎General divide between civil and common law remedies

▶︎Performance is primary remedy in civil law

☞Germany: §241 BGB - right to performance

☞France: Art 1217 CC-party may seek specific performance
↳1221 CC-may seek performance unless it is disproportionate costs, impossible,

☞NL-generally recognised
↳Art 3: 296 BW-procedural basis to claim performance

Steps to claim performance :

1. Contact of the other party
2. Possible to seek court order if seller refuses
3. Court establishes rights of the claimant and command debtor
4. Possibility of performance done by 3rd party at expenses of debtor
5. Bailiff or penalty (abstreinte) is or payable to court or to the claimant

Remedies: Performance and Impossibility:

1. Absolute impossibility: no one could perform the contractual obligation

1. Generic-claim for absolute impossibility is not possible
2. Non generic goods-claim can arise
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2. Relative impossibility: performance is possible
(i) practical impossibility: unreasonable effort or expenses (§275(2) BGB, Art 1221 CC)
(ii) moral impossibility : unreasonable danger to the debtor’s health or freedom
(iii) legal impossibility: contrary to statutory law or the contract performance would be
prohibited

3. Personal services: one be rendered by specific party, closely related to personal characteristics,
law will not enforce where personal characteristics are essential to contract
↳ 1. Affects on the individual liberty
2. likely to be low-quality
3. Difficult to determine if party has actually performed under the required qualities

Remedies: Performance - English law:

▶︎Primary remedy is claim for damages

▶︎Equitable remedy is performance only for specific performance and when damages would be
inadequate for the breach

☞S 52 SGA: when goods are unique, that cannot be substitute, court may order specific
performance
↳Land is considered unique and falls under s52 or when courts finds it difficult to evaluate
the measure of damages
Cooperative Insurance Society v Argyll Stores Holding→difficulty to quantifying the claimant’s loss

☞Frustration: Brings contract to an end

↳ Paradine v Jane-where contracting parties enter into a contract, they are strictly liable,
and in case of non-performance, this will lead for a claim for damages

↳Taylor v Caldwell-possible for defendant to rely on the excuse for non performance that
the contract was frustrated (default rules )
→Default rule, possible to parties to decide otherwise

Remedies: Damages

3 common requirements for a claim for damages

1. There has been a breach: look at contract terms, then at supplementing sources (law, custom,
good faith)
2. Loss has been suffered: damages for delay, damages in lieu of performance, collateral
damages
3. Causal link between breach and loss: adequate, reasonable, direct and immediate
consequence, not too remote

2 additional requirements for civil law

4. Breach is attributable to the debtor: we can determine that the breach intentionally or negligently
failed his part of the contract, debtor is responsible for guarantee, employees, instruments

5. Must put the debtor in default (notice of the breach or second chance):

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 ▶︎Expectation interest : position the creditor would have been in if the contract had been duly
performed
▶︎Reliance interest: put the creditor back in his position before the contract

☞English law: 3 requirements:

↳Breach-Doctrine of strict liability, any failure gives rights to damages-
↳Paradine v Jane-absolute liability
↳Nicolene Ltd v Simmonds - what matters is the fact of performance-has
he performed or not

↳Loss - expectation interest is preferred

↳Causation-loss must not be too remote, test of remoteness, loss needs to arise
naturally as a result of the breach
↳ Hadley v Baxendale , Victoria Laundry v Newman Industries: court
restricts the amount of damages when debtor is not aware- too remote, not
foreseeable

☞German law
↳§280(1) BGB-if debtor violates a duty arising from the obligation relationship, loss
caused by the breach, creditor may demand damages if debtor is in fault, (2)
damages for delay, (3) damages in lieu of performance
↳§249 BGB-expectation interest
↳§252 BGB-profits deemed to be loss are the one that can naturally be accepted
↳§276 BGB-debtor is responsible for intentional and negligent breach
↳§278 BGB-debtor responsible for breaches of his employees

Damages for delay

↳§280(1+2) + §286= warning notice is needed expect case scenarios §286(2)

Damages in lieu of performance

↳§280(1+3) +§281 (late or defective performance)
Requirements : Breach, loss, causation, attributability, late or defective performance, this is
not a minor breach= reasonable additional time period for performance (expect certain case
scenarios)

↳§280(1+3) +§282 (breach of an ancillary duty)

Requirements: Breach, loss, causation, attributability, debtor breach an ancillary duty (rights
and interests of creditor)= claim for damages

↳§280(1+3) + §283(impossibility or refuse to perform

Requirements: Breach, loss, causation, attributability, refuse to perform and is responsible
for it (§275 shows case scenarios in which debtor is not obliged to perform )= claim for
damages

☞Netherlands:
↳Art 6:74(1)BW — breach, loss, causation,attributability
↳Art 6:75 BW-breach was either the fault of the debtor or the contract attributes the
fault on the debtor or the law or generally accepted views
↳Art 6:76 BW-debtor is liable for employees and instruments
↳Art 6:74(2) BW-may be necessary to put the debtor in default (if performance
remains possible)
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 ↳Art 6:81 BW-default happens when performance remains possible
↳Art 6:82 BW-default commences when written notice with reasonable time-period
for performance has been sent
↳Art 6:83 BW - default does not need notice when period of time has been given or
where obligations follow from a wrongful act or damages and obligation is not
immediately performed , where creditor is to understand tar the debtor will fail to
perform

☞France:

↳Art 1217 CC - right to demand compensation for non-performance

↳Art 1231 CC - in order to claim damages, necessary to put the debtor in default by means
of a formal notice
↳Art 1231-1 CC - debtor pays damages when he is liable for it, no force majeure incurred
↳Art 1218 CC - force major is present when the events unforeseeable and impossible to
↳Art. 1231-2 CC - the nature of the loss occurred is what is comprised for damages
↳Art.1231-3 CC - the damages that were foreseeable are entitled to damage
↳Art.1231-4CC - damages only comprises immediate consequences of breach
↳Art. 1344 CC - formal notice is a document with sufficient warning or automatically when
time-limit is decided

Termination:

▶︎Pacta sunt servanda→ binding force

▶︎Legal effect= bring an end to the contract and thus to the obligations of the parties
▶︎Dutch and German law = possible to terminate the contract for non-fundamental breach
▶︎French and English law = termination only available for a sufficiently serious breach or a
fundamental breach
▶︎Some jurisdictions add the requirement to put the breaching party in default or to provide the
breaching party with a second chance

☞English law: leads to the discharge of both parties of their obligations

↳Remedy for termination is damage, termination leads to a claim for damages
↳Photo Production Ltd v Securicor transport Ltd
Possibility to combine termination and damages:

▶︎Conditions= gives rise to termination

▶︎Warranty= no possibility to terminate
▶︎Intermediate terms: we have to look at the consequences of the breach to allow termination

Conditions: terms that go to the root, essential core of the contract, gives rise to
termination
↳Ss 13-15 SGA - standards for conditions
↳Hong Kong Fir Shipping Company case= it is open to the parties in the
contract to make clear that a specific term must be interpreted as a
condition
↳Lombard North Central Plc v Butterworth-"time is of the essence “- delay
in performance is breaching an essential core of the contract

Warranty: less important terms, breach of warranty, claim for damages is sufficient to
remedy to the breach

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 Intermediate terms : between conditions and warranties, term that may be broken in
different ways, seriousness of the terms depends of circumstances
↳Hong Kong Fir Shipping Company case=court recognises intermediate terms

☞Germany: §323 BGB-can terminate for late or defective performance provided that he
sets an additional period of time and that performance does not happen after that second
chance
↳§323(1)BGB-late or defective performance
↳§323(5) BGB-does not allow for termination is it is a trivial breach
↳§323(2)BGB — case scenarios in which additional period of time is not needed

↳§324 — debtor violates ancillary duty, creditor can terminate

↳§326-debtor is no longer required to perform the contract when impossible or
debtor has a right to refuse performance

☞France: Art 1224 CC-possible to terminate a contract when termination clause, severe
performance, or creditor has obtained court decision
↳Art 1225 CC-termination clause within the contract, freedom of parties
↳Art 1226 CC-unilateral notice to terminate for sever breach, sufficiently serious breach,
creditor needs to give second chance unless cases of urgency
↳Art 1227 CC-termination can be requested to the court

☞Netherlands: Art 6:265 BW-every deficiency gives right to termination unless the non
performance and its nature (too trivial) does not qualify for termination
↳Art 6:265(2) BW - if performance remains possible the debtor must be put in
default and be given a second chance to perform the contract
↳Art 6:82(1) BW-be given a second chance to perform the contract
↳Art 6:82(2) BW-case scenarios in which it is not necessary to be given a second
chance to perform the contract
↳Art 6:83 BW-case scenarios in which formal notice is not required
↳Art 6:271BW — consequence of termination, parties are free of their obligations

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