Contract law: a comparative introduction – Jan M. Smits
Contents
Contract law: a comparative introduction – Jan M. Smits......................................................................... 1
Lecture 1 ................................................................................................................................................. 2
Ch 1 introduction ............................................................................................................................ 2
Ch 2 sources of contract law ........................................................................................................... 2
Ch 4: the intention to create legal relations .................................................................................... 3
Lecture 2 ................................................................................................................................................. 4
Ch 3: offer and acceptance .............................................................................................................. 5
Chapter 4: The test of earnestness in problematic cases................................................................. 8
Lecture 3 ............................................................................................................................................... 11
Ch 5: legal capacity of the parties ................................................................................................. 12
Ch 6: formalities ............................................................................................................................ 15
Lecture 4 ............................................................................................................................................... 19
Ch 7: the party agreement: interpretation and gap filling ............................................................. 19
Ch 8: the principle of good faith and policing unfair contract terms ............................................. 22
Lecture 5 ............................................................................................................................................... 25
Chapter 9: defects of the consent and misrepresentation ............................................................ 25
Ch 10: prohibited contracts ........................................................................................................... 29
Lecture 6: contractual remedies I .......................................................................................................... 31
Chapter 11: Performance .............................................................................................................. 31
Chapter 12: Damages for non-performance .................................................................................. 35
Lecture 7: contractual remedies II ......................................................................................................... 42
Chapter 13: termination of the contract ....................................................................................... 42
Lecture 8: precontractual liability .......................................................................................................... 46
Good Faith and Precontractual Liability Chapter 6 – Vanessa Mak ............................................... 46
Lecture 9: contracts and third parties .................................................................................................... 50
Chapter 14: contracts and third parties ......................................................................................... 50
1|P ag e
,Lecture 1
Ch 1 introduction
B2B contracts: business to business
B2C contracts: business to consumer
C2C contracts: consumer to consumer
Nominate contracts: dealt with in statutory law
Innominate contracts: not dealt with in statutory law
4 principles of contract law:
1. Freedom of contract
Each individual should be allowed the autonomy to make the choices they desire.
- Freedom to contract
- Choice of contents
- Freedom to choose the other party
2. Binding force
Each party has to perform the obligations it took upon itself and if it fails to do so, the court can
intervene at the request of the other party. A contract must be upheld.
3. Informality
Contracts do not require any particular form. Intention is sufficient, there is no need to put the
contract into writing or something else. The agreement that suffices for a contract to exist,
consensus ad idem.
4. Contractual fairness
Ch 2 sources of contract law
3 types of rules relevant to contract law:
1. Rules that are made by the contracting parties themselves (the party agreement)
2. Rules that emerge from the official national, European and supranational sources (official
sources
3. Informal rules that are made by other than the official institutions (informal rules)
The party agreement
Parties often make use of standardized sets of rules that are suited to their own interested → general
conditions, or standard forms, are used by almost all professional parties.
Mostly common in B2C → consumer is not in the position to renegotiate the standard terms, it is a
matter of accepting the conditions or not contracting with this party at all. (ch 8: not too one sided)
Official sources
Matters not dealing with the substance of the contract, are governed by default rules that are
automatically applicable if the parties have not made any other arrangements.
Default rules are rules that parties can deviate from: they are applicable subject to agreement otherwise
and fill the gaps left open by the parties.
Juridical act = Juridical act as used in civil law refers to a lawful act or expression of will intended to have
legal consequences. An act that have legal consequences because of the fact of these consequences are
intended by the person acting. Expressing a will to cause legal consequences.
2|P ag e
,National law
National level: law is produced by legislature and the courts.
French Civil Code in Book III.
BGB general provisions on judicial acts in Book 1, contracts in book 2.
BW Dutch: Juridical acts book 3, contracts book 6, contracts specific book 7
England most important acts:
• Sale of Goods Act 1979
• The Misrepresentation Act of 1967
• Unfair Contract Terms Act 1977
• Contracts (rights of third parties) Act 1999
• Consumer Rights Act 2015
European law
See directives
Supranational law
Convention on Contracts for the International Sale of Goods (CISG), concluded in Vienna, has been
ratified in 85 states and is very important. The CISG rules apply to a contract, unless the parties of the
contract have explicitly excluded it.
Not applicable in the UK and Portugal (they have not signed this treaty)
Informal rules
• Soft law
• Principles
• PICC
• PECL
• DCFR
Contract exists when:
1. Agreement (offer + acceptance)
2. Intention to create legal relations
3. Legal capacity
4. Formalities
Ch 4: the intention to create legal relations
Consensus ad idem: a meeting of minds, parties need to agree what they agree upon is binding in law,
meaning that each of them can go to court and enforce the agreement if necessary.
PECL 2:101(1): ‘if the parties intend to be legally bound’ and ‘reach a sufficient agreement’, then a
contract is concluded.
All legal systems adhere the same thought.
What is the intention of the parties? The objective approach to agreement
The intention is not always clear when making a contract → dissensus of intention and declaration.
Mistakes can also be made.
Diverging intention and declaration in the stage of formation, may stand in the way of the parties
actually having reached an agreement.
3|P ag e
, Each jurisdiction treats this problem differently.
Dutch law: art 3:33 BW: ‘the intention to create legal relations’
English law: ‘the intention of creating legal relations’
German law: ‘the intention to create a legal commitment’
French law: ‘a meeting of intentions’
Main approach: look for an objective meaning of the used words, rather than to try to discover what the
real intention of the parties was. Decisive: what the words or actions of the other party suggest to a
reasonable person in the position of a promisee.
Factors applying the objective approach:
• How easy is it for the addressee to investigate whether the declaration was really intended to
mean what it says?
• Whether the transaction would be beneficial for one of the parties
• What is customary in a branch or location
• The meaning of the disputed term in everyday speech
• The place of contracting
• The expertise and experience of the parties. (Professional: a party should make more effort to
make a statement clearer to the party)
Will theory:
Expression theory: only the statement of the party should be taken into account, only what was
expressed. Only the declaration counts.
Reliance theory: Most commonly accepted, whether a reasonable person could rely on the statement
made by a party.
Dissensus: consequences:
English & French law: no contract (England assesses meeting of minds more objectively than in France)
German law: ‘a mistake in the declaration’ → the contract can be avoided (119 BGB)
Dutch law: contract is concluded, but the other party can invoke the absence of intention in a
declaration if the other party could not reasonably rely on this party’s declaration (3:35 BW)
France puts more emphasis on the will of the parties, but it is hard to say if this is reflected in court
practice. If a party can prove that it did not intend to declare as it did, the internal will would prevail and
the contract is not seen as validly concluded.
Lecture 2
Formation of contract:
1. Agreement
2. Intention to create legal relations (+consideration in England and +causa in French-based
systems)
3. Legal capacity
4. (formalities)
4|P ag e
Contents
Contract law: a comparative introduction – Jan M. Smits......................................................................... 1
Lecture 1 ................................................................................................................................................. 2
Ch 1 introduction ............................................................................................................................ 2
Ch 2 sources of contract law ........................................................................................................... 2
Ch 4: the intention to create legal relations .................................................................................... 3
Lecture 2 ................................................................................................................................................. 4
Ch 3: offer and acceptance .............................................................................................................. 5
Chapter 4: The test of earnestness in problematic cases................................................................. 8
Lecture 3 ............................................................................................................................................... 11
Ch 5: legal capacity of the parties ................................................................................................. 12
Ch 6: formalities ............................................................................................................................ 15
Lecture 4 ............................................................................................................................................... 19
Ch 7: the party agreement: interpretation and gap filling ............................................................. 19
Ch 8: the principle of good faith and policing unfair contract terms ............................................. 22
Lecture 5 ............................................................................................................................................... 25
Chapter 9: defects of the consent and misrepresentation ............................................................ 25
Ch 10: prohibited contracts ........................................................................................................... 29
Lecture 6: contractual remedies I .......................................................................................................... 31
Chapter 11: Performance .............................................................................................................. 31
Chapter 12: Damages for non-performance .................................................................................. 35
Lecture 7: contractual remedies II ......................................................................................................... 42
Chapter 13: termination of the contract ....................................................................................... 42
Lecture 8: precontractual liability .......................................................................................................... 46
Good Faith and Precontractual Liability Chapter 6 – Vanessa Mak ............................................... 46
Lecture 9: contracts and third parties .................................................................................................... 50
Chapter 14: contracts and third parties ......................................................................................... 50
1|P ag e
,Lecture 1
Ch 1 introduction
B2B contracts: business to business
B2C contracts: business to consumer
C2C contracts: consumer to consumer
Nominate contracts: dealt with in statutory law
Innominate contracts: not dealt with in statutory law
4 principles of contract law:
1. Freedom of contract
Each individual should be allowed the autonomy to make the choices they desire.
- Freedom to contract
- Choice of contents
- Freedom to choose the other party
2. Binding force
Each party has to perform the obligations it took upon itself and if it fails to do so, the court can
intervene at the request of the other party. A contract must be upheld.
3. Informality
Contracts do not require any particular form. Intention is sufficient, there is no need to put the
contract into writing or something else. The agreement that suffices for a contract to exist,
consensus ad idem.
4. Contractual fairness
Ch 2 sources of contract law
3 types of rules relevant to contract law:
1. Rules that are made by the contracting parties themselves (the party agreement)
2. Rules that emerge from the official national, European and supranational sources (official
sources
3. Informal rules that are made by other than the official institutions (informal rules)
The party agreement
Parties often make use of standardized sets of rules that are suited to their own interested → general
conditions, or standard forms, are used by almost all professional parties.
Mostly common in B2C → consumer is not in the position to renegotiate the standard terms, it is a
matter of accepting the conditions or not contracting with this party at all. (ch 8: not too one sided)
Official sources
Matters not dealing with the substance of the contract, are governed by default rules that are
automatically applicable if the parties have not made any other arrangements.
Default rules are rules that parties can deviate from: they are applicable subject to agreement otherwise
and fill the gaps left open by the parties.
Juridical act = Juridical act as used in civil law refers to a lawful act or expression of will intended to have
legal consequences. An act that have legal consequences because of the fact of these consequences are
intended by the person acting. Expressing a will to cause legal consequences.
2|P ag e
,National law
National level: law is produced by legislature and the courts.
French Civil Code in Book III.
BGB general provisions on judicial acts in Book 1, contracts in book 2.
BW Dutch: Juridical acts book 3, contracts book 6, contracts specific book 7
England most important acts:
• Sale of Goods Act 1979
• The Misrepresentation Act of 1967
• Unfair Contract Terms Act 1977
• Contracts (rights of third parties) Act 1999
• Consumer Rights Act 2015
European law
See directives
Supranational law
Convention on Contracts for the International Sale of Goods (CISG), concluded in Vienna, has been
ratified in 85 states and is very important. The CISG rules apply to a contract, unless the parties of the
contract have explicitly excluded it.
Not applicable in the UK and Portugal (they have not signed this treaty)
Informal rules
• Soft law
• Principles
• PICC
• PECL
• DCFR
Contract exists when:
1. Agreement (offer + acceptance)
2. Intention to create legal relations
3. Legal capacity
4. Formalities
Ch 4: the intention to create legal relations
Consensus ad idem: a meeting of minds, parties need to agree what they agree upon is binding in law,
meaning that each of them can go to court and enforce the agreement if necessary.
PECL 2:101(1): ‘if the parties intend to be legally bound’ and ‘reach a sufficient agreement’, then a
contract is concluded.
All legal systems adhere the same thought.
What is the intention of the parties? The objective approach to agreement
The intention is not always clear when making a contract → dissensus of intention and declaration.
Mistakes can also be made.
Diverging intention and declaration in the stage of formation, may stand in the way of the parties
actually having reached an agreement.
3|P ag e
, Each jurisdiction treats this problem differently.
Dutch law: art 3:33 BW: ‘the intention to create legal relations’
English law: ‘the intention of creating legal relations’
German law: ‘the intention to create a legal commitment’
French law: ‘a meeting of intentions’
Main approach: look for an objective meaning of the used words, rather than to try to discover what the
real intention of the parties was. Decisive: what the words or actions of the other party suggest to a
reasonable person in the position of a promisee.
Factors applying the objective approach:
• How easy is it for the addressee to investigate whether the declaration was really intended to
mean what it says?
• Whether the transaction would be beneficial for one of the parties
• What is customary in a branch or location
• The meaning of the disputed term in everyday speech
• The place of contracting
• The expertise and experience of the parties. (Professional: a party should make more effort to
make a statement clearer to the party)
Will theory:
Expression theory: only the statement of the party should be taken into account, only what was
expressed. Only the declaration counts.
Reliance theory: Most commonly accepted, whether a reasonable person could rely on the statement
made by a party.
Dissensus: consequences:
English & French law: no contract (England assesses meeting of minds more objectively than in France)
German law: ‘a mistake in the declaration’ → the contract can be avoided (119 BGB)
Dutch law: contract is concluded, but the other party can invoke the absence of intention in a
declaration if the other party could not reasonably rely on this party’s declaration (3:35 BW)
France puts more emphasis on the will of the parties, but it is hard to say if this is reflected in court
practice. If a party can prove that it did not intend to declare as it did, the internal will would prevail and
the contract is not seen as validly concluded.
Lecture 2
Formation of contract:
1. Agreement
2. Intention to create legal relations (+consideration in England and +causa in French-based
systems)
3. Legal capacity
4. (formalities)
4|P ag e
