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General Contract


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   Conflict rules: see Ch. 2
   Most national legal systems have no specific rules for cross-border
    transactions or international contracts in general
   International instruments ? Soft law and some model laws on specific
-   Soft law : Unidroit « Principles », PECL (Lando-commission), possible
    Optional instruments*. Conflict rule will determine whether accepted as
    « law » or merely as contract clauses
-   Model laws, e.g. Uncitral model law electronic commerce; Draft Common
    Frame of reference (DCFR)

-   *Examples of existing optional instruments: CISG, European trademark,
    societas europea, international last will, european procedures.
               V. UNIDROIT PICC

   Unidroit Principles for International Commercial contracts
-   « Principles », i.e. no Convention or Model Law
-   First edition 1994
-   Enlarged edition 2004
-   Endorsed by Uncitral 2007

   Intended field of application: international commercial contracts
   Regulated matters: Formation (incl. Representation), Validity (defects of
    consent, specific clauses), Interpretation, « Contents », Performance Non-
    performance and remedies, Set-off, Contractual Assignment of rights,
    Transfer of obligations, Limitations of Actions (Prescription)
   In progress: illegality, plurality of debtors or creditors, conditional
    obligations, unwiding of failed contracts (restitutution)
   Not regulated: other grounds of invalidity, non-contractual assignment
               V. UPICC PREAMBLE
   Preamble: Purpose of the Principles)
   These Principles set forth general rules for international commercial
   They shall be applied when the parties have agreed that their contract be
    governed by them.
   They may be applied when the parties have agreed that their contract be
    governed by general principles of law, the lex mercatoria or the like.
   They may be applied when the parties have not chosen any law to govern
    their contract.
   They may be used to interpret or supplement international uniform law
   They may be used to interpret or supplement domestic law.
   They may serve as a model for national and international legislators.
   See also 1.4. : applicable insofar as the conflict rule allows it
   Art. 1. 6 (Comp. 7 CISG) – Autonomous interpretation
    (Interpretation and supplementation of the Principles)
    (1) In the interpretation of these Principles, regard is to be had to their
    international character and to their purposes including the need to
    promote uniformity in their application.
    (2) Issues within the scope of these Principles but not expressly settled by
    them are as far as possible to be settled in accordance with their
    underlying general principles.

   But ALSO duty to act in good faith: Art. 1.7 (Good faith and fair dealing)
    (1) Each party must act in accordance with good faith and fair dealing in
    international trade.
    (2) The parties may not exclude or limit this duty.
   And art. 1.9 Usages and practices
   Art. 1.1: Freedom of contract
   Art. 1.2: No form required
   Art. 1.3: Binding character of contract
   Art. 1.7: Duty to act according to good faith & fair dealing
   How intention is determined – interpretation of acts: Art. 4.1 and 4.2
-   (4.1. for contracts, 4.2 for unilateral acts)
   Usages and practices – Art. 1.9
   Rules on notices in 1.10
     Very similar to CISG
     2.1.1.: conclusion of the contract by offer and acceptance or by
      conduct of the parties that is sufficient to show agreement.
     Rules on offer and acceptance similar to CISG
     Art. 2.1.12 (Writings in confirmation)
     Art. 2.1.14 (Contract with terms deliberately left open)
    Art. 2.1.17 and 2.1.18 on merger clauses and clauses on
    modification in a particular form.
   Going beyond CISG: Art. 2.1.15 on liability for negotiations (or
    breaking off) in bad faith
     Specific rules for battle of forms (2.1.22) (NB. Comparative law:
      usually knock out; Engl = last shot; NL = first shot)
   Not in CISG , inspired by Unidroit Convention (not in force)
   Deals with authority, i.e. external relationship
   Not internal relationship (agency contract) (2.2.1)
   Authority by grant (express or implied) (2.2.2); authority based on
    belief caused by the principal (2.2.5 (b))
   Direct relationship in case of disclosed agency (2.2.3)
   In principle no direct relationship in case of undisclosed agency
   Liability if the agent acts outside authority: positive interest (2.2.6)
   Art. 2.2.7 on conflicts of interest,
   Art. 2.2.9 on ratification
   Art. 2.2.10 on effect of internal termination of autority
           V. UPICC– VALIDITY
   Not in CISG
   Deals with defects of consent:
   Mistake: 4 cases of mistake (shared, caused, left in error, contract
    not yet relied upon) + requirement of material difference, no
    gross negligence, risk not assumed or to be bourne
   Error in expression or transmission: treated as mistake of the
   Fraud
   Threats
   Gross disparity or excessive advantage (with abuse of
   General rules on « avoidance » and its effects (in CISG avoidance
    means termination; here avoidance means annullment)
   Effect= retroactive; restitution = non-contractual obligation
          V. UPICC– CONTENTS
   Various rules
   Under interpretation: supplying an omitted term (Art. 4.8) where
    important for the determination of their rights and duties
    Art. 5.1.2: implied obligations stem from (a) the nature and
    purpose of the contract; (b) practices established between the
    parties and usages; (c) good faith and fair dealing; (d)
   Art. 5.1.3. Duty to co-operate
   Art. 5.1.4. Distinction duty result / merely best efforts
   Art. 5.1.7. Price determination mechanisms: normal price;
    unilateral unless manifestly unreasonable; third party decision
   Art. 5.1.8. Contract for an indefinite period: ending by notice with
    reasonable time
   Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences
          V. UPICC– CONTENTS
   Art. 5.2.1. ff. Contracts in favour of third parties; rule on defences

                    stipulator                                 beneficiary
                                                               (3rd party)

           (provision) (original
           contract)                              resulting relationship

   Modalities of (performance) of the obligation:
   Time of performance (Art. 6.1.1.)
   Order of performance (Art. 6.1.4.) in principle simultaneous
   Place of performance (Art. 6.1.6)
    - Money: creditor’s place (« obligee »)
    - Other: debtor’s place (« obligor »)
   Monetary obligations: means of payment, currency etc. (6.1.7 ff.)
   Rules where public permission required for performance

   Hardship (change of circumstances) Art.: 6.2.1 ff.

   Performance as extinction of an obligation
   Art. 6.1.12-13: imputation of performance
   « Non-performance » of an obligation as general (unitary) concept) (Art.
    7.1.1, shift from «(breach of) contract » to « obligation »)
   In view of the availalbe remedies distinction between:
    - non-performance caused by the creditor itself (7.1.2): no remedy
    - non-performance excused under 7.1.7 (force majeure): only withholidng
    performance, termination and interest on money due
    - non-performance cured without delay (7.1.4): only withholding
    performance, damages
    - non-performance not excused: all remedies
   Rule on exemption clauses: only if not grossly unfair (7.1.6)
   Withholding performance (7.1.3.)
    (the rule on anticipatory breach as in CISG is missing) (but implied in

   Right to (enforce) (specific) performance
    - always for monetary obligations (7.2.1) (no exception for cases where
    you can sell it elsewhere)
    - in principle for other obligations (7.2.2) unless impossible or unlawful,
    unreasonably burdensome, reasonably available elsewhere, strictly
    personal character; must be requested within a reasonable time

   Termination (next slide)
   Damages (s. further)
         V. UPICC – REMEDIES :
   Grounds for termination:
    - fundamental non-performance (7.3.1. (1) (2))
    - after an additional period granted for performance (Nachfrist, 7.1.5. and
    7.3.1 (3))
    - in case of anticipatory fundamental non-performance: 7.3.3. and 7.3.4.
   Mode of termination (7.3.2):
    - by notice
    - in case of late or defective performance: within a reasonable time
   Scope of termination: all obligations, unless extended over time and
    divisible (7.3.6 (2))
   Effects of termination:
    - release from (outstanding) obligations (7.3.5 (1))
    - restitution of performances (in kind or in money) (7.3.6. (1))
    - surviving clauses (7.3.5 (3))
    - damages reserved (7.3.5 (2))
         V. UPICC – REMEDIES :
   Except where non-performance is excused (7.4.1.)
   General measure of damage:
    - positive interest (see 7.4.2 (1), incl. lost profit)
    - includes non-pecuniary loss (7.4.2. (2))
    - includes loss of a chance (7.4.3.)
    - limited by foreseeability test (7.4.4)
    - restriction where due to creditor or non-mitigation (7.4.7, 7.4.8)
    - includes costs of mitigation (7.4.8 (2))
   Calculation of damage:
-   Late payment: interest (plus further damage) (Art. 7.4.9); interest rate in
    7.4.9 (2, place of payment); dies interpellat pro homine (7.4.10)
-   reasonable substitute transaction: price difference (plus further damage)
    (Art. 7.4.5)
-   current price (Art. 7.4.6)
   Agreed payment for non-performance: clauses binding unless grossly
    excessive in relation to actual harm (7.4.13)
              V. UPICC – SET-OFF

   Obligations of the same kind between 2 parties
   Can be set-off by notice by one party where:
    - its own obligation is payable (entitled to perform)
    - the obligation of the other party is (a) due and (b) ascertained or arising
    from the same contract
   No « retroactive » effect
   Assignment = transfer of a right (property)
   Scope:
    - contractual assignment of contractual rights
    - not in a negotiable instrument (9.1.2.)
   Limits to assignability
    - where significantly more burdensome (9.1.3.)
    - partially assignable ? If divisible (9.1.4)
    - no-assignment clauses have NO effect (1) for rights to payment of
    money and (2) in case of good faith of assignee (9.1.9)
   Requirements for assignment:
    - existence of the right ? For future rights with retroactive effect (9.1.6)
    - mere agreement assignor / assignee (neither notice nor consent
    required for the transfer as such) (9.1.7)
   Duty to perform of the debtor: according to (order of ) notice and
    possibly adequate proof of assignment (9.1.10, 9.1.11, 9.1.1)
   All defences available + set-off available at time of notice (9.1.13)
                                                  (valuta) + transfer
                                                 of property

                     assignor                                                        assignee

           (provision) (original
           contract)                                                    resulting relationship
                                                                        (substituted creditor)

                                debitor cessus

   Ch. 9.2. Substitution or addition of debtor.
   3 Types:
    - substitution: original debtor discharged
    - subsidiary liability of the original debtor
    - solidary liability of old & new debtor (« joint and several » in Eng. law)
   Several more specific institutions or instruments can be classified in this
   System of a double period: 3 / 10 years (10.2)
    - 3 years from (constructive) knowledge
    - 10 years from the day the right can be exercised
   Renewal of limitation period by acknowledgment (irrespective of 10
    years) (10.4)
   Suspension in case of proceedings (judicial, arbitral and similar): 10.5 to
   Prolongation until one year after impediment (force majeure) ceases:
   Effects of expiration:
    - « weak effect » (art. 10.9); no restitution because not « undue »
    - set-off possible until assertion of prescription (10.10)
                  V. E-COMMERCE
   Some provisions of the Uncitral model law 1996 (1998)
    - « Data messages » cover EDI, e-mail, telegram, telex and telecopy
    - Art. 5: Information shall not be denied legal effect merely because it is
    in the form of a data message
    - Art. 6: Writing < accessible so as to be usable for subsequent reference
    - Art. 7: Signature
    - Art. 8: Whether a data message can be an « original »
    - Art. 13: Attribution of data messages (who is the sender)
    - Art. 15: (1) time of dispatch and (2) of receipt
   UN Convention on the Use of Electronic Communications in International
    Contracts 2005 (not in force)
   EU Directive 1999/93 on electronic signatures:
    - different degrees of e-signature; legal effects
   EU Directive 2000/31, framework directive e-commerce
    - Art. 9 Treatment of contracts: equivalence (some exceptions)
    - Rules relating to information duties, conclusion contract, receipt, ...

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