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Session 10

European institutions and comparative international systems - 1

European inst. and comp. inter. Systems – Obligation

 Contract is an agreement between two or more parties that creates an
obligation on all parties to perform (or not to perform) a particular action
or set of related actions. It is a legally binding agreement.
 Contract Law determines what makes a particular contract enforceable,
and provides remedies when a contract is breached.

What is a contract?
 Freedom of contract: Principle that voluntary exchange should be freely
permitted in order to maximize value.
 Not all agreements are contracts, but all contracts are the outcome of
 Essential Elements: Offer, Acceptance, Consideration, Privity, Intention to
create legal relations.
 “…to constitute a contract, there must be an offer by one person to
another and an acceptance of that offer by the person to whom it is
o A mere statement of a persons intention or a declaration of his
willingness to enter into negotiations is not an offer and cannot be
accepted so as to form a valid contract.”
Delict and contract
 Law of delict protects the intrests of affected 3rd parties. It also
determines whether and under which circumstances redress may be
 Cevilian tradition: Contract and delict two separate branches of the law
of obligations.
o UK the same: Contract and Tort Law
 It is a promise, which is capable of acceptance, to be bound on particular
 Offeror and offeree.
o Offer sets out the terms upon which the offeror is willing to enter
in to contractual relations with the offeree.
Session 10
European institutions and comparative international systems - 2

 Must be a (..) approach to another party to contract

o Clear (not vague  not capable of acceptance)
o Unequivocal
o Direct
 Can an offer end/Remains open until?
o Rejected or accepted
o Retraced (changed) or countered
 They can be revoked before acceptance unless it is under
o Deadline: Expires by its own terms.
 Not deadline  offer expires in a “reasonable time.”
 An acceptance validates a contract
o Cannot be partially accepted  rejection & needs new terms
 Can be…
o Express: “I accept the deal”
o Implied: paying for the goods or services offered for sale
 Must be (..) and made by the person to whom the offer is intended.
o Clear
o Unequivocal
o Unconditional (Mirror image rule: an offer must be accepted
exactly with no modifications)
 Is an offer ‘agreeable’?
o NO, you must ‘accept’ the offer & bring it to the direct attention of
the offeror before a valid contract exists.
 Acceptance can be implied by conduct
o 1. Condition: Expression of acceptance (not done for other reason)
o 2. Condition: Action or conduct was intended as acceptance.
 Trick (invalid/unenforceable): Acceptors silence will lead to acceptance
o Must be positive acceptance (wither words or conduct)
 Mailbox Rule
o Accepted as soon as the letter posted (properly addressed and
o Contract is concluded even if it doesn’t reach the offeror.
Session 10
European institutions and comparative international systems - 3

Privity (only UK)  Tort Law

 Privity is a “Doctrine”: a contract cannot confer rights or impose
obligations arising under it on any person or agent except the parties to
 Only parties to contracts should be able to sue to enforce their rights or
claim damages as such even is the contrac was to operate to a third
party’s benefit.
o Example: “ Before my dad died, he said you had agreed with him to
hive me money.”
“I am sorry, but that was an agreement between your father and I,
not you!”
 Difficult to prove and it can be a grey in the UK system
 A valid contract may be made by any erson recognised by law as laving a
legal personality.
o Natural persons
o Corporations
o Crown/governments
 Classes of persons incompetent to contract
o Bankrupts
o Minors (under 18 years)
o Persons of unsound mind  contract is void
o Alien enemies (citizen of countries which are in a state of conflict)
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European institutions and comparative international systems - 4

Legal Intention
 Most important! There must be a legal intention to the contract. This
means it should be moral and legally valid.
o E.g. to exclude a competitor  not valid (void)
 Domestic agreements: it is very difficult to verify the legal intention