International Contract Law.Mr. Marco Tupponi Studio AssociatoAvv. Marco TupponiDott. Giuseppe De Marinis& PartnersVia Maceri n.25 - 47100 ForlìTel +39 0543 33006 - Fax +39 0543 21999 www.tupponi-demarinis.it www.commercioestero.net
Common law The common law forms a major part of the law of many nations, especially those with a history as British territories or colonies. It is notable for its inclusion of extensive non-statutory law reflecting precedent derived from centuries of judgments by judges hearing real cases. The opposition between civil law and common law legal systems has become increasingly blurred, with the growing importance of jurisprudence (almost like case law but in name) in civil law countries, and the growing importance of statute law and codes in common law countries (for example, in matters of criminal law, commercial law (the Uniform Commercal Code in the early 1960's) and procedure (the Federal Rules of Evidence in the 1970's)). Scotland is often said to use the civil law system but in fact it has a unique system which combines elements of an uncodified civil law dating back to the Corpus Juris Civilis with an element of common law long predating the Treaty of Union with England in 1707
Civil law (legal system) Civil law is system of law that has its origins in Roman law and sets out a comprehensive system of rules, usually codified, that are applied and interpreted by judges. However, modern systems are descendants of the 19th century codification movement, during which the most important codes (most prominently the Napoleonic Code and the BGB) came into existence. The civilian system is by and large the most widely practiced system of law in the world. As discussed in detail below, the civil law systems of Scotland and South Africa are uncodified, and the civil law systems of Scandinavian countries remain largely uncodified.
…continue Thus, the difference between civil law and common law lies less in the mere fact of codification, but in the methodological approach to codes and statutes. In civil law countries, legislation is seen as the primary source of law. By default, courts thus base their judgments on the provisions of codes and statutes, from which solutions in particular cases are to be derived. Courts thus have to reason extensively on the basis of general rules and principles of the code, often drawing analogies from statutory provisions to fill lacunae and to achieve coherence. By contrast, in the common law system, cases are the primary source of law, while statutes are only seen as incursions into the common law and thus interpreted narrowly. There are, however, certain sociological differences. Civil law judges are usually trained and promoted separately from advocates, whereas common law judges are usually selected from accomplished and reputable advocates. Also, the influence of articles by legal academics on case law tends to be much greater in civil law countries
Commercial law Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law regulates corporatecontracts, hiring practices, and the manufacture and sales of consumergoods.
What are the Sources of Contract Law ? • Common law : judge-made law, as distinguished from laws passed by legislature • Uniform Commercial Code(UCC) : model code on commercial transactions adopted by all states (except Louisiana) • Civil or Commercial Code, or specific law in Civil Law
International Commercial LawThe Myth of Transnational Commercial Law
International Contracts and the Myth of a Transnational Contract Law • International Contracts: How do they differ from domestic contracts? • Drafting is in legalese – English jargon handed down from contract to contract • References to non national sets of rules – INCOTERMS, UNIDROIT, UCP 600 etc. • Is there a transnational commercial law based on English law?
The Style of International Contracts • International contracts are written in English • International contracts are lengthy and regulate all thinkable aspects: • Gender/Singular and Plural • Representations and Warranties • Notices • Amendments • Etc.
Possible Implications of the Contract Style • Parties may assume that all aspects of transactions are regulated by the contract • Parties may assume that the contract is the only regulation • Parties may rely on transnational commercial law • Parties may draft the contract irrespective of the governing law (chosen at the end)
Firm Offer and National Law • Romanistic systems of law - Art. 1329 Italian Civil Code: Firm offer is binding. Revocation is ineffective • Germanic systems of law - § 145 German BGB: Firm offer is binding. Revocation is ineffective • Common Law systems • USA: Promissory estoppel (irrevocable to the extent it has induced offeree’s action) • UK: Revocable if there is no consideration
Contracts can have many names • Contract • Agreement • Purchase Order • Memorandum of Understanding • Terms and Conditions • Appointment Letter • Handbook (“implied contract”) • License • Ticket
Or no name at all… • a letter… • a telephone call… • an e-mail…
Contract: “[a]n agreement between two or more persons which creates an obligation to do or not do a particular thing… A legal relationship consisting of the rights and promises constituting an agreement between the parties that gives each a legal duty to the other and also the right to seek a remedy for the breach of those duties.” [Black’s Law Dictionary, 6th ed.]
In other words … A contract is a legally enforceable promise
Title II: Contracts in General. Item I: Introductory Provisions. 1321 c.c. Ita. Concept. A contract is the agreement between two or more parties to establish, regulate or extinguish a patrimonial legal relationship among themselves.
1322 c.c. ita Freedom of Contract. – The parties may freely set out the content of a contract, as long as it is in accordance with the law and corporative regulations.
Bilateral Unilateral Express Implied Executory Executed Valid Unenforceable Voidable Void Types of Contracts (or Agreements) • Bilateral and Unilateral Contracts • Bilateral: both parties make a promise. • Unilateral: one party makes a promise that the other party can accept only by doing something vs. vs. vs. vs. vs. vs.
Types of Contracts • Express and Implied Contracts • Express: the two parties explicitly state all important terms of their agreement. • Implied: the words and conduct indicate that the parties intended an agreement. • Executory and Executed Contracts • Executory: when one or more parties has not fulfilled its obligations. • Executed: when all parties have fulfilled their obligations.
Types of Contracts • Valid, Unenforceable, Voidable, and Void Agreements • Valid: satisfies the law’s requirements. • Unenforceable: when the parties intend to form a valid bargain but some rule of law prevents enforcement. • Voidable: when the law permits one party to terminate the agreement. • Void: one that neither party can enforce, usually because the purpose is illegal or one of the parties had no legal authority.
1337 c.c. Ita. Talks and Pre-Contractual Liability. – During the negotiations process and the formation of contract the parties must act in good faith. 1340 c.c. Ita. Clauses of Use. – The clauses of use are deducted as included in the contract, if does not come out that they were not wanted by the parties.
Item II: Requirements of Contract. • 1325 c.c. ita Guidelines for Requirements. • The requirements of a contract are: • the agreement between the parties; • the cause for the contract; • the subject-matter of the contract; • the form of the contract, as far as is prescribed • by the law under penalty of invalidity.
Elements of a Contract • Agreement • offer, and • acceptance • Consideration • There has to be bargaining that leads to an exchange between the parties. • Legality • The contract must be for a lawful purpose. • Capacity • The parties must be adults of sound mind.
Meeting of the Minds • The parties can form a contract only if they had a meeting of the minds. • They must understand each other and intend to reach an agreement. • A judge will make an objective assessment of any disagreements about whether a contract was made -- whether or not a reasonable person would conclude that there was an agreement, based on the parties’ conduct. • Objective Theory of Contract: Lucy v. Zehmer
Negotiation Terms JOE BOB Offer Accept or Reject or Accept or Counteroffer Reject or Counteroffer
Section I: Agreement Among The Parties. 1326 c.c. ita Contract Conclusion. – A contract is concluded when the proponent party is informed about the other parties’ acceptance. The acceptance must arrive within the term established by the proponent, or (within) the term necessary as a rule depending on the nature of business, or according to uses. The proponent may consider effective a belated acceptance as long as he promptly forewarns the other party. If the proponent asks for a particular fo rm of contract, acceptance by the other parties has no effect if it is given in another form. An acceptance which does not conform to the proposition is equivalent to a new proposition.
Offer Acceptance Consideration Mutuality What are the Elements of a Contract?In Common Law
Offer: • A proposal to do a thing or pay an amount, usually accompanied by an expected acceptance, counter-offer, return promise or act • The offeror is the “master of his offer”.
Offer • An offer is an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms. • Problems with Intent • Invitation to bargain is not an offer. • Price quote is generally not an offer. • An advertisement is generally not an offer. • Placing an item up for auction is not an offer, it is merely a request for an offer. • Problems with Definiteness • The term of the offer must be definite.
Termination of Offers • Termination by Revocation • Effective when the offeree receives it. • Firm Offers and Revocability • Common Law Rule • Revocation of a firm offer is effective if the offeree receives it before he accepts. • Option Contract • The offeror may not revoke an offer during the option period. • Sale of Goods • A writing signed by a merchant, offering to hold an offer open, may not be revoked.
Termination of Offers • Termination by Rejection • If an offeree rejects an offer, the rejection immediately terminates the offer. A counteroffer operates as a rejection. • Termination by Expiration • When an offer specifies a time limit for acceptance, that period if binding. • If the offer specified no time limit, the offeree has a reasonable period in which to accept.
Irrevocable offer ”This offer is binding on the Offeror and cannot be revoked before 30 days have elapsed from the date hereof” • May the offer be revoked within the 30 days term?
Acceptance: • Compliance by the offeree with terms and conditions of an offer • A manifestation of assent to terms of offer in a manner invited or required by the offer • The offer and acceptance must match (“mutuality” …more on this soon…)
Acceptance: Does not necessarily occur only by signature of a contract Acceptance can occur by: • Action -using goods -opening the package (software) -entering an establishment or participating in an activity • Inaction –not returning goods
Acceptance: Sometimes acceptance does not appear “voluntary,” but it is still sufficient Contracts of Adhesion: -- “Take it or leave it” terms -- Not bargained for
Acceptance • The offeree must say or do something to accept. • In a bilateral contract, the offeree generally must accept by making a promise. • In a unilateral contract, the offeree must accept by performing. • Mirror Image Rule (Common Law) • Requires that acceptance be on precisely the same terms as the offer. • Normile v. Miller
Communication of Acceptance • Wucherpfennig v. Dooley • and Manner of Acceptance • If an offer demands acceptance in a particular medium or manner, the offeree must follow those requirements. • If the offer does not specify a type of acceptance, the offeree may accept in any reasonable manner and medium. • Time of Acceptance: The Mailbox Rule • An accceptance is generally effective upon dispatch, meaning the moment it is out of the offeree’s control.
Consideration: • Something of legal value; anything that induces you to give up something • May be something other than money (i.e., a promise to do something; a promise to refrain from doing something)
Consideration • Bargaining that leads to an exchange of value between the parties. • Consideration can be anything that someone might want to bargain for. It is the inducement to make the deal, or the thing that is bargained-for. • McInerny v. Charter Golf
A Bargain and an Exchange “Bargaining is obligating yourself in order to induce the other side to agree.” • The thing bargained for can be: • another promise or action. • a benefit to the promisor or a detriment to the promisee. • a promise to do something or a promise to refrain from doing something.
Mutuality: • A “meeting of the minds” with respect to material contract terms • A signature is deemed to be sufficient to evidence this requirement • Therefore, it is crucial that you read carefully and understand all of the terms of a contract before you sign it
Mutuality of Obligations • Illusory Promise • If one party’s promise is conditional, the other party is not bound to the agreement. • Promise to pay in return for past favors. • Passante v. McWilliam
Contract Clauses to Include (cont.) • Liability Protections • Defense & Indemnification • Insurance • Termination • Dispute Resolution • Litigation; Arbitration; Mediation • Governing Law • Forum – What court? Where?
Amendments to a contract ” The parties hereby agree to modify clause XX of the contract entered into by and between the parties hereto on [date] for the sale of YY (hereinafter the ”Contract”), so that the price to be paid by the Buyer shall be ZZ instead of WW. All other terms and conditions of the Contract remain unchanged and continue to be fully valid and binding on the parties.” • Is the amendment valid?
Amendments to a Contract and National Law • Romanistic systems: amendment is valid • Germanic systems: amendment is valid • Common law systems: amendment is valid only if there is consideration
Choice of law clause A choice of law clause or proper law clause in a contract is one in which the parties specify which law (i.e. the law of which state or nation if it only has a single legal system) will be applied to resolve any disputes arising under the contract.
Lex fori In Conflict of Laws, the Latin term lex fori literally means the "law of the forum" and it is distinguished from the lex causae which is the law the forum actually applies to resolve the particular case. Forum shopping Forum shopping is the informal name given to the practice adopted by some plaintiffs to get their legal case heard in the court thought most likely to provide a favourable judgment, or by some defendants who seek to have the case moved to a different court Forum selection clause A forum selection clause in a contract with a Conflict of Laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum.
Arbitration Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In the United States, the term is also used to refer to non-binding arbitration, a process in which the final award does not bind the parties. Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states.