Comparative Private Law 24 / 10 / 2011

1. Comparative Private Law24 / 10 / 2011 Prof. Dr. Ulrike Babusiaux

2. Theories and Techniques of Contracts in Europe • The Place and Sources of Contract Law • II. Definitions of Contract – Offer and Acceptance • III. Additional Requirements Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

3. I. The Place and Sources of Contract Law France: Basically in the Code civil (1804) Some provisions in the Code de commerce Growing number of provisions in the Code de la consommation (since 1993) Germany: Bürgerliches Gesetzbuch (German Civil Code, 1900) special legislation on consumer protection was incorporated in the Code in 2002 («Schuldrechtsmodernisierung») England: Common law legislation: Misrepresentation Act 1967, Unfair Contract Terms Act 1977, Contracts Rights of Third Parties Act 1999 Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

4. The structure of the French Civil Code (Materials pp. 3) • Three books: Book I: Of Persons Book II: Of Property and of Various Modifications of Property Book III: Of the Various Ways, how Ownership is acquired [Book IV: Of Securities Book V: Provisions applicable in Mayotte] Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

5. The Place of Contracts in French Law • Contract law is part of book III: Of the Various Ways How Ownership is acquired Title 1: Of Successions Title 2: Of Gifts inter vivos and of Wills Title 3: Of Contracts and of Conventional Obligations in General (art. 1101 to 1369-11) Title 4: Of undertakings formed without an agreement… • And so are the special types of contract: Title 6: Of Sales (art. 1582 to 1701) Title 7: Of Exchanges (art. 1702 to 1707) Title 8: Of Hiring (art. 1708 to 1831)… Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

6. Observations: • the place of contract is not prominent in the French Code:  it only appears in book III  it is one way to acquire ownership • Code civil is often described as «the owners‘ code»  a very old model, already known in Roman Law (Gaius‘ Institutes are divided in personae, res, actiones)  indeed property is in the centre of this codification, not contract • unchanged since 1804 until recently projects for a major reform of the law of obligations were proposed • reform projects are a consequence of the vivid discussion about the European Civil Code  pressure to modernise the old Civil Code Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

7. Change of paradigms in French law projects: • Ex.: Avant-Projet «Catala» (name of the president: Pierre Catala) •  new title to book III: «obligations» and •  a completely changedstructure of book III : • Preliminary Chapter: The sources of obligations • Sub-Title I: Contracts and Obligations Created by Agreement in General • Chapter I: General Provisions • Section 1: Definitions • Section 2: Formation of Contract • Chapter II: The essential conditions for the validity of Contracts • Chapter III: The effects of Contracts (….) Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

8. The Place of Contracts in German Law • the German Civil Code consists of five books: Book 1: General Part Book 2: Law of Obligations Book 3: Law of Property Book 4: Family Law Book 5: Law of Succession • contract is dealt with in Book 1 and Book 2, Sect. 3 - peculiarity of the German Law to divide contractual consent according to the general idea of «legal transaction/juridical act» (Rechtsgeschäft) und «declaration of intent» (Willenserklärung) Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

9. The theory of „legal transaction/ juridical act“: Bernhard Windscheid (1906) The four characteristics of the juridical act: (1) Synonym to declaration of intention (2) Private declaration (private, not public law) (3) Declaration aiming for the creationof legal effects (4) Not necessarily an (immediate) creation of the legal effects this theory is still dominant in German Law and has been adopted by other European civil law systems its abstraction – juridical act is a kind of substrate of the contractual agreement – explains its success even in the German Law of Property (transfer of ownership is due to tradition AND joining of the parties’ juridical acts) Prof. Dr. Ulrike Babusiaux, Universität Zürich Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

10. The general part (book 1 of the German Civil Code) • structure: Section 1: Persons Section 2: Things Section 3: Legal transactions/ Juridicalacts Title 1: Legal capacity Title 2: Declaration of Intent Title 3: Contract Title 4: Condition and stipulation as to time Title 5: Agency and grant of authority Title 6: Consent and ratification (…) • contract is seen as a sub-division of legal transactions! • in the general part the focus is put on legal transactions, not on contracts. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

11. The Law of obligations (Book 2 of the German Civil Code) • structure: Section 1: Content of Obligations Section 2: Shaping contractual obligations by means of standard business terms Section 3: Contractual Obligations Section 4: Extinction of Obligations (…) Section 8: Particular kinds of obligations Title 1 Sale, exchange Title 2 Time-share agreements (…) • contracts are a predominant figure in the German Civil Code; the idea of contracts is no longer linked to property • but the theoretical idea of legal transaction /juridical act is even more important than the contract itself. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

12. English Law / Common Law: • contract is a not a precise concept in English law, which prefers to speak of a «promise» • contracts and the law of obligations (even later concept) are separated areas of law • Roman law had less influence in the Common Law • it was Pothier, the intellectual father of the Code civil, who influenced the modern english discussion about contracts (and who is cited in judgements at the end of the eighteenth century) - in the centre of the English doctrine is the notion of a «promise» and the famous theory of consideration. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

13. The Theory of consideration the original writ system did not contain a general action for contracts (only for contract under seale) contractual liability developed from tortious liability (action of assumpsit) a contract is only legally binding (within this action), if there is a consideration Prof. Dr. Ulrike Babusiaux, Universität Zürich Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

14. Some essential ideas about consideration: • Consideration • is a bargained-for promise to provide something of legal value to another. • promise of legal value: • to do something the actor had no prior legal duty to do • not to do something the actor had a prior legal right to do (or had no prior legal duty to refrain from doing)  bargained-for : • the legal value given is that which the other party requested, i.e. that there has been communication about who gives or does what for whom. • the parties are in a “contract-making state of mind” – not a gift-giving state of mind. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

15. Types of Consideration benefit and detriment: the idea of reciprocity:  the contract must either be to the benefit of the promisor or to the detriment of the promisee existing duties as consideration  in principle no valid consideration: if you are already obliged to do or to refrain from doing something, the contract concerning this duty is invalid. bargain-theory: the contract is valid, if the parties view the contract as beinga result of an exchange or a bargain. if a deal does not give you any new legal rights, but relief, it may be that there is consideration. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

16. II. Definitions of Contract: • art. 1102 Code civil: A contract is an agreement (convention) by which one or several persons bind themselves, towards one or several others, to transfer, to do or not to do something. • § 311 BGB: Obligations created by legal transaction and similar obligations • Unless otherwise provided by statute, a contract between the parties is necessary in order to create an obligation by legal transaction or to alter the content of an obligation (…) - Treitel (Common Law): «an agreement giving rise to obligations which are enforced or recognised by law.» Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

17. Basic elements: • agreement = offer and acceptance • in all European systems • concepts of offer and acceptance (by the offeree) • sufficent agreement = it must be clear, what obligations are agreed upon  differences at least in terminological concepts • validity of a contract Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

18. Conditions of contracts in French Law Art. 1108 Code civil Four conditions: (1) consent = intention to be legally bound (2) capacity to contract, cf. Art. 1223 Code civil (3) object = an ascertained object as subject matter of the promise (4) causa = the foundation of a contract the theory of offer and acceptance is a creationof the French doctrine a good summary of this doctrine can be found in the avant-projet «Catala» Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

19. Offer and acceptance in French Law: Avant-Projet Catala • Offer: • Art. 1105 • The formation of a contract requires the meeting of the definite and certain will to be bound on the part of more than one person. • Art. 1105-1 • An offer is a unilateral act defining the essential elements of the contract which the person making it proposes to a particular person or to persons generally, and by which he expresses his will to be bound if it is accepted. • Art. 1105-2 • An offer may be revoked freely as long as it has not come to the knowledge of the person to whom it was addressed, or if it has not been validly accepted within a reasonable period. • Art. 1105-3 • An offer lapses if it is not accepted within the period fixed by the person who makes it or in the case of his incapacity or death before its acceptance. It is also extinguished if the offeree rejects it. • (…) Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

20. Avant-Projet Catala: • Acceptance: • Art. 1105-5 • Acceptance is a unilateral act by which a person expresses his will to be bound on the terms of the offer. • An acceptance which does not confirm to the offer has no effect, apart from constituting a new offer. • Art. 1105-6 • In the absence of legislative provision, agreement between the parties, business or professional usage or other particular circumstances, silence does not count as acceptance. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

21. The German Civil Code: § 145: An offeror is bound to his offer, unless he excluded the binding effect of it. § 146: An offer ceases to be binding, if it is declined by the offeror or if it is not accepted in due time (…) § 147: An offer made to a person who is present may only be accepted there and then. (…) An offer made to a person who is not present may only be accepted within the time the offeror may expect to receive an answer under ordinary circumstances. Prof. Dr. Ulrike Babusiaux, Universität Zürich Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

22. III. Additional Requirements (with Case study) • The doctrine of cause (French Law) • - Art. 1108 Code civil object and cause • - Art. 1131: An obligation without cause or with a false cause, or with an unlawful cause, may not have any effet. • - Art. 1132: An agreement is nevertheless valid, although its cause is not expressed. • - Art. 1133: A cause is unlawful where it is prohibited by legislation, where it is contrary to public morals or to public policy. • 2. Consideration (English Law) Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

23. (1) The theory of cause Two aspects of cause:  objective aspect: abstract reason behind the promise of the debtor e.g.: synallagmatic contracts = the expectation of the performance of the obligation by the other party  subjective aspect: the main individual motive behind the promise e.g.: to control the lawfulness / morality of contract (common cause) Cause and object of the contract: the object must exist, be determined or determinable and lawful, Art. 1126-30 C. civ. e.g.: the good that is sold; the machine that is to be repared. cause is the link that exists between this object and the counterpart: e.g.: if the good does not exist, the payment of the price has no counterpart, i.e. is without cause. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

24. Cour de cassation on cause: • Cass. Civ. 12 July 1989 Hocus pocus (Materials, p. 40) • a traditional application of the condition of cause Facts: A professional soothsayer sells to his successor his occult paraphernalia, then contested the validity of the sale Cour de cassation: «Whereas one (…) established that the impelling and determining cause of a contract for the sale of various works on the occult and associated paraphernalia was to enable the buyer to engage in the occupation of soothsayer and fortune teller, which is an offence under (…) the Criminal Code, the lower courts correctly inferred that a cause of that kind originating in a criminal offence, is unlawful» (2)Cass. Com. 22. Oct. 1996 Chronopost (Materials p. 43) • recent development of the cause-doctrine • ethical control of contract Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

25. Cass. com. 22 october 1996 «Chronopost»: • Facts: • Chronopost is a company which delivers mail on time. • Banchereau, a company, which was twice handedan envelope containing a bid in a tendering procedure [hier: öffentliche Ausschreibung; im Original: «soumission a une adjucation»] • these envelopes had to be delivered before midday, but Chronopost failed to do so (twice) . • As a consequence Banchereau did not participate in the tendering procedure and brought an action for damages against Chronopost in respect of the sustained loss. • Chronopost invoked a clause in the contract limiting compensation for delay to the cost incurred by it in transporting the packet. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

26. Cour de cassation: • «Under article 1131 of the Civil Code: (…) • Whereas in dismissing Bandereau‘s claim (…) the court of appeal infringed the above-mentioned provision; as Chronopost a specialist in swift transport guaranteeing the reliability and speed of its service, undertook to deliver the envelopes (…) within a specific period; as owing to its failure to perform that fundamental duty, the contractual clause limiting liability, which contradicted the scope of the obligation entered into, was deemed not to have been incorporated in the contract». • the payment for the transport service is without cause, because the transporter did not perform the fundamental duty • the cause is applied furthermore in the definition of the fundamental duty under the contract («obligation essentielle») Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

27. (2) Applications of the doctrine of consideration in English Law: • Carlill v Carbolic Smoke Ball Co, 1893 (Materials p. 50) • consideration in unilateral contracts (2) Central London Property Trust Ltd v High Trees House Ltd (Materials p. 58)  consideration and gratuitous promises that have been relied on. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

28. Carlill v Carbolic Smoke Ball Co • Facts: - The carbolic Smoke Ball Company had avertised that it would pay £ 100 to any person who used the Smoke Ball for two weeks and nonetheless caught influenza. • Mrs Carlill purchased a carbolic Smoke Ball from a third party and used it. She caught a flue but the company refused to pay. [the case is to be seen in the context of a flu pandemia; the smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a user's nose and squeezed at the bottom to release the vapours. The nose would run, flushing out viral infections.] Judgement: «Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think therefore that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them, because the use of the smoke ball would promote their sale (…) If you once make up your mind that there was a promise made to this lady who is the plaintiff (…) she should have £ 100, it seems to me that her using the smoke ball was sufficient consideration.» Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

29. Central London Property Trust Ltd v High Trees House Ltd • Facts: • Central London Property Trust granted to High Trees House Ltd a ninety-nine year lease on a block of flats at a ground rent of £ 2,500 a year. • The war supervened, making it hard for the tenants to sub-let the flats and the lessor granted a reduction in rent of one-half to take account of circumstances. • The reduced rent was paid regularly. • In 1945 all the flats were again let and the lessor sought to recover ground rent at the full rate from the beginning of the term. • The lessor then claimed the rent from the third quarter of 1945. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

30. Judgement: • «Equity, (…) stepped in, and said that if there has been a variation of a deed by a simple contract, the courts may give effet to it (…). • That equitable doctrine, however, could hardly apply in the present case because the variation here might be said to have been made without consideration. (…) [There] are cases in which a promise was made which was intented to create legal relations, and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on. In such cases the courts have said that the promise must be honoured. (…) They are really promises – promises intended to be binding, intended to be acted on, and in fact acted on. (…) • I am satisfied that a promise such as that to which I have referred is binding and the only question remaining for my consideration is the scope of the promise in the present case. (…) I find that the conditions prevailing at the time when the reduction in rent was made, had completely passed away by the early months of 1945. (…) the promise was understood by all the parties only to apply under the conditions prevailing at the time when it was made. (…) In those circumstances, (…) it seems to me that rent is payable at the full rate for the quarters ending September 29 and December 25 1945.» Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux

31. Observations: • Judgement founded the doctrine of promissory estoppel • estoppel is derived from old French estoupail (= variation), which lead to the verb estop which comes from the Old French term estopper, meaning stop up, impede. • this doctrine means that promises to reduce sums owing under a contract must be regarded as valid even if they are unsupported by consideration, if they are intended to alter the legal relationship and to be acted upon by the parties. Universität Zürich, RWI, Comparative Private Law HS 2011, Prof. Dr. iur. Ulrike Babusiaux