Principles of European Business Law

1. Principles of European Business Law

2. Housekeeping • New arrivals? • Exam; • Ohar reading / Links are not working well, these are open access, simply Google the titles; • Instructions for Wednesday 11/9: • At 16:00 – Groups 1,3, 5, 7 • At 17:00 – Groups 2, 4, 6, 8

3. Lecture Topic • Not a substantive comparative analysis of contract law; • Focus being on the realities of divergences in legal cultures and how these can be dealt with; • Whether international instruments can help in alleviating some of these potential problems; and • How these divergences are even more noticeable where there is a cross-over between property and contract law.

4. Formation of Contracts • National contract regimes have their own peculiarities; • National requirements may well have international effect, especially where an agreement is subject to the laws of a particular country; • Could be dire consequences of not having account for the special requirements of national contract law; • International contract regimes and European Union models add a further layer of complexity.

5. Multitude of things to discuss • Cause • Consideration • Intent • Capacity • Offer • Acceptance • Revocation • Amendment

6. Looking at the Offer All legal systems require an offer to be sufficiently definite which means that upon acceptance of the offer a contract must immediately be created with obligations that are legally enforceable. The offer must therefore contain the essentiafianegotiiof the envisaged contract to be concluded. As a general rule, all legal systems take the position that a declaration only constitutes an offer, if the mere 'yes' of the offeree is sufficient to create consent.

7. Around the world Is an offer always an offer? Could a statement be considered an offer?

8. Internationality of Contract law National contract laws continue to play an important role in practice, particularly in purely domestic scenarios. However, nowadays they are far from being the only ones to be considered in the field of contract law.

9. International Conventions • Can neutral international approaches provide solutions? The International Institute for the Unification of Private Law (Unidroit) • An independent intergovernmental Organisation. Its purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups of States and to formulate uniform law instruments, principles and rules to achieve those objectives. • 63 States as members.

10. UNIDROIT • A revised version of the draft Model Clauses was unanimously adopted by the Council (May 2013). ARTICLE 2.1.2 (Definition of offer) A proposal for concluding a contract constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance.

11. CISG United Nations Convention on Contracts for the International Sale of Goods Being of the opinion that the adoption of uniform rules which govern contracts for the international sale of goods and take into account the different social, economic and legal systems would contribute to the removal of legal barriers in international trade and promote the development of international trade

12. CISG – Offer definitions Article 8 (1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. (2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. Article 14 (1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. (2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.

13. Principles on European Contract Law The Background of the Principles The European Union have promoted a European régime of academic lawyers whose platform is Europe and whose writings and debates are concerned with the future European law. This new European régime resembles that of the American. In the United States the writings on contract law -- as on other subjects -- deal with the problems and issues common to the common law states. There are considerable differences between the contract laws of the several states. These differences, however, do not prevent a debate which can be based on common concepts and a common legal method. Such a common language and a common legal method is also slowly emerging in Europe. The American and the new European régimes are inspiring each other. Together with lawyers from other countries they are in the process of becoming a world community of academic lawyers.

14. Principles on European Contract Law Article 2:201 (ex art. 5.201) – Offer (1) A proposalamounts to an offer if: (a) itisintended to result in a contract if the other party acceptsit, and (b) itcontainssufficientlydefinitetermsto form a contract. (2) An offermaybe made to one or more specificpersons or to the public. (3) A proposal to supplygoods or services atstatedprices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, ispresumed to be an offer to sell or supplyatthatpriceuntil the stock of goods, or the supplier'scapacity to supply the service, isexhausted.

15. Important considerations • If parties choose only international principles as the rules of law governing their contract, the question arises as to how to deal with issues not covered by the principles? • If parties choose international principles and one of the states are not a contracting party what effect will they have? • However, you can avoid more difficult areas such as ‘cause’ in French systems and ‘consideration’ in common law systems.

16. Practical Scenario The latest computers are displayed in a shop window at a very attractive price. A customer comes into the shop and says he would like to buy one of the computers at the advertised price. All the relevant information, is also displayed. The sales person changes her mind and refuses to sell at the advertised price. In your groups consider the legal answer to the customer based on your country of legal studies.

17. Comparator

18. Cross jurisdictional difficulties • Problems continue to exist when drafting cross border agreements; • Lawyers cannot be experts on laws from every jurisdiction; • Often appoint external counsel; • Other ways to mitigate the difficulties?

19. Considerations for the negotiating lawyer • Be clear on what you can offer; • Be clear on what you want to offer; • Know what you have offered. Be wary when drafting documents such as: • Term Sheets; • Letters of Intent; • Letters of Undertaking.

20. Simple negotiation stages (In-house)

21. Overcoming Difficulties Letter of Intent I refer to the discussions which have been taking place Company A and Company B relating to a proposed asset acquisition, and in particular to the document entitled XX and dated XX and prepared by YY(the 'Proposal'). I am pleased to confirm that it is our intention to negotiate the terms of an agreement between Company A and Company B under which, among other matters: …… I hope this letter gives you the assurances you need, but please note that this letter should not be construed as creating any legal obligations. Yours faithfully

22. Non-binding term sheet Term Sheet This Non-binding Term Sheet concerning the … matter has the intention of outlining the general terms which are being discussed between Company A and Company B in relation to a proposed agreement between the parties. Company A and Company B will continue discussions and negotiations in good faith to execute an Agreement within ninety (90) days of the execution of this Non-binding Term Sheet.

23. PROPERTY

24. property • What is property? • What is title in property? • Why is it an important consideration? In your groups consider the answer to these questions.

25. Transfer of Property

26. CISG Article 30 The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention Article 4 This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold.

27. ENGLAND and WALES Section 17 Property passes when intended to pass. (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. Section 18 Rules for ascertaining intention. Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Rule 1. —Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.

28. Netherlands Article 3:84 Requirements for a transfer1. The transfer of property requires delivery pursuant to a valid legal basis by the person with power of disposition over that property. Article 3:90 Formal delivery of movable property1. The formal delivery, necessary for the transfer of non-registered movable things that at that moment are in the possession of the alienator, is performed by transferring the possession of that thing to the acquiring party

29. Germany Section929 - Agreement and delivery For the transfer of the ownership of a movable thing, it is necessary that the owner delivers the thing to the acquirer and both agree that ownership is to pass.

30. Scenario – Group Work As part of a large scale project, two businesses plan the sale of two machines. However, without the parties’ knowledge, the contractual relationship, including the contract is void, the seller delivers the machines to the first purchaser in order to fulfill his contractual obligation. The parties believe that there is a binding agreement and agree that the machines now belong to the purchaser. In your home legal order, what solutions would exist for the seller?

32. Insolvency/Bankruptcy (*Global Sales Law) 39.4 The transfer of title in the goods sold under a sales contract is central to the interests of the parties and their creditors. Particularly in instances of insolvency of either the buyer or the seller, the party who has title is almost always in a better position. Although a variety of situations are conceivable, there are two archetypal scenarios. First, where a fully paid seller becomes insolvent prior to the transfer of title to the buyer, this effectively leaves the buyer an unsecured creditor as it is unlikely to regain the purchase price and is usually only left with an effectively unenforceable contract claim for tide. Secondly, where the buyer becomes insolvent subsequent to the transfer of title, the unpaid seller is in this scenario the unsecured creditor and without a claim based in property to recover the goods. Property claims are beneficial to a seller in this situation as they receive preferred treatment in many domestic insolvency laws.

33. Insolvency proceedings - Difficulties • Not usually governed by contract law; • The liquidator/administrator may not have any interest in the company • Companies have some discretion as to where they are initiate proceedings: Insolvency Regulation Article (3) The first court to receive a request and finding that the company's centre of main interests (COMI) is within its jurisdiction can open insolvency proceedings. Article 4 of the Regulation, the proceedings must comply with the laws of the country where they are opened. • Consider this in light of jurisdictions such as England and Wales and Germany where title could pass easily.

34. Case Study FishNet AB appoint an English company ‘C’ to distribute EnviroNet across Europe. FishNet agrees to manufatcure, package and supply EnviroNet to C. Following your brilliant advice on their expansion plans FishNet now engage you to help them minimise the risk of supplying EnviroNet. Specifically they ask you to help them with the following: • Who bears the risk of shipping? • C are paying us on 60 days after delivery are we at risk of loosing both product and money in the event of bankruptcy?

35. Contractual Protection? Option 1 Title to the goods shall remain with the Seller and shall not pass to the Buyer until payment in full for the same has been received by the Seller. What potential difficulties do you see with this?

36. Option 2 Title to Equipment shall not pass to the Customer but shall be retained by the Seller until the Contract Price has been paid to the Seller in full by the Customer. Until such time as title in Equipment has passed to the Customer: (i) the Seller shall have absolute authority to retake, sell or otherwise deal or dispose of all any or part of the Equipment in which title remains vested in the Seller; (ii) for the purpose specified in (i) above, the Seller or any of its agents or authorised representatives shall be entitled at any time and without notice to enter upon any premises in which the Equipment or any part thereof is installed, stored or kept or is reasonably believed so to be;… What potential difficulties do you see with this?

37. Title should not be risk Possible draft: Notwithstanding the foregoing, risk in the Equipment shall pass on delivery of the same to the Customer, and until such time as title in the Equipment has passed to the Customer, the Customer shall insure such Equipment to its replacement value and the Customer shall forthwith, upon request, provide the Seller with a certificate or other evidence of such Insurance. How else could you pass risk? Without title?