Comparative Private Law Theories and Technique of Contract in Europe

1. Comparative Private LawTheoriesandTechniqueofContract in Europe Prof. Dr. Ulrike Babusiaux 20th October2014 PLEASE NOTE: The followingslidesare not complete. The missingwordsandphrasesmust befilledinbythestudents.

2. Preliminaries… Gary Larson, The Far Side. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

3. B. TheoriesandTechniquesofContracts in Europe • I. The Place andSourcesofContract Law • II. DefinitionsofContract – OfferandAcceptance • III. Additional Requirements Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

4. I. The Place andSourcesofContract Law France: Basically in theCode civil (1804) Someprovisions in theCode de commerce Growingnumberofprovisions in theCode de la consommation(since 1993) Germany: Bürgerliches Gesetzbuch (German Civil Code, 1900) speciallegislation on consumerprotection was incorporated in the Code in 2002 («Schuldrechtsmodernisierung») England: Common law legislation: Misrepresentation Act 1967, Unfair Contract Terms Act 1977, ContractsRightsof Third Parties Act 1999 Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

5. The French Civil Code (Reader p. 6f.) Structured in threebooks: Book I: OfPersons Book II: Of Property andofVariousModificationsof Property Book III: [Book IV: Of Securities Book V: Provisionsapplicable in Mayotte] Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

6. The Place ofContracts in French Law • Contractlawispartof Title 1: OfSuccessions Title 2: Of Gifts intervivosandof Wills Title 3: Title 4: Ofundertakingsformedwithout an agreement… • And so arethespecialtypesofcontract: Title 6: OfSales (art. 1582 to 1701) Title 7: OfExchanges (art. 1702 to 1707) Title 8: OfHiring (art. 1708 to 1831)… Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

7. Observations: • theplaceofcontractis not prominent in the French Code:  itonlyappears in book III  itisonewaytoacquireownership • Code civilisoftendescribedas «theowners‘ code»   unchangedsince 1804 untilrecentlyprojectsfor a majorreformofthelawofobligationswereproposed • reformprojectsare a consequenceofthevividdiscussionaboutthe European Civil Code  pressuretomodernisetheoldCivil Code Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

8. Change of paradigms in French law projects: • Ex.: Avant-Projet «Catala» (nameofthepresident: Pierre Catala) •  new title tobook III: «obligations» and •  a completelychangedstructureofbook III : • Preliminary Chapter: The sourcesofobligations • Sub-Title I: ContractsandObligationsCreatedby Agreement in General • Chapter I: General Provisions • Section 1: Definitions • Section 2: Formation ofContract • Chapter II: The essential conditionsforthevalidityofContracts • Chapter III: The effectsofContracts (….) Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

9. The Place of Contracts in German Law (Handout p. 1/2) • the German Civil Code consistsoffivebooks: Book 1: General Part Book 2: Law ofObligations Book 3: Law of Property Book 4: Family Law Book 5: Law ofSuccession • contractlawis dealt with in Book 1 and Book 2, Sect. 3 - peculiarityofthe German Law: Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

10. The theory of „legal transaction/ juridical act“: Bernhard Windscheid (1906) The four characteristics of the juridical act: (1) Synonym to declaration of intention (“Willenserklärung”) (2) Private declaration (private, not public law) (3) (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 (Austria, France, Switzerland, Italy) 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) Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

11. The «General Part» (Allgemeiner Teil) (book 1 ofthe German Civil Code, Reader p. 7) • structure: Section 1: Persons Section 2: Things Section 3: Legal transactions/ Juridicalacts Title 1: Legal capacity Title 2: Title 3: Title 4: Conditionandstipulationasto time Title 5: Agency andgrantofauthority Title 6: Consentandratification (…) • contractisseenas a sub-division of legal transactions! • in thegeneralpart,thefocusislaid on Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

12. The Law ofobligations(Book 2 ofthe German Civil Code, Reader p. 7) • structure: Section 1: Content ofObligations Section 2: Shapingcontractualobligationsbymeansofstandardbusinessterms Section 3: ContractualObligations Section 4: ExtinctionofObligations (…) Section 8: Particularkindsofobligations  ; theideaofcontractisnolongerlinkedtoproperty • but thetheoreticalideaof legal transaction / juridicalactisevenmoreimportantthanthecontractitself Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

13. English Law / Common Law (Reader p. 9) • contractis a not a preciseconcept in English law, whichpreferstospeakof a «promise» • contractsandthelawofobligations (evenlaterconcept) areseparatedareasoflaw • Roman lawhadlessinfluence in the Common Law • it was Pothier, theintellectualfatherofthe Code civil, whoinfluencedthe modern englishdiscussionaboutcontracts (andwhoiscited in judgments at the end oftheeighteenthcentury) - in thecentreofthe English doctrineisthenotionof a «promise» but thefamous . Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

14. Robert-Joseph Pothier (1699-1772) • A French Lawyer and Scholar of Roman Law. • PandectaeJustinianae in novumordinemdigestae(1748-1752) • Since 1749 professor of law at the University of Orleans. • Much of his work was almost textually incorporated into the French Code Civil(1804). • His theories on the law of contract were influential in England and in the United States. • Further reading: • J. M. Perillo (Fordham U School of Law) http://ssrn.com/abstract=610601 Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

15. II. DefinitionsofContract (Reader p. 11): Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

16. PECL: «Sufficientagreement» (Reader p. 11f.): • Principlesof European Contract Law (a scholarlycommissiontodefinethecommonbasisof European contractlaw, also calledLando-Commissionbecauseofitspresident Ole Lando) • Basic elementsofcontractaccordingtothisunderstanding: • Compareto: House of Lords «The Hannah Blumenthal» (Reader, p. 12f.) Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

17. ConditionsofValdity in French Law, Reader p. 16 Art. 1108 Code civil Fourconditions: (1) consent = intentiontobelegallybound (2) capacitytocontract, cf. Art. 1223 Code civil (3) object = an ascertainedobjectassubject matter ofthepromise (4) causa = thefoundationof a contract thetheoryofofferandacceptanceis a creationofthe French doctrine a goodsummaryofthisdoctrinecanbefound in the avant-projet «Catala» Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

18. Offerandacceptance in French Law: Avant-ProjetCatala • Art. 1105 • The formationof a contractrequiresthemeetingofthe definite andcertain will tobebound on thepartofmorethanoneperson. • Art. 1105-1 • An offeris a unilateral actdefiningthe essential elementsofthecontractwhichthepersonmakingitproposesto a particularpersonortopersonsgenerally, andbywhich he expresseshis will tobeboundifitisaccepted. • Art. 1105-2 • An offermayberevokedfreelyaslongasithas not cometotheknowledgeofthepersontowhomit was addressed, orifithas not beenvalidlyacceptedwithin a reasonableperiod. • Art. 1105-3 • An offerlapsesifitis not acceptedwithintheperiodfixedbythepersonwhomakesitor in thecaseofhisincapacityordeathbeforeitsacceptance. Itis also extinguishediftheoffereerejects it. (…) Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

19. Avant-ProjetCatala: • Acceptance: • Art. 1105-5 • Acceptanceis a unilateral actbywhich a personexpresseshis will tobebound on thetermsoftheoffer. • An acceptancewhichdoes not confirmtotheofferhasnoeffect, apart fromconstituting a newoffer. • Art. 1105-6 • In theabsenceof legislative provision, agreementbetweentheparties, businessor professional usageorotherparticularcircumstances, silencedoes not countasacceptance. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

20. III. Additional Requirements (with Case study) • The doctrineofcause (French Law, Reader p. 16) • - Art. 1108 Code civilobjectandcause • - Art. 1131: An obligationwithoutcauseorwith a falsecause, orwith an unlawfulcause, may not haveanyeffect. • - Art. 1132: An agreementisnevertheless valid, althoughitscauseis not expressed. • - Art. 1133: A causeisunlawfulwhereitisprohibitedbylegislation, whereitiscontrarytopublicmoralsortopublicpolicy. • 2. The doctrineofconsideration (English Law, Reader p. 19f.) • - the original writ system did not contain a general action for contracts (only for contract under seal) • - contractual liability developed from tortious liability (action of assumpsit) • - a contract is only legally binding (within this action), if there is consideration Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

21. (1) The theoryofcause (Reader p. 16f.) 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. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

22. Cour de cassation on cause: • Cass. Civ. 12 July 1989 Hocuspocus (Reader, p. 16f. ) • a traditional applicationoftheconditionofcause Facts: A professional soothsayersellstohissuccessorhisoccultparaphernalia, thencontestedthevalidityofthesale Cour de cassation: «Whereasone (…) establishedthattheimpellinganddeterminingcauseof a contractforthesaleofvariousworks on theoccultandassociatedparaphernalia was toenablethebuyertoengage in theoccupationofsoothsayerandfortuneteller, whichis an offenceunder (…) theCriminal Code, thelowercourtscorrectlyinferredthat a causeofthatkindoriginating in a criminaloffence, isunlawful» (2)Cass. Com. 22. Oct. 1996 Chronopost (Reader, p. 17f. ) • recentdevelopmentofthecause-doctrine • ethicalcontrolofcontract Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

23. 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. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

24. Cour de cassation: • «Underarticle 1131 oftheCivil Code: (…) • Whereas in dismissingBandereau‘sclaim (…) thecourtofappealinfringedtheabove-mentionedprovision; asChronopost a specialist in swifttransportguaranteeingthereliabilityandspeedofitsservice, undertooktodelivertheenvelopes (…) within a specificperiod; asowingtoitsfailuretoperformthat fundamental duty, thecontractualclauselimitingliability, whichcontradictedthescopeoftheobligationenteredinto, was deemed not tohavebeen incorporated in thecontract». • thepaymentforthetransportserviceiswithoutcause, becausethetransporterdid not performthe fundamental duty • thecauseisappliedfurthermore in thedefinitionofthe fundamental dutyunderthecontract («obligation essentielle») Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

25. (2) Common Law: thetheoryofConsideration • 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 it)  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. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

26. Different Typesofconsideration: • benefitanddetriment: theideaofreciprocity:  thecontract must eitherbetothebenefitofthepromisorortothedetrimentofthepromisee • existingdutiesasconsideration •  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: • thecontractis valid, ifthepartiesviewthecontractasbeinga resultof an exchangeor a bargain. • if a deal does not giveyouanynew legal rights, but relief, itmaybethatthereisconsideration. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

27. Applications of the doctrine of consideration in English Law: • Carlill v Carbolic Smoke Ball Co, 1893 (Reader, p. 19f.) • consideration in unilateral contracts • Facts: • Main arguments: Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux

28. At home: • Pleasereadthedecisionofthe French Cour de cassation «The videoclub» (Reader, p. 18). • Whydidthe Cour de cassation hold thatthecontract was void? • Pleasecomparethetheoryofconsiderationandthedoctrineofcause! Isitrighttocallthemfunctionalequivalents? Whatarethemaindifferencesbetweenthetwoconcepts? • Can youname a functionalequivalent in Swiss Law? • Studentsarekindlyrequestedtoprepare an answer (about 1 page) tothequestionsforthenextmeeting (10/11/2014). • They will beaskedtoreadtheiransweraloudtotheothersand/ortocomment on theworkpresentedbyothers. Comparative Private Law HS 2014, Prof. Dr. iur. Ulrike Babusiaux