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Il est précisé que le thème « CONTRACT LAW » sera abordé à travers 2 fiches.
- WHAT IS A CONTRACT ?
- TYPES OF CONTRACTS
- WHAT IS THE APPLICABLE LAW ?
- ELEMENTS OF A CONTRACT
I. WHAT IS A CONTRACT ?
A contract is a legally enforceable agreement between two or more parties (individual person, company, or other legal entity).
It creates an obligation to do or not do particular things.
Parties are bound by the terms of the contract.
In the US, contracts for the sale of goods are governed by the Uniform Commercial Code (UCC) : it is a standardized collection of guidelines governing the law of commerce.
In the UK, contracts for the sale of goods are governed by the Sale of Goods Act.
II. TYPES OF CONTRACTS
1. Contracts under Seal (= les contrats sous scellés)
Traditionnally, a contract was stamped with a seal : it represented the agreement of the parties.
Today, the seal has lost some or all its effects by statute in many jurisdictions.
2. Express Contracts (= contrats explicites)
In this type of contracts, the terms by which the parties agree to be bound are declared either orally or in writing.
The contract must manifest a mutual intent to be bound.
3. Implied Contracts (= contrats implicites)
The contract is formed by behavior of the parties even if there is no written contract.
There are two types of implied contracts:
- Contracts that are implied in-fact (implicite en faits) = it creates an obligation between the parties based on the facts of the situation if the parties’ behavior suggests they had an agreement;
- Contracts that are implied at-law (implicite en droit) = the law will enforce a contract even against a person’s will, where circumstances are such that without this remedy, one party would be unfairly enriched by another party’s action.
4. Executed and executory Contratcs (= contrats exécutés et contrats exécutoires)
Executed contracts = the promises of the contract are performed immediately (ex : the purchase of a product).
Executory contracts = the promises of the contract are not fully performed immediately (ex : an apartment lease).
5. Bilateral and Unilateral Contracts
Bilateral contracts = there is an exchange of mutual promises.
Unilateral contracts = the promise is made by only one party.
6. Unconscionable Contracts (= contrats abusifs)
This type of contract is unfair to one party.
In a lawsuit, if the court finds a contract to be unconscionable, they will declare the contract to be void.
The majority of unconscionable contracts are in consumer transactions.
7. Adhesion Contracts (= contrats d’adhésion)
An adhesion contract is drafted by one party (who has the greater bargaining power) and signed by the weaker party, who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract.
Courts often refuse to enforce this type of contracts because the weaked party had no choice.
8. Void and Voidable Contracts (= contrats nuls et annulables)
A void contract = it is invalid at the time of its creation.
A voidable contract = it becomes invalid if it is cancelled by one of the two parties who are engaged in the contract. It can be ratified by the party who has the right to void it.
III. WHAT IS THE APPLICABLE LAW ?
Contracts are usually governed and enforced by the laws of the state where the agreement was made.
When courts must select the applicable law, many courts apply the center of gravity doctrine = application of the law of the jurisdiction which has the most significant relationship with the matter in issue.
When foreign law governs, contracts are enforced under the doctrine of comity.
IV. ELEMENTS OF A CONTRACT
1. Formation of the contract
Mutual agreement – There must be a mutual agreement for a contract to be formed.
All parties have a meeting of the minds on a specific subject.
Offer – One of the parties makes a promise to do or refrain from doing some specified action in the future.
It is made in exchange for a return promise to do the same.
If the other party accepts, the bargain is concluded.
Preliminary negotiations – Preliminary negotiations are distinguished from formal legal offers in that parties to preliminary negotiations lack a present intent (absence d’intention) to form a contract.
No contract is formed when parties during preliminary negotiations.
Letter of intent (= lettre d’intention) – The parties express their desire to enter into serious contractual negotiations.
In the letter of intent, parties can clarify key points of a complex transaction and they can provide safeguards in case the deal collapses during negotiations.
It does not obligate the parties to conclude subsequently a contract.
Termination of an offer – There are a number of ways for an offer to be terminated.
For example, an offer can be terminated by the death or insanity of either the offeror (= offrant) or the offeree.
An offeror may revoke an offer anytime before it has been accepted.
If there is no time limit, the offer terminates after a reasonable time has elapsed.
Irrevocable offers – The offer may be irrevocable for a specified time.
Rejection of an offer – An offer can be rejected by an offeree through an express refusal, or through the creation of a counteroffer. A counteroffer is both a rejection of the original offer made to the offeree, and the creation of a new offer : the offeree introduces a new offer to offeror and the counter-offer kills the original offer which is no longer be accepted.
2. Acceptance (= acceptation)
It is an unconditional assent, communicated by the offeree to the offeror, to all terms of the offer, made with the intention of accepting.
An acceptance is valid only if :
- The offeree knows of the offer;
- The offeree manifests an intention to accept;
- The acceptance is unequivocal and unconditional; and
- The acceptance is manifested according to the terms of the offer.
In bilateral contracts, the offer is effective when the offeree receives it.
3. Consideration (= contreparties)
A valid contract requires some exchange of consideration.
Consideration is when Person A makes a promise, Person B makes a promise in return.
The promise must be something of value (= valeur) and can take the form of money, action, abstaining from action, services, and other valuable consideration.
4. Mutuality of Obligation (= réciprocité des obligations)
Both parties must be bound to perform their obligations or the law will treat the agreement as if neither party is bound to perform.
If a party does not bind himself to some performance, it is an illusory promise and there is no enforceable contract.
– legally enforceable agreement = accord écrit ayant force obligatoire