1. Contract – meaning of the term Meaning of the term „contract”:  the fact of agreement  any written record of it (document), which may be made later  rights and obligations that the contract (in the first sense of the word) gives rise to Legal definitions:  Italy (1321 CC) The contract is the agreement of two or more parties to establish, regulate or extinguish a legal relationship (patrimonial character only). dr R. Strugała WPAiE

2. Contract as an agreement What is the agreement? How the courts „look for” it? (interpretation) How is it formed? (offer and acceptance) What is to be agreed? (minimum content) dr R. Strugała WPAiE

3. Contract as an agrement Agreement is not sufficient but it is needed in all modern legal systems (one of the elements of a binding contract) Usually no separate requirement of agreement (exception: Italy) Different approaches:  Common law: parties’ intention to be legally bound, certainty as to terms, offer and acceptance, consideration  Polish law/German law/Italian law: at least two unanimous declarations of intent dr R. Strugała WPAiE

4. Contract as an agrement The courts main concern in disputes over contracts: discovering and giving effect to the parties’ intentions Agreement = communication between the parties (meeting of minds or intentions = common intention to make a binding contract) Reservatio mentalis is irrelevant Only express communications (but not only "words"; facta concludentia)  how are they interpreted? dr R. Strugała WPAiE

5. Contract as an agrement: intentions During a wine auction the participants can signalise their raising offer by lifting their hand. During the auction Mr. X raised his hand to greet a friend, which was interpreted as an offer by the auctioneer Usually acceptance of an offer during an auction is expressed by accepting the offer by the auctioneer The offer of Mr. X has been accepted by the autioneer who belived that Mr X thus wins the auction and makes a binding contract dr R. Strugała WPAiE

6. Contract as an agrement: intentions A twofold role of interpretation A participant’s behaviour is to be understood as the offer, if a reasonable person would understand their action as a declaration of their will to treat (to make a binding contract): objective approach A participant’s behaviour is to be understood as the offer if there is „real will” (real intention) to treat (to make a binding contract): subjective approach dr R. Strugała WPAiE

7. Contract as an agrement: intentions Objective or subjective approach? Pros and cons…… dr R. Strugała WPAiE

8. Contract as an agrement: intentions Modern legal systems – a mixed approach (the so called combined method) Objective approach weakened (the view of an objective cautious, reasonable observer but put in the postiotion of given parties, e.g. with access to iformation they had access to) Where there really is a meeting of minds, the law does not disregard it (subjective view goes first): falsa demonstratio non nocet dr R. Strugała WPAiE

9. Contract as an agrement: intentions Section 133 BGB (art. 65 KC) Interpretation of a declaration of intent: When a declaration of intent is interpreted, it is necessary to ascertain the true intention rather than adhering to the literal meaning of the declaration 1362 CC: interpretation of contract, instead of „declaration of intent” (the same rule) Case law: a mixed approach; a car park cases (Germany) Common law: Centovincial Estates plc v Merchant Investors Assurance Co dr R. Strugała WPAiE

10. Interpretation of intentions: the role of context English law: social and family relations (domestic agreements) vs commercial relations; e.g. Balfour v. Balfour case, esso petroleum v. commissioners of Customs case A rebuttable presumption Other legal systems? dr R. Strugała WPAiE

11. Form and further requirements La causa del contratto (1325 CC): romanistic tradition The doctrine of Consideration: English and Irish common law (does not concern Scottland) No further requirements of a similar kind: German law (unjustified enrichment); Polish law („weakened causality”) dr R. Strugała WPAiE

12. Consideration A promise or offer, even if seriously meant and accepted by the other party, will not result in a contract unless the other party gives or does something, or promises to give or do something, in exchange  executory and executed consideration Contract as a bargain A promise to make a gift is not a contract (can it not be made as binding, is a gratitious transfer of the title not recognised by the law?): exclusion of promises to make a gift from the scope of the law of contract dr R. Strugała WPAiE

13. Consideration It is not necessary that the action taken or promised is of direct benefit to the promisor What is vital is that the promisee has in some sense incurred a detriment in exchange for the promise (e.g. promisses to do smth for the benefit of B in return for the promise of C) Proimisee must act at promisor’s request, that is in return for the promise (no spontaneous promise or act, or act required by the law, can constitute consideration)  See Combe v. Combe case Forberance can be consideration (compromise agreements) Consideration must have economic value However the consideration need not be ‘adequate’, i.e. of equivalent value, so that a small or even a purely nominal payment is good consideration, e.g. Thomas v. Thomas (1842) 2 QB 851.  nominal consideration dr R. Strugała WPAiE

14. Consideration Past consideration? (not enough) e.g. linked promises a promise linked to „doing smth” promises (acts) exchanged by reference to ech other not neccesairly at the same time Handing over a car in return for a promise to pay Promising to pay in return for being helped a week before dr R. Strugała WPAiE

15. Consideration Relaxation of the doctrine: e.g. de la Bere v. Pearson [1908] 1 KB 280. In that case a newspaper’s promise to give readers financial advice was held to be contractual, because the newspaper had the right to publish the readers’ letters if it so wished. It is argued that this means that the doctrine is incoherent and means no more than ‘a good reason to enforce the promise’. In this sense it becomes similar to the romanictic doctrine of „causa” In relation to agreements to alter the terms of existing contracts, there were formerly in ENGLISH law considerable difficulties when the terms were varied in a way that benefited only one of the parties; e.g. one party promised to release the other from part of the obligation (Foakes v. Beer (1884) 9 App. Cas. 605 (HL)) or to increase the price payable to the other (Stilk v. Myrick (1809) 2 Camp 317). dr R. Strugała WPAiE

16. Consideration and promises of gifts A promise to make a gift is not a contract (lack of consideration) Other legal system’s approach? Usually special form is required (e.g. notarial autentication) dr R. Strugała WPAiE

17. Contract – requirements as to form General rule: no formal requirements (widely accepted among the legal systems) In general, there is no need for writing (private writing – hand-written signature), sealing, authentication by a notary, filing in a public registry or anything else dr R. Strugała WPAiE

18. Italy – requirements as to form No special form required (e.g. sales of movable) Private writing (la forma scritta) as a requirement to be fulfield for the contract to be valid: e.g. sales of immovable (art. 1350 CC) La forma per transcrizione La forma ad probationem – express indication in a statutory peovision (e.g. 1967 CC – the contract for settlement) La forma ad probationem (as a „formal” obstacle); „de facto” obstacles to prove a contract, where there is no writing. [French law: all contracts concerning non-commercial transactions > 800 Euro] dr R. Strugała WPAiE

19. Germany – requirements as to form No special form required Private writing (Schriftform) and other kinds of form (e.g. writing attested by the notary public) - a requirement to be fulfield for the contract to be valid, where a specific provision (section 125 BGB) Specific provisions are to be found here and there throughout BGB (they specify kind of form and its scope: e.g. only declaration of intent of one of the parties, depending of type of the contract) No „ad probationem” – germanic v. romanistic tradition (factual obstacles as to proof only) dr R. Strugała WPAiE

20. English common law – requirements as to form No special form required: general rule Specific requirements: section 2 of the Law of Property (1989) A contract for sale or other disposition of an interest in land  only in writing (all the terms of the contract) The deed: an alternative to contract? No longer needs to be „under the seal”, no „delivery” needed Law of Property (1989): a term „deed” needs to be on it, a signature attested by a witness Different rules: considerastion, periods of prescription dr R. Strugała WPAiE

21. The mechanism of contract formation General rule: Offer and acceptacne The agreement of the parties manifests itself by the offer and acceptance Contracts concluded by an offer followed by an acceptance: the usual model for the conclusion of contracts. An offer is a proposal to make a contract. If it is accepted it becomes a contract provided that the general requirements for concluding a contract are met: „oferror is bound by the offer” dr R. Strugała WPAiE

22. Harvey v Facey (1893) The plaintiffs sent a telegram to the defendant, "Will you sell Bumper Hall Pen? Telegraph lowest cash price". The defendants reply was "Lowest price £900". The plaintiffs telegraphed "We agree to buy... for £900 asked by you". dr R. Strugała WPAiE

23. For a proposal to amount to an offer it must… show an intention that a contract (on the terms set out in the offer) is to result if it is accepted: must be serious, sufficiently full and clear as opposed to preliminary discussions contain terms which are sufficiently definite. All the laws of the UNION require that the offer must show an intention to be bound, and that it must be sufficiently definite to establish an enforceable contract Before it can be effective it must also be communicated to one or more specific persons. Proposals which are not made to one or more specific persons (proposals to the public) may take many shapes - advertisements, posters, circulars, window displays, invitations for tenders, auctions etc Are they offers? dr R. Strugała WPAiE

24. Offer to the public Before an offer can be effective it must also be communicated to one or more specific persons. Proposals which are not made to one or more specific persons (proposals to the public) may take many shapes - advertisements, posters, circulars, window displays, invitations for tenders, auctions etc Are they offers? All the legal systems accept that in some situations proposals to the public may amount to an offer. However, in a number of situations the laws reach different results on the question whether a proposal is an offer. Most of them have general principles, and provide special rules applicable to special situations. dr R. Strugała WPAiE

25. Offer or not? Advertisements: offer or invitation to treat only?; EU legislation: legitimate expectations (breach of contract), brochures and leaflets as „part of the contract” Displays in shop windows/supermarket shelves Preliminary discussions, proposals to enter negotiations Election promise dr R. Strugała WPAiE

26. Fisher v Bell (1960) A shopkeeper displayed a flick knife with a price tag in the window. The Restriction of Offensive Weapons Act 1959 made it an offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in the magistrates' court but the Justices declined to convict on the basis that the knife had not, in law, been 'offered for sale'. This decision was upheld by the Queen's Bench Divisional Court. Lord Parker CJ stated: "It is perfectly clear that according to the ordinary law of contract the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract." dr R. Strugała WPAiE

27. Italy The ITALIAN CC art. 1336(1) provides that a proposal to the public which contains the main elements of the contract towards whose formation the proposal is directed is effective as an offer unless it appears otherwise from the proposal or from usages, see Bianca, Diritto civile III, 251, who stresses the necessity of a clear undertaking. dr R. Strugała WPAiE

28. Offer or invitation to treat? Proposals made in circumstances where the personal qualities of the other party are likely to be important are generally presumed to be invitations to make offers only. This applies to an advertisement of a house for rent at a certain price. Further, an advertisement for a job-opening for persons who meet certain requirements does not oblige the advertiser to employ a person offering his or her services and meeting the requirements. Construction contracts are often made on the basis of public bidding. Owners generally only invite tenders, which are the offers. dr R. Strugała WPAiE

29. Offer or invitation to treat? Proposals which are sufficiently definite and which can be accepted by anybody without respect of person are to be treated as offers. Illustration 1 Company A advertises in a trade paper that it will buy “all fresh eggs delivered to our premises before 22 February” and pay a certain price. A’s advertisement is to be considered an offer which may be accepted by bringing the eggs to its premises. Illustration 2 In the local paper Bell advertises a plot of land for sale to the first purchaser to tender €25,000 in cash. This constitutes an offer and when Mart tenders €25,000 there is a contract. dr R. Strugała WPAiE

30. Binding nature of the offer May an offer be revoked? In this matter the laws of the Union differ on various questions. Usually yes, if the revocation reaches the offeree before the offeree has dispatched an acceptance (also an offer made to the public can be revoked by the same means as were used to make the offer) However, a revocation of an offer is ineffective if: the offer indicates that it is irrevocable or the offer states a fixed time for its acceptance dr R. Strugała WPAiE

31. Acceptance = a contract Under all the legal systems of the Union acceptance is any statement or conduct by the offeree which manifests assent. In general no form is required Acceptance must be unconditional. Acceptances which contain modifications do not count as acceptance: mirror image rule. However in some cases they may be effective acceptances. Silence and inactivity will generally not amount to acceptance But acceptance is not required when it follows from an earlier statement by the offeree, e.g. in an invitation to make an offer, or from usage or practices between the parties, that silence will bind the offeree. dr R. Strugała WPAiE

32. Modified acceptance A reply by the offeree which states or implies additional or different terms which alter the terms of the offer is usually treated as a rejection and a new offer dr R. Strugała WPAiE

33. Acceptance: silence and inactivity But acceptance is not required when it follows from an earlier statement by the offeree, e.g. in an invitation to make an offer, or from usage or practices between the parties, that silence will bind the offeree. Illustration Between A who runs a maintenance service and B who owns a factory, a practice has developed according to which A sends B a note telling B the day A intends to service B’s machinery. If B does not want A’s services, B informs A immediately. If B keeps silent, A will come. A’s note will oblige A to come at the date fixed. B is obliged to receive A if B does not cancel A’s visit immediately upon receipt of the note. dr R. Strugała WPAiE

34. Binding nature of the offer: rejection In most if not all the countries of the Union, an offer lapses if it is rejected When a rejection of an offer reaches the offeror, the offer lapses, even if the offer is irrevocable and even if the time for acceptance has not yet run out. The offer can then not be accepted even if the offeree has a change of mind. The rejection need not be express but may be implied, for instance if the offeree makes a counter- offer or invites a lower bid or a smaller consignment than the one offered dr R. Strugała WPAiE

35. An acceptance of an offer is effective only if it reaches the offeror within:  the time fixed by the offeror (set out in the offer).  if no time has been fixed by the offeror the acceptance is effective only if it reaches the offeror within a reasonable time. Reasonable time: Due account has to be taken of the circumstances of the transaction. One factor is the rapidity of the means of communication used by the offeror. Another factor is the type of contract. Offers relating to the trade of commodities or other items sold in a fluctuating market will have to be accepted within a short time. Offers relating to the construction of a building may need a longer time for reflection. dr R. Strugała WPAiE