contractlaw6.ppt

Lecture 6 Contract Law The Outline1.Fundamentals of contract lawDefining a contract Defining a contract Classifying contractsClassifying contracts2.Formation of contracts-elements of a valid contract3.Laws governing the contract in different countries4.Remedies for breach of contract under Anglo-American law1 1Lecture 6 Contract LawpFundamentals of contract lawFundamentals of contract lawDefining a contract?Defining a contract?“A promise or set of promises,for breach of“A promise or set of promises,for breach of which the law gives a remedy,or the which the law gives a remedy,or the performance of which the law in some way performance of which the law in some way recognizes as a duty.”-Samuel Willistonrecognizes as a duty.”-Samuel Williston “is an agreement between two or more“is an agreement between two or more parties which creates an obligation to do or parties which creates an obligation to do or not to do a particular thing,and which is not to do a particular thing,and which is enforceable in law.”-enforceable in law.”-Blacks Law Blacks Law DictionaryDictionary.“Contracts are binding agreements that have Contracts are binding agreements that have legal consequences and can be enforced in legal consequences and can be enforced in court.”court.”-CalviCalvi&Coleman&Coleman 2 2Classifying Contracts 1.Express contract V.implied contract -a contract in which the terms are stated by the parties -a contract that is inferred from the conduct of the parties 2.Bilateral contract V.unilateral contract -a contract in which the parties exchange promises to do some future act.-a contract in which one party acts immediately in response to the offer(promise).3 3Lecture 6 Contract Law Classifying Contracts 3.3.ExecutoryExecutory contract V.executed contract contract V.executed contract -a contract in which some or all of the terms-a contract in which some or all of the terms are uncompleted.are uncompleted.-a contract in which all the terms have been -a contract in which all the terms have been pleted.4.Valid,void,4.Valid,void,voidablevoidable,unenforceable,unenforceable contract contract Valid contracts:Valid contracts:the usual contracts,which the usual contracts,which may be enforced by either party to the contract.may be enforced by either party to the contract.Void contracts:Void contracts:such contracts have no effect such contracts have no effect from its beginning.from its beginning.4 4Lecture 6 Contract LawVoidable contract:the contract is binding until it is disaffirmed or canceled by the party with the authority to do so.(which one party may at his option either enforce or not enforce)Unenforceable contract:the contract that meets the basic common law elements for contracts but lack some other additional legal requirement.5 5Lecture 6 Contract LawII.Formation of contracts elements of a valid contract 1.Parties:legal capacity 2.mutual assent&offer and acceptance 3.consideration 4.legality of the subject matter 5.form of the contract6 6Element 2Agreement of mutual assent reached through offer and acceptance Duress:“any wrongful act or threat which overcomes the free will of a party.”Unconscionability:It ensures the fairness of a transaction Unilateral mistake v.mutual mistake9 9Element 2Agreement of mutual assent reached through offer and acceptanceMutual mistake:Where both parties have acted on the same mistaken belief.Generally,the contract of mutual mistake should be subject to either rescission or reformation(re-writing by the court).Unilateral mistake:Where only one party has acted on the mistaken belief.It is harder for the party to get rescission than in the mutual-mistake situation.1010 Case 1 Jack agrees to sell Giant a goose for$20.Both parties think the goose is a regular goose,which Giant wants for breeding.Before the goose transferred,the goose begins laying golden eggs,which makes her priceless.Jack refuses to uphold the agreement,and Giant sues to enforce the contract.Will a court force Jack to sell for$20?1111Element 3:Valid consideration Consideration is an element for a valid contract in classic theory of contract law in common law countries.Consideration is not required in all contracts now.The essence of consideration is a bargained exchange of benefits or detriments (1)the exchange of mutual promises;(2)the exchange of money or goods;(3)the result of bargaining 1212Element 4 Legality:Contracts are void if the subject Legality:Contracts are void if the subject matters are illegal or contrary to public matters are illegal or contrary to public policy.policy.illegal contracts:the subject matters are illegal contracts:the subject matters are barred by statute.barred by statute.e.g.ce.g.contracts for the commission of a criminal ontracts for the commission of a criminal offence or civil wrong,offence or civil wrong,usurious contracts etc.usurious contracts etc.contracts void for public policy contracts void for public policy e.g.gambling contracts,immoral contracts e.g.gambling contracts,immoral contracts Case Case 1313Element 5 Form of the contract must conform to legal requirements.written VS.Oral contracts written VS.Oral contracts A contract may be binding and enforceable contract A contract may be binding and enforceable contract in most circumstances even though it is oral.However,in most circumstances even though it is oral.However,there are a few kinds of contracts for which a written there are a few kinds of contracts for which a written form is necessary.form is necessary.e.g.The UCC requires that contracts for the sale of e.g.The UCC requires that contracts for the sale of goods of$500 or more must be in writing.goods of$500 or more must be in writing.Contracts for the sale of investment securities must Contracts for the sale of investment securities must be in writing.be in writing.1414III Liability of breachElements of liability of breach1.breach-non-performancenon-performance-inadequate performanceinadequate performance2.default-strict liability principlestrict liability principle-obligor bears the burden of proofobligor bears the burden of proof-legally allowed defenses limited to force legally allowed defenses limited to force majeure and obligees faultmajeure and obligees fault1515IV.Defenses&Exemption from liabilityGrounds for exemption-force majeure-obligees fault(the aggrieved party is imposed with the affirmative duty to mitigate damages stemming from the breach)-stipulated exemption clauses(exemptions not necessarily upheld)1616Lecture 6 Contract Lawv.Remedies for breach of contract1.Damages -common law2.Promissory estoppel3.-equity3.Specific performance4.-equity1717Damagesliquidated damages:liquidated damages:money awarded money awarded according to the parties previous agreement.according to the parties previous agreement.Compensatory damages:Compensatory damages:the sum shall be the sum shall be equal to the loss-that was foreseeable when equal to the loss-that was foreseeable when the contract was made.the contract was made.punitive damages:punitive damages:money awarded,in money awarded,in addition to compensatory damages,in order to addition to compensatory damages,in order to punish intentional or malicious wrongdoer.punish intentional or malicious wrongdoer.nominal damages:nominal damages:a trivial amount of a trivial amount of money awarded where no actual loss resulted money awarded where no actual loss resulted from a wrong.from a wrong.1818Promissory estoppelThe promissee has substantially changed positions in reliance on a gratuitous promise from the promisor,and the promisor is now claiming inadequate consideration as an excuse for nonperformance.The court will force the promisor to comply with the terms of the agreement.1919Promissory estoppel允诺的不容否定允诺的不容否定:允诺人相信对方将由于信赖其允诺作出某项实质性的作为或不作为,受允诺人确实作出了某项作为或不作为.作出的允诺不得否定或取消,以免给对方造成损害.2020Specific performanceThe court orders the nonperforming party to perform the contract.The usual remedy in civil law countries;Considered a harsh remedy by common law courts;Used only where money damages are inadequate;(the subject matter of the contract is unique)2121VI.Laws governing sales contract in different countries1.U.S.Uniform Commercial Code Common LawPublished in 1952 by the American Law Institute Published in 1952 by the American Law Institute and the National Conference of Commissioners and the National Conference of Commissioners on Uniform State Laws.on Uniform State Laws.drafted as a model law to be enacted by a drafted as a model law to be enacted by a particular stateparticular stateState law,not federal lawState law,not federal lawadopted by all US states,only partially in adopted by all US states,only partially in LouisianaLouisiana2222VI.Laws governing sales contract in different countriesThe UCC contains 10 articles:It covers sales,The UCC contains 10 articles:It covers sales,commercial paper,bank deposits and collections,L/C,commercial paper,bank deposits and collections,L/C,bulk transfer,warehouse receipts,B/L,investment bulk transfer,warehouse receipts,B/L,investment securities and secured transactions.(securities and secured transactions.(see P274see P274)The UCC does not cover all commercial transactions,The UCC does not cover all commercial transactions,e.g.services,real estate.e.g.services,real estate.Contracts not governed by the UCC are governed by Contracts not governed by the UCC are governed by the common law(case law).the common law(case law).Important amendments to Article 2 were drafted in Important amendments to Article 2 were drafted in 2003,and will be effective when enacted into law by 2003,and will be effective when enacted into law by state legislatures.state legislatures.2323VI.Laws governing sales contract in different countriesArticle 2 of the UCC deals with contracts for the sales of goods and applies to sales between consumers and merchants as well as between merchants.Article 2 covers such topics as the formation of the contract and discusses the offer and acceptance.Warranty provisions:express warranties and implied warranties.2424VI.Laws governing sales contract in different countriesExpress warranties:The seller makes an Express warranties:The seller makes an explicit promiseexplicit promise that the goods will have that the goods will have certain qualities.certain qualities.Implied warranties:The seller makes an implied Implied warranties:The seller makes an implied promise that the goods are promise that the goods are“fit for ordinary“fit for ordinary purposes”purposes”for which such goods are used.for which such goods are used.25252.England:Sale of Goods Act 1894(a model)/19793.China:General Principles of the Civil Law of the PRC Contract Law(1999.10.1)Economic Contract LawEconomic Contract LawForeign Economic Contract LawForeign Economic Contract LawTechnology Contract LawTechnology Contract Law 2626