Category Archives: legal contract

Three Key Elements To The Creation Of A Contract

If you are entering into any sort of agreement with an individual, and money, products, or services are changing hands, it is a good idea for you to write a contract. A legal contract will protect you both, by outlining your obligations. If anything goes wrong, you will have something that you can take to court to help you receive adequate compensation. Receiving what you deserve is much easier if you have a contract. However, not all contracts written by two parties are legally binding. In order to have a legally binding contract, you need three basic elements to be present in the document. You need competent parties, compensation, and a meeting of the minds in order to have a legally binding contract.

The first key element to the creation of a contract is that both parties must be of sound mind, and they must be legally able to enter into a contract. Minors cannot enter into most contracts without parental consent. However, minors can independently enter into contractual agreements for basic necessities, such as food, clothing, and shelter. Minors can also sign contracts for student loans. Individuals under the influence of drugs or alcohol cannot enter a contract. Also, individuals who suffer from a mental illness that prevents them from making rational decisions cannot enter a legally binding contract.

The second major aspect of a contract is compensation. Compensation refers to both the payment made and the service or product received. You cannot have a binding contract that requires one or both parties to commit an illegal action. If you hire a hit man, have him sign a contract or enter a verbal agreement, and he fails to perform the murderous task you specified, you cannot take him to court for breach of contract. You also cannot have a valid contract where the compensation is an illegal item, such as drugs or stolen merchandise. For the contract to be valid, both parties must receive some sort of compensation. There cannot be a valid contract wherein only one person receives money or services. The compensation must be reasonably equitable as well, in order for the contract to be upheld in a court of law.

The third major aspect of a contract is a meeting of the minds. Both parties must fully understand the agreement. One way to ensure that a true meeting of the minds has been accomplished is to put as many details as possible into the contract. For example, if you are trying to sell a car, describe it in minute detail. This will prevent your buyer from protesting that they thought they were buying a car in a different color or with fewer miles. Details will help strengthen your contractual agreement.

Contract law is a complicated and complex legal area. Legal scholars spend years studying its intricacies. Although these are three of the basic elements of a legally binding contract, other factors can come into play. If you have any legal questions about your contract, consult a lawyer.

The Legality of Betting Contracts

A wager or bet is defined as where something valuable is placed on the outcome of an uncertain present or future event, to which the wagering parties have conflicting views.

A bet is legally regarded as a contract, and it is an essential feature of such contract that there are no more than two parties to the agreement, and that one party will win and the other lose upon the determination of the event.

Many gaming transactions are not legally wagers. It has been determined in the UK that a bet placed with the Horseracing Totalisator does not constitute a wagering contract within the meaning of the Gaming Act 1845. Multipartite agreements such as lotteries and sweepstakes are not regarded as betting contracts, as it is not considered that the organizing bodies actually lose, as their function is to divide a net aggregate amount of the monies received.

It is an essential feature of a betting agreement that the stake must be the only interest which the parties have in the contract. The question of whether the parties are interested in more than the winning or losing of the stake depends on the substance rather than the form of the agreement.

The Gaming Act 1845 renders all betting agreements, whether oral or written, void and no action can be brought in the UK courts for the recovery of monies allegedly won on a bet. Although such contracts are voided by statute, they are not illegal.

Decided cases have held that no rights under law are conferred on either party, so even if the loser pays a dishonoured cheque in satisfaction of the bet to the winner, no right to sue under the betting agreement exists. However, if in the case of non payment of bets, the parties make a new agreement to pay, such as a promissory note, subsequent to the original betting agreement, this new contract can be enforced in court. Whether a new agreement has been made, or whether the action is based on the betting contract, and thus void, is one for the determination of the courts, and judges will look at the nature of the transaction and ascertain the true intentions of the parties.

Specific rules exist dealing with betting on licensed or registered premises. Gaming and betting on streets and public places, subject to the exception for certain games played on licensed premises, is prohibited and legislation in the UK sets out penalties for contravention.

In conclusion, betting agreements are generally unenforceable in court and such contracts are per se void under statutory law, despite the fact that the betting industry is worth hundreds of millions of pounds annually to the UK economy.

Contract Law In The Kingdom Of Thailand

A contract is an exchange of promises between two or more people for a particular purpose. It is a legally enforceable agreement that generates a commitment to do or not to do something. The central part of most contracts is a set of shared promises. The promises are made by the parties that describe the privileges and obligations of the parties. The term ‘party’ can mean an individual, company or corporation. No matter what kind of contract you take, having an understanding of contract law is a central part to establish sound business agreements that will be lawfully enforceable in the event when a clash arises.

In Thailand, the contract law is controlled by the Thailand Civil & Commercial Code (TCCC) and other Thai legal authorities. The contract is a comprehensive description of the obligations and duties and the time limit for performance of the parties. The law gives the parties comparatively broad freedom to agree any terms. The general rule of contract under the TCCC is that the contract is binding and concluded where the offer is accepted and the recognition is communicated from the offeree to the offeror. All contracts should be given in the form of a written document signed by the two parties. One of the major risk areas is that the laws especially restrict activities of foreigners, such as the Foreign Business Act and Land Act.

As in any common law system, concluding a contract requires offer, acceptance, formality, consideration and intention to create a legal relationship. The contract encompass terms that are expressly agreed upon by the people as well as implied conditions that were not particularly arranged but implied into the contract by act or court explanation. In general, implied terms may not be inconsistent with the express terms of a contract. At common law, courts would usually imply a term into a contract if it is necessary to provide effectiveness to the contract from a business point of view.

Actually there are two different areas where the place of the contract becomes important. The foremost is the selection of law clause. It describes the law of which nation will apply. The second is the choice of forum clause that specifies which nation a complaint may be filed and a legal case may be enforced in court. Notice of the terms must be given at or before concluding the contract. The terms must be referred to or contained in a document that was projected to have contractual effect; and reasonable steps must be taken to bring the terms to concentration of the other party.
The TCCC states that the laws of that country will apply if the parties are of the same nationality. However, if the parties are not of the same nationality, the law of the country where the contract has been made will apply. For instance where a contract has been made between parties at a distance, the country where the contract is deemed to have been made is the country where notice of the acceptance reaches the seller. If such a place cannot be determined, the law of the country where the contract is to be performed shall govern.

Agreements between foreigners and Thai nationals are enforceable in Thailand. Real estate, purchase and sale of property, hotel and property management, guarantees, construction are the important contracts that are entered into between foreigners and Thai partners. Shareholder agreements, employment, trust agreements, loan, joint ventures, franchising, licensing and distributorship are other types of contracts that are found to be very common. According to TCCC, if a contract of sale is subject to a time clause or to a condition, the ownership of the property is not transferred until the condition is fulfilled, or the time has arrived. The completion time of the contract of sale is referred to hereafter as the time of sale. The costs of a sale contract are paid by both parties equally.

If a disagreement over a contract arises and informal attempts at resolution fail; the most common method used to enforce contracts and resolve contract disputes is through the court system and lawsuits. Courts and formal lawsuits are not the only option for people and businesses involved in contract disputes. The parties can have a mediator to review a contract dispute, or may agree to binding arbitration of a contract disputez

Affects of Personal guarantee contract

An indemnity is a promise of assurance to be responsible for another loss and to compensate on the agreed terms. Indemnity creates the principal nature of liability.

There are three parties involved in the contract of guarantee such as the surety, principal debtor and the creditor. While there are two parties involved in indemnity such as indemnifier and indemnity holder.

It was held in “Yeoman Credit Ltd v Latter (1961)” that an indemnity is a contract by one party  to keep the other harmless against a loss.

What is a personal guarantee?

A personal guarantee is usually required by the lender when a business requires a loan and does not have other assets to secure the loan. A personal guarantee is a legal document that secures the loan of company against individual assets. The guarantor is liable to perform his obligation when the company fails to do so.

In fact a personal guarantee is a legal undertaking by an individual to pay the loan when borrower fails to do so. Mostly banks require the personal guarantee from such businesses those have no previous credit record. Personal guarantee creates the problems for both sides when enforcement occurs.

Legal Requirements

Statue of Frauds (Ireland) 1695 requires that guarantee must be in written form and must be signed.

It was held in case Bank of Ireland VS McCabe that a verbal renewal of guarantee is not sufficient.

Importance of Personal guarantee

A guarantee is a contractual right that creates a right in personem. There is no restriction on the assignment of guarantee of indemnity if the prior consent is obtained from the party or as agreed between the parties in contract. If the agreement is silent or does not allow the assignment then the guarantee or indemnity can be assigned.

Reasons for personal guarantee

The personal guarantee is required when the business is new and has new pervious credit record. Mostly the entrepreneur i.e. the director of the company provides the personal guarantee to repay the loan if the company fails to do so. Personal guarantee can be limited and unlimited.

Legal affects on Personal guarantee

The Financial regulator has issued two mandatory code of conducts in 2009 with reference to Business Lending to Small and Medium Enterprises and Mortgage Arrears which minimize the freedom of lender to enforce personal guarantee over personal private residence.

Tips for guarantor

The guarantor must read the entire contract before signing it and must understand his nature of liability. Because once the contract is signed; t becomes a legal contract . Therefore the guarantor must consider the following points before singing the agreement. Such as:

The Guarantor must obtain the independent legal advice before signing the agreement.The guarantor must know and understand about the nature of secured liabilities.

Net Lawman provides the following types of personal guarantee document . Such as:

Guarantee of contract debt

This is a supplementary contract that brings in a guarantor to a situation where the client of a provider of a service or supplier of goods has failed or is likely to fail to make payment when due. It can be used with any performance contract and can add a personal guarantee for an individual, or bring in another party, such as a business. The key benefit of this document is that the original contract remains unchanged, making this a neat solution to adding a guarantor

Contract Validity and the Cisg International Treaty: Closing the Loophole

Contract Validity and the CISG: Closing the Loophole

Nir Bar, Attorney (Israel) and Mss Natanella Har-Sinay

[1] Introduction [2] Ambiguity Created by Article 4(a) [3] Different Approaches in Interpreting Article 4(a) [4] CISG Case Law on Article 4(a) [5] Israeli Law Regarding Contract Validity [6] Israeli Case Law on Contract Validity [7] Comparison to Other Legal Systems [8] Conclusion

[1] Introduction:

The United Nations Convention on Contracts for the International Sale of Goods (CISG) was created as an answer to the question of how to create uniformity in the business practices of parties in different countries. Work was begun on the CISG in 1968 by the United Nations Commission on International Trade Law (UNCITRAL). A Working Group, made up of representatives of the member countries in UNCITRAL, was commissioned to prepare a document that would “facilitate acceptance by countries of different legal, social and economic systems.” The draft was completed by 1978, and in 1980, a Diplomatic Conference representing 62 States finalized the text in Vienna. As of July 17, 2007, seventy-one states have ratified the convention.

The Preamble to the Convention expresses the drafters’ position 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.” It is with this hope that the drafters went on to detail the requirements to be met in forming a sales contract, as well as the rights and obligations of the seller and buyer. However, it is in spite of this stated purpose that the Convention leaves open a loophole, which is the source of conflict among signatory parties.

[2] Ambiguity Created by Article 4(a):

Part I of the CISG lays out the parameters of the Convention’s application- which issues it covers and which it does not. One such issue is validity, which is excluded from the CISG in Article 4(a):

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

From looking at the drafting history of Article 4(a), it is evident that the validity exception was included in order to protect the differing interests that are safeguarded by different domestic laws. The history shows that the drafters designed Article 4(a) to “serve as a loophole which could stretch to fit the needs of each domestic legal system.” However, the article which was supposed to provide flexibility to an otherwise rigid set of rules in order to allow for international differences has sprouted further complications. Because Article 4 does not define validity, the task of determining when a cause of invalidity exists and what its consequences are is left to the various domestic legal systems. Because these legal systems have no central formula to rely on, “the very reason for excluding issues of validity- the differing and strongly felt national traditions- suggests that judges and arbitrators will be tempted to enforce domestic rules of validity.” For example, on nations law may allow the use of parole evidence, while another may not. In light of the Convention’s stated goals of achieving uniform rules to promote international trade, the issue becomes “to what extent [does] applying non-uniform domestic rules of validity to contracts for the international sale of goods seriously [handicap] the CISG’s potential for achieving its goals?”

While it may be argued that performing a simple conflict of laws analysis to determine which state’s validity rules apply circumvents the ambiguity created by Article 4(a), a problem arises when the causes of invalidity proscribed by domestic law deal with circumstances that also give rise to remedies under the CISG. For example, some domestic laws state that the absence of a definite price term voids the contract “since agreement on the price is regarded as one of the “essentialia” of a contract of sale.” According to Article 55 of the CISG, however, if there is no definite price term, “the parties are considered…, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned.” While a consensus exists regarding certain validity issues, such as duress, in this instance, it is evident that an issue labeled as one of validity by domestic law may merit different consideration in the international context. This fact has been the subject of great debate over how to resolve the ambiguity created by Article 4(a).

[3] Different Approaches in Interpreting Article 4(a):

In beginning one’s analysis of the ambiguity, a good first step is to look at the drafting history of the article in order to gain some insight as to why the article was drafted the way it was. The history of Article 4(a) suggests that the drafters purposely worded the clause ambiguously. The Working Group did consider several proposals for validity provisions to be included in the Convention, but ultimately decided against incorporating them. The drafting history indicates that fear of an inability to reach agreement or substantial delays resulting from debate led the drafters to postpone discussing validity; their vehicle for the postponement was the ambiguous wording of Article 4(a). The drafters did not dismiss the validity issue completely; they simply “deferred it to those who would later interpret the Convention.” However, the history also reveals that the CISG drafters did not intend for the validity exception to provide carte blanche for applying domestic public policy laws to international transactions. It is for this reason that it is important to create uniform guidelines regarding the interpretation of Article 4(a).

The first of these guidelines has already been created by the drafters of the CISG themselves. Article 7(1) of the Convention states: “In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.” This article suggests that, even in situations where domestic law is to be applied, it should be applied narrowly in order to “allow the Convention to have the widest possible application consistent with its aim as a unifier of legal rules governing the relationship between parties to an international sale.” In other words, the term “validity” must be defined in light of the CISG as a whole.

Keeping in mind the nature of the Convention, commentators have proposed an analysis process to aid in the interpretation of Article 4(a) that is based on the language of the article itself. The “crucial question,” according to these commentators, is whether the circumstances invoke both a domestic rule as well as a rule of the Convention. If they do, the “except as otherwise expressly provided” clause in Article 4(a) comes into play; since the Convention expressly provides a rule to apply under the circumstances, domestic law is inapplicable. One example is the CISG rule on form. Article 11 states that “a contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form.” Because the form requirement is expressly excluded from the Convention, tribunals are prohibited from applying domestic writing requirements. Conversely, for issues which are not addressed by any provisions of the Convention, reference must be made to domestic law. Issues falling under this category include illegality, capacity, fraud, mistake, duress, and unconscionability. It is these issues that are held by a consensus of the various domestic legal systems to be issues of validity. One explanation for this fact is that the Convention only covers rights and obligations arising from a contract, and issues such as fraud arise from the process of concluding the contract and not the contract itself.

This analysis referring to the negative rule excluding validity issues in Article 4(a) and the positive rule of “except as otherwise expressly provided” is just one of several theories as to how the validity exception should be interpreted. Another suggested approach is to view all applicable domestic laws that are considered “mandatory” by the State to be issues of validity. Such an approach may be advocated by critics of the “critical question” method, who feel that “if all issues addressed by the Convention were classified as non-validity issues, the question of validity would never arise”, and the “expressly provided” provision would be redundant. The method would also ignore the fact that several provisions of the CISG address issues that are considered validity issues by some domestic legal systems. Furthermore, imposing domestic restrictions on international sales transactions would impose an “unfortunate, if inevitable, conflict between the philosophy of freedom of contract generally enshrined in the Convention and a restriction on that freedom, governed by national law.”

[4] CISG Case Law on Article 4(a):

Although there is no uniform rule on contract validity, past court decisions ruling on the issue may serve as a looking glass through which the perspectives of the various legal systems may be observed. One such court decision comes from an Austrian case that dealt with the validity of a specific contractual clause. In this case, the German seller (plaintiff) delivered gravestones to the Austrian buyer (defendant), who later discovered a defect in the product. Upon discovering the defect, the buyer retained his payment and sent one of the stones back for examination. Although he eventually used some of the other stones, the seller filed suit, claiming that the conditions agreed to by the buyer included a clause excluding the buyer’s right of retention, even in the case of non-conforming goods. The Austrian Supreme Court ruled on the validity of the non-retention clause, holding that clause validity is an issue of domestic law. While the Court went on to apply German law as per a conflict of rules analysis, it also held that any domestic provisions which contravened the principles upon which the CISG was based would be disregarded. Also, although the Court considered invalidating the German law that excluded a party’s right to avoid a contract, it ultimately held that the law granting a party the right to compensatory damages was sufficient. Consequently, the contract clause excluding the right of retention was held to be valid.

Another issue dealt with by courts is consideration, which was the subject of a 2002 United States case. In this case, the New Jersey buyer brought suit against the Canadian seller, alleging breach of contract. Among other things, the defendant argued lack of consideration. In addressing this claim, the Court first stated: “By validity, the CISG refers to any issue by which the domestic law would render the contract void, voidable, or unenforceable.” The Court classified the subject of consideration as such an issue. To determine which domestic law would apply, the Court applied a conflict of law analysis, and subsequently determined that there was sufficient consideration under New Jersey law.

[5] Israeli Law Regarding Contract Validity:

As the stated purpose of the CISG is to remove legal barriers in international trade, it would be a logical step to look not only at international court cases, but also at the laws of the various legal systems themselves, as the foundation on which to build uniform law; one such system is that of the State of Israel. While the nation incorporated the CISG into its laws in 1999, it retained its own regulations for contract formation, which are expressed in Contracts Law (General Part), 1973. Subjects that are covered by the Convention, such as offer and acceptance, are discussed, as well as subjects that are not- the most significant being invalidity.

Article thirty of the Contracts Law states that if the content or object of a contract is “illegal, immoral, or contrary to public policy”, it is void. Furthermore, articles fourteen through eighteen list factors that, if present, allow a contracting party to rescind the contract: mistake, deceit, duress, extortion. Mistake is defined as a mistake of fact or law which does not include a mistake about the “worthwhileness” of the deal. The article further states that mistake is ground for rescission only if the contract cannot be preserved by rectifying the mistake. Deceit is defined as “the nondisclosure of facts which the other party, according to law, custom or circumstances, should have disclosed,” and is grounds for rescission when it has resulted in a mistake by the victim party who entered into the contract only in consequence of that mistake. Duress is grounds for rescission if a person has entered into a contract due to force or threats applied by the other party, subject to the limitation that “a bona fide warning that a right may be exercised does not constitute a threat.” Finally, rescission by reason of extortion is allowed if a party or his agent takes advantage of the distress, inexperience, or mental or physical weakness of the other party, and the terms of the contract are unreasonably less favorable than is customary.

[6] Israeli Case Law on Contract Validity:

In order to use Israeli law as a model for creating a uniform law on contract validity, one cannot only look at the law, but must also observe how it has been applied by the Israeli courts. In Ben Lulu v. Atrash Elias , the plaintiff and defendant had come to a settlement agreement regarding an accident in which the plaintiff was injured; the agreement barred all future claims. Upon discovering new injuries, the plaintiff again brought suit against the defendant, who claimed that this suit was prohibited by the original agreement. The Supreme Court ruled that a contract is a device for allocating risk and that a court must not interfere with an otherwise valid contract just because the parties included a known certainty when drafting their agreement .

While uncertainty is not grounds for invalidation, contracts based on deception have been held by the Israeli Supreme Court to be void. In Meir Vofna v. Ogash, a couple was looking to buy a home in a quiet neighborhood; the seller of a home insisted on showing the buyers the house only on a Saturday, the Jewish day of rest. After signing the agreement, the buyers learned that the house is near a noisy construction zone, and that the seller intentionally deceived them by showing the house on the day that no construction is done. The court annulled the agreement .

Duress has also been found to be grounds for contract annulment. In Rahamim v. Expomedia Ltd , a joint venture in a fair sought to annul his joint venture agreement on the grounds that the defendant forced him to invest more money by threatening to end the project before it began. The Israeli Supreme Court ruled that economic pressure is sufficient grounds to annul an agreement. In Diyur Laole Ltd. V. Keren , the court held that duress can be found at any point before the agreement is signed, up until the actual signing, but not at any time after that .

Finally, in a case where a woman was seeking to annul her marriage contract, the Israeli court referencing Article 30 of Israel’s Contract Law in stating that a court can annul a contract which goes against the values, interests, and major vital principles that the legal system was seeking to preserve and develop.

[7] Comparison to Other Legal Systems:

In formulating a uniform law regarding contract validity, it is also important to look at how the laws of specific signatory countries relate to each other. For example, the aforementioned Israeli validity rules are similar to those of China. According to the Contract Law of the Peoples Republic of China, a contract is void if it is created through the use of fraud or coercion, has an illegitimate purpose, is damaging to the public interest, or violates compulsory laws and regulations. Further, a party has the right to request a court to modify or revoke a contract which is the result of a significant misconception, was obviously unfair at the time of its conclusion, or was concluded by exploiting a party’s unfavorable position.

Also similar to Israeli law is European contract law, codified in The Principles of European Contract Law 1998, Parts I and II. According to these principles, a contract may be avoided if it was concluded as a result of fraudulent misrepresentation, fraudulent non-disclosure, an imminent of serious threat, or the other party had excessive benefit or unfair advantage. Specific contract clauses may be avoided if they have not been individually negotiated and cause a significant imbalance in the rights and obligations of the parties.

These three law systems are just a small portion of the seventy-one nations whose interests must be addressed. Comparing the laws of the various signatory countries is key in ensuring that the uniform law on validity, once formulated, will not stray too far from the interests of each nation, and will strike a balance that will suit the stated goals of the CISG.

[8] Conclusion:

When the drafters of the CISG set out to create a uniform law, their stated purpose was to promote the development of international trade while keeping in mind the varying world legal, social, and economic systems. While many issues were addressed and resolved in creating the CISG, the issue of validity has remained a heavily-debated and enigmatic one. Supporters may claim that deferring contract validity to the several domestic systems allows flexibility, but the fact remains that as long as there is no uniform law regarding the subject, different court systems will apply different law, and parties will have no continuity in their expectations. In order to create such a uniform law, one must look to the laws of the various states, such as Israel, and find a consensus among the laws on issues such as mistake, duress, and illegality.

Until this difficult process can be completed however, practicing lawyers are left with the dilemma of how to protect their clients and the contracts to which they are parties; the answer is twofold. First, a prudent attorney drawing up an international contract should consult an attorney from the other party’s country, in order to ensure that the agreement’s validity will hold up in both forums. Second, since a contract drawn up according to the CISG is subject only to the laws of the CISG, it is crucial to expressly designate the choice of law to be referred to in case an issue arises for which the CISG has no resolution (i.e. contract validity). If these two steps are taken, the potential for conflict between two parties regarding contract validity will be decreased. Until a uniform law or treaty is created, it falls on attorneys to “promote the development of international trade.”

————

Attorney Nir Bar specializes in corporate & Business law and is a head partner at “Nir Bar Law Firm” in Israel; http://www.barlawyers.com Attorney Bar authored further articles and published the Israeli book: “The complete guide to mortgages in Israel”. The aforesaid does not constitute legal advice nor replaces it. Attorney Nir Bar may be reached at www.barlawyers.com

The author wishes to express his deepest regards to Mss Natanella Har-Sinay, for her excellence research and assistance.

Patrick C. Leyens, CISG and Mistake: Uniform Law vs. Domestic Law [The Interpretive Challenge of Mistake and the Validity Loophole (2003), available at http://cisgw3.law.pace.edu/cisg/biblio/leyens.html#con.

Id.

Helen Elizabeth Hartnell, Rousing the Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of Goods, 18 Yale. J. Int. Law 1-93 (1993), available at http://cisgw3.law.pace.edu/cisg/biblio/hartnell.html

Id.

Ulrich Drobnig, Substantive Validity, 40 Am. J. Comp. L. 635-644 (1992), available at http://cisgw3.law.pace.edu/cisg/biblio/drobnig2.html.

John A. Spanogle & Peter Winship, International Sales Law: A Problem-Oriented Coursebook, 131-132 (2000).

Hartnell, supra.

Drobnig, supra.

Id.

Hartnell, supra.

Christoph R. Heiz, Validity of Contracts Under the Untied Nations Convention on Contracts for the International Sale of Goods, 20 Vand. J. Transnat’l L. 639-663 (1987), available at: http://cisgw3.law.pace.edu/cisg/biblio/heiz.html.

Hartnell, supra.

Id.

Id.

Id.

Heiz, supra.

Id.

Spanogle, supra.

Dr. Peter Schlechtriem, Uniform Sales Law – The UN-Convention on Contracts for the International Sale of Goods (1986), available at http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem-04.html.

Heiz, supra.

Hartnell, supra.

Leyens, supra.

Hartnell, supra.

Oberster Gerichtshof, 8 Ob 22/00v, 7 September 2000.

Id.

Id.

Pharmaceuticals Tech. Corp. v. Barr Labs. Inc. 201 F.Supp.2d 236 (2002).

Id.

Id.

Article 30 of the Israeli Contract (General Part) Law, 1973.

Id at Article 14(d).

Id at Article 15.

Id at Article 17.

Id at Article 18.

Civil appeal 2495/95 Hadas Ben Lulu v. Atrash Elias, Supreme Court Verdicts vol. 51(1), page 583 (1997).

For further verdicts regarding Mistake in Contract see also: Civil appeal 406/82 Nahmani V. Galor, Supreme Court Verdicts vol. 41(1), page 494; Civil appeal 2444/90 Aroesti v. Kashi, Supreme Court Verdicts vol. 48(2), page 513; Civil appeal 8972/00 Shlezinger v. Hafenix Hevra Lebituah, Supreme Court Verdicts vol. 47(4), page 814.

Civil appeal 373/80 Meir Vofna v. Dan Ogash, Supreme Court Verdicts vol. 31(2), page 215 (1981).

For further verdicts regarding Deception in Contract see also: Civil appeal 494/74 Hevrat Beit Hashmonaim v. Aharoni, Supreme Court Verdicts vol. 30(2), page 141; Civil appeal 838/75 Spector v. Tzarfati, Supreme Court Verdicts vol. 32(1), page 231; Civil appeal 488/83 Tzan’ani v. Agmon, Supreme Court Verdicts vol. 38(4), page 141; Civil appeal 373/80 Meir Vofna v. Dan Ogash, Supreme Court Verdicts vol. 31(2), page 215 (1981).

Civil appeal 8/88 Shaul Rahamim v. Expomedia Ltd., Supreme Court Verdicts vol. 43(4), page 95 (1989).

Id.

Civil appeal 5493/95 Diyur Laole Ltd. V. Shoshana Keren, Supreme Court Verdicts vol. 50(4), page 509 (1996). This case involved an agreement by two neighbors to move out of their building. One year after the agreement, they claimed they were forced to sign by their other neighbors.

For further verdicts regarding Duress in Contract see also: Civil appeal 403/80 Sassi v. Kikaon, Supreme Court Verdicts vol. 31(1), page 762; Civil appeal 784/81 Shaffir v. MArtin, Supreme Court Verdicts vol. 39(4), page 149; Civil appeal 4839/02 Ganz v. Katz, Supreme Court Verdicts vol. 48(4), page 749; Civil appeal 1569/93 Maya v. Penford, Supreme Court Verdicts vol. 48(5), page 705; Civil appeal 6234/00 SH.A.P Ltd v. Bank Leumi, Supreme Court Verdicts vol. 37(6), page 769.

Civil appeal 8256/99 Jane Doe v. John Doe, Supreme Court Verdicts vol. 58(2), page 213 (2003). See also Civil appeal 148/77 Rot v. Yeshoofe, Supreme Court Verdicts vol. 33(1), page 617; Civil appeal 661/88 Haymov v. Hamid, Supreme Court Verdicts vol. 44(1), page 75; Civil appeal 139/87 Soolimani v. Katz, Supreme Court Verdicts vol. 43(4), page 705; Supreme Court of Justice case 6051/95 Rekent v. Beit Hadin Haartzi, Supreme Court Verdicts vol. 51(3), page 289; Civil appeal 695/89 Shilo v. Be’eri, Supreme Court Verdicts vol. 47(4), page 796.

The Need for Intention to Create Legal Relations in Contract Law

Under UK law, an agreement supported by consideration is not enough to create a legally binding contract, the parties must also have an intention to create legal relations. Often, the intention to create legal relations is expressly stated by the contracting parties. In other situations, the law will readily imply the intention, because of the nature of the commercial dealings between the parties.

The presence of consideration is often indicative of the intention to create legal relations, though there are situations where the presumption of the intention can be rebutted, thus determining that there is no contract and no legal liability.

In many domestic agreements, for example those made between husbands and wives and parents and children, there is no intention to create legal relations and no intention that the agreement should be subject to litigation. Familial relationships do not preclude the formation of a binding contract, though to create contractual relations, there must be a clear intention on either party to be bound.

While there are conflicting legal authorities on whether specific facts involving familial relations result in binding and enforceable agreements, it seems settled that in domestic agreements there is a rebuttable presumption that the parties do not have intention to create legal relations.

In commercial agreements, there is a rebuttable presumption that parties intend to create legal relations and conclude a contract. In determining whether parties have created legal relations, courts will look at the intentions of the parties. If in the course of business transactions, the parties clearly and expressly make an agreement stating that it ought not be binding in law, then a court will uphold those wishes. However, if a court is of the view that there is any ambiguity of intention, or that such intention is unilateral, such contract will be voided. The burden of rebutting the presumption of legal relations in commercial agreements lies on the party seeking to deny the contract. In terms of commercial contracts involving large sums of money, case law has determined that it is a heavy burden.
It has been decided in the UK, that so called “Letters of Comfort”, which express a parties intention on business dealings can amount to an intention to create legal relations and so bind a party in contract, but that it will depend on the nature of the specific wording used.

Agreements between companies and trade unions have also raised the question of the intention to create legal relations. Collective agreements are generally not intended to be legally binding. It has been held that specific provisions of collective agreements can be incorporated into individual contracts of employment and thus legally binding.

The intention to create legal relations is an essential feature of contract law in the UK, and the existence of the intention will depend on the nature and form of the contract and the contracting parties.

when does an agreement become a contract?

A contract is an agreement which gives rise to obligations which are recognized by law. Thus, the course of dealings between the contracting parties would be governed by stipulations contained in the agreement which is enforceable if it is not repugnant to law of the land.

Anson- A contract is an agreement enforceable at law made between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of the other or others.

Fredrick Polllock- Every agreement and promises enforceable by law is a contract.

Salmond- Contract is an agreement, creating and defining obligations between the parties.

Section 2(h) of Indian Contract Act 1872 defines-

An agreement enforceable by law is a contract.

Section 10 of Indian Contract Act 1872 defines-

An agreement is a contract when it made for some consideration, between parties who are competent, with their free consent and for a lawful object.

The analysis of above definitions- A contract is an agreement the object of which is to create an obligation i.e. a duty enforceable by law. For example – if there is an agreement between A and B that A will make a furniture for B, and B will pay a Rs 1,000/ to A, the agreement is a contract.

Section 10 defines a valid contract-

1.     All agreements are contract which are made by the-

2.     Free consent of parties.

3.     Competent to contract.

4.     A lawful consideration.

5.     With a lawful object.

Thus every contract is an agreement, but every agreement is not a contract.  An agreement becomes a contract when it fulfills the following conditions:

  1. 1. Consideration.
  2. 2. Competent parties to contract.
  3. 3. Free consent.
  4. 4. Lawful object.

There are some agreements which literally satisfy the requirements of a contract, such as proposal, acceptance, consideration etc. but which do not catch its sprit and they are not enforced because it does not sound to be reasonable to do so.

Constituent Element of Agreement:

  1. Several parties- There must be two or more parties to initiate a contract. Where one who has to discharge the obligation and the other entitled to enforce the obligations.

For example- A borrowed money from a joint account in which A & B are the owner. Here the obligation was not enforceable since A was both the creditor and debtor.

  1. Obligation– Obligation is the prime constituent, where one person agrees to do or obtains from doing a definite act or acts. It is the bond of legal necessity which binds together two or more parties.  It is also necessary the obligation must be definite acts, otherwise there may be uncertainty or indefiniteness about the obligations, and it may be possible that if one has to be under an obligation to do or abstain from doing acts for all the time, it would similar like slavery.
  2. Identity of Mind– Both parties must be agreed on the subject matter at the same time and at the same manner.
  3. Mutual Communication-Law does not go into the mind of the contracting parties but recognizes what is expressed in writing. Till such time there is complete understanding on the terms and there is communications in this respect, there can be no agreement in law.
  4. Legal Relationship-it is also most important there must be some legal relationship than the social relationship.

Contract Law – Its Importance in the World Today

Our society depends upon free exchange in the marketplace at every stage. The interactions in the market all the times depend upon voluntary agreements between individuals or other “legal persons”. Such voluntary agreements can never become binding without a legal contract.

The origin of the contract law can be traced from the development of common law and it is also alleged to be an offspring of tort law, as both contracts and torts give rise to obligations. The difference between them lies in the fact that the tort obligations are imposed by law; on the other hand contracts are a medium through which people willingly create commitment between themselves.

Contract law is based on a number of Latin legal principles, out of which consensus ad idem is the most important, which means a meeting of the minds between the parties i.e. an agreement among them. It is said to be a part of “private law” because it does not bind the state or persons that are not parties to the contract. Thus, contracts are voluntary and require an “exercise of the will of the parties”. But not all agreements are contracts e.g. Non-business agreements, religious agreement, or charitable agreements etc.

A contract an agreement between two or more persons, creating an obligation upon them to fulfill or not to fulfill some duties laid down specifically in the agreement. This agreement creates a legal relationship of rights and duties on the parties and if these obligations in the agreement are not fulfilled then stringent action could be taken by the courts on the party. There are three key elements for the conception of a contract. These are offer, acceptance, consideration and an intention to create legal relations. Contracts can be written, oral, or implied also. Generally the parties to a written contract comprehend that they have entered into a binding agreement, but they do not always grasp this point when making an oral or implied contract. It is always difficult to prove the terms of an oral or implied contract than those of a written one.

There are many important points that have to be kept in mind while forming a valid contract; after making the offer to the promisee, the contract will be formed when the promisee communicates his acceptance to the contract. The person making the offer is free to withdraw the same before the acceptance of the offer. Once the agreement is made, the following clauses should be present in the same.

1. There should be some consideration offered for the agreement.
2. The parties should be competent to contract.
3. The consent to the agreement should be free.
4. The object of the agreement should be lawful.

Consideration

This is one of the important aspects which is necessary for a party to enter into a contract. This is the return which a person gets for performing the obligations of the contract. This needs to be of some value but it is not necessary that it should be specified in the contract. An agreement made without consideration is void.
Persons competent to contract.

All persons are legally authorized to enter into a contract except for the following:
• Minors, who are above 18 years of age and when a guardian is appointed for them the age is increased to 21 years.
• Mentally incompetent persons.
• Person who is ineligible from entering into the contract by law.

Companies have a separate legal entity to enter into contracts through the acts of their agents, officers and workers.

Consent to the contract

Unless the consent of the contract is obtained through, coercion, undue influence, fraud, misrepresentation or mistake, it is presumed that the consent is free.

Relief given to the aggrieved party
Generally the party who has suffered due to the breach of contract of the other can claim money damages that will put the non-breaching party in the position it would be in, if the contract had been performed. In some cases the court may order the breaching party to perform its obligations.

The aim of the law of damages is to place the plaintiff in the same position that he would have been, had the breach not occurred. The parties to a contract may determine the damages beforehand which are called liquidated damages and can be recovered. In this case the sum of money should not exceed the amount already specified. But in the case when there are no predetermined damages then the person can claim the whole amount.

Essentials of a contract agreement

The contract should contain certain clauses without which the agreement will be incomplete.
• A detailed description of the duties and obligations of the parties should be stated to avoid ambiguity at a later stage.
• Representations concerning warranties should be present in the contract
• Confidentiality clauses should be present to ensure that the parties keep any information which comes into the possession, due to the contract, confidential.
• The force majeure clause which generally provides that no party will be liable for non-performance arising out of an event of force majeure i.e. war, aggression, epidemic should also be present.
• The term should also be specified in the agreement.
• The events on the occurrence of which the contract will be terminated should also be specified. This clause also describes the methods of giving notice, and whether the breaching party must be given a chance to cure the breach.
• The relief available to the other party on the breach by one party should also be stated. This would also include liquidated damages.
• An arbitration clause should also be inserted to settle the disputes through arbitration rather than court litigation.
• In international contracts, it is important to state the jurisdiction and the applicable law governing the contract.

Once these conditions are incorporated in a contract it will be easier for the parties to enforce them and claim their rights.

Legal Contracts and Documents: Boilerplate Clauses, Purpose and Examples

Boilerplate clauses are provisions that do not relate directly to the particular subject matter of a legal contract but set out the respective rights of the parties during the term of the agreement and, in some cases, after the agreement is terminated. They are standard clauses drafted using commonly used and understood language, whose function is to save legal drafters time.

While many boilerplate clauses are common to most commercial contracts, some will not apply to a particular contract and others will need to be adapted to meet the particular requirements of the parties. Failure to include appropriate boilerplate clauses can come back to haunt the drafter if things subsequently go wrong between the parties and one of them finds itself unexpectedly disadvantaged. The purpose and effect of each boilerplate clause, therefore, must be understood as it applies to each individual legal agreement.

Below are some examples of commonly used boilerplate clauses and their purpose.

Entire Agreement

This Agreement contains the entire agreement between the parties relating to the subject matter and supersedes any previous agreements, arrangements, undertakings or proposals, oral or written. This Agreement may be varied only by a document signed by both parties.

This clause limits the parties’ rights and obligations to only the provisions contained within the agreement. This means that neither party can claim to have acted based on any statement, discussion or document not expressly contained within the agreement.

Force Majeure

Neither party shall be liable for delay or failure to perform any obligation under this Agreement if the delay or failure is caused by any circumstance beyond their reasonable control, including but not limited to, acts of God, war, civil unrest or industrial action.

This clause prevents the parties to a contract from being liable in the event that circumstances outside their control stop them from being able to undertake their obligations under the contract.

Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the law of England and Wales and each party agrees to submit to the exclusivejurisdiction of the courts of England and Wales.

This determines the law of the country that governs the contract. In the event of litigation the jurisdiction is the country that will hear any legal dispute.

No Assignment 

Neither party shall assign or otherwise transfer any of its rights, interests or obligations under this Agreement to a third party without the prior written consent of the other party.

This refers to the rights and obligations of a party to a contract and the ability or not of that party to pass on those rights and obligations to a third party. Often contracts have a ‘no assignment’ clause, preventing either party transferring their duties under the contract without consent.

Notices

Any notice required to be given by either party to the other under this Agreement may be sent by either email, fax or recorded delivery to the most recent email address, fax number or address notified to the other party, and if sent by email shall unless the contrary is proved be deemed to be received on the day it was sent or if sent by fax shall be deemed to be served on receipt of an error free transmission report, or if sent by recorded delivery shall be deemed to be served 2 days following the date of posting.

This provides the parties to a legal contract with an agreed method of communication and sets out the way in which parties should communicate, and the timescales, thereby avoiding dispute later on.

Severance

If any provision of this Agreement is held invalid, illegal or unenforceable for any reason by any court of competent jurisdiction, such provision shall be severed and the remainder of the provisions hereof shall continue in full force and effect as if this Agreement had been agreed with the invalid illegal or unenforceable provision eliminated.

If a clause in a contract is found to be invalid, illegal or otherwise unenforceable, this clause allows the parties to remove that clause and continue performing under the contract.

Employment Contract High Wycombe Builds a Legal Relationship

Previously, the basic law seemed to esteem the requirement for a worker to be faithful and devoted and there was no obligation with respect to the manager to guarantee that the labourer had entry to monetary welfare and professional stability. In any case, it creates the impression that the basic law likewise imported the thought of an inferred commitment of shared trust and certainty in the middle of managers and representatives by means of anEmployment contract High Wycombe and that this example is clear in the statute of courts. It is contended by numerous legitimate researchers that the example of work law as it is managed by the regular law tends to support employers in that guilds are controlled with a suspicion of doubt and that the law has a tendency to embrace the estimations of preservationist political members, for example, columnists, government officials and senior civil servants.

An Employment contract Oxford accord could contain various things. Most importantly, it should unmistakably show who the contracting parties are and an announcement that both sides went into the agreement with capability and full assent. Assent and capability are fundamental components of an agreement and without it nothing in the understanding will be legitimate. The accord is void from the starting point. The accord should likewise contain the date when it was consummated and sign. This will be the premise of the initiation of the understanding and the advantages, obligations and liabilities that accompany it. This understanding must have terms or stipulations. In the event that the occupation is just a 5-year contract, such ought to be explicitly included in the agreement. What happens following 5 years, whether the business naturally closes or in the event that it is subject for reestablishment ought to likewise be in the accord.

In the advanced super adaptable economy where persons can and do change professions rapidly and routinely, there are couple of work environments with standard hours of work and there are expanding quantities of individuals occupied. In past times the idea of work law was that a man would do work for an executive in a solitary area, in a solitary occupation for a solitary employer. Presently specialists tend to work with a range of superintendents without a moment’s delay, frequently on low maintenance or easygoing premise. Likewise, there are currently countless who view themselves as independently employed. These patterns are clarified by the apparent yearning of labourers to claim adaptability in their working game plans. It likewise implies that more prominent effectiveness can be picked up from the force of innovation to permit teleworking. On the other hand, in spite of these progressions, there has not been a disavowal of the requirement for there to be a composed Employment contract High Wycombe between an executive and representative.