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UNIT 1

THE CONCEPT OF A CONTRACT

1. A contract is an agreement which legally binds the parties.

The ususally remedy is damages.

2. A contract is the outcome of consenting minds, each party being free to accept or reject the

terms of the other. Parties are judged by what they have said, written, or done. The law will sometimes imply terms into contracts because the parties are expected to observe certain standard of behaviour. A person is bound by these terms.

3.

The essential elements of a contract are:

a)

an agreement is made as a result of an offer and acceptance;

b)

the agreement contains an element of value known as consideration;

c)

the parties intend to create legal relations.

4.

The validity of a contract may also be affected by the following factors:

a)

Capacity. Some persons (children) have limited capacity to make contracts.

b)

Form. Most contracts can be made verbally, but others must be in writing or by deed.

Some verbal contract must be supported by written evidence.

c) Content. The parties may generally agree any terms, although they must be resonably

precise and complete. In addition some terms will be implied by the courts, custom or statute

and some terms will be overriden by statute.

d) Genuine consent. Misrepresentation, mistake, duress and undue influence may invalidate a

contract.

e)

Illegality. A contract will be void if it is illegal or contrary to public policy.

5.

A contract that does not satisfy the relevant requirements may be void, voidable or

unforceable.

a) A void contract has no legal effect. If an agreement is void, it cannot be a contract. The

term usefully describes a situations where the parties have attempted to make a contract, but

the law will not give effect to their agreement because, for example there is a common mistake on some major term.

b) When a contract is voidable the law will allow one of the parties to withdraw from it if he

wishes, thus rendering it void. Voidable contracts include some agreements made by minors and contracts induced by misrepresentation, duress or undue influence. A voidable contract remains valid unless and untill the innocent party chooses to terminate it.

c) An unenforceable contract is a valid contract and any goods or money transferred can be recovered from the other party to the contract. However if etither party refuses to perform his part of the contract, the other party cannot compel him to do so. A contract will be unenforceable when the required written evidence of its terms is not available.

THE FORMATION OF A CONTRACT

For most types of contract the offer and acceptance may be made orally or in writing, or they may be implied from the conduct of the parties. The person who makes the offer is known as the offeror and the person to whom the offer is made is the offeree.

In addition to offer and acceptance the law imposes the requirements of consideration (value)

and intention to create legal relations.

Offer An offer is a definite promise to be bound on certain specific terms.

Termination of Offer

An offer may be terminated in the following ways.

a. Revocation.

- Withdrawal of the offer. A promise to keep an offer open for a fixed period does not prevent

its revocation within that period. The offer can not then be revoked without breach of this option contract.

- Revocation is ineffective until communicated to the offeree.

- Where the offer consists of a promise to pay money for the performance of an act the offer cannot be revoked once performance has commenced.

b. A refusal or a counter offer.

A counter offer must be distinguished from a request which doest not, by itself, terminate an

offer.

c. Lapse of time.

The offer will terminate at the end of the period stated in the offer, or if no period is fixed, it will terminate after a resonable time.

d. Failure of a condition subject to which the offer was made.

e. Death.

Acceptance The acceptance may be in writing, orally, or it may be deduced from the conduct. The acceptance must correspond to the terms of the offer.

Consideration

A promise is only legally binding if it is made in return for another promise or an act , if it is a

part of a bargain. The requirement of something in excahnge for something else is called

consideration. It may be defined as some benefit accruing to one party, or some detriment suffered by the other.

Consideration must be of some value.

Intention to create legal relations. Where the parties have not expressly denied an intention to create legal relations, what matters is not what the parties had in their minds, but the inferences, that reasonable people would draw from their words or conduct.

- Where there is a commercial agreement, it is presumed that the parties intend to create legal

relations. However if the parties expressly deny this intention, by stating that negotiations are subject to contract or that any agreement is to be binding in honour only, then there is no contract.

- Where there is a domestic agreement, the presumption is that legal relations are not intended.

- Where adult members of a family (other than husband and wife) share a household, the

financial arrangements which they make may well be intended to have a contractual effect.

- An agreement between persons who share a household, but which has nothing to do with the management of the household will probably be intended to be legally binding.

Words to remember

bind = a obliga binding = obligatoriu, imperativ, executoriu, irevocabil binding agreement = obliga ţ ie irevocabil ă

binding authority = autoritate obligatorie binding effect = efect obligatoriu binding precedent = precedent obligatoriu legally binding = obligatoriu de drept remedy = compansa ţ ie, desp ă gubire damages = desp ă gubiri, daune consideration = compensa ţ ie reasonably = judicios misrepresentation = decl. fals ă genuine = original, incipient overriden = înc ă lcat, nesocotit duress = constrângere voidable = anulabil, revocabil unenforceable = neexecutoriu, neaplicabil terminate = a înceta, a anula, a rezilia bargain = tocmeal ă , învoială , negociere

UNIT 2

THE FORM OF THE CONTRACTS

Writing makes it easier to prove the content of a contract, but it is not usually necessary. There are however 3 categories of exceptions.

1. Contracts which must be by deed

a) a conveyance/transfer of a legal estate in land (including a mortgage) or the grant of a

lease for 3/more years (conveyance = the document which transfers the title of unregistered land; transfer = the document which transfers title to registered land).

b) consideration is not necessary for a deed. The essentials elements of a deed are:

- writing;

- signature;

- seal (intention that the document be executed as a deed; no wax/stick-on seal is necessary);

- delivery (the person executed the deed intends to be bound by it; no physical transfer of possession is necessary).

c) the effect of non-compliance with the above is that the contract is void. Therefore any

money paid or property transferred can be recovered.

2. Contracts which must be in writing

- the main types are:

- the transfer of shares in limited companies;

- the sale /disposition of an interest in land;

- bills of exchange and cheques;

- consumer credit contracts;

- policies of marine insurance;

- legal assignments of choses in action.

3. Contracts which must be evident in writing

A contract of guarantee must be evidenced in writing to be legally enforceable.

Any signed note of the material terms of the contract is sufficient. Besides the signature of the guarantor other evidence must include the names/identification of the parties, a description of the subject matter and any other material terms.

THE CONTENT OF THE CONTRACTS

A contract may contain 3 types of clause: express terms, implied terms, and exemption

clauses.

Express terms

A statement may be an express term of the contract or a representation inducing its formation.

Different remedies are available if a term is broken or a representation is untrue.

There are 2 basic types of express term:

a) a condition is a vital term, breach of which normaly entitles the innocent party to treat the

contract as at an end and to claim damages.

b) a warranty is a term which is subsidiary to the main purpose of the contract, breach of

which only entitles the innocent party to damages.

Incomplete Contracts

a. A legally binding agreement must be complete in its terms.

b. The parties may leave an essential term to be settled by specified means outside the

contract.

c. If the parties used non essential words (eg. standard printed conditions some of which are inappropriate), such words may be disregarded.

Standard Form Contracts Many agreements are not individually negotiated. Standard form contracts are usually used by large organisations in their contracts with consumers. They are also often used in commercial transactions.

Implied Terms Terms may be implied by custom, courts, statute.

Custom The parties are presumed to have contracted by reference to the customs prevailing in the trade or locality in question, unless they have shown a contrary intention.

Courts

The courts will imply 2 types of terms into contracts:

1- terms implied in fact (terms which are so obvious that the parties must have intended them to be included). The implied terms must be both obvious and necessary to give “business efficacy” to the contract.

2- terms implied in law (terms which are implied to maintain a standard of behaviour, even

though the parties may not have intended them to be included). In a contract of employment, the employee undertakes to faithfully serve his employer and that he is reasonably skilled. The employer undertakes that he will not require the employee to do an unlawful act and he will provide safe premises.

Exemption Clauses An exemption clause is a term in a contract which seeks to exempt one of the parties from liability, or which seeks to limit his liability to a specific sum if certain events arise (breach of warranty, negligence, theft of goods). An exemption clause may become a term of the contract by signature or by notice.

If a person signs a document he is bound by it even if he does not read it.

A person may not be bound by a signed document if the other party misrepresented its terms.

Where a document is not signed, the exemption clause will not apply if the party knows the clause or if reasonable steps are taken to bring it to his notice before the contract is made.

The court will not enforce an exemption clause unless the party affected by it was properly informed of it, when he accepted it.

Limitation on the use of Exemption Clauses

In consindering the validity of exemption clauses, the courts have had to strike a balance

between:

-the principle that parties should have complete freedom to contract on whatever terms they

wish;

-the need to protect the public from unfair exemption clauses in standard form contracts used by large business enterprises.

Exclusion of negligence liability.

A person cannot, by reference to any contract term, restrict his liability for death or personal

injury resulting from negligence.

In the case of other loss or damage, a person cannot restrict his liability for negligence unless

the term is reasonable.

UNIT 3

THE MAIN PARTS OF A CONTRACT

I OPENING SECTION

II ACTION SECTION

III REPRESENTATIONS & WARRANTIES

IV COVENANTS

V CONDITIONS PRECEDENT

VI DEFAULT

VII BOILERPLATE

VIII SIGNATURE BLOCK

IX EXHIBITS & SCHEDULE

I (consideration) 1) - preamble: title, parties, date; 2) - recitals; 3) - statement of Consideration; 4) - definition of terms specific to the contract.

II (entire agreement)

1) - subject matter & performance clause; (reciprocal promises – what each party agrees to

2) - flow of money, documents & the object of the agreement (product/service); (who is obligated to pay whom?/ how much?/ on what date?/ by what means?)

- what documents must be delivered?

(by whom?/ to whom?/ on what date?/ in what form?)

- what product/service is required?

(by whom?/ to whom?/ on what date?) 3) - dates of significant events; 4) – term (duration) of the contract (-how long this contract is in effect bet. these parties?)

)

III (R&W)

1)- representation = a statement of the fact of that moment in time intended to cause reliance & based on that reliance to cause an action. 2) -warranty = a promise that if a statement of fact is not true, the maker of the statement will

pay damages to the recipient; no reliance is required. There are stipulated: negligence, misrepresentation, rescission, recovery, fraud, damages.

IV (C of one party/the other party)

1) - addresses actions/changes in circumstanecs bet. the execution of a contract & the closing of the deal; 2) - creates common law contract remedies. 3) - specific performance.

V (CP)

1) -a state of facts that must exist before there is an obligation to perform under a contract.

VI

(D)

1) - what happens if a party defaults; 2) - what constitutes a default event; 3) - protection of proprietary information;

4) – the non-competition clause.

VII (B) 1) - provisions of general applicability that tell the parties: a) how the agreement is to be managed. (It is a standard clause inserted, as a matter of course, into all agreements of a certain type, such as Force Majeure, where fulfilling a contract becomes impossible due to unforseen events beyond anyone’s controll); b) how and when any notices under the agreement have to be served; 2) - choice of law; 3) - forum for dispute resolution (venue); 4) - notices to the parties; 5) – the merger clause; 6) - time of the essence; 7) – language.

VIII (SB) 1) - who signs & how they sign -individual signing; -legal entity signing (in case of agency – who is the agent?); 2) - notarization -signature of the witnesses; -corporate seal.

IX (Es&S)

1) - include deal-specific information and data essential to the deal but not usually included in the body of a contract.

UNIT 4

CONTRACT OF SALE

Def. : A contract of sale is a legal contract where the Seller/Vendor transfers or agrees to transfer the goods/property/service to the Buyer/Purchaser for a consideration called Price (value in money). It is a part of the commercial law.

Contracts of Sale are governed by the Uniform Commercial Code in the most of the United States and Canada and by Sale of Goods Act 1979 in the United Kingdom.

I The ELEMENTS of the SALE CONTRACT:

-the parties agreement (offer & acceptance); -the parties capacity (minors, disable persons or drunkenness); -the object (the goods); -price (in money ).

Capacity

Is regulated by the general law concerning capacity to contract, but where necessaries are sold

and delivered to an infant/ a person who by reason of mental incapacity/drunkness is incompetent to contract, he must pay a reasonable price for them.

Form

A contract of sale may be in writing/by word of mouth/implied from conduct.

Subject Matter The Goods = all chattles personal (bunuri personale) other than things in action and money. =There are “specific g.s” (identified and agreed upon at the time a contract of sale is made); =“future g.s” (are to be manufactured/acquired by the seller after making of the contract of

sale); =“unascertained g.s” (all g.s of the same class or that is a part of a larger consignment (înc ă rcatur ă )”.

It may also refer to a list of products and/or services contained in one of the schedules to the

contract.

Description Where goods are sold by description, there is an implied condition that:

-the goods will correspond with the description and; Where goods are sold by sample, there is an implied condition that:

-the goods will corespond with the sample. =Quality =Fittness

The Price

Must be in money. May be: -fixed by the contract; -left to be fixed in the manner agreed in the contract; -determined by the course of dealing of the parties.

In adition to stating the prices, the clause may also contain : -the currency in which the

transactions are to take place; -the basis for variation of prices; -the basis for giving discounts.

Terms of Payment Deals with the basis on which payments will be made. =The time period within payment must be made; =The level of interest (cota) charged on late payment; =Arrangements for credit facilities.

II The TERMS of the CONTRACT:

Conditions / and Warranties The terms of a contract may be divided into 2 categories: conditions and warranties.

1. A condition is a vital term, breach of which normaly entitles the injured party to repudiate

the contract and claim damages.

2. A warranty is a subsidiary term, breach of which only entitles the innocent party to

damages but not to treat the contract as discharged (as in the first case).

In the USA, the term “warranty” covers both conditions and warranties.

III PERFORMANCE of the CONTRACT

Delivery

Is the physical transfer of possession from one person to another. It does not necessarily mean transportation.

=May be actual or constructive (the keys to a warehouse in which the goods are stored). =It is the duty of the seller to deliver the goods / and the buyer to accept and pay for them. =Payment and delivery are concurrent conditions unless otherwise agreed, for. ex. if the sale is on credit. =Place of delivery. =Incorrect delivery. The rights of the Seller =Remedies against the Buyer (Lien, Stop the transmission of goods, Repossession of goods). The rights of the Buyer =Remedies against the Seller (Sue for non-delivery, Sue to recover money paid, Repudiate the contract for breach of a condition, Sue for damages).

IV COMMENCEMENT and TERMINATION

Sets out when the contract starts and finishes. It may be expressed in terms of specific dates or

on the basis of particular events ocurring. =Circumstances under which the contract can be extended and for how long; =Any events which could automatically terminate the contract; =The manner in which either party may terminate the contract where there has been a material breach by the other party.

Procedures on TERMINATION Sets out any procedures which the parties agree to follow after the agreement has been terminated. It relates to the return of sample, specimens, advertising material or to the destruction of any confidential material acquired in the course of the contract.

V RETENTION of TITLE CLAUSE

Usually specifies that where goods are being transferred from one party to the contract to another, ownership of the goods does not change until the second party pays for the goods. (Title = right of ownership)

VI SERVICE OF NOTICES Specifies the way in which any notice or other communication that may have to be given by either party in performing the contract is to be sent. It usually states that notices may be sent by post/fax or gives the address/fax number and name of the person who receives the notices. (Dispatch = sent)

UNIT 5

CONTRACT OF SALE (PART 2)

VII GOVERNING LAW

States which national law governs the contract and which court has jurisdiction in the event of disputes arising out from the contract. It is an essential clause in cases in which the parties are situated in different countries, because a contractual breach may be interpreted in different

ways.

VII ASSIGNMENT

Deals with the circumstances under which the benefit of the contract can be assigned to a third party by either party to the contract. It usually provides that if assignment is permitted, then the party that wishes to assign the benefit of the contract must inform the other party in writing before carrying out the assignment. (Assign = transfer; Purpoted assignment = an invalid assignment claimed falsely to be a valid one)

IX INDEMNITY

Is an agreement by one party to a contract (A) made with another party to the contract (B) to protect (B) against liability for any sums owed to a third party (C). (A) agrees to assume liability for any sums (B) might owe (C). Indemnity clauses are generally designed to protect one or other of the parties to a contract

from any liability in respect of claims borught by third parties.

XI ARBITRATION

Generally specifies the terms under which any dipute arising from the contract will be settled by arbitration rather then being referred to the court. It is the settlement of a dispute by one or more independent third parties. It usually names the venue at which arbitration will take place and appointes the arbitrators or defines the way in which arbitrators are to be appointed in the absence of agreement bet. the parties. (Venue = court)

XII WHOLE AGREEMENT/MERGER CLAUSE

Specifies -the supremacy of the written contract in recording the agreement bet. the parties; -

the conditions under which the parties may vary the terms of the agreement; -that the written contract contains the whole of the agreement bet. the parties and overrides any previous oral and written agreements; -that any variation of the terms of the contract must be in the form of a written document. (Whole agreement = the UK term; Merger = the USA term)

XII SEVERANCE

The purpose of this clause is to record the parties’ wish that if the court finds that any part of the contract is unenforceable, the remainder of the contract should not be affected by this. It invites the court to sever the unenforceable clause from the rest of the contract. (Severance = removing one part of the contract from the rest of the contract:

Unenforceable = not legally enforceable)

XIII

WAIVER

It occurs when one party to a contract agrees not to insist on strict performance by the other party of one or more of the terms of the contract. The party therefore refrains from asserting its full legal rights under the contract. It states the terms under which a waiver is effective and provides that it must be in writing and signed by both parties to the contract.

XIV NOVATION

Occurs when a contract is replaced by a new one, bet. the same parties, or introducing a new part. The parties specify the circumstances and the manner in which a new contract arises as a result of the discharge of an obligation under the original one. (Release the claims = abandon the claims)

XV LIMITED WARRANTY

Is limited in extent/time. Ex: The Seller might warrant that the goods sold were free of defects

for a period of one year from the date of purchase.

XVI EXEMPTION CLAUSE

Tries to exclude/reduce the liability of one of the parties in specified circumstances. In

common law jurisdiction, courts usually interpret these clauses by applying the contra proferentem rule, which states that in cases of ambiguity, the clause shall be interpreted against the party trying to rely on it.

XVII CONFIDENTIALITY AND DISCLOSURE Aims to protect both parties intellectual property rights. Provides that neither party may reveal to another party any confidential information about the other party acquired as a result of the contract. It applies after the contract is terminated and not to information that is already in the public area.

XVIII RESTRAINT/ANTI-COMPETITION Prevents one/another of the parties from entering into competition with the other party following the termination of the contract. Contains restrictions on the party competing in a specified territory/business sector/for a specified period of time. Its extent will depend on the law governing and the nature of the restriction.

XIX FORCE MAJEURE

Specifies circumstances which the parties agree to regard as being beyond their reasonable control. If one of these circumstance arises and the contract is breached, neither party can be held liable.

(Beyond the reasonable control = not expected to have any control over; Default = failure to fulfil)

XX COSTS

States the proportion of the costs of negotiating and drafting the contract to be paid by each party. Each party pays only its own costs.

XXI CURRENCY

States the currency in which any amounts payable under the contract are to be paid.

XXII AMENDMENT Deals with the way in which any amend. required to be made are made. They are ineffective unless made in writing and signed by the authorised representatives of both parties.

XXIII INTERPRETATION States: -the way in which certain linguistic features of the contract are to be interpreted; -the gender, person, number; -reference to subordinate legislation (legal rules under the authority of a particular statute).

UNIT 6

LEASE CONTRACT

Definition:

1. It is an Agreement by which one party, called “Lessor” is bound by to assure to the other

party, called “Lessee” the total/partial/temporary usage of an asset in exchange for an amount

of money/rent.

How do we distinguish between Contract of Sale and Lease Agreement? By leasing it is transferred only “the right to use” and not the ownership of that asset.

2. A residential Lease Agreement, also known as a House Lease Agreemnet, or Residential

Rental Contract is a form used by landlords to rent out real estate based on the fact that

someone will be living there.

3. It is a formal document that identifies the lessor, lessee and the leased asset or property; it

states lease term and fee (rent), and detailed terms and conditions of the lease agreement.

LA is a bilateral contract – there are reciprocal obligations of both parties. The lessor has to assure the usage of the leased asset and the Lessee has to pay the price of the leasing.

LA is by onerous title – both parties have a patrimonial interest.

LA is a consensual contract – it is executed by the mutual agreement of both parties.

LA is a call-off agreement – the Lessor warrants the asset usage until the contract is terminated; the price is calculated according to the usage duration; this duration is stipulated according to the parties will (it can be determined or non-determined).

What does a Lease Agreement contain:

Any agreement involving a piece of property should always be in writing. It should include:

-a description of the property, including the address of the property;

-the type of property such as a house or apartment etc.; -who the parties are, this will generally be the owner of the property, also known as the lessor/

landlord and the tenant, also known as the lessee/ renter; -the term of the lease, this will indicate how long the lease is for, what day the lease begins, and what day the lease entered into ends; -the rental payments (it should be put down in writing), how much the rent is due, how often (weekly, monthly, anually), and when it is due.

Many other provisions may be included. It is important to put the terms of the Lease Agreement so that should any problems arise, all the parties are clear on their responsibilities, and where the fault lies. If the parties are unable to resolve their dispute, and go to court, a court will be able to interpret a written agreement and decide on the most fair solution.

A Residential Lease form can be sometimes called by different names and can cover many

types of leses such as House Leases, Apartment Lease, Condo Lease and even Room Lease.

A lease is a contract for the possession and profits of lands and tenements on one side and a

recompense of rent or other income on the other or else it is a conveyance of lands and tenements to a person for life or years or at will, in consideration of a return of rent or other recompense.

Its parts:

A lease in writing by deed indented consists of following: 1. the premises; 2. the habendum

(determines the extent of the interest/ estate granted); 3. the tenendum (used to express the tenure by which the estate granted was holden); 4. the reddendum (The grantor reserves smth. new to himself out of that which he granted before); 5. the covenants; 6. the conditions; 7. the warranty.

The formalities the law requires.

A lease may be avoided: 1. Because it is not sufficiently formal, and 2. Because of some

matter which has arisen since its delivery. Leases may be in writting or not in writting. Lease in writting are either by deed or without deed. A deed is a writting sealed and delivered by the parties, so that a lease under seal is a lease by deed. The Lease must be delivered either by the parties themselves or their attorneys, which delivery is expressed in the attestation “sealed and delivered in the presence of us”.

Provisions:

1. Object of the Contract (The Subject Matter);

2. Duration of the Contract;

3. The Lessor’s Rights and Obligations;

4. The Lessee’s Rights and Obligations;

5. Times and Terms of Delivery;

6. Residual Value/ Consideration;

7. Claims and Penalties;

8. Force Majeure;

9. Arbitration;

10. Other terms.

The Validity Conditions of the Lease A:

1. Capacity of the parties;

2. Subject MAtter;

3. The Effects of the Lease A (the rights and obligations of the Lessor/Lesse).