Lecture 4: Contracts & Terms Flashcards
Chapter 4 (48 cards)
How is the law governing contract formation determined?
Determined by either:
- The chosen legal system as per the choice of law clause (if any)
- The applicable conflict of laws regulations (if any): Rome I, Rome Convention or Hague Convention On The Law Applicable To International Sale Of Goods
- Otherwise, rules of conflict under national law.
In general, it is chosen based on the nationality of where the parties are from.
What is a best practice for determining the governing law during contract formation?
Sign a pre-contract stating which law to using during contract formation.
What are the necessary elements for a valid contract under the CISG?
A valid CISG contract requires an offer, acceptance, mutual intent to be legally bound, and agreement on essential terms.
That is:
- Offer and acceptance
- On essential elements
- Intention to be legally bound
- (Consideration)
- Formal requirements (specificity, reception, writing, certification and witness)
What are essential elements (3Ps)?
- Parties
- Product - type and quantity
- Price
What is the major difference between common law and civil law in terms of contract formation?
Summary of the legal systems:
- Civil law: A legal system where rules are written in codes and used to decide cases.
- Common law: A legal system where judges make decisions based on past court cases.
Difference = Consideration: Each party must give something in return (a promise, service, or payment), which is required in common law for a contract to be valid.
- So, in common law, no consideration = no contract (usually).
- Whereas, in civil law, a mutual agreement can be binding even without consideration.
- Consequences: One-sided actions are often invalid or non-enforceable - e.g. pre-contractual obligations, contractual amendments, side agreements and promises. There might be remedies under equity for these cases, but there are uncertainties attatched.
What is the difference between consideration in common law and synallagmatic obligations in civil law?
Consideration in common law requires something of value exchanged to make a contract binding = Give and take!
Synallagmatic obligations in civil law refer to mutual obligations without requiring consideration as a separate element = Mutuality!
How do formal requirements differ between national laws in contract formation?
They vary in aspects such as language, definiteness, writing requirements, communication method, and whether silence counts as acceptance.
What are e-contracts? And what are the necessary elements for a valid contract under the CISG?
Most countries accept electronic contracts. Often, no special laws are needed, because many contracts don’t need to be in writing.
So, elements are the same as other contracts:
- Offer and acceptance
- On essential elements
- Intention to be legally bound
- (Consideration)
- Formal requirements (specificity, reception, writing, certification and witness)
However, where written form is required, the requirements vary depend on national law:
- EU: There are 3 levels of electronic signatures.
- China: Standard electronic signatures are enough.
What counts as a valid “signature” is different in each country.
Can one use general terms and conditions in e-contracts?
Yes, one can include general terms and conditions in e-contracts.
Just make sure the other party has access to read them.
What are some issues with e-contracts?
- Privacy laws (like GDPR in the EU)
- Consumer protection laws (e.g. for digital products)
- Authentication (proving who is signing)
- Enforcement (making sure the contract can be used in court)
- Clickwrap & Browsewrap: Clickwrap = user clicks “I agree”. Browsewrap = terms are linked at the bottom of the website; user agrees by using the site.
What is the legal status of smart contracts, and what are their limitations?
Smart contracts are self-executing digital agreements. They offer automation but face legal uncertainty and are mainly limited to simple transactions.
Describe the main parts of a commercial contract.
Main parts include:
- Introduction (Preamble, Recitals etc.)
- Definitions
- Primary operative provisions (clauses on price, payment, delivery, etc.)
- Secondary operative provisions (clauses on liability and limitation, indemnification, liquidated damages, etc.)
- Framework provisions (clauses on law and jurisdiction, assignment, merger)
- Testimonium
What is a preable? How does it vary from common law to civil law?
An introductory section that:
- Names the parties involved
- Defines the purpose of the agreement
- Sets the context for why the contract is being made
Generally helpful in avoiding misunderstandings.
For both legal frameworks: Non-binding and no contractual duty.
- Common law: Necessary for guidance of interpretation due to the “Four Corner Rule”
- Civil law: Helpful for guidance of interpretation
Define the definitions section of a contract.
A section that defines key terms relevant for the contract, like “Business day”.
For which legal framework are definition especially important? Why?
Common law
Because this section defines any words which might be necessary, due to low trust in legal books.
What are primary operative provisions?
The main terms of a contract that state the core obligations of each party.
They usually include clauses on:
- Price & Payment
- Delivery terms
- Scope of goods or services
These provisions are legally binding and define what the contract is really about.
What are secondary operative provisions?
The secondary terms that support the main terms of the contract by dealing with risk, responsibility, and consequences.
They often include clauses on:
- Liability & limitation
- Indemnification (compensation for loss)
- Liquidated damages (agreed penalty for breach)
These provisions are legally binding and help manage what happens if something goes wrong in the contract.
What is a possible problem with heading in a contract? What is a solution to this?
They are a part of interpretation.
Therefore, one party might think that the clauses deal with one issue only under the appropriate heading.
The solution is to exclude headings from being an integral part of the contract through ‘Headings clause’.
What are framework provisions?
The general rules that govern how the contract functions beyond the main terms.
They often include clauses on:
- Choice of law & jurisdiction (which country’s law applies)
- Assignment (if rights can be transferred)
- Merger or entire agreement clauses
- No waiver (ensuring rights aren’t lost by not enforcing them immediately)
These provisions help ensure the contract is clear, enforceable, and complete.
What are framework provisions also called?
Boilerplate clauses
What are boilerplate clauses and why are they important?
A standardized provision found in most contracts.
These clauses are typically placed at the end of a contract and deal with general aspects that apply to the agreement as a whole.
- E.g. choice of law and jurisdiction
They are not specific to the particular deal, but ensure legal consistency and protection.
- Boilerplate = keep stable, thus, only slight change from contract to contract.
What are some framework provisions (boilerplate clauses)?
1. Governing Law & Jurisdiction Clause: States which country’s law and court will apply in case of dispute.
2. Merger Clause: Merges all previous agreements into the current final contract.
3. Entire Agreement Clause: Confirms that only the written contract counts—no external documents or conversations apply.
4. Counterparts Clause: Signing different copies of the contract still forms one valid agreement.
5. No Oral Amendment Clause: Contract changes must be made in writing, not verbally.
6. No Waiver: Allowing something once doesn’t mean it’s allowed forever.
7. Unenforceability / Severability / Salvatory Clause: If one part is invalid, the rest of the contract still applies.
8. Survival Clause: Specifies which parts of the contract stay valid after termination or expiration.
9. Confidentiality Clause: Requires both parties to keep contract details private.
What is the testimonium in a contract?
The final part of a contract where the parties sign the agreement.
It typically includes:
- A sentence like “In witness whereof…”
- The date and place
- The names and signatures of the parties or their representatives
It confirms that both sides agree to the terms and makes the contract official and binding.
What are model terms and contracts? What are they used for?
Privately prepared and generally formulated contractual terms or entire contracts to be used in certain circumstances.
The starting point/basis for the contract in the drafting process.
