Appunti di Contract Law

SANCTIONS IF A CONTRACT LACKS THE REQUIRED FORMA: voidness and avoidability of the contract

An important question is what are the consequences of a failure to comply with a formality. We have already seen that when it comes to a violation of a European information requirement each MS decides for itself how it wants to sanction. Its clear that this question don’t arise for contracts to be evidenced in writing, but if the written form is not met does this mean that the contract is void? In German and Dutch civil code its stated that “a juridical act that lacks the form prescribed by statue is void. In case of doubt, lack of the form specified by juridical act also results in voidness”. It also says” unless the law provides otherwise, a juridical act that is not performed in accordance with formal requirement, is null and void”. English law adopts the same approach by holding the contract unenforceable. Things are not that straightforward, in practice much depends on

the presence of certain conditions or actions. This is known as statutory curing. For example, in some jurisdictions, if a contract is not properly signed, but the parties later acknowledge and confirm the terms in writing, the contract may be considered valid. Second, the parties themselves may agree to cure the defect by taking certain actions or fulfilling certain conditions. This is known as contractual curing. For example, if a contract requires a specific formality, such as being notarized, but the parties agree to waive this requirement and proceed with the contract, the defect may be cured. Finally, in some cases, a court may have the power to cure a defect in a contract. This is known as judicial curing. For example, if a court determines that a contract is in the best interest of the parties and that the defect is not material, it may choose to enforce the contract despite the lack of formality. In conclusion, while the lack of formality in a contract can have serious consequences, such as rendering the contract void or avoidable, there are also situations in which the defect can be cured. Whether through statutory, contractual, or judicial means, the goal is to ensure that the parties' intentions are upheld and that justice is served.

The interest of the party for whose protection formality was introduced. For example, if a residential lease of more than one year is not concluded in writing the BGB coverts it in a contract of indeterminate time. The second case it may happen that one party or both parties actually carry out the intended contract without worrying about any formalities, in such case the performance itself can cure the defect. For example, if a guarantor in a consumer suretyship simply performs the contract is valid even if made orally. In the third case one party could make its counterpart intentionally believe that no formalities are needed while in fact is not true. If this is the case the court can disallow the first party claiming that the contract is invalid for lack of formalities. In Germany the basis for this is usually found in the principle of good faith.

THE PARTY AGREEMENT: INTERPRETATION AND GAP FILLING

Once the contract is validly concluded, the second stage of its life begins, the parties have to

perform inconformity with what they promised. Fortunately, this does not pose a problem in the great majority of cases. The party agreement consists of contractual terms that the parties have explicitly agreed upon, these agreements can be unclear which calls for interpretation in order to give one meaning to the used terms. The agreement can also be incomplete, calling for gap filling. A validly concluded contract obliges the parties to perform their contractual obligations. But this is not straightforward as it may look, in fact parties frequently dispute what they agreed upon, this is due to the fact that words are never clear. The parties may interpret the same thing in two different ways based on their knowledge and experience. So, an important role is done by the interpretation, that aims to establish one meaning for all parties affected by the contract establishing only one meaning to the word used. The mere interpretation of the party agreement is almost never enough to establish whatparties need to do under the contract. Parties often only agree on a few main points and do not bother to agree on anything else for three reasons: • First, because the great majority of parties cannot conceive of all the possible contingencies that could happen during the course of the contract. • Second, because in most cases it is not efficient to negotiate a contract that aims to foresee all the possible contingencies. • Third, because the law provides solutions to deal with incomplete contracts. In each jurisdiction, this is called gap filling and takes place in two different ways. First, it can happen that parties didn't provide for a certain contingency because it is such an obvious part of the contract that they did not believe it necessary to spell it out. For example, if I rent a car, they need to provide me with the car keys even if it is not written in the contract. If necessary, the court fills this gap in the parties' agreement by speaking for both parties. The court construes whatthey would have said. This type of interpretation is called in German, English and French law ad hoc gap filling. The party agreement is supplemented with terms that follow form the hypothetical will of the parties in circumstance of the case. Second, it frequently happens that interpretation of the party agreement by way of ad hoc gap filling is not sufficient to establish all the rights and obligations of the contracting parties. If Mike has his car repaired by Sophie, they usually do not agree who carries the risk of the car being destroyed by a fire in Sophie's garage. This is where the second type of gap filling comes and it's called gap filling through default rules. The gaps in the contract left by the parties are filled by the default rules that are automatically applicable insofar as the parties did not deviate from them. INTERPRETATION OF THE PARTY AGREEMENT A: Subjective and objective interpretation The interpretation must be directed at ascertaining what parties have intended with it,

not at what the court or anyone else find the fairest suitable or efficient interpretation. So, the interpretation of the contract is to search for the common intention of the parties, this search can take place starting form two fundamentally different positions the subjective and the objective one.

The subjective method consists in giving preference to the real intention of the parties. Since the words the parties used are only an expression of their interpretation, it is the intention that should prevail. The problem with this approach is when the consensus between the parties is discussed, the actual intention of the party can never be established.

The objective method instead consists in giving the priority to the declaration and therefore to the external expression of the intention, so it protects a party's reliance on the words actually used.

The tension between giving priority to a party's (subjective) intention and to its (objective) declaration is clearly visible in the

Great codifications of private law. French civil code requires the court to find the common intention of the parties but it also prescribes that the contact must be interpreted in the sense which a reasonable person placed in the same situation would give to it. The BGB states that the aim of interpretation must be to ascertain the real intention. The same tension between words and intention can be found in English law, in this case of doubt about the meaning of contractual terms we look at an extreme version of the objective approach, namely to interpret a contract according to its literal meaning. This makes clear that all EU jurisdictions adopt a compromise between attaching importance to the intention and the expression, this compromise do not differ from the civil and common law. Interpretation is always directed at finding the common intention of the parties. If the parties differ about what their common intention is, the reasonable meaning to be given to the words in the circumstances.

the literal meaning. However, if there is no common intention, the court will look at other factors tointerpret the contract. These factors include: 1. The language used in the contract: The court will consider the words used in the contract and theirordinary meaning. If the words are clear and unambiguous, they will be given their literal meaning. 2. The context of the contract: The court will consider the surrounding circumstances at the time thecontract was made. This includes the purpose of the contract, the background and knowledge of theparties, and any relevant industry practices or customs. 3. The conduct of the parties: The court will look at how the parties have acted under the contract. If theirconduct suggests a particular interpretation, the court may adopt that interpretation. 4. The commercial purpose of the contract: The court will consider the commercial purpose of thecontract and the intentions of the parties. This includes any specific objectives or goals that the partiesintended to achieve through the contract. 5. The law: The court will also consider any relevant legal principles or rules that may apply to theinterpretation of the contract. It is important to note that these factors are not exhaustive, and the court may consider other relevantfactors depending on the specific circumstances of the case. The goal of interpretation is to give effect tothe intentions of the parties and to ensure a fair and reasonable outcome.

The word in the contract. The subjective understanding of the parties prevails over the objective meaning of the contract. Lawyer call this kind of situation falsa demonstration (a wrong description that does not harm). Equally simple is the case in which parties are not mistaken about the meaning of a term but in which their common understanding of a word differs from its usual meaning.

Things become more difficult if parties use truly ambiguous clauses. Civil law jurisdictions allow court to look at a range of different circumstances in interpreting such clauses like preliminary negotiations or the conduct of the parties. Instead, English law approach is not fundamentally different, courts are bound by the so called parol evidence rule, this rule of evidence entails that written contract evidence external to the express terms of the contract cannot be taken into account. Drafts, letters, statements form pre-contractual negotiations between parties cannot play a role in ascertaining what the

Il contratto stabilisce effettivamente ciò che viene detto. Un fattore rilevante in quasi tutte le giurisdizioni è la posizione delle parti e quale conoscenza ed esperienza ci si può aspettare da loro.

C: Massime di interpretazione; regola del contra proferentem

Il codice civile nella tradizione giuridica francese fornisce tipicamente regole di interpretazione per aiutare a interpretare i contratti. Le massime di interpretazione possono essere trovate anche nei codici italiano e spagnolo. La regola di interpretazione più nota che è importante nella pratica è la cosiddetta regola del contra proferentem. Questa regola prevede che un'ambiguità in un contratto scritto debba essere interpretata contro la persona che lo ha redatto, ciò dà un incentivo al redattore a mettere il contratto in termini chiari. Gli Stati membri hanno adottato questa regola in ogni caso per le condizioni generali nei contratti con i consumatori.

INTEGRAZIONE AD HOC

Una volta stabilito il significato corretto delle parole esplicitamente utilizzate dalle parti, il contratto può comunque essere incompleto, perché un contratto non può mai prevedere eventualità.

court than ahs to supplement the interpreted party agreement though gap filling. This can take place on ad hoc gap filling or by use of default rules. The first method means that a lacuna