7.

CONTRACTS AND OTHER

SOURCES OF OBLIGATIONS

INTRODUCTION TO THE LEGAL SYSTEM – MODULE I

A.y. 2017/2018 Prof. Pietro Sirena

WHAT IS A CONTRACT?

Contracts allow consumers to purchase

goods and services

Contracts allow businesses to organize

themselves and to trade goods and services
both with other businesses and with
consumers
WHAT IS A CONTRACT?
Contracts may be concluded:

through documents drawn up by the parties, by a

public notary, by a solicitor, etc.

orally or even by
conduct
CONTRACTS IN MODERN SOCIETIES

• Modern society is unthinkable without the possibility to

conclude binding contracts.
• Societies without contracts are conceivable solely in
situations where the State or the community takes care
of everything, including the provision of the necessities
of life (such as food, housing and health care)
 FROM STATUS TO CONTRACT
Henry James Sumner Maine (1822-1888)

“The movement of the progressive societies

has hitherto been a movement from Status to
Contract” (Ancient Law, 1861)

Families/social Ancient
Status Feudalism classes Society

Individual Modern
Contract Market Society
freedom
 THE DEATH OF CONTRACT?
Grant Gilmore (1910-1982)

The Death of Contract (1974)

Market Individual Modern

Contract
freedom Society

Welfare Contemporary
Tort Statualism Society
systems
DEFINITION OF CONTRACT
ROMAN LAW

Contractus: Cum-trahere meant “to bind” the parties

CIVIL LAW JURISDICTIONS

Contract = an agreement

• Donations are contracts

DEFINITION OF CONTRACT

COMMON LAW JURISDICTIONS

Contract = a bargain, i.e. an exchange

• Gratuitous promises are not contracts (if not made by deed)

• Gratuitous bailments are not contracts

• A bailment occurs when a person (the bailor) transfers
possession of a chattel to another (the bailee)
DEFINITION OF CONTRACT

II-1:101 Meaning of “contract” and “juridical act”

(1) Contract is an agreement which is intended to give

rise to a binding legal relationship or to some other
legal effect. It is a bilateral or multilateral juridical act
DEFINITION OF CONTRACT

Art. 1321 codice civile

A contract is an agreement between

two or more parties to establish,
regulate or extinguish their patrimonial
legal relationship
DEFINITION OF CONTRACT

Art. 1101 (as amended in 2016)

A contract is a concordance of wills of

two or more persons intended to
create, modify, transfer or extinguish
obligations
BINDING FORCE OF CONTRACTS

Art. 1103 (as amended in 2016)

Contracts which are lawfully formed

have the force of legislation for those
who have made them
 CONTRACTS AND OBLIGATIONS
Contract is essentially a source of obligations

e.g. contract of sale (the contract having as its object the transfer of the
ownership of a thing or the transfer of other rights in exchange for a price)

Obligations of the seller Obligation of the buyer

• To deliver the thing to the buyer • To pay the price within the time
• To warrant the buyer against and the place fixed by the
eviction and defects in the thing contract
sold
SOURCES OF OBLIGATIONS

Contract (Vertrag, contrat, contratto)

Tort (unerlaubte Handlung, responsabilité

extracontratuelle, fatto illecito)

Other (minor) sources

LEGAL EFFECTS OF CONTRACT
Contract

Obligation Ownership

Not in all
Creation, modification, Transfer of rights legal
discharge systems
8. FUNCTIONS, CONTENTS
AND CHOICE OF CONTRACT
LAW
INTRODUCTION TO THE LEGAL SYSTEM – MODULE I

A.y. 2017/2018 Prof. Pietro Sirena

PARTY AUTONOMY
To a large extent, contract law is based upon the assumption that parties are
the best judges of their own interests

Subsidiarity principle

Freedom of contract
FREEDOM OF CONTRACT

Art. 1102 (as amended in 2016)

1. Everyone is free to contract or not to contract, to

choose the person with whom to contract, and to
determine the content and form of the contract,
within the limits imposed by the legislation
2. Contractual freedom does not allow derogation
from rules which are an expression of public
policy
LIMITS TO FREEDOM OF CONTRACT
• It may happen that parties would like to contract in a way that is
considered contrary to law or morality
• It may also happen that one of the contracting parties is not capable of
assessing her/his own interest, or, though being capable, his or her will
is affected by some ground of irrationality

In that case, the law dictates ‘mandatory rules’, which declare such a
contract void or at least avoidable by one of the parties
LIMITS TO FREEDOM OF CONTRACT

B-TO-B Contracts B-TO-C Contracts

In business-to-consumer contracts EU internal market law

imposes intense limits on party autonomy
UNIFORM CONTRACT LAW

UNITED NATIONS CONVENTION

ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

Date of adoption: 11 April 1980

Entry into force: 1 January 1988

known as Vienna convention or CISG,

it is applicable solely to B-to-B sales of goods
EU (CONSUMER) CONTRACT LAW

• In the last three decades European legislature has enacted nearly 20

directives regarding contract law, which in almost their entirety rule
solely B-to-C transactions
• European contract law is rather fragmented: directives only deal with
special contracts (e.g. package travel, doorstep sales, consumer sales)
and only with certain aspects of these contracts (e.g. information duties,
right of withdrawal)
EU CONTRACT LAW

The source of the EU competence is mostly found in

Art. 114 of the Treaty on the Functioning of the EU

which allows the European institutions to adopt measures

harmonizing national provisions ‘which have as their object the
establishment and functioning of the internal market’
NATIONAL CONTRACT LAW
• In national jurisdictions, contract law is primarily laid down by legislature
and the courts
• Contract law is arguably one of the fields where more commonalities
among the world’s jurisdictions can be found

Despite such commonalities, parties may have the need to choose a

particular national law to regulate their contract, particularly when they
undertake a cross-border transaction
CONTENTS OF CONTRACT LAW
• WHEN IS A BINDING CONTRACT CONCLUDED?
• When can a promise to do, or not to do, or to give
something be enforced in court?

• Given that a contract is concluded, WHAT SHALL BE

EXACTLY PERFORMED BY THE PARTIES in order to
execute it?

• In case a party does not perform a contract, WHAT CLAIM

CAN BE PURSUED BY THE INNOCENT PARTY?
CONTENTS OF CONTRACT LAW
These issues represent the three main bulks of
contract law:

1. FORMATION

2. DETERMINATION OF CONDITIONS AND

WARRANTIES (AND INNOMINATE TERMS)

3. REMEDIES FOR NON-PERFORMANCE

CHOICE OF LAW

Choice of law clause is a term of a contract by which the parties

specify:

1) Which court shall have jurisdiction in the case of legal disputes

between them;

2) Which law is applicable to their contractual relation

THE QUESTION OF JURISDICTION

CONVENTION OF 30 JUNE 2005

ON CHOICE OF COURT AGREEMENTS

signed on behalf of the European Union and the United States of America

Entry into force: 1-X-2015

THE QUESTION OF JURISDICTION

REGULATION (EU) No 1215/2012

OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 12 December 2012 on jurisdiction and the recognition and enforcement
of judgments in civil and commercial matters

BRUSSELS I REGULATION
THE QUESTION OF JURISDICTION
ART. 25 OF BRUSSELS I REGULATION Prorogation of jurisdiction
1. If the parties, regardless of their domicile, have agreed that a court or the courts of
a Member State are to have jurisdiction to settle any disputes which have arisen
or which may arise in connection with a particular legal relationship, that court or
those courts shall have jurisdiction, unless the agreement is null and void as to its
substantive validity under the law of that Member State. Such jurisdiction shall be
exclusive unless the parties have agreed otherwise. The agreement conferring
jurisdiction shall be either:
a) in writing or evidenced in writing;
b) in a form which accords with practices which the parties have established
between themselves; or
c) in international trade or commerce, in a form which accords with a usage of
which the parties are or ought to have been aware and which in such trade or
commerce is widely known to, and regularly observed by, parties to contracts
of the type involved in the particular trade or commerce concerned.
ARBITRATION CLAUSE

“Any dispute or claim arising out of this

Agreement shall be referred to and resolved by the
International Chamber of Commerce (ICC) in Paris
in accordance with the ICC Conciliation and
Arbitration rules”

Arbitration is ruled by domestic jurisdictions as well as by

international treaties, such as the 1958 New York Convention
THE QUESTION OF PROPER LAW

Choice of the parties may be directed:

1. To the contract law rules of a national State (e.g. France, Delaware,

etc.)
• “Hard law” choice

2. To the contract law rules set out in a restatement (e.g. PICC, PECL,
DCFR), generally combined with an arbitration clause
• “Soft law” choice
«SOFT LAW»
Contract law is increasingly affected by sets of rules, which, albeit not
binding, can be a source of inspiration for courts while settling a dispute, for
parties while drafting a contract and can be chosen as the law applicable to
the parties’ agreement, generally combined with an arbitration clause

The best-known sets of soft law rules in contract law are:

- Unidroit Principles of International Commercial

Contracts (PICC) of 1994-2016
- Principles of European Contract Law (PECL) of 1995
- Draft Common Frame of Reference (DCFR) of 2008-2009
PICC
The UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL
CONTRACTS (4th ed., 2016)

• cover all the most important topics of general contract law

• main source of inspiration was the CISG
• general rules of international sales law and other contracts
to be performed at one time
• drafted by a working group composed by scholars and
practitioners from all over the world
PECL
Principles of European Contract Law
• set of model rules drawn up by leading contract law
academics in Europe set up by Ole Lando ("Lando
Commission")
• attempt to elucidate basic rules of contract law and
more generally the law of obligations which most legal
systems of the member states of the European
Union hold in common
• are based on the concept of a uniform European
contract law system
• take into account the requirements of the European
domestic trade
RESTATEMENT (SECOND)
OF CONTRACT
• promulgated by the ALI, a private organization of
scholars, judges and practitioners
• the first restatement of contract was promulgated in 1932,
the second officially appeared in 1981
• seeks to formulate “in the aggregate” the American law of
contract, as though the U.S. consisted of only one, rather
than fifty, state jurisdictions
• when the single States are in conflict, it is represented not
the rule adopted in their majority, but the “better view”
CHOICE OF CONTRACT LAW

• Convention on the law applicable to contractual obligations opened for

signature in Rome on 19 June 1980

• Regulation (EC) No 593/2008 of the European Parliament and of the

Council of 17 June 2008 on the law applicable to contractual obligations
(Rome I Regulation)
CHOICE OF CONTRACT LAW

ART. 3 OF ROME I REGULATION

Freedom of choice

1. A contract shall be governed by the law chosen by the parties. The choice
must be expressed or demonstrated with reasonable certainty by the terms of
the contract or the circumstances of the case. By their choice the parties can
select the law applicable to the whole or a part only of the contract.
 ART. 6 OF ROME I REGULATION

Consumer contracts

Choice of law is barred when the business activity of the trader or the
professional who enters into a contract has been either pursued in, or
directed to the country where the consumer has her/his habitual residence

If so, the contract «shall be governed by the law of the country where the
consumer has his habitual residence»
 CHOICE OF CONTRACT LAW
In the U.S. legal system, contract law is regulated at state-level, and there is no
formal Federal contract law

B-to-B transactions B-to-C transactions

Uniform Commercial Code • Common law and special
(U.C.C.) statutes (about food, drugs,
etc.)

UNIFORM COMMERCIAL CODE (since 1952)

It is drawn up by private organizations and actually adopted by the
legislature of all 50 states, the District of Columbia, and the U.S. territories
(e.g. Puerto Rico, American Samoa, etc.). The part of the UCC that deals
with contracts is Article 2 and it is specifically restricted to contracts for
the sale of goods.