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UNIDROIT Principles Slides - International Business Law
UNIDROIT Principles Slides - International Business Law
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Why do we use Contracts?
• A contract is an agreement creating obligations
enforceable by law
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How are contracts formed?
• That depends on the jurisdiction
– In most jurisdictions an oral contract can be
perfectly valid.
• May depend on the subject matter
• The issue with an oral contract is in proving its
existence.
Formation, cont.
• In some circumstances the law insists on the presence of
writing.
– Form of the writing can be formal, or informal (even potentially
an exchange of emails)
• E.g., notarial act in civil law jurisdictions
• The Chinese Contract Law does not make requirement about contract
forms and a contract can be concluded in any form, however in
practice a written contract is important
Elements of a Contract
– Mutual Assent
• Offer (including a defined object)
• Acceptance
– Consideration/Cause/Intent
– No Defenses to Formation
• Capacity
• Legality
• Writing
• Many more…
Breach of Contract
• The violation of a contractual obligation.
– For example you might say, "The roofer breached our contract
by using substandard supplies when he repaired my roof."
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What happens when there is a breach?
• One side to a contract proves that the other side
breached the contract in court.
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Damages Rules for Ordinary Contracts
• General measure of damages
– The injured party is entitled to recover an amount
that would put him in as good a position as if the
contract had been performed
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Consequential Damages
• Also called special damages
– Damages suffered because of the injured party’s circumstances
– To be recoverable the damages must be a foreseeable result of
the initial act.
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Example of Consequential Damages
• L contracts with F to lease a harvesting
machine for $2,000.
– L breaches.
– F is able to lease another harvesting machine for $2000 but
sustains $400 in damages to his crops because of the delay in
harvesting.
– Can F recover this $400 from L?
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Example, cont.
• Yes…this $400 in damages to the crops is a
foreseeable consequence of L’s breach.
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International Commercial Contracts
• There is no general international law for
commercial contracts which is applicable by
default
– Keep in mind there are treaties for certain subject
matters, e.g. Sales contracts
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UNIDROIT Principles of International
Commercial Contracts
• A good source of basic contractual principles
and rules for international commercial
contracts can be found in the UNIDROIT
Principles of International Commercial
Contracts
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UNIDROIT Principles 2010
• The Principles can be adopted by international parties
as the law governing their commercial relationship
through a choice of law provision in a contract, or as a
supplement to the law governing their contractual
relationship.
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UNIDROIT Principles 2010
• The UNIDROIT Principles are simply a statement of
general contract principles with 11 Chapters covering
basic contract law concepts such as the formation of a
contract and the performance obligations of the
parties to a contract.
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Selected UNIDROIT Provisions related to
formation of contracts
• Art. 1.1 (Freedom of Contract)
– The parties are free to enter into a contract and to determine its
content.
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Selected UNIDROIT Provisions related
to formation of contracts
• Art. 2.1.2 (Definition of offer)
– A proposal for concluding a contract constitutes an offer if it is sufficiently definite and
indicates the intention of the offer or to be bound in case of acceptance.
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Selected UNIDROIT Provisions related to
interpretation of contracts
• Art. 1.9 (Usages and Practices)
– (1) The parties are bound by any usage to which they have agreed and by any
practices which they have established between themselves.
– (2) The parties are bound by a usage that is widely known to and regularly
observed in international trade by parties in the particular trade concerned
except where the application of such a usage would be unreasonable.
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Selected UNIDROIT Provisions related to
interpretation of contracts
• Art. 7.1.1 (Non-performance defined)
– Non-performance is failure by a party to perform any of its obligations under
the contract, including defective performance or late performance.
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Selected UNIDROIT Provisions related
to interpretation of contracts
• Art. 7.4.3 (Certainty of harm)
– (1) Compensation is due only for harm, including future harm,
that is established with a reasonable degree of certainty.
– (2) Compensation may be due for the loss of a chance in
proportion to the probability of its occurrence.
– (3) Where the amount of damages cannot be established with a
sufficient degree of certainty, the assessment is at the discretion
of the court.