May 12, 2010

Cause and Consideration

The Section 4 of Chapter2 of Title 3 about obligations of the French Code Civil provides that an agreement has to have a real “cause”. The legislator her is the most moral of amongst the three here compared countries, France, Germany, United Kingdom. Indeed in France a contract must have a goal, an aim must be creative. A cause is needed for the obligation but for the contract to exist this cause has to be licit, i.e. allowed by laws and regulations. Nevertheless the courts analyse only if there was an objective and serious cause that can be seen from outside the parties, not if the parties are satisfied.

In German law half of this involvement can be seen. Even if a real goal is not needed for a valid agreement, if we add the concerns of article 138 BGB mentioning “good morals” and article 242 BGB mentioning “good faith” we are very close to the provision on article 1133 i.e. the third article of the section mentioned above, about illicit cause. Indeed in German law the only prohibited scenario is the unjust enrichment as also mentioned in 818 BGB in paragraph 3: “The liability to undertake restitution or to reimburse the value is excluded to the extent that the receiver is no longer enriched.”

Again here English law is very pragmatic. No matter what, how much, when, and how long; as long as something generally valuable is agreed for something else there is a contract, as there is consideration.

Due to this consideration doctrine a simple agreement is needed for a full discharge of the contract in French or German law. In English law on the other hand, another consideration must be given to release one party (for example unpaid rent cancellation).

In these cases we can consider that French or German law, with its tiny part of morality is perhaps more accurately armed to fight on a juridical basis the speculation excesses of our economy.

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