February 02, 2010

Cause and Consideration ; Intention to create legal relations

All systems require agreements and intention in order to create a contract. Although PELC and German law do not have further requirements, English law and French law respectively require the contract to have a good consideration or a cause.

The French law has a dualist conception of the cause. Following the objective one, a counter-performance or an interest for each party must exist otherwise the contract would be null and void. The subjective cause is the individual intention which prompted the party to enter into the contract.

Similarly, consideration in English law consists of a requirement of a counterpart in exchange for a promise. Consideration is essentially an objective concept and does not include psychological aspects. There is consideration as soon as the parties have made an exchange even if there were not conscious of that. (Bere v Pearson).

German Law does recognise neither the doctrine of cause nor the one of consideration. It attaches importance to the act abstracted from its underlying cause or consideration. However the ‘cause’ could be found in

§ 812 BGB deals with matters that would be seen as a false cause; ‘a person who, through an act performed by another, or in any other manner, acquires something at the expense of the latter is bound to return it.” They must be a common assumption of the two parties. This might be seen as an objective approach of the doctrine of cause. The doctrine of unjust enrichment is applied in order to restore the balance between the two parties.

Recently the French courts have taken a more concrete approach to the cause (Chronopost case) and have strengthened its use and sanctions. It can be justified by the will to protect the interests of each party. The projects Catala ( Article 1125(2) ) and Terré seem to have consecrated the Chronopost solution.

The doctrine of consideration has been renewed as well. For example, Lord Russel stated in the case Williams v Roffey Bros that consideration should reflect the real intentions of the parties. The courts also use the doctrine of “promissory estoppel” to avoid the effects of consideration.


January 26, 2010

Notions of Contact

In the three legal systems (French, German and English), there will be a contract as long as there has been an agreement between the parties.

The different systems present similarities to consider whether or not an agreement has been reached: it is usually asked whether there has been an offer made by one party and an acceptance of the same offer by the other one.

However the three systems use different approaches.

The English law has an objective approach that examines what the parties said and did as it has been stated in Smith v. Hughes.

On the contrary, the French law uses a subjective test that focuses on the intention of the contracting parties. The french Code Civil has been influenced by national schools of legal thought that were adherent of the liberal principle and therefore placed importance on the will. This is called the will theory.

The German system seems to be a “mixture” of the two approaches. It took originally a subjective approach ( § 133 BGB ). In the 19th century, German jurists, such as Windscheid, considered that the essence of the contract was the order or command of an individual. Nevertheless, recent doctrine and case law have been taken a more objective approach.

Article 2:102 of PECL seems to give a preference to the objective approach as it focuses on 'what has been reasonably understood by the other party.'

A second difference between the legal systems is to be found in the notion contract.

In order to determine whether there is a contract or not, the continental sytems put emphasis on the voluntary nature of contractual liabilty. German and French laws refer to obligations created by the agreement of the parties. This can be explained by the fact that Roman law and canon law had lots of influence on the continent, leading to the voluntarist approach.

Common law put emphasis on whether the law creates liability. A remedy has to be provided, otherwise the agreement is seen as a social agreement. The approach is therefore more objective.

Finally, the English law, unlike the French and German law in some circumstances, regards the “agreement in principle” devoid of any effect.


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