Right before
digging in different legal systems to analyze this issue, there is a matter we
should deal with in advance. This is the formation of contracts. Here, we are
going to analyze any requirements that each legal system imposes on the parties
for a promise to be binding.
According
to English law, a contract is not formed right after a promise. Therefore, we
can say a promise is not enforceable itself but after complying with several requirements. Thus, there will be some requisites
for a promise to be considered binding. These requirements, for instance, are those of the kind that English courts call 'consideration'. It is the doctrine and court decisions that have
decided thorugh time, as it did in the case Currie v. Misa, which promise can be accounted as
binding.
In this
case, the court decided that a valuable consideration may consist in some
right, interest, profit or benefit accruing to the one party, or some
forbearance, detriment, loss, or responsibility given, suffered, or undertaken
by the other.
But there
are more requirements to accomplish for a valid contract to be formed. We might find some difficulties in reaching an agreement whether a promise is to
be accounted as binding when it is not made at the request of the promisee, or
when its content implies doing what someone is already obliged to do.
Thirdly, it
will make the promisor show a doubtless intention to contract, depriving
parties from accidentally binding themselves [[1]].
With regard
to the idea of benefit or detriment, consideration will either consist in a
benefit of some kind to the promisor or a detriment to the promise. Sir
Frederick Pollock himself considered a detriment as “the price for which the
promise is bought”. But there is one further rule regarding this benefit or
detriment, since it is considered necessary to be provided by the promisee.
Yet, the idea of the benefit will be required, but it will not be held
necessary to be a clear, sufficing a ‘practical’ benefit for consideration to
take place.
Furthermore,
consideration must be given in return for the promise, and usually –not
necessarily- given at the request of the promisor. On the other hand, it will
not be accounted as a binding promise a detrimental action accepted by the
promisee in reliance with the promise, but not in return for it. Hence, in the
case Combe v. Combe, a promise to pay a monthly allowance would not be
accounted as consideration since the promisor did not request for the other
party’s forbearance, and this action should not be said to have been in return
for this promise to pay.
Consideration
must also be differenced from the fulfillment of a condition. There is quite a
difference where the promisor asks the promisee to harm himself to obtain a
certain amount of money. However, it would be troublesome when trying to make a
difference in the case of a performance of some act. To help us make a
difference, there is an illustrative case in Chapell & Co. Ltd. V. Nestlé
Co. Ltd.
In this
case, the price would not be the money alone, so the rest of the price would
not be a condition, but a part of this consideration.
A different
between consideration and gift was also made by the courts in Esso Pretroleum
Co. Ltd. V. Customs and Excise Commissioners. This company offered a coin in
return for a purchase of four gallons of
petrol. This coin was considered part of an offer of consideration.
Therefore,
a contract, for now, will always require consideration of some kind, unless
when reaching an agreement in a deed.
However,
Chief Justice of the King’s Bench in 1756, Lord Mansfield asserted that
consideration could not be required in two certain kinds of contracts, which
are, on the one side, those made on the grounds of commercial custom and on the
other side those in obedience to statutory requirement. This can be read in the
case Rann v. Hughes. He made a further attack to the concept of consideration.
He considered a previous moral obligation s81ufficient to support an express,
but gratuitous promise. There is a common ground for consideration and civil
law term ‘causa’, finally dismissed in the case Eastwood v. Kenyon.
Finally, it
is to be mentioned that a previous debt will also suffice to consider the
existence of consideration, but only when forbearance is induced as a result of
an enforceable debt. This particular form of consideration has a especial
regulation when it is given under the form of a negotiable instrument, such as
a cheque. In this case, under section 27(1) of the Bills of exchange Act 1882, valuable
consideration for a bill may be constituted by any consideration sufficient to
support a simple contract or an antecedent debt or liability.
Consideration
will not be adequate and must be real. It must be of some value on the eye of
the law, but only of some value. It must be real inasmuch as we just said, it
should be of some value in the eye of the law.
Although
this concept might seem unfamiliar to us, meaning those who have studied
contract law under the continental civil law system, there is not such a huge difference
when compared with the idea of reciprocity, which we find essential to the
formation of a valid contract. Let’s take a look on the continental civil law
system so as to check these system requirements for a promise to be binding.
FRENCH LAW
Whereas,
according to English law, a contract is binding on the grounds of a
consideration of some kind, French law takes a look on two different but
related concepts, such as ‘cause’ and ‘objet’.
First of
all, the ‘objet’, deals with the subject matter in a contract. A contract
subject matter will sometimes only consist in prestations in the eye of modern
jurists, as it is claimed from the very beginning in the Principles of French
Law. But the main idea is, regardless its origin, the object of the contract;
may it be a physical thing, an activity or omission or a risk.
Two
requirements are set as to the validity of the ‘objet’. The first one is its
legality. French law requires the subject matter of a contract to be legal.
This is a simplified way to put it, since it will not be valid if it is
contrary to law, public policy or morality (wide sense of the term legal or
‘licit’).
As a
result, a contract between to parties will never be binding when the thing,
activity, omission or risk are considered to be against the law. Therefore, in
the case of a contract with a surrogate mother, this contract would be void for
the lack of an ‘objet licit’.
As to the
cause, ‘la cause’ in French, a common lawyer finds it really difficult to
understand this term because of its uncertainty, disparateness and dispute
around it. To approach this term, it will normally explain why a debtor owes an
obligation. To come closer to its real meaning, we should study it from two
different points of view, in connection with two different spheres: the
objective and the subjective.
On the
subjective approach, the cause would be related to the determining motive for
the debtor’s undertaking an obligation, whereas on the other hand, when
considered form the objective outlook, it is connected to the legal or formal
reason for the obligation’s imposition.
We have to
take a deeper look on bilateral contracts, where reciprocal obligations are
undertaken. In these cases, a lack of objet in one of the parties will bring
about a lack of cause in the other one. It is also important because the courts
have sometimes used the term cause to invalidate an exemption or limitation
clause regarding responsibility when it derives from the contract obligations.
Furthermore, the cause will not exist when it is not of utility or it is
considered derisory for the other party. This last situation is very similar to
what occurs when common law courts cannot find sufficient consideration in a
supposedly binding contract. This similarity is however superficial. The
gratuitous agreement which can be reached according to English law will not be
considered a bilateral contract according to French law since it will only
create obligations on behalf of the promisor.
The last
reason to consider the cause important according to French law is the legality
of the purpose which originates the contract.
Finally,
there is another clue concept to the contract in French law, which is ‘Lésion’.
This term refers to the loss suffered by one of the parties in the contract
conditions. However, this term would not suffix by itself so as to avoid a
contract performance. It is to be considered the legal grounds to find what
French law calls ‘clauses abusives’.
As a whole,
these regulations are thought to be a limit to the theoretically absolute
liberty of contract.
German Law:
according to German law, a contract is formed by two declarations of intention,
which are the offer and acceptance.
The BGB,
German Civil Code, creates a presumption: everyone is in possession of the
necessary quality as to entering a contractual relationship. This general
principle is especially remarked in German law in three different respects.
First of
all, the age and capacity are divided in three different stages, only the first
one being a deterrence for a person to contract. This stage ends at the age of
7. Therefore, security and accuracy in contracts has been primarily considered
when creating this regulation.
It also
makes a distinction between psychologically disabled people due to mental
illness that is of a certain duration and those who lack capacity because of
more temporary mental disturbance or due to unconsciousness (105. Nr. 2 BGB).[2]
In all
these cases, the declaration of intention will be void under §105 BGB. In this case, security in contracts has not been majorly
considered.
After this
brief look at three different legal traditions in Europe, this part will
examine responsibility derived from a contract. When trying to find out whether
there is a similar regulation in all three different traditions, there are
three concepts to be taken into account: duress, mistake and fraud, the former
three being grounds for avoiding a contract.
However, when taking a deeper look, it comes
up that there are many causes for avoiding a contract, which vary from one
legal tradition to another.
In fact,
according to English law we find mistake, misrepresentation, duress and undue
influence. In French law, there is mistake, fraud and threat. In German law:
fraud, mistake and illegitimate threat.
Remedies for
breach of contract:
ENGLISH LAW
According
to English law, the primary remedy is damages. As Oliver Wendell Holmes claims
in The Common Law (1881), “The only universal consequence of a legally
binding promise is that the law makes the promisor pay damages if the promised
act does not come to pass”. Another traditional and primary rule to quote here
is “You can breach any contract as soon as you are ready to pay damages”.
Termination
is another remedy for these cases, which discharges both parties from further
performance. The terms in which a contract will be terminated will depend on
the nature of the term broken, works under some conditions and it brings about
some warranties. The question whether damages or termination should apply is
answered by a standard of utility of the contract for the non-breaching party,
since a breach which does not deprive this party from the benefit intended to
obtain under the contract would not mean termination but damages.
After this
remedy, we should analyze a secondary remedy called “specific performance”.
According to this remedy, the person who breached the contract would be obliged
to perform, even though this means forcing the person to do or give something
according to the terms of the contract. This one is said to be an equitable
remedy, available at court’s discretion and related to the law of equity, since
they are only available at the court’s discretion.
Analyzing a
legal system implies taking into account its own nature and main
characteristics in order to understand how things work in it. Therefore, it is
compulsory to take a look at the common law system of justice. Historically, it
could have been described as the sum of two halves: the courts of law for
common law and the courts of equity for the law of equity. However, in 1873 and
1875 they was a fusion of both. As a result, now every court is a court of law
and equity. This union is not a burden to make a difference between law and
equity remedies, though. On the one hand, law remedies are normally pecuniary.
On the other hand, equitable remedies mean forcing someone to do (specific
performance) or avoid (injunction) a certain action. It will normally be
awarded where monetary relief is not adequate, leaving an unfair result if
chosen.
When would
damages be inadequate?
When it
comes to land, damages do not seem to be an appropriate remedy since land is
unique and forcing someone to accept the remedy means making the promisee
relinquish what he entered the contract for. As a whole, it is not an adequate
remedy when goods are unique. In other cases, as in Beswick vs. Beswick,
damages would mean a symbolic quantity or where there is no easy way to
calculate the loss.
There are
also limitations as to the obligation to complywith the contract in the case of
specific performance. Some reasons to find it inadequate are actions which
would take a long period (named ‘sword of damocles’), in contracts of personal
service (it could mean a humiliation) and also where performing is impossible
because of the nature of the breach (As it happens when a person sells a land
that he does not own).
GERMAN LAW
Now, it is
time to take a look on German law in regard to remedies. In German law,
performance is not considered a remedy, but a natural consequence of the
contract, as it is mentioned in §241 I BGB [3].
In German
law, the concept of ‘Anspruch’ (lawsuit) is very important. This legal system
considers this the grounds for requiring doing the obligation content.
As it
happens in English law, there are some thoughtful limitations for specific
performance. It will also have two versions: the case of performance as an
active conduct and the case of injunction.
There are
other options for the promisee to see the right to receive a performance be
fulfilled. It is also possible to be enforced by a bailiff who hands the goods
over to the creditor, this option being obviously restricted to movable goods
(movables).
When it comes to termination, a distinction
should be made among several similar concepts, such as avoidance, cancellation
and termination. The first one operates retroactively, whereas the cancellation
and termination operate onwards. The application of termination means that the
so called innocent party, meaning the one who did not breach the contract,
would be allowed to withdraw from the contract if the other party committed a
breach of it. For the terms in which termination applies in German law, section
§323 BGB and following, which deal with termination for breach other than
in case of impossibility, non-performance, defective performance and so on.
Finally, we should highlight damages as a very important
remedy, ruled in sections §280 and following. Here, a
distinction among several types of damages can be found. The BGB describes
three different types of damages: damages in lieu of performance, damages for
delay and ‘simple damages’. Of all three types, it is the first one to deserve
any further explanation. It is intended to protect the expectation interest, a
monetary equivalent or substitute of performance. Its main consequence is the
extinction of the duty to perform.
FRENCH LAW
When it
comes to French law, remedies are also different. As a matter of fact, it is in
the case of personal obligations that the promisee can compel the promisor to
perform in attendance to the uniqueness of the action or avoidance which should
have been complied with.
In the
article 1184 of the French Civil Code, the creditor can choose to compel
performance. There is a similar approach to performance if compared to German
law, since it is also explicitly considered to have the obligation fulfilled at
the debtor’s expense. French contract law is also similar to German law
inasmuch it also finds it suitable to use the authority of a bailiff to assure
the handover of a good subject to a contract obligation.
It will be
the courts that will evaluate the breach so as to decide whether this breach is
sufficiently important to justify ending the contract.
It will
also be at the courts discretion in the cases of partial or defective
performance.
The concept
of ‘astreinte’.
This is a
very important concept when studying the breach of a contract in French law
since it is the tool that courts and creditors use to coerce performance. It
was developed in the 19th Century, and consists in a sanction aimed
to pressure the debtor to perform.
There are two
different ‘astreintes’: provisional and definitive astreinte.
