11

International Contract Law.International Contract Law.Mr. Marco TupponiMr. Marco Tupponi

Studio AssociatoAvv. Marco Tupponi

Dott. Giuseppe De Marinis& Partners

Via Maceri n.25 - 47100 ForlìTel +39 0543 33006 - Fax +39 0543 21999

www.tupponi-demarinis.itwww.commercioestero.net

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The common law forms a major part of the law of many nations, especially those with a history as British territories or colonies. It is notable for its inclusion of extensive non-statutory law reflecting precedent derived from centuries of judgments by judges hearing real cases.

The opposition between civil law and common law legal systems has become increasingly blurred, with the growing importance of jurisprudence (almost like case law but in name) in civil law countries, and the growing importance of statute law and codes in common law countries (for example, in matters of criminal law, commercial law (the Uniform Commercal Code in the early 1960's) and procedure (the Federal Rules of Evidence in the 1970's)).Scotland is often said to use the civil law system but in fact it has a unique system which combines elements of an uncodified civil law dating back to the Corpus Juris Civilis with an element of common law long predating the Treaty of Union with England in 1707

Common law

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Civil law (legal system)

Civil law is system of law that has its origins in Roman law and sets out a comprehensive system of rules, usually codified, that are applied and interpreted by judges. However, modern systems are descendants of the 19th century codification movement, during which the most important codes (most prominently the Napoleonic Code and the BGB) came into existence. The civilian system is by and large the most widely practiced system of law in the world. As discussed in detail below, the civil law systems of Scotland and South Africa are uncodified, and the civil law systems of Scandinavian countries remain largely uncodified.

55

Thus, the difference between civil law and common law lies less in the mere fact of codification, but in the methodological approach to codes and statutes. In civil law countries, legislation is seen as the primary source of law. By default, courts thus base their judgments on the provisions of codes and statutes, from which solutions in particular cases are to be derived. Courts thus have to reason extensively on the basis of general rules and principles of the code, often drawing analogies from statutory provisions to fill lacunae and to achieve coherence. By contrast, in the common law system, cases are the primary source of law, while statutes are only seen as incursions into the common law and thus interpreted narrowly.

…continue

There are, however, certain sociological differences. Civil law judges are usually trained and promoted separately from advocates, whereas common law judges are usually selected from accomplished and reputable advocates. Also, the influence of articles by legal academics on case law tends to be much greater in civil law countries

66

Commercial law

Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods.

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What are the Sources What are the Sources of Contract Law ?of Contract Law ?

Common lawCommon law : judge-made law, as distinguished : judge-made law, as distinguished from laws passed by legislaturefrom laws passed by legislature

Uniform Commercial CodeUniform Commercial Code (UCC)(UCC) : model code : model code on commercial transactions adopted by all on commercial transactions adopted by all states (except Louisiana)states (except Louisiana)

Civil or Commercial Code, or specific law in Civil Civil or Commercial Code, or specific law in Civil LawLaw

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International Commercial LawInternational Commercial Law The Myth of Transnational The Myth of Transnational

Commercial LawCommercial Law

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International Contracts and the Myth of International Contracts and the Myth of a Transnational Contract Lawa Transnational Contract Law

International Contracts: How do they differ International Contracts: How do they differ from domestic contracts?from domestic contracts?

Drafting is in legalese – English jargon Drafting is in legalese – English jargon handed down from contract to contracthanded down from contract to contract

References to non national sets of rules – References to non national sets of rules – INCOTERMS, UNIDROIT, UCP 600 etc.INCOTERMS, UNIDROIT, UCP 600 etc.

Is there a transnational commercial law Is there a transnational commercial law based on English law?based on English law?

1010

The Style of International The Style of International ContractsContracts

International contracts are written in International contracts are written in EnglishEnglish

International contracts are lengthy and International contracts are lengthy and regulate all thinkable aspects:regulate all thinkable aspects:Gender/Singular and PluralGender/Singular and PluralRepresentations and WarrantiesRepresentations and WarrantiesNoticesNoticesAmendmentsAmendmentsEtc.Etc.

1111

Possible Implications of the Possible Implications of the Contract StyleContract Style

Parties may assume that all aspects of Parties may assume that all aspects of transactions are regulated by the contracttransactions are regulated by the contract

Parties may assume that the contract is Parties may assume that the contract is the only regulationthe only regulation

Parties may rely on transnational Parties may rely on transnational commercial lawcommercial law

Parties may draft the contract irrespective Parties may draft the contract irrespective of the governing law (chosen at the end)of the governing law (chosen at the end)

1212

Firm Offer and National LawFirm Offer and National Law

Romanistic systems of lawRomanistic systems of law - Art. 1329 Italian - Art. 1329 Italian Civil Code: Firm offer is binding. Revocation is Civil Code: Firm offer is binding. Revocation is ineffectiveineffective

Germanic systems of lawGermanic systems of law - § 145 German BGB: - § 145 German BGB: Firm offer is binding. Revocation is ineffectiveFirm offer is binding. Revocation is ineffective

Common Law systemsCommon Law systems USA: Promissory estoppel (irrevocable to the extent USA: Promissory estoppel (irrevocable to the extent

it has induced offeree’s action)it has induced offeree’s action) UK: Revocable if there is no considerationUK: Revocable if there is no consideration

1313

Contracts can have many names Contracts can have many names

ContractContract AgreementAgreement Purchase OrderPurchase Order Memorandum of UnderstandingMemorandum of Understanding Terms and ConditionsTerms and Conditions Appointment LetterAppointment Letter Handbook (“implied contract”)Handbook (“implied contract”) LicenseLicense TicketTicket

1414

Or no name at all…Or no name at all…

a letter…a letter…a telephone call…a telephone call…an e-mail…an e-mail…

1515

ContractContract::

““[a]n agreement between two or more persons [a]n agreement between two or more persons which creates an obligation to do or not do a which creates an obligation to do or not do a particular thing… A legal relationship consisting particular thing… A legal relationship consisting of the rights and promises constituting an of the rights and promises constituting an agreement between the parties that gives each agreement between the parties that gives each a legal duty to the other and also the right to a legal duty to the other and also the right to seek a remedy for the breach of those duties.”seek a remedy for the breach of those duties.”

[Black’s Law Dictionary, 6[Black’s Law Dictionary, 6thth ed.] ed.]

1616

In other words …In other words …

A contract is a legally A contract is a legally enforceable promiseenforceable promise

1717

Title II: Contracts in General.Item I: Introductory Provisions.

1321 c.c. Ita. Concept. A contract is the agreement between two or more

parties to establish, regulate or extinguish a patrimonial legal

relationship among themselves.

1818

1322 c.c. ita Freedom of Contract. – The parties may freely set out the content of a contract,

as long as it is in accordance with the law and corporative regulations.

1919

Types of Contracts Types of Contracts (or Agreements)(or Agreements)

Bilateral and Unilateral ContractsBilateral and Unilateral ContractsBilateralBilateral: both parties make a promise.: both parties make a promise.UnilateralUnilateral: one party makes a promise that : one party makes a promise that

the other party can accept only by doing the other party can accept only by doing somethingsomething

Bilateral vs. Unilateral Express vs. Implied

Executory vs. Executed

Valid vs. Unenforceable vs. Voidable vs. Void

2020

Types of Contracts Types of Contracts Express and Implied ContractsExpress and Implied Contracts

ExpressExpress: the two parties explicitly state all : the two parties explicitly state all important terms of their agreement.important terms of their agreement.

ImpliedImplied: the words and conduct indicate : the words and conduct indicate that the parties intended an agreement.that the parties intended an agreement.

Executory and Executed ContractsExecutory and Executed Contracts ExecutoryExecutory: when one or more parties has : when one or more parties has

not fulfilled its obligations.not fulfilled its obligations. ExecutedExecuted: when all parties have fulfilled : when all parties have fulfilled

their obligations.their obligations.

2121

Types of Contracts Types of Contracts Valid, Unenforceable, Voidable, and Void Valid, Unenforceable, Voidable, and Void

AgreementsAgreementsValidValid: satisfies the law’s requirements.: satisfies the law’s requirements.UnenforceableUnenforceable: when the parties intend to form a : when the parties intend to form a

valid bargain but some rule of law prevents valid bargain but some rule of law prevents enforcement.enforcement.

VoidableVoidable: when the law permits one party to : when the law permits one party to terminate the agreement.terminate the agreement.

Void:Void: one that neither party can enforce, usually one that neither party can enforce, usually because the purpose is illegal or one of the parties because the purpose is illegal or one of the parties had no legal authority.had no legal authority.

2222

1337 c.c. Ita. Talks and Pre-Contractual Liability. –

During the negotiations process and the formation of contract the parties must act in good faith.

1340 c.c. Ita. Clauses of Use. –

The clauses of use are deducted as included in the contract, if does not come out that they were not wanted by the parties.

2323

1325 c.c. ita Guidelines for Requirements. The requirements of a contract are:1. the agreement between the parties;2. the cause for the contract;3. the subject-matter of the contract;4. the form of the contract, as far as is prescribed by the law under penalty of invalidity.

Item II: Requirements of Contract.

2424

Elements of a ContractElements of a Contract AgreementAgreement

offer, and offer, and acceptanceacceptance

ConsiderationConsiderationThere has to be bargaining that leads to an There has to be bargaining that leads to an

exchange between the parties.exchange between the parties. LegalityLegality

The contract must be for a lawful purpose.The contract must be for a lawful purpose. CapacityCapacity

The parties must be adults of sound mind.The parties must be adults of sound mind.

2525

Meeting of the MindsMeeting of the Minds The parties can form a contract only if they had a The parties can form a contract only if they had a

meeting of the minds.meeting of the minds. They must understand each other and intend to They must understand each other and intend to

reach an agreement.reach an agreement. A judge will make an A judge will make an objectiveobjective assessment of assessment of

any disagreements about whether a contract was any disagreements about whether a contract was made -- whether or not a made -- whether or not a reasonable personreasonable person would conclude that there was an agreement, would conclude that there was an agreement, based on the parties’ conduct.based on the parties’ conduct.

Objective Theory of Contract: Objective Theory of Contract: Lucy v. ZehmerLucy v. Zehmer

2626

Negotiation TermsNegotiation Terms

JOEJOE BOBBOB

OfferOffer Accept or Accept or

Reject or Reject or

Accept orAccept orCounterofferCounteroffer

Reject orReject or

CounterofferCounteroffer

2727

Section I: Agreement Among The Parties.

1326 c.c. ita Contract Conclusion. –A contract is concluded when the proponent party is informed about the other parties’ acceptance.

The acceptance must arrive within the term established by the proponent,or (within) the term necessary as a rule depending on the nature of business, or according to uses.

The proponent may consider effective a belated acceptance as long as he promptly forewarns the other party.If the proponent asks for a particular form of contract, acceptance by the other parties has no effect if it is given in another form.

An acceptance which does not conform to the proposition is equivalent to a new proposition.

2828

What are the What are the Elements of a Contract?Elements of a Contract?

In Common LawIn Common Law

OfferOfferAcceptanceAcceptanceConsiderationConsiderationMutualityMutuality

2929

OfferOffer::

A proposal to do a thing or pay an amount, A proposal to do a thing or pay an amount, usually accompanied by an expected usually accompanied by an expected acceptance, counter-offer, return promise acceptance, counter-offer, return promise or actor act

The offeror is the “master of his offer”. The offeror is the “master of his offer”.

3030

OfferOffer

Problems with IntentProblems with Intent Invitation to bargain is not an offer.Invitation to bargain is not an offer. Price quote is generally not an offer.Price quote is generally not an offer. An advertisement is generally not an offer.An advertisement is generally not an offer. Placing an item up for auction is not an offer, it Placing an item up for auction is not an offer, it

is merely a request for an offer.is merely a request for an offer. Problems with DefinitenessProblems with Definiteness

The term of the offer must be definite.The term of the offer must be definite.

An offer is an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms.

3131

Termination of OffersTermination of Offers Termination by RevocationTermination by Revocation

Effective when the offeree receives it.Effective when the offeree receives it. Firm Offers and RevocabilityFirm Offers and Revocability

Common Law RuleCommon Law RuleRevocation of a firm offer is effective if the offeree Revocation of a firm offer is effective if the offeree

receives it before he accepts.receives it before he accepts. Option ContractOption Contract

The offeror may not revoke an offer during the The offeror may not revoke an offer during the option period.option period.

Sale of GoodsSale of GoodsA writing signed by a merchant, offering to hold an A writing signed by a merchant, offering to hold an

offer open, may not be revoked.offer open, may not be revoked.

3232

Termination of Offers Termination of Offers Termination by RejectionTermination by Rejection

If an offeree rejects an offer, the rejection If an offeree rejects an offer, the rejection immediately terminates the offer. A counteroffer immediately terminates the offer. A counteroffer operates as a rejection.operates as a rejection.

Termination by ExpirationTermination by Expiration When an offer specifies a time limit for When an offer specifies a time limit for

acceptance, that period if binding.acceptance, that period if binding. If the offer specified no time limit, the offeree If the offer specified no time limit, the offeree

has a reasonable period in which to accept.has a reasonable period in which to accept.

3333

Irrevocable offerIrrevocable offer

””This offer is binding on the Offeror and This offer is binding on the Offeror and cannot be revoked before 30 days have cannot be revoked before 30 days have elapsed from the date hereof”elapsed from the date hereof”

May the offer be revoked within the 30 May the offer be revoked within the 30 days term?days term?

3434

AcceptanceAcceptance::

Compliance by the offeree with terms and Compliance by the offeree with terms and conditions of an offerconditions of an offer

A manifestation of assent to terms of offer A manifestation of assent to terms of offer in a manner invited or required by the offerin a manner invited or required by the offer

The offer and acceptance must match The offer and acceptance must match (“mutuality” …more on this soon…)(“mutuality” …more on this soon…)

3535

AcceptanceAcceptance::

Does Does notnot necessarily occur only by necessarily occur only by signature of a contractsignature of a contract

Acceptance can occur by:Acceptance can occur by:

ActionAction -using goods-using goods

-opening the package (software)-opening the package (software)

-entering an establishment or -entering an establishment or participating in participating in an activity an activity

Inaction –Inaction –notnot returning goods returning goods

3636

AcceptanceAcceptance::

Sometimes acceptance does not appear Sometimes acceptance does not appear “voluntary,” but it is still sufficient“voluntary,” but it is still sufficient

Contracts of Adhesion:Contracts of Adhesion:

-- “Take it or leave it” terms-- “Take it or leave it” terms

-- Not bargained for-- Not bargained for

3737

AcceptanceAcceptance The offeree must say or do something The offeree must say or do something

to accept.to accept. In a In a bilateral bilateral contract, the offeree generally contract, the offeree generally

must accept by making a promise.must accept by making a promise. In a In a unilateralunilateral contract, the offeree must contract, the offeree must

accept by performing.accept by performing. Mirror Image Rule (Common Law)Mirror Image Rule (Common Law)

Requires that acceptance be on precisely Requires that acceptance be on precisely the same terms as the offer.the same terms as the offer.

Normile v. MillerNormile v. Miller

3838

Communication of AcceptanceCommunication of Acceptance Wucherpfennig v. DooleyWucherpfennig v. Dooley and Manner of Acceptanceand Manner of Acceptance

If an offer demands acceptance in a particular If an offer demands acceptance in a particular medium or manner, the offeree must follow those medium or manner, the offeree must follow those requirements.requirements.

If the offer does not specify a type of acceptance, If the offer does not specify a type of acceptance, the offeree may accept in any the offeree may accept in any reasonable mannerreasonable manner and medium.and medium.

Time of Acceptance: The Mailbox RuleTime of Acceptance: The Mailbox Rule An accceptance is generally effective upon dispatch, An accceptance is generally effective upon dispatch,

meaning the moment it is out of the offeree’s control.meaning the moment it is out of the offeree’s control.

3939

ConsiderationConsideration::

Something of legal value; anything that Something of legal value; anything that induces you to give up somethinginduces you to give up something

May be something other than money May be something other than money

(i.e., a promise to do something; (i.e., a promise to do something;

a promise to refrain from doing a promise to refrain from doing something) something)

4040

ConsiderationConsideration Bargaining that leads to an exchange Bargaining that leads to an exchange

of value between the parties.of value between the parties.

Consideration can be anything that Consideration can be anything that someone might want to bargain for. It someone might want to bargain for. It is theis the inducement inducement to make the deal, or to make the deal, or the the thing that is bargained-forthing that is bargained-for..

McInerny v. Charter GolfMcInerny v. Charter Golf

4141

A Bargain and an ExchangeA Bargain and an Exchange

The thing bargained for can be:The thing bargained for can be:another promise or action.another promise or action.a benefit to the promisor or a detriment to a benefit to the promisor or a detriment to

the promisee.the promisee.a promise to do something or a promise to a promise to do something or a promise to

refrain from doing something.refrain from doing something.

““Bargaining is obligating yourself in Bargaining is obligating yourself in order to induce the other side to order to induce the other side to

agree.”agree.”

4242

MutualityMutuality::

A “meeting of the minds” with respect to A “meeting of the minds” with respect to material contract termsmaterial contract terms

A signature is deemed to be sufficient to A signature is deemed to be sufficient to evidence this requirementevidence this requirement

Therefore, it is crucial that you read carefully Therefore, it is crucial that you read carefully and understand all of the terms of a contract and understand all of the terms of a contract beforebefore you sign it you sign it

4343

Mutuality of ObligationsMutuality of Obligations

Illusory PromiseIllusory Promise If one party’s promise is conditional, the other party If one party’s promise is conditional, the other party

is not bound to the agreement.is not bound to the agreement.

Promise to pay in return for past favors. Promise to pay in return for past favors. Passante v. McWilliamPassante v. McWilliam

4444

Contract Clauses to Include (cont.)Contract Clauses to Include (cont.)

Liability ProtectionsLiability ProtectionsDefense & IndemnificationDefense & Indemnification InsuranceInsurance

TerminationTerminationDispute ResolutionDispute Resolution

Litigation; Arbitration; MediationLitigation; Arbitration; MediationGoverning LawGoverning LawForum – What court? Where?Forum – What court? Where?

4545

Amendments to a contractAmendments to a contract

” ” The parties hereby agree to modify clause XX The parties hereby agree to modify clause XX of the contract entered into by and between the of the contract entered into by and between the parties hereto on [date] for the sale of YY parties hereto on [date] for the sale of YY (hereinafter the ”Contract”), so that the price to (hereinafter the ”Contract”), so that the price to be paid by the Buyer shall be ZZ instead of WW. be paid by the Buyer shall be ZZ instead of WW. All other terms and conditions of the Contract All other terms and conditions of the Contract remain unchanged and continue to be fully valid remain unchanged and continue to be fully valid and binding on the parties.”and binding on the parties.”

Is the amendment valid?Is the amendment valid?

4646

Amendments to a Contract and Amendments to a Contract and National LawNational Law

Romanistic systems:Romanistic systems: amendment is valid amendment is valid

Germanic systemsGermanic systems: amendment is valid: amendment is valid

Common law systemsCommon law systems: amendment is valid : amendment is valid only if there is considerationonly if there is consideration

4747

Choice of law clause

A choice of law clause or proper law clause in a contract is one in which the parties specify which law (i.e. the law of which state or nation if it only has a single legal system) will be applied to resolve any disputes arising under the contract.

4848

In Conflict of Laws, the Latin term lex fori literally means the "law of the forum" and it is distinguished from the lex causae which is the law the forum actually applies to resolve the particular case.

Lex fori

Forum shopping

Forum shopping is the informal name given to the practice adopted by some plaintiffs to get their legal case heard in the court thought most likely to provide a favourable judgment, or by some defendants who seek to have the case moved to a different court

Forum selection clause

A forum selection clause in a contract with a Conflict of Laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum.

4949

Arbitration

Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In the United States, the term is also used to refer to non-binding arbitration, a process in which the final award does not bind the parties.

Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states.

5050

What form must a contract What form must a contract take to be a legally take to be a legally

enforceable?enforceable?

5151

Does an agreement between two or Does an agreement between two or more parties have to be in writing in more parties have to be in writing in order to be enforceable in a court of law?order to be enforceable in a court of law?

5252

A Contract Can Be Written or Oral A Contract Can Be Written or Oral in USAin USA

Certain contracts Certain contracts mustmust be in writing: be in writing:

Contracts for the sale of goods over $500Contracts for the sale of goods over $500Contracts for the sale of real propertyContracts for the sale of real propertyContracts that are incapable of being Contracts that are incapable of being

performed within 1 yearperformed within 1 yearPromises to answer for or discharge the debts Promises to answer for or discharge the debts

of another (Guarantee)of another (Guarantee)

5353

Written and Oral Contract Terms Written and Oral Contract Terms (cont.)(cont.)

EvidenceEvidence questionsquestions become crucial if become crucial if there is a contract dispute there is a contract dispute

A contract is only as good as what you A contract is only as good as what you can later can later proveprove to be the terms of the to be the terms of the contractcontract

5454

1341 c.c. Ita. General Terms of Contract. –

The general terms of contract are arranged by one of the contracting parties.

They are effective to the other contracting party if at the time of formation of contract the other contracting party was or

should have been aware of them, according to ordinary diligence.

In any case they have no effect unless the following terms are specifically approved in writing:

the limitation of liability, the right of rescission, and the performance of contract suspension, that is to say they rule

forfeitures in charge of the other contracting party, limits to the right of objecting exceptions, restrictions to the freedom of contract with

third parties,deferment or renewal of contract, arbitration clause or ouster of jurisdiction

5555

What is “boilerplate” in a What is “boilerplate” in a contract?contract?

Is it different from “legalese”?Is it different from “legalese”?

5656

Is it necessary to read and Is it necessary to read and negotiate “boilerplate” or negotiate “boilerplate” or

“legalese”?“legalese”?

…… the 70-page Confidentiality the 70-page Confidentiality Agreement that was all “just boilerplate”…Agreement that was all “just boilerplate”…

5757

Battle of the FormsBattle of the Forms

Modern business transactions are often Modern business transactions are often conducted primarily through formsconducted primarily through forms

Example:Example: Bob decides to buy a computer Bob decides to buy a computer Purchasing sends a purchase order to the vendor Purchasing sends a purchase order to the vendor

containing standard terms and conditions that are containing standard terms and conditions that are favorable to Bobfavorable to Bob

After receiving the order, vendor sends a written After receiving the order, vendor sends a written acceptance or confirmation of the order on its form acceptance or confirmation of the order on its form which contains the basic contract terms and a series which contains the basic contract terms and a series of pre-printed terms that are favorable to the vendorof pre-printed terms that are favorable to the vendor

5858

This is where the Battle Begins…This is where the Battle Begins… If there is a contract dispute, which form will If there is a contract dispute, which form will

prevail?prevail?

Common law: the acceptance must mirror the precise Common law: the acceptance must mirror the precise terms of the offer and any variance from that terms of the offer and any variance from that constitutes a rejection of the offer or a counterofferconstitutes a rejection of the offer or a counteroffer

UCC: says that, on premise that both parties UCC: says that, on premise that both parties recognize a contract despite their clashing forms, a recognize a contract despite their clashing forms, a contract is formed, unless the vendor specifically contract is formed, unless the vendor specifically states that there shall be no contract unless his set of states that there shall be no contract unless his set of terms is accepted by the original offerorterms is accepted by the original offeror

5959

……continuescontinues

IfIf: the offeree’s (vendor) response contains : the offeree’s (vendor) response contains terms terms additional additional to those contained in Bob’s to those contained in Bob’s original offer (purchase order)original offer (purchase order)

ThenThen: a contract exists consisting of the terms : a contract exists consisting of the terms on which the offer and acceptance agreeon which the offer and acceptance agree

The additional terms are merely a proposal for The additional terms are merely a proposal for additions to the contractadditions to the contract

6060

……and endsand ends

IfIf: the offeree’s response contains terms which : the offeree’s response contains terms which are are inconsistentinconsistent with the original offer with the original offer

ThenThen: the court looks at the parties’ conduct to : the court looks at the parties’ conduct to determine whether they acted as though a determine whether they acted as though a contract was formedcontract was formed

If so, the conflicting terms cancel each other out and If so, the conflicting terms cancel each other out and necessary terms are provided by the UCC or custom.necessary terms are provided by the UCC or custom.

6161

Section IV: Procedures of Contract

1351 c.c. Ita. Pre-Contract. – The pre-contract is null and void unless it respects

the same form prescribed by the law for the final contract.

6262

Is a “Memorandum of Understanding” a Is a “Memorandum of Understanding” a contract?contract?

6363

Is a “Letter of Intent” a contract?Is a “Letter of Intent” a contract?

6464

What is apparent authority?What is apparent authority?

6565

Who May Sign A Contract?Who May Sign A Contract?

Only those individuals who have been Only those individuals who have been expressly delegated signature authority or expressly delegated signature authority or managementmanagement

Unauthorized individuals who sign contracts Unauthorized individuals who sign contracts expose themselves to possible personal expose themselves to possible personal liabilityliability

6666

Challenges,Challenges,

ProblemsProblems

&&

PitfallsPitfalls

6767

Potential Contract PitfallsPotential Contract Pitfalls

Not reading and understanding the Not reading and understanding the contractcontract

Not negotiating and documenting the Not negotiating and documenting the contract’s terms contract’s terms

6868

Potential Contract PitfallsPotential Contract Pitfalls

Disclaimers or limitations on the other party’s Disclaimers or limitations on the other party’s performance; disclaimers of warranties, etc.performance; disclaimers of warranties, etc.

Any clause permitting the other party to change Any clause permitting the other party to change contract terms without the permission in writingcontract terms without the permission in writing

Failure to specify all terms, documents, etc. that Failure to specify all terms, documents, etc. that are included in the contract or failure to show are included in the contract or failure to show acceptance (i.e., signing or initialing changes)acceptance (i.e., signing or initialing changes)

6969

Potential Contract Pitfalls (cont.)Potential Contract Pitfalls (cont.)

Reference to terms Reference to terms

Indemnification, Liability Releases, Limits Indemnification, Liability Releases, Limits on Other Party’s Liabilityon Other Party’s Liability

7070

Potential Contract Pitfalls (cont.)Potential Contract Pitfalls (cont.)

Termination of ContractTermination of ContractExcessive opportunity for the other party to Excessive opportunity for the other party to

cure its breaches of the contractcure its breaches of the contractExcessive or unreasonable penalties imposed Excessive or unreasonable penalties imposed

for terminating the contract for terminating the contract

Dispute Resolution in distant locations Dispute Resolution in distant locations (other party’s home city and state) and (other party’s home city and state) and under laws of a distant state (other party’s under laws of a distant state (other party’s home state)home state)

7171

What if a contract is What if a contract is breached?breached?

7272

Section II: Penal Clause and Deposit

1382 c.c. Ita. Effects of Penal Clause. –

The clause, which lays down that in case of non-fulfilment or belated fulfilment of thecontract one of the contracting parties is due to supply a certain consideration, produce the effect of reducing the compensation to the consideration promised, if a further damage has not been agreed.

1385 c.c. Ita. Confirmation Deposit. – When a contract is formed, if one party gives to another a certain amount or quantity of fungible things as a deposit, this must be returned or imputed to the consideration due in case of fulfilment. If the party who gives the deposit defaults, the other may back out of the contract holding the deposit back; if the defaulting party is the one who receives the deposit, the other may back out of the contract and collect double the deposit.Alternatively, if the fulfiller party wishes to exact the consideration or the rescission of contract, the compensation is regulated by the general terms.

7373

Remedies for Breach of a ContractRemedies for Breach of a Contract

Money DamagesMoney Damages

CompensatoryCompensatory: actual or real damages; compensate : actual or real damages; compensate for the injury sustained and nothing morefor the injury sustained and nothing more(“benefit of the bargain”)(“benefit of the bargain”)

PunitivePunitive: damages to punish the defendant or set an : damages to punish the defendant or set an example for similar wrongdoersexample for similar wrongdoers

NominalNominal: token amount of money because of : token amount of money because of technical wrong but no actual damagestechnical wrong but no actual damages

7474

What are liquidated damages?What are liquidated damages?

7575

RemediesRemedies

Money Damages (cont.)Money Damages (cont.)

ConsequentialConsequential: damage, loss or injury that : damage, loss or injury that doesn’t flow directly and immediately from the doesn’t flow directly and immediately from the act, but only from some of the consequences act, but only from some of the consequences or results of such actor results of such act

LiquidatedLiquidated: specific sum of money expressly : specific sum of money expressly stipulated by the parties in the contract to stipulated by the parties in the contract to cover damagescover damages

7676

RemediesRemedies

Specific PerformanceSpecific Performance

Money damages aren’t adequate to give the Money damages aren’t adequate to give the plaintiff the “benefit of the bargain”plaintiff the “benefit of the bargain”Remedy used if the item is unique, such as a piece Remedy used if the item is unique, such as a piece

of property or artworkof property or artwork

So, the defaulting party is required to perform So, the defaulting party is required to perform its obligations under the contractits obligations under the contract

7777

Item XIV: Resolution of Contract.

Section I: Resolution by Reason of Breach.

1453 c.c. Ita. Resolution of Contract by Reason of Breach. –

Contracts which provide for fair and valuable considerations enable the fulfiller contracting party to exact the defaulting party the performance, or the resolution, of the contract, unless in any case a compensation.The resolution may be exacted even when the action has been promoted in order to get the fulfilment but not vice versa.The defaulting party cannot fulfil its obligation once the date of the resolution claim has been communicated

7878

1456 c.c. Ita. Explicit Resolutive Clause. –

The parties may explicitly agree that the contract is to be rescinded if a particular obligation is not fulfilledaccording to the agreed procedures.In this case the rescission is determined by right when the party concerned declares to the other its intention to make use of the avoidance clause.

7979

Section II: Supervening Impossibility i.e. Force Majeure

1463 c.c. Ita. Complete Impossibility. –

In contracts which provide for fair and valuable considerations, the party freed on account of the supervening impossibility of the due performance cannot exact the action for money had and received.

8080

Force MajeureForce Majeure

””The usual Force Majeure clauses to The usual Force Majeure clauses to apply”apply”

Does governing law provide with force Does governing law provide with force majeure regime?majeure regime?

Does governing law not provide with force Does governing law not provide with force majeure regime?majeure regime?

8181

Definition of Force Majeure and Definition of Force Majeure and National LawNational Law

Romanistic systemsRomanistic systems: Art. 1218, 1463 Italian Civil : Art. 1218, 1463 Italian Civil CodeCode

Germanic systemsGermanic systems: § 275 German BGB: § 275 German BGB

Common LawCommon Law: Clause is void for uncertainty – : Clause is void for uncertainty – force majeure is not a legal term under English force majeure is not a legal term under English law. Contractual obligations are absolute; law. Contractual obligations are absolute; exception: frustration exception: frustration

8282

Partial ImpedimentPartial Impediment

” ”Non performance by a party of its Non performance by a party of its obligations hereunder is excused if such obligations hereunder is excused if such party was prevented from fulfilling its party was prevented from fulfilling its obligations by an event beyond that party’s obligations by an event beyond that party’s control, that was not foreseen at the date control, that was not foreseen at the date hereof and that could not be reasonably hereof and that could not be reasonably avoided or overcome.”avoided or overcome.”

8383

Partial Impediment and National Partial Impediment and National LawLaw

Romanistic systemsRomanistic systems: Art. 1464 Italian Civil Code: : Art. 1464 Italian Civil Code: Partial ExcusePartial Excuse

Germanic systems: § 275 German BGBGermanic systems: § 275 German BGB

Common LawCommon Law: Frustration kills the contract. : Frustration kills the contract.

Partial frustration does not existPartial frustration does not exist

8484

Section III: Hardship Clause.

1467. Contracts With Performance Considerations. –

In continuing contracts, that is to say in future contracts, if the consideration of one of the parties has become exceedingly onerous because of exceptional and unforeseeable events, the party who owes such consideration may exact the rescission of the contract, bex art.1458.The rescission cannot be exacted if the supervening unconscionability is part of the risk in the contract.The party asked to rescind the contract may propose a fair alteration of the contract.

8585

Item V: Effects of Contract

Section I: General Provisions

1376 c.c. Ita. Contract With Real Effects. –

If the subject-matter of a contract is the transfer of property of a particular thing, the constitution or the transfer of interest, that is to say the transfer of another interest, property or interest are transferred and acquired if the parties lawfully agree.

8686

Rome Convention (contract)

In Conflict of Laws, the Rome Convention is the Convention on the Law Applicable to Contractual Obligations and it opened for signature in Rome on 19th June 1980. NOW this Convention is substitued from the Reg. n. 593/17 june 2008

The intention is to create at least a harmonised if not a unified body of law within the European Union.

8787

Express selection

Article 3 states the general rule that the parties to a contract have freedom of choice over the Applicable Law. To exercise this choice either express words may be used or the intention should be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. The law chosen may apply to the whole or only a part of the contract, and the choice is not irrevocable. The parties can at any time agree to change the Applicable Law and any such variation will not prejudice the formal validity of the agreement nor adversely affect the rights of third parties. But, although the parties do not need to match the Applicable Law and the forum given jurisdiction, the choice of law cannot be used to evade the mandatory provisions of the state most closely connected with the agreement.

8888

Implied selection

If there is no express choice, Article 4 provides that the contract shall be governed by the law of the country with which it is most closely connected. If the agreement is severable, two Applicable Laws may be selected. For these purposes, it is presumed that the contract is most closely connected with the lex loci solutionis, i.e. the law of the place where the contract is to be performed, or the law of the habitual residence of the person who is to perform, or, in the case of a body corporate or unincorporate, where its central administration is located.

8989

…continue

where the subject matter of the agreement is immovable property, the lex situs will apply; andcontracts for the carriage of goods and charter-parties are governed by the law of the place in which, at the time the contract is concluded, the carrier has his principal place of business if that is also the place in which loading or discharge is to occur or the place where the consignor has his or her principal place of business,.

However, if it is a commercial or professional contract, the Applicable Law will be the law of the place in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated except that there is a rebuttable presumption:

9090

Agency (law)

Agency is an area of Commercial law dealing with a contractual or quasi-contractual tripartite set of relationships when an Agent is authorised to act on behalf of another (called the Principal) to create a legal relationship with a Third Party. This branch of law separates and regulates the relationships between:

Agents and Principals

Agents and the Third Parties with whom they deal on their Principals' behalf; Principals and the Third Parties when the Agents purport to deal on their behalf.

9191

The concepts

The reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any business of size, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business.

These problems are increased if the business is a corporation, because it is then a fictitious legal person and, as such, it can only act through human agents. Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses.

When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.

9292

Brief statement of legal principles

There are three broad classes of Agent:

1. Universal Agents hold broad authority to act on behalf of the Principal, e.g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client.

2. General Agents hold a more limited authority to conduct a series of transactions

over a continuous period of time;

3. Special Agents are authorised to conduct either only a single transaction or a specified series of transactions over a limited period of time.

9393

Authority

For these purposes, the Principal must give, or be deemed to give, the Agent authority to act.

9494

Principal (law)

In Commercial Law, a Principal is a person, fictitious or otherwise, who authorises an Agent to act to create one or more legal relationships with a Third Party. This branch of law is called Agency

9595

Liability of Agent to Principal

If the Agent has acted without actual authority, but the Principal is nevertheless bound because the Agent had apparent authority, the Agent is liable to indemnify the Principal for any resulting loss or damage.

Liability of Principal to Agent

If the Agent has acted within the scope of the actual authority given, the Principal must indemnify the Agent for payments made during the course of the relationship whether the expenditure was expressly authorised or merely necessary in promoting the Principal’s business.

9696

Liability of Agent to Third Party

If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i.e. the fact of the agency was revealed and the identity of the Principal revealed.

But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound.

Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority

9797

Thank you for your attentionThank you for your attentiontupponi@commercioestero.nettupponi@commercioestero.net