Contract Law

Contract Law
Prof. Cornelia Lefter Grade: 1p. presence 1p. homework 2p. seminar (1p. presence, 1p. homework) 5p. exam 1p. office Bibliography: 1. Cornelia Lefter, Raluca Dimitriu, Ovidiu Maican Civil Law, 2000, Ed. Economica 2. Gabriel Boroi, Liviu Stanciulescu Institutii de drept civil in reglementarea noului Cod Civil, 2012, Ed. Hamangiu 3. Dumitru Florescu Contracte Civile, 2011, Ed. Universul Juridic 4. Stanciu Carpenaru Drept comercial, 2011, Ed. Universul Juridic 5. Paul Richard Law of contract, 1998, Putnam Publishing 6. Law 287/2009 and Law 71/2011 The new Civil Code (NCC)
Year I Master
Contract Law
Course 1
Juridical relations one party (creditor) + other party (debtor) = juridical relation (stipulated by law Civil Code)
Obligations Sources of civil obligations (in the Civil Code): a) Events (in nature and society) b) Human actions regulated by law unwillingly produced to conclude juridical relations willingly produced to conclude juridical relations Unwillingly produced human actions: flood in your apartment because of another landlords pipe damage) => enter into a juridical relation because of the situation Willingly produced human actions: you enter into ones apartment because he lets you, in order to fix his pipe. Some actions may be lawful (cvasi contracts) unlawful (offenses/crimes) Law 1165/NCC the sources of civil obligations are: 1. The contract 2. The unilateral juridical acts 3. The legal juridical facts 4. The unlawful fact 5. Any other act/fact of which law binds the creation of an obligation Juridical acts - A material form of an act (e.g. the paper) - The proof of the act (material proof), called instrumentum (the expression of somebodys will made with the intention to produce legal effects) !!! proof = instrumentum act - e.g. when you buy a bread from the store you receive a receipt (this is the proof), and when you pay the money you receive the bread (this is a juridical act)
Homework 1: Write about the legal and abstract capacity of natural and legal persons
Year I Master
Contract Law
Course 2
The unilateral juridical act (art. 1324 1329 / NCC) It is defined to be unilateral the juridical act that supposes only the expression of the will of each party. We include here the unilateral promise and the public process of reward. Article 1327 stipulates that if the author has not established a time limit, it is supposed that the promise/contract is valid for a certain time, according to the nature or the circumstances when the obligation was assumed. Within a unilateral promise, the author expresses the intention to assume an obligation. By difference, within the public process of reward, the author publicly promises to reward a person who will carry out a certain service/activity for him. Article 1328 stipulates that who publicly promises a reward in exchange for a service is liable to pay even if the service was carried out without knowing the reward. The legal juridical facts There are 3 different facts: a) the administration of business (art. 1339 and 1340 / NCC) Refers to the situation when a person, without being liable, voluntarily administrates the business of another person who is not aware of this administration or, knowing it, he could not appoint a mandator to carry it out. The person who administrates is called endorser and the beneficiary is called endorsee. The specificity of this situation is that the endorser acts only in the benefit of the endorsee. The endorser can conclude juridical facts and acts without having a mandate for that. b) the undue payment (art. 1341 1345 / NCC) That who pays without being liable has the right of restitution. It is presumed until the contrary proof that the payment is done with the intention to pay off your own debt. (art. 1341) Undue payment is the situation when a payment made by someone is not an obligation. Normally, a person who pays is considered to be liable to each payment it corresponds a debt (there is a debtor). If that situation occurs, that person has the right to be restituted the money. c) the enrichment without legal cause (art. 1345 1348 / NCC) That who in a non-imputable way has been enriched without legal cause to the detriment of another is liable to restitution as far as the patrimonial loss suffered by the other person, but not over the limit of his own enrichment. (art. 1345)
Year I Master
Contract Law
The unlawful facts (art. 1349/NCC) Any person has the obligation to observe the rules of behavior that the law or the rules of the place imposes and not to bring prejudice through his actions/non-actions to the right or to the lawful interest of another person. In case the persons do not observe the law and bring prejudices (moral, physical etc.), they will be liable to cover the damages. We speak here about liability due to damages or due to misfeasance or nonfeasance (raspundere non-conflictuala). Certain categories of persons are kept liable: parents for their children, employer for the facts of their employees, even if they do not do anything. The contract (art. 1166/NCC) It is defined as an agreement between the wills or two or more persons, with the intention to create/modify/end juridical relations. There are also rules referring to the contract not only in the NCC, articles up to 260 in number. The contract is a juridical act and it also is bilateral. Act = expression of somebodys will Contract unilateral (only one party assumes obligations, but there are two parties involved) bilateral (but not the same as for unilateral acts !!) !!! One cannot contract with himself. There must be two parties. There are also exceptions, when you are forced to contract with yourself for example (contract de comodat cu mine insami pentru ca detin spatiul). Within the bilateral contract, one party has the responsibility to conclude the contract, called active subject. He is entitled to receive something from the other party. From the point of view of the debt relation, the active subject is the creditor. The other party, who is liable to perform a duty for the active subject is called passive subject or debtor. The duty that the debtor has to perform is to give, to do or not to do. To give to transfer or to create a real right (e.g. selling and purchasing contract sell a specific good, transfer the ownership right to the buyer) To do to carry on a service/activity (e.g. do a service deliver a telephone) Not to do you assume the obligation not to do, although legally you are allowed to do (e.g. contract with exclusivity clause assume not to do the same thing/do a service with another party)*** *** synallagmatic (synallarmatical ?) contract the obligations of the parties are reciprocal and interdependent !!! The right of the active party is the obligation of the passive party. Homework 2: Write about the classification of goods
Year I Master 4 Contract Law
Course 3
The classification of contracts (criteria) 1. according to the number of parties a) unilateral contracts b) bilateral contracts art. 1171/NCC the contract is synallagmatical when the obligations born from it are reciprocal and interdependent 2. according to the form of the contract a) consensual contracts The consensual contracts are enforceable by the simple consent of the parties. Their conclusion does not impose the performance of another activity or a specific form (concluded orally/written). If goods have to be delivered, the handing over of them represents the execution of the obligation and not a condition for their conclusion (e.g. sale-purchase). b) real contracts The real contract produces effects only when the goods are delivered (e.g. warehouse, shipping contracts). c) formal contracts Formal contracts are those which are enforceable only if they are concluded in a specific form (the authentic form normally the form written/drafted in front of a notary). Normally, the form can be enforced by law, either in order to prove the partys obligations (ad probatiorum only for the proof, or ad validitatem for the validity of the juridical operation itself); e.g. a mortgage has to be concluded in authentic form (requested ad validitatem), and the insurance contract has to be concluded in a certain form (ad probatiorum). 3. according to the personal qualities of the parties a) intuitu personae These contracts are concluded based on the personal qualities of the parties. The effect that the error in personae (who the real party is) brings the annulment of the contract. The parties cannot subcontract in this kind of contract. b) contract concluded by professionals or between professionals and consumers Here we take into account that at least one party is a professional from a certain point of view (legal rules, Civil Code): The contract concluded between professionals is submitted to special laws in admission to the provisions of the Code (article 1176/NCC).
Year I Master
Contract Law
4. according to the content of the contract a) adhesion contract The adhesion contracts are those contracts where the essential clauses are imposed by one of the parties or for this one, or as a result of his instructions, while the other party is only able to accept them or not (article 1175/NCC). The content of the contract is unilaterally imposed to the other party (e.g. insurance, bank, cable provider, telephone contracts). b) negotiated contract 5. according to the way the contract is performed a) contract with instant execution (unno ictu) b) contract with successive execution 6. according to the conclusion of the contract to another one a) principal contract b) accessory contract The legal regime of the accessory contract follows the one of the principal contract. 7. according to whether the contract is regulated or not by law a) named contract The named contract is regulated by law. b) unnamed contract The parties of the contract have to establish all the necessary elements of the contract. 8. the framework contract The framework contract is the agreement through which the parties agree to negotiate, to conclude or to maintain contracted relations where the essential elements are established by the contract (article 1176/NCC). The ways in which the contract is performed, especially the term and volume of services, as well as the price are established by subsequent agreements. It is just the frame for other contracts.
Year I Master
Contract Law
Course 4
Conditions for validity of contracts The conditions apply to any kind of contract The grounds for validity conditions (article 1179/NCC) The essential conditions for the contracts validity are: - the capacity of the parties to contract - the consent of the parties (generally consent) - the general and lawful subject matter - the lawful and moral consideration
The capacity of the parties ability of a subject of law to assume the obligations
and exercise rights in their own name.
capacity
have
exercise/ assume
The concrete capacity - underage persons no concrete capacity - mentally ill persons no concrete capacity - 14-16 persons restrained/limited concrete capacity, consent of the parents/legal guardian needed - 16-18 persons restrained/limited concrete capacity, consent of the parents/legal guardian not compulsory - over 18 full concrete capacity Due to the social position they have, some persons (e.g. the President, the deputies, the sanctioned by law persons parents accused to having killed their children have interdiction to exercise parenting rights) have restricted their concrete capacity for a certain period. The abstract capacity of legal persons Abstract capacity = the possibility recognized to have rights and obligations 206/NCC the legal person may have any rights and obligations, except for those that may belong only to the natural person. In addition, the legal person with no patrimonial rights may have only those rights and obligations that are necessary for the accomplishment of their purpose established by law, its constitutive act or state (the principle of specialty of the abstract capacity of legal persons). The sanction for non-observing this principle is the absolute nullity of the act.
Year I Master
Contract Law
The abstract capacity of the legal person begins at different moments, depending on the fact if the legal person in question is submitted or not to registration meaning incorporation or any other formality of publicity mentioned by law, with the purpose of obtaining legal personality or in order for the legal person to be taken into consideration (e.g. a commercial company incorporated by the Register of Trade; the state, town or village are legal person not submitted tot registration). The abstract capacity of the legal person begins at the moment of the registration. The commercial company gets legal personality and abstract capacity at the moment of incorporation at the Register of Trade. The other legal persons have rights and obligations from the moment of their setting up, from the moment they obtain the necessary authorization or from the moment of fulfillment of any provision provided by law. According to article 205/NCC, paragraph (3), even before its registration, the legal person has some rights and obligations which are linked to its valid setting up. These so-called limited or anticipated abstract capacity results directly from the aim taken into account for the setting up of the legal person. This anticipated capacity allows the legal person to obtain the necessary rights and to assume the necessary obligations required for its valid setting up. The end of the abstract capacity of the legal person refers to both the anticipated abstract capacity and the full abstract capacity. The anticipated abstract capacity ends when the full abstract capacity is obtained. The full abstract capacity ends when the subject of law (the legal person) ends its existence. The sanction for not complying with the legal rules of the abstract capacity of the legal person is the nullity, either relative or absolute, depending on the nature of the protected interests. The concrete capacity of legal persons Concrete capacity = the ability of a legal person to exercise the rights and obligations by concluding in its own name juridical acts through its management bodies. In relation to the concrete capacity of the legal person, there are three rules: - the legal person exercises its rights and obligations through its management bodies; - the juridical acts concluded by the management bodies of the legal person within the limits of the powers given to them by law (constitutive acts) are the acts of the legal person itself; - the lawful/unlawful facts committed by the management bodies of a legal person oblige the legal person itself if they are committed within the exercise of their powers. Unlike the natural person, the legal person obtains the concrete capacity on the day of its setting up.
The sanction when not complying with the rules is nullity (= the sanction which leads to the deprivation of the act itself of its effects).
Course 5 The consent of the parties

The juridical act is the expression of somebodys will, in order to produce juridical effects. Will = the juridical will of the parties is composed by two elements the consent and the consideration. In our system of law, the juridical will of the parties is governed by 2 principles, as follows: - the principle of freedom to contract (arts. 1169 and 1270(1)/NCC) The parties are free to conclude a juridical act, to provide in it any particular clauses and modify/end the juridical act they concluded. In addition, according to the provisions of article 1178/NCC, the parties are free to conclude named or unnamed contracts and to choose the form of the act if the law does not impose it. There are some limits imposed by law in relation to this principle as resulting from article 11 and 1179/NCC. These limits are imperative legal provisions and good morals. If the limits are not observed, the juridical act is sanctioned with abstract or relative nullity. The imperative legal provisions = must be applied as they are; derogations are not permitted (e.g. the donation contract should be concluded in authentic form). - the principle of the real will of the parties If there are any differences between the real will of the parties at the conclusion of the juridical act and the expressed clauses of the act, we have to take into account the real intentions of the parties (article 1266(1)/NCC). The most important effect of the principle of the real will of the parties is the good faith. The good faith is a moral concept and refers to the behavior of the contracting parties. It means that the contracting parties, especially the debtor, are obliged to perform exactly the assumed obligations, in order to accomplish the purpose or interest taken into account at the contract conclusion. In addition, the creditor is obliged to do nothing that will make the conclusion of the contract more difficult or even impossible. Moreover, in accordance to the requirements of good faith, both parties are obliged to cooperate in order to obtain a better performance of the contract (e.g. the debtor who provokes the impossibility to conclude the contract or a person who concludes a sale-purchase contract with 2 persons for selling an apartment do not observe the requirements of good faith).
Year I Master
Contract Law
The creditor who puts the debtor in the position of making unnecessary expenses does not observe the duty to act in good faith (e.g. the carrier is obliged to take the shortest route). Article 1170/NCC regulation of good faith in relation to contracts Article 1183/NCC regulation of good faith during negotiations The parties have the right to continue or end the contract without sanctions. The consent means the externalized decision or intent to conclude a contract. In order to be valid, it must fulfill several conditions: 1) To be expressed by a person who is mentally capable to conclude the act. This means that the parties must have judgment, must be able to understand the nature of the act and its consequences. Generally, a person having full concrete capacity is presumed by law to have judgment or discernment. This presumption may be overruled by proving that temporary lack of judgment of the person in question (e.g. in case of temporary mental illness or in case of drugs influence) article 1205(1)/NCC. 2) To be expressed by a person who has the intention to produce legal effects. This condition is not fulfilled when, for example, a person is only kidding, has no real intention to conclude a contract (informal bet). 3) To be externalized, the consent must result from the words/actions of the parties. In this respect, several problems arise in case of silence. Generally, in our law, the consent cannot be implied and, therefore, in case of silence, it is considered that there is no consent at all. The inaction of the parties (or the silence) is not conceived as the expression of the intention to conclude a contract. However, there are some exceptions from this rule, as follows (article 1196(2)/NCC): a) The law expressly provides, in some cases, that the silence of one of the parties must be considered as consent (e.g. according to the law, the rent contract continues to be enforced if, after the duration of the contract has expired, the parties silently continue to perform the contract). b) The initial agreement of the parties may constitute in some cases for regarding silence as consent. It means that the parties, by their will, give a particular juridical significance to silence. 4) To be genuine, the consent derives from the fact that the contract has an intention and a free nature. Therefore, the consent to conclude a contract must be intentional and genuine, because otherwise there is no contract between the parties. The lack of genuine consent may arise from the following vices of consent:
I.
The mistake (error) = a false representation of reality at the conclusion of a contract. It is induced by the person himself and not by the other party or anybody else. Classification: a) According to the nature essential or immaterial error The essential error leads to the relative nullity of the act, because there is a lack of genuine consent. The essential error may refer to the following issues: - the nature of the contract (called error in negotium), e.g. when one of the parties believe that it is a donation contract, and the other party believes that it is a sale contract; - the identity of the object of the contract (called error in corporae), e.g. when one of the parties believes he sells a crop, and the other party believes the contract refers to a plane; - the qualities of the object of the contract (called error in substantia), e.g. when the buyer believes that the object of the contract is an apartment with the walls made of brick, and actually the walls of the apartment are made of concrete; - the qualities of the contracting party (called error in personae) applies only in case of contracts concluded intuitu personae (in person), meaning on the ground of one of the partys qualities, e.g. the donation contract or a contract concluded with a singer for a specific performance. The immaterial error refers to an unimportant element of the contract. Generally, this kind of error does not produce any juridical consequences.
b) According to the number of parties affected unilateral or bilateral error The unilateral error when the mistake is on the part of only one of the parties The bilateral (mutual) error when the mistake is on the part of both parties However, an act may be avoided on the ground of error vice of consent in both cases of error. c) According to its object error concerning the law or error concerning the fact The error concerning the law the legal provisions applicable in the case, which is accepted as a vice of consent only in relation to
legal provisions essential in concluding the contract in accordance with the will of the parties (article 1207(3)/NCC) The error concerning the fact e.g. the object of the act, the value and the contracting party, which is a vice of consent if it is essential for concluding the contract.
II.
The fraud = a misrepresentation of the reality, made with the intention to deceive the other party and to determine him to conclude a contract. Therefore, the fraud is always the result of another persons action. According to the law, the fraud must always be proven. The fraud as a vice of consent leads to the relative nullity of the contract. The fraud has two elements: a) The intentional element the will to deceive the other party b) The material element the activities performed in order to lead the other party into mistake (e.g. lying about the hidden defect of the sold goods or failing to inform the other party about it). According to the law, the fraud is a vice of consent even if it is the result of the action of a 3rd party, but the contracting party is aware of this action.
III.
The duress (violence) = a state of mind induced by threats in order to determine the person to conclude a contract. The duress leads to the relative nullity of the contract. According to article 1216/NCC, the threats may be: a) Moral referring to the feelings of the person; b) Physical referring to the physical injury of the person or his property. Furthermore, the threats may be exercised not only against the contracting party, but also against a relative or against the relative to the contracting party. According to the law, the duress as a vice of consent can arise not only from the activity of the contractual party, but also from the wrongful activity of a 3rd party (article 1220/NCC). The duress has two elements: a) The intentional element the intention to force the contracting party to conclude a contract in a state of mind characterized by lack of free will; b) The material element the means used in order to threat the contracting party.
Year I Master
12
Contract Law
According to article 1216(4)/NCC, the duress, as a vice of consent, must be considered from case to case. It means that, in each case, it is necessary to determine whether the acts of threats are wrongful and whether the threats and not the free will of the party have induced the consent to conclude a contract. IV. The injury It means the disproportion between the mutual promises of the parties within a contract. In case of injury, one of the parties takes advantage from the lack of experience, lack of knowledge or a specific state of mind of the other party and provides in the contract in its own benefit a promise that is more valuable than his own promise. According to article 1221(3)/NCC, there is an injury when the minor assumes an excessive obligation taking into account his patrimony, the advantage obtained from the contract or the circumstances in which the contract was concluded. According to article 1222/NCC, the injury as a vice of consent may have the following consequences: a. The relative nullity of the contract, but only in the cases when the promise of the injured party is reduced with more than half of its value at the moment of concluding the contract.
b. The reduction of the promise of the injured party. However, according to article 1224/NCC, the aleatory contracts cannot be avoided on the ground of injury.
Course 6 The general and lawful subject matter (the object of the contract)
According to article 1225(1)/NCC, the object of the contract consists of the juridical operation agreed by the parties as it results from all rights and obligations assumed through the contract. Therefore, for example we have the sale-purchase, rent, loan, deposit contracts as object. According to article 1226(2)/NCC, the object of the obligation consists of the action or inaction that the debtor (passive party) is obliged to perform. In other words, the object of the contract is composed by the behavior of the parties established through that contract, namely the actions/inactions that the active party has the right to request and the passive party has the obligation to perform.
For example, the object of a particular sale-purchase contract is the sale-purchase operation, meaning the transfer of the ownership right of the specific goods by one party in exchange for the payment of the price by the other party. Generally, the behavior of the parties, meaning their actions or inactions, is related to goods. Therefore, the goods must be considered as the derived object of the contract. In order to be valid, the object of the contract must fulfill the following general conditions: 1. the object has to exist The law considers the object as existing even if it does not actually exist, but it will exist in the near future. For example, the sale of future harvest is a valid contract. Therefore, according to article 1228/NCC, a future thing may be the object of the contract with only one exception: the future inheritance. The juridical acts having as object the future inheritance are prohibited by law because of the moral consideration. 2. the object of the contract has to be in civil circuit Therefore, the goods that are the public property of the state or the administrative-territorial units (villages, towns, counties) cannot be object of contracts. In addition, there are several categories of goods which may be the objects of contracts, but only under special conditions (e.g. firearms, drugs etc.).
3. the object of the contract has to be identified or identifiable According to article 1225(2)/NCC, a contract must have as object an identified juridical operation under the sanction of absolute nullity. In addition, at the moment of concluding the contract, the behavior of the parties, meaning their actions/inactions and the thing which is the derived object of the contract must be identified or at least identifiable. Therefore, if the object of the contract is an individually determined thing, this condition is fulfilled. If the object of the contract is composed by generally determined goods, this condition is fulfilled in the following ways: mentioning in the contract the exact number, quantity, quality or volume of the goods. In this case, the object is identified (e.g. 10 kg of strawberries). mentioning in the contract several criteria for identifying the goods. This criteria is going to be used when the contract is performed. In this case, the object is identifiable.
Year I Master
14
Contract Law
In addition, it should be mentioned that the NCC contains expressed provisions for determining the object of the contract, its quality, or other specific elements in relation to it. As for the quality of the object of the contract is concerned, according to article 1231/NCC, if it cannot be established by the contract, the quality of the promise or object must be reasonable or at least of medium quality. In addition, article 1232/NCC provides the possibility of establishing the object of the contract by a 3rd party. Thus, for example, a 3rd party nominated by the contractual parties may determine the price or any other element of the contract. If the 3rd party is not able to establish the element in question or his assessment is unreasonable, the price of the undetermined element will be established by the judge. In the relations between professionals, according to article 1233/NCC, if the contract does not provide the price or the method to determine the price, the law considers that the parties took into account the price usually charged in that field of business for the same promises, under similar conditions, or if there is no such price, a reasonable price. If, according to the contract, the price must be determined in relation to a reference factor, and this reference factor does not exist or is no longer used, it must be replaced by the closest reference factor, according to article 1234/NCC. 4. the object of the contract must be possible This condition is imposed by the principle of law according to which nobody can be obliged to do something impossible. This condition is not fulfilled only when there is an absolute impossibility to perform the object of the contract, meaning the object is impossible for everybody (e.g. traveling to the moon). However, this condition is fulfilled if the impossibility is relative, meaning the performance of the contract is generally possible, being impossible only for particular persons (e.g. the obligation to return of a sum of money is always possible, even if the debtor has no money to perform the obligation). In addition, according to article 1227/NCC, the initial impossibility or the obligation may be admitted. Therefore, the contract is valid even though at the moment of concluding it there was an impossibility of one of the parties to perform his obligation, unless the law provides otherwise. 5. the object must be lawful and moral Therefore, a contract by which the parties promise to do something illegal and immoral is not valid. In addition, sometimes the object of the contract must fulfill several special conditions in accordance with the type of agreement involved.
In some cases, the law requests some authorizations for concluding specific controls (e.g. the sale-purchase of firearms is possible with a special permission). The non-observance of the validity conditions leads to the absolute nullity of the contract.
The lawful and moral consideration

The consideration is the objective, motive, goal for which the parties decided to conclude the contract. It is the element of the contract which answers to the question why is the contract concluded?. The consideration has two elements: the instant consideration the same in all acts belonging to a certain category. In bilateral contracts, the instant consideration of each party is determined by the mental consideration of the other partys promise (e.g. in the sale-purchase contract, the instant consideration of the seller is determined by the wish to buy the product; in contracts made with gratuitous title, the instant consideration is the intentions to do/give something for free animus donati). the specific consideration different from a certain contracts to another. In order for the contract to be valid, the consideration has to fulfill several conditions. These conditions refer to the specific consideration because the instant consideration is abstract and always valid. According to article 1236/NCC, the conditions are the following: o it has to exist if there is no consideration or it is not real, the sanction applied to the contract is the relative nullity. The consideration is not real when there is a misrepresentation of the motive for which the contract is concluded (e.g. a specific sale-purchase, the specific consideration is to buy a specific good). o it has to be lawful and moral if the unlawful/immoral consideration is done by both parties, or if one of the parties knows or should have known the unlawful/immoral consideration, the sanction is the absolute nullity of the contract. It should be mentioned that the consideration does not have to be proven. Thus, article 1239/NCC provides two presumptions: the consideration that any contract exists the contract is valid As a consequence, the party who wants to obtain the nullity of the contract has to prove that the consideration of a particular contract does not exist or it is not valid.
Year I Master
16
Contract Law
Course 7 The legal form

The legal form is a validity condition of the juridical act. The observance of the legal form is one of the validity conditions required for concluding a juridical act. The legal form may be defined as the validity condition that represents the way in which the will of the parties to conclude a juridical act is expressed. Actually, in our law, most contracts are consensual (article 1178/NCC). Therefore, the simple expression of the will of the parties is sufficient in order to conclude a valid contract and the law does not normally request a special form for the agreement of the parties. There are exceptions from this rule, meaning juridical acts or contracts that must be concluded in a certain form imposed by the law for their validity. According to the juridical consequences of their non-observance the form conditions meet the requirements concerning the legal form of the contract may be divided into three categories: 1. the form requested by law ad validitatem This form has to be observed for the validity of the contract. It means it is a constitutive, essential validity condition of the juridical act. Therefore, the form requested ad validitatem is compulsory and its non-observance is sanctioned by the absolute nullity of the act. For example, several categories of contract are valid only when they are concluded in authentic form, meaning as a document drawn up by a notary (e.g. the donation contract, all the contracts transfer a real right submitted to registration with the Land Register). 2. the form requested by law ad probatiorum This form has to be observed in order to prove the content of the act, although the act is valid even in the absence of this form. However, the form requested ad probatiorum is also compulsory, but its nonobservance is sanctioned by the impossibility to prove the act by other means of evidence. Therefore, even though the simple consent of the contracting parties is sufficient for concluding a valid contract, the law requires a written form only for constituting evidence that may be used in future disputes (e.g. insurance contracts, company contracts). 3. the form requested for the opposability to a 3rd party It means the formalities necessary, according to the law, in order to make the juridical act opposable to persons who did not participate to its conclusion. This form is based on the idea of protecting the interest of 3rd parties. This form is also compulsory and its non-observance is sanctioned by the inapposability of the act towards 3rd parties. This means that in such a case, 3rd parties are allowed to disregard the juridical act in question and, therefore, the act could not produce its effects over any 3rd party.
However, the act is able to produce its effects between the parties, but the parties are not allowed to invoke against 3rd parties their right derived from the act (e.g. the publicity concerned certain rights over movable goods, meaning the formality of registration within the Electronic Register -> a mortgage contract over movable things has effects only between the parties creditor and debtor, unless it is registered in the Electronic Register; therefore, the creditor who is the owner of the mortgage could not be able to invoke his rights against the debtor unless he has observed the form requested by law).
The nullity of the act

A juridical act concluded with the observance of legal rules is a valid act. Therefore, it can produce its effects provided by the law. Whenever, the contract concluded by the parties disregards certain legal rules, it cannot produce legal effects. Therefore, the contract is void. It means that a juridical act concluded against the provisions of the law is sanctioned with a specific sanction nullity. As a definition, the nullity is the civil sanction that deprives the juridical act of its effects contrary to the legal provisions stipulated for its valid conclusion. However, in the Romanian system of law, the nullity does not destroy the act itself, but only its effects. Therefore, a void or avoidable act is not considered as nonexistent. Actually, as a consequence of the nullity, such an act is not able to produce any effect due to the nonobservance of legal rules at the moment when the act was concluded. E.g. A sale-purchase contract done by a minor(<18years), the contract will be sanctioned by complete nullity. Once pronounced by a judge or declared by the parties, the nullity applies from the moment when the contract was concluded (meaning ex tuk/tunc) and the parties are restored to their positions prior to the conclusion of the contract. Finally, according to article 1246(3)/NCC, the nullity may be declared by the parties of the juridical act. If the parties are not able to reach an agreement concerning the nullity, it will be pronounced by a judge. This possibility was newly introduced in the NCC, before that the judge was declaring the nullity. Classification of nullity: 1. According to the nature of the interest protected through this sanction, the nullity may be divided into absolute nullity and relative nullity. a. the absolute nullity sanctions the nonobservance at the moment of the conclusion the act of legal provisions that protect public interests (the interests of the entire community). Such an act is designated as void. The following grounds leads to absolute nullity of the juridical acts: - the nonobservance of the legal rules related to the abstract capacity of the parties, in special cases as for e.g. the nonobservance of the principle of specialty of the abstract capacity of legal persons having non-patrimonial goal; - the consent is missing;
the object of the contract is not valid; the consideration of the contract is prohibited by law and public morals; the form requested ad validitatem has not been observed. b. the relative nullity sanctions the nonobservance at the conclusion of the contract of legal provisions that protects private, individual interests. Such an act is designated as avoidable. The following grounds lead to relative nullity of juridical acts: the vices of consent; the consideration of the contract is missing; the discernment of the judge is missing at the moment of concluding the contract; the nonobservance of legal rules related to the concrete capacity of the parties.
This classification has a significant importance due to the differences between the rules governing the absolute nullity and the relative nullity. The absolute nullity is governed by the following rules: a) Anybody having a legal interest may claim the absolute nullity of a juridical act (even 3rd parties); b) The absolute nullity may be claimed anytime. There are no limits in time for bringing an action in absolute nullity before a court of law, meaning that the action of absolute nullity is non-prescriptive by means of action or by means of exception. c) The absolute nullity cannot be ratified by the parties. It means that the effects of a void act cannot be covered in order for the act to be able to produce its effects despite the nullity. On the other hand, the relative nullity is governed by the following rules: a) It may be claimed only the party whose interests has been disregarded at the moment of concluding the act, because the relative nullity protects only private interests. b) The relative nullity may be claimed by means of action only within a specific period of time (the so-called term of extinctive prescription). The general term of extinctive prescription is 3 years. It means the action in relative nullity is prescriptive within 3 years. However, the relative nullity is non-prescriptive by means of exception. c) The relative nullity can be ratified by the parties. The ratification can be expressed or implied. This means that the effects of an avoidable act may be covered by the parties according to their will. The ratification is expressed when the interested party concludes another act stating expressly his will to ratify the former avoidable contract. The ratification is implied in the following cases: - the interested party performs the avoidable act; - the interested party does not bring in action in relative nullity within the term of extinctive prescription in 3 years.
2. According to the extent, the nullity may be divided into partial or total. a. the total nullity affects the whole act b. the partial nullity affects only a part of the juridical act. In case of partial nullity, the clauses of the act that are not avoided by nullity are still able to produce their legal effects, because they are not contrary to the law. Within the Romanian legal system, the partial nullity is the rule, and the total nullity is the exception. Therefore, whenever it is possible, the intention of the parties must be to save the act and to avoid only those clauses that are contrary to the law. However, the extent of the nullity depends on two elements: - the ground of the nullity (e.g. nonobservance of the form requested ad validitatem leads to total nullity); - the complexity of the consent of the juridical act.
Course 8
The effects of the nullity As mentioned before, the nullity eliminates the effects of the juridical act, which are contrary to the law. Therefore, the legal effect (or the juridical consequence) of the nullity is the elimination of those effects of the juridical act which are contrary to the legal rules that regulate its valid conclusion. The effects of nullity are governed by 3 principles as follows: a) The principle of retroactivity according to this principle, void or avoidable acts cannot produce any effects in the future and the effects already produced in the past must be eliminated. Therefore, this principle means the elimination of the effects of the juridical acts which have been produced between the moment of concluding the act and the mom of declaring the nullity. Therefore, once pronounced by a judge or declared by the parties, the nullity applies in the past from the moment the act was concluded and the parties are restored to their positions prior to the agreement. However, there are some exceptions to this principle, for e.g. in case of legal persons their nullity does not produce any effects in the past and the legal persons ends its existence only for the future. b) The principle of restoring the parties into their positions before the conclusion of the acts, also known as restitutio in integrum according to this principle, the parties must restitute to each other all the promises already performed in accordance with the void act. The exceptions to this principle are the same as those to the retroactivity, because the principle of restoring the parties into their prior position is a consequence of the retroactivity principle.
c) The principle of avoidance of the accessory acts according to this principle, the nullity of a primary juridical act leads to the nullity of the subsequent accessory acts, due to their relation with the primary act. Nevertheless, there are some exceptions to this principle which are justified on another principle of law namely the principle of protecting the good faith. E.g. the avoidance of the ownership title of the seller of an immovable thing does not always lead to the nullity of the subsequent sale-purchase contract, concluded between the first buyer and the third party, if it is proven that the third party has acted in good faith (good faith = the third party is not aware of the nullity of the first party).
The extinctive prescription

According to article 2500/NCC, the extinctive prescription is a way to extinguish the right to act in justice due to its non-exercise during a period of time provided by the law. In other words, the extinctive prescription leads to the loss of the right to obtain the judgment of a court of law in order to proceed to the force execution of an obligation. This loss of the right to act in justice is regulated by the law in relation to a period of time during which the owner of a subjective right did not act, meaning he did not try to obtain the performance of the corresponding obligation. Due to this inaction, the law no longer protects the owner of the right and he loses the possibility to defend the subjective right with the help of state authorities. Therefore, the extinctive prescription may be considered as a civil sanction against the passivity of the owner of the subjective right. The effect of the extinctive prescription The extinctive prescription extinguishes only the right to act in justice of the holder of the subjective right. Therefore, the subjective right itself and the corresponding obligation still exist after the expiration of this period of time, but the subjective right is no longer protected by means of the power of the state. As a consequence, after the term of the extinctive prescription has expired, the holder of the subjective right cannot obtain anymore the assistance of the state through its competent bodies in the exercise of his right, in order to oblige the debtor to perform his obligations. Nevertheless, as the subjective right itself and the corresponding obligation still exist, the debtor may willingly perform his obligations and such a performance is valid. Within the Romanian system of law the effect of the extinctive prescription is governed by 2 principles as follows: - The extinction of the right to act in justice concerning a principal subjective right leads to the extinction of the right to act in relation to accessory rights (article 2503(1)/NCC).
If the performance of the obligation is successive, the term of extinctive prescription must be calculated in relation to each performance (article 2503(2)/NCC) e.g. rent contract, the obligation to pay the rent monthly, for each month there will be a specific extinctive prescription. There is one exception to this principle, provided by article 2503(3)/NCC this principle is not applicable if the successive performances compose a unitary system due to their nature as resulting from the law or from the convention of the parties.
The application field of the extinctive prescription As a rule provided by law, the patrimonial subjects are prescriptive and the nonpatrimonial rights are non-prescriptive. However, there are several exceptions. Thus patrimonial rights are divided in real rights and debt rights. In general real rights are non-prescriptive. Actually in accordance with the provision of the law, the application field of the extinctive prescription refers mainly to debt rights, because they are mostly prescriptive. The term of the extinctive prescription The main idea to the extinctive prescription is the expiring of a period of time, because the loss of the right to act in justice is regulated by the law in relation to a specific term during which the holder of the subjective right did not act in order to claim/plan the performance of the corresponding obligation. As a consequence, the law regulates the term of extinctive prescription as a period of time during which the right to act in justice must be exercised under the sanction of losing it. According to the law, article 2517/NCC, the general term of extinctive prescription provided by the law in relation to debt rights is of 3 years. However, the parties are allowed to modify by their common agreement, the terms of the extinctive prescription, either reducing or increasing them. In addition, article 2515(4)/NCC, provides that the term of extinctive prescription agreed by the parties must be between 1 and 10 years.
Year I Master
22
Contract Law
Course 9 The conclusion of the contract

Any contract is consider as concluded when the parties reach an agreement, meaning when the acceptance of one of the parties meets the offer of the other party. There are two ways of concluding the contract: 1) the conclusion of the contract inter presentes, or between present parties. Concerning the conclusion of the contract between present parties, meaning parties that are at the same moment and place present, the moment of concluding the contract is the moment when the agreement is reached, because most contracts are consensual contracts. The place of the conclusion of the contract is the place where the negotiation has been carried out and the agreement of the parties has been reached. Generally, even in case of consensual contracts, the parties draw out a written document in order to use it as evidence in future disputes. In this document, the parties stipulate expressly the moment and the place of concluding the contract. 2) the conclusion of the contract inter absentes, or between absence parties. When the contract is concluded between absence parties, meaning persons who are in difference locations, the problem of determine the moment and the place of concluding the contract is much more difficult. The contract concluded between absence parties may be divided as follows: a) contract concluded by mail (post), which represents the most important category of contracts of the absence parties. All system of law provides that the contract is consider concluded when the letter of acceptance meets the offer. If the acceptance is different from the offer, it constitutes a new offer, which must be accepted by the party who has made the first offer in order to conclude the contract. However, there are some differences between the systems of law in difference states concerning the establishment of the place and the moment of the conclusion of the contract. Therefore, they are 3 theories: The sending theory that is used meanly in the Anglo-American system of law. According to this theory, the contract is concluded when the party who accepts the offer sends the letter of acceptance to the other party. This date is proved by the postage seal put on the letter by the postal service. The place of the conclusion of the contract is the place of headquarters of the party who accepts the offer, because in this place the accepter has met the offer. The receiving theory which is used in most states. such us France, Italy, Belgium and Romania. According to this theory, the contract is concluded when the party who has made the offer receives the letter of acceptance of the other party. The date is proved, as mentioned above, by the postage seal put on the letter by the postal service. The place of concluding the contract is the place of headquarters
of the party who has made the offer, because in this place the acceptance has met the offer. The information theory used in Portuguese and Brazilian system of law. According to this theory, the contract is concluded when the party who has made the offer is informed by any means of the other party acceptance. Actually, this moment may be placed before or after receiving the letter of acceptance. The place of concluding the contract is the place of headquarters of the party who has made the offer.
b) contract concluded by phone Concerning the contract concluded by phone, the moment of concluding the contract is the moment when the parties speak over the phone and their agreement is reached. Regarding the place of concluding the contract, there are 2 approaches as follows: - in the Anglo-American system of law, it is the place of headquarters of the party who makes the contract. - in the continental system of law (of roman tradition), it is the place of headquarters of the party who receives the contract. Homework 3: Case study
Course 10
The offer The offer is a unilateral juridical act that expresses the will of the offeror to conclude a contract. The legal definition of the offering contract is provided by article 1188(1)/NCC, which states: a proposal represents an offer to contract if it includes sufficient elements to form the contract and it expresses the intention of the offeror to be obliged if the beneficiary of the offer accepts it. In order to be valid the offer must meet several requirements: - The offer has to observe all the validity conditions provided by the law of the validity of any juridical act, namely, the capacity, the consent, the object and the consideration; - The offer has fulfill the following conditions 1. It has to be made with the intention to produce legal effects meaning to conclude a contract. From this point of view, the offer has to express a serious, real and free will to conclude a contract. 2. It has to be communicated to the other party, meaning to the offeree.
3. It must be serious, precise and complete, meaning it must contain all the necessary elements in order to conclude a contract by simple acceptance. 4. It must be kept within the term provided by the offer or within a reasonable period of time, if the offer does not specify a term. Generally, if the offer does not provide a particular term, the acceptance must be made at once. Thus, according to article 1194/NCC, the offer without time limit addressed to present persons has no effects unless it is accepted immediately. This rule also applies to the offer made by phone or by other similar means to communicate at distance. However, according to article 1193(1)/NCC, the offer without time limit addressed to absent persons, has to be maintained a reasonable period of time, according to the circumstances in order for the offeree to receive it, to analyze it and to send the acceptance. In addition, in such a case the revocation of the offer does not make impossible the conclusion of the contract unless the revocation reaches the offeree before the offerer has received the acceptance. If the offeror specifies a particular term of acceptance, the acceptance must be within that period of time. Generally, the offer may be revoked anytime until it reaches the offeree. As a consequence, after the offer has reached the other party it cannot be revoked anymore. In relation to the offer, two special situations must be analyzed as follows: The case of the tacit offer. In this respect the silence has the value of an offer, only corroborated with other external elements (e.g. a taxi waits for clients in special places). The proposal addresses to the public or to undetermined persons. According to article 1189(1)/NCC, even if it is precise, it has not the value of an offer, but it must be considered as a solicitation of offer or as an intention to negotiate. However, according to article 1189(2)/NCC, the proposal addressed to the public (meaning undetermined persons) has the value of an offer if it results from the law, the customs or the practices or the specific circumstances.
Sometimes the offer cannot produce its effects and it is considered automatically as cancelled. This cause of inefficiency of the offer is called the caducity (caducitate). The caducity of the offer applies in the following cases: - the offeror dies or becomes incapable before the offer is accepted; - the offeree refuses the offer; - the acceptance does not reach the offeree within the acceptance term.
Year I Master
25
Contract Law
The acceptance The acceptance is the expression of the will of one party to conclude the proposed contract under the conditions provided by the offer. Therefore, the acceptance of the offer is a unilateral juridical act. The legal definition of the acceptance is provided by article 1196(1)/NCC, which states any act or fact of the offeree constitutes an acceptance if it shows its agreement regarding the offer as it was proposed and it reaches in due time the author of the offer. However, according to article 1196(2)/NCC, the silence or the inactivity of the offeree has not the value of acceptance unless it results from the law, the agreement of the parties, the practices between them, the customs or other circumstances. In order to be valid the acceptance has to fulfill several conditions: - as any other juridical act, the acceptance must fulfill the validity conditions required by law, namely the capacity, the consent, the consideration and the object of the contract; - in order to conclude a contract, the acceptance must fully correspond to the elements of the offer. If the acceptance is different from the offer, it constitutes a new offer which must be accepted by the party who has made the offer in order to conclude the contract. - if the offer is addressed to a certain person, the offeree is the only one entitled to accept it; if the offer is addressed to the public, anyone can accept it and the contract can be concluded with the first person who has accepted the offer. Moreover the acceptance should be made within the term provided by the offer and before the caducity of the offer unless the offerer accepts to conclude a contract based on a delayed acceptance.
The effects of the contract

The effects of the contract mean the subjective rights and the corresponding obligations that are created, modified or extinguished by the contract in question. Actually, the effects of the contracts mean the content of the act. Therefore, in order to determine the effects of a contract we must establish its content, meaning the clauses that provide the rights and obligations which are created, modified or extinguished by the act. In this respect, the following steps should be achieved: 1. determine the existence of the act and to prove it by using different means of evidence that are allowed by the law; 2. determine the effects of the contract by the interpretation of these clauses.
Year I Master
26
Contract Law
The effects of the contract, as well as the effects of any juridical act, are governed by the following 3 principles: I. The principle of compulsory force of the act pacta sunt servanda According to article 1270/NCC, the contract validly concluded has the force of the law between the contracting parties, in other words the contract is compulsory as the law itself. Nevertheless, there are some exceptions to the principle of the compulsory force of the contract, meaning the cases in which the effects of the juridical acts are not produced as intended by the parties. E.g. despite the will of the parties, the contract shall terminate before the expiry of its term in the following cases: the total destruction of the goods terminates the contract itself (article 1818/NCC) the death, incapacity or insolvability, bankruptcy or death of any of the parties, terminates the mandate contract (article 2030/NCC) the contract concluded intuitu personae (= concluded based on the personal qualities of the parties e.g. contract with a specific singer.) generally terminate at the moment of death of the party who assumes obligations. Another exception to this principle is based on the hardship theory (impreviziune), which applies as long as the essential circumstances that existed at the moment of concluding the contract did not change during its performance. Actually, the hardship theory takes into account an essential change in the existing circumstances that have determined the conclusion of the contract in question. The hardship event is unpredictable, it cannot be overcome by the parties and it does not depend on the will of the parties. The performance of the contract by one of the parties becomes very costly due to this event. Therefore, when the hardship event happens, the parties must renegotiate the contract in order to reestablish the balance between their promises. If the renegotiation of the contract is not possible and the parties are not able to reach an agreement in this respect, according to article 1171/1271(2)/NCC, the judge may pronounce the adaption of the contract to the new circumstances or its termination. E.g. Electricity contract an electricity supplier had concluded a contract with a client, for a certain price for one year. Hidroelectrica S.A. had declared its insolvency unusual because this company is a state owned one. As a consequence, the prices of electrical energy prices raise. The supplier had terminated the contract, because it was impossible to supply at the price established in the beginning, due to the market prices. Hardship theory because there occurred events that were unrelated to the supplier. Therefore, it was needed to renegotiate the contract. In case it is not possible, they can ask the court of law to adapt the contract or terminate the contract.
Course 11
II. The principle of the relativity of the contracts effects According to article 1280/NCC, the contracts produce their effects, only between the contracting parties. Therefore, the principle of relativity of the contracts effects, means that the effects of the act are produced only between the parties and the contract cannot benefit or harm other persons. In order to understand this principle and its exceptions, the following terms should be explained: party, third party, interested party. These concepts are important because in relation to a certain contract all subjects of law, meaning all persons are included in one of these 3 categories. 1. The party is the person who concludes the contract either personally or by representation. According to the principle of relativity, the effects of the contract are generally produced only towards the contracting parties 2. The third party is the person who was not involved in any way in the conclusion or the performance of the contract. Therefore, the contract cannot produce any effects towards third parties 3. The interested party is a person who did not participate at the conclusion of the contract but is affected by the effects of the acts due to his or her juridical relation with the contracting party. The interested party are divided into 3 categories, as follows: a) Universal successors or successors with universal title A universal successor is a person who acquires a patrimony, meaning an universality of rights and obligations. For example, the sole legal successor of a dead person inherits the whole patrimony and therefore he is a universal successor. In company law, a case of universal succession is the merger by absorption. The successors with universal title are persons who acquire a fraction of a patrimony. For e.g. is a dead person has several legal successors, each one inherits only a part of the patrimony, and therefore they are successors with universal title. In company law, the division of a company leads to a succession with universal title. From a juridical point of view, the universal successors and the successors with universal title continue the personality of their author because they acquire the whole patrimony or a part of the patrimony of their author. Universal successors and successors with universal title are interested persons in any act concluded by their author. Therefore, the contracts concluded by their author produce juridical effects towards them because they acquire all or only a part of the rights and obligations belonging to their author.
Year I Master
28
Contract Law
b) Successors with particular title The successor with particular title is a person who acquires a certain subjective right. For e.g. the buyer is the successor with particular title of the seller in relation to the ownership right of the sold good. The successors with particular title are interested parties only in relation to contracts concluded by their author which fulfills the following conditions: they have been concluded before the transfer of the right between the successor and his author; they have as object the same right or thing as the one acquired by the successor; they are concluded between the author and other persons than the successors. Thus for e.g., according to the provision of the NCC, the buyer of a rented thing is obliged to observe the rent contract concluded by the seller before the sale. c) Simple creditors The creditor is a person to whom an obligation is due. Any creditor has the right to ask the debtor to provide a security for the performance of the obligation, as for example the mortgage of a thing. The creditors who are the owners of such securities are generally referred to as secured creditors. The creditors who do not have such securities are known as simple creditors. Nevertheless, according to the law, the simple creditors have a general security over the patrimony of the debtor. This means that their receivables is secured with a patrimony of the debtor. Therefore the simple creditors are interested parties in relation to any acts made by their debtor because such acts may have an influence over the patrimony of the debtor (meaning may increase or decrease the patrimony of the debtor).
Exceptions to the relativity of the contract effects These exceptions are actually cases in which the contract might produce its effects towards third parties according to the will of contracting parties. They are divided into two categories as follows: - Apparent exceptions - Real exceptions Nevertheless, nobody may become a debtor to a contract concluded between other persons without his consent. Therefore, concerning the passive side of the juridical relation, there are no exceptions relating to the relativity of the contracts effects. Actually, the exceptions are possible only concerning the rights that might arise in the benefit of a 3rd party from a contract concluded between other persons.
Year I Master
29
Contract Law
These exceptions are: 1. The promise of another persons action, also known as promesse de porte-fort It is a contract by which a person known as the promiser, promises to another person, known as the promisee, to convince a third party to assume an obligation, meaning to ratify a juridical act in his absence. It is provided by article 1283/2283/NCC. The promise of another persons action is not a real exception to the relativity of the contracts effects because the promisor promises his very own performance, which consists in convincing the third party to become a party to a juridical act. If the third party does not want to ratify the juridical act, he cannot be obliged to execute the obligation. 2. The simulation The simulation means the juridical operation by which the parties conclude two juridical acts as follows: - the first one is a public act which is not real, it does not contain the clauses actually intended by the parties. The public act is known by everybody, but it creates a juridical situation which does not really exist between the parties; - the second act is a secret act which corresponds to the real intentions of the parties, but which is not known by third parties. For example, in the public act, the parties agree to conclude a sale-purchase contract, but in the secret contract, they provide that the juridical act concluded betweenn them is a conation. There are three categories of simulations as follows: a) The false contract, when the parties conclude a public contract and a secret agreement in which they provide that the public contract does not really exist; b) The disguised contract, when the parties actually conclude two contracts, one of them real but secret, and the second public but not real; c) The interposition of another person when the secret contract provides the real parties to the public contract (in order to avoid the law, A and B makes a contract even if the main reason was to conclude). The secret contract produces its effects between parties, while 3rd parties are entitled to invoke the public contract. Nevertheless, the 3rd parties, are also entitled to invoke the public contract in case this benefits them. In case of a false sale-purchase contract, the creditors of the seller are allowed to invoke the secret agreement by which the parties had agreed that the public contract does not exist.
Year I Master
30
Contract Law
However, the simulation is not a real exception to the relativity to the contracts effects, because the right of 3rd parties to invoke either the public or the secret contract derives from the law and from the contract. 3. The direct actions When a 3rd party is allowed to bring proceedings against the debtor of his debtor in order to obtain the payment of his receivable. The 3rd party is not actually a party to the contract concluded between his debtor and the debtor of his debtor. The direct actions are not real exceptions to the relativity because in this case the right to bring a direct action against a person without any direct juridical relation is expressly granted by the law. For example, in the case of the construction contract, article 1856/NCC, provides that the constructors employed by the constructor have the right to bring a direct action against the beneficiary of the construction in order to pay their salaries but only when the beneficiary has a debt towards the construction. In the case of a mandate contract, article 2023(6)/NCC provides that the mandator has a direct action against the submandatory. Such a case arises when the principal mandatory has substituted another person, the sub-mandatory, in his place, in order to execute the mandate contract. Through the mandate contract, a party known as the mandatory assumes the obligation to act as a representative of another party, known as the mandatory. The real exception of the relativity of the contracts effects is the stipulation to the benefit of a third party. The stipulation is a contract by which one party, the promisor, promises to the other party, the promisee, to perform an obligation to the benefit of a third party known as the beneficiary. It is a real exception to the relativity of the contracts effects because the beneficiary is not a party to the contract, but he will benefit from the performance of the contract meaning, the effect of the contract will be produced towards him. However, according to the provisions of the law, in order for the stipulation to produce its effects, the beneficiary must accept. For e.g. the life insurance contract, by which the insurance company promises to pay an amount of money to a 3rd party, the beneficiary of the insurance, at the death of the insured person. E.g. the transportation contract by which the sender and the carrier agree to transport the merchandise and to deliver it to a third party, the beneficiary. The general conditions for the validity for the stipulations of a 3 rd party are the same as for any other contract. In addition, the law provides special conditions of validity as follows: a. the expresses will of the parties to grant a right for the beneficiary, namely for a third party.
b. at the moment of concluding the contract, the person of the beneficiary must be determined or at least determinable. The stipulation to the benefit of a 3rd party produces three categories of effects, as follows: 1. The effects between the parties, namely the promisor and the promisee, as any other contract. Therefore, the promisee may claim the cancellation of the contract, or its forced execution and he may bring an action against the promisor to carry on the promise to the benefit of a third party. 2. The effects between the promisor and the beneficiary. The stipulation to the benefit of a 3rd party creates a juridical relation between the promisor and the beneficiary despite the fact that the beneficiary is not a party to the contract. Within this juridical relation, the beneficiary is the creditor and the promisor is the debtor. As a consequence, the beneficiary may bring an action against the promisor asking the court of law to oblige him to perform the contract. Nevertheless, the beneficiary is not entitled to claim the cancelation of the contract because he is not a party to that contract. 3. The effects between the promisee and the beneficiary. Normally the stipulation to the benefit to a third party does not produce any direct effects between the promise and the beneficiary. However, it produces an indirect effect because the goal of the stipulation is the right granted to the beneficiary to the promisors action. III. The principle of irrevocability of the act
Generally, the principle of the irrevocability of the contract means that once concluded it cannot be revoked. Actually, the contracts as bilateral juridical acts cannot be revoked by the will of only one of the parties, but they may be terminated by common agreement of both parties. Nevertheless, the unilateral juridical act cannot be revoked by its author. As exceptions to this principle there are several cases in which the unilateral revocation of the act is allowed by law. For instance, the law allows: - The revocation of the donation made by one spouse to another (art 1031/NCC) - The termination of a rent contract by any of the parties if the contract has been concluded for undetermined period of time (1816(1) Juridical Code) - The termination of the mandate contract by any of the parties (article (1), a and b from NCC) - There are several unilateral juridical acts that may be revoked by their author such as the will (art 1034/NCC) and the revocation of an offer without time limit (art 1999 NCC) - The offer may be revoked if the revocation letter reaches the other party before or at the same time as the offer.
Specific effects of bilateral contracts As mentioned before, the main feature of bilateral contracts is the reciprocity of the parties obligation. Thus, each obligation is assumed taking into consideration the others party obligation and each party at the same time, debtor and creditor of the other party. Taking into account this special feature, the bilateral contracts produce the following effects: A. The exception of non-performance of the contract Is also known as exception de non ad impleti contractus and may be invoked whenever one of the contracting parties who has not performed his or her obligations, requests the other party to perform his or her promise. This party to whom the performance of the obligation is requested may oppose the exception of nonperformance and may refuse to perform his obligations until he gets the other partys performance. It is regulated in a general manner by article 1556/NCC. The exception of nonperformance of the contract applies whenever the following conditions are fulfilled: 1. The mutual obligations of the parties have as source the same bilateral juridical relation. Thus it is not possible to oppose this exception if the obligations of the parties are created by different contracts E.g. between two parties have been concluded two contracts a sale-purchase contract and a rent contract, therefore there are two obligations. One obligation is the obligation of the buyer to pay the price which arises from the sale-purchase contract and the second one is the obligation of the other party, as the tenant within the rent contract to pay the rent. In such a case, it is not possible to invoke this exception, meaning the buyer is not allowed to refuse the payment of the price due to the nonpayment of the rent deriving from another contract. 2. The contracting party against which the exception opposed has not fulfilled his obligation. Generally is has no relevance whether there is total or partial nonperformance of the obligation. 3. The contracting party who invokes the exception has acted in good faith, meaning the nonperformance of the other party is not intervened by his behavior. E.g. the buyer refuses to take possession of the sold goods and then he opposed the exception as far as his obligation to pay the price is concerned. 4. The mutual obligation of the two parties must be performed in the same time; therefore, the exception cannot be invoked if the parties have agreed a specific term for performing one of the mutual obligations. From a procedural point of view it is not necessary to invoke this exception within the court of law. Is exercise is not submitted to any formality or to the
debtors formal notifications. The exception of nonperformance has a defensive nature because the party who invokes it refuses the performance of his due obligation. However, the effects of this exception are temporary since the performance of the obligation is only suspended until the other party performs his own obligations B. The cancellation and termination of the contract I. The cancellation of bilateral contract Within a bilateral contract whenever one of the parties does not perform its contractual obligations, the other party has two options, either to claim the forced execution of the non-performed obligation, or the cancellation of the contract with eventual damages. Thus, the cancellation of the contract is a special civil sanction for the nonperformance of the bilateral contract. Is consists of retroactive cancellation ex tunc of the contracts effects and the parties reinstatement of the parties formal juridical situation. The cancellation of the contract is justified on the reciprocity and interdependence of the partys obligations within bilateral contracts. The cancellation of the contract is different from the contract nullity, thus in case of nullity the contract has been concluded by disregarding the express provisions of the law. In fact, due to the nonobservance of the legal rules the contract has not been validly concluded since the beginning. On the contrary, in case of cancelation the contract was validly concluded but later on due to a special reason meaning the nonperformance of contractual obligations by one of the parties its effects are cancelled. The common aspect between nullity and cancellation is the retroactive effect. Indeed, in both cases the parties are restored into the previous situation before the contract was concluded. The cancellation of the contract is regulated as a general rule by articles 1549 until art 1554 from NCC. According to the provisions of the art.1550, the cancellation may be as follows: a) Judicious cancellation when must be pronounced by the court of law b) Unilateral cancellation which operates the following to the declaration of cancelation of the interested party c) Cancellation by law, which applies in the cases provided by the law or according to the agreement of the parties. Concerning the judicious cancellation, such an action is admissible and the judge may pronounce the cancellation of the contract if the following conditions are observed: - There is a total or partial nonperformance of contractual obligations from one of the contractual parties. In case of partial nonperformance the court analyses whether the non-execution is so important that the contract has to be cancelled or not. - The non-performance of the contract is guilty, meaning it is due to the parties fault. In case of the party who has not fulfilled its obligation proves of force majeure event or accident who caused, the court cannot pronounce the cancellation of the contract but the intervention of contractual risk.
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The debtor who does not fulfill his contractual obligation as to be formally notified in one of the legal ways stipulated by law The action for the contracts cancellation may be brought by the creditor of the nonperformed obligation within the term of extinctive prescription of 3 years. However, the creditor is not obliged to ask for the contracts cancellation. He may choose to ask the court of law to oblige the debtor to perform his contractual obligation. Therefore, the creditor has always the choice to choose between the continuation of the contract, meaning its performance and the contracts cancellation. However, the juridical cancellation of the contract is difficult and takes time. Therefore, in order to limit or to avoid the intervention of the courts the parties may provide within the contract the so called cancelation clauses regarding the cancellation of the bilateral contract for nonperformance. In this case the cancellation of the contract no more judicial, it is conventional according to the expressed common will of the parties. It has to be mentioned that the simple presence of an express cancellation cause within the contract does not remove the creditors possibility to claim the debtors forced execution. Indeed the creditor still has the choice between the cancellation of the contract according to the clause or its performance. No matter the cancelation is judicial or conventional there is always the same, the contract is retroactively cancelled, therefore the parties are reinstated into their previous positions ant the promises that have been already performed must be given back. Moreover the guilty party is liable to pay the damages. It should be kept in mind that the cancellation applies only to the contracts with immediate or simultaneous execution. In case of bilateral contracts with successive performance the sanction for the nonperformance of contractual obligations is called the termination of the contract. II. The termination of bilateral contract Whenever the nonperformance of contractual obligations refers to contracts with successive execution, the contracts are canceled or terminated only for the future because it is objectively impossible to eliminate the effects they produce in the past. Thus, the termination is a different sanction from the cancellation of the contract even if both produce the same effect, which is that the contract comes to an end due to the nonperformance of the contractual obligations. However in case of termination the effects of the contract are eliminated only for the future, in latin ex nun and therefore the promises which have been performed are considered validly fulfilled. For instance the rent contract is a bilateral contract with successive execution and therefore its termination when one of the parties does not fulfill his obligation has effects only for the future. However, besides this difference from a procedural point of view all the rules presented above in relation to the cancellation of the contract also obliged to the termination of the contract.
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C. The risk of the contract The risk of the contract must be analyzed in relation to the impossible of one of the parties to perform contract obligations. Therefore, if the non-performance of contractual obligations is due to a force-majeure event, the question is who should bare the risk of the contract? The legal provisions governing the risk of the contract include a principle, namely res perit debitori, meaning that the impossibility to perform one contractual obligation leads to the termination of the other obligations and, therefore, the risk of the contract is born by the debtor of the obligation, which is impossible to fulfill. For example: within a rent contract, if a rented apartment is destroyed due to force majeure, the risk is supported by the landlord who is the debtor of the obligation which is impossible to fulfill. Actually, the owner of the apartment is liable to assure the use of the rented apartment. Therefore, the tenant is released from its obligation to pay the rent. In addition, in a sale-purchase contract, according to the law, if the sold goods are not delivered yet, the risk of the contract is born by the debtor of the delivery obligations, even though the ownership right had been transferred to the buyer. Therefore, the risk of the contract is not barn by the owner of the goods, but by the debtor of the obligation impossible to fulfill. However, in case the seller was formally notified that he hadnt fulfilled his obligation to deliver the goods in due time he will bear the risk of destruction of the sold goods; in such a case, the seller isnt exonerated of liability, even if he proves that the goods would have also been destroyed in the buyers possession.
The content of the contract

In a first place, any contract must provide the identification elements of the parties to that contract. In the second place, the parties must specify the juridical nature of the contract, meaning if it is a sale-purchase contract, a rent contract, a transport contract and so on. The juridical nature of the contract is a very important element, especially in case of named contracts. Actually, taking into account the juridical nature of the contract, the applicable legal provision to that contract may be determined. In addition, the parties must mention in the contract the following elements: 1) their rights and obligations according to the contract; 2) the price of the contract, if any; 3) the means and instruments of payment; 4) certain period of time or terms for the existence or the performance of the contract. Besides all these compulsory elements, the parties may include in the contract specific clauses (see paper).
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The first clause Electio juris clause it means the clause for choosing the applicable law to the contract (for contracts with a foreign clause mainly). This clause derives from the principle of contractual freedom, which is very important within the international trade. Therefore, due to this principle the parties are free to choose the applicable law to a specific contract. All systems of law recognize the right of the parties to a contract to choose the applicable law to that contract. This principle is known as lex voluntatis. Therefore, on the basis of the lex voluntatis principle, the parties are allowed to choose lex contractus (meaning the law of the contract). In some states, the lex voluntatis principle is a legal principlem because it is provided by the law (for example in Romania). In other states, the lex voluntatis principle is recognized by the case law of judges or arbitrators (for example in the anglo-saxon system of law). The lex voluntatis principle is also stated by the international conventions concluded between the states. Concerning lex contractus, some system of law (the Romanian one including) allow the parties to choose the law of any state as lex contractus. In other systems of law (the American one), the parties may choose as lex contractus only the law of a state which is closely connected to the contract. Nevertheless, in all the cases, the parties may choose as lex contractus only a law that is enforced. However, generally the parties to a contract fail to choose the applicable law to that contract. This omission may cause problems when disputes arise. Thus, the court of law that hears this dispute must know the applicable law to that specific contract. If the parties have failed to choose it, the court must determine the applicable law using the so- called subsidiary conflict principles. The subsidiary conflict principles are divided in 2 categories: 1) Subsidiary contract principles that are legal, meaning they are provided by the law (for example in Romania). Therefore, if the parties did not choose the applicable law to the contract, the contract should be regulated by the law of the country with witch it is more closely connected. The Romanian legislators consider that the contract is most closely connected with the country where the party who undertakes the performance that is characteristic to the contract has his residence or his headquarters. If the characteristic performance cannot be determined or the place of residence or headquarters are not known, the contract should be regulated by the law of the country where the place of conclusion of the contract is situated. 2) Subsidiary conflict principles establish by practice (for example in America). Thus, in the silence of the parties, the applicable law to the contract is the law of the
country where the contract is performed. This solution is based on the idea that the performance of the contract is the consideration/the goal of both parties of that contract. If the performance of the contract is successive, the contract is regulated by the law of the place of main performance. If the place of performance is not known, the contract is regulated by the law of the place of conclusion. The second clause The arbitration clause this clause is related to the problem of the settlement of disputes arising from the nonperformance or the improper performance of contract. Generally, in all systems of law, the courts of law have jurisdiction to settle these disputes, especially the court of law from the place where the headquarters of the defender are situated. However, there are some exception,s wich are provided by the procedural law of the state, as for example the court of law from the place where the immovable goods are situated has exclusive jurisdiction to hear all disputes involving those goods. The settlement of disputes by the court of law have some disadvantages for the professionals, as follows: 1. The period of time until the disputes are settled is very long and it imposes the existence of proper relations between parties. 2. The procedural legal rules, meaning the rules concerning the proceedings before the court of law, are very complicated and the parties do not know them. As a consequence, they must be assisted by lawyers before the court of law and lawyers are quite expensive. Due to these disadvantages, the professionals choose alternative ways for the settlement of disputes, such as the arbitration. The arbitration represents a jurisdictional way for the settlement of disputes. It means that the hearing and the settlement of the disputes between the parties is performed by a person or persons chosen or agreed to by the parties. The parties of the contract may choose the arbitration to settle the disputes only if the procedural law of their country allows them to do so. For example, in Romania the Code of Civil Procedure allows the parties to choose the arbitration in order to settle certain categories if disputes, such as dispute between professionals. The arbitration represents a special way for the settlement of disputes, which derogates for the usual jurisdiction of the court of law. Due to this aspect, there are special ways used in order to refer a dispute to arbitration. Therefore, a dispute may be submitted to arbitration in 2 ways, as follows: 1. According to the agreement between states, by means of an international convention concluded for this purpose. 2. According to the will of the parties.
The will of the parties may be expressed by means of an arbitration clause included in the contract or by separate arbitration agreement. The arbitration clause (clauza compromisorie) is provided by the contract concluded between the parties, either at the moment of concluding the contract or during its performance. However, the arbitration clause must be agreed and provided before the dispute arises. It supposes the agreement of the parties to submit the arbitration any eventual dispute between them arising in relation to the contract by excluding the usual jurisdiction of the court of law. The arbitration clause must fulfill the following conditions, under the sanction of the absolute nullity: 1. to be concluded in written form, regardless of the form requested by the law for the valid conclusion of the contract; 2. to be precise; 3. to express the will of the parties to settle the eventual dispute by means of arbitration; 4. to provide the competent arbitration body, the way of appointing the arbitrators and the applicable rules of proceeding. Example: the parties to the contract agree to refer to an arbitration any eventual disputes between them in relation to the present contract and the International Court of Arbitration of the Romanian Chamber of Commerce has jurisdiction to hear such disputes, the proceedings being regulated by the own rules of this court. The arbitration agreement (compromis) is concluded by the parties after the dispute has arisen. It supposes the agreement of the parties to submit to arbitration the dispute between them by excluding the usual jurisdiction by the court of law. In order to conclude an arbitration agreement, the parties should have provided in the contract an arbitration clause. In all cases, the arbitration agreement must be concluded in written form and provide the following elements: 1. the agreement of the parties to submit to arbitration the existing dispute; 2. the choice of the arbitration body; 3. the way of appointing the arbitrators 4. the applicable law, if any.
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Contract Law

Contract Law - Course

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Course 5 The consent of the parties

The lawful and moral consideration

Course 7 The legal form

The nullity of the act

The extinctive prescription

Course 9 The conclusion of the contract

The effects of the contract

The content of the contract

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