NOTES PART 7

BUSINESS CONTRACTS
As previously mentioned, the law imposes on us all a variety of obligations and a failure to abide by these can produce consequences which may be expensive. Such obligations can derive from the general law for instance, a duty not to harm ones fellow citizen through negligent conduct. owever, obligations can also be created by agreement. !f two or more persons enter into a contract in which they agree to honor certain promises, the law recognizes the binding nature of these promises and should either of the parties fail to carry out their underta"ing, the other can see" the assistance of the court.

#he essential value of such an arrangement is the certainty it provides.

!n other words, each party is entitled to rely on performance by the other of the promises made with the assurance that the law will hold to account a party in default. The security so generated has made the contract the cornerstone o !usiness re"ationships#

#he comments above stress the idea that a contract results from a vo"untary agreement entered into !y the parties#

owever, while it may be true to say that all contracts are agreements, the converse is not true. Not a"" agreements are contracts. $early everyone during the course of a wee" will ma"e a variety of agreements, some of which will be binding as contracts and others not. !n any %urisdiction there has to be a distinction between agreements recognized by the law as "ega""y !inding and those which are not. &nder most systems of law, in order to have the status o a contract, an agreement must display certain characteristics. 'asically, these are(

) compliance with any required form* ) an offer which has been accepted* ) capacity of the parties* ) in common law %urisdictions, the presence of +consideration* ) contractual intention* ,

) absence of any potential invalidating factors, such as mista"e, illegality, duress, and so on.

ALBANIA

#he most important source of obligations 'ilateral %uridical action -expression of willingness by two parties in order to create definite %uridical consequences. /egulated by the articles 012 3ivil 3ode and ongoing

Artic"e $%& A contract is the agreement of two or more parties to establish, regulate or extinguish a legal relationship. Artic"e $$' #he parties can freely determine the contents of the contract within the limits imposed by law.

Agreement 4xpression of willingness to enter into an agreement 5arties 6uridical capacity

(uridica" Capacity 4very physical person en%oys full and equal capacity in order to have civil rights and obligations, within the limits defined by the law. 6uridical capacity is acquired at the time the person is born alive and ends with his death. 7hen the child is born alive, it en%oys %udicial capacity from the time of the pregnancy. 3ivil rights of a physical person can not be limited, except exclusions provided by law. 8

#he %uridical action that places limits to the legal capacity of a physical person is invalid.

The capacity to act #he person who reaches eighteen years old wins the full rights so that by his acts he gains rights and holds civil obligations. #he full capacity to act is gained through marriage by the wife who has not reached the age of eighteen years. She does not loose this capacity even when the marriage is declared invalid or divorced before reaching the age of eighteen years old.

Characteristics

4nforcement in case one party does not fulfill it the other has the right to file a complain in court. So we enter an agreement having confidence that we want reply only on the other parties will to fulfill the contract but also of the state. 9ives security to the social order.

Conditions or the va"idity o a contract

,. 8. :. ;.

approval of parties legal reason ob%ect form

Artic"e $$) Re*uisites o Contracts #he requisites of the contract are( agreement of the party that has underta"en the obligation, the motive for the obligation, the ob%ect that forms the content of the contract, and the form as prescribed by law.
,.

Coincidence o the +i""ingness o the parties to create rights and o!"igations

#he willingness of parties is fundamental autonomy of willingness principle contractual freedom principle
,. 8.

the freedom to %oin in a contract or not to choose with whom to enter a contract :

:. ;.

to define the conditions, content, form to change or end the contract on agreement

5arties have to express themselves on( <undamental conditions ob%ect of the contract, price or period for the contract to be valid b. 9eneral conditions they are defined in law, even if the parties do not include they are not a condition for the validity c. =ccasional conditions they are included with the willingness of the parties -not a condition for validity.
a. 8.

,ega" reason - +hy the legal reason is unlawful( if it is in violation of the law> the public order> aiming at avoiding a legal rule

#he legal reason is different in different contracts ?onation contract the legal reason is the increase of property without the payment of the accepting party 3ontract of sale the obligations of party is to give and ob%ect and ta"e money, so the transferring of property
:.

O!.ect - shou"d !e

Artic"e $7/ O!.ect o Contract #he ob%ect of a contract must be possible, lawful, determined, or determinable. Possi!"e nobody can be obligated to do something he cannot -if the ob%ect has been excluded from civil circulation ,a+ u" if the performance of a definite action is prohibited by law 0etermined we "now the ob%ect at the moment of performance of the contract 0etermina!"e we don@t "now the ob%ect at the time of performance of contract -auction.
;.

1orm 2 if the law requires a definite form it should be done in that form 3ontrary to the popular belief that a contracts validity depends on it being in writing, in most %urisdictions an oral contract can be perfectly valid. #he problem with a purely oral contract, however, re"ates to proo # ;

!f one of the parties to such a contract alleges that the other has failed to honor its terms, the court will be una!"e to assist un"ess satis actory proo can be produced showing precisely what was agreed. Common sense3 there ore3 +ou"d dictate that3 +here the contract is comp"icated and4or invo"ves signi icant sums o money3 +ritten evidence in the orm o signed documentation is essentia"# ?espite the general principle that a contract can ta"e any form, in some circumstances the law insists on the presence of writing. #his requirement may be either formal or evidential. 5here the re*uirement is orma" the a!sence o the +riting +i"" ma6e the contract void - that is3 o no e ect# !n civil law %urisdictions the most formal writing that can be required is the notarial act.

ere a document is drawn up by and signed before an official "nown as a notary. 4x( 3ontracts involving the sale or mortgaging of land very often are required under civil law to follow this form and, depending on the particular %urisdiction, such a requirement may also extend to other types of contract.

<ormal contract A proof>validity 4x( 3ontract of sale of immovable goods notary act B registration -office of registration of immovable property. Standard 3ontract after 7ar ! Adhesion 3ontracts one party defines the terms the other has to approve and sign.

A standard orm contract -sometimes referred to as an adhesion contract. is a contract between two parties that does not a""o+ or negotiation, i.e. take it or leave it. !t is often a contract that is entered into between unequal bargaining partners, such as when an individual customer is given a contract by the salesperson of a multinational corporation. #he customer is in no position to renegotiate the standard terms of the contract and the companyCs representative usually does not have the authority to do so. 7hile adhesion contracts, in and of themselves, are not illegal per se, there exists a very real possibility for unconscionability. Types on contracts
,.

typical D regulated by law directly atypical D not but not prohibited

8.

primary D they exist separately secondary D not, but not prohibited negotiable D standard not negotiable if they want they sign if not they don@t

:. ;.

unilateral D one side %ust duties the other %ust obligations bilaterial D duties and rights for both parties

Artic"e $$7 Bi"atera" and Uni"atera" Contracts #he contract is unilateral when one of the parties has obligations and the other does not have any other obligations. Artic"e $$8 #he contract is bilateral when both parties have reciprocal obligations toward each other. ;. 7ith payment>without payment
1. 0.

3onsensual>real <ormal>nonformal

Binding in contracts #he contract becomes binding when the parties have freely expressed their willingness that they agree with all the fundamental terms of contract
E

formal and informal contract

Steps( two phases 5roposal Acceptance

,.

Negotiation

-it can happen that there is no negotiation %ust proposal and than the other party %ust accepts or not. $egotiation and proposal are always lin"ed to being bonaAfides.

!f any of the parties "new sth that it would cause the contract to be invalid he has the right to inform otherwise has to pay damages.
8.

Proposa" another party

dec"aration o one party to enter in an agreement +ith

Fust be comp"ete to create legal consequences 0

A#o contain fundamental conditions 4x. !n case the sale proposal lac"s the price it has no validity as proposal

eaded to a concrete person #he proposing person has to be ready to !ind himse" with the contract

Pu!"ic o er - $7) civi" code says that they ho"d a dominating position in the mar6et they must contract +ith every person +ithin the scope o their activity e9# Te"ephony4+ater4e"ectricity they cannot say I don:t +ant to .oin in contract#

#he proposal has a time for its validity if it hasn@t the time will be a reasonable one having in mind the circumstances, communications methods etc. #he proposal ma"er is obligated to "eep it until has reached the other party and it has given an answer. e cannot withdraw, only before it has reached the other party.

Is di erent rom negotiations4 commercia"s4announcements in ne+spapers - they invite a"" peop"e to enter in negotiations# The !inding in a proposa" is inherited3 e9cept +hen it is re"ated to persona" a!i"ities# Acceptance

:.

?eclaration of the person who has been proposed that he accepts the content of it and wants to %oin in contract. Comp"ete4 ;eaded to the person +ho made the proposa"4Timing +ithin the time given in the proposa" 7hen is the moment we bind ourselves with the contractG
,. 8.

if there is a term we will apply it when the proposing party receives the approval

:.

when the approving party starts the execution without sending the approval.

6&S# /4A? Artic"e $$< 1ormation o the Contract 7hen the contract contains only the obligation of the offeror, the offeree can re%ect the proposal within the term specified or that derives from the nature of the agreement. !n the absence of such refusal, the contract is deemed to be formed. Artic"e $$% #he offeror is bound by his proposal except when provided differently. 7hen the offer is refused or not accepted within the time provided, the offer lapses. !f no time limit is set for the acceptance, the offeror is bound by the offer for the time that is usually, or according to the circumstances, necessary, for the acceptance of the other party to reach him. Artic"e $$$ #he offer of a contract made to a person that is present without a term for its acceptance, loses its power if this person does not accept this offer immediately. Artic"e $$7 7hen the offeror has specified a time limit for the acceptance, it is necessary for the acceptance to come within that time. #he offeror can treat a late acceptance as effective provided that he immediately so informs the other party. 7hen the acceptance is sent on time, but it reaches the offeror late, he should inform the offeree immediately if he does not want to be bound by his offer any longer. Artic"e $$/ An offer can be revo"ed if the offeror notifies the other party, before the offer reaches that party, that he has revo"ed the offer. #his rule is also applied to the revocation of acceptance. Artic"e $$& 7hen at the request of the offeror or ta"ing into account the nature of the transaction and circumstances connected to it, results that it is not necessary to wait for an expression of acceptance, or the duty to perform arises without a prior reply, the contract is concluded at the time and place in which performance begins. #he party beginning performance must promptly give notice to the other party and, otherwise he is liable for compensation of damages. Artic"e $7' An acceptance that does not conform to the offer is a re%ection and equivalent to a new offer. Artic"e $77 I

#he offer is valid when it incorporates the essential elements of the contract that the !nterpretation parties see" to conclude, except when under the circumstances it produces a different result. Artic"e $78 #he contracting party can withdraw from the contract within seven days of its conclusion, without stating reasons, when( A the contract is concluded at the wor" place or domicile of one of the parties, during an excursion organized in a public place, or in such conditions that do not correspond to a normal negotiating situation* A in a credit contract for the purchase of a consummable good, the seller should give the buyer written notice of the right to withdraw from the contract with the above conditions, otherwise the period for withdrawal is one year. Artic"e $7) An enterprise that has a dominant position in the mar"et is obliged to contract with anyone who see"s a contract within its field of activity, according to the laws and commercial customs. #he completion of a contract cannot be refused without a legal reason. Artic"e $7< ?uring the negotiation and formation of the contract the parties must act in good faith with one another. A party who "nows, or should "now, the existence of a reason for invalidity of the contract and does not give notice to the other party is bound to compensate for the damage suffered by the latter in replying, without fault, on the validity of the contract. Artic"e $7% !f one of the contracting parties has professional "nowledge and the other party has complete reliance, the first is obliged to give in good faith information and instructions. Artic"e $7$ #he contract is completed when the parties have demonstrated their mutual will, agreeing to all the essential conditions. #his expression of will can be expressed or silent. Artic"e $77 Un"a+ u" =otive !n a contract, the motive is unlawful when it is contrary to mandatory rules, public policy, or when the contract becomes a means to avoid the fulfillment of a rule.

So 5;EN is the time +e !ind ourse"ves to the contract>

,.

!f the parties are in the same place and present, the expression of their willingness in that moment, signifies that they are bind in a contract. 2

!f there is a term in contract stating the enforcement of the contract, the contract will start on that term. :. !f they are in different places( a. ?eclaration #heory Agreement of parties>meetings of mind b. Sending #heory sending the reply by the person who accepted> deposit in mail c. /eceiving theory receiving the approval for the proposal d. 'ecoming effectively informed on the acceptance
8.

Revocation o the contract

Artic"e $78 #he contracting party can withdraw from the contract within seven days of its conclusion, without stating reasons, when( A the contract is concluded at the wor" place or domicile of one of the parties, during an excursion organized in a public place, or in such conditions that do not correspond to a normal negotiating situation* A in a credit contract for the purchase of a consummable good, the seller should give the buyer written notice of the right to withdraw from the contract with the above conditions, otherwise the period for withdrawal is one year. C;APTER II - INTERPRETATION O1 CONTRACT Artic"e $/7 7hen interpreting a contract, the common and real intent of the parties must be sought, not limited to the literal meaning of the words, and including their overall understanding before and after the conclusion of the contract. Artic"e $/8 4very clause of the contract is interpreted with reference to all the others, attributing to each the meaning resulting from the act as a whole. #he contract shall be interpreted according to good faith. Artic"e $/) !n case of doubt, the contract or the individual clauses shall be interpreted in a manner which they may have some effect, rather than a manner in which they would have none.

E ects o contract? ,J

,.

contract is "a+ but is does not only force the parties to act according to its terms but also according to the law the contract may have effect on other parties only if the law states that. #he contract is passed to the inheriting persons, except when it is strictly personal -ta"e over contract. sipermarr%a sculpture. 3an end only if it is approved by both parties &nilateral withdrawal without reasonable cause and consequences is not allowed.

8. :.

;. 1.

Contracts on third party benefit #he third party does not participate in contract drafting. #hus the other two parties cannot impose duties on him -would be illogical. instead they can give rights. Kife insurance contract companyDinsured who agrees that after his death the insurance amount will pass to a third party. #he third party can accept or not. Ending o a contract @+e are not ta"6ing o inva"idityA And should not be confused with the execution of all duties in the contract. !n case the contract is not fulfilled by one party the other party has the right to( a. request the other party to fulfill, and pay the damages caused by the delay
b.

ending of the contract and damages

4nding of contract willingness of both parties if we have a unilateral non fulfillment the other party is entitled to( a.execution in nature of the obligation B damages b. damages

,,