Product Code Database
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of those at a future date. The activities and intentions of the parties entering into a contract may be referred to as contracting. In the event of a breach of contract, the injured party may seek legal remedy such as damages or equitable remedies such as specific performance or rescission. A binding agreement between actors in international law is known as a treaty.
Contract law, the field of the law of obligations concerned with contracts, is based on the principle that agreements must be honoured.Hans Wehberg, Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.; Trans-Lex.org Principle of Sanctity of contracts Like other areas of private law, contract law varies between jurisdictions. In general, contract law is exercised and governed either under common law jurisdictions, civil law jurisdictions, or mixed-law jurisdictions that combine elements of both common and civil law. Common law jurisdictions typically require contracts to include consideration in order to be valid, whereas civil and most mixed-law jurisdictions solely require a meeting of the minds between the parties.
Within the overarching category of civil law jurisdictions, there are several distinct varieties of contract law with their own distinct criteria: the German tradition is characterised by the unique doctrine of abstraction, systems based on the Napoleonic Code are characterised by their systematic distinction between different types of contracts, and Roman-Dutch law is largely based on the writings of renaissance-era Dutch jurists and case law applying general principles of Roman law prior to the Netherlands' adoption of the Napoleonic Code. The UNIDROIT Principles of International Commercial Contracts, published in 2016, aim to provide a general harmonised framework for international contracts, independent of the divergences between national laws, as well as a statement of common contractual principles for arbitrators and judges to apply where national laws are lacking. Notably, the Principles reject the doctrine of consideration, arguing that elimination of the doctrine "brings about greater certainty and reduce litigation" in international trade. UNIDROIT Principles of International Commercial Contracts The Principles also rejected the abstraction principle on the grounds that it and similar doctrines are "not easily compatible with modern business perceptions and practice".
Contract law can be contrasted with tort law (also referred to in some jurisdictions as the law of delicts), the other major area of the law of obligations. While tort law generally deals with private duties and obligations that exist by operation of law, and provide remedies for civil wrongs committed between individuals not in a pre-existing legal relationship, contract law provides for the creation and enforcement of duties and obligations through a prior agreement between parties. The emergence of , , and quasi-delicts renders the boundary between tort and contract law somewhat uncertain.Beatson, Anson's Law of Contract (1998) 27th ed. OUP, p.21
Contracting is a specific phase within procurement. It includes creating, negotiating, and managing contracts.
Obligations created by contracts can generally be transferred, subject to requirements imposed by law. Laws regarding the modification of contracts or the assignment of rights under a contract are broadly similar across jurisdictions.For the assignment of claim see Trans-Lex.org In most jurisdictions, a contract may be modified by a subsequent contract or agreement between the parties to modify the terms governing their obligations to each other. This is reflected in Article 3.1.2 of the Principles of International Commercial Contracts, which states that "a contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirement". Assignments are typically subject to statutory restrictions, particularly with regard to the consent of the other party to the contract.
Contract theory is a large body of Jurisprudence that addresses normative and conceptual questions in contract law. One of the most important questions asked in contract theory is why contracts are enforced. One prominent answer to this question focuses on the economic benefits of enforcing bargains. Another approach, associated with Charles Fried in his book Contract as Promise, maintains that the general purpose of contract law is to enforce promises . Other approaches to contract theory are found in the writings of legal realism and critical legal studies theorists, which have propounded Marxist and feminism interpretations of contract. Attempts at understanding the overarching purpose and nature of contracting as a phenomenon have been made, notably relational contract theory. Additionally, certain academic conceptions of contracts focus on questions of transaction cost and 'efficient breach' theory.
Another important dimension of the theoretical debate in contract is its place within, and relationship to a wider law of obligations. Obligations have traditionally been divided into contracts, which are voluntarily undertaken and owed to a specific person or persons, and obligations in tort which are based on the wrongful infliction of harm to certain protected interests, primarily imposed by the law, and typically owed to a wider class of persons. Research in business and management has also paid attention to the influence of contracts on relationship development and performance.
Private international law is rooted in the principle that every jurisdiction has its own distinct contract law shaped by differences in public policy, judicial tradition, and the practices of local businesses. Consequently, while all systems of contract law serve the same overarching purpose of enabling the creation of legally enforceable obligations, they may contain significant differences. Accordingly, many contracts contain a choice of law clause and a forum selection clause to determine the jurisdiction whose system of contract law will govern the contract and the court or other forum in which disputes will be resolved, respectively. Failing express agreement on such matters in the contract itself, countries have rules to determine the law governing the contract and the jurisdiction for disputes. For example, European Union Member States apply Article 4 of the Rome I Regulation to decide the law governing the contract, and the Brussels I Regulation to decide jurisdiction.
The hawala system also influenced the development of agency in common law and in civil laws. In Roman law, agents could not act on behalf of other individuals in the formation of binding contracts. On the other hand, Islamic law accepted agency as permissible in not only contract law but in the law of obligations generally, an approach that has since become mainstream in common law, mixed law, and most civil law jurisdictions. Analogously, the transfer of debt, which was not accepted under Roman law, became widely practiced in medieval European commerce, owing largely to trade with the Muslim world during the Middle Ages.
Since the nineteenth century, two distinct traditions of contract law emerged. Jurisdictions that were previously British colonies generally adopted English law. Other jurisdictions largely adopted the civil law tradition, either inheriting a civil law legal system at independence or adopting civil and commercial codes based on German or French law. While jurisdictions such as Japan, South Korea, and the Republic of China modelled their contract law after the German pandectists tradition, the Arab world largely modelled its legal framework after the Napoleonic Code. While the Netherlands adopted a legal system based on the Napoleonic Code in the early 19th century, Dutch colonies retained the precedent-based Roman-Dutch law. British colonies in Southern Africa adopted Roman-Dutch principles in areas of private law via reception statutes adopting South African law, retaining Roman-Dutch law for most matters of private law while applying English common law principles in most matters of public law. Saint Lucia, Mauritius, Seychelles, and the Canadian province of Quebec are mixed-law jurisdictions which primarily adhere to French legal tradition with regard to contract law and other principles of private law.
Over the course of the nineteenth and twentieth century, the majority of jurisdictions in the Middle East and East Asia adopted civil law legal frameworks based on the Napoleonic, German, or Swiss model. The Napoleonic Code shapes contract law across much of the Middle East, while contract law in Japan, South Korea, and the Republic of China is rooted in the German pandectists tradition. In 1926, Turkey replaced its Ottoman-era mixture of Islamic and secular laws with a secular civil code modelled after that of Switzerland, with its contract and commercial law modelled after the Swiss Code of Obligations, which was in turn influenced by German and French legal traditions. Following the Meiji Restoration, Japan adopted a Six Codes modelled primarily on German law, adopting its commercial code in 1899. The Japanese adaptation of German civil law was spread to the Korean Peninsula and China as a result of Japanese occupation and influence, and continues to form the basis of the legal system in South Korea and the Republic of China. In 1949, Abd El-Razzak El-Sanhuri and Edouard Lambert drafted the Egyptian Civil Code, modelled after the Napoleonic Code but containing provisions designed to fit Arab and Islamic society. The Egyptian Civil Code was subsequently used as a model for the majority of Arab states.
In the 20th century, the growth of export trade led to countries adopting international conventions, such as the Hague-Visby Rules and the UN Convention on Contracts for the International Sale of Goods,Willmott, L, Christensen, S, Butler, D, & Dixon, B 2009 Contract Law, Third Edition, Oxford University Press, North Melbourne bringing the various legal traditions closer together. In the early 20th century, the United States underwent the "Lochner era", in which the Supreme Court of the United States struck down economic regulations on the basis of freedom of contract and the Due Process Clause. These decisions were eventually overturned, and the Supreme Court established a deference to legislative statutes and regulations that restrict freedom of contract.Bernstein DE. (2008). Freedom of Contract. George Mason Law & Economics Research Paper No. 08-51. The need to prevent discrimination and unfair business practices has placed additional restrictions on the freedom of contract. For example, the Civil Rights Act of 1964 restricted private racial discrimination against African-Americans.Douglas D. (2002). Contract Rights and Civil Rights. Michigan Law Review. The US Constitution contains a Contract Clause, but this has been interpreted as only restricting the retroactive impairment of contracts. In the late twentieth and early twenty-first century, consumer protection legislation, such as Singapore's Consumer Protection (Fair Trading) Act 2003, progressively imposed limits upon the freedom of contract in order to prevent businesses from exploiting consumers. Consumer Protection (Fair Trading) Act 2003 (Singapore)
In 1993, Harvey McGregor, a British barrister and academic, produced a "Contract Code" under the auspices of the English and Scottish , which was a proposal to both unify and codify the contract laws of England and Scotland. This document was offered as a possible "Contract Code for Europe", but tensions between English and German jurists meant that this proposal has so far come to naught. In spite of the European Union being an economic community with a range of trade rules, there continues to be no overarching "EU Law of Contract".... indeed the Code was neither published nor adopted by the UK, instead being privately published by an Italian University
In 2021, Mainland China adopted the Civil Code of the People's Republic of China, which codifies its contract law in book three. While generally classified as a civil law jurisdiction, contract law in mainland China has been influenced by a number of sources, including traditional Chinese views toward the role of law, the PRC's socialist background, the Japanese/German-based law of the Republic of China on Taiwan, and the English-based common law used in Hong Kong. Consequently, contract law in the Chinese mainland functions as a de facto mixed system. The 2021 civil code provides for the regulation of nominate contracts in a manner similar to that of jurisdictions such as Japan, Germany, France, and Québec.
A contract cannot be formed without assent of the two parties to be bound by its terms. Normally this is by written signature (which may include an electronic signature), but the assent may also be oral or by conduct. Assent may be given by an agent for a party.
Remedies for breach of contract include damages (monetary compensation for loss) and, for serious breaches only, cancellation..as in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd and The Mihalis Angelos Specific performance and injunction may also be available if damages are insufficient.
In determining if a meeting of the minds has occurred, the intention of contracting parties is interpreted objectively from the perspective of a reasonable person.DiMatteo L. (1997). The Counterpoise of Contracts: The Reasonable Person Standard and the Subjectivity of Judgment . South Carolina Law Review. The "objective" approach towards contractual intent was first used in the English case of Smith v Hughes in 1871. Where an offer specifies a particular mode of acceptance, only acceptance communicated via that method will be valid..The Uniform Commercial Code disposes of the mirror image rule in §2-207, although the UCC only governs transactions in goods in the USA.
Contracts may be or unilateral. A bilateral contract is an agreement in which each of the parties to the contract makes a promise or set of promises to each other. For example, in a contract for the sale of a home, the buyer promises to pay the seller $200,000 in exchange for the seller's promise to deliver title to the property. Bilateral contracts commonly take place in the daily flow of commerce transactions. Less common are unilateral contracts, in which one party makes a promise, but the other side does not promise anything. In these cases, those accepting the offer are not required to communicate their acceptance to the offeror. In a reward contract, for example, a person who has lost a dog could promise a reward if the dog is found, through publication or orally. The payment could be additionally conditioned on the dog being returned alive. Those who learn of the reward are not required to search for the dog, but if someone finds the dog and delivers it, the promisor is required to pay. On the other hand, advertisements which promise bargains are generally regarded not as offers for unilateral contracts but merely "invitations to treat".Feinman JM, Brill SR. (2006). Is an Advertisement an Offer? Why it is, and Why it Matters. Hastings Law Journal. Some have criticised the categorisation of contracts into bilateral and unilateral ones. For example, the High Court of Australia stated that the term unilateral contract is "unscientific and misleading".Wilmot et al, 2009, Contract Law, Third Edition, Oxford University Press, page 34
In certain circumstances, an implied contract may be created. A contract is implied in fact if the circumstances imply that parties have reached an agreement even though they have not done so expressly. For example, if a patient refuses to pay after being examined by a doctor, the patient has breached a contract implied in fact. A contract which is Quasi-contract is sometimes called a quasi-contract. Such contracts are means for to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. Quantum meruit claims are an example.
Where something is advertised in a newspaper or on a poster, the advertisement will not normally constitute an offer but will instead be an invitation to treat, an indication that one or both parties are prepared to negotiate a deal. Partridge v Crittenden 1968 1 WLR 1204 Harris v Nickerson (1873) LR8QB 286 Household Fire Insurance v Grant 1879 An exception arises if the advertisement makes a unilateral promise, such as the offer of a reward, as in the case of Carlill v Carbolic Smoke Ball Co,. decided in Victorian era. The company, a pharmaceutical manufacturer, advertised a smoke ball that would, if sniffed "three times daily for two weeks", prevent users from catching the Influenza. If it failed to do so, the company promised to pay the user pound sterling100, adding that they had "deposited £1,000 in the Alliance Bank to show their sincerity in the matter". When the company was sued for the money, they argued the advert should not have been taken as a serious, legally binding offer but a gimmick. The Court of Appeal held that it would appear to a reasonable man that Carbolic had made a serious offer and determined that the reward was a contractual promise.
As decided in the case of Pharmaceutical Society of Great Britain v Boots Cash Cashiers, an offer that is made in response to an invitation to treat, without any negotiation or explicit modification of terms, is presumed to incorporate the terms of the invitation to treat. Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd , 1953, 1 Q.B. 401
The insufficiency of past consideration is related to the pre-existing duty rule. For example, in the early English case of Eastwood v. Kenyon 1840, the guardian of a young girl took out a loan to educate her. After she was married, her husband promised to pay the debt but the loan was determined to be past consideration. In the early English case of Stilk v. Myrick 1809, a captain promised to divide the wages of two deserters among the remaining crew if they agreed to sail home short-handed; however, this promise was found unenforceable as the crew were already contracted to sail the ship. The pre-existing duty rule also extends to general legal duties; for example, a promise to refrain from committing a tort or crime is not sufficient. Collins v. Godefroy (1831) 1 B. & Ad. 950.
Some jurisdictions have modified the English principle or adopted new ones. For example, in the Indian Contract Act, 1872, past consideration constitutes valid consideration, and that consideration may be from any person even if not the promisee.The Indian Contract Act 1872 s.2d The Indian Contract Act also codifies examples of when consideration is invalid, for example when it involves marriage or the provision of a public office.
While the purpose of the doctrine was ostensibly to protect parties seeking to void oppressive contracts, this is currently accomplished through the use of a sophisticated variety of defences available to the party seeking to void a contract. In practice, the doctrine of consideration has resulted in a phenomenon similar to that of Ḥiyal in Islamic contracts, whereby parties to a contract use technicalities to satisfy requirements while in fact circumventing them in practice. Typically, this is in the form of "peppercorn" consideration, i.e. consideration that is negligible but still satisfies the requirements of law.
The doctrine of consideration has been expressly rejected by the UNIDROIT Principles of International Commercial Contracts on the grounds that it yields uncertainty and unnecessary litigation, thereby hindering international trade. Similarly, the United Nations Convention on Contracts for the International Sale of Goods does not require consideration for a contract to be valid, thereby excluding the doctrine with regard to contracts covered by the convention even in common law jurisdictions where it would otherwise apply. The continued existence of the doctrine in common law jurisdictions is controversial. Scots lawyer Harvey McGregor's "Contract Code", a Law Commission-sponsored proposal to both unite and codify English and Scots Law, proposed the abolition of consideration. Some commentators have suggested for consideration to be replaced by estoppel as a basis for contracts.e.g. P.S. Atiyah, "Consideration: A Restatement" in Essays on Contract (1986) p.195, Oxford University Press
Written contracts have typically been preferred in common law legal systems.Michida S. (1992) Contract Societies: Japan and the United States Contrasted. Pacific Rim Law & Policy Journal. In 1677 England passed the Statute of Frauds which influenced similar statute of frauds laws in the United States and other countries such as Australia. In general, the Uniform Commercial Code as adopted in the United States requires a written contract for tangible product sales in excess of $500, and for real estate contracts to be written. If the contract is not required by law to be written, an oral contract is generally valid and legally binding.Trans-Lex.org: international principle The United Kingdom has since replaced the original Statute of Frauds, but written contracts are still required for various circumstances such as land (through the Law of Property Act 1925).
Apart from using a written document. a valid contract may generally be made orally or even by conduct. An oral contract may also be called a parol contract or a verbal contract, with "verbal" meaning "spoken" rather than "in words", an established usage in British English with regards to contracts and agreements, and common although somewhat deprecated as "loose" in American English. An unwritten, unspoken contract, also known as "a contract implied by the acts of the parties", which can be legally implied either from the facts or Quasi-contract. Implied-in-fact contracts are real contracts under which parties receive the "benefit of the bargain".. However, contracts implied in law are also known as quasi-contracts, and the remedy is quantum meruit, the fair market value of goods or services rendered.
If the terms of a contract are so uncertain or incomplete as to elude reasonable interpretation, the parties cannot have reached an agreement in the eyes of the law.Fry v. Barnes (1953) 2 D.L.R. 817 (B.C.S.C) An agreement to agree does not constitute a contract, and an inability to agree on key issues, which may include such things as Contract price or safety, may cause an entire contract to fail. However, a court will attempt to give effect to commercial contracts where possible, by construing a reasonable construction of the contract. Hillas and Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503 In New South Wales, even if there is uncertainty or incompleteness in a contract, the contract may still be binding on the parties if there is a sufficiently certain and complete clause requiring the parties to undergo arbitration, negotiation or mediation.See Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236 Thomson Reuters
Courts may also look to external standards, which are either mentioned explicitly in the contract. or implied by common practice in a certain field. Three Rivers Trading Co., Ltd. v. Gwinear & District Farmers, Ltd. (1967) 111 Sol. J. 831 In addition, the court may also imply a term; if price is excluded, the court may imply a reasonable price, with the exception of land, and second-hand goods, which are unique.
If there are uncertain or incomplete clauses in the contract, and all options in resolving its true meaning have failed, it may be possible to sever and void just those affected clauses if the contract includes a severability clause. The test of whether a clause is severable is an objective test—whether a reasonable person would see the contract standing even without the clauses. Typically, non-severable contracts only require the substantial performance of a promise rather than the whole or complete performance of a promise to warrant payment. However, express clauses may be included in a non-severable contract to explicitly require the full performance of an obligation."Cutter v Powell" (1795) 101 ER 573
English courts have established that any intention to make the contract a "complete code", so as to exclude any option to resort to a common law or extra-contractual remedy, must be evidenced in "clear express words": otherwise a "presumption that each party to a contract is entitled to all remedies which arise by operation of law" will be honoured by the courts.Swarbrick, D., Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd: HL 1974, updated on 4 August 2022, accessed on 17 September 2024. This case is referred to as an authority in this regard in the High Court case of Stocznia Gdynia SA v Gearbulk Holdings Ltd., paragraph 9, delivered on 2 May 2008, accessed on 17 September 2024
In a less technical sense, however, a condition is a generic term and a warranty is a promise. In specific circumstances these terms are used differently. For example, in English insurance law, violation of a "condition precedent" by an insured is a complete defence against the payment of claims.Burling JM. (2011). Research Handbook on International Insurance Law and Regulation. Edward Elgar Publishing. In general insurance law, a warranty is a promise that must be complied with. In product transactions, warranties promise that the product will continue to function for a certain period of time. In the United Kingdom, the courts determine whether a term is a condition or warranty, regardless of how or whether the term was classified in the contract. Poussard v Spiers and Pond (1876) 1 QBD 410 Bettini v Gye (1876) 1 QBD 183 Statute may also declare a term or nature of term to be a condition or warranty. For example, the Sale of Goods Act 1979 s15A provides that terms as to title, description, quality and sample are generally conditions.As added by the Sale of Goods Act 1994 s4(1). The United Kingdom has also developed the concept of an "intermediate term" (also called innominate terms), first established in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd 1962.
Traditionally, while warranties are contractual promises which are enforced through legal action, regardless of materiality, intent, or reliance, representations are traditionally precontractual statements that allow for a tort-based action (such as the tort of deceit) if the misrepresentation is negligent or fraudulent.Primack MA. (2009). Representations, Warranties and Covenants: Back to the Basics in Contracts. National Law Review. In U.S. law, the distinction between the two is somewhat unclear. Warranties are generally viewed as primarily contract-based legal action, while negligent or fraudulent misrepresentations are tort-based, but there is a confusing mix of case law in the United States. In modern English law, sellers often avoid using the term "represents" in order to avoid claims under the Misrepresentation Act 1967, while in America the use of "warrants and represents" is relatively common.Ferara LN, Philips J, Runnicles J. (2007). Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements . Jones Day Publications.
English courts may weigh parties' emphasis in determining whether a non-contractual statement is enforceable as part of the contract. In the English case of Bannerman v White, Bannerman v White [1861] EngR 713; (1861) 10 CBNS 844, Court of Common Pleas (United Kingdom). the court upheld a rejection by a buyer of hops which had been treated with sulphur since the buyer explicitly expressed the importance of this requirement. The relative knowledge of the parties may also be a factor, as in English case of Bissett v Wilkinson, Bissett v Wilkinson 1927 AC 177. where the court did not find misrepresentation when a seller said that farmland being sold would carry 2000 sheep if worked by one team; the buyer was considered sufficiently knowledgeable to accept or reject the seller's opinion.
According to Andrew Tettenborn et al, there are five differing circumstances under which a contractual term will become a condition:
Each contractual party must be a "competent person" having legal capacity. The parties may be natural persons ("individuals") or juristic persons (""). An agreement is formed when an "offer" is accepted. The parties must have an intention to be legally bound; and to be valid, the agreement must have both proper "form" and a lawful object. In England (and in using English contract principles), the parties must also exchange "consideration" to create a "mutuality of obligation", as in Simpkins v Pays. Elements of a Contract – Contracts
In the United States, persons under 18 are typically minor and their contracts are considered voidable; however, if the minor voids the contract and benefits received by the minor are returnable, those benefits must be returned. The minor can enforce breaches of contract by an adult while, absent ratification upon the minor's reaching adulthood, the adult's enforcement may be more limited. (2025). 9780199299553, Oxford University Press. ISBN 9780199299553
Meanwhile, in Singapore, while individuals under the age of 21 are regarded as minors, sections 35 and 36 of the Civil Law Act 1909 provide that certain contracts entered into by minors aged 18 and above are to be treated as though they were adults. Civil Law Act 1909 s35-36 (Singapore). Additionally, the Minors' Contracts Act 1987 as applicable in Singapore and in England and Wales provides that a contract entered into by a minor is not automatically unenforceable and that a "court may, if it is just and equitable to do so, require the minor defendant to transfer to the plaintiff any property acquired by the defendant under the contract, or any property representing it". Minors' Contracts Act 1987
In addition to age, a party to a contract may lack capacity on the grounds of mental illness or senility. Under Singapore's Mental Capacity Act 2008, for example, "a person lacks capacity in relation to a matter if at the material time the person is unable to make a decision for himself or herself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain". Mental Capacity Act 2008 s4 (Singapore) Where an individual lacks capacity on grounds of mental illness or senility, a relative or other responsible person may obtain a lasting power of attorney to make decisions concerning the "personal welfare" of the person lacking capacity, the "property and financial affairs" of the person, or both. Mental Capacity Act 2008 s11 (Singapore) Questions as to whether an individual has the capacity to make decisions either generally or with regard to a particular matter or class of matters are generally resolved by a judicial declaration and the court making the declaration may appoint one or more individuals to act as conservatorship (American English) or deputies (Commonwealth English) for the person lacking capacity. Part 5 of the Mental Capacity Act 2008 (Singapore)
or legal precedent may create implied contractual terms, particularly in standardised relationships such as employment or shipping contracts. The Uniform Commercial Code of the United States also imposes an implied covenant of good faith and fair dealing in performance and enforcement of contracts covered by the Code. In addition, Australia, Israel and India imply a similar good faith term through laws while the Supreme Court of Canada has developed a doctrine of honest contractual performance. While English law does not impose such a requirement, there is nevertheless an overarching concept of "legitimate expectation" in most common law jurisdictions.
Most jurisdictions have specific legal provisions which deal directly with sale of goods, lease transactions, and trade practices. In the United States, prominent examples include, in the case of products, an implied warranty of merchantability and fitness for a particular purpose, and in the case of homes an implied warranty of habitability. In the United Kingdom, implied terms may be created by statute (e.g. Sale of Goods Act 1979, the Consumer Rights Act 2015 and the Hague-Visby Rules), common law (e.g. The Moorcock, The Moorcock (1889) 14 PD 64. which introduced the "business efficacy" test), previous dealings (e.g. Spurling v Bradshaw), or custom (e.g. Hutton v Warren). Hutton v Warren 1836 M&W 466
In many common law jurisdictions, insurance contracts are subject to a term implied in law of Uberrima fides, and this is codified (for example) in section 17 of Singapore's Marine Insurance Act 1909. Marine Insurance Act 1909 s.17 (Singapore) Additionally, depending on jurisdiction, marine and life insurance contracts may require the policyholder to have an insurable interest in the asset or life insured. Marine Insurance Act 1909 s.5 (Singapore) Insurance Act 1966 s.146 (Singapore) Report on Reforming Insurance Law in Singapore (Singapore Academy of Law) In contrast, instead of requiring a policyholder to hold an insurable interest in the life insured, German law merely requires the policyholder to obtain the consent of the person whose life is insured. As opposed to being implied by law or fact, a term may be implied on the basis of custom or usage in a particular market or context. In the case of Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur (Aust) Limited,. the requirements for a term to be implied by custom were set out. For a term to be implied by custom it needs to be "so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract".
In the United Kingdom and Singapore, breach of contract is defined in the Unfair Contract Terms Act 1977 as: i non-performance, ii poor performance, iii part-performance, or iv performance which is substantially different from what was reasonably expected. Unfair Contract Terms Act 1977 Innocent parties may repudiate (cancel) the contract only for a major breach (breach of condition),Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd 1962 1 All ER 474; see also .The Mihailis Angelos 1971 1 QB 164 but they may always recover compensatory damages, provided that the breach has caused foreseeable loss.
Compensatory damages compensate the plaintiff for actual losses suffered as accurately as possible. They may be expectation damages, reliance damages or damages. Expectation damages are awarded to put the party in as good of a position as the party would have been in had the contract been performed as promised.. Reliance damages are usually awarded where no reasonably reliable estimate of expectation loss can be arrived at or at the option of the plaintiff. Reliance losses cover expense suffered in reliance to the promise. Examples where reliance damages have been awarded because profits are too speculative include the Australian case of McRae v Commonwealth Disposals Commission. which concerned a contract for the rights to salvage a ship. In Anglia Television Ltd v. Reed1972 1 QB 60 the English Court of Appeal awarded the plaintiff expenditures incurred prior to the contract in preparation of performance.
Common law jurisdictions traditionally distinguish between legitimate liquidated damages, which are valid and enforceable and penalties, which are usually prohibited as against public policy. The traditional test to determine which category a clause falls into was established by the English House of Lords in Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd. In Canadian common law provinces, penalty clauses are considered valid and enforceable provided that they are not unconscionable. Awad v. Dover, 2021 ONSC 5437 (CanLII) Fern Investments Ltd. v. Golden Nugget Restaurant (1987) Ltd., 1994 ABCA 153 (CanLII) Bidell Equipment LP v Caliber Midstream GP LLC, 2020 ABCA 478 (CanLII) The Canadian position is similar to the middle-ground approach taken under Philippine contract law, which provides that a penalty clause providing for liquidated damages is enforceable unless either the clause is "iniquitous or unconscionable" or the breach of contract in question is not one that was envisioned by the parties when they concluded the contract. Philippine Civil Code (Republic Act No. 386) Articles 2226–2228 A similar approach has been adopted by the High Court of Australia and the Supreme Court of the United Kingdom over the first few decades of the twenty-first century; whereby a penalty clause is unenforceable only if it is disproportionate to the "legitimate interests", not restricted to seeking compensation, of the non-infringing party.Cavendish Square Holdings BV v Makdessi 2015 UKSC 67 (Cavendish)Paciocco v Australia & New Zealand Banking Group Ltd 2016 HCA 28
After a breach has occurred, the innocent party has a duty to mitigate loss by taking any reasonable steps. Failure to mitigate means that damages may be reduced or even denied altogether.The UCC states, "Consequential damages... include any loss... which could not reasonably be prevented by cover or otherwise." UCC 2-715.In English law the chief authority on mitigation is British Westinghouse Electric and Manufacturing Co v Underground Electric Railway Co of London1912 AC 673, see especially 689 per Lord Haldane. However, Michael FurmstonMichael Furmston, Cheshire, Fifoot & Furmston's Law of Contract, 15th edn (OUP: Oxford, 2007) p.779. has argued that "it is wrong to express (the mitigation) rule by stating that the plaintiff is under a duty to mitigate his loss",M.P. Furmston, Cheshire, Fifoot & Furmston's Law of Contract, 15th edn (OUP: Oxford, 2007) p.779 n.130. citing Sotiros Shipping Inc v Sameiet, The Solholt. Sotiros Shipping Inc v Sameiet, The Solholt 1983 1 Lloyd's Rep 605. If a party provides notice that the contract will not be completed, an anticipatory breach occurs.
Damages may be general or consequential. General damages are those damages which naturally flow from a breach of contract. Consequential damages are those damages which, although not naturally flowing from a breach, are naturally supposed by both parties at the time of contract formation. An example would be when someone rents a car to get to a business meeting, but when that person arrives to pick up the car, it is not there. General damages would be the cost of renting a different car. Consequential damages would be the lost business if that person was unable to get to the meeting, if both parties knew the reason the party was renting the car. To recover damages, a claimant must show that the breach of contract caused foreseeable loss.See also Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310. Hadley v Baxendale established that the test of foreseeability is both objective or subjective. In other words, is it foreseeable to the objective bystander, or to the contracting parties, who may have special knowledge? On the facts of Hadley, where a miller lost production because a carrier delayed taking broken mill parts for repair, the court held that no damages were payable since the loss was foreseeable neither by the "reasonable man" nor by the carrier, both of whom would have expected the miller to have a spare part in store.
In most common law jurisdictions, such circumstances are dealt with by court orders for "specific performance", requiring that the contract or a part thereof be performed. In some circumstances a court will order a party to perform his or her promise or issue an injunction requiring a party refrain from doing something that would breach the contract. A specific performance is obtainable for the breach of a contract to sell land or real estate on such grounds that the property has a unique value. In the United States by way of the 13th Amendment to the United States Constitution, specific performance in personal service contracts is only legal " as punishment for a crime whereof the party shall have been duly convicted". Both an order for specific performance and an injunction are discretionary remedies, originating for the most part in equity. Neither is available as of right and in most jurisdictions and most circumstances a court will not normally order specific performance. A contract for the sale of real property is a notable exception. In most jurisdictions, the sale of real property is enforceable by specific performance. Even in this case the defences to an action in equity (such as laches, the bona fide purchaser rule, or unclean hands) may act as a bar to specific performance.
In Indian law, the Specific Relief Act 1963 codifies the rules surrounding specific performance and other remedies aside from damages. Relief available under the act is limited to recovery of possession of property, specific performance of contracts, rectification of instruments, rescission of contracts, cancellation of instruments, declaratory relief, and injunctions.
Where appropriate, courts in most common and civil law jurisdictions may permit declaratory relief or rescission of contracts. To rescind is to set aside or unmake a contract. There are four different ways in which contracts can be set aside. A contract may be deemed 'void', 'voidable' or 'unenforceable', or declared "ineffective". Voidness implies that a contract never came into existence. Voidability implies that one or both parties may declare a contract ineffective at their wish. Unenforceability implies that neither party may have recourse to a court for a remedy. Ineffectiveness arises when a contract is terminated by order of a court, where a public body has failed to satisfy the requirements of public procurement law.Public Contracts (Amendments) Regulations 2009, (SI 2009–2992)
Although provisions for the voidability of a contract for conduct of the other party are generally similar across jurisdictions, voidability on the grounds of a third party's conduct is more contentious. Article 3.2.8 of the Principles provides that where conduct constituting grounds for rescission "is imputable to, or is known or ought to be known by, a third person for whose acts the other party is responsible, the contract may be avoided under the same conditions as if the behaviour or knowledge had been that of the party itself". Similarly, while vitiating factors are similar across jurisdictions, the extent to which a failure by another party to a contract may form grounds for rescission or an early termination of contractual obligations varies between jurisdictions. For instance, Mainland China provides that a party may seek to rescind a contract or terminate its remaining obligations if the other party "expresses or indicates by act that it will not perform the principal obligation", "delays performance of the principal obligation and still fails to perform it within a reasonable period of time", or "delays performance of the obligation or has otherwise acted in breach of the contract, thus making it impossible to achieve the purpose of the contract"., Article 563
In common law jurisdictions, to prove misrepresentation or fraud, there traditionally must be evidence that shows a claim was made, said claim was false, the party making the claim knew the claim was false, and that party's intention was for a transaction to occur based upon the false claim. In order to obtain relief, there must be a positive misrepresentation of law and also, the person to whom the representation was made must have been misled by and relied on this misrepresentation: Public Trustee v Taylor.. There are two types of misrepresentation: fraud in the factum and fraud in inducement. Fraud in the factum focuses on whether the party alleging misrepresentation knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void. Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable. Assume two people, Party A and Party B, enter into a contract. Then, it is later determined that Party A did not fully understand the facts and information described within the contract. If Party B used this lack of understanding against Party A to enter into the contract, Party A has the right to void the contract. According to Gordon v Selico 1986 it is possible to misrepresent either by words or conduct. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation. If one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact. Esso Petroleum Co Ltd v Mardon 1976 2 Lloyd's Rep. 305
In Singapore and the United Kingdom, the Misrepresentation Act 1967 provides that innocent misrepresentations can also be grounds for damages and remission of the relevant contract. Misrepresentation Act 1967 Section 35 of the Contract and Commercial Law Act 2017 similarly provides for damages in cases of both innocent and fraudulent misrepresentation in New Zealand. Contract and Commercial Law Act 2017 (New Zealand) In assessing remedies for an innocent misrepresentation, the judge takes into account the likelihood a party would rely on the false claim and how significant the false claim was. Contract law does not delineate any clear boundary as to what is considered an acceptable false claim or what is unacceptable. Therefore, the question is what types of false claims (or deceptions) will be significant enough to void a contract based on said deception. Advertisements utilising "puffing", or the practice of exaggerating certain things, fall under this question of possible false claims.
The foundational principle of "caveat emptor", which means "let the buyer beware", applies to all American transactions. In Laidlaw v. Organ, the Supreme Court decided that the buyer did not have to inform the seller of information the buyer knew could affect the price of the product.
It is a fallacy that an opinion cannot be a statement of fact. If a statement is the honest expression of an opinion honestly entertained, it cannot be said that it involves any fraudulent misrepresentations of fact..
Common law jurisdictions identify three types of mistake in contract: common mistake, mutual mistake, and unilateral mistake.
Aside from fraud and unjustified threats, contracts can also generally be set aside on the grounds that one party exercised its superior bargaining power in order to impose inequitable terms upon the other party. Article 3.2.7 of the Principles provides that "a party may avoid the contract or an individual term of it if, at the time of the conclusion of the contract, the contract or term unjustifiably gave the other party an excessive advantage" and specifies that, in determining whether the term was inequitable, a court or arbitrator should consider the extent to which "the other party has taken unfair advantage of the first party's dependence, economic distress or urgent needs, or of its improvidence, ignorance, inexperience or lack of bargaining skill". In addition to setting the contract aside, Article 3.2.7 also provides that courts may apply the blue pencil doctrine and modify or nullify any inequitable terms while leaving the contract otherwise intact. In common law jurisdictions, the related equitable doctrine of undue influence enables courts to provide a remedy in situations involving one person taking advantage of a position of power or influence over another person. Where a special relationship exists, such as between parent and child or solicitor and client, courts in common law jurisdictions have broad discretion as to whether a remedy is provided. When no special relationship exists, the question is whether there was a relationship of such trust and confidence that it should give rise to such a presumption..See also . Odorizzi v. Bloomfield Sch. Dist., 246 Cal. App. 2d 123 (Cal. App. 2d Dist. 1966) In Australian law, a contract can additionally be set aside due to unconscionable dealing..See also . Firstly, the claimant must show that they were under a special disability, the test for this being that they were unable to act in their best interest. Secondly, the claimant must show that the defendant took advantage of this special disability.
In the 1996 Canada case of Royal Bank of Canada v. Newell Royal Bank of Canada v. Newell 147 D.L.R (4th) 268 (N.C.S.A.). 1996 case and 1997 appeal. a woman forged her husband's signature, and her husband agreed to assume "all liability and responsibility" for the forged checks. However, the agreement was unenforceable as it was intended to "stifle a criminal prosecution", and the bank was forced to return the payments made by the husband. In the U.S., one unusual type of unenforceable contract is a personal employment contract to work as a spy or secret agent. This is because the very secrecy of the contract is a condition of the contract (in order to maintain plausible deniability). If the spy subsequently sues the government on the contract over issues like salary or benefits, then the spy has breached the contract by revealing its existence. It is thus unenforceable on that ground, as well as the public policy of maintaining national security (since a disgruntled agent might try to reveal all the government's secrets during his/her lawsuit). Tenet v. Doe, . Other types of unenforceable employment contracts include contracts agreeing to work for less than minimum wage and forfeiting the right to workman's compensation in cases where workman's compensation is due.
Hardship is defined by Article 6.2.2 of the UNIDROIT Principles as "where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party's performance has increased or because the value of the performance a party receives has diminished" provided that either the risk of the events occurring was not assumed by the party alleging hardship or that the events' occurrence was "beyond the control of the disadvantaged party", unknown until after the conclusion of the contract, or "could not reasonably have been taken into account" by the party. Article 6.2.3 of the Principles provides that a party facing hardship is entitled to request renegotiation of the contract and, if negotiations are unsuccessful, may apply to the appropriate court to terminate or modify the contract or provision thereof.
In England and Wales, Benjamin's Sale of Goods sets a high threshold for the use of claim to be "prevented" from complying with a contractual liability, stating that to show that a party is "unable" to perform the contract, they must show that performance is physically or legally impossible. Difficulty and unprofitability are not treated as making performance impossible. Benjamin's Sale of Goods, 8th edition, para 8-092, quoted in High Court of Justice, Dunavant Enterprises Incorporated v Olympia Spinning & Weaving Mills Ltd [2011] EWHC 2028 (Comm), paragraph 29, delivered 29 July 2011, accessed 21 December 2023
As per Article 8.1 of the Principles, "where two parties owe each other money or other performances of the same kind, either of them ("the first party") may set off its obligation against that of its obligee" ("the other party") if when set-off is invoked:
Civil law jurisdictions with codified laws of obligations distinguish between nominate and innominate contracts. Nominate contracts are standardised categories of contracts which are closely regulated in form and substance by law. Contracts for sale, gift, lease, and insurance are generally regulated as nominate contracts. The obligor and obligee under nominate contracts have rights and obligations specially prescribed by law. Nominate contracts are usually statutorily required to include certain express terms ( essentialia) and are construed to include terms implied in law. Unlike civil law jurisdictions with codified laws of obligations, jurisdictions following Roman-Dutch law or Scandinavian law typically lack specific provisions for nominate contracts as their law of obligations is largely determined by judicial precedent and individual statutes, similar to common law jurisdictions. Nevertheless, the principles underlying the formation of contracts in these jurisdictions are closely related to those of other civil law jurisdictions.
Nominate contracts in civil law jurisdictions and contracts subject to the United Nations Convention on Contracts for the International Sale of Goods (CISG) are subject to terms implied by the appropriate civil or commercial code or by the convention, respectively. Many civil law jurisdictions impose a legal duty of good faith which extends to the negotiation as well as performance of contracts. Under the CISG, a variety of terms implied by law are prescribed for contracts involving the international sale of goods. Generally, the goods must be of the quality, quantity, and description required by the contract, be suitably packaged and fit for purpose.United Nations Convention on Contracts for the International Sale of Goods, Article 35. The seller is obliged to deliver goods that are not subject to claims from a third party for infringement of industrial or intellectual property rights in the State where the goods are to be sold.United Nations Convention on Contracts for the International Sale of Goods, Articles 41, 42. The buyer is obliged to promptly examine the goods and, subject to some qualifications, must advise the seller of any lack of conformity within "a reasonable time" and no later than within two years of receipt.United Nations Convention on Contracts for the International Sale of Goods, Articles 38, 39, 40.
In civil law jurisdictions, penalty clauses are permitted and seen to serve two purposes: deterring the obligee from defaulting on their obligations and providing predictable and guaranteed compensation for any breach of contract that takes place.Florian Faust, "Contractual Penalties in German Law", (2015), 23, European Review of Private Law, Issue 3, pp. 285–296, [48]
Under the United Nations Convention on Contracts for the International Sale of Goods (CISG), remedies of the buyer and seller depend upon the character of a breach of the contract. If the breach is fundamental, then the other party is substantially deprived of what it expected to receive under the contract. Provided that an objective test shows that the breach could not have been foreseen,United Nations Convention on Contracts for the International Sale of Goods, Article 25. then the contract may be avoidedUnited Nations Convention on Contracts for the International Sale of Goods, Article 49, 64. and the aggrieved party may claim damages.United Nations Convention on Contracts for the International Sale of Goods, Articles 74, 75, 76, 77. Where part performance of a contract has occurred, then the performing party may recover any payment made or good supplied;United Nations Convention on Contracts for the International Sale of Goods, Article 81. this contrasts with the common law where there is generally no right to recover a good supplied unless title has been retained or damages are inadequate, only a right to claim the value of the good.Cf Doulton Potteries v Bronotte (1971) 1 NSWLR 591 for example of damages as inadequate. If the breach is not fundamental, then the contract is not avoided and remedies may be sought including claiming damages, specific performance, and adjustment of price.United Nations Convention on Contracts for the International Sale of Goods, Articles 45, 46, 47, 48, 50, 51, 52, 61, 62, 63, 65, 74, 75, 76, 77. Damages that may be awarded conform to the common law rules in Hadley v Baxendale Hadley v Baxendale (1854) 9 Exch 341. but it has been argued the test of foreseeability is substantially broaderJacob Ziegel and Claude Samson "Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods" (1981) Toronto 168–305. and consequently more generous to the aggrieved party.
In jurisdictions applying Roman-Dutch law, a claim for specific performance is the primary and obvious and most basic remedy for breach of contract, upholding as it does the expectation interest of the creditor: When one enters into a contract, one expects performance in terms of it. This approach is contrary to that taken under English law, Benson v SA Mutual Life 1986 (1) SA 776 (A) at 779H. where damages are preferred, and where specific performance is a special discretionary remedy that may be sought only in certain circumstances. Benson v SA Mutual Life at 777A. Santos v Igesund 2003 (5) SA 73 (C) at 86H. A claim for specific performance may be for the payment of a sum of money ( ad pecuniam solvendum), a claim for the performance of some positive act other than payment of money ( ad factum praestandum) or a claim to enforce a negative obligation. The remedy of specific performance is not absolute and does not guarantee success. Even where it is shown that there has been a breach, the remedy is not granted unless the innocent party is ready to perform and performance is subjectively and objectively possible for the defendant. The courts have exercised an equitable discretion to refuse a claim for specific performance, usually on the grounds of impossibility, undue hardship or in claims for the enforcement of personal services. An order for specific performance is enforced in keeping with the ordinary rules of procedure. The cases of Benson v SA Mutual Life, Santos v Igesund and Haynes v King William's Town Municipality1951 (2) SA 371 (A). set out guidelines to be taken into consideration where the court is asked to grant specific performance. A court does not make an order for specific performance in cases where:
In other civil law jurisdictions, the range of available remedies varies but typically includes provision for specific performance, rescission, declaratory relief, and injunctions although the distinction between specific performance and injunctions does not necessarily exist in all civil law jurisdictions. In jurisdictions with codified laws of obligations, the extent of remedies available and the circumstances in which they are provided is outlined in the civil or commercial code.
Contracts in systems based on the Napoleonic Code can typically be categorised as consensual contracts, which are formed solely on the basis of the parties' exchange of consent to form legal relations; , which are analogous to in common law and are formed not only by mutual assent but also by the transfer of the possession of property; or , which are analogous to in common law jurisdictions and require notarial execution to be formalized. Thus, while consensual contracts and real contracts can be formed solely by the actions of the parties, contrats solennels can only be formed via specified formal processes. Nevertheless, all three categories of contracts are based solely on the exchange of mutual assent, differing only in the manner in which assent is expressed.
Additionally, with regard to maritime law, Quebec follows the Anglo-Canadian common law. This is because Canadian maritime law developed a distinct jurisdiction and area of law within the legislative purview of Parliament rather than the provincial legislatures and, as such, is uniform across the countries. In Ordon Estate v. Grail, the Supreme Court of Canada stated that "the substantive content of Canadian maritime law is...the body of law administered in England by the High Court on its Admiralty side in 1934, as that body of law has been amended by the Canadian Parliament and as it has developed by judicial precedent", and that "most of Canadian maritime law with respect to issues of tort, contract, agency and bailment is founded upon the English common law" but nevertheless that "English admiralty law as incorporated into Canadian law in 1934 was an amalgam of principles deriving in large part from both the common law and the civilian tradition". The formation of contracts under Canadian maritime law thus functions similarly but not identically to the formation of contracts in the country's common law provinces; furthermore, the implementation of rules derived from international conventions subject maritime contracts to distinct rules often derived from international norms. Similarly, with regard to bills of exchange and , Quebec and the remainder of the Canadian provinces and territories follow a distinct legal system based on, but not identical to, the contract law of Canada's common law jurisdictions. As Canadian law regarding bills of exchange and promissory notes is derived from English common law, consideration is required for the issue of a valid bill of exchange or promissory note, but the requirement for consideration is looser, with the federal Bills of Exchange Act providing that the requirement for consideration may be satisfied either by "any consideration sufficient to support a simple contract" in the country's common law provinces and territories or by "an antecedent debt or liability", thus enabling past consideration to be valid as it is under Indian contract law. Bills of Exchange Act R.S.C., 1985, c. B-4 section 52(1). Accessed 1 June 2022
Quebec contract law also shares two distinctly Canadian duties of good faith with the other Canadian provinces and territories, as a result of the Supreme Court of Canada interpreting provisions of the civil code and precedent in the common law provinces such that they converge. One such duty is that of honest contractual performance. This duty requires parties to a contract to act in good faith and with honesty in exercising their rights under a contract and in delivering their obligations under a contract. This duty prohibits parties to a contract from "lying or otherwise knowingly misleading each other about matters directly linked to the performance of the contract". C.M. Callow Inc. v. Zollinger, 2020 SCC 45 paragraph 3 In Quebec, it is rooted in articles 6 and 7 of the Civil Code which provide that "every person is bound to exercise his civil rights in accordance with the requirements of good faith" Book One of the Queb. Civ. Code art. 6 and that "no right may be exercised with the intent of injuring another or in an excessive and unreasonable manner, and therefore contrary to the requirements of good faith". Book One of the Queb. Civ. Code art. 7 The other such duty is that to negotiate in good faith, grounded in article 1375 of the Civil Code which provides that parties to a contract must act in good faith not only at the time an obligation is performed but also "at the time the obligation arises". Book Five, Title One of the Queb. Civ. Code art. 1375 Circumstances giving rise to this duty include: negotiations between franchisors and franchisees, insurers and insured parties, contracts pertaining to marriages and separation agreements, invitations to tender, and fiduciary relationships. With regard to invitations to tender, this duty is applied in the form of the uniquely Canadian Contract A doctrine.
In Quebec contract law, there are a variety of nominate contracts for which the civil code makes special provision. These include contracts for the sale of goods, the sale of immovable property, gifts, and a variety of contracts described by the civil code as being similar in nature to contracts for sale. Furthermore, the rules regarding contracts for the international sale of goods are harmonised as a result of Canada's membership in the United Nations convention
In keeping with Enlightenment values, natural lawyers stripped away the Christian morality from contract law. They redefined a contract as a concurrence of wills, and each party's "promise" was now seen as a declaration of will devoid of moral obligation (will theory). In place of iusta causa developed a general principle of binding force under which any valid contract was both binding and actionable. Canonist substantive fairness shifted to procedural fairness, so good faith and mutual assent were retained as requirements, but just price and laesio enormis were not. In African states which were previously under English or South African rule, public policy was substituted for bonos mores, though this shift did not affect other Roman-Dutch law jurisdictions.
In jurisdictions following Roman-Dutch Law, including mixed systems in South Africa and neighbouring countries in which contract law continues to adhere to Roman-Dutch tradition, the following requirements must be met for a contract to be considered valid:
In such jurisdictions, a contract has certain characteristic features:
The modern concept of contract is generalised so that an agreement does not have to conform to a specific type to be enforced, but contracting parties are required to conduct their relationship in good faith ( bona fides).
Scots contract law has also been supplemented and modified by legislation seeking to modernise jurisprudence. For example, the Contract (Scotland) Act 1997 codifies the parol evidence rule in Scots contract law by providing that where a written document appears to comprise all the terms of a contract, it shall be presumed to do so except where the contrary is proved and by further providing that a document which expressly states that it comprises all the terms of a contract is conclusively presumed to do so. Contract (Scotland Act 1997), 1997 c.34 The act also alters Scots contract law to enable a buyer to seek damages for breach of contract under a contract of sale from the seller without being required to reject the goods or rescind the contract as was previously the case. For example, while a contractual promise historically had to be proved by writ or oath, the Requirements of Writing (Scotland) Act 1995 provided that a promise need only be evidenced in writing for the creation, transfer, variation or extinction of a real right in land (s 1(2) (a)(i) of Requirements of Writing (Scotland) Act 1995) and for a gratuitous unilateral obligation other than one undertaken in the course of business (s 1(2)(a)(ii) of Requirements of Writing (Scotland) Act 1995.)
Rules concerning the creation of third-party rights in Scots contract law are codified in the Contract (Third Party Rights) (Scotland) Act 2017, which provides that a third-party right comes into existence where a "contract contains an undertaking that one or more of the contracting parties will do, or not do, something for the third-party's benefit" and the parties to the contract intended that "the third-party should be legally entitled to enforce or otherwise invoke the undertaking". Contract (Third Party Rights) (Scotland) Act 2017, 2017 asp. 5 The act specifically provides that a third-party does not have to be in existence or fall within the category of persons specified by the right at the time of the right's creation. Furthermore, it makes provisions for the enforcement of rights by third-parties and, while it allows for the parties to a contract to modify or rescind the third-party right, it codifies protections for third-parties who have acted in reliance on such a right or have provided notice of their acceptance to the promisor of the right.
Based on the common law concept of an invitation to treat, mainland Chinese law recognises the notion of an invitation to offer. An invitation to offer is defined as "a manifestation that a person expects another person to make an offer" and the code specifically provides that "Auction announcements, bidding announcements, stock prospectuses, bond prospectuses, fund prospectuses, commercial advertisements and promotions, mailed price catalogs, and the like, are invitations to offer" and that "commercial advertisement and promotion constitute an offer if their content satisfies the conditions for an offer". Civil Code of the People's Republic of China, Book 3, Chapter 2, Article 473
Mainland Chinese law takes a liberal approach to the manner in which a contract is recorded, with the civil code providing that "parties may conclude a contract in writing, orally, or in other forms" and that "a data message in any form...that renders the content contained therein capable of being represented in a tangible form and accessible for reference and use at any time is deemed as a writing." Civil Code of the People's Republic of China, Book 3, Chapter 2, Article 469 Nevertheless, the code provides for specific requirements as to the contents of a contract. Government procurement law in China prescribes that the republic's contract law applies in the field of public procurement and that contracts are to be made in writing.People's Republic of China, The Government Procurement Law of the People's Republic of China (Order of the President No.68) , articles 43 and 44, 29 June 2002, accessed on 14 January 2025
Under the Taiwan Civil Code, a contract purportedly entered into by an incapable person ( incapax) for any reason is void Civil Code of the Republic of China Article 75 unless ratified by the person's guardian or conservator. Civil Code of the Republic of China Article 79 Only an incapax’s lawful guardian or conservator may assent to a juridical act on the incapax’s behalf. Civil Code of the Republic of China Article 76 Additionally, where an incapax fraudulently deceives the other party into believing that the first party had capacity to enter a contract, the contract is valid despite such incapacity. Civil Code of the Republic of China Article 83
Japanese contract law recognises the existence of pre-contractual and post-contractual obligations. With regard to pre-contractual obligations, a party to a contract which is ultimately impossible to perform or void may be liable for negligence in concluding the contract if another party relied upon their representations and consequently suffered pecuniary or other material damages. Another distinct area of pre-contractual obligation pertains to experts' obligation to explain complicated contracts to consumers, with complex financial contracts being a key example of this. Post-contractual obligations frequently recognised under Japanese contract law include obligations regarding confidentiality and non-competition, which may be defined by the contract itself, implied for reasons of public policy, or provided for by non-derogable statutory law.
The Japanese Civil Code provides for a variety of nominate contracts similar to those prescribed in other civil law jurisdictions; including contracts for sale, gifts, leases, loans, and the provision of services. These nominate contracts are subject to specific rules and warranties mandated by the code in order to protect the rights of the contracting parties, particularly those with lesser negotiating power. Additionally, nominate contracts for the formation of partnerships and associations govern the establishment of these categories of legal persons and there are special provisions governing third party beneficiary contracts. Rules governing the performance of contracts, set-off, assignment, and the seizure of defaulting obligors' assets are also provided by the Japanese Civil Code.
Contract law in Japan, despite the civil law origins of its civil code, is heavily shaped by traditional Japanese attitudes toward business and obligations. For example, under the Japanese Commercial Code, a merchant trader who receives an offer from a regular client that falls within one of their areas of business is expected to respond without undue delay and, if they fail to do so, they are presumed to have accepted the contract. This can be seen as an illustration of a Japanese approach to commerce and contract law rooted in notions of honouring relationships. This is significant since, owing to the German roots of the Japanese Civil Code; once a contract becomes effective as between the parties, it is not freely revocable. Japanese judges, interpreting the obligation of good faith contained in the Japanese Civil Code as codifying this notion of honour-bound relationship in commerce, tend to deny both the termination of pre-contractual negotiations and the non-renewal of existing contractual relations.Landini, Sara (2021) "The Idea of Contract in Japanese Law and Culture", Japanese Society and Culture: Vol. 3 , Article 9. DOI: 10.52882/2434-1738-0309 Available at: [80]
Where a written instrument purporting to embody a contract does not adequately represent the true intention of the parties due to mistake, fraud, inequitable conduct, or accident; any party may seek reformation. Philippine Civil Code (Republic Act No. 386) Article 1359 Where one party was mistaken and the other either acted fraudulently or inequitably, Philippine Civil Code (Republic Act No. 386) Article 1362 or was aware of the defect in the instrument, Philippine Civil Code (Republic Act No. 386) Article 1363 the first party may seek reformation. Additionally, reformation may be sought where the defect in the document is caused by "ignorance, lack of skill, negligence, or bad faith on the part of the person drafting the instrument". Philippine Civil Code (Republic Act No. 386) Article 1364 The Supreme Court has the authority to determine the rules governing reformation under its Rules of Court. Philippine Civil Code (Republic Act No. 386) Article 1369 A party who takes legal action to enforce a contract is estopped from seeking reformation. Philippine Civil Code (Republic Act No. 386) Article 1367
Valid contracts may only be rescinded in cases provided for by law. Philippine Civil Code (Republic Act No. 386) Article 1380 This includes fraudulent conveyances Philippine Civil Code (Republic Act No. 386) Article 1382 as well as contracts concluded by an individual's guardian or agent if an individual suffers lesion by more than one quarter of the value of the assets or services alienated, contracts alienating assets subject to litigation without the consent of the litigants, and other categories of contract expressly designated by statute. Philippine Civil Code (Republic Act No. 386) Article 1381 Rescission may not be sought except where it is the only means by which a party can obtain reparation for the damages caused to them by the contract Philippine Civil Code (Republic Act No. 386) Article 1383 and is only permitted to the extent necessary to cover such damages. Philippine Civil Code (Republic Act No. 386) Article 1384 Under Philippine law, rescission creates an obligation to return anything that was the object of the contract as well as any profit derived therefrom, and rescission is consequently available only where the party seeking the remedy is able to return or provide reparation for such things. Philippine Civil Code (Republic Act No. 386) Article 1385 Additionally, rescission is prohibited where the items that are the object of the contract are in the possession of a holder in due course who acted in good faith. Aside from rescission, a contract under Philippine law may be voided where a party did not possess the capacity to consent or where the consent was given due to mistake, violence, intimidation, undue influence, or fraud. Philippine Civil Code (Republic Act No. 386) Article 1390
Certain contracts under Philippine law, while valid, are unenforceable unless ratified. This includes contracts concluded by an agent who acted without or beyond authority, contracts where both parties lack capacity to consent, and contracts that violate the Statute of Frauds as applicable under the Philippine Civil Code. Philippine Civil Code (Republic Act No. 386) Article 1403 Additionally, a contract is void ab initio if its cause, object, or purpose is contrary to law, morals, good customs, public order or public policy; it is absolutely simulated or fictitious; its cause or object did not exist when it was concluded, is impossible, or is "outside the commerce of men"; the intention of the parties cannot be determined; or it is expressly prohibited or declared void by law. Philippine Civil Code (Republic Act No. 386) Article 1409 A contract that is void ab initio may not be ratified.
Philippine contract law takes a middle ground between the common law and civil law approaches to liquidated damages or . While such provisions are lawful and enforceable, a court may reduce such damages if it finds their effect to be iniquitous or unconscionable. Philippine Civil Code (Republic Act No. 386) Article 2227 Additionally, if the breech of contract litigated is one that was not contemplated by the parties when the contract was concluded (e.g. force majeure), the appropriate level of damages will be determined by the court without regard to the provision. Philippine Civil Code (Republic Act No. 386) Article 2228
Aside from the rules specified in the Code of Obligations, the Swiss Civil Code contains separate provisions governing contracts of marriage and inheritance while separate enactments govern contracts concerning private insurance, consumer credit, and travel packages.
Islamic marriages are typically solemnised as a written financial contract, typically in the presence of two Muslim male witnesses, and it may include a brideprice (Mahr) payable from a Muslim man to a Muslim woman. The brideprice is considered by a Sharia court as a form of debt. Written contracts were traditionally considered paramount in Sharia courts in the matters of dispute that are debt-related, which includes marriage contracts. (2025). 9789004145924, Brill Academic. ISBN 9789004145924 In Singapore, the contract-based Islamic marriage law is governed by the Administration of Muslim Law Act Administration of Muslim Law Act 1966 and coexists with the secular system of marriage registration established under the Women's Charter. Meanwhile, in India, Muslim personal law is a distinct branch of law governed by a variety of statutes and Islamic customs that vary from community to community.
In contemporary Islamic finance and banking, a variety of nominate contracts are used to comply with the Islamic prohibition on gharar and riba. These include profit and loss sharing contracts such as Mudarabah, Musharakah, and Diminishing Musharaka; as well as a variety of asset-backed contracts. The most common contract used in modern Islamic finance is the Murabaha, which was originally a term of fiqh for a sales contract in which the buyer and seller agree on the markup (profit) or "cost-plus" price for the item(s) being sold. In recent decades it has become a term for a very common form of Islamic (i.e., "shariah compliant") financing, where the price is marked up in exchange for allowing the buyer to pay over time—for example with monthly payments (a contract with deferred payment being known as bai-muajjal).
Additionally, Islamic law imposes several legal conditions on the process of establishing a waqf, a type of patrimony of affectation similar to a trust law. A waqf is a contract, therefore the founder (called al-wāqif or al-muḥabbis in Arabic) must be of the capacity to enter into a contract. For this the founder must:
Although waqf is an Islamic institution, being a Muslim is not required to establish a waqf, and dhimmi may establish a waqf. Finally if a person is fatally ill, the waqf is subject to the same restrictions as a will in Islam. Furthermore, the property (called al-mawqūf or al-muḥabbas) used to found a waqf must be objects of a valid contract. The objects should not themselves be haram (e.g. khamr or pork). These objects should not already be in the public domain: public property cannot be used to establish a waqf. The founder cannot also have pledged the property previously to someone else. These conditions are generally true for contracts in Islam. The beneficiaries of the waqf can be persons and public utilities. The founder can specify which persons are eligible for benefit (such the founder's family, entire community, only the poor, travelers). Public utilities such as mosques, schools, bridges, graveyards and drinking fountains can be the beneficiaries of a waqf. Modern legislation divides the waqf as "charitable causes", in which the beneficiaries are the public or the poor) and "family" waqf, in which the founder makes the beneficiaries his relatives. There can also be multiple beneficiaries. For example, the founder may stipulate that half the proceeds go to their family, while the other half go to the poor. Valid beneficiaries must satisfy the following conditions:
The CISG applies to contracts of the sale of goods between parties whose places of business are in different States, when the States are Contracting States (United Nations Convention on Contracts for the International Sale of Goods, Article 1(1)(a)). Given the significant number of Contracting States, this is the usual path to the CISG's applicability. The CISG also applies if the parties are situated in different countries (which need not be Contracting States) and the conflict of law rules lead to the application of the law of a Contracting State.United Nations Convention on Contracts for the International Sale of Goods, Article 1 (b). For example, a contract between a Japanese trader and a Brazilian trader may contain a clause that arbitration will be in Sydney under Australian lawMore correctly, the law of New South Wales as mandated in Sale of Goods (Vienna Convention) Act 1986 (NSW). with the consequence that the CISG would apply. A number of States have declared they will not be bound by this condition.Specifically, China, Germany, Czech Republic, Saint Vincent and the Grenadines, Singapore, Slovakia, and the United States of America. See http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG_status.html at 22 December 2007. The CISG is intended to apply to commercial goods and products only. With some limited exceptions, it does not apply to personal, family, or household goods, nor does it apply to auctions, ships, aircraft,Article 2. or intangiblesFrom United Nations Convention on Contracts for the International Sale of Goods Article 2 (d) and (f), intangibles such as , shares, investment securities, negotiable instruments or money, and electricity. and services.United Nations Convention on Contracts for the International Sale of Goods, Article 3- However, Sale of Goods contracts under the CISG may include services ( e.g., transport, erection, supervision, training) up to 50% of the agreed contract price at the date of the signature of the contract ( See Verweyen/Foerster/Toufar Handbuch des Internationalen Warenkaufs UN-Kaufrechts (CISG) 2. Auflage, 2008 2.1.1 p. 46) The position of computer software is "controversial" and will depend upon various conditions and situations.Peter Schlechtriem, "Requirements of Application and Sphere of Applicability of the CISG" (2005) 36 Victoria University of Wellington Law Review 781.Frank Diedrich, "Maintaining Uniformity in International Uniform Law Via Autonomous Interpretation: Software Contracts and the CISG" (1996) 8 Pace International Law Review 303, 321, 322. Importantly, parties to a contract may exclude or vary the application of the CISG.Articles 6, 12.
Under the CISG, an offer to contract must be addressed to a person, be sufficiently definite – that is, describe the goods, quantity, and price – and indicate an intention for the offeror to be bound on acceptance.United Nations Convention on Contracts for the International Sale of Goods, Article 14. The CISG does not appear to recognise common law unilateral contractsSee, for example, Carlill v. Carbolic Smoke Ball Company (1892) 2 QB 484. but, subject to clear indication by the offeror, treats any proposal not addressed to a specific person as only an invitation to make an offer.Article 14 (2). Further, where there is no explicit price or procedure to implicitly determine price, then the parties are assumed to have agreed upon a price based upon that "generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances".Article 55. Generally, an offer may be revoked provided the withdrawal reaches the offeree before or at the same time as the offer, or before the offeree has sent an acceptance.United Nations Convention on Contracts for the International Sale of Goods, Articles 15, 16 (1). Some offers may not be revoked; for example when the offeree reasonably relied upon the offer as being irrevocable.Article 16 (2). The CISG requires a positive act to indicate acceptance; silence or inactivity are not an acceptance.United Nations Convention on Contracts for the International Sale of Goods, Article 18.
The CISG attempts to resolve the common situation where an offeree's reply to an offer accepts the original offer, but attempts to change the conditions. The CISG says that any change to the original conditions is a rejection of the offer—it is a counter-offer—unless the modified terms do not materially alter the terms of the offer. Changes to price, payment, quality, quantity, delivery, liability of the parties, and arbitration conditions may all materially alter the terms of the offer.United Nations Convention on Contracts for the International Sale of Goods, Article 19.
Common law jurisdictions are often associated with a high degree of freedom of contract. One example of the supposedly greater freedom of contract in American law, is the 1901 case of Hurley v. Eddingfield in which a physician was permitted to deny treatment to a patient despite the lack of other available medical assistance and the patient's subsequent death.Blake V. (2012). When Is a Patient-Physician Relationship Established? . Virtual Mentor. In civil law jurisdictions rooted in the French or German tradition, nominate contracts are regulated in order to prevent unfair terms. The law of obligations typically includes a duty to rescue which would make cases such as Hurley v. Eddingfield far less likely. Conversely, civil law jurisdictions are more likely to enforce and provide for the specific performance of contracts than their common law counterparts, which typically refuse to recognise clauses providing for damages greater than that required to adequately compensate the plaintiff.
While the majority of common law jurisdictions continue to rely on precedent and unmodified principles to determine issues under contract law, a significant minority of common law jurisdictions have enacted statutes governing contract law. Contract law in New Zealand is governed by the Contract and Commercial Law Act 2017, which comprehensively outlines rules regarding contracts and related areas of law. Contract and Commercial Law Act 2017 (New Zealand) Notably, contract law in India, the most populous common law jurisdiction, is codified in the Indian Contract Act, 1872, which comprehensively outlines issues of contract law, versions of which remaining in force in Pakistan and Bangladesh. Although not a comprehensive code, the Singaporean Civil Law Act 1909 makes several provisions regarding contract law in Singapore. Civil Law Act 1909 (Singapore) In America, the Uniform Commercial Code codifies several provisions of commercial law, including the law of contracts.
When a contract dispute arises between parties that are in different jurisdictions, law that is applicable to a contract is dependent on the conflict of laws analysis by the court where the breach of contract action is filed. In the absence of a choice of law clause, the court will normally apply either the law of the forum or the law of the jurisdiction that has the strongest connection to the subject matter of the contract. A choice of law clause allows the parties to agree in advance that their contract will be interpreted under the laws of a specific jurisdiction.
Within the United States, choice of law clauses are generally enforceable, although exceptions based upon public policy may at times apply. Within the European Union, even when the parties have negotiated a choice of law clause, conflict of law issues may be governed by the Rome I Regulation.
Typically, either the doctrine of freedom of contract or multilateral instruments require non-chosen courts to dismiss cases and require the recognition of judgments made by courts designated by exclusive choice of court agreements. For example, the Brussels regime instruments (31 European states) and the Hague Choice of Court Agreements Convention (European Union, Mexico, Montenegro, Singapore), as well as several instruments related to a specific area of law, may require courts to enforce and recognise choice of law clauses and foreign judgments.
Under the Hague Choice of Court Agreements Convention, a court designated by an exclusive choice of court agreement has jurisdiction unless the contract is void under its domestic law and cannot decline to exercise jurisdiction on the grounds that another jurisdiction's court is a more appropriate venue. Choice of Court Agreements Act 2016 (Singapore), s.11 Similarly a non-chosen court is required to refuse jurisdiction except where the agreement is null and void under the law of the chosen court, a party to the contract lacked capacity under the non-chosen court's domestic law, giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the non-chosen court's state, the agreement cannot be performed due to force majeure, or the chosen court has chosen not to hear the case. Choice of Court Agreements Act 2016 (Singapore), s.12 Exclusive choice of court agreements under the Hague Choice of Court Agreements Convention solely apply to commercial matters and thus do not apply to any party dealing as a consumer, employment contracts or collective bargaining agreements, matters related to civil status or family law, or similar scenarios. Choice of Court Agreements Act 2016 (Singapore), s.8
In jurisdictions that are not party to the Hague Convention, an exclusive choice of court agreement may not necessarily binding upon a court. Based upon an analysis of the laws, rules of procedure and public policy of the state and court in which the case was filed, a court that is identified by the clause may find that it should not exercise jurisdiction, or a court in a different jurisdiction or venue may find that the litigation may proceed despite the clause. As part of that analysis, a court may examine whether the clause conforms with the formal requirements of the jurisdiction in which the case was filed (in some jurisdictions a choice of forum or choice of venue clause only limits the parties if the word "exclusive" is explicitly included in the clause). Some jurisdictions will not accept an action that has no connection to the court that was chosen, and others will not enforce a choice of venue clause when they consider themselves to be a more convenient forum for the litigation.See, e.g.,
Some arbitration clauses are not enforceable, and in other cases arbitration may not be sufficient to resolve a legal dispute. For example, except in Singapore, disputes regarding validity of registered IP rights may need to be resolved by a public body within the national registration system. For matters of significant public interest that go beyond the narrow interests of the parties to the agreement, such as claims that a party violated a contract by engaging in illegal anti-competitive conduct or committed civil rights violations, a court might find that the parties may litigate some or all of their claims even before completing a contractually agreed arbitration process.See, e.g.,
Most civil law jurisdictions and the majority of common law jurisdictions outside America either limit or prohibit the enforcement of arbitration clauses included in contracts of adhesion. For instance, in the 2020 case Uber Technologies Inc v Heller, the Supreme Court of Canada declared that an arbitration agreement included in contracts concluded by Uber with its drivers was unconscionable and thus unenforceable under the law of Ontario. Similarly the UNCITRAL Model Law on International Commercial Arbitration and legislation based on the model law restrict the applicability of the arbitration framework to commercial arbitration, expressly excluding parties dealing as consumers.
Customer claims against securities brokers and dealers are almost always resolved pursuant to contractual arbitration clauses because securities dealers are required under the terms of their membership in self-regulatory organisations such as the Financial Industry Regulatory Authority (formerly the NASD) or NYSE to arbitrate disputes with their customers. The firms then began including arbitration agreements in their customer agreements, requiring their customers to arbitrate disputes.
In addition to arbitration under the Uniform Arbitration Act, the State of Delaware maintains a second arbitration framework known as the Delaware Rapid Arbitration Act (DRAA). Delaware Rapid Arbitration Act The purpose of the DRAA is to provide for a "prompt, cost-effective, and efficient" method for "sophisticated entities" to resolve business disputes. The DRAA accomplishes this through the use of expedited deadlines and financial penalties for arbitrators who fail to rule on disputes within the time allotted under the act.
In 2020, the Singapore Academy of Law published a report on the right of appeal in arbitral proceedings evaluating the advantages and disadvantages of the two distinct frameworks, concluding that the existence of appeals enables the development of case law and consequently provides greater certainty for parties to arbitral proceedings. Report on the Right of Appeal against International Arbitration Awards on Questions of Law The report identifies the availability of appeals by default under section 69 of England's Arbitration Act 1996 as a factor contributing to the popularity of London as a seat of arbitration in international contract disputes. Consequently, the report recommends amending the International Arbitration Act 1994 to enable parties to opt for a right of appeal in their arbitration agreement, thus enabling the development of case law and providing greater certainty for parties who desire it while maintaining an absence of appeals as the default position in order to cater to parties who desire a completely extrajudicial resolution of contractual disputes.
Uniquely, both the International Arbitration Act 1994 and the Arbitration Act 2001 contain provisions (Part 2A and Part 9A, respectively) explicitly authorising the arbitration of intellectual property disputes regardless of the extent to which the law of Singapore or any other jurisdiction expressly confers jurisdiction upon any designated body. This contrasts with the general approach taken by the majority of other jurisdictions and enables parties to foreign intellectual property disputes to seek resolution offshore without affecting the recognition of intellectual property rights in the jurisdictions in which they are issued.
Mediation is a form of alternative dispute resolution which aims at addressing disputes between two or more parties in an amicable and non-adversarial manner and typically involves a neutral third party (the mediator or conciliator) assisting the parties in reaching a settlement that, depending on the applicable law, may then be registered as an arbitral award or a judicial decision. Typically, courts will stay proceedings where a party successfully asserts the existence of a valid mediation or negotiation agreement. It is generally permitted for an individual appointed as a mediator to serve as an arbitrator as per a hybrid mediation-arbitration clause if the parties are unable to reach a mediated settlement.
Typically, a mediated settlement may be recorded as an order of court in the jurisdiction under whose law it was concluded and the registration of a mediated settlement is sufficient to stay any arbitral or judicial proceedings addressing the same matters. Mediation Act 2017 (Singapore) While arbitral awards are typically enforceable in third countries under the New York Convention, mediated settlements in international contractual disputes are enforceable under the Singapore Mediation Convention. A mediated settlement in an international contractual dispute is referred to as an international settlement agreement and, in jurisdictions where the Singapore Convention applies, international settlement agreements entered into in other member states may be registered by a court for domestic enforcement. Singapore Convention on Mediation Act 2020 (Singapore) Additionally, courts in jurisdictions where the convention applies will stay proceedings where satisfied that a valid mediation agreement governed by the law of another state party covers the subject matter of the dispute, and international settlement agreement registered under the convention will be sufficient to preclude the commencement of domestic judicial or arbitral proceedings.
The Hague Judgments Convention of 2019, which has not yet entered into force, provides for a harmonised framework for the recognition of offshore commercial judgments in the absence of a valid forum selection clause. The convention is modelled after The Hague Choice of Court Convention and similarly excludes matters such as family law, the status and capacity of natural persons, insolvency, and matters covered by other conventions (e.g. arbitration, choice of court agreements, nuclear damage liability, intellectual property, the existence of legal persons, etc.). Article 5 of the convention provides that offshore judgments under certain requirements.
Each jurisdiction takes its own approach to determining whether a standard form contract is an unconscionable contract of adhesion.
The Act renders terms excluding or limiting liability ineffective or subject to reasonableness, depending on the nature of the obligation purported to be excluded and whether the party purporting to exclude or limit business liability, acting against a consumer.
It is normally used in conjunction with the Unfair Terms in Consumer Contracts Regulations 1999 (Statutory Instrument 1999 No. 2083), as amended by the Unfair Terms in Consumer Contracts (Amendment) Regulations 2001, which further defined a 'Financial Service Authority'Statutory Instrument 2001 No. 1186 as well as the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.
In an attempt to harmonise the complicated system of international law governing transport contracts, members of the Association of South East Asian Nations have adopted the ASEAN Framework Agreement on Multimodal Transport providing for standardised terms governing multimodal transport contracts within the bloc. Multimodal Transport Act 2021 (Singapore) The Civil Code of the People's Republic of China (CCPRC) makes similar provisions for multimodal transport contracts. Civil Code of the People's Republic of China, Book Three, Chapter Nine, Section Four Both the CCPRC and the ASEAN Framework provide for the primary multimodal transport operator to bear overarching contractual responsibility for damage or loss to the goods carried and provide for operators of particular legs of the transport contract to be treated as agents of the primary multimodal transport operator. In China, chapter nine of the civil code additionally provides standard terms for the carriage of both passengers and goods by each mode of transport. CCPRC Chapter XIX
With regard to maritime transport, common law jurisdictions additionally maintain special legal provisions regarding insurance contracts. Such provisions typically provide for the prohibition of contracts "speculation" and prescribe special rules for double insurance, determining the existence of insurable interest, and governing the provisions that a maritime insurance policy must include. Marine Insurance Act 1909 (Singapore)Marine Insurance Act 1906 (UK)
In Europe, the international carriage of passengers by rail is governed by the CIV. The CIV establishes terms governing the transport of passengers, along with any accompanying articles (hand luggage, registered baggage, vehicles and trailers) and live animals. The traveller is responsible for full supervision of animals and their hand luggage.
In some common law jurisdictions, a distinction is made between contract carriers (who transport goods or individuals per private contracts) and (who are generally obliged to transport any passengers or goods). In some European civil law jurisdictions, the equivalent concept is referred to as a public carrier. While contract carriers negotiate contracts with their customers and (subject to international conventions) are able to allocate liability and refuse customers subject only to consumer protection or anti-discrimination laws, common carriers bear full liability for goods and passengers carried and may not discriminate.
In 2005–6, the Care Services Improvement Partnership, an arms-length agency which operated in the UK from 2004 to 2008,Sale, A. U., Replacing the Care Services Improvement Partnership, published 24 November 2008, accessed 30 September 2023 published a Guide to Fairer Contracting in two parts: part 1 covered the purchase of residential care and home care services in the UK social care market,Social Care Institute for Excellence, A guide to fairer contracting: part 1, published 2005, accessed 30 September 2023 and aimed to "open up a debate about what constitutes a fair contract", while part 2 covered writing specifications for fairer contracts.Social Care Institute for Excellence, A guide to fairer contracting, part 2: service specifications, published 2007, accessed 9 November 2023 These documents were concerned with improving the relationships between commissioners and providers of , where effective contracting is seen as a skill which contributes to securing the best outcomes for recipients of care,Social Care Wales, National Occupational Standards: Commissioning, Procurement and Contracting, updated 16 June 2023, accessed 9 November 2023 and unfair contracting, especially unfair pricing, can increase the likelihood that the provider's business will fail and the service will be withdrawn. Deborah Clogg noted that a contractual document with "terms that appear only to reflect the interests of the purchaser" will appear to contradict any other expressions of "partnership" being adopted, and warned that leaving the contracting process to or contract officers without a background in social care can be unproductive.Clogg, D., The importance of well worded contracts in commissioning, Care Services Improvement Partnership, accessed 30 September 2023
In construction, longer-term contracting and win-win contracting have been seen as desirable aims, and the offer of a "fair return" is seen as integral to effective contracting.HM Government, The Construction Playbook, Version 1.1, September 2022, accessed 9 November 2023
==Gallery==
United States
In the United States, thirty-five states (notably not including New York)New York Civil Procedure Law and Rules § 7501, et seq. and the District of Columbia have adopted the Uniform Arbitration Act to facilitate the enforcement of arbitrated judgments. Unlike the UNCITRAL Model Law, the Uniform Arbitration Act expressly requires a court to confirm an arbitral award before it can be enforced.
Singapore
Presently, Singapore maintains two distinct frameworks under which contractual disputes can be arbitrated, which differ primarily in regard to the extent to which parties to the proceedings may resort to the courts. Under section 45 of the Arbitration Act 2001, either party or the arbitral tribunal itself may apply to the court to issue a ruling on "any question of law arising in the course of the proceedings which the Court is satisfied substantially affects the rights of one or more of the parties" and under section 49, either party may appeal an arbitral award on any question of law unless the parties have expressly excluded appeals the section. Arbitration Act 2001 (Singapore) Either action is only permitted with the consent of the other parties or either the arbitral tribunal (for rulings on preliminary points of law) or the Court with regard to appeals. This is in contrast to the International Arbitration Act 1994, which generally replicates the provisions of the UNCITRAL Model Law on International Commercial Arbitration and provides more restricted access to the courts. International Arbitration Act 1994 (Singapore)
Mediation and negotiation
If a contract contains a valid mediation or negotiation clause, the parties will typically have to comply with the mediation or negotiation procedures specified by the contract before commencing arbitration or litigation. In Emirates Trading Agency Llc v Prime Mineral Exports Private Ltd., an obligation relating to "friendly discussion" acting as the first stage of an agreed approach to resolving disputes was upheld as enforceable.McNair Chambers, " English Commercial Court Reviews Jurisdiction Clauses", published 8 July 2014, accessed 26 June 2023.
Recognition of offshore judgments
While arbitral awards and mediated or negotiated settlements are invariably issued on the basis of an arbitration or mediation clause, court decisions are commonly issued in the absence of an exclusive choice of court agreement or even an explicit choice of law agreement from which the courts of another country may infer the legitimacy of the issuing court's jurisdiction. Consequently, most jurisdictions have enacted laws standardising the procedure for the recognition and enforcement of offshore judgments in the absence of an exclusive choice of court agreement. For example, Singapore's Reciprocal Enforcement of Foreign Judgments Act 1959, which only applies to countries the Minister of Law determines are likely to reciprocate, provides that a judgment creditor may apply to the General Division of the High Court to register a foreign judgment for the purpose of enforcement in Singapore. Reciprocal Enforcement of Foreign Judgments Act 1959 (Singapore) Similarly, the Uniform Foreign Country Money Judgments Recognition Act enacted by the majority of U.S. states and territories provides for the enforcement of judgments from outside America Foreign-Country Money Judgments Recognition Act while the Uniform Enforcement of Foreign Judgments Act provides for the enforcement of judgments issued by other U.S. states and territories. Enforcement of Foreign Judgments Act
Types of contracts
There are various ways in which types of contract may be categorised.
Contract theory
Contract theory divides contracts into "complete" and "incomplete" contracts, reflecting whether or not the parties to a contract are able to specify their "rights, duties, and remedies under every possible state of the world".Eisenberg, M. A. (2018), Foundational Principles of Contract Law, chapter 36, Incomplete Contracts, Oxford Academic, accessed 4 September 2023
Electronic contracts
With the rise of the internet and the corresponding emergence of e-commerce and electronic securities trading, electronic contracts have risen to prominence over the first two decades of the twenty first century. Many jurisdictions have passed e-signature laws that have made the electronic contract and signature as legally valid as a paper contract. In Singapore, the Electronic Transactions Act (implementing the United Nations Convention on the Use of Electronic Communications in International Contracts and the UNCITRAL Model Law on Electronic Transferable Records) provides for the validity of electronic records, signatures, and contracts, while additionally prescribing specific criteria for electronic transferable records. Electronic Transactions Act 2010 (Singapore) In order to promote and simplify the use of electronic contracts and related documents, the act provides for broad recognition of electronic signatures and expressly declares that electronic documents satisfy any legal requirement for a contract or other document to be "written". Similarly, subpart three of New Zealand's Contract and Commercial Law Act 2017 codifies provisions pertaining to the recognition of electronic contracts. Contract and Commercial Law Act 2017 subpart 3 (New Zealand) In India, electronic contracts are governed by the Indian Contract Act (1872), per which certain conditions need to be fulfilled while formulating a valid contact, and the Information Technology Act (2000) makes further provisions for the validity of online contracts in particular. In some U.S. states, email exchanges have been recognised as binding contracts.
Smart contracts
An emerging category of electronic contract is the smart contract, which consists of computer program or a transaction protocol capable of automatically executing, controlling, or documenting legally relevant events and actions according to the terms of a contract or an agreement. (1998). 9783540644934, Springer. ISBN 9783540644934 (2025). 9783161569111, Mohr Siebeck. ISBN 9783161569111 (2016). 9780670069972, Portfolio/Penguin. ISBN 9780670069972 The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions. A number of U.S. states have passed legislation expressly authorising the use of smart contracts, such as Arizona, Nevada,Hyman Gayle M, Digesti, Matthew P., New Nevada legislation recognizes blockchain and smart contract terminologies August 2017, Nevada Lawyer Tennessee, Wyoming, and Iowa.
Consumer contracts
Legislation in many jurisdictions distinguishes between consumer contracts, where one party contracts as a consumer or private individual and not acting for a trading or professional purpose, and contracts between business traders. There are additional protections for people being enticed into consumer contracts and protection their rights against unfair terms. Examples of such legislation include the European Union's Directive on Unfair Terms in Consumer Contracts and derivative legislation implementing the directive within EU member states. Under Quebec law, promises or agreements entered into before securing a consumer contract are not considered binding.Gowling WLG, International transactions: Consumer contracts Q&A Canada, reproduced from Practical Law with the permission of the publishers, accessed on 20 December 2024
Standard form contracts
Standard form contracts are contracts in which one party supplies the text of a contract using a standard template, thus giving the other party no opportunity to negotiate its terms. A well-known example is the rise of clickwrap/shrink wrap contracts and terms of service which consumers of software products are required to sign in order to use products such as smartphones, computers, and other devices reliant on software; however, standard form contracts are common wherever there is an inequality of bargaining power between parties to an agreement. Such contracts typically contain "boilerplate clauses" drafted by the party with greater bargaining power, which the party with weaker bargaining power was unable to negotiate against. A standard term contract that is particularly unfavourable to the party with weaker bargaining power may be regarded as a contract of adhesion and thus be considered unconscionable. Las 7 cláusulas abusivas más frecuentes en una hipoteca: efectos y consecuencias
Canada
The doctrine of unconscionability restricts the enforceability of "unfair agreements that resulted from an inequality of bargaining power". Uber Technologies Inc. v. Heller, 2020 SCC 16 The test for unconscionability applied by Canadian courts is to determine whether there was an inequality of bargaining power between the parties to the contract and, if so, whether this inequality resulted in the contract being an "improvident bargain" for the party with lesser bargaining power. The inequality criterion is satisfied where one party is unable to sufficiently protect its interests while negotiating the contract, while the improvidence criterion is satisfied where the contract "unduly advantages the stronger party or unduly disadvantages the more vulnerable". Improvidence must be measured with reference to the time of the contract's formation and involves a contextual assessment of "whether the potential for undue advantage or disadvantage created by the inequality of bargaining power has been realised".
Argentina
Under article 1119 of the country's civil and commercial code, a clause which "has for object or by effect cause a significant imbalance between the rights and obligations of the parties, to the detriment of the consumer" is considered an abusive clause; (2025). 9789870331940, La Ley. ISBN 9789870331940 and, under article 37 of the country's consumer protection law, such clauses are generally unenforceable in Argentina. LDC art. 37 Similarly, consumer protection law in both Spain and Mexico limit the enforceability of such terms. El Supremo arruina el multimillonario negocio de la reclamación de gastos hipotecarios, 1 March 2018, Público (España)
United Kingdom
The Unfair Contract Terms Act 1977 regulates contracts by restricting the operation and legality of some Contractual term. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of of legal liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Construction contracts
A range of contract types is available for use in contracting for construction work.
Freight and transport contracts
Contracts for the transport of goods and passengers are subject to a variety of distinct provisions both under international law and under the law of individual countries. Presently, different provisions apply at the international level to contracts for transport by maritime, land, and air transport. With regard to maritime transport, the Hague-Visby Rules currently govern contracts for the international carriage of goods by sea in the vast majority of jurisdictions. In Singapore and the United Kingdom, provisions of each of the two countries' Carriage of Goods by Sea Act additionally apply the Hague-Visby rules to the domestic transport of goods by sea. Carriage of Goods by Sea Act 1972 (Singapore)Carriage of Goods by Sea Act 1971 (UK) Similarly, the Montréal Convention and the Warsaw Convention provide standardised terms for the transport of passengers' luggage by air. Contracts for the international transport of goods by air and legal provisions regarding the international transport of passengers by any mode of transport are currently governed by a variety of domestic and international laws.
Federal government contract types
The United States' Federal Acquisition Regulation (FAR), Part 16, describes the different types of contract available for use in federal government acquisition and when they may be used.General Services Administration, Federal Acquisition Regulation: Part 16 – Types of Contracts, accessed 4 September 2023 In this context there are three main categories of contract: fixed-price contracts, cost-reimbursement contracts, and time-and-materials and labor-hour contracts. The Federal Acquisition Institute advises that selection of the best contract type is important, "as it is a driver of risk, incentives, and obligations for both the Government and the contractor".Federal Acquisition Institute, Knowledge Nugget: Contract Types Transcript, accessed 4 September 2023 Government personnel are required by FAR 16.103(d) to record the reason why a particular type of contract was selected for each contract they let.
Contemporary developments in contracting
Visual contracting
Several attempts to present and record contractual agreements with more visual impact have been considered since around 2000, for example from a Scandinavian perspective, Helena Haapio et al in 2012 advocated "a visual turn in contracting" as a means of engaging those who read and work with contracts, improving understanding, easing implementation and avoiding disputes.Haapio, H., Berger-Walliser, G., Walliser, B. and Rekola, K., Time for a Visual Turn in Contracting?, Journal of Contract Management, Summer 2012, pp. 49–57 Adrian Keating and Camilla Baasch Andersen noted that in eastern and northern Europe, including Germany, visualisation of contracts has been seen as promising in eastern and northern Europe, including Germany, and argued that the benefits of such a step "would seem apparent".Keating, A. and Andersen, C. B., A graphic contract: Taking visualisation in contracting a step further, Journal of Strategic Contracting and Negotiation, 2016, Vol. 2 (1–2), pp. 10–18, , accessed 1 December 2023
Fairer contracting and responsible contractual behaviour
Fairer standards of contracting and responsible contractual behaviour have been promoted by government bodies and civil society organisations, encouraged or mandated for public sector contracting, set out in guidance for both public and provide sector contracting parties,Cabinet Office, Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency published 7 May 2020, accessed 30 September 2023 and endorsed as an aim of public policy.Competition and Markets Authority, How to write fair contracts: information for businesses, published 23 March 2016, accessed 9 November 2023 The interdisciplinary Responsible Contracting Project sees "innovative contracting practice" as a means of improving the human rights of workers engaged in global supply chains.Responsible Contracting Project, The Mission, accessed 9 November 2023
that records the purchase of a 15-year-old slave for six bolts of plain silk and five Chinese coins]] to Thomas Jefferson, May 1786, Maritime Insurance Premiums]] contract of 1796]]
See also
By country
Notes
Further reading
External links
|
|
