Contract Law Notes PDF

LA Weeks 5 & 6 Contract Law Code of obligations and contracts Agenda: The basic requirements for a contract:  Offer  Acceptance  Consideration The necessary requirements for a VALID contract:  Intention (duress and misrepresentation)  Capacity (age and m...

LA Weeks 5 & 6 Contract Law Code of obligations and contracts Agenda: The basic requirements for a contract:  Offer  Acceptance  Consideration The necessary requirements for a VALID contract:  Intention (duress and misrepresentation)  Capacity (age and mental disability)  Legality  Possibility of performance Breach of Contract  Remedies for Breach of Contract  TUNISIAN CONTRACT LAW Contract Law can be found in the Code of obligations and contracts (art 3 -4-5-6-7-8- 9)  DEFINITION OF A CONTRACT A contract is: an agreement between two (or more) persons that results in obligations or duties (things that both parties must do) The parties to a contract may be: natural persons (people) or artificial persons (companies) (eg: an employment contract is between a company and an employee) CONTRACTS contracts must be written examples of contracts: o contracts of marriage o contracts for the sale of immovable property (such as a house or apartment or land) and movable things such as cars, electronics… o an employment contract between an employer and an employee o Commercial contracts such as Leasing, transportation, sales … o etc  3 BASIC REQUIREMENTS OF A CONTRACT The 3 basic requirements for a contract are: An OFFER : one party must make an offer ACCEPTANCE : the other party must accept the offer CONSIDERATION : BOTH parties must receive something of value from the contract ie: there must be a mutual promise to exchange something of value in the future (value includes money, services or property) If the 3 basic requirements are present, then there is a contract between the parties When there is a contract between two parties then this means that both parties must do what they promised to do in the contract (provided that it’s a *valid contract) *NOTE: for a contract to be VALID: that is, a contract that the Court will recognize and enforce, certain necessary elements must be present If any of these necessary elements is missing then the contract is not valid and will not be enforced by the courts (necessary elements will be discussed in 2nd class on contract) EXERCISE 1 Ahmed offers to sell his car to Budour for 70 000. TND Budour accepts the offer. Question: Are the 3 basic requirements of a contract present? ANSWER The 3 basic requirements of a contract are:  Offer: one party must make an offer  Acceptance: the other party must accept the offer  Consideration: both parties must receive something of value So the 3 basic requirements of a contract are present:  Offer: Ahmed makes an offer to sell his car to Budour  Acceptance: Budour accepts Ahmed’s offer  Consideration: both Budour and Ahmed will receive something of value: Ahmed will receive 70 000 and Budour will receive a car (there is a mutual exchange of value)  NECESSARY REQUIREMENTS There are 3 basic requirements for a contract to exist: offer, acceptance and consideration However the contract will only be VALID if the following necessary requirements are present A contract is valid if the court will recognize and enforce it Necessary requirements of a contract are: Intention : both parties must have the intention to enter into the contract Capacity: both parties must have the capacity to enter into the contract Legality: the contract must be lawful Possibility of performance: it must be possible to perform under the contract ie: both parties must agree to do something that is possible INTENTION BOTH parties to the contract must have the intention to enter into (to make) the contract If one of the parties entered into the contract as a result of: Duress OR Misrepresentation THEN that party DOES NOT HAVE INTENTION and the contract is voidable (nullité relative in French)  Presentation title 11 VOID VS VOIDABLE -A « void » contract is one that is Invalid abd has no legal effect. A contract can be considered Void if it is contrary to the law, public policy or moral values. A void contract can be declared null by any intersted parties (not only the parties to the contract) - A « voidable » contract is one that is initially valid and binding, but which can be challenged by one of the parties. A contract may be considered voidable if it is affected by a defect in the consent (vice du consetement in French) of one of the parties such as misrepresentation or duress.  DURESS (VIOELNCE IN FRENCH) In contract law Duress is about forcing or threatening a person to enter into a contract against their free will Duress in a defect of consent that can make a contract voidable Duress can be: Forcible (violence physique in French) Non-forcible (violence morale in French Forcible duress: if is it an immediate threat of serious physical harm Non-forcible duress: if it is a lesser threat (not immediate or serious physical harm e.g intimidation, blackmail) In both situations; forcible and non-forcible duress the contract is voidable, (ie: the party who was threatened can choose whether or not to continue with the contract) DURESS EXAMPLES:  Forcible duress: Forcible duress: Ayman threatens Morad with a knife and says that Morad must sign a contract agreeing to sell him his house in Tunis for TND 20 000. Morad signs the contract. This contract is VOIDABLE because Ayman used forcible duress ie: he threatened Morad with a knife – to get Morad to sign the contract Non-forcible duress: Ayman, who is Morad’s boss, threatens Morad that it “will not be good for his job” if Morad doesn’t sign a contract agreeing to sell him his house. This is non-forcible duress as it is a threat. The contract is VOIDABLE ie: Morad can choose whether or not to continue with the contract of sale MISREPRESENTATION (DOL OR TREMPERIE IN FRENCH) A misrepresentation is when one of the parties to the contract deceives the other party which leads the deceived party to make a contract that he may not have made if he’d known the truth The misrepresentation may be made by:  Word  Deliberate silence The law requires that the parties to a contract:  must act honestly (in “good faith”) and  have a duty to disclose any known defect in a thing being sold If a party enters into a contract as a result of a misrepresentation, then the contract is voidable (ie: deceived party can choose whether or not to continue with the contract) MISREPRESENTATION Examples: Misrepresentation by word: Salma offers to sell her car to Maha for TND 50 000. Maha accepts the offer. Salma knows that the car has faulty brakes but tells Maha that the car is in excellent condition. Salma has made a misrepresentation by word. Salma has a duty to act honestly (in “good faith”) and to disclose the fact that the car has faulty brakes to Maha Misrepresentation by deliberate silence: Salma offers to sell her car to Maha for TND 50 000. Maha accepts the offer. Salma knows that the brakes are faulty but says nothing to Maha. Salma has made a misrepresentation by deliberate silence. Salma has a duty to act honestly (in “good faith”) and to disclose the fact that the car has faulty brakes to Maha In both cases, there is a misrepresentation and so the contract is voidable (Maha can choose whether or not to continue with the contract)  CAPACITY One of the necessary element of a contract is that both of the parties to the contract must have capacity This means that they must be capable of understanding the terms of the contract The following persons do NOT have FULL capacity to enter into a contract: A minor (person under the age of 13) A mentally disabled person CAPACITY: AGE According to the Tunisian law on capacity: A person aged 18 and above with full mental capacity has full capacity to enter into a contract A person under the age of 18 years, is a minor and does NOT have full capacity to enter into a contract The law distinguishes between a minor: