Contracts 2024 Lecture Notes PDF

Contracts LECTURER ANNALEENA KOLEHMAINEN 2024  1. Finnish Contract Law Contracts Act (www.finlex.fi ) is the general law for contracts Contract is created when the offeree accepts the offer of the offeror -> the buyer accepts the offer by the seller; within the given time and without...

Contracts LECTURER ANNALEENA KOLEHMAINEN 2024  1. Finnish Contract Law Contracts Act (www.finlex.fi ) is the general law for contracts Contract is created when the offeree accepts the offer of the offeror -> the buyer accepts the offer by the seller; within the given time and without changing or adding anything Specific rules in for example Employment Contracts Act, Code of Real Estate, Consumer Protection Act Offers are already binding 1.1. Some main principles Oral contracts are binding  BUT wise to make a written contract Freedom of form Requirements of form e.g. real estate Freedom of contracts Loyalty in between parties Negotiations must be conducted in good faith 1.2. An offer becomes effective when it is received or read by the other party; some differences IN GERMANY THE OFFER BECOMES EFFECTIVE WHEN RECEIVED IN NORDIC COUNTRIES WHEN THE OFFEREE HAS HAD THE POSSIBILITY TO READ AND UNDERSTAND IT …As a consequence In Germany and the cancellation must arrive before or at the same time with the offer; _ in Nordic countries before the offeree has had a change to get acquainted with the offer 1.3. An Addition Constitutes a New Offer The offerer is bound by the offer for the time specified in the offer or if no specified for a reasonable time, e.g. the seller has included in the letter that this offer will be valid until 15th of Dec. 2024 An acceptance is effective if it is unreserved and unconditional, i.e., the buyer does not want to add or change anything 1.4. Some differences, US: In US an acceptance has legal effect even if it contains additional or different terms than the offer unless the terms materially alter the agreement or the party objects within reasonable time -> Contracts can be created via the exchange of nonmatching forms; some responses that would be seen as counteroffers in other countries are considered acceptances “The terms that materially alter” are related with essential business terms like the description of the product, quantity, price, payment, and delivery terms “Battle of forms” 1.5. Interpretation of Contracts Interpretation of contracts ◦Process of determining the meaning of ambiguous or incomplete expressions ◦Common aims and goals of the contract ◦The risk of ambiguity on the side of the party which drafted that clause  1.6. Invalidity of Contracts Invalidity of contracts ◦ Duress: Contracting party was forced to a contract ◦ Fraudulent inducement: An innocent party is induced to make a contract ◦ Undue influence: Taking advantage of another’s distress, lack of understanding, imprudence or position of dependence on him ◦ Mistake in motives or mistake in expression ◦ Honor and good faith (Small general clause) ◦ Contract is not binding if it has been entered into in circumstances that would make it incompatible with honor and good faith for anyone knowing of them to invoke the transaction 1.7. Adjustment Adjustment ◦ Is exception to the rule of the binding force of the contracts ◦ Process of changing an “unfair” contract by the court ◦ A contract can be adjusted only if it is considered to be binding ◦ A legal transaction or a clause in it may be adjusted if it is unfair of if applying it would lead to an unfair result ◦ All circumstances relevant to the matter have to be taken into account ◦ The goal is to restore the contractual balance 1.8. Authorization Authorization ◦ An agent is a person acting on behalf of another person (his principal) with the authority of principal ◦ If the agent has entered into transaction against the instructions of the principal, the transaction is not binding for principal only if the third person knew or should have known that the agent was exceeding his authority ◦ If the authorization is based only on the communication by the principal to the agent, transactions by the agent exceeding the scope of his/her authority is not binding for the principal 2. Standard Terms It is a customary practice in international business to adopt commonly recognized or standard terms (standard for contracts) Standard terms are of great help ◦ The risks can be calculated more precisely ◦ The clarity: the contract has been tested in practice ◦ Time and costs saved ◦ The special demands of the branch in question have been taken into account Standard term contracts are only suggestions, the details of every contractual situation have to be taken into account  If one wants to apply standard terms, there has to be a special reference to them It also has to be individualized which terms are to be used Both parties have to have in practice a possibility to familiarize themselves to the terms in question before signing the contract It is customary that the standard terms of the branch are implied in the sales contract and that the text of the contract itself remains quite brief Eg. INCOTERMS International Commercial Terms by International Chamber of Commerce, latest 2020 https://iccwbo.org/resources-for-business/incoterms-rules/inc oterms-2020/ 3. Force Majeure Clauses Force majeure: an obstacle which makes the performance of contract impossible Obstacle is not dependent on either of the contracting parties and is beyond their control Could not reasonably be foreseen when the contract was made E.g., earthquakes, hurricanes, war, epidemics, strikes etc. It is advisable to determine as precisely as possible which impossibilities are due to force majeure The consequences of force majeure Most often has two stages:1) the time for performance is extended and 2) if the force majeure continues after this each party is entitled to cancel the contract 4. Arbitration Clauses Arbitration clause binds the parties of the contract to solve the disputes arising from that contract outside the courts in arbitration process An arbitration agreement is to be made in writing By signing the agreement or By concluding it in the correspondence between two parties or By a reference to a standard conditions of contract or to some other document that includes a provision on arbitration in an agreement signed by the parties  Positive: Confidential and allows parties to find arbitrators who are specialized in precisely the kind of contract in question More rapid that ordinary national court Negative Can be quite costly Example “Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules for Expedited Arbitrations of the Arbitration Institute of the Stockholm Chamber of Commerce.”