Theory of Obligation (2022-2023) PDF

THEORY OF OBLIGATION Volume1 SOURCES OF OBLIGATION (Contract & Unilateral Act) BY Dr. Ahmed Sharafeldin & Dr. Mohieddin Alameddin Professor, Civil Law For...

THEORY OF OBLIGATION Volume1 SOURCES OF OBLIGATION (Contract & Unilateral Act) BY Dr. Ahmed Sharafeldin & Dr. Mohieddin Alameddin Professor, Civil Law Former Counsel for the Cairo Regional Former Scientific Supervisor, Centre for International Commercial English Section Arbitration, International Arbitrator Former Director, Arbitration Centre Former Member to the International Ain Shams University Court of Arbitration of the ICC, Paris (Cairo) (With Compiled Texts) (2022-2023) II  ACKNOWLEDGEMENT The author of this book owes so much gratitude to Professor Hamdy Abd Alrahman and Professor Walaa Arakeeb for their consent to borrow specific parts of their books titled “Theory of Obligation” to be included in this book. Notice The author of this book would like to note that considering the short period allowed for the preparation of this text book, there are some concerns with regards to the optimum completion of the book since there was a commitment to present it before the start of the academic year 2022/2023. Hence, it is expected that the book will be revised in due course. That is what has partly been done in preparation the same book for the academic year 2023/ 2024. In this context there are some parts of the course that has been added to same book. III  Contents Page Contents IV Introduction 1 Study plan 3 Chapter I: Obligation and its Sources 4 1– Definition of Obligation 4 a) Idea of Obligation: its Content 4 b) Obligation Scope 6 2– Classification and Sources of 6 Obligations a) Natural and Civil Obligations 6 b) Prefect and Imperfect Obligations 7 c) Obligation to Give, Obligation to Do 8 and Obligation not to Do Something d) Obligation of Result (to Achieve 8 Result) and Obligation of Means (to Exert Diligence and Prudence) e) Classification of the Obligation 11 According to its Source Chapter II The Contract 18 - Historical Approach 18 Section I Preliminary Notions 19 1. Definition of Contract 19 2. Distinction between Conventions and 21 Contracts 3. Contract must Effect Legal Rights 23 Section II Classification of Contracts 25 (A)Bilateral and Unilateral Contracts 25 (B)Commutative and Aleatory Contracts 29 (C)Gratuitous Contracts and Onerous 33 Contracts (D)Consensual, Formal and Real 36 Contracts IV Section III Formation of Contract 40 Subsection1 Agreement (Mutual Assent) 42 First Branch Consent of the Parties 42 Second Modes of the Declaration of Intention 45 Branch Third Branch Concordance of Wills 50 1- Offer 50 - Offer to the Public 51 - Binding Force of an Offer 52 - Revocation of Offer 53 2- Acceptance 55 (a) Conditions of Acceptance 56 (b) Silence and Expression of Will 56 (Acceptance by Silence) (c) Acceptance in the Contract 59 Concluded by Auction 3- The Time and Place of Contract 60 Conclusion Subsection2 Special Modes of Agreement 64 (A) The Contract of Adhesion 64 (B) The Promise to Enter a Contract 67 (C) Earnest Money 70 (D) Representation 71 1. Kinds of Representation 74 2. Elements of Representation 75 3. Representation Legal Effects 77 4. Self Contracting 78 Section IV Validity of Consent 79 Subsection1 Capacity for Contracting 80 Subsection2 Vices of Consent 88 V  1) Error 89 A) Kinds of Error 92 B) Conditions of Error Vitiating 92 Consent 2) Misrepresentation 98 A) Relation between Misrepresentation 99 and Error B) Elements of Misrepresentation 100 C) Conditions of Misrepresentation 104 Vitiating Consent 3) Duress 106 1. Definition of Duress and its Features 107 2. Elements of Duress 108 3. Conditions of Nullity Due to Duress 109 4) Exploitation 110 1. Definition and Elements of 111 Exploitation 2. Exploitation Remedys 113 section V The object of Contract 114 Object of Obligation and Object of Contract 115 Subsection1 Various Conditions of Obligation Object 118 1. Obligation to Give (Transfer) 118 2. Obligation to Do 119 Subsection2 Qualities of Object in Obligation to 119 Transfer Subsection3 Conditions of Object in Obligation to Do 131 Section VI The Cause of Contract 134 Subsection1 Background of the idea of cause (its 134 kinds) A) Meaning of the Cause 134 B) History of the Theory of Cause 138 C) Consideration in English Law 138 VI  D) Recent Amendments of French 141 Civil Law Subsection2 The Cause must be Lawful 143 Subsection3 When Contracts are Unlawful? 145 A) Classes of Unlawful Contracts 146 B) When Contract are Against Public 147 Order? Section VII Nullity OF Contract 149 Subsection1 Preliminary Ideas on Contract Nullity 149 1. Kinds of Nullity 149 2. Basic of Distinction between Kinds 150 of Nullity 3. Consequences of Distinction 151 Subsection2 Special Rules Related to Each Kind of 151 Nullity 1. Absolute-Nullity 151 2. Relative-Nullity 154 Subsection3 Effects of Nullity 156 1. Effect of Contract Nullity as to its 156 Parties 2. Limitation on the Effects of Contract 157 Nullity A) Reduction of Contract 157 B) Conversion of Contract 159 3. Effect of Nullity as to Third Parties 161 Section VIII The Effects of Contract 163 Subsection1 Effects as to Persons 163 Branch 1 Effects between the Parties 163 (A) Universal Successors 164 (B) Particular Successors 167 Branch 2 Effects on Third Parties 169 A) Stipulation for Third Parties 170 VII  Item 1: Conditions of Stipulation 172 Item 2: Effects of Stipulation 175 B) Undertaking to Bind a Third Party 177 Subsection2 Effects of a Contract as to its Content 177 Firstly: Interpretation of Contract 178 Secondly: Characterization of Contract 179 Thirdly: Enforcing Contract 180 Fourthly: Theory of Unexpected Events 182 1) Conditions of the Theory 183 2) Authority of the Judge to Modify the 184 Contract Section IX Remedies for non- Performance of 185 Obligation Subsection 1 Termination of Contract 185 (A) Judicial Dissolution 186 (B) Conventional Dissolution 190 (C) Rescission Due to Impossibility of 192 Performance (D) Effects of Dissolution 193 Subsection 2 Party’s Right to Suspend Performance 194 Texts related to Sources of Obligations (In 199 Egyptian Civil Code) VIII  INTRODUCTION Importance of the Theory of Obligation: The theory of obligation is the main part of the civil law. It casts its lights upon other branches of private law as well as those of the public law. Both the theory of contract and the theory of tort are the two main themes of the sources of obligation. These two theories surpass civil law framework to incorporate other branches of law. For example, they affect areas such as: the administrative contracts which are to a large extent based on the law of contract with exceptions to comply with the public utilities and other activities of the administration. In the public international law, you can find some applications of the notion of contract with different parties in the treaties, conventions and memos of understanding, because their parties are States and International bodies not individuals. Similarly, the theory of tort has its applications in the administrative law concerning the unlawful activities of the administration and in the public international law as to the effects of violations of the treaties of war and weapons and other offensive activities of states. Egyptian Civil Code (ECC) Divisions: We will initially perceive an outline of civil law prior to analyze the sources of obligation. The code of this law begins with a preliminary chapter, encompassing rules dealing with the sources of law, the scope of application, rules for the conflict of laws as to the place and to the time, some private international law rules, natural and juristic persons, kinds of groups of juristic persons some of which were later on cancelled. It comprises also, three parts: the first for the obligations or personal rights, the second for specific contracts and the third concerns the real rights: principal and accessory. In the first part of the civil law (obligations) we find the sources of obligation, one of which is the contract (subject matter of this study), we also find the transfer and extinguishing of obligations as well as the effects of the obligation, and its description "modalities".The rules of evidence were contained in this part, but about 20 years later to the promulgation of the code these rules were abolished and substituted by the law of evidence No. 25 of 1968. 2  STUDY PLAN In our study of the theory of obligation, in the sense of civil law countries, we have to know the definition of obligation, its classification and its sources. The focus of this book is the contract; we have to study its definition, classification, elements, nullity, effects and performance and dissolution. For every point, a chapter or section will be devoted in this book. Accordingly, our research will be branched to: Chapter One: Obligation and its Sources. Chapter Two: Contract. Section I: Preliminary Notions Section II: Classification of Contracts. Section III: Formation of Contract. Section IV: Validity of Consent Section V: The Object of Contract Section VI: The Cause of Contract Section VII: Nullity of Contract Section VIII: The Effects of Contract Section IX: Remedies for the Non- Performance of Obligation. Chapter Three: Unilateral Will 3  CHAPTER I OBLIGATION AND ITS SOURCES 1- Definition Of Obligation: Different shades of the word obligation are provided from extensive to restrictive as follows: “Obligation” has a general meaning intended to indicate a: “duty imposed by law, promise, contract, relations of society, courtesy and kindness, etc. It, also, it may mean an “undertaking to perform”. The obligation is also: “A tie which binds us to pay or do something agreeably to the laws and customs of the country in which the obligation is made”(1). The word is, however, eventually used to signify the right claimed. More frequently it is still made synonymous with the duty owed and it is in this latter sense that this term is most freely employed in France and Egypt. (a) Idea of Obligation: its Content: Referring back to your study of the classification of rights, you will remember that obligations fall under the head of rights and duties in persona. It is the correlative of right as it leads to the understanding of: the corresponding duty, 1 ( ) Black’s: Law Dictionary, 1968, p. 1223, 1224. 4 constraint, or binding force which should prevent all other persons from denying, abridging or obstructing such right, or 2 interfering with its exercise( ). The French Civil Code (FCC) defines obligation as "a legal relationship whereby a person, called the obligor, is bound to render a performance in favor of another, called the obligee. Performance may consist of giving, doing, or not doing something". More evidently, it is the abstract idea of the legal tie or bond uniting a person (obligee, creancier) (3) with another person (obligor, debiteur)(4) which is designated by the term obligation. 2 ( ) Black’s: p. 1224. 3 ( ) F. Goadby, Introduction to the study of law, (1914) P. 400. Obligee means, The person in favor of whom some obligation is contracted, whether such obligation be to pay money or to do or not to do something. The party to whom a bond is given. Obligees are either several or joint. An obligee is several when the obligation is made to him alone; obliges are joint when the obligation is made to two or more; and in that event each is not a creditor for his separate share, unless the nature of the subject or the particularity of the expression in the instrument lead to a different conclusion. Black's: Dictionary p. 1226. The words obligee and payee have been held to have a technical and definite meaning under an act relative to promissory notes, bonds, etc. and= =apply only to notes bonds, or bills whether given for the payment of money or for the performance of covenants and conditions, and not to mortgages. (Black’s: p (1226). 4 ( ) Obligor: The person who has engaged to perform some obligation, including person liable for tort. Obligors may be joint and several. They are joint when they agree to pay the obligation jointly. They are several when one or more bind themselves and each of them has separately to perform the obligation. In order to become an obligor, the party must actually, either himself, or by his attorney, enter into the obligation and execute it as his own. (Black’s: p. (1226). 5 (b) Obligation Scope: An obligation exists between two persons when money or its equivalent is owing from one to the other; rights and duties in persona which do not increase or diminish the holder's patrimonium( 5 ) do not fall within the sphere of obligations. Thus, the duty of respect and obedience, which a son owes to his father, is outside the sphere of pecuniary obligations and it enters in family duties; but the son's duty to provide the father with alimony in certain circumstances is within it. It is true that the term is used broadly to cover all rights and duties in persona where such usage is to be avoided. 2. Classification of Obligations: (a) Natural and Civil Obligations: One well-known classification of obligations distinguishes those, which are civil from those, which are natural, the natural obligation being one which is not protected and enforceable by action. An imminent example thereof is the civil obligation which had degenerated by limitation and thus degraded from a civil obligation to 5 ( ) The Patrimonium is the totality of an individual’s economic assets and liabilities, i.e. those rights and duties which are capable of valuation in money terms. The patrimonium consists of property (beins) and obligations. Beins in French law are rights in rem (droits reels), obligations are rights in personam ( droits personnels) and the duties correlative to such rights. 6 become a natural obligation. The payment of such debt is not a liberality or donation, but a payment of a due debt and may not be restituted(6) by the payer. As we mentioned above, a natural obligation is one that can not be enforced by action. Nevertheless such obligation is binding on the party who makes it in conscience and according to natural justice. As, for instance, when the action is barred by the act of limitation, a natural obligation still subsists, although the civil obligation is extinguished.It consists, therefore, of an imperfect right or duty(7). A civil obligation is a legal tie, which gives the party with whom it is contracted the right of enforcing its performance by law. (b) Prefect and Imperfect Obligations: In American law there is also perfect and imperfect obligation. A perfect obligation is one recognized and sanctioned by positive law; one of which the fulfillment can be enforced by the aid of the law. However, when the duty created by the obligation operates only in the moral sense, without any positive law enforcement, this is called an “imperfect obligation,” that creates no right of action, nor has it any legal operation. The duty of exercising gratitude, 6 ( ) Sanhouri: Wassiet, (Explanation of the civil law) Vol. 1 (1966), no. 779 – 781, P. 751 – 762. 7 ( ) Black’s law Dictionary: page 1224 7 charity, and other merely moral duties are examples of this kind of obligation(8). (c) Obligation to Give and Obligation not to Do Something: Another classification of greater importance is based upon the nature of the acts forming the content of the right and duty of which the obligations consist. From this point of view obligations are distinguished as either binding a person to give something, to do something, or not to do something(9). It deserves to mention that the obligation of giving something can be joined to that of doing because the two kinds require doing something. (d) Obligation of Result (to Achieve Result) and Obligation of Means (to Exert Diligence and Prudence): Obligation to achieve a result: in which the debtor is obliged to achieve a particular result such as the carrier's obligation to transport the goods to a particular location and the carrier's obligation, in the contract of carriage of persons, to ensure the safety of the passenger(10). 8 ( ) Black’s: Law Dictionary: p. 1225. 9 ( ) In French: obligations de donner, de faire, et de ne pas faire. 10 ( ) In this regard see the court of cassation 26/4/1964, Civil Bulletin. 13 p. 522. 8  The obligation of means or care: implies that the debtor is obliged to take care and prudence in its business without being required to reach a particular conclusion. It is exemplified by the physician's obligation to exercise due diligence in treating the patient( 11 ). This means that the physician is not obliged to heal the patient. The basis of this classification derives from the extent to which the performance to which the debtor has been so bound to conform to this purpose that creditor aims to achieve. In addition, if the performance is identical to that purpose or objective then, the obligation is an obligation to achieve a result such as a seller's obligation to transfer the seller's ownership of the thing sold to the buyer(12). If the performance is not in conformity with the creditor's objective of the obligation and is only a means of achieving this objective, the obligation is an obligation of means, such as the obligation of the physician to treat the patient. Therefore if the physician exerts the required care, he is presumed, fulfilling his obligation, even if the patient is not cured or healed, according to what the latter seeks. 11 ( )Cassation 21/12/1971, judicial year 22, p. 1062. 12 ( )The same applies to the garage holder's obligation to repair a vehicle in accordance with what is agreed with its owner. See for considering the distinction between the obligation to achieve a result and that to take care is a relative matter subject to the circumstances: Mallory's comment on French cassation (First Circuit) 15/10/88– Dalloz- sirey 1989, p. 180. 9  The importance of the distinction between the two types of obligation is demonstrated in terms of the burden of proof of fault in the event of non-performance of the obligation. In obligation to achieve a result in which the debtor is obliged to reach a particular result the debtor's liability is based on the mere failure to achieve the result. The creditor suffices to prove that the debtor has failed to achieve the result, and the debtor, in order to dispose of its liability, must prove that the failure to perform its obligation is due to a foreign cause. In the obligation to exercise care, the debtor is obliged only to exercise due diligence in the execution of its obligation and is not liable in case he fails to reach the creditor's objective, unless the creditor proves the debtor's failure to perform the due diligence. For example, in the obligation of the physician to treat the patient, the responsibility of the physician shall be established only if the patient (creditor) proves the physician did not perform his obligation to caution and due diligence treatment, which is carried out by a verage (normal) physician found in the same circumstances as the physician in question. 10  (e) Classification of the Obligation According to its Source: The most important classifications of obligations are those, which divide them according to their source. The Roman jurists formed four classes of obligations, distinguishing them as contractual (ex contractu), delictual (ex delicto), or, quasi- contractual (quasi ex contractu) and quasi-delictual (quasi ex delicto). Modern French law follows this classification(13). The classification adopted by the Egyptian Code is: obligations arising from agreement, those arising from unilateral act, obligations arising from unlawful acts (torts), obligations arising from enrichment without just cause and obligations arising from a rule of law. This classification is more scientific than that of the French Code(14). We can distribute the above mentioned obligations between two categories, the first includes what is described as voluntary obligation and those considered as involuntary. This classification is sometimes studied under the head of acts and events(15). (13) Goodby, op.cit, P. 401. (14) Frederick Parker Walton: The Egyptian law of obligations, Vol. 1, London 1920,p. 13 15 ( ) To have legal analysis for this classification see: Prof. Dr. Abdul Razzak Al-Sanhouri: Al_wajeez: Vol. 1 p. 22-23; also his studies for the students of Doctorate Department (1954). Objections to the classification and an 11  Acts include the contract or agreement and the unilateral act, which are creative, translative or extinctive in their effect upon rights. Events which are facts taking place independently of the person’s will, whose rights and duties are under consideration. Each event may be a movement of external nature, for example an earthquake is an event, or some other natural occurrence, such as death, or it may be the act of some person other than the person whose rights we are considering. The determination of the legal consequences of events is, of course, only another aspect of the regulation of human conduct. By creating, extinguishing, or altering the incidence of legal rights and duties as a consequence of an event, the law in fact lays down rules to be observed by human bodies in view of the event(16). For example, the fact that the sun appears and disappears makes the day and the night, upon which the labour law imposes the duties of workers to spend daily a certain number of hours and the obligations of employers to pay their wages. We might consider the earthquake or the flood of a river an act of God, or a force majeure exempting the debtor who was affected by such attempt to introduce modifications referred to in: Abdel Hay Hejazi: the general theory of obligation, second edition, (1954) p. 50. (16) Goodby: op. cit. p. 321 - 322. 12 events from performing his obligation during the period such event lasts. The movement of the earth around the sun makes the years that are used in calculating the acquisitive and the extinctive prescription or limitation period, or in calculating the age of human beings to see if they have attained majority or are still minors(17). For the purpose of our study, obligations can be divided into two main groups: (1) Obligations arising from the agreement of parties. (2) Obligations, which arise without any such agreement. The first group will be studied under the head of contract; regarding the second group, it can be summarized hereinafter. Sources of obligations, which arise without agreement: When we consider the various ways in which an obligation may be created we reach a conclusion that there are in fact only two possible sources: (1) the agreement of parties(18), and (2) the law. In a certain sense it is true that even the obligations, which arise from contract, are the 17 ( ) Abdl Razak El-Sanhouri: Al-Wajeez, (1966), the explanation of the new civil code, vol. 1, p. 23, 24. Gamal Zaki (1976), Theory of Obligation, No. 12, p.20 – 22, Heszam Aboustate (1954): Theory of Obligation, 2nd ed. vol. 1, No. 23; Anwar Sultan: Sources of obligation (1983) No. 23. J. Carbonnier: Droit Civil, les obligations, e. 4 (themis) 1972, no. 8, p. 13. 18 ( ) This classification belongs to Mr. Walton, but we can add to the agreement of parties: the unilateral undertakings provided for in article 162 of the Egyptian civil law. Both of them are known as acts, i.e., voluntary sources of obligations. 13 creation of the law, but between these obligations and all others there is, an important distinction. It is a fact that if two parties form an agreement then, their agreement has no legal effect unless there is a law that gives its sanction to it. However in this case, it is the will of the parties which is the primary source of the obligation and the law, that is, the indirect or the secondary source. The law declares that the agreements of parties, if they are of a nature, which is not prohibited, and are intended to affect their legal rights, shall be enforced by the parties, and if not, by the authority of the courts. Nevertheless, in the non-contractual obligations the liability of the parties arises from the law itself and independently of their will. It is quite correct to say with regard to all of them, that it is the law and the law only that creates the liability. Neither Roman law nor French law, however, is content with this simple division of the sources of obligations. Roman law as of the time of Justinian has classified the sources of obligations under four heads: (1) contracts; (2) delicts; (3) obligations arising from quasi ex contractu, and (4) obligations arising from quasi ex delicto. The Roman lawyers saw that there were certain cases in which equity requires that a man should pay for a benefit that he had received, although he had never undertaken to 14 do so, and they said, logically enough, that he had been liable here as if he had made a contract. Further, in Roman law there were a certain number of definite delicts or torts, and the man who had committed one of these special wrongs was bound to pay penalty or to make reparation. However there was no general rule that a man was liable for damages caused by his fault, and, in course of time, the list of definite delicts was found to be inadequate. Accordingly, liability came to be recognized for a number of other wrongful acts, and in these cases the jurists said that the wrongdoer was liable quasi ex delicto, i.e., as if he had committed one of the enumerated delicts of the older law. The Glossators, the mediaeval commentators on the Roman law, invented the substantive quasi-contractus and quasi-delictum; and the French law, at any rate since the eighteenth century, has currently employed the terms quasi-contrats, and quasi-delits. However examination of all possible ways in which an obligation might arise led to the conclusion that there were some of them which were impossible to bring under the head of any one of the four sources, contracts, quasi-contracts, delicts, and quasi-delicts. The liability, for example, of a son to support his indigent father did not arise 15 from a contract, or from an unjust enrichment, or from an act of wrongdoing intentional or unintentional. All that one could say about it was that the son was liable because the law [and the religion] said he should be liable. Accordingly, French Civil Code classifies the sources of obligations as follows: (1) contracts; (2) quasi-contracts; (3) delicts; (4) quasi-delicts; and (5) the authority of the law solely. (F.C.C. article 1370.). According to this classification, the liability may arise without agreement in three cases: a. From a voluntary and lawful act, in which case we say that it arises from a quasi-contract, though it is a manifest abuse of language to employ a term which suggests that we have here something which is like a contract. Agreement or consent is the essence of contract and any case where there is no agreement must differ from a contract; or, b. In the second place, the liability may arise from an unlawful act, and this unlawful act may be either intentional or unintentional. If it is intentional, it is called either a delict or quasi-delict, and currently is known as “Torts”. Lastly, c. We have a small group of cases in which the liability may arise without any action at all. 16  This classification is now generally condemned. The distinction between a delict and a quasi-delict is unimportant. In both cases the liability arises from an unlawful act, and the question of intention has no bearing except that the Court may be inclined to make a liberal estimate of the damages when the wrong was done intentionally. The term quasi-contract is artificial and misleading, as the liability arising from a wrong or from what is improperly called a quasi-contract is, after all, neither more nor less than a liability, which is directly created by the law. French Decree No. 131/2016 was issued amending some provisions of the French Civil Code. The amendments included the sources of obligation, as it defined them in Article 1100 as including legal acts (dispositions), legal facts, and the law. The simple classification of the sources of obligations is still the best, viz., that they can all be divided into (1) obligations arising from contract; and unilateral will (2) obligations created by law(19). 19 ( ) F.P. Walton, the Egyptian Law of Obligations, vol. 1 (1920) P 14 - 16. 17  CHAPTER II THE CONTRACT Historical Approach: In a society where the exchange of goods and services is crucial in its economic order, as the process of exchange needs in a developing with free enterprise, is largely required. It was in this context that the foundations of modern contract law were established. By the third quarter of the nineteenth century, accelerating industrialization in Britain, generated by scientific innovation, economic entrepreneurship and increasing access to both capital and labor, had given rise to an unprecedented boom in trade, both at national or local level and in expanding markets overseas. This boom had been accompanied by a similarly massive development of that area of the law particularly contract, commercial and company law which is designed to facilitate and regulate business relationships"(20).That what was happened also in others developed and industrial countries. Therefore, we shall consider in this book contract's definition, classification, formation, nullity, effects and its 20 ( ) John Tillotson, Contract law in perspective, London, Butterwoths, 1985, p5. 18 dissolution. It is to be noted that Since the Egyptian Civil Code derived many of its provisions from the French civil code in its original version before its amendment in 2016, we will refer to the texts of this version when explaining the texts of the Egyptian Civil Code. SECTION I Preliminary Notions 1. Definition of Contract: A contract is a determination of the will producing an effect in the sensible world. It consists of two elements: an internal effect of the will and an external manifestation of that will(21). When a waiter in a restaurant offers you a menu, one of its items is: "Fish and Ships", and you give your order pointing to this item, you have entered into a legal contract against a consideration being the price in the menu. The waiter gave an offer of foodstuff shown on the menu and where you accepted one of them knowing the fixed price and these are the elements of the contract or agreement. In this context you might think of other contracts you enter into everyday when: you buy a newspaper, a piece of chocolate, a ticket for the metro, or in the cinema. 21 ( ) Goodby: 324. 19  The contract may be defined in different styles, and all of them are denote the same meaning: (a) A Contract may be defined as: “An agreement between two or more parties, where the first step in making of which is an offer by one party and acceptance by the other, provided that, minds of parties meet and concur in understanding of terms”. (b) Another Definition: “A deliberate engagement between competent parties, upon a legal consideration, to do, or abstain from doing, some act”. We can say that a contract is an agreement based on mutual promises between two or more competent parties to give, to do, or refrain from doing some particular thing. This agreement results in any obligation or a duty that can be enforced in a court of law (22). 22 ( ) Dr. Farouk Malash puts this definition: “A contract is an agreement made between two or more persons for the purpose of obtaining a certain consideration, such as sale contract, hire contract, labour contract… etc.” see his book on business law, 2003, p. 1. Some writers say: the useful as will as a brief definition of contract is “It is an agreement which binds the parties”. Jerry Defrietas. Business Law. Castlevale Limited, London. 2006. P.34, Walton: P 82 - 83 20 (c) A Third Definition: “A promissory agreement between two or more persons that creates, modifies, or extinguishes a legal relation”(23). The French civil law, in its amendment of 2016, (Art1101) gives definition of contract as follows: "a contract is an agreement of wills between two or more persons aiming to create, modify, transfer, or terminate obligations". 2. Distinction between Conventions and Contracts: The French Code is making a distinction between a convention and a contract. Every agreement between parties with regard to an object of legal interest is a convention, but it is not necessarily a contract. An agreement to extinguish a debt by the release of the debtor, or to modify an existing contract is a convention, but it is not a contract. A contract, in the strict sense, it means a convention, which creates an obligation. So all contracts are conventions, whereas not all conventions are contracts(24). 23 ( ) Black’s Law Dictionary: ed. 1968, p. 334 – 398. 24 ( ) Nicholas.op.cit. P.38. 21  Conventions are the genus and contracts are the species that is inserted under the genus. Some writers argue that a convention, that has for its object the transfer of a right, is similar to a contract. Planiol (French law Professor) explains that, the transfer of the right is the consequence of the creation of the obligation to give, that is executed as soon as it is formed. The contract is only translative because it creates an obligation. If I sell you my car, the immediate effect of the contract of sale is to create an obligation in that I am the debtor to deliver to you the car. The effect of this obligation, in modern law, is that you become the owner. Even so this distinction of language between convention and contract is not important as the term "convention" is frequently used as synonymous of contract. Moreover, the French Civil Code is not consistent in terms of using the two terms, in addition the general principles governing both types of convention are the same(25). The definition of the contract given in the French Code, in its initial version (art.1101), is: “An agreement by which, one or more persons bind themselves in favour of one or 25 ( ) Nicholas.op.cit. P.38. 22 more persons to give, to do, or not to do something” (F.C.C 1101). 3. Contract must Affect Legal Rights: The essence of the idea of a contract is the existence of intention to create legal relation between its parties. Based upon the above idea, one can say that there may be an agreement, which has all the outward marks of a contract. However, it will not be enforced by the courts because of the parties who made it did not intend thereby to affect their legal relations. Assuming invitation to dinner can be placed and accepted in the most formal way, but if the guest does not show up at the appointed time, he would not be liable for damages. Consequently, his excuse represented his intention to make a social engagement, not a contract of a legal engagement(26). 26 ( ) The same thing may be said if the host disappeared at the time of dinner. One of the most famous cases on forming a contract is Carlill v. Carbolic Smoke Ball Company, decided in nineteenth century in England. A medical firm advertised that its new wonder drug, the smoke ball, would cure people’s flu, and if it did not, buyers would get £ 100. Lots of people sued for £ 100 when it did not work. Fearing bankruptcy, Carbolic argued the advert was not to be taken as a serious, legally binding offer. It was merely an invention to treat, or mere puff, a gimmick. But the court of appeal held that to a reasonable man Carbolic had made a serious offer. People had given good “consideration “for it by going to the distinct inconvenience of using a faulty product. “Read the advertisement how you will, and twist it about as you will” said the court, “here is a distinct promise expressed in language which is perfectly unmistakable”. Carlill v. Carbolic Smoke Ball Company 2QB256, referred to in Jerry Defrietas.Op.Cit.p.48. 23  Another example would be “a father says to his son: "If you work hard during the semester, I will give you money to travel with during the vacation". The father may be quite sincere in his promise, but he does not intend to give his son a legal claim against him where no such claim has been created. In a Belgian case, an official was asked by his superior officer to do some extra work. The superior told him that he would see he got special remuneration for it. The official, failing to get this remuneration, brought an action against both his superior and the government, accordingly it was held he had no legal claim against either the government had made no contract with him at all, and the superior officer had not intended to bind himself, but had meant only that he would recommend paying for the work. With short words, a contract is a legally binding exchange of promises or agreement between parties that the law will enforce(27). Based on all the above, the following ideas are suggested to be included in the definition of a contract: "A contract is an agreement by which one person gives to another a legal claim against him which this other 27 ( ) Walton: P 82 - 83. 24 "accepts". There must be consent; there must be at least two persons; there must be an outstanding claim contemplated. The claim must be one which the law will enforce"(28). SECTION II Classification of Contracts (A) Bilateral and Unilateral Contracts: The French Civil Code (art. 1102) states: “A contract is bilateral (synallagmatic) when the contracting parties bind themselves reciprocally the one to the other. It is unilateral when one or more persons are bound in favour of one or more other persons without any engagement on the part of the latter. The same meaning is present in Egyptian law. Here, it is ought to be noted that there is no merit in the word "synallagmatic" because the Greek word "synallagma" simply means a contract. Therefore, it is better to use the term "bilateral" to indicate the two-sided character of these particular contracts. In the language of the French court of Cassation, the essential character of such contracts is to engender both two principal and correlative obligations simultaneously in which the one is the cause of the other. 28 ( ) Walton: P 82 - 83. 25  In a bilateral contract each party is concurrently a debtor and creditor. Even though a party owes certain obligations and in return he can claim certain rights from the other party, the obligations contracted by each party are conditional on those contracted by the other; thus bilateral contracts create reciprocal or interdependent obligations. Among such contracts are sale, exchange, lease, partnership, and many others. In a sale, the seller is bound to deliver the sold thing and provide certain warranties. Whereas buyer is bound to pay the price. We cannot say that either party is more a debtor or more a creditor than the other is, because, both of them are fully satisfied with the transaction. The seller is a debtor in terms of his obligation to deliver and to warrant; on the other hand, he is a creditor as regards his right to claim for the price and its accessories. Conversely, the buyer is a debtor as regards his liability for the price, whereas he is a creditor as regards his claim for delivery of the thing and for the warranty. Similarly, with the lessor and the lessee, the employer and the employee and so on. With contracts of this class we must contrast the unilateral contracts where one party is purely and simply a debtor, and the other party is purely and simply a creditor. 26  On the contrary, there are no reciprocal rights and duties in unilateral contracts; since the rights are all on one side and the duties are all on the other side. The best example of such contracts is the contract of donation where the donor binds himself to give being a deboter , whereas the donee is a creditor. Consequentially the donor has no any action from his side because; the donee owes him nothing and has come under no obligation to him. So the obligations are all on the side of donor (29). Therefore, if one party gives the other an option to buy his property, which the other accepts, the party to whom the option is given does not bind himself to anything. The same may be the case in a contract of sale on approval (in French: vente a l'essai) but this is a question of interpretation. It deserves mentioning that unilateral contracts are contracts, which require consent for their formation just as much as other contracts. The creditor in these type of contract does not bind him to do or to pay anything, but it is his acceptance that enforce the legal tie(30). 29 ( ) There is a rule saying that: where a contract is described as unilateral, this description may relate to the conclusion of the “acte juridique” and in this case we are looking at the formation of a disposition and not its effects. On the contrary, where the same description relates to the outcome of contracting it will mean the effects of the contract and not its ere formation; Planiol et Ripert, 1 partie, par Esmein no. 1, p. 1; Sanhouri and Maraghi 2004, no. 55, p. 133; Anwar Sultan (1983): no. 353, p. 280. 30 ( ) Walton: P. 84-86. 27 Importance of the Distinction: Article 157/ 1 of the Egyptian Civil Code provides that: "In bilateral contracts if one of the parties does not perform his obligations, the other party may, after serving a formal summon on the debtor, demand the performance or rescission of the contract with damages". It is, in fact, a general rule of law that where there are reciprocal obligations and one party has performed, or is willing to perform, his part; whereas the other party has failed to perform his part, the first party may demand that the contract be set aside. This is in virtue of what is called the tacit resolutory condition [as opposed to the express resolutory condition provided for in a contract]; the basis of the claim is the reciprocity of the obligations. The one party is presumably have performed his part on the implied condition that the other party would make the counter-performance. And if this does not follow, he can ask for the dissolution of the contract. However, the contract is not dissolved by law(31). The creditor who desires to have the contract set aside on this ground must serve a formal demand of execution upon the debtor and in default of such execution obtains a judgment of the court deciding, that 31 ( ) in French: de plein droit 28 contract is dissolved. The judgment will also give him damages if requested. The creditor is certainly not bound to ask for dissolution of the contract. Alternatively, he can ask for its performance instead, and, where specific performance can be made, he will probably prefer this remedy. Irrespective whether he asks for dissolution of the contract or for its execution he must begin by showing that he is not to blame; that he has done or is ready to do what he promised (32). (B) Commutative and Aleatory Contracts: The next division of contracts made by the French Code is into contracts, which are commutative, and those, which are aleatory. According to some French authors, the definition: “A contract is commutative when each of the parties binds himself to give or do something which is regarded as the equivalent for that which is given or done for him. When the equivalent consists in a chance of gain or of loss for each of 32 ( ) The creditor may opt to stop execution its part (obligation) in the contract. This is called in Latin: “Exceptio non adimpleti contractus”. It has to be noted that the exception non adimpleti contractus may not be invoked in case of a natural obligation nor in connection with an obligation the enforcement of which is pending on a delay; Gamal Zaki (1976) no. 213, p. 416 – 418. 29 the parties, depending upon an uncertain event, the contract is aleatory”(33). In commutative contracts each party gets something fixed and which is capable of being valued so that we can say at once whether the equivalent is a fair one. In these contracts, it is not required to examine if one party should be a gainer and the other party is a loser. For example if I, as a purchaser, voluntary buy something at a fair price, or I, as a lessee, pay a reasonable rent for the lessed thing, neither I nor the other party to the contract gains anything at the expense of the other, each of us gets what he wants. In the aleatory contracts it is not alike. The parties know that they are making speculation, as one of them is can potentially gain and the other to lose. What each of the parties gets is not anything that can be instantly valued; it is prospect or chance. For example, a bet is an aleatory contract. Until an event that the parties have staked their money turns out in a certain way, for instance, until a certain horse wins, or does not win a race, we do not know which of the parties the winner is. The character of this species of aleatory contracts has been already explained. 33 ( ) Walton: P. 88. 30  Cairo Court of Appeal ruled that: “The aleatory contract may be incumbent upon the sale of plants or fruits before its maturity against an agreed price. However such contract is not aleatory if there is an agreed price agreed for each separate unit"(34). Another important class of aleatory contracts is contracts of insurance (assurance)(35). The whole business of insurance consists of taking risks, or, in other words, of making aleatory contracts. It is only the fact that if the policies issued by the insurance company are sufficiently numerous the favorable chances balance the unfavorable, and indeed, leave a profit, which makes gambling of this kind a safe business. A man takes out an accident policy; he may be fortunate enough to break his neck the next day, and, thereby, cause a serious loss to the company, or he may pay premiums for fifty years and die of old age without accident and, therefore, obtain nothing. The sale against a life-rent or annuity is another example of an aleatory contract. 34 ( ) Judgment of 18-4-1948, Al- Mohamat, year 31, No. 135, p. 365, referred to in: Sanhouri & El-Maraghy (2004) el wassiet, vol. 1, p. 137, footnote no. 1. 35 ( ) Weill et Terré: Droit civil, les obligations, 1975 (Dalloz) no. 40, p. 42; Carbonnier; op. cit, no. 8, p. 32 – 33; Mazeaud: Leçons de droit civil, 1968, t. 2, No. 105, P. 84; Sanhouri: El wagiez: No. 45, p. 44. 31 The Object of the Aleatory Contract is the Risk Taken: In a contract of this class it is essential that the parties got a risk of losing. At any rate, the contract fails if they thought there was a risk whereas in fact there was none. This is well known in the contract of insurance. When the chance of gain or loss depends on the longer or shorter life of a person, as when a person contracts to pay a life rent, the parties act on the assumption that the person, during whose life the rent is to be paid, is alive at the date of the contract. And if, unknown to them, this was not the case the contract would be null. Every contract must have an object, and in aleatory contracts the object is the taking of a risk or alea. If a friend sells to you his house on condition that you pay a life rent to his mother, and, unknown to both of you, his mother was dead at the time, you never took any risk at all, though you thought you did. However, where the parties expressly have in view the possibility of the person or thing about which they are dealing being no longer in existence there is nothing to prevent them from making this a part of the risk. There is one case in which this is common. This is when a ship is insured while it is at sea. A ship may be insured "lost or not 32 lost". Here both parties contemplate the possibility of the ship being at the bottom of the sea at the date of the contract(36). (C) Gratuitous Contracts and Onerous Contracts: A gratuitous contract( 37 ) is one in which one of the parties procures for the other an advantage for which the latter gives nothing in exchange. A contract by onerous title is one, which obliges each of the parties to give or to do something, and by this each party obtains an advantage in exchange for his obligation. Donations, loans for use, gratuitous mandate, and unremunerated deposits are all examples of the first class. Similarly loan for consumption is another example unless there is a stipulation for interest. Sale, lease, and paid mandate, are examples of the second class. A French writer (Pothier) gives a class of contracts, which he calls, "mixed". This is when the benefactor in a gratuitous contract stipulates for something in return, but something of much less value than what is given by the donor. However, the French Code does not mention this mixed class, and the prevailing view is that every contract must be either onerous or gratuitous. If the charges laid on the donee are of much 36 ( ) Walton: P. 91-93. 37 ( ) in French: contrat de bienfaisance 33 less value than the benefits which he receives the contract will be regarded as on the whole a gift, whereas, conversely, if a contract is mainly onerous but has an element of donation in it, it will be treated as onerous. The preponderating element will absorb the other. Importance of the Distinction: If it is a matter of practical importance to decide whether a contract is gratuitous or onerous, this will generally be for one of the following reasons: 1. Donations are always based on the “intention to donate”, in Latin: “L’animus donandi”. This intention makes the legal relationship a contract; but without it, it becomes an enrichment without just cause, or a lesion. 2. A gratuitous contract being made from the donor to a particular person will be set aside if there is an error as to that person. The identity of the person in such a contract is a principal consideration for making it; it is one of the contracts "intuitu personae". On the other hand, in many onerous contracts the identity of the person with whom one is dealing is immaterial. If I buy goods for cash the seller cannot excuse himself from delivery by saying, he mistook me for someone else. This is not the case in donations as 34  they are regularly based upon the “intuitu personae”, which means based on personal consideration. 3. When loss is caused by one that is acting gratuitously, by discharging an office of friendship, the court will be disposed to moderate the rigor of the liability arising from his negligence or fault. In some cases, special authority to do so is given by the codes. Thus, in regard to the mandatory, a different standard is applied if the mandate is gratuitous, and not remunerated. The gratuitous mandatory may be liable only for gross negligence or fault. However in other cases, when there is no provision in the code it will be always a fact, that a court may properly take into account that the debtor was acting for nothing(38). 4. When an insolvent debtor makes a gratuitous contract, the law presumes that he does so in order to defraud his creditors. A man who cannot pay his debts has nothing, which he can honestly give away. 5. Deeds containing gifts must be made and accepted in an official form(39), and gifts of immoveable, if they are to 38 ( ) Sanhouri: Al-wageez (1966), no. 36, p., 38, Morcos: (1959) no. 38, p. 43; Waill et Terré: no. 38, p. 39 , 40; Carbonnier: No. 8, p. 32. 39 ( ) ECC. 488/1. 35  be secure from attack by third parties, must be registered(40). (D) Consensual, Formal and Real Contracts: Notwithstanding, all contracts are consensual in modern Egyptian law, there are, however, certain of them in which the consent has to be expressed in a certain form under pain nullity. In the absence of the prescribed form neither party is bound, the form being necessary for the validity of the contract. The technical name for such contracts is a formal contract(41). In Roman law the stipulation was an example of a special form of words making the agreement binding. The creditor must put the verbal question and the debtor must give the affirmative answer. In modern codes there are no special words or phrases, which are sacramental, that are prescribed, as essential for the validity of any contract. That is probably, exist in some schools of the Islamic law, though there is controversy as to whether certain special words are necessary for the creation of marriage. Nevertheless, however this may be what is meant in French law by saying 40 ( ) ECC. 932, Walton: P. 94-96. In Egyptian civil law (art. 488,2) the donation of immoveable is completed by delivery of its object. (41) in French: contrats solennels. 36 that a contract is formal or solemn (as apposed to the “consensualisme”) is when some form, though not the use of any particular words, is prescribed as essential. Gifts of moveable and mortgage must be made, according to the Egyptian law, by an official instrument (acte authentique)(42). Under the French Code and the Code of Quebec marriage contracts likewise must be made in a notarial form. The purposes or functions of imposing certain forms for a contract validity are as multiples as for example drawing the intention of the parties to the importance, or to the risks, surrounding their future contractual undertaking and/or protecting the weaker party. The requirement of a particular form as essential to the existence of a contract is to be carefully distinguished from the case in which it is said that the contract can only be proven by writing. Where, writing is required only as a matter of proof, and the parties come to an agreement verbally, there is a contract between them, though it may be difficult to prove it. There is a contract without writing if the parties have so 42 ( ) ECC.art. 488, 1031 In Roman law the contract unvesting a form could never have an action to protect the creditor (which can be said an illegal protection for the debtor), but in “droit conanique” the principle was: “ex nud paeto action oritur” which is the apposite of the Roman rule. Through the efforts of “les glossateurs” and “les poste glossateurs” the rule of the “droit canonique” prevailed. See: Weill et Terré: no. 116, p. 124 – 126. 37 agreed. If the defendant can be gotten admit its existence, as, for instance, by the tender of an oath, the contract is perfectly valid. In the contrary, when the law says that a contract can only be made in a certain way (writing for instance), there is no contract at all unless this condition is satisfied(43). In such case, writing is said “ad solemnitatem” i.e., that writing is stipulated for the conclusion and without it the contract is not validly concluded. The contract in such a case has four elements: (1) the consent; (2) the object; (3) the cause; (4) the legal form, which is mostly the written official form. Although the writing “ad solemnitatem” is mainly a statutory requirement; it may as well be a requirement by the parties. They can even make the contract, originally concluded by consent, a real contract, which comes into existence only by the delivery of something. An imminent example is the insurance contract where the contract is not concluded (or effective) unless the first installment is paid. The insurance policy is delivered to the insured but the insurance cover is subject to a certain payment. 43 ( ) Walton: P. 101-102. 38 Real Contracts: There are certain contracts, which by their nature arise only upon the delivery of a thing (subject matter of the contract). According to Roman law the contracts of loans, in its two varieties of loan for consumption and loan for use, the contract of deposit, and the contract of pledge came into existence only by delivery of the thing lent or deposited or pledged. Here, also, the contract becomes valid by the existence of four elements: consent, object, cause and delivery. The only right of action, which arose out of the contract, was the action for the restitution of the thing, and such action presupposes that the thing to be restored is in the hands of the debtor. In like manner the French Code says of deposit and of pledge that the contract is complete only by delivery. Under the Egyptian Civil Code (art. 488), although the gift must be made by an authentic document under pain of nullity, a gift of movable may be completed by delivery to the donee without an official instrument is necessary. 39 The Practical Importance of the Distinction between Real and Consensual Contracts: There are practical consequences resulting from the fact that some contracts are real in modern law. If a debtor has promised to pledge articles (things) as security for a debt, the creditor's real right of security does not arise until he got the actual possession. Until that time, therefore, these articles are liable to seizing by other creditors. In addition the loan for consumption of a determinate thing such as a particular cask of oil, it is the delivery, that makes the borrower the owner, and if after the promise to lend, but before delivery, the thing were to perish by a fortuitous event, there would be no obligation on the borrower to return its value(44). SECTION III Formation of Contract Art. 89 of the ECC provides that: "A contract is created subject to any special formalities that may be required by law for its conclusion from the moment that two persons have exchanged two concordant intentions". 44 ( ) Walton: p. 101-103. 40  For a contract, there must be an agreement between the two parties in which this agreement must appear from their declarations exchanged. It is not enough that they mean the same thing; they must mention or declare their intention in somehow. The law looks into the declarations of the parties in order to discover their intention. If a person declares his will to be bound by a contract, he will be bound by his declaration. He is not be allowed to declare, "I did not mean to carry out my promise, and therefore my declaration did not express my real will". Moreover, the parties must intend the agreement to affect their legal relations. It must not be such an agreement as, for example, to play a game together. For, here the parties do not intend their agreement to be legally enforceable; they are far from the law. The Fundamental Elements in any Simple Contract are: Agreement (Mutual Assent), intention to create or affect a legal relation, lawful object and cause. In the following paragraphs, we shall search the elements of a contract, dealing, first of all, with the will of its parties and the conditions of its validity. 41  Subsection 1 Agreement (Mutual Assent) First Branch: Consent of the Parties: In the Egyptian legal system, the formation of a valid contract requires consent, or agreement of the parties, which is defined as the "manifestation of mutual assent on the part of two or more persons". Egyptian law allows private parties to bind themselves by their consent provided that, such consent is given for a purpose, or object, and further provided that such consent must be given for a legal reason, or cause. It must be noted that the existence of consent is not only sufficient to render the desired contract stability. But, consent must be rendered free of consent defects, and by contracting parties who must have a sufficient (despositive) capacity to contract. Missing these former requirements would vitiate consent and make contracts voidable. These requirements must be distinguished from other basic elements of contract that affect the contract existence or formation and render the contract void not a voidable one. In sum, to say that a contract has been formed means that the parties have reached agreement on the principal terms of a contract. To say that this contract has become effective 42 means that the contract has become legally binding on the parties and has legal validity(45). The first element of an Agreement is “offer”. It is a proposal made by one party, the offeror, to another party, the offeree. The proposal indicates the offeror's willingness to enter into a contract with the offeree. If the offer is seriously intended, clear and definite, and communicated to the offeree, then the offeree may accept or reject it(46). The second element of an agreement is acceptance. If the offeree does, in fact, accept the offer, then there is mutual assent between the parties( 47 ). The disruption of mutual assent, which is the third element of a valid contract, is discussed in detail in this section. The Nature of Mutual Assent: Mutual assent signifies that the parties have had a meeting of the minds. In other words, both parties know what the terms are and both have voluntarily agreed to be 45 ( ) Walaa Arakeeb, Theory of Obligation Under Egyptian Civil Code "Sources of Obligation - Contract and Unilateral Act", P.56-57. 46 ( ) Malash: Business Law, 2003, p. 4. 47 ( )This can be called a “ concurrence of wills “ or a “ meeting of the minds “ if two or more parties had each from an objective perspective engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement. An objective perspective means that it is only necessary that somebody gives the impression of offering or accepting contractual terms in the eyes of a reasonable person, not that they actually did want to contract. Lord Steyn. Contract Law : Fulfilling the Reasonable Expectations of Honest Men.1997.p.113. 43 bound by those terms. Mutual assent can be attained swiftly, as in buying a laser disk at the local video store, or it may result from weeks of negotiations related to a multimillion-dollar undertaking. Whatever, the case, mutual assent evolves from a communication of an offer and an acceptance between the contracting parties. Offer must be definite, not vague or illusory(48). When the parties have agreed on all the essential points of a contract and have left certain details to be agreed at a later date without stipulating that by failing agreement on these details the contract shall not be concluded, the contract is deemed to have been concluded, and the points of detail will, in the event of dispute, be decided by the court according to the nature of the transaction, to the provisions of the law, to custom and to equity(49) (art. 95 of the ECC). It results from such provision that the required mutual assent is, that which is related to the essential points of the proposed contract. Every contract can be analyzed into two parts, an offer and an acceptance. Either or both of them may be implied. For instance, a tramway company by running its cars makes 48 ( ) Hassan M. Reda and Hossam El-Ahwany: Introduction to the Study of Law (1996) p. 324; Gordon Brown: Business Law, New York (1993) p. 114. 49 ( ) Such contract is sometimes called " Protocol " 44 an offer to the public to carry them at the ordinary rate, where the person who gets into the car or even puts his foot on the step presumably accepts this offer. When acts and conducts are sufficient to convey an offeror's (or offeree's) intentions, an implied offer (or acceptance) results. Second Branch: Modes of the Declaration of Intention: As a will is a psychological matter, its existence is not only sufficient to fulfill the purpose of a recognized consent, but a consent is only reached when the parties’ will is manifested (materialized) or declared in a complete accord manner. Therefore, the manifestation of parties’ will in an accord manner would constitute the two requirements that needs to be fulfilled, in order to reache the outward appearance of an agreement that is recognized under the Egyptian Civil Code(50). An intention may be declared verbally, in writing, by signs in general use, and also by such conduct as, in the circumstances of the case, leaves no doubt as to its true meaning(art. 90 of the ECC). A declaration of intention may be implied when neither the law nor the parties require it to be expressed (art. 90/2 of the ECC). 50 ( ) Walaa Arakeeb, Theory of Obligation Under Egyptian Civil Code "Sources of Obligation - Contract and Unilateral Act", P.59 45  The explicit means a voluntary declaration of an individual’s intention that leads directly to the intended meaning. For example, using the word "for sale" or "for buy" in the either verbal or written modes in agreement. The will can be expressed explicitly by utilizing signs common in use, when the buyer nods his/her head vertically to signify acceptance for the proposed offer, or nods horizontally to signify refusal for such offer(51). Also, an explicit means of manifesting an indented will can be done through the circumstances of the case that leave no doubt as to its true meaning, e.g., placing a cab (taxi) in the parking station, or having goods in a shop-window with a price-tag. These circumstances leaves explicitly no doubt that constitutes an offer for public(52). Tacit manifestation of will is also a voluntary declaration of an individual’s intention that leads indirectly to the intended meaning. In a typical consent-by-tacit manifestation of the will for the sale of goods, the buyer may send an offer that the seller accepts by the conduct of shipping the goods to form the contract (53). In other example, shoppers in self-service stores may simply present items to a cashier without one spoken word, 51 ( ) Arakeeb, p. 60 52 ( ) Arakeeb, P. 60 53 ( ) Arakeeb, p. 61. 46 but there is no doubt that in these and myriad other situations manifesting tacit assent. Time in Which the Declaration of Intention Becomes Effective: Under Egyptian law, the intention is a secret and physiological factor that must be declared to render the desired legal effect. There are four theories that govern when declaration of intent becomes legally effective: declaration, expedition (dispatch), reception, and knowledge. Reception theory is adopted by the E.C.C (art.91) to determine that a declaration of intent is effective upon receipt(54). Important to note is that the E.C.C. adopted the reception theory as a presumption of the intended recipient’s knowledge because intent produces its legal effect when it becomes known to the addressee. In the meantime, a declaration of intent, when reaches the other party, shall be held as circumstantial evidence of being taken note of, unless otherwise has been proved(55). 54 ( )Arakeeb, p. 66, Ahmed Sharaf, Theary of Obligation, Vol.1 No (61) P. 102, No (62) P. 103. 55 ( )Arakeeb, p. 67. 47  A declaration of intention becomes effective from the time that it comes to the knowledge of the person for whom it was addressed or most precisely directed, who, subject to proof to the contrary, shall be deemed to have knowledge of the declaration of intention from the time that it reaches him. Article 91 of the ECC states: “Arrival of declaration of intention is a presumption of knowledge of such declaration until the contrary is proven”. If the person who declared the intention dies or becomes legally incapable prior to the declaration of intention become operative, the declaration of intention shall not be less effective at the time it comes to the knowledge of the person for whom it was intended. This rule applies except if the contrary is presented by the declaration of intention or by the nature of the transaction (art. 92 of the ECC). The Contract may be Inter Presents or Inter Absents: The interchange of consent between the parties to a contract may be between two parties who meet each other in the same place and communicate directly. In this case, there is no appreciable interval of time between the declaration of acceptance and the offeror's knowledge of this declaration. The two things are, for practical purposes, simultaneous. And, in contracts of this class, unless the 48 offer is accepted at once, it falls to the ground unless the parties have fixed a delay. If the recipient (adds or modifies) a word in the offer it is not an acceptance, but a new offer awaiting for acceptance. On the other hand, the parties may be in different places, so it takes a period of time for them to communicate with each other. Their declarations of will must be conveyed by some means of communication such as a messenger, a letter, a telegram or through the internet. Contracts formed in this way between parties at a distance are called contracts by correspondence (between absent parties). These contracts differ from contracts between present parties in two important respects: (1) The party who makes the offer does not know at once whether it is accepted or not; (2) there is a difficulty in determining where the contract has been made and whether it is formed at the place where the offer is received, at the place where the acceptance has been declared, or at the place where the offeror received the information that his offer has been accepted? The various theories on this subject will be referred to later. Further, contracts made by telephone are to be assimilated for some purposes to contracts made inter presents, and for other purposes to contracts inter absents. It will be convenient to postpone discussing these contracts 49 until after we have explained the theories as to the time and place of the completion of contracts in general. Third Branch: Concordance of Wills: A contract is formed by the consent of the parties established through offer and acceptance reflecting a concordance of contracting parties wills. This is unless the law prescribes a certain formality for the intended contract(56). 1- The Offer: An offer is a proposal made by one party to another indicating a willingness to enter into a contract. The person who makes an offer is called the offeror. The person to whom the offer is made is the offeree. Making the offer is actually the first step in creating the contractual relationship between the two parties. Due to its priority and position of importance, the offer must be seriously intended, clear and definite, and communicated to the offeree. If those requirements have been satisfied, the offeree may choose to accept or reject the offer. Offer may be made by words or signs, orally or in writing, personally or by a messenger, fax, through e-mail or any other EDI transmission. It is not in law an offer until it 56 ( )Arakeeb, p. 70, 71.. 50 comes to the knowledge of the person to whom it is made, ( 57 ) i.e., the offeree. It should be definite in its terms otherwise, it may have to be more distinct to coincide an acceptance and merge in a contract. The offer must be made with a view to acceptance; that is, it must be a final proposal (58). An offer of this kind must be distinguished from a mere invitation to negotiate. An invitation to treat is a first step in negotiations, which may, or may not, be a prelude to a firm offer by one of the parties. The person who puts (a flat to be rented) on his house is not obliged to let it to the first person that agrees to pay the rent. This offer is merely an offer to negotiate. However, the shopkeeper who puts a ticket on goods stating the price is bound to sell them at that price. Offer to the Public: An offer may be to the public or to a group of persons, as in the case displaying of goods in a shop-window marked at a certain price, the same applies where such display in a self – service super market(59). 57 ( ) Black’s: p. 1233. 58 ( ) Malash: Business Law, P. 9. 59 ( ) This applies in a self-service supermarket. The Paris Court of Appeal, ruled that in a self-service shop” the sale is complete when the customer, having chosen from the shelf an article offered for sale at a posted price which he accepts, places it in the basket which is provided and which he is bound to use until the goods are checked out at the cash-desk”: Nicholas.Op.Cit.P.64. 51 Binding Force of an Offer: When a time limit is fixed for acceptance, the person who makes the offer is bound to maintain his offer until the expiration of the time limit. The time limit may be concluded from the circumstances or from the nature of the transaction (art. 93 of the ECC). If at the time of a contract is being framed, an offer is made without a time limit being fixed for acceptance; the offeror is released from his offer if it is not accepted forthwith(art 94 ECC). This also applies, if one person makes the offer to another person by telephone or by any other similar means of communicant. A contract is concluded, however, even if acceptance is not immediate, when, during the interval between offer and acceptance, there is nothing to indicate that the offeror has withdrawn his offer, and the case was that the declaration of acceptance has been made before the end of the meeting (majlis al'aqd) in which the contract was being framed (art. 94 of the ECC). Also, in an offer made to a person not physically present and without a stipulated time for acceptance, the offeror is bound to keep its offer for a reasonable time plus 52 the time necessary for the public mail to deliver the offer to the place of the offeree and back. Alternatively, in the absence of public mail, the offeror is bound for sufficient delivery time in accordance with the distances and the available communication channels between the parties(60). Revocation of Offer: If the offeror changes his mind before the offeree has decided to accept, the conclusion to be drawn from the consensual principle should be that there is no contract. For there has been no moment at that the minds of the parties were at one. However, the offeror should abide by the restrictions provided by the law in order to protect the reasonable expectation of the person to whom the offer is addressed. In the case which came before the court of appeal of Montpellier, Isler had offered to sell a chalet to Chastan, but a few days later, when Chastan, having by an agreement made an inspection, sent a telegram of acceptance, Isler contended that there could be no contract because he had by then already sold to another buyer. The court, upheld by the court of cassation, rejected this contention; the ground for the rejection being that the 60 ( )Arakeeb, p. 77, 78.. 53 court did not believe that Isler had already sold to the other buyer and therefore that there had been no revocation(61). This purely consensual approach may be seen at first sight to be justified in Egyptian Civil Code (art.93) in that the offeror, if there is no period indicated, should keep its offer open for such period as is necessary to enable the offeree to consider and reply to it. In the Egyptian and French systems, the premature withdrawal of an offer leads to liability in damages. Moreover, the law may oblige the offeror to keep its offer during a certain period, always in the case of offers with fixed periods, and usually for offers without express periods attached. In so long as there must be an implied period required by the circumstances or by the nature of the relevant transaction. In these cases, the offer will lapse with the passage of time. Thus, the acceptance must be prompted (made) during the necessary time for examining and replying to the offer. According to Egyptian Civil Code (art.93), if a time limit is fixed for the acceptance, the offer is to remain open and the offeror cannot revoke it during this fixed time. Otherwise, the contract will be concluded if the 61 ( )In our opinion the base of the count’s rejection need to be corrected in a way to reflect the principles of obligatory force of contract already formed and good faith. 54 acceptance is made in such time(62). In common law, an offer has no binding force at all and is not even a ground for liability in damages. In German law every offer is irrevocable; a purported withdrawal has no legal effect whatever it is unless the offeror has excluded the binding effect of his proposal. 2- Acceptance: Acceptance is the expression of the second will in the contract or the will of the second party. In most cases, only the specifically identified offeree has the right to accept an offer. Acceptance means that the offeree agreed to be bound by the terms set up by the offeror in the offer. If a valid offer has been made by the offeror and the offeree has made a valid acceptance, then the parties have agreed to the terms, and mutual assent exists between them. Sometimes mutual assent is called a meeting of the minds(63). The concordance of the two wills and consequently the conclusion of the contract does not occur unless the offeree accepts the offer. An offer may be accepted by either express or implied acceptance by any mean of communication or conduct. To be effective, an acceptance 62 ( ) Art.93. E.C.C 63 ( ) Brown: p. 91. 55  must be unequivocal which means that the acceptance must not change any terms stated in the offer. In many situations, if the offeree changes any of those terms, the acceptance is not really an acceptance but a counteroffer. (a) Conditions of Acceptance: The person to whom the offer was directed (the offeree) has the right to accept or refuse it. In case he accepts, such acceptance must be in conformity with the offer, and the offer must still prevail at the moment of acceptance. If the acceptance is not in conformity with the offer, or comes late where the offer has fallen and becomes no longer valid, such declaration is not a valid acceptance, but it is considered a new offer directed to the other party(64). Article 96 of ECC states: "An acceptance that goes beyond the offer, or is accompanied by a restriction or a modification, is deemed to be a rejection comprising a new offer". (b) Silence and Expression of Will (Acceptance by Silence): The principle is that silence by itself is not an implicit expression of the will, as it is expressing nothing which does not conclude to anything, this is due to the fact that “the will 64 ( ) Ismail Ghanem: The General Theory of Obligation (In Arabic), Vol. 1, (1968). The Sources, no. 61-66, p. 113-120 56 is a positive action while silence is a negative thing”(65). It cannot be imagined that silence is an expression of the offer, because the offer by its very nature includes a positive that cannot be inferred from silence. However, acceptance of an offer might be inferred from silence and this is an exception where the surrounding circumstances lead to consider it as such, that is what is called concomitant silence. Article 98 Civil Code gave examples of silence, approved by the Egyptian judiciary, by stipulating that: “(1) If the nature of the transaction or commercial custom or other circumstances indicate that the offeror was not waiting for a declaration of acceptance, then the contract is considered complete unless the offer is rejected in a suitable time”. (2) Silence after receiving an offer is considered acceptance if there was a previous transaction between the contracting parties and the offer was related to this transaction, or if the offer resulted in the benefit of the one to whom it was addressed”. The cases that the text coveys silence status are: 65 ( )Al-Sanhoury, Al-Wasit, (Explanation of civil law), vol.1 (sources of obligation)revised by counsel Ahmed Elmaraghy, (2004) No 112 p. 184 57 1- If the nature of the transaction, commercial custom or other circumstances indicate that the offeror would not have awaited a declaration of acceptance, the contract shall be considered concluded if the offer is not rejected in a reasonable time. Commercial custom may take place on the consideration of silence tantamount to acceptance, that is to say that, if a bank sent to its customer a statement on his account with no objection from his end, this non - objection (Silence) will be considered an acknowledgment to the bank from his customer. 2- Silence in case of receiving an offer is considered acceptance if there was a previous transaction between the contracting parties and the offer is related to this transaction, just as if a customer used to request goods from a merchant, who does not respond to him with acceptance. Alternatively the merchant instantly sends the goods directly to him upon his request. If the customer requests the same goods later and the merchant remains silent as usual, his silence is considered an acceptance. 3- If the offer results in the benefit of the one to whom it was addressed (gift for instance), his silence shall be considered acceptance if he does not respond with 58  approval or rejection, unless there are circumstances that prevent the acceptance of the offer. In France the court of cassation has decided that a lower court is allowed to find that an offeree's silence was acceptance where the offer was made in his exclusive interest( 66 ). But this approach is considered, by some commentators, as infrequent, contested and artificial(67). The previous examples are just examples of silence surrounded by circumstances that indicate acceptance. Every concomitant silence in other cases than the cases referred to is considered acceptance as if the agent exceeded the limits of his agency and the principal kept silent despite his knowledge of this, his silence is considered acceptance. (c) Acceptance in the Contract Concluded by Auction (Tender): Article 99 of the ECC stipulates that: "A contract by public auction is only concluded when the final bid is accepted. A bid is nullified from the moment a higher bid is made, even if the higher bid is void". 66 ( ) Cass Civi (1) 1 dec. 1969, Dalloz 1970. 422 67 ( ) J. Bell and others, principles of French law, Oxford, 1998 p. 312, Nicollas (1982) p. 75. 59  The advertisement made in connection with a tender or an auction is not a contract nor it is an offer. It is just an (68) invitation for the presentation of offers by merchants , or an invitation to negotiate a contract, even where a starting price is mentioned. Every bidder presents an offer, but the contract is not concluded except by adjudication, which is considered acceptance. The bidder presenting a higher offer makes the lower one falls and becomes invalid, and this effect happens even where the higher bid is void (a nullity), because the person inviting the bids, when receiving the higher bid without being able to be ascertained of its validity, is considered to have refused the lower one(69). 3- The Time and Place of Contract Conclusion: It is very important to determine the time and place where the contract was concluded and more specifically in contracts between absents. Determining the date (time) and place of a contract varies according to whether the parties were present or absent at the date and place of contracting. In the first situation, all parties are present at the contractual scene. 68 ( ) Ablott and pendlebury: Business law, London, 1992, p. 110. 69 ( ) Ghanem: no. 74, p. 129-131. 60 The solution is simple, because acceptance was communicated to the offeror instantly, the date and place of the contract scene shall be the date and place of the contract. The same rule shall apply to contract by telephone. In the second case, parties are absent which is called in law contracting among absentees. Egyptian Civil Code adopts the theory of knowledge of acceptance. It states in article 97 that the contract between absentees shall be considered as it was made in the place and at the time that the offeror is become aware of the acceptance, unless there is an agreement or legal provision against that. The arrival of acceptance to the offeror is a rebuttable presumption that he knows of such an acceptance. 3/1 Importance of defining place and date of contract: a) Defining the place where the contract was made is of great importance to determine the venue jurisdiction and which law can be applied. b) Determining the exact time of contract helps in specifying some important rules. Article 458/2 of Egyptian Civil Code states that in a sale contract the buyer gains fruits and accretion of the sold thing from the date in which the sale is completed. c) Timing of contract is important in cases of issuing new laws creating certain contractual situations contrary to 61  the contractual situation which had previously arisen. Applying or not applying the new law depends on the date of the contract. d) Another aspect of importance appears in the legal system of bankruptcy and whether the contract was made during a suspicious period or not. e) A contract may be void or voidable according to capacity of the party. This matter is subject to the time of declaration of consent along with whether the contractor was capable or incapable to make a legal act(70). 3/2 Theories Pertaining to the Time and Place of a Contract Conclusion: Returning back to the time and place of conclusion of a contract between absent parties. There are four opinions in this regard; each one focuses on a certain event related to the acceptance (namely declaration, expedition, reception and knowledge). In some opinions the acceptance with which the contract is concluded, produces this effect once it is declared by the acceptor (the offeree) even before being forwarded to the other party. Others see that it is not enough to pronounce the acceptance but it is necessary to forward it by post, fax, electronic transmission or any other means. It 70 ( ) Hamdy abdrahman, Op. cit, P.42-43. 62 was argued that, in case the acceptance is sent by letter, the acceptor can send a telegram expressing rejection of the offer, which arrives at the other party's domicile before the letter sent by post mail arrives, and in this case the contract (71) will not be concluded or more precisely the offer had fallen down and is not valid for meeting or merging with an acceptance. As for the Egyptian Civil Code, it opts for the third and fourth opinions. The provision of the ECC expressed in Article no. 97 provides that: "(1) In the absence of an agreement or a provision of the law to the contrary, a contract between persons who are not present at the time of contract is deemed to have been concluded at the place where and at the time when the offeror becomes aware of the acceptance. (2) The offeror is deemed to have had knowledge of the acceptance at the place and at the time the acceptance reached him"(72). If the acceptance was sent by mail, the contract is concluded at the place it was received by the offeror, and in 71 ( ) Ismail Ghanem: Op. cit, no. 67-71, p. 120-125. (72) According to art.1362,1335 French civil code a contract comes into being as soon as the offeror knows of the acceptance; such knowledge is presumed as soon as the declaration of acceptance arrives at the offer‫ۥ‬s normal address unless he can prove that ignorance is not attributable to its negligence. 63 the time of being acquainted with it according to art. 91 EEC. The receipt of the acceptance is considered known by the offeror unless evidence is produced to the contrary(73). As to the case of contracting by phone, the contract shall be concluded in the place where the offeror heard acceptance by phone. Subsection 2 Special Modes of Agreement A) The Contract of Adhesion: Article 100 of the ECC provides that: "Acceptance in the case of contracts of adhesion is confined to adhesion to standard conditions which are drawn up by the offeror, and are not subject to discussion". It is a general rule that contracting must be characterized by the liberty of discussion and bargaining and that the parties are free to negotiate the conditions of the contract. Nevertheless, the contract of adhesion derogates from these principles as no discussion or bargain is allowed, as one of the parties prepares in advance the clauses upon which he agrees to execute (sign) contracts in question, and 73 ( ) Ghanem: no. 72-73, p. 125 - 128. 64 considers them as an offer to the public for contracting. The public has the choice either to accept the terms and conditions as a whole or to refuse them all(74). The will of the accepting party is yielding, submitting, and adhering to the will of the stronger party who imposed such terms and conditions. The contract of adhesion is one of the phenomena of modern life. When you want to travel by air or rail you accept the clauses of transport without discussion. The same is done in applying for a telephone, gas, electricity, water supply, etc. This comes as a result of the economic situation where huge companies, having a monopoly or not, are in a strong position allowing them to impose their wills upon others, and refuse negotiations. The contracts of adhesion have three essential characteristics, viz: 1. The matter of contracting must relate to a commodity or a service of prime priority to the public. 2. One of the parties has the monopoly of the commodity or the service, whether such monopoly is legal or effective, or at least the competition between him and others is too narrow. 74 ( ) that is what is known as "take - it- or leave - it basis". 65 3. The offeror of the commodity or service offers it to the public according to conditions prepared in advance and does not accept discussion or negotiation(75). It was argued that the contract of adhesion is not a real contract, but the ECC determined that it is a real contract though the weak party is in need of protection. This protection was provided (ECC. 149) by exempting the weak party from the clauses causing harm and prejudice to him or at least amending such clauses by the judge. This protection is extended even where the weak party was aware of these clauses at the time of contracting and his consent included it. But where doubts surround some phrases of the contract, its interpretation shall not be prejudicial to the adhering party(76). Article 151 of the ECC stipulates that: "(1) In cases of doubt, interpretation shall be made in favo