1. 1 International Contract Law. Mr. Marco Tupponi Studio Associato Avv. Marco Tupponi Dott. Giuseppe De Marinis & Partners Via Maceri n.25 - 47100 Forlì Tel +39 0543 33006 - Fax +39 0543 21999 www.tupponi-demarinis.it www.commercioestero.net

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3. 3 The common law forms a major part of the law of many nations, especially those with a history as British territories or colonies. It is notable for its inclusion of extensive non-statutory law reflecting precedent derived from centuries of judgments by judges hearing real cases.lawnationsBritishcoloniesnon-statutory lawprecedentjudgmentsjudges The opposition between civil law and common law legal systems has become increasingly blurred, with the growing importance of jurisprudence (almost like case law but in name) in civil law countries, and the growing importance of statute law and codes in common law countries (for example, in matters of criminal law, commercial law (the Uniform Commercal Code in the early 1960's) and procedure (the Federal Rules of Evidence in the 1970's)).jurisprudencecase law ScotlandScotland is often said to use the civil law system but in fact it has a unique system which combines elements of an uncodified civil law dating back to the Corpus Juris Civilis with an element of common law long predating the Treaty of Union with England in 1707a unique systemCorpus Juris Civilis Treaty of Union1707 Common law

4. 4 Civil law (legal system) Civil law is system of law that has its origins in Roman law and sets out a comprehensive system of rules, usually codified, that are applied and interpreted by judges. However, modern systems are descendants of the 19th century codification movement, during which the most important codes (most prominently the Napoleonic Code and the BGB) came into existence. The civilian system is by and large the most widely practiced system of law in the world. As discussed in detail below, the civil law systems of Scotland and South Africa are uncodified, and the civil law systems of Scandinavian countries remain largely uncodified.system of lawRoman lawcodifiedcodificationNapoleonic CodeBGB system of law in the worldScotlandSouth AfricaScandinavian

5. 5 Thus, the difference between civil law and common law lies less in the mere fact of codification, but in the methodological approach to codes and statutes. In civil law countries, legislation is seen as the primary source of law. By default, courts thus base their judgments on the provisions of codes and statutes, from which solutions in particular cases are to be derived. Courts thus have to reason extensively on the basis of general rules and principles of the code, often drawing analogies from statutory provisions to fill lacunae and to achieve coherence. By contrast, in the common law system, cases are the primary source of law, while statutes are only seen as incursions into the common law and thus interpreted narrowly. analogieslacunae …continue There are, however, certain sociological differences. Civil law judges are usually trained and promoted separately from advocates, whereas common law judges are usually selected from accomplished and reputable advocates. Also, the influence of articles by legal academics on case law tends to be much greater in civil law countrieslegal academics

6. 6 Commercial law Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods.law businesscommerce civil lawprivate lawpublic lawcorporatecontractshiring practicesmanufacturesalesconsumergoods

7. 7 What are the Sources of Contract Law ? Common law : judge-made law, as distinguished from laws passed by legislature Common law : judge-made law, as distinguished from laws passed by legislature Uniform Commercial Code (UCC) : model code on commercial transactions adopted by all states (except Louisiana) Uniform Commercial Code (UCC) : model code on commercial transactions adopted by all states (except Louisiana) Civil or Commercial Code, or specific law in Civil Law Civil or Commercial Code, or specific law in Civil Law

8. 8 International Commercial Law The Myth of Transnational Commercial Law

9. 9 International Contracts and the Myth of a Transnational Contract Law International Contracts: How do they differ from domestic contracts? International Contracts: How do they differ from domestic contracts? Drafting is in legalese – English jargon handed down from contract to contract Drafting is in legalese – English jargon handed down from contract to contract References to non national sets of rules – INCOTERMS, UNIDROIT, UCP 600 etc. References to non national sets of rules – INCOTERMS, UNIDROIT, UCP 600 etc. Is there a transnational commercial law based on English law? Is there a transnational commercial law based on English law?

10. 10 The Style of International Contracts International contracts are written in English International contracts are written in English International contracts are lengthy and regulate all thinkable aspects: International contracts are lengthy and regulate all thinkable aspects: Gender/Singular and Plural Gender/Singular and Plural Representations and Warranties Representations and Warranties Notices Notices Amendments Amendments Etc. Etc.

11. 11 Possible Implications of the Contract Style Parties may assume that all aspects of transactions are regulated by the contract Parties may assume that all aspects of transactions are regulated by the contract Parties may assume that the contract is the only regulation Parties may assume that the contract is the only regulation Parties may rely on transnational commercial law Parties may rely on transnational commercial law Parties may draft the contract irrespective of the governing law (chosen at the end) Parties may draft the contract irrespective of the governing law (chosen at the end)

12. 12 Firm Offer and National Law Romanistic systems of law - Art. 1329 Italian Civil Code: Firm offer is binding. Revocation is ineffective Romanistic systems of law - Art. 1329 Italian Civil Code: Firm offer is binding. Revocation is ineffective Germanic systems of law - § 145 German BGB: Firm offer is binding. Revocation is ineffective Germanic systems of law - § 145 German BGB: Firm offer is binding. Revocation is ineffective Common Law systems Common Law systems USA: Promissory estoppel (irrevocable to the extent it has induced offeree’s action) USA: Promissory estoppel (irrevocable to the extent it has induced offeree’s action) UK: Revocable if there is no consideration UK: Revocable if there is no consideration

13. 13 Contracts can have many names Contract Contract Agreement Agreement Purchase Order Purchase Order Memorandum of Understanding Memorandum of Understanding Terms and Conditions Terms and Conditions Appointment Letter Appointment Letter Handbook (“implied contract”) Handbook (“implied contract”) License License Ticket Ticket

14. 14 Or no name at all… a letter… a letter… a telephone call… a telephone call… an e-mail… an e-mail…

15. 15 Contract: “[a]n agreement between two or more persons which creates an obligation to do or not do a particular thing… A legal relationship consisting of the rights and promises constituting an agreement between the parties that gives each a legal duty to the other and also the right to seek a remedy for the breach of those duties.” [Black’s Law Dictionary, 6 th ed.]

16. 16 In other words … A contract is a legally enforceable promise

17. 17 Title II: Contracts in General. Item I: Introductory Provisions. 1321 c.c. Ita. Concept. A contract is the agreement between two or more parties to establish, regulate or extinguish a patrimonial legal relationship among themselves.

18. 18 1322 c.c. ita Freedom of Contract. – The parties may freely set out the content of a contract, as long as it is in accordance with the law and corporative regulations.

19. 19 Types of Contracts (or Agreements) Bilateral and Unilateral Contracts Bilateral and Unilateral Contracts Bilateral: both parties make a promise. Bilateral: both parties make a promise. Unilateral: one party makes a promise that the other party can accept only by doing something Unilateral: one party makes a promise that the other party can accept only by doing something Bilateral vs. UnilateralExpress vs. ImpliedExecutory vs. Executed Valid vs. Unenforceable vs. Voidable vs. Void

20. 20 Types of Contracts Express and Implied Contracts Express and Implied Contracts Express: the two parties explicitly state all important terms of their agreement. Express: the two parties explicitly state all important terms of their agreement. Implied: the words and conduct indicate that the parties intended an agreement. Implied: the words and conduct indicate that the parties intended an agreement. Executory and Executed Contracts Executory and Executed Contracts Executory: when one or more parties has not fulfilled its obligations. Executory: when one or more parties has not fulfilled its obligations. Executed: when all parties have fulfilled their obligations. Executed: when all parties have fulfilled their obligations.

21. 21 Types of Contracts Valid, Unenforceable, Voidable, and Void Agreements Valid, Unenforceable, Voidable, and Void Agreements Valid: satisfies the law’s requirements. Valid: satisfies the law’s requirements. Unenforceable: when the parties intend to form a valid bargain but some rule of law prevents enforcement. Unenforceable: when the parties intend to form a valid bargain but some rule of law prevents enforcement. Voidable: when the law permits one party to terminate the agreement. Voidable: when the law permits one party to terminate the agreement. Void: one that neither party can enforce, usually because the purpose is illegal or one of the parties had no legal authority. Void: one that neither party can enforce, usually because the purpose is illegal or one of the parties had no legal authority.

22. 22 1337 c.c. Ita. Talks and Pre-Contractual Liability. – During the negotiations process and the formation of contract the parties must act in good faith. 1340 c.c. Ita. Clauses of Use. – The clauses of use are deducted as included in the contract, if does not come out that they were not wanted by the parties.

23. 23 1325 c.c. ita Guidelines for Requirements. The requirements of a contract are: 1.the agreement between the parties; 2.the cause for the contract; 3.the subject-matter of the contract; 4.the form of the contract, as far as is prescribed by the law under penalty of invalidity. Item II: Requirements of Contract.

24. 24 Elements of a Contract Agreement Agreement offer, and offer, and acceptance acceptance Consideration Consideration There has to be bargaining that leads to an exchange between the parties. There has to be bargaining that leads to an exchange between the parties. Legality Legality The contract must be for a lawful purpose. The contract must be for a lawful purpose. Capacity Capacity The parties must be adults of sound mind. The parties must be adults of sound mind.

25. 25 Meeting of the Minds The parties can form a contract only if they had a meeting of the minds. The parties can form a contract only if they had a meeting of the minds. They must understand each other and intend to reach an agreement. They must understand each other and intend to reach an agreement. A judge will make an objective assessment of any disagreements about whether a contract was made -- whether or not a reasonable person would conclude that there was an agreement, based on the parties’ conduct. A judge will make an objective assessment of any disagreements about whether a contract was made -- whether or not a reasonable person would conclude that there was an agreement, based on the parties’ conduct. Objective Theory of Contract: Lucy v. Zehmer Objective Theory of Contract: Lucy v. Zehmer

26. 26 Negotiation Terms JOEBOB OfferAccept or Reject or Accept orCounteroffer Reject or Counteroffer

27. 27 Section I: Agreement Among The Parties. 1326 c.c. ita Contract Conclusion. – A contract is concluded when the proponent party is informed about the other parties’ acceptance. The acceptance must arrive within the term established by the proponent, or (within) the term necessary as a rule depending on the nature of business, or according to uses. The proponent may consider effective a belated acceptance as long as he promptly forewarns the other party. If the proponent asks for a particular fo rm of contract, acceptance by the other parties has no effect if it is given in another form. An acceptance which does not conform to the proposition is equivalent to a new proposition.

28. 28 What are the Elements of a Contract? In Common Law Offer Offer Acceptance Acceptance Consideration Consideration Mutuality Mutuality

29. 29 Offer: A proposal to do a thing or pay an amount, usually accompanied by an expected acceptance, counter-offer, return promise or act A proposal to do a thing or pay an amount, usually accompanied by an expected acceptance, counter-offer, return promise or act The offeror is the “master of his offer”. The offeror is the “master of his offer”.

30. 30 Offer Problems with Intent Problems with Intent Invitation to bargain is not an offer. Invitation to bargain is not an offer. Price quote is generally not an offer. Price quote is generally not an offer. An advertisement is generally not an offer. An advertisement is generally not an offer. Placing an item up for auction is not an offer, it is merely a request for an offer. Placing an item up for auction is not an offer, it is merely a request for an offer. Problems with Definiteness Problems with Definiteness The term of the offer must be definite. The term of the offer must be definite. An offer is an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms.

31. 31 Termination of Offers Termination by Revocation Termination by Revocation Effective when the offeree receives it. Effective when the offeree receives it. Firm Offers and Revocability Firm Offers and Revocability Common Law Rule Common Law Rule Revocation of a firm offer is effective if the offeree receives it before he accepts. Revocation of a firm offer is effective if the offeree receives it before he accepts. Option Contract Option Contract The offeror may not revoke an offer during the option period. The offeror may not revoke an offer during the option period. Sale of Goods Sale of Goods A writing signed by a merchant, offering to hold an offer open, may not be revoked. A writing signed by a merchant, offering to hold an offer open, may not be revoked.

32. 32 Termination of Offers Termination by Rejection Termination by Rejection If an offeree rejects an offer, the rejection immediately terminates the offer. A counteroffer operates as a rejection. If an offeree rejects an offer, the rejection immediately terminates the offer. A counteroffer operates as a rejection. Termination by Expiration Termination by Expiration When an offer specifies a time limit for acceptance, that period if binding. When an offer specifies a time limit for acceptance, that period if binding. If the offer specified no time limit, the offeree has a reasonable period in which to accept. If the offer specified no time limit, the offeree has a reasonable period in which to accept.

33. 33 Irrevocable offer ”This offer is binding on the Offeror and cannot be revoked before 30 days have elapsed from the date hereof” May the offer be revoked within the 30 days term? May the offer be revoked within the 30 days term?

34. 34 Acceptance: Compliance by the offeree with terms and conditions of an offer Compliance by the offeree with terms and conditions of an offer A manifestation of assent to terms of offer in a manner invited or required by the offer A manifestation of assent to terms of offer in a manner invited or required by the offer The offer and acceptance must match (“mutuality” …more on this soon…) The offer and acceptance must match (“mutuality” …more on this soon…)

35. 35 Acceptance: Does not necessarily occur only by signature of a contract Acceptance can occur by: Action-using goods Action-using goods -opening the package (software) -entering an establishment or participating in an activity Inaction –not returning goods Inaction –not returning goods

36. 36 Acceptance: Sometimes acceptance does not appear “voluntary,” but it is still sufficient Contracts of Adhesion: -- “Take it or leave it” terms -- “Take it or leave it” terms -- Not bargained for -- Not bargained for

37. 37 Acceptance The offeree must say or do something to accept. The offeree must say or do something to accept. In a bilateral contract, the offeree generally must accept by making a promise. In a bilateral contract, the offeree generally must accept by making a promise. In a unilateral contract, the offeree must accept by performing. In a unilateral contract, the offeree must accept by performing. Mirror Image Rule (Common Law) Mirror Image Rule (Common Law) Requires that acceptance be on precisely the same terms as the offer. Requires that acceptance be on precisely the same terms as the offer. Normile v. Miller Normile v. Miller

38. 38 Communication of Acceptance Wucherpfennig v. Dooley Wucherpfennig v. Dooley and Manner of Acceptance and Manner of Acceptance If an offer demands acceptance in a particular medium or manner, the offeree must follow those requirements. If an offer demands acceptance in a particular medium or manner, the offeree must follow those requirements. If the offer does not specify a type of acceptance, the offeree may accept in any reasonable manner and medium. If the offer does not specify a type of acceptance, the offeree may accept in any reasonable manner and medium. Time of Acceptance: The Mailbox Rule Time of Acceptance: The Mailbox Rule An accceptance is generally effective upon dispatch, meaning the moment it is out of the offeree’s control. An accceptance is generally effective upon dispatch, meaning the moment it is out of the offeree’s control.

39. 39 Consideration: Something of legal value; anything that induces you to give up something Something of legal value; anything that induces you to give up something May be something other than money May be something other than money (i.e., a promise to do something; a promise to refrain from doing something) a promise to refrain from doing something)

40. 40 Consideration Bargaining that leads to an exchange of value between the parties. Bargaining that leads to an exchange of value between the parties. Consideration can be anything that someone might want to bargain for. It is the inducement to make the deal, or the thing that is bargained-for. Consideration can be anything that someone might want to bargain for. It is the inducement to make the deal, or the thing that is bargained-for. McInerny v. Charter Golf McInerny v. Charter Golf

41. 41 A Bargain and an Exchange The thing bargained for can be: The thing bargained for can be: another promise or action. another promise or action. a benefit to the promisor or a detriment to the promisee. a benefit to the promisor or a detriment to the promisee. a promise to do something or a promise to refrain from doing something. a promise to do something or a promise to refrain from doing something. “Bargaining is obligating yourself in order to induce the other side to agree.”

42. 42 Mutuality: A “meeting of the minds” with respect to material contract terms A “meeting of the minds” with respect to material contract terms A signature is deemed to be sufficient to evidence this requirement A signature is deemed to be sufficient to evidence this requirement Therefore, it is crucial that you read carefully and understand all of the terms of a contract before you sign it Therefore, it is crucial that you read carefully and understand all of the terms of a contract before you sign it

43. 43 Mutuality of Obligations Illusory Promise Illusory Promise If one party’s promise is conditional, the other party is not bound to the agreement. If one party’s promise is conditional, the other party is not bound to the agreement. Promise to pay in return for past favors. Promise to pay in return for past favors. Passante v. McWilliam Passante v. McWilliam

44. 44 Contract Clauses to Include (cont.) Liability Protections Liability Protections Defense & Indemnification Defense & Indemnification Insurance Insurance Termination Termination Dispute Resolution Dispute Resolution Litigation; Arbitration; Mediation Litigation; Arbitration; Mediation Governing Law Governing Law Forum – What court? Where? Forum – What court? Where?

45. 45 Amendments to a contract ” The parties hereby agree to modify clause XX of the contract entered into by and between the parties hereto on [date] for the sale of YY (hereinafter the ”Contract”), so that the price to be paid by the Buyer shall be ZZ instead of WW. All other terms and conditions of the Contract remain unchanged and continue to be fully valid and binding on the parties.” ” The parties hereby agree to modify clause XX of the contract entered into by and between the parties hereto on [date] for the sale of YY (hereinafter the ”Contract”), so that the price to be paid by the Buyer shall be ZZ instead of WW. All other terms and conditions of the Contract remain unchanged and continue to be fully valid and binding on the parties.” Is the amendment valid? Is the amendment valid?

46. 46 Amendments to a Contract and National Law Romanistic systems: amendment is valid Romanistic systems: amendment is valid Germanic systems: amendment is valid Germanic systems: amendment is valid Common law systems: amendment is valid only if there is consideration Common law systems: amendment is valid only if there is consideration

47. 47 Choice of law clause A choice of law clause or proper law clause in a contract is one in which the parties specify which law (i.e. the law of which state or nation if it only has a single legal system) will be applied to resolve any disputes arising under the contract.contractpartieslawstatenation

48. 48 In Conflict of Laws, the Latin term lex fori literally means the "law of the forum" and it is distinguished from the lex causae which is the law the forum actually applies to resolve the particular case.Conflict of Laws Lex fori Forum shopping Forum shopping is the informal name given to the practice adopted by some plaintiffs to get their legal case heard in the court thought most likely to provide a favourable judgment, or by some defendants who seek to have the case moved to a different courtinformal nameplaintiffslegal casecourtdefendants Forum selection clause A forum selection clause in a contract with a Conflict of Laws element allows the parties to agree that any litigation resulting from that contract will be initiated in a specific forum.contractConflict of Lawslitigation

49. 49 Arbitration Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In the United States, the term is also used to refer to non-binding arbitration, a process in which the final award does not bind the parties.legaldisputes courtsarbitratorsawardIn the United Statesnon-binding arbitration Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states.commercialinternational commercial transactionslabourconsumerfamilystates

50. 50 What form must a contract take to be a legally enforceable?

51. 51 Does an agreement between two or more parties have to be in writing in order to be enforceable in a court of law?

52. 52 A Contract Can Be Written or Oral in USA Certain contracts must be in writing: Certain contracts must be in writing: Contracts for the sale of goods over $500 Contracts for the sale of goods over $500 Contracts for the sale of real property Contracts for the sale of real property Contracts that are incapable of being performed within 1 year Contracts that are incapable of being performed within 1 year Promises to answer for or discharge the debts of another (Guarantee) Promises to answer for or discharge the debts of another (Guarantee)

53. 53 Written and Oral Contract Terms (cont.) Evidence questions become crucial if there is a contract dispute A contract is only as good as what you can later prove to be the terms of the contract

54. 54 1341 c.c. Ita. General Terms of Contract. – The general terms of contract are arranged by one of the contracting parties. They are effective to the other contracting party if at the time of formation of contract the other contracting party was or should have been aware of them, according to ordinary diligence. In any case they have no effect unless the following terms are specifically approved in writing: the limitation of liability, the right of rescission, and the performance of contract suspension, that is to say they rule forfeitures in charge of the other contracting party, limits to the right of objecting exceptions, restrictions to the freedom of contract with third parties,deferment or renewal of contract, arbitration clause or ouster of jurisdiction

55. 55 What is “boilerplate” in a contract? Is it different from “legalese”?

56. 56 Is it necessary to read and negotiate “boilerplate” or “legalese”? …the 70-page Confidentiality Agreement that was all “just boilerplate”…

57. 57 Battle of the Forms Modern business transactions are often conducted primarily through forms Modern business transactions are often conducted primarily through forms Example: Bob decides to buy a computer Purchasing sends a purchase order to the vendor containing standard terms and conditions that are favorable to Bob Purchasing sends a purchase order to the vendor containing standard terms and conditions that are favorable to Bob After receiving the order, vendor sends a written acceptance or confirmation of the order on its form which contains the basic contract terms and a series of pre-printed terms that are favorable to the vendor After receiving the order, vendor sends a written acceptance or confirmation of the order on its form which contains the basic contract terms and a series of pre-printed terms that are favorable to the vendor

58. 58 This is where the Battle Begins… If there is a contract dispute, which form will prevail? If there is a contract dispute, which form will prevail? Common law: the acceptance must mirror the precise terms of the offer and any variance from that constitutes a rejection of the offer or a counteroffer Common law: the acceptance must mirror the precise terms of the offer and any variance from that constitutes a rejection of the offer or a counteroffer UCC: says that, on premise that both parties recognize a contract despite their clashing forms, a contract is formed, unless the vendor specifically states that there shall be no contract unless his set of terms is accepted by the original offeror UCC: says that, on premise that both parties recognize a contract despite their clashing forms, a contract is formed, unless the vendor specifically states that there shall be no contract unless his set of terms is accepted by the original offeror

59. 59 …continues If: the offeree’s (vendor) response contains terms additional to those contained in Bob’s original offer (purchase order) If: the offeree’s (vendor) response contains terms additional to those contained in Bob’s original offer (purchase order) Then: a contract exists consisting of the terms on which the offer and acceptance agree Then: a contract exists consisting of the terms on which the offer and acceptance agree The additional terms are merely a proposal for additions to the contract The additional terms are merely a proposal for additions to the contract

60. 60 …and ends If: the offeree’s response contains terms which are inconsistent with the original offer If: the offeree’s response contains terms which are inconsistent with the original offer Then: the court looks at the parties’ conduct to determine whether they acted as though a contract was formed Then: the court looks at the parties’ conduct to determine whether they acted as though a contract was formed If so, the conflicting terms cancel each other out and necessary terms are provided by the UCC or custom. If so, the conflicting terms cancel each other out and necessary terms are provided by the UCC or custom.

61. 61 Section IV: Procedures of Contract 1351 c.c. Ita. Pre-Contract. – The pre-contract is null and void unless it respects the same form prescribed by the law for the final contract.

62. 62 Is a “Memorandum of Understanding” a contract?

63. 63 Is a “Letter of Intent” a contract?

64. 64 What is apparent authority?

65. 65 Who May Sign A Contract? Only those individuals who have been expressly delegated signature authority or management Only those individuals who have been expressly delegated signature authority or management Unauthorized individuals who sign contracts expose themselves to possible personal liability Unauthorized individuals who sign contracts expose themselves to possible personal liability

66. 66 Challenges,Problems&Pitfalls

67. 67 Potential Contract Pitfalls Not reading and understanding the contract Not reading and understanding the contract Not negotiating and documenting the contract’s terms Not negotiating and documenting the contract’s terms

68. 68 Potential Contract Pitfalls Disclaimers or limitations on the other party’s performance; disclaimers of warranties, etc. Disclaimers or limitations on the other party’s performance; disclaimers of warranties, etc. Any clause permitting the other party to change contract terms without the permission in writing Any clause permitting the other party to change contract terms without the permission in writing Failure to specify all terms, documents, etc. that are included in the contract or failure to show acceptance (i.e., signing or initialing changes) Failure to specify all terms, documents, etc. that are included in the contract or failure to show acceptance (i.e., signing or initialing changes)

69. 69 Potential Contract Pitfalls (cont.) Reference to terms Reference to terms Indemnification, Liability Releases, Limits on Other Party’s Liability Indemnification, Liability Releases, Limits on Other Party’s Liability

70. 70 Potential Contract Pitfalls (cont.) Termination of Contract Termination of Contract Excessive opportunity for the other party to cure its breaches of the contract Excessive opportunity for the other party to cure its breaches of the contract Excessive or unreasonable penalties imposed for terminating the contract Excessive or unreasonable penalties imposed for terminating the contract Dispute Resolution in distant locations (other party’s home city and state) and under laws of a distant state (other party’s home state) Dispute Resolution in distant locations (other party’s home city and state) and under laws of a distant state (other party’s home state)

71. 71 What if a contract is breached?

72. 72 Section II: Penal Clause and Deposit 1382 c.c. Ita. Effects of Penal Clause. – The clause, which lays down that in case of non-fulfilment or belated fulfilment of thecontract one of the contracting parties is due to supply a certain consideration, produce the effect of reducing the compensation to the consideration promised, if a further damage has not been agreed. 1385 c.c. Ita. Confirmation Deposit. – When a contract is formed, if one party gives to another a certain amount or quantity of fungible things as a deposit, this must be returned or imputed to the consideration due in case of fulfilment. If the party who gives the deposit defaults, the other may back out of the contract holding the deposit back; if the defaulting party is the one who receives the deposit, the other may back out of the contract and collect double the deposit. Alternatively, if the fulfiller party wishes to exact the consideration or the rescission of contract, the compensation is regulated by the general terms.

73. 73 Remedies for Breach of a Contract Money Damages Money Damages Compensatory: actual or real damages; compensate for the injury sustained and nothing more (“benefit of the bargain”) Compensatory: actual or real damages; compensate for the injury sustained and nothing more (“benefit of the bargain”) Punitive: damages to punish the defendant or set an example for similar wrongdoers Punitive: damages to punish the defendant or set an example for similar wrongdoers Nominal: token amount of money because of technical wrong but no actual damages Nominal: token amount of money because of technical wrong but no actual damages

74. 74 What are liquidated damages?

75. 75 Remedies Money Damages (cont.) Money Damages (cont.) Consequential: damage, loss or injury that doesn’t flow directly and immediately from the act, but only from some of the consequences or results of such act Consequential: damage, loss or injury that doesn’t flow directly and immediately from the act, but only from some of the consequences or results of such act Liquidated: specific sum of money expressly stipulated by the parties in the contract to cover damages Liquidated: specific sum of money expressly stipulated by the parties in the contract to cover damages

76. 76 Remedies Specific Performance Specific Performance Money damages aren’t adequate to give the plaintiff the “benefit of the bargain” Money damages aren’t adequate to give the plaintiff the “benefit of the bargain” Remedy used if the item is unique, such as a piece of property or artwork Remedy used if the item is unique, such as a piece of property or artwork So, the defaulting party is required to perform its obligations under the contract So, the defaulting party is required to perform its obligations under the contract

77. 77 Item XIV: Resolution of Contract. Section I: Resolution by Reason of Breach. 1453 c.c. Ita. Resolution of Contract by Reason of Breach. – Contracts which provide for fair and valuable considerations enable the fulfiller contracting party to exact the defaulting party the performance, or the resolution, of the contract, unless in any case a compensation. The resolution may be exacted even when the action has been promoted in order to get the fulfilment but not vice versa. The defaulting party cannot fulfil its obligation once the date of the resolution claim has been communicated

78. 78 1456 c.c. Ita. Explicit Resolutive Clause. – The parties may explicitly agree that the contract is to be rescinded if a particular obligation is not fulfilled according to the agreed procedures. In this case the rescission is determined by right when the party concerned declares to the other its intention to make use of the avoidance clause.

79. 79 Section II: Supervening Impossibility i.e. Force Majeure 1463 c.c. Ita. Complete Impossibility. – In contracts which provide for fair and valuable considerations, the party freed on account of the supervening impossibility of the due performance cannot exact the action for money had and received.

80. 80 Force Majeure ”The usual Force Majeure clauses to apply” Does governing law provide with force majeure regime? Does governing law provide with force majeure regime? Does governing law not provide with force majeure regime? Does governing law not provide with force majeure regime?

81. 81 Definition of Force Majeure and National Law Romanistic systems: Art. 1218, 1463 Italian Civil Code Romanistic systems: Art. 1218, 1463 Italian Civil Code Germanic systems: § 275 German BGB Germanic systems: § 275 German BGB Common Law: Clause is void for uncertainty – force majeure is not a legal term under English law. Contractual obligations are absolute; exception: frustration Common Law: Clause is void for uncertainty – force majeure is not a legal term under English law. Contractual obligations are absolute; exception: frustration

82. 82 Partial Impediment ”Non performance by a party of its obligations hereunder is excused if such party was prevented from fulfilling its obligations by an event beyond that party’s control, that was not foreseen at the date hereof and that could not be reasonably avoided or overcome.” ”Non performance by a party of its obligations hereunder is excused if such party was prevented from fulfilling its obligations by an event beyond that party’s control, that was not foreseen at the date hereof and that could not be reasonably avoided or overcome.”

83. 83 Partial Impediment and National Law Romanistic systems: Art. 1464 Italian Civil Code: Partial Excuse Romanistic systems: Art. 1464 Italian Civil Code: Partial Excuse Germanic systems: § 275 German BGB Germanic systems: § 275 German BGB Common Law: Frustration kills the contract. Common Law: Frustration kills the contract. Partial frustration does not exist

84. 84 Section III: Hardship Clause. 1467. Contracts With Performance Considerations. – In continuing contracts, that is to say in future contracts, if the consideration of one of the parties has become exceedingly onerous because of exceptional and unforeseeable events, the party who owes such consideration may exact the rescission of the contract, bex art.1458. The rescission cannot be exacted if the supervening unconscionability is part of the risk in the contract. The party asked to rescind the contract may propose a fair alteration of the contract.

85. 85 Item V: Effects of Contract Section I: General Provisions 1376 c.c. Ita. Contract With Real Effects. – If the subject-matter of a contract is the transfer of property of a particular thing, the constitution or the transfer of interest, that is to say the transfer of another interest, property or interest are transferred and acquired if the parties lawfully agree.

86. 86 Rome Convention (contract) In Conflict of Laws, the Rome Convention is the Convention on the Law Applicable to Contractual Obligations and it opened for signature in Rome on 19th June 1980.Conflict of LawsContractual NOW this Convention is substitued from the Reg. n. 593/17 june 2008 The intention is to create at least a harmonised if not a unified body of law within the European Union.harmonisedEuropean Union

87. 87 Express selection Article 3 states the general rule that the parties to a contract have freedom of choice over the Applicable Law. To exercise this choice either express words may be used or the intention should be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. The law chosen may apply to the whole or only a part of the contract, and the choice is not irrevocable. The parties can at any time agree to change the Applicable Law and any such variation will not prejudice the formal validity of the agreement nor adversely affect the rights of third parties. But, although the parties do not need to match the Applicable Law and the forum given jurisdiction, the choice of law cannot be used to evade the mandatory provisions of the state most closely connected with the agreement. jurisdictionevade

88. 88 Implied selection If there is no express choice, Article 4 provides that the contract shall be governed by the law of the country with which it is most closely connected. If the agreement is severable, two Applicable Laws may be selected. For these purposes, it is presumed that the contract is most closely connected with the lex loci solutionis, i.e. the law of the place where the contract is to be performed, or the law of the habitual residence of the person who is to perform, or, in the case of a body corporate or unincorporate, where its central administration is located.habitual residence

89. 89 …continue where the subject matter of the agreement is immovable property, the lex situs will apply; andlex situs contracts for the carriage of goods and charter-parties are governed by the law of the place in which, at the time the contract is concluded, the carrier has his principal place of business if that is also the place in which loading or discharge is to occur or the place where the consignor has his or her principal place of business,. However, if it is a commercial or professional contract, the Applicable Law will be the law of the place in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated except that there is a rebuttable presumption:rebuttable presumption

90. 90 Agency (law) Agency is an area of Commercial law dealing with a contractual or quasi- contractual tripartite set of relationships when an Agent is authorised to act on behalf of another (called the Principal) to create a legal relationship with a Third Party.Commercial lawcontractualquasi- contractualAgentPrincipal This branch of law separates and regulates the relationships between: Agents and Principals Agents and the Third Parties with whom they deal on their Principals' behalf; Principals and the Third Parties when the Agents purport to deal on their behalf.

91. 91 The concepts The reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any business of size, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business. These problems are increased if the business is a corporation, because it is thencorporation a fictitious legal person and, as such, it can only act through human agents. Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses. When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.

92. 92 Brief statement of legal principles There are three broad classes of Agent: 1. Universal Agents hold broad authority to act on behalf of the Principal, e.g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client.power of attorneymandatecivil lawjurisdictionslawyer 2. General Agents hold a more limited authority to conduct a series of transactions over a continuous period of time; 3. Special Agents are authorised to conduct either only a single transaction or a specified series of transactions over a limited period of time.

93. 93 Authority For these purposes, the Principal must give, or be deemed to give, the Agent authority to act.

94. 94 Principal (law) In Commercial Law, a Principal is a person, fictitious or otherwise, who authorises an Agent to act to create one or more legal relationships with a Third Party. This branch of law is called AgencyCommercial LawAgentAgency

95. 95 Liability of Agent to Principal If the Agent has acted without actual authority, but the Principal is nevertheless bound because the Agent had apparent authority, the Agent is liable to indemnify the Principal for any resulting loss or damage. Liability of Principal to Agent If the Agent has acted within the scope of the actual authority given, the Principal must indemnify the Agent for payments made during the course of the relationship whether the expenditure was expressly authorised or merely necessary in promoting the Principal’s business.

96. 96 Liability of Agent to Third Party If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i.e. the fact of the agency was revealed and the identity of the Principal revealed. But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound. Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority

97. 97 Thank you for your attention tupponi@commercioestero.net