Recap private law

Aims of private law

1) instrumental view and 2) normative view

Instrumental view

Private law is a means to an end. A tool for achieving some goal that exists outside the legal system itself. The focus here is on social (distributive) justice. Here you ask, what external pressure does this rule secure?

• Economic efficiency = rule exists to maximaze overall welfare

• Incentives = rewarding “right” behaviour and penalising “wrong” behaviour, shaping behaviour by attaching consequences. For example, art. 1599 CC + s.932 BGB

• Social/distributive justice = protecting weaker parties (tenants, employees, consumers). In these contracts, it will be easier for one party to walk away, has more power, and more information. Lawmakers deliberately tilt this “neutral” contract to protect the weaker party more.

• Autonomy = enabiling people to lead the life they value. People should get to right to write their own story rather than having its major shape imposed on them. This gets done through;

  • Freedom of contract = the law lets you decide whether to enter a relationship, with whom, and on what terms, and then makes that choice binding and enforceable

  • Property rights = ownership is the legal guarantee that you get to decide how something is used (keep it, sell it, lend it, develop it, give it away). Because property rights are absolute ==> erga omnes

  • Liability rules as backup enforcement

Normative view

Private law is an autnonomous, self-constrained system of principles defining the rights and duties parties owe to each other, valued for its own internal logic and coherence (not for an external goal it might produce).

The focus is interpersonal justice: was the interaction between these two specific people fair, regardless of what that means for society at large?

• Communicative justice (voluntary exchanges) = was the deal fair/equal? Substantively, was the price actually fair? Formally, did both parties consent? if yes, its fair by definition

• Corrective justice (involuntary exchanges) = if one person loses and another gains unfairly, the law setps in to restore equality

“What is contractual is just” = if two parties freely agreed to something, that agreement is treated as fair by virtue of how it came about.

PIL skeleton (order of operations for any cross-border question)

1. Which Regulation applies, and why? (is it a civil/commerical matter? Contractual? Cross-border?)

2. State the general rule

3. Check if a special/exception rule applies instead

4. Conclude

Brussels I

• Art. 1 scope = civil/commercial matters

• Art. 4 general rule = defendant's domicile

• Art. 7 (1)(a)/(b) contract exception = place of delivery/performance

Rome I

• Art. 1 scope = conflict of laws to contractual obligations in civil and commercial matters

• Art. 3 freedom of choice (check this before default rule!)

• Art. 4 default = seller's/service provider's habitual residence

Rome II

• Art. 1 scope = conflict of laws to non-contractual obligations in civil and commercial matters

• Art. 4 general rule = place of damage

• Art. 5 product liability =

• Art. 7 environmental damage = habitual residence or product/damage was acquired

Examples of civil and commercial matters

Contract law disputes:

• Any lease/rental agreement, service contract, employment contract, or loan agreement between two private parties

Tort/non-contractual liability disputes (Rome II):

• A car accident where the driver and victim are domiciled in different countries

• Product liability = a defective product manufactured in one country injures a consumer in another (art. 5)

• Environmental damage caused by a company's operations crossing into another country's territory (art. 7)

Property law disputes:

• Any dispute about who has a valid right of usufruct, leasehold, or ownership over a house, car, or other asset

Examples of non commercial and civil matters

• Matrimonial property rights —> regulation 2016/1103

• Wills and succession

• Status or legal capacity of natrual persons

Main principles of contract law

1. Freedom of contract

2. Binding force

3. Principle of formality = contracts do not require a specific form (art.1172 CC)

4. Contractual fairness = can be derived from the freedom of contract and it also the legitimation of binding force

Main requirements for formation of contract

1. Agreement of the parties (offer + acceptance); consent on vital elements

2. Intention to create legal relations (to be bound)

3. ENGLAND: consideration = a gift is not a contract

Is a proposal to the public an offer?

Yes, it can be an offer, art.1114 CC, if it contains the essential elements of a contract and if the buyer is not being lured with false pricing. It is an automatic lapse of offer when the product is out of stock

No, it is treated merely as an invitation to treat (it is an invitation for you to come forward and make the offer (by trying to buy it), which the seller can then choose to accept/decline)

No, ads are treated as an invitation to treat: Partridge v. Crittenden

Time of conclusion of the contract

1. Externalisation theory = when the offer is written

2. Dispatch theory = when the offer is sent

3. Receipt theory = when the offer is received (art. 1121 CC + s.130 (1) BGB)

4. Actual notice = when the offer is read

Revocation of the offer: can an offer be revoked before the offer reaches the offeree?

Art.1115 CC = yes, can be withdrawn freely as long as it has not reached the person to whom it was addressed

S.130(1) BGB = yes, a declaration of intent does not become effective if a revocation reaches the other person before or at the same time

Yes, the concept of retraction

Can an offer be revoked after the offer reaches the offeree?

Art. 1116 CC = yes and no, an offer may be withdrawn after the expery of any period fixed by the offeror, or if no such period has been fixed, the end of a reasonable period. However, if withdrawn in this period, liable for damages

S.145 BGB = no, unless the person has ruled out the offers being binding upon them

Dickinson v. Dodds = yes, it is always possible because of concept of consideration

Absolute nullity (art. 1179 + art. 1180 CC)

Art. 1179 CC = this applies where the rule violated has as its object the safeguard of the public interest. Think about contracts that are illegal, contrary to public policy, or that damage something society at large has a stake in (not just one of the contracting parties)

Art. 1180 CC, who can invoke it =

• Any person who can demonstrate an interest, not just the two contracting parties. A third party affected by the contract can ask a court to annul it

• The ministere public (the public prosecutor) can also bring the claim — because the public interest itself is at stake, the State has standing even though it isn't a party to the contract at all

• It may not be remedied by affirmation!

Relative nullity (art. 1179 and art. 1181 CC)

Art. 1179 CC = applies where the rule violated has as its sole object to safeguard of a private interest. I.e., it exists to protect one specific party, not the public at large

Art. 1181 CC, who can invoke it = only the party that the legislation intends to protect

• It may be remedied by affirmation!

Void (null) vs. voidable (annulable)

1. Void = the contract never legally existed at all, automatically, from the moment it was made. No one needs to do anything, automatically invalid.

2. Voidable = the contract does exist and is valid, but one party has the option to have it cancelled. Until they take action, the contract stands —> valid until you choose to undo it

Art. 1112.1, duty to inform examples

Where the duty to inform does apply:

• Hidden mechanical defect (car sale)

• Pending development next door (apartment sale)

• Collapsing revenue (sale of a business) = a seller knows the company's largest client, 75% of its revenue, is about to terminate the contract. The buyer is relying on the seller's financial representations and has no independent way to find out —> must disclose

• Franchise track record = a franchisor knows that the last three franchisees at this exact location went bankrupt due to poor foot traffic. A prospective franchisee, relying on the franchisor's superior knowledge of the location, has no way to know this

Where the duty does not apply:

• The savvy buyer at the flea market = a buyer with genuine expertise recognises that a painting being sold for EUR50 is actually a valuable original worth thousands. The seller has no idea. The buyer is not obligated to say “you're underpricing this”, that is purely an assessment of value

• “You could get more for this” = a buyer privately believes a used car is worth more than the asking price based on their own market knowledge. No duty to volunteer that opinion: the seller bears the risk of pricing their own goods

Vitiating factors

1. Mistake

• Essential qualities

• Decisive to the consent

• Excusable

• No assumed risk

• Both parties must know of the essential importance

1. Deceit

• England = knowingly, without belief in its truth, or recklessly, careless whether it is true or not

1. Duress

2. Undue influence

Mistake (DEKEN + caveat emptor)

An incorrect belief about an essential element of the contract

• French (art.1132 CC) + German (s.119 BGB) law

  • D - Decisive to the consent of the mistaken party = would you still have agreed if you'd known the truth? The seller would've never sold it for cheap if they'd known it was a Poussin —> the mistake decided their consent

  • E - Bears on essential qualities agreed and taken into consideration by the parties = the mistake must be about something important to the contract, like what the painting actually is, not about the price or motive

  • K - Both parties must know of the essential importance of the quality to which the mistake relates = both the buyer and seller know the authorship of the painting was crucial to the deal

  • E - It’s ‘excusable’, not excusable if enough info to avoid the mistake or could have done so without undue effort = you cannot be careless —> the seller hired an expert; they took reasonable precautions. If a professional dealer had made the same mistake without checking, it might be inexcusable (negligent)

  • N - No assumed risk = the seller didn't say “I'm not sure what this is, I'll take the risk”; they genuinely believed the expert's assessment

  • Result = contract annulled for mistake

• England has no general duty to disclose facts —> caveat emptor

  • Smith v. Hughes = if you made a mistake based on your own assumption, the other party has no duty to correct you, as long as they did not actively lie to you

  • Caveat emptor = when you buy something, it is your responsibility to check what you're getting. The seller doesn't have to volunteer information or correct your wrong assumptions

Deceit

You were lied to. Someone made a false statement to trick you into a contract.

• French (art.1137 CC, referred to as fraud) and German (s.123(1) BGB) law

• England = Derry v. Peek 1889

  • “First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short will suffice. Secondly, fraud is proven when it is shown that the false representation has been made:

    • i) knowingly (I know this is a lie, but I'm saying it anyway), or

    • ii) without belief in the truth (I have no idea if it's true, but I'm saying it as if it is), or

    • iii) recklessly, careless whether it be true or false (I don't care whether it's true or not)”

    • = deliberate misrepresentation!

Duress

• French (art.1140 CC) and German (s.123(1) BGB) law

• England Atlas v. Kafco 1989

Undue influence

A party concluded a contract due to excessive (unfair) persuasion

• France, a form of duress (threat) = art.1143 CC

  • Exploits the others’ state of dependence

  • Obtains an undertaking to which the other would not have agreed otherwise

  • Gains from it are a manifestly excessive advantage

• Germany, a separate provision = s.138 (2) BGB

  • Exploiting the predicament, inexperience, lack of sound judgement or considerable weakness of will of another

  • Cause a promise to be made to them (or a third party)

  • In exchange for pecuniary advantages that are clearly disproportionate

• England, a separate legal doctrine = Alcard v. Skinner 1887

  • Developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud

What happens when someone says “yes” to a contract but actually meant “no”? Who's version wins?

1. Will theory = what you intended in your head wins, but you have to prove it. Your consent is internal/psychological, but only counts legally once it's externalised, so the other party can understand it

1. Declaration theory = what you actually said wins, your words bind you. It's not about your hidden intention. It's about how your actions appear to an objective observer, judged by good faith and business customs

2. Reasonable reliance theory = what a reasonable person in the other party's position would have believed wins. Smith v. Hughes, if a reasonable person would think you agreed, you're bound, even if you didn't mean to

Contract is the product of the will and descion of two specific parties. Thus, the parties must be directed at accepting what parties have intended with it. A search for common intention, but how?

1. Subjective interpretation = the ‘real’ intention of parties —> more fairness

2. Objective interpretation = declaration and external expression protects the party's reliance on words used —> more certainty

Non-performance of contracts

claims for performance = in a civil law jurisdiction, pacta sunt servanda — binding force must mean that the creditor can go to court and force the debtor to preform in kind

• art.1221 CC — use of penalty payment to enforce performance

• s.286 BGB + s.241(1) BGB — use of procedural action to preform

England — binding force of contract means primarily that the creditor is allowed to claim monetary compensation (exception for cases concerning a specific good)

A contract cannot be enforced if performance is impossible (no fault required)

• Art. 1221 CC = manifest disproportion between the cost of performing and its interest for the other party if performance is impossible, absolute impossibility, performance in person in some situations

• S.275 BGB =

  • Absolute impossibility = seller cannot deliver a good that has been destroyed

  • Unreasonably costly = performing is grossly disproportionate to the other party's interest in performance

  • Moral impossibility = weighing impediment performance in person and the other party's interest in performance (e.g., an opera singer refusing to sing because her child has been taken seriously ill)

Termination of contracts

• France = performing is its primary duty

  • Termination is possible if the non-performance is sufficiently serious, art.1224 CC

  • A notice to perform is required, art.1225 CC + art.1226 CC

  • Exceptions where no notice is required = emergency, if performance is impossible

• Germany = performance is the primary duty

  • Termination is possible for failure of performance (no fault required), s.323 BGB

  • An additional period of nachfrist = a notice to perform is required

  • Exceptions when a notice isn't required = s.323 (2) BGB

• England = performance is NOT the primary duty

  • Termination, in principle, if the breach of contract is sufficiently important

  • Warranty v. condition

    • Warranty = normally provides additional assurance or guarantee regarding the quality, fitness or performance of goods

    • Condition (here, termination is possible) = fulfilment of an important contractual promise is a condition for the other party to perform

  • No notice is required as a claim for performance is, in principle, not possible

Claiming for damages requirements

1. Non-performance = the debtor must not have performed its obligations under the contract

• Total non-performance = nothing delivered at all

• Later performance = delivered, but after the due date

• Defective/bad performance = delivered, but not to the agreed standard

• Partial performance = only some of what was owed

2. Attributable = the non-performance must be attributable to the debtor

• Art. 1231-1 CC = debtor condemned to damages unless they can prove the non-performance was caused by force majeure

• S.276 BGB + S.280(1) BGB = the debtor is responsible for intent and negligence

• A contract is treated as a guaranteed promise. If you didn't do what you promised, you pay —> Paradine v Jane (1647)

3. Causality = there must be a legally relevant connection/link between the non-performance and the harm for which damages are sought

• Art. 1231-3 CC = debtor only liable for damages that were foreseeable (or could have been foreseen) at the time the contract was concluded — unless the non-performance involved gross or dishonest fault

• Art.1231-4 CC = if it was gross/dishonest fault, damages are then limited to only the immediate and direct result of the non-performance

• Sale of Goods Act, ss.50(2)/51(2) = damages are measured by the estimated loss directly and naturally resulting in the ordinary course of events from the breach

4. Extent of damage = there can be doubt as to whether the harm is compensable and how it can be calculated, non-performance of contract usually causes a loss for the creditor, but may often result in an advantage that must be offset against the claim for damages

After interpretation of the express terms of a contract, it might be concluded there is a gap in the contract = an aspect of the contract to which the parties did not make contractual agreements

Art.1194 CC = contract create obligations in what they expressly provide, but also all the consequences which are given to them by equity, usage, or legislation —> default rules on contract law

‘Completive interpretation’ and supplementation

1. Supplementation = based on default rules or good fair (restrictive approach)

2. Completive interpretation = to complete the contract by inserting a term on which the parties would have agreed on if they had considered the unforeseen situation

Implied terms

• Terms implied in law for all contracts of a specific type

• Terms implied in ‘fact' for a specific contract = parties did not provide for certain contingency because it is an obvious part of the contract they didn't believe it was necessary to spell it out

France, Germany and England interpretation of contracts

France = court should find i) common intention (subjective) but if this intention cannot be discerned, ii) the contract must be interpreted in the sense which a reasonable person placed in the same situation would (art.1188 CC)

• Art.1192 CC = clear and unambiguous terms are not subject to interpretation as doing so risks their distrotion

Germany = the aim of interpretation must be to ‘ascertain the real intention’

• Step 1 = find the true intention, not literal words : S.133 BGB — general rule

• Step 2 = interpret according to good faith + customary practice : S.157 BGB

England = what would a reasonable person with all the background knowledge available to the parties understand the words to mean? Investors Compensation Scheme Ltd v. Bromwich Building Society 1998

Breaking off negotiations in France, Germany and England

France = parties are free to decide whether to commence negotiations, how to proceed, and when to end negotiations

• Art.1112 CC — parties must negotiate in good faith

• Liability for breaking off negotiations (damages) based on tort law, general provision art.1240 CC, because it is a breach of general duty of care

Germany = parties are in principle free to break off negotiations, but contracting parties are under a duty to deal in good faith with each other during negotiations, arising from the special relationship of trust, arising when parties start to negotiate and which obliges them to consider each other's interests

• Liability based on separate provision (not tort law) = duty of care not to cause purely economic loss to a person who relied on a contract that failed to materialise, also includes liability for negligent statements

• A party is obliged to compensate the other party if it negligently breaches its duty during the conclusion of a contract, s.311(2) BGB + s.241(2) BGB

England = no general principle whereby parties must observe the principle of good faith and fair dealing during pre-contractual negotiations, disclose important information without being asked, or take any special account of the other party

• Walford v. Miles 1992 = no good faith, no liability unless you lied

• You can walk away from negotiations freely, but if, during those negotiations, you said something that is false or misleading, you can still be sued for damages for the lie or misinformation

The three views in property law

1. Libertarians = any given distribution of wealth is just, as long as it is historically justified

2. Egalitarians = property should be distributed more equally between the people. This is so called the property owning democracy

3. The right to keep/possess and transfer property = also the power/legal capacity to dispose of, or to establish a sub-property right

Characteristics of property law

• Absolute rights (erga omnes) = enforceable against the world

• Real rights (rights in rem) = sub-rights established on the property must be respected (droit de suite)

• Standardisation = the numerous clausus principle (a closed system of property rights). Parties create new property rights themselves. No mistake or misunderstandings can occur

• Maxim nemo plus principle = no one can transfer more than they have

• Publicity = especially in relation to public land (register) and certain movables (registered vessels and aircraft)

• The principle of possession = the person who physically has/controls the thing

  • Possessor for yourself = you have the thing + treat it as your own (you believe like you are the owner, and act like you are)

  • Holder for someone else = you physically have the thing, but you know it belongs to someone else

  • Transfer of a movable property = in Germany, you need to actually hand over physical possession to transfer the ownership. In France + Englandm, possession is relevant for the protection of good faith buyers

  • Prescription (squatters’ right) = if you possess something long enough, even without being the legal owner, the law may eventually make you the owner

• Restrict the use of ownership

  • Restrictions by means of administrative regulations: environmental rules, zoning rules, building rules, etc

  • Not violating the rights of others (disproportionately) via noise, water drainage, planting trees near the neighbour’s border, etc

  • The use of ownership/property rights must not go against community interest

  • Restrict ownership of tangible property also with respect to a certain “control” by humans over the tangible/physical object

Tangibles (‘real rights’)

Things you can physically touch

• Movables = physical things you can move place to place (bike, chair, laptop, airplane, etc)

• Immovables = physical things that cannot (or not easily) be moved — they are fixed to the earth (house, land, tree, etc)

Intangables

All goods, property, assets which are not touchable/physical

• Property right = over a tangible —> works against everyone

• Contractual right = over an intangible —> only works between the two parties

Non-registered property rights vs. registered property rights

Property rights that do not need to be written in a public register (bike, phone, laptop, etc)

Property rights that must be recorded in an official public register to be legally valid

• Immovables

• Some movables = aeroplanes and large vessels

Sub-rights

Rights you establish on top of someone’s ownership rights

• Sub-rights follow the same registration status as the right they sit on

  • For example, you own land (registered), and you grant someone a long lease on that land. That long lease is automatically also a registered right because it sits on a registered ownership

Ownership (right)

This is the most complete right you can have. You can use it, sell it, destroy it, give it away. Everything else below it is a lesser right carved out of ownership.

Sub-rights (mother and daughter rights)

Rights established on top of the ownership right. The owner still exists (mother) but grants someone else a specific right over their property (daughter). However, the owner cannot give more than what they have!

Property rights (6)

1. Right of usufruct = the right to use and enjoy the fruits/benefits of something that belongs to someone else. Applies to both tangibles and intangibles (for example, your uncle owns a house but gives you the right to usufruct. You can live in it and keep any rental income, but you do not own it)

2. Right of servitude = the right to use someone else's land in a specific, limited way, or to stop the owner from doing something on their own land. For example, the right to cross your neighbour’s land to reach the road. Even if the land is sold to a new owner, that right of crossing is attached to the land.

3. Right of long lease (leasehold/emphyteusis) = a very far-reaching sub-right on immovable property. The long lessee can use the land as if they own it, for a very long period (up to 100 years or indefinitely), but pays yearly fees to the actual owner (often the owner is the municipality)

4. Superficies solo credit = everything built on the soil belongs to the soil. Normally, if you build a house on land, the house automatically belongs to the landowner.

5. Right of superficies = it gives someone the right to own a building or trees on land that belongs to someone else

6. Apartment right/condominium right = splitting ownership of a building into separate ownerships per apartment. This is NOT a sub-right on someone else's property; each apartment owner has their own independent ownership of that unit

How to transfer immovables

1. Agreement (contract law) = both parties agree on the sale: price, object, terms

2. Notarial deed + registration = the actual transfer occurs through formal documentation signed by both parties and a notary. The deed then gets registered in the public land register, only at this point does the ownership legally pass to the new owner (In countries with no notaries (England), they get a designated lawyer or another person that fullfills this role)

Other registered property

1. Registered aircrafts = planes are movables but have a high value

2. Registered vessels = ships + barges

Security rights

When a bank lends you money, it wants a guarantee that it will het paid back. Two ways to provide:

1. Personal guarantee = someone else promises “if they don't pay, I will” — this is a contractual promise and provides limited protection

2. Property law security right = the creditor gets a real right over your property itself. If you don't pay, they can sell that property to recover the money

Right of mortgage

A security right over a registered property (land, buildings, aircraft, vessels, etc) — registration of the right of mortgage in a public register

Right of pledge

A security right over movables and intangibles (not registered property)

1. Possessory pledge = the bank/creditor physically takes and keeps the object

2. Non-possessory pledge = you keep the object, but the creditor has a right over it

3. Pledge on intangibles = this is especially for claims (money owed to you)

   1. Undisclosed = the person owes you money but is not told about the pledge. They keep paying you normally. The pledger’s right exists but stays secret

   2. Disclosed = the debtor is informed, now they know they must pay the pledgee directly, not you

Advantages of security rights

• Priority/high ranking = if multiple creditors are trying to get paid from the same property, the mortgage/pledge holder goes first. Other creditors wait in line

• Easy execution = you do not necessarily need to go to court first. The right to sell the property is already built into the security right itself

• Works in bankruptcy = even if the debtor goes bankrupt, the mortgage/pledge can still enforce their right. Other creditor's might get nothing, but the secured creditor gets paid from the pledged/mortgaged property first

• Absolute right = enforceable against the whole world, not just the debtor

Floating charge (England)

It is a security right over all the assets of a company at once, including assets that change over time.

• Key feature = while the company operates normally, the “charge” floats — the company can buy and sell assets freely, the charge doesn't fix onto specific things

• The moment the company defaults, the charge “crystalizes” meaning it freezes and becomes a fixed charge on everything the company owns at that exact moment

• Companies accept floating charges because getting the loan now outweighs the risk of losing assets later and they expect to pay it all back

Cumulation of property rights

Multiple property rights can stack on top of each other on the same property

• Land example = ownership —> long lease —> bank A mortgage —> bank B mortgage

  • Owneber grants a long lease to a tenant

  • The tenant uses that long lease as security for a loan —> mortgage for bank A (2019)

  • Later, they take another loan —> mortgage from bank B (2024)

  • Bank A's mortgage has a higher priority over Bank B's because A came first

• Laptop example =

  • Owner pledges laptop to creditor (2024) —> non-possessory pledge

  • Owner then grants usufruct on the same laptop to a family member (2025)

Limited community of property

The assets acquired by spouses during the marriage become community property. Liabilities incurred during the marriage fall in te community property as well.

• Limited = in principle, only assets acquired during the marriage, with som exceptions (gifts, inheritance, legacies) these stay private

• The c.p is equally divided between the spouses upon dissolution of their marriage (death or divorce)

• Administration of c.p = art.1421 CC — each spouse has the power to administer and dispose of c.p

Deferred community of property

• No c.p

• No specific rules on the administration of c.p

• Upon dissolution of marriage, each spouse is entitled to an equal share of the community of accrued gains

Total separation of property

• There is no matrimonial property law; only separate acts and rules apply

• No c.p = not during marriage and not upon dissolution

• No specific rules on administration as there is no c.p —> each spouse independently administers their own assets and is solely liable for their own debts

• Discretionary power of the judge to reallocate assets