Law of Contracts Notes

Chapter One: Obligations in General

  • Introduction

  • Discusses the foundational concepts of obligations and contracts.

  • Essential for understanding subsequent topics.

  • The Concept of Obligation

  • Originates from Roman law, defining obligation as a legally binding relationship where one party promises performance to another.

  • Key definitions by Roman jurists like Gay classify obligations as contracts, quasi-contracts, delicts, and quasi-delicts.

  • Definitions of Obligations

  • Black's Law Dictionary: A legal or moral duty to act or refrain from acting.

  • Different legal traditions, including French and Ethiopian systems, provide various interpretations without a unified definition.

  • Sources of Obligations

  • Gay identifies sources as:

    • Contracts
    • Extra-contractual sources (quasi-contracts, unlawful acts, etc.)

  • Ethiopian laws highlight contractual agreements but infer broader classifications from existing articles.

  • Types of Obligations

  • Divisible Obligations: Can be performed in parts. Example: joint payments.

  • Indivisible Obligations: Cannot be performed in parts. Example: unique items.

  • Positive Obligations: To do or give something.

  • Negative Obligations: To refrain from certain actions. Example: non-compete agreements.

  • Classifications based on the number of parties: unilateral, bilateral, multilateral.

  • The Meaning of Contract/Contract Law

  • Contract Law governs agreements related to promises or undertakings.

  • Key focus areas include enforceability of agreements, obligations, and remedies for breach.

  • Purpose and Scope of Contract Law

  • Purpose: To support and control exchanges, resolve disputes, and empower enforceable agreements.

  • Scope: Covers contractual obligations between parties, distinguishing it from tort law.

  • Historical Development of Contract Law

  • Originates from Roman law, evolving with nullius and laissez-faire philosophies impacting enforcement and fairness.

  • Economic Analysis of Contract Law

  • Examines how resources allocate efficiently through contracts and their impact on social wealth.

  • Emphasizes contracts' role in economic exchanges and the penalties for non-performance.

Chapter Two: Formation of Contracts

  • Introduction to Consent

  • Consent is the declaration of intent to create obligations.

  • Indicates autonomy in decision-making, freedom from external interference.

  • Non-Binding Agreements

  • Social or moral agreements lack legal binding intent.

  • Courts typically presume absence of intent in familial or casual arrangements.

  • Meeting of Mind (Art. 1680)

  • Contractual consent is secured when both parties act towards an agreed object.

  • Court assesses parties based on offers and acceptances rather than unspoken intentions.

  • Formation Criteria

  • Essential elements: capacity, consent, object, and form if required.

  • Capacity: Minors and interdicts may lack legal capacity to enter contracts.

  • Consent (Art. 1679-1710)

  • Consent must be informed; errors, fraud, threats, or unreasonable influences can defect it.

  • Defects in Consent

  • Mistake: Parties misunderstand contract terms; certain conditions allow invalidation.

  • Fraud: Intentional deception affecting agreement validity; elements include deceit and damage.

  • Threats and duress: Compulsion may void consent if significant harm is threatened.

  • Object of Contracts

  • Objects must be lawful and within human capacity to achieve.

  • Freedom of Contract: Parties define contractual content; limited by law for public interest.

Chapter Three: Effect of Contracts

  • Meaning of Contract Effects

  • Contracts bind parties; sanctity of contract emphasizes obligation fulfillment.

  • Interpretation of Contracts

  • Courts interpret based on clear intention and context using established legal principles.

  • Remedies for Non-Performance

  • Includes enforcement, cancellation, and damages.

  • Pre-requisites include default notice and certain exceptions providing for direct cancellation.

  • Enforcement

  • Courts may enforce contracts through forced or substituted performance.

  • Damages

  • Compensation for losses arising from non-performance; need for proof of loss due to breach.

  • Cancellation

  • Judicial or unilateral; conditions for cancellation focus on necessity and material effect of non-performance.

  • Remedies for Non-Performance Under Ethiopian Law

  • Article 1771 outlines general remedies; includes provisions for enforcement and compensation.

  • Default notice as pre-condition unless circumstances exclude it.