Week 7 – Comparative Contract Law . Prof. Mark. – 21st February, 2019.

- C Good Faith Principle (All continental courts contain an express &

specific provision imposing good faith for the performance of contracts.
- Contracts must be performed & negotiated in good faith. As per Art. 1134
of the French Code. Further, the Dutch Civil Code specifies the
significance of good faith.
- Goodfaith is somewhat stronger than fairness. Bad Faith points at some
conscious bad intention on the side of one of contracting parties. Good
Faith Focuses on an intention, fairness on the result. PECL refers to good
faith & fair dealing in Art. 1:201. The German Concept, ‘Treu und
Glauben’ covers both.
- Good Faith principles may have several ways to use it. The First one is
essentially for completing the contract. It involves the implied terms such
as ‘duty of information’ & ‘constructive notice’
- The second function of good faith is interpreting the contract
- The next function involves restricting the exercise of contractual rights,
most notably in the case of ‘abuse of right’.
- Apart from consumer law, the essential concept of good faith is alien in
english Law.
- Lord Ackner in the case of Walford V. Miles

D. Equilibrium Principle

Art. 3 of the Unfair terms directive – Unfairness of a contractual terms as

“causing a significant imbalance in the parties’ rights and obligations.”
Hence a contractual disequilibrium is another way to define an unfair
contract.

On the Continent, such an approach may also be found in the doctrine

Abuse of Right- a disproportionate disadvantage for one party as compared
to the advantages for the other one.

E. Protection of the Weaker Parties

The whole of consumer law has been introduced to protect the assumed
weaker party, the consumer, against the professional supplier of goods or
services. The same goes for legislation enacted for the protection of
workers against their employer or tenants against landlords.
Also, outside consumer law standard business terms are, as a rule, to be
interpreted against the one who drafted them or even more generally , the
European Code states “terms have to be interpreted against the dominant
 party.” Unfair terms may be put aside to protect the weaker party, in UK it
is in principle limited to such situations.

Unexpected Circumstances – Force majeure – Act of God . The wording

of Art. 11218 French Civil Code explains clearly the condition of Force
Majeure – In contractual terms, force majeure is an event beyond the
control of the debtor, which could not reasonably have been foreseen at the
time of the conclusion of the contract. A general strike causing an
interruption of electricity supply to businesses & not receiving the
administrative authorisation for putting an illuminated sign on the roof of
a factory (EXAMPLES OF ACCEPTED FORCE MAJEURE)

However, force majeure was not accepted in the case of an armed robbery,
emptying the safe of a hotel, because not all precautions had been taken to
prevent it ( Cass. Fr. 9.3.1994, Saint- Tropez Robbery)

Unexcepted Circumstances - Frustration

As a rule in the common law, unforeseen circumstances are at the risk of

the party which obliged itself, but is some, rather exceptional cases
frustration may be accepted.

“frustration” has a somewhat broader scope than ‘force majeure’ in that it

covers not only the impossibility of performance, but also events that
render the contract something radically different from that which was in
the contemplation of the parties.

Example – An English Case, “Mr. Henry Hired a room with a view on Pall
Mall for two days for watching the coronation procession for King Edward
VII. The King Fell ill and the coronation was postponed. This was accepted
– and it was considered as the Frustration of the Contract.

Unexcepted Circumstances – Performance not impossible, just more

onerous
- For Force Majeure, the performance has to be reasonably impossible, but
what if it has become considerably more onerous? The Common Law is
very clear on this, there is no frustration in such cases.

It is pertinent to note that there is a significant difference between the scope

of Impossibility to perform v/s. more onerous to perform!!  Refer to the
Court of Appeal case of Lauritzen V. Wijsmuller, 1990.
The strict approach of the English Courts as to the scope of the
impossibility to perform, “since the effect of frustration is to kill the
contract & discharge the parties from further liability under it, the doctrine
is not to be lightly invoked, must be kept within very narrow limits and
ought not to be extended.

In the continental courts, accepting the change in the contract due to

unforeseeable circumstances “render performance excessively onerous.”
Or when the parties, “would not have entered into the contract or upon
different terms, it would have been more onerous.” However, in Common
Law, the debtor has to perform or pay the damages.

As per the PECL – A party is bound to fulfil its obligations even the
performance has become more onerous whether because its cost of
performance has increased or the value it receives has been diminished.