Civil Law W/ Hypos

Kevin Duindam
Flashcards by Kevin Duindam, updated more than 1 year ago
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What are the 3 Characteristics of Law Rules - What you are allowed to do... Positive Law - Rules created through government action Collective Enforcement - Rules enforced by the government
Definition of Law Laws are the rules that we as a society specifically set up to govern our lives, enforced by the government.
What is Civil Law (two basic categories) Public Law - Where the government is involved. Criminal, Constitutional Law.. Private Law (Civil Law) - Where the government is not involved. Family Law, Property Law..
Basic Structure of Civil Law Law of Obligations - (Schuldrecht) - Contract Law (Obligations to others into which we enter voluntarily.) - Tort Law (Obligations to others that are defined by law.) Law of Things - (Sachenrecht) -Property Law (The rights that people have over things.)
Rechtsfähigkeit is the Capacity to... Example – Your ability to inherit property also comes with the duty to use that property according to the law… Capacity to have rights & duties - all humans have this - Begins at birth, sometime earlier
Handlungsfähigkeit & Two Types of this Capacity to perform legal acts - Varies by age Deliktsfähigkeit & Geschäftsfähigkeit
Deliktsfähigkeit is the capacity.. Capacity to be liable for the consequences of one's own actions
Geschäftsfähigkeit is the power to... Power to undertake legally binding actions and contracts.
What forms of 'Persons' are there Natural Persons - Us.... Legal Persons - Entities that gain legal capacity through the law Outcome –We have rights from birth as humans, entities gain capacities through law, when given at all.
Legal Transactions (Das Rechtsgeschäft) All legal acts that bring about a legal consequence or effect
Basic Parts of a Legal Transaction Declaration of Will Realakt
Declaration of Will Statement or action aimed at achieving some legal consequence
Realakt Any act which the legal system attaches legal consequences regardless of the actor's intent
Legal Transactions are One or more Declarations of Will or Realakt + Declaration of Will
Elements of a Declaration of Will ? vs ? Objective vs Subjective
What is an Objective declaration of will? The outward act of expressing one's intent. What people actually see happen, or what they think happend...
What is a Subjective declaration of will? The Person's actual intent behind the outward act. Must: 1) desire the act 2) be aware of it 3) know its consequence
What are the Limitations of Legal Transactions Void Voidable
Void Transactions that are ________ legal effect from the very beginning Without Outcome - A void contract may not be enforced by either party. Legally, it never happened...
Voidable Transactions which are ________, but may be ______once challenged. initially valid & voided Outcome - A voidable contract may be enforced by the "innocent" party, if they so choose
What is Agency Where one individual (agent) legally acts on behalft of another individual (principal)
Compulsory vs Non-compulsory In regards to Agency Agency created by law vs. Agency created by transaction, voluntary
Describe both terms regarding agency Active vs. Passive agent gives the declaration of will vs. agent receives the declaration of will
Direct vs. Indirect Define both in terms of agency agent acts using the principal's name vs. agent acts in his own name, but for principal
Spezialvollmacht for agency Authority for a single, specific transaction Bob being sent to buy the specific boat.
Generalvollmacht Authority for generally anything and everything Greenpeace turning the organization over to Bob.
What is Untervollmacht? Authority given from an agent to a subagent Bob sending his son to buy the boat for him (and for Greenpeace).
Definition of Duldungsvollmacht & in respect to this Hypothetical – Bob is sent by Greenpeace... Authority where the principal knows the agent is actiong on his behalf (but beyond his actual authority) but does nothing about it. The actions become legally enforeable against the principal If the CEO actually knows that Bob is bidding for Greenpeace…
Definition of Anscheinsvollmacht & in respect to this Hypothetical – Bob is sent by Greenpeace... Authority that arises where the principal should have know that the agent was acting outside his authority. Theses actions also become enforceable against the principal. If the CEO should have known what Bob was doing…
What happens to a transaction concluded by an agent while working within their authority? The transaction is immediately valid and has legal effect for and against the principal
What happens to a transaction that is concluded by an agent working Beyond their Authority The transaction is not valid (unless the principal ratifies it afterwards)
What is Unclear Authority for agency Where the agent does not make it clear that he is acting on behalf of a principal, then the agent is personally liable for the transaction
Contracts & the what every contract needs.. legal act consisting of two or more _______________, corresponding with each other, aimed at bringing about a specific legal effect. Declarations of Will Every contract requires an offer and an acceptance
Freedom to conclude a contract Question – Is this true from a practical perspective? What limitations might exist as to a person’s ability to decide with whom he wishes to conclude a contract? can conclude or not conclude a contract with anyone... - May not disciminate upon age, gender, race or disability - Allowed monopolies must contract with everyone
Freedom to Decide Contract Contents Question – What limitations might exist as to a person’s ability to decide the form and contents of a contract? Individuals may decide their own content and form. - Anti trust law - not contract for anything illegal... - Consumer Protections laws. etc.
Offer Definition Declaration of will that must be received by another party, offering the conclusion of a contract
Details of an Offer - must contain all the essential aspects - other party must be able to just say "yes" - person making the offer is bound by the details of the offer until it lapses - only open to the person to whom it is addressed. - the offerer can avoid being bound be inserting: subject to change; revocable; without obligation
Timing of an Offer defintion & Question – When does the validity of an offer end? An offer is effective and valid once it enters a person's "sphere of control" and they could have been expected to take notice of it. • As long as is specified in the offer. • If not specific in the offer – a “reasonable” time. • If the other party is present – immediately • Whenever the offerer formally revokes the offer. • The moment the offer is officially turned down.
Acceptance Definition Declaration of Will accepting the offer of a contract
5 Specific Details of an Acceptance - must be unreserved and unconditional - not effectiv if the offer was timely revoked - only effective by the person to whom the offer is made - Acceptance need not always to be overt - An acceptance is effective once it enters a person's "sphere of control"
Open Lack of Agreement - The parties know that they are not in agreement. What happens? Or could happen? 2 answers • Fundamental contract aspect = contract is void. • Side issue of the contract = contract only if the parties’ want to go forward regardless of the problem.
Hidden Lack of Agreement - Where the parties do not know of a disagreement or ambiguity in the contract What happens? Any side issues? 2 Answers Fundamental contract aspect = contract is void. • Side issue of the contract = contract only if the parties’ would have gone ahead if the parties knew of the disagreement beforehand.
Standard Form Contracts (Many contracts now have a "fine print") Explain how the acceptance by the other party works and is there any type of protection against things written in the fine print? - Accepting party need to have had a reasonable opportunity to take notice of it and accept it. -the law protects against certain unfair practices or illegal acts.
What are the General Forms of a Contract No basic form necessities are required by statute, however with respect to certain types of contracts, specific forms may be required by statute in order to provide increased certainty that the parties understand the legal consequences of their actions Example - Sale of land, donation
Breaches of Requirements can Void a contract. What are they? Breach of formal requirements Breach of a Law - Where a contract itself violates a statutory provision Breach of Good Morals - Where a contract is against public morality
What Defects of the Declaration of Will will Void a contract? Mental Reservations - Both parties know that the declared intent by one side was not real Sham Transactions - Actual agreement is fake, to cover a different agreement Joke Declaration - one party is making a joke about their intent to enter into the agreement = void. However they must clarify the situation as soon as possible
What Defects of the Declaration of Will will make the contract Voidable Content mistake – Where the two parties misunderstand each other. Characteristic Mistake –Where a mistake is made by one party as to an “essential characteristic” of the deal Declaration Mistake– Where one party makes a mistake in their declaration Deceit Where one party purposefully deceives the other party in order to convince them to make a Declaration of Will. Duress Where one party threatens an unlawful act in order to obtain a Declaration
Creditor and Obligor Definition Creditor - Person to whom an obligation is owed. Obligor - Person who owes the performance of the obligation
Primary Duties Definition Arises from the contract itself, and is generally the entire point of the contract
Secondary Duties Definiton Arise generally when the primary duty has not been fulfilled
Types of Performance Obligations & Examples Individual Obligations - Specific Bottle of Wine Generic Obligations - Any Bottle of Wine Quasi Generic Obligations - Specific Type of Wine
Obligations as the Place of Performance ___schuld ____schuld _____chuld • Holschuld – The Seller has no duty to bring the object to the Buyer. Place of performance is at the Seller’s address. • Bringschuld – The Seller must bring the object to the Buyer. Place of Performance is at the Buyer’s address. • Schickschuld – The Seller need only send the item on its way to the Buyer. Place of Performance is at the beginning of delivery
Several different options exist that end an Obligor’s necessity to perform. What are these? Timely performance of the obligation Example – In the sale of a car for €3000, the Buyer hands over the money and the Seller hands over the car. Some substitute is accepted in lieu of performance by the Creditor.
What is Partially Fulfulling the Obligation to Perform. In some circumstances, actions may only partially fulfill an Obligor’s necessity to perform: Some alternative is accepted "on account of fulfillment". The obligation to perform continues - Example – Stan accepts the painting from Bob on the agreement that he will auction it off and put the sale price towards Bob’s debt. A set‐off of performance obligations. This occurs where both parties owe the other something from a prior transaction. The obligations offset. - Example – Stan owes Bob €500 from a bet, while Bob owes €1000 for the car. At the end, Bob only owes Stan €500.
What isImpossibility? Where it has become impossible for the Obligor to perform
What is the Collapse of the Foundation of the Contract Where the circumstances that are the basis of a contract have significantly changed, to an extent that the parties WOULD NOT HAVE ENTERED INTO THE CONTRACT IF THEY HAD KNOWN (or would have done so on different terms), the contract cannot reasonably be upheld.
Impossibility Basic Concepts Impossibility does not invalidate a contract Impossibility is a defence or and excuse Creditor may still have a claim for monetary damages from the Obligor
Objective Impossibility Impossible for anyone to perform
Subjective Impossibility Impossible for the Obligor specifically to perform
Initial Impossibility Where it was already impossible to perform at the time the contract was made
Subsequent Impossibility Where it only became impossible to perform after the contract was concluded
Unreasonableness in terms of performance Where the actual performance is possible, but would impose a disproportionate cost on the Obligor
Factual Impossibility Where the performance is actually, factually impossible
Temporary Impossibility Where the Performance is currently impossible, but may be possible at a later date
Permanent Impossibility Where the performance is and will always be impossible
Explain Obligor Delay Where the Obligor does not perform by the original set date
What is a Positive Breach of contract? Where the contract was poorly performed and that substandard performance resulted in unexpected damage
What are Pre-Contractual Duties in terms of damages? Where one party in a contract negotiation causes damage to the other party
Creditor Delay Obligor offers to perform, but the performance is refused by the Creditor. The obligor is generally entitled to compensation for the delay
What is Obligor Delay and are there consequences? The Obligor does not perform by the original set date....the creditor is generally entitled to claim compensation for the delay (unless the Obligor can prove that he was not responsible). The Creditor must eventually accept performance when tendered, even if it is late.
Damages in Lieu of Performance The damages necessary to make the Creditor whole as if the Obligor had actually performed
Damages caused by the delay The damages that result from the delay, to compensate the Creditor for waiting for performance
What elements are necesssary in order for a party to claim damages through a "positive breach" ? -A contractual duty has been breached -The Creditor has suffered damages, -The breach caused the Creditor's damage, and -The obligor was at fault for the breach
What are Damages? Every disadvantage a person suffers as a result of action on property, belongings, or to a lawfully protected right.
Define Causation with regard to Damages Damage must have been caused by an action or omission carried out or omitted under a contract
Two Basic Types of Compensation Natural substitution - Substituition as compensation Schadenersatz in Geld - Money as compensation
Direct Damage definition Actual impairment of the injured object or right
Indirect Damage definition Any further consequences of the original damage
Material Damage Any damage that money can naturally compensate
Non - Material damage Damage that money cannot easily compensate
Two Goals for Compensation Expectancy - (Schadensersatz statt Leistung) Placing the person in the position they would have been in had the deal been completed with no breach
Unjustified Enrichment (Restitution) Basic Principle –Where person A ______ something from person B, whether by some act of person B or by any other means, _______ legal justification, and to the detriment of person B, person A has _______ to give back to person B what they gained. Gains Without An Obligation
Unjustified Enrichment (Restitution) Example – Bob agrees to buy a book from Stan for €20. Bob mistakenly sends Stan €50 instead. Stan has been unjustifiably enriched by €30 and has no legal justification to keep the money, so who gets what? Bob has a claim for the return of the money.
Definition – A Condiction 'Kondiktion' is the claim of the person who is entitled to _____ the unjustified enrichment ________. have returned
Two basic categories of Condiction Leistungskondiktion & Condiction by 'other means'
Leistungskondiktion I Definition – Unjustified transfer of wealth due to the performance of some assumed obligation.
Basic 2 Requirements of Leistungskondiktion Deliberate act of some sort with the intent of transferring wealth to another person. • Deliberate act must lack legal necessity, ie, the person was fulfilling an obligation that did not actually exist.
Bob agrees to buy a book from Stan for €20. Bob’s wife pays Stan the €20. She tells Bob she already paid, but Bob sends Stan €20 anyway. Solution? Question – Was there a deliberate act of some sort with the intent of transferring wealth to another person? Question – Did the deliberate act lack legal necessity, ie, the person was fulfilling an obligation that did not actually exist. Both Yes & Bob just gifted him the money.
Hypo – Brad agrees to pay Steve €1000 to steal a painting. Brad pays the money, but then Steve refuses to actually follow through. Solution? Leistungskondiktion I – Performance of an obligation in exchange for an object that is not achieved. Where performance is made in exchange for a promisethat is not then fulfilled in return, the original personmay recover the value of their performance.End Result – Steve must return the €1000.
Leistungskondiktion I – Exception A Hypo – Brad agrees to pay Steve €1000 to lift the Eiffel Tower, on his own. Brad pays the money, but then Steve refuses to actually follow through. Solution? • Where the original transaction is actually impossible and both sides know it, the payment is not recoverable. • End Result – Steve may keep the €1000. • This is similar to when Bob knows he need not pay the €20, but does so anyway. Brad knows this is not a real deal…
Leistungskondiktion I – Exception B Hypo – Brad pays Steve €1000 to play guitar at his pub. When Steve shows up to play, Brad has locked him out. Every time Steve shows up to play, Brad refuses to allow him entry. Brad files a claim to recover his €1000. Solution? • Where the claiming person has “frustrated” the other party’s performance, then they may not recover their money. • End Result – Steve may keep the €1000, but may still have to perform…
Leistungskondiktion II Hypo – Bill has an insurance contract with AIG, whereby they provide cover for his personal property (in exchange for money). Bill’s bike is stolen. He files a claim with AIG and they give him €200 for the bike. A month later, thepolice find Bill’s bike and return it to him. Solution? Leistungskondiktion II–Where the legal basis (valid at the time) of an obligation falls away after theperformance of that obligation. Here, AIG paid money to Bill to fulfill their contract obligation. But then their obligation was negated by a change of circumstances. This leaves Bill unjustifiably enriched. End Result – Bill must return the €200.
Leistungskondiktion III Hypo – Benny agrees to lease Sylvia a house at an oppressive rate. Sylvia pays the initial amount and Benny lets her use the house. After a few weeks, Sylvia refuses to pay any more money, claiming the lease agreement is void due to “gute Sitten”. Can she get her money back? Leistungskondiktion III–Where acceptance of the performance was against the public morals. Since Benny was charging an “oppressive” rate for the house, the contract would thereby be void as against public policy. Sylvia may recover the amount she already paid since she was not obligated to have done so. End Result – Benny must return the payment.
Kondiktion in sonstiger Weise I Definition Condiciton by other means. Bascially where the claimant has not performed an obligation.
Kondiktion in sonstiger Weise I Basic Example – Bruce builds houses. He orders paint to be delivered to his building site. A few days later, he finds a delivery of paint at his site and uses it to paint the house. Unfortunately for Bruce, the paint was actually supposed to be for the house next door and was incorrectly delivered to his site. Solution? Interference Condiction Bruce has not performed an obligation, so this is not a Leistungskondiktion. He has, however, unjustifiably enriched himself at the expense of his neighbor. He is obligated to pay for the neighbor’s paint.
Hypo – Brandon works for AIG. He decides to buy a bike online for €100 for his personal use. The bike is delivered, as is a bill for €100. Francis, the accountant for AIG sees the bill, and assuming that the bike was for company purposes, pays it. Now what? Recourse Condiction AIG was under no legal obligation to pay, though they mistakenly believed they were. Brandon has unjustifiably enriched himself at AIG’s expense, and AIG may recover €100 from Brandon.
Hypo – Beau agrees to buy a Magritte painting from the local art gallery for €1 million. He will pick it up in 2 days. The next day, the gallery gets a better offer from Fenn (€2 million), so they sell it to him. Solution? Bona Fide Purchaser Where a party sells property that is not their property, the owner may recover the proceeds of the sale. … Note that Beau may not recover the painting. He may not enforce the contract with the gallery, since the gallery no longer has the painting. Fenn has the painting, but since Beau has no contract with Fenn, he has nothing to enforce against him. Fenn’s interest in the painting is protected.
Hypo – Beau agrees to buy a Magritte painting from the local art gallery for €1 million. He will pick it up in 2 days. The gallery puts a “SOLD” sign on the painting. The next day, Fenn makes a €2 million offer on the painting and the gallery sells it to him. What happens? Bona Fide Purchaser – Exception A Where the buying party knows that the seller has no right to sell, then they have not bought the property in good faith. Their ownership interest will not be protected. Beau can recover the painting from Fenn.
Hypo – Beau agrees to buy a Magritte painting from the local art gallery for €1 million. He will pick it up in 2 days. The next day, the gallery changes its mind and instead gives the painting to a charity as a gift. Is this different? Bona Fide Purchaser – Exception B Here as well, there is no ownership interest that the law will protect. Since the charity did not actually purchase the property, it has no right vis‐à‐vis Beau to keep the property.
Hypo – Brett agrees to buy Saul’s car for €1000. Brett pays the money, and Saul will deliver the car in 2 weeks. A few days later, Brett sells his ownership interest in the car to Fred. Saul doesn’t know about this, and delivers the car to Brett anyway. Solutions? Wrong Receiver Saul has fulfilled his obligation and has unjustifiably enriched Brett at Fred’s expense. Fred can recover the car from Brett. Wrong Receiver Fred can also recover from Brett for the use and enjoyment of his property (the car)…
Hypo – Beau agrees to buy a Magritte painting from the local art gallery for €1 million. He will pick it up in 2 days. The next day, the gallery changes its mind and instead gives the painting to a charity as a gift. While at the charity, a fire destroys the painting. Who collects what from whom? The Nature of Unjustified Enrichment I The action is for enrichment. If the receiving person is no longer enriched, then there is nothing to recover. It is not meant to put the claimant in the position he would be in before the enrichment. It is to get the enrichment back. End Result – Beau can’t collect the painting from the charity since it no longer exists.
Hypo – Beau agrees to buy a Magritte painting from the local art gallery for €1 million. He will pick it up in 2 days. The next day, the gallery changes its mind and instead gives the painting to a charity as a gift. Upon learning that they will have to give the painting back to Beau, the charity destroys the painting. Solution? The Nature of Unjustified Enrichment II Obviously, the charity can’t give the painting back anymore, and it is no longer enriched… But it also knew that it had someone else’s property and destroyed that property. Thus, they must compensate Beau for the value of the painting.
Conclusions of Unjustified Enrichment Distinction between the two kontionen Does it have practical effect? •The distinction between Leistungskondiktion and Kondiktion in sonstiger Weise may seem irrelevant… • It does have a practical effect, in that Leistungskondiktion claims have legal precedence over Kondiktion in sonstiger Weise claims. •As such, where everyone is fighting over the recovery of money, a Leistungskondiktion claim will be more likely to be paid off.
Contracts of Sale Default Rules vs Mandatory Rules • Default Rules – Those rules that apply to specific types of contracts, unless the parties choose to create a different set of rules within the contract. • Mandatory Rules – Those rules that apply to specific types of contracts regardless of what the parties otherwise agree.
Consumer Contracts Explain the two Consumer vs Entrepreneur • Consumer – Someone contracting on a matter outside their trade or profession. (§13 BGB) • Entrepreneur–Someone contracting on a matter within their trade or profession. (§14 BGB)
Three Types of Contracts of Sale • On‐Premises Contracts – A contract concluded at the entrepreneur’s place of business. • Off‐Premises Contracts – A contract concluded face‐toface but away from the entrepreneur’s place of business. • Distance Contracts – A contract concluded at a distance. Examples would be online, telephone, etc…
Are these Valid Contracts of Sale? Hypo ‐ Bob owns a piano shop. Sam is a car salesman. They shake hands on a deal whereby Sam will buy a piano for €5000. Hypo – Bob is a real estate agent. Sam is a car salesman. They shake hands on a deal whereby Sam will buy a house for €1 mil. Yes No
Hypo – Benny runs a piano store. Steven is a plumber. Steven stops by and agrees to buy a new piano for €5000. Steven pays the money. Benny delivers a piano to Steven the next day, however it has a noticeable hole in the top of the piano. Steven asks Benny to replace the piano. Must he? Yes… The Seller is required to deliver a good to the consumer that is: • Free of material and legal defects, and • Is of merchantable quality.
Hypo – Benny runs a piano store. Steven is a cart salesman. Steven stops by and agrees to buy a new piano for €5000. Steven pays the money. Benny delivers a piano to Steven the next day, however it has a noticeable hole in the top of the piano. Steven wants to revoke the contract and get his money back. May he? Not yet… • Steven must demand either replacement or repair of the defective object. If his second demand has not been met, then he may revoke the contract. • Alternatively, he may demand that Benny compensate him for the damage to the piano.
Hypo – Benny runs a piano store. Steven is a painter. Steven stops by and agrees to buy a new piano for €5000. Steven pays the money. Benny delivers a piano to Steven the next day, however there is a small scratch on the underside of the piano stool that comes with the piano. Steven asks Benny to replace the chair. Must he? Arguably not. Any defect must be material. Defects that are inconsequential are not material, and a scratch on the underside of a stool is probably not a “material” defect. As such, Benny will have performed his legal obligations. However… he has an unhappy customer.
Hypo – Benny also has a website where he sells pianos. Painter Steven orders a €5000 piano as a gift for his wife. It is delivered a few days later, but unfortunately, Steven’s wife hates it. Steven immediately wishes to revoke the sales contract and return the piano. May he? Yes… §356 BGB gives consumers a 14 day window to withdraw from any sale contracts that takes place over distance or off‐premises. This is not true with respect to on‐premises contracts.
Hypo – Benny runs a piano website. Plumber Steven orders a new piano for €5000 as a gift for his wife. Benny currently doesn’t have the item in stock and is not able to deliver the piano until a month later. Upon delivery, Steven’s wife hates it. A week after delivery, Steven tells Benny that he wants to withdraw from the contract and return the piano. May he? Yes… In distance contracts, the 14‐day withdrawal period only starts running: • After the Seller has correctly informed the consumer of his right to withdraw, and • Once delivery has been made.
Hypo – Benny runs a piano store. He agrees to sell Steven a new piano for €5000. Steven pays the money and decides to take the piano home right away in his pickup truck. On arrival at his house, Steven notices that the piano now has a number of large scratches on the outside wood. He immediately asks Benny to take back the piano and refund his money. Must Benny? No… Since this is not a distance contract, Steven has no right to withdraw. The passage of risk with respect to the piano changed to Steven the moment he took possession of the piano. As such, he is responsible for any damage that occurred.
Hypo – Benny runs a piano website. Artist Steven orders a new piano for €5000 for his wife. The piano is delivered a few days later and Steven’s wife hates it. She throws a beer bottle at it, and causes damage to the outside wood. Still within his 14 day withdrawal window, Steven tells Benny that he wants to withdraw from the contract and return the piano. May he? Yes… Steven has a statutory right to withdraw within 14 days. However… Steven must compensate Benny for the damage to the object that was caused during his ownership.
Contracts of Sale •All Contracts of Sale are subject to... •Only Consumer‐Entrepreneur Contracts of Sale are subject to.. ... the rules on material and legal defects. ..the Right to Withdraw, and even then only specific types of these contracts.
Hypo – Brad decides that he wants to give his favorite painting to his friend Stan. He and Stan sit down and write out a contract whereby Brad agrees to give his painting to Stan on New Year’s Eve in exchange for nothing. Both Brad and Stan sign the contract. A few days before the New Year’s, Brad changes his mind and decides to keep the painting. Does Stan have a contract he can enforce? No… As mentioned on a number of occasions, where a person agrees to donate money or an item as a gift to another person, this Schenkung is a legally enforceable contract, so long as it is made through a notarial deed.
Hypo – Beth inherited a Picasso painting from her father when he died. However, Beth’s mother inherited the right to use the painting as long as she lived. Beth’s mother hated the painting, so she let Beth keep it. Beth decides that she no longer wants it, so she donates it to the local art museum. A few months later, Beth’s mother moves to a new house and decides that the painting would look good hanging over her new toilet. Does she have a right to reclaim the donation? Yes… Beth can only convey to the art museum what she possessed, which was the ownership title, but without the right to use during her mother’s lifetime. Thus, the museum must yield to Beth’s Mom.
Hypo – Brad gives Stan his favorite Magritte painting as a gift using a notarized contract. A few years later, Brad and Stan have a falling out and Stan makes it his mission in life to see that Brad is ruined. He continuously works to bankrupt Brad’s business from afar by spreading lies and false statements. Eventually, penniless, Brad dies, leaving his estate to his son. Brad’s son seeks to reclaim the Magritte painting. May he? No… Even if it is assumed that Stan acted with “gross ingratitude”, an heir of the donor has no right to reclaim a donation unless the recipient of the donation “has intentionally and unlawfully killed the donor.” (§530 BGB).
Three Types of Contracts to “Loan” • Miete – Contract whereby a person pays for the right to use a thing. • Pacht – Contract whereby a person pays for the right to use a thing and appropriate its fruits. • Darlehen – Contract whereby a person is “loaned” money or other fungible items in exchange for a payment of interest
Hypo – Bill rents an apartment from Sydney. He has lived there for several years. One day recently, the water in the apartment simply stopped working. Bill is unable to shower, wash his dishes, or even flush his toilet. He let Sydney know immediately about the water problem, but two weeks later the water still does not function. What are Bill’s options? Under §536 BGB, Bill need only pay a reduced rent during the time that the material defect in the apartment exists. He may only terminate the contract where the defect renders the apartment uninhabitable (or by giving appropriate notice under the contract).
Hypo – Bill rents an apartment from Sydney. He has lived there for several years. One day recently, the water in the apartment stopped working. A few days after that, the water system developed a large leak. Since Bill spends most evenings at his girlfriend’s apartment, he hasn’t been that bothered about it and hasn’t notified Sydney yet. A month later, the water leak has become so serious that the floors in the apartment have been damaged. Who is responsible for what? As a tenant, Bill has a responsibility to give notice of any defects in the apartment. Where he fails to do so and damage occurs, then he is responsible for the damage. He may not claim any reduction in his rent under §536 for the defect, since it is his responsibility.
Two Types of Contracts for Services • Dienstvertrag Werkvertrag
Hypo – Sitting, drinking beers one night, Beck agrees to work for his friend Sasha. They discuss payment and the exact work that Beck will be doing and finally shake hands on the deal. A few days later, Sasha changes his mind and refuses to honor the deal. Does Beck have a legally enforceable work contract? Yes… There is no requirement of any particular form (written or oral) for a Dienstvertrag. However… an apprenticeship contract must be in writing.
Hypo – Beck agrees to work for Sasha. Beck signs a 2‐ year Dienstvertrag wherein he will be officially on “probation” for the first six months of the contract. It specifically states that Sasha can terminate the contract for any reason during the probation period. Is this a valid provision? Yes… Under §622 BGB, a probationary period may last for up to six months and allows termination of the contract with two weeks notice for virtually any reason.
Hypo – Beck agrees to work for Sasha and they sign a 2‐ year Dienstvertrag. While working for Sasha, Beck is approached by Sasha’s main competitor (Josh). Josh offers to pay Beck an extra €1000 a month if Beck will also work part‐time for his company, since he believes that Beck’s experience with Sasha will be very useful to his business. Is this legal? No… German labor law specifically prohibits employees from taking a second job in the same line of business as their first employer without that employer’s consent.
Hypothetical – Greenpeace is in the process of expanding its protest operations, and needs to buy another large boat in order to continue protesting polluting oil rigs in the North Atlantic. The company spots a very nice boat owned and being put up for auction by Sotheby’s. They send Bob, one of their employees, to bid on and buy the boat. However, since the boat is dirty and fuel inefficient, they ask Bob to buy the boat in his own name. At the auction, after a fierce bidding war, the Sotheby’s auctioneer awards Bob the boat and a sale is completed. Question – What Types of Agency exist here? Bob - Indirect – Acting in his own name, but for Greenpeace. Bob - Active – Actively giving the declaration of will to buy the boat on the principal’s (Greenpeace) behalf. Auctioneer - Direct – Openly representing Sotheby’s on their behalf. Auctioneer - Passive – Accepting Bob’s declaration of will on behalf of the principal (Sotheby’s).
Bob likes Susan’s car. One day, Susan sends Bob a note “Would you like to buy my car?” Is this a valid offer? Invalid
Susan sends Bob a note “Bob, would you like to buy my car for €3000?” Gus sees the note. Is this a valid offer that Gus can accept? Invalid
Hypotheticals – Valid Acceptance or Not? Bob likes Susan’s car. Susan sees Bob at work and asks him if he would like to buy it for €3000. Bob says, “Yes, but I need to check my bank account first.” Valid acceptance? Same as above, but later that day, Bob stops Susan in the hallways and tells her that he agrees to buy her car for €3000. Valid? Both Invalid
Hypothetical #1 – Bob drives his car into a private parking lot that prominently displays the rates for parking by the hour. Bob parks his car and leaves. Has a contract been formed? Yes… By parking in the parking lot, Bob has, through his actions, factually accepted the parking lot owner’s offer of a contract (park here for €).
Hypothetical #3 – Sally offers to sell Bob her old computer. She tells him that she will accept €100, as well as date to the movies to see the latest action movie. Benny tells her that he accepts her offer, but tells her that he only wants to see the new romantic comedy playing at the theater. Has a valid contract been formed? Counteroffers – Where the person receiving the offer does not accept, but instead offers a different contract to the original offerer. Any late acceptance is also simply a counteroffer.
Hypotheticals – Void or Not? Bob agrees to sell a piece of land to Susan for €3000. They draw up a contract with the relevant details and both sign. Bob is an author who desperately needs money. He enters into a contract with Stan whereby Stan receives the irrevocable right to publish Bob’s entire literary catalog forever. Bob’s restaurant generates a lot of garbage. His friend Stan has a piece of land with a pond. Bob contracts with Stan to have Stan pick up the garbage and dump it in the pond. All Void
Ted’s friend is a painter who has a work being auctioned off at Sotheby’s. Ted has no money, nor does he actually have any intention to buy the painting, but he goes to the auction and continuously bids on the painting in an attemptto force the price higher. Unfortunately for Ted, he ends up being the high bidder. Void Or Not? Valid
Hypotheticals – Voidable or Not? British Prime Minister David Cameron is visiting Texas for the first time. He sits down for a meal and orders “biscuits”. What arrives is not what he is expecting. Must he pay for it? PM Cameron knows that Jay Z is cheating on Beyoncé. While negotiating the sale of a (real) Magritte painting, the PM tells Jay that if he doesn’t accept €20m, the PM will tell Beyoncé about the cheating. Jay agrees to the €20m offer. Voidable Not Voidable
Bob agrees to sell Stan his car for €3000. Stan delivers the €3000 to Bob. Who is Obligor & Creditor? • Bob is currently an Obligor, since he is still obliged to deliver his car to Stan. • Stan is currently a Creditor, since he is still owed an obligation from Bob.
How can place of performance be decided? General Rule – The parties to a contract can specify the place of the performance as they wish. They generally always do so. Where terms are not specified, the German Civil Code (statute) applies. (Holschuld)
Question – Why does it matter where and when the performance of the contract must take place? The Place of Performance (and Time of Performance) dictates who bears the risk of damage for goods. • Unless otherwise specified, the Buyer/Creditor must pick up his goods (Holschuld) from the Seller/Obligor. Until he does so, any damage to the goods is the responsibility of the Seller/Obligor. • Assigning risk through a contract by stipulation of the time and place of performance is an especially important aspect of commercial law.
Hypothetical #1 – Bob agrees to sell Stan his car for €3000. In the contract of sale, it is specified that Stan will pick the car up Saturday at noon and that Bob will wash and wax the car beforehand. Saturday at noon, Stan is stuck in traffic. While Bob is still waiting for Stan, a bolt of lightening strikes the car and destroys it. Who bears the risk for this event? Answer #1 – At the appointed time of performance, the responsibility for the car switched over to Stan. As such, the car was officially Stan’s once it was destroyed. Bob has fulfilled his end off the contract and must do nothing more.
Hypotheticals – Valid or Not? Bob agrees to sell a specific Picasso painting to Stan. After signing the contract, Bob learns that his Picasso was stolen from his house. Is this still a valid contract? Bill is a carrot farmer. He agrees to sell Susan 1000 carrots on December 1st. However, in mid‐November, his warehouse burns down and his carrots are destroyed. Valid contract? Ben agrees to sell Sally a unicorn. After searching all week, Ben realizes that unicorns do not exist. Valid contract? ALL VALID
Hypothetical – Bob agrees to sell a specific Picasso painting to Stan. After signing the contract, Bob learnsthat his Picasso was stolen from his house. Question – Is Stan entitled to the Picasso still? In other words, must Bob still perform? Answer – This is a subjective impossibility, but Bob need no longer perform because doing so would be disproportionate in costs.
Hypothetical – Brad agrees to clean Fred’s boat every month in exchange for €200. They sign a 12 month contract. 3 months later, Fred accidentally sinks his boat in the North Sea. Brad is no longer able to clean the boat. Question – What happens to Brad and Fred’s relative obligations to each other? Answer – It is actually impossible for Brad to clean the boat, and that impossibility is Fred’s fault. So Brad need no longer clean the boat. He is released from his obligation. He may also have the right to demand Fred keep paying him…
Ben is an amateur painter. He agrees to rent a lakehouse from Owner for the summer in order to paint in peace. However, in April, he decides to quit painting. Must he still fulfill his obligation? Yes
Hypothetical – Farmer and Creditor are in negotiations as to a contract whereby the Creditor will purchase carrots from the Farmer to feed his horses. During the negotiations, the Farmer gives the Creditor a sample of the carrots. The Creditor feeds them to his horses to see if the horses like them, but the carrots are poisonous and the “test” horse dies.. Questions • Does a contract exist? • Can the Creditor claim damages for the horses? Answer – No contract technically exists, however it is assumed that a pre‐contractual situation creates quasi‐contractual duties to exercise care and loyalty. As such, the Farmer would have breached a duty of care and the Creditor might recover for the damage to this horse.
Hypo – Bob agrees to paint Sam’s house for €500. Bob, however, uses the wrong paint, which causes damage to Sam’s house that must be repaired. The repairs cost €3000. Solution? Answer – Bob caused the damage by using the wrong paint, and Bob must pay for the repairs (€3000).
Hypo – Sam must move out of the house while the repairs (Bob's fault) are being made and stay in a hotel. This costs an additional €500. Is Bob also liable for the hotel? Answer – Yes, Bob caused the damage that led to the repairs which force Sam to move out…
Hypo – Bill leases kitchen equipment. Susan agrees to lease an oven from Bill for her restaurant. Bill agrees to deliver the oven on Friday morning, however, only does so on Monday morning. Without the oven, Susan was unable to open her restaurant on the weekend. What can Susan recover from Bill? Answer – Bill’s delayed performance caused Susan to lose profits she would have otherwise made…
Hypo – Bob agrees to clean Sid’s car for €50. Bob, however, scratches the car accidentally. The repairs cost €500. While the car is being repaired, Sid pays another €300 to rent a substitute car. What can Sid recover? Name the Breach of Performance Damages Expectancy damages + Indirect Damages Actual result €500 + €300 = €800
Hypo – Blake agreed to sell Sybil his house for €50,000. In expectation of moving in, Sybil rents a moving van for €1000 and buys new furniture for €3000. A month before the sale of the house is final, a tornado destroys the house. Who may recover what? Impossibility Damages? Dissolve Contract... it never happened Damages Actual result No damages on either side
Hypo – Brad agrees to clean Fred’s boat every month in exchange for €200. They sign a 12 month contract. 3 months later, Fred accidentally sinks his boat in the North Sea. Brad is no longer able to clean the boat. Who may recover what? Name the Impossibility with Fault Damages Dissolve contract & if fault = non‐performance damages Actual result Fred must pay €1800
Hypo – Jay Z agrees to sell a Magritte painting to PM David Cameron for €50m. As part of the agreement, Jay agrees to have the painting reframed, costing €5000. 2 weeks after the sale, an ppraisal of the painting reveals that it is actually not a Magritte. Who can recover what? Name the Mistake of Fact Damages Dissolve contract & dissolving party must pay reliance damages. Actual result Cameron must pay €5000
Hypo – Susan is about to open her new restaurant. She agrees to lease an oven from Bill, which will be delivered on Friday. Bob only delivers it on Monday. Without the oven, Susan must delay opening her restaurant by a few days. What can Susan recover from Bill? What are the Delay in Performance Damages? Loss of Profit Actual result Bill must pay lost profits…
Hypo – Bubba is a famous artist. Stannis signs a contract to buy Bubba’s newest painting for €1 million when it is finished. A week later, when it is finished, Stannis refuses delivery of the painting and refuses to pay the money. What are Bubba’s options? • Bubba can rescind the contract and keep the painting • Bubba can force Stannis to perform the contract
Declaration of Will meaning: _________ or action ______ at a acheiving some ________ _________. Statement or action aimed at achieving some legal consequence.
Agency Agents must ____________________________ their authority Agents must always act within the limits of their authority
The Legal Consequences of Authority Within Authority means.. The Transaction is.... Within Authority – The transaction is immediately valid and has legal effect for and against the principal.
The Legal Consequences of Authority Beyond Authority The transaction is.. The transaction is not valid (unless the principal ratifies it afterwards).
The Legal Consequences of Authority Unclear Authority – Where the agent.. Unclear Authority – Where the agent does not make it clear that he is acting on behalf of a principal, then the agent is personally liable for the transaction.
The Legal Consequences of Authority Prohibition on Self‐Contracting (Verbot des Insichgeschäfts) – The agent.. Prohibition on Self‐Contracting (Verbot des Insichgeschäfts) – The agent may not conclude a contract with himself on behalf of the principal.
Explain Freedom of Contract Every person should... Every person should be able to structure their life and economic relationships as they see fit. As contracts are mutually agreeable and optional endeavors, the government lets people freely negotiate their individual terms and condition (within reason).
What 6 types of agency exist? • Compulsory vs. Non‐Compulsory • Active vs. Passive • Direct vs. Indirect
What are the remedies for collapse of foundation of contract? • Preferred Outcome – Adaptation of the contract to eliminate any unfairness. • Second Choice – Rescission of the contract.
Obligor Delay – Where the Obligor does not perform by the original set date... This qualifies as Verzug.. What generally happens? This qualifies as Verzug, the Creditor is generally entitled to claim compensation for the delay and the Creditor must eventually accept performance when tendered, even if it is late.
For creditor or obligor delay. What would be a smart option to ensure payment? Penalty clauses in inital contract.
Goals for Compensation Reliance (Vertrauensschaden) Placing the person in the position they were in before the deal and breach. ( like for impossibility)
Handling Damages Given the difficulty in proving loss of profits, many contracts include “penalty clauses” that set out the damages for delay or breach beforehand. Give me three points about Penalty Clauses • The parties agree ahead of time as to the damages that would be inflicted by any specific event. • Courts will enforce these, so long as the damages do not turn out to be disproportionately high. • However, the creditor need not show any actual injury or damage. The clause will still apply.
Penalty Clauses For Non-Performace AND for Delayed Performance please name what happens to the Payments and the Performances Non‐Performance: Payment OR Performance Delayed Performance: Payment AND Performance
Question – Why make a special set of rules for Consumer and Entrepreneur relationships? The assumption is that when a person contracts outside of their area of business, they will be at a disadvantage vis‐à‐vis someone who is within their area of expertise.
What performance is required? The Seller is required to deliver a good to the Buyer that: • Free of material and legal defects, and • Is of merchantable quality.
So we know these two points.. • Is free of material and legal defects, and • Is of merchantable quality. Question – If this performance has failed, what are the Buyer’s options? • The Buyer must demand either replacement or repair of the defective object. If his SECOND demand has not been met, only then he may revoke the contract. • Alternatively, the Buyer may demand money for the change in value of the defective object.
Question – What are the “details” of an acceptance? Aparently there are 5.. • Acceptance must be unreserved and unconditional. • An acceptance is not effective if the offer was timely revoked or has otherwise lapsed. • Acceptance is only effective by the person to whom the offer is made. • Acceptance need not always be overt. Actions or even silence can act as an acceptance. • An acceptance is effective once it enters a person’s “sphere of control” (Machtbereich).
What is the duty to mitigate damages? The Creditor must act reasonably when the Obligor has breached a contract. This means that he has a duty to mitigate (or lessen) any damages.
Question – Under what circumstances may a person revoke a Contract of Donation? • The donor is impoverished and unable to support himself (or his dependents) OR • The recipient of the donation is “guilty of gross ingratitude by doing serious wrong to the donor”.
What is Tort Law? Obligations to others that are defined by law.
What is Contract Law? Obligations to others into which we enter voluntarily.
What is property law? The rights that people have over things.
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