Law Of Contract Notes

Supervision 6 The Law of Contract Obligations arising from contract are divided into: ! Duress A contract is made under duress if A threatens B or a member of his family with "serious evil" unless he consents. Created the exceptio metus (defence) in the late Republic for unilateral contracts. Did no invalidate bilateral contracts. A contract made through actual physical force was invalid. The Romans had a law of contracts rather than a law of contract, the consequences of this lack of generalisation were: (1) by isolating the transitions of life under a small number of headings, it was able to assign them the most appropriate legal consequences. (2) Possibility of gaps in the law, an agreement seriously intended may fall into none of the categories and have no legal effect. Fraud Trickery practiced in order to cheat/deceive another. Late Republic allowed an exceptio doli against a party trying to enforce a fraudulent contract and an actio doli for an aggrieved party who suffered loss as a result of fraud. re - the handing over of a thing verbis - by a form of words litteris - by a special kind of writing consensus - agreement without anything further: sale, hire, partnership, mandate Mistake The following mistakes were fatal to a contract: Error in negotio: where 1 or both parties were mistaken about the type of transaction intended e.g. A thought sale, B thought loan. Error in corpore: where one or both parties were mistaken over the identity of the thing that is central e.g. X thinks he is buying A, but Y intends to sell B. Error in persona: where one or both parties are mistaken about the identity of the other party. Error in substantia: quality of subject-matter post-Classical. Causa Not all agreements amounted to contracts, only those which were actionable by law, there needed to be an existence of some ground, reason or cause for enforcing them i. Formal contracts - the form of the agreement constituted the causa e.g. in litteris, the writing did. ii. Contracts re - the handing over of the thing iii. Consensual contracts - causa had to be sought outside the contract, and it seems their causa lay in the commercial necessity for recognising them as actionable. As a general rule, an agreement to perform an illegal/ immoral act was null; this arose when an agreement breached the standards of morality set by praetors/jurists/ Emperor. Supervision 6 The Law of Contract Impossibility? (i) Initial impossibility - this occurred when an agreement, when made, was already impossible - void. (ii) Supervening impossibility - made impossible after it was made due to events occurring; valid but could not be enforced, provided the other party was not to blame for the occurrence of the event. Privity A contract could be enforced by or against the parties to a contract, and not by or against any third parties. This rule was strictly applied. Standards of care Every party to a contract, whatever the nature of his undertaking, is required to come up with a standard of care, the Classical jurists distinguished 3 forms: - Custodia: strict liability for all loss not caused by vis maior (Superior force; Acts of God). This form of liability disappeared in later Law. - Dolus: everyone was answerable for intentional acts - Culpa: Roman negligence or failure to show a certain level of care, the texts distinguished between: a. culpa lata - gross fault or negligence that is "not understanding what everyone understands" (Digest) b. culpa levis: b(i) culpa levis in abstracto - failure to show the standard that the reasonable bonus paterfamilias exercises habitually in his own affairs. b(ii) culpa levis in concreto - failure to show the diligence which the person in question habitually exercises in his own affairs. The person in question must assume his normal course. The texts often conflict over what is the appropriate standard at which time, a very rough guide would be that the incidence of culpa lata/levis depended on whether or not the party benefitted from the contract (then he has a higher standard). Mora If a party through his own fault failed to fulfil his duty at the proper time, he was strictly liable for any any loss or damage which occurred thereafter, even if occasioned by vis maior. Supervision 6 The Law of Contract Verbal Contracts Formal Requirements There were three verbal contracts: i. dotis dictio - solemn declaration of the composition of a dowry made by a bride's family. ii. iusiurandum liberti - made when a freedman took a solemn oath in his patron's presence to render services to him, immediately after manumission. iii. stipulatio Stipulatio "a stipulation is a verbal expression in which the man who is asked replies that he will give or do what he was asked" (D.45.1.5.1) ! Consisted in the form of question and answer e.g. "do you promise to give me 500 sesterces?" "I promise". ! It was essential that there should be a correspondence between the question and the answer; the contract was unilateral and imposed something on only one party; it was stricti iuris. origin Existed at the time of the XII Tables, Kaser has offered that it was born from the merging of sponsio and stipulatio. - The promisor had to make a verbal answer - a nod is not sufficient - The question and answer session should form one continuous exchange; a substantive gap may invalidate proceedings. - Terms had to be clear - Congruence between question and answer; answer couldn't introduce new terms or be made conditionally if the question was unconditional. There were exceptions to the precise congruence, there is a text attributed to Ulpian which says if J asks "do you promise ten?" and S answers "I promise five", or if J asks "do you promise ten?" and S answers "I promise twenty", there is a valid stipulation for the lesser sum. However this was inconsistent with Gaius and may be an interpolation. Ulpian also says there is a binding promise where A says "will you give?" and B answers "why not?" or "of course". Further relaxation in the Classical period where any language could be employed, provided the question and answer corresponded. Became usual from the late Republic to record the transaction in writing (cautio) to show the question and answer form had been followed. This was then used as evidence of the verbal exchange. Supervision 6 The Law of Contract By the late Empire (AD 427) Emperor Leo enacted that any expression of intent, whatever the words used, should be sufficient to create a valid stipulation. The need for formal question and answer appears to have been formally abandoned by this ruling. There were different interpretations of this Enactment: Nicholas - simply made Gaius' list of verbs non-exhaustive Riccobono- removed the need for a question and answer in stipulatio Ulpian- it simply noted a change that had already occurred All of these developments left unaffected the essence of the contract - the parties must come together in the conclusion of a contract. This was reaffirmed by Justinian. Although the use of the cautio became widespread in the Empire it was never a requirement. Scope of the stipulatio Unlike the rest of the Roman contracts, the stipulation was applicable to any kind of agreement, and there were differing actions for each: i. condictio certae pecuniae - for a specific sum of money ii. condictio triticaria - for a specific thing iii. condictio ex stipulatu - any act/abstention, even if of uncertain or indefinite character. As the contract was unilateral only the promisee could have a remedy. Use of stipulatio Stipulatio played a very important role in the world of Roman commerce and finance, 3 important uses were: a. the novation of debts - this was when an obligation is terminated and replaced with a stipulatio b. imposition of penalties c. surety: i. adstipulatio - a debt that was already owed to one lender was promised to another lender. B promises money to A, and later to C - the second promise is adstipulatio. C is acting on the understanding that if B cannot pay A, C will enforce the obligation and give it to A. ii. adpromissio - a stipulation to pay the debt of the principal debtor if he failed to pay. S.C. Velleianum AD 46 stopped women acting as sureties. Classification of stipulatio Simple - obligation arose once and unconditionally Ex die - one where the obligation arose at once, but could not be enforced until a specified time/day, however a promise made 'after my death' was valid. Anything up to 'when I die' was valid. Conditional - differed from ex die because the obligation might never arise; e.g. "If Titius leaves Rome". Promisor not obliged to perform until the condition had been met, yet he was bound in other respects - could not revoke his promise or do anything once the condition was fulfilled. Supervision 6 The Law of Contract Contract Litteris Early Law (Gaius) - practice for the paterfamilias to record financial transactions and note them in a daybook and then to a ledger. There were two sorts of entries: (a) entry in a creditor's ledger of payment actually made this was evidence of a debt and did not create a contractual obligation. (b) entry in a creditor's ledger of a payment alleged to be made to a debtor (but not actually made) - the written entry was the obligation, the contract litteris. This contract litteris was a formal contract; unilateral and strict iuris. The Law of Justinian - Contract litteris became obsolete by the late Empire however the compilers of Justinian's Institutes, wanting to keep a fourfold pattern, created a new form of litteris contract. Many, in fact probably all, academics would say that it isn't really a new type of contract at all but that Justinian is making this more complicated than it needs to be in order to preserve his four-fold symmetry. e.g. A agrees to lend money to B, in exchange for a signed note acknowledging that B must repay A. B delivers the note, but A does not pay the money. B forgets about the agreement until some time later, when A brings the condictio against B asking for the money, producing the note as evidence. B can use the exceptio non numeratae pecuniae, although this would require B to prove a negative (that the money wasn't paid) which is very difficult. So, a time was set (originally 5 years, 2 under Justinian) within which bringing this defence would reverse the burden of proof: B would merely have to say 'I claim the exceptio' and the burden would be on A to show that he paid the money. The supposed written contract arises when B was out of time to reverse the burden in this way. Lee believed that it was a question of evidence - the note was not a contract but evidence that was conclusive. Real Contracts All four were (1) agreements that became binding upon (2) the transfer of a thing from one thing to the other. Obligations arose from the delivery of the thing hence, contract re (by a thing). Effect of delivery This group included four particular contracts: Mutuum - recipient got dominium of the thing delivered mutuum - a loan for consumption Commadatum - recipient got bare detention (physical commadatum - loan for use control) depositum - deposit Depositum - recipient got bare detention pignus - pledge Pignus - interdictally protected possession Supervision 6 The Law of Contract Mutuum This was a gratuitous loan for a consumption of money or of other things which were weighed, numbered or measured and which were consumable through use e.g. grain. - Unilateral - gave rise to a duty on one side (binds only the borrower) - Stricti iuris - Mutuum vested the ownership of the thing transferred in the transferee, and normally, the lender must be owner of the thing lent. Use Most frequent use was in the case of lending money; the mutuum was inherently gratuitous, but the parties would normally agree on interest. This was not binding unless expressed as a stipulatio: an informal agreement to pay interest would only give rise to a natural obligation. Duty to restore The transferee had to restore not the thing itself but the equivalent. This was a strict duty; the thing that was returned had to be equivalent in size, number and quality. The borrower could not escape this duty on the ground that the subject of the loan had perished. Except in the case of financing the voyage of a ship, in which case the loan was repayable only if the ship completed the journey safely. In such cases the lender took the risk, but were allowed to impose unlimited interest until Justinian fixed the rate at 12%. Permitted rate of interest varied, 12% was the maximum during the Classical period, Justinian then reduced this to 6% for business and 4% for personal. Procedure Lender could enforce the duty by condictio pecuniae (for money) or the condictio triticaria (for a specific thing). ! ! In later Law it became usual to reduce any loan to a verbal contract, therefore mutuum lost its importance. Senatusconsultum Macedonianum - introduced in AD 69-79 forbade loans of money to sons-in-power because sons had a tendency to kill their fathers to repay their debts. Allowed a plea known as exceptio senatusconsulti Macedoniani however, this was not available when: i. son was sui iuris or gave himself out to be ii. the father consented to the loan/was enriched by it iii. if the son had a peculium castrense/quasi-castrense and the loan was covered by it iv. the son had acknowledged the loan when he became sui iuris. Supervision 6 The Law of Contract Commodatum This was a gratuitous loan for a corporeal thing for use, the thing to be returned at the end of the loan. Had to be gratuitous, if it were for money, it would be hire not commodatum. The loan was usually for a limited time/purpose, if the time had not been specified, then the borrower could keep it for a reasonable time. After some dispute, it was accepted that land could be subject of commodatum. Because the borrower only got bare detention, there could be a valid commodatum even though the lender was not the owner e.g. thief could be a lender, with a right to sue in contract. Duties of borrower (1) to return the thing lent at the time or in the event agreed or implied in the contract (2) to return it as good as he received it; reasonable wear and tear expected, also to return any acquisitions during the period of the loan e.g. young born to a borrowed animal. (3) probably liable for custodia (if thing were stolen - he was liable to the lender) (4) to use the thing within the terms of the contract. Duties of lender (1) to allow the borrower to have it for the time agreed (2) to indemnify him for any extraordinary expense e.g. medical treatments of slaves; but not ordinary costs of food etc... (3) to indemnify him for damage caused by the thing lent owing to some defect that he was aware of. Procedure Lender - actio commodati directa to enforce the duties of the borrower ! Borrower - actio commodati contraria to enforce the duties of the lender ius retentionis to retain the thing until he had received anything which was due to him. 

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