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Articles in this section are of general information and in every situation are subject to the application and interpretation of a law, rule or factual situation that may differ. Consult us for any specific question.

Those contracts that are part of our daily lives!

12 April 2019

Contracts are everywhere and come in different forms, from buying a package of gum to renting a house, to a handshake between two neighbours for an exchange of services. The vast majority of contracts do not involve a lawyer. Lawyers are generally involved when it comes to a fait accompli, and often only intervene when the parties have agreed to and executed a contract, and a dispute arises. It is therefore important to know some basic rules of contract law, if only to make the right decisions until you consult a lawyer.

Contracts don’t have to be in writing: it is made with the consent of the contracting parties

This is one of the most fundamental principles of contract law: respect for the promises made, which in our jargon is called the principle of “consensualism”. Two people agree on something that provides for reciprocal obligations and there are all the ingredients to form a contract. The oral contract is therefore valid in the eyes of the law and has the same legal effects as a written contract. However, it is less practical and carries greater risk in the event of a dispute, since both the proof of its existence and the terms of the contract will have to be proven by testimony. This may complicate the court’s efforts, especially if there are contradictory testimonies! Words are fleeting, while a written contract is permanent. Thus, for greater peace of mind, important contracts should be recorded in writing, whether by an exchange of e-mails or text messages, or in a duly signed written deed.

The contract is the law that binds the parties

Contract law is called “private” in that it governs relations between two private persons, as opposed to public law, which governs relations between the State and individuals. The government has little interest in relationships or contracts between individuals or private companies, subject to public policy.

What exactly is public policy? It is a concept that evolves according to the habits, customs and values of a given era. Public policy is something that is fundamental, sacred and mandatory for all citizens. Breaking it is unacceptable in society, often immoral, contrary to public peace or fundamental rights. For example, the crimes contained in the Criminal Code are all contrary to public policy, as are contracts designed to circumvent tax rules. Family law generally concerns public policy, especially when children are involved.

Thus, as long as a contract does not conflict with public policy, it binds the parties and prevails over the other provisions of the law, which apply only if the parties have made provision otherwise. Thus, in the case of a sale, the price is payable in principle as soon as the good sold is handed over. If the parties agree that the purchase price will be payable in monthly instalments, the contract will apply and not the law.

The contract binds the parties

It is the nature of a duly formed contract that in the event of non-compliance, remedies and sanctions are provided. Civil law recognizes the principle of full reparation: the party aggrieved by a contract that has not been respected must be reinstated in the same situation as if the contract had been faithfully performed. This objective can be achieved in two ways: through specific performance (for example, if a fence was to be installed, the court may order that it be done) or through performance by equivalence (by ordering that a sum of money be paid to compensate for the damage suffered).

Once a contract has been made, it binds the parties not only to the provisions of the contract, but also to everything that stems from the law, equity and practice. It is only normal that the parties may not have been able to foresee everything, so any contract has implicit content. The law provides rules to mitigate the silence of the parties and, failing that, the court can still render a decision in accordance with both equity and practice.

Faced with the impossible, no one is bound

This maxim is included in civil law in the concept of force majeure. Unless a person has committed to a contract even beyond force majeure, it is always possible to exonerate oneself from a contract by demonstrating that a circumstance beyond one’s control, unforeseeable and irresistible, has made it impossible to fulfil the contract. But beware! Any force majeure is interpretable restrictively and it must be a real impossibility.

The contract may be cancelled under certain circumstances

Let’s be clear, this is the exception and not the rule. Cancelling a contract is contrary to another major principle, namely the stability of contracts. But the fact remains that our legal system recognizes certain causes of nullity of contracts, the most significant of which is undoubtedly the defect of consent. We mentioned earlier that the contract is an agreement of intent and that it is formed by the simple exchange of consent among the contracting parties. However, this consent must have been free and informed, and the parties must have had the authority to enter into a contract! Thus, a person who is not competent cannot give valid consent. Consent will not be free and informed if it is flawed by error, fear or injury.

The so-called “simple” error generally does not vitiate consent and allows the contract to be cancelled only when it concerns:

a) The nature of the contract (e.g., you believe that your brother-in-law is lending you his trailer, when in fact he is renting it to you)

b) The purpose of the service (e.g., you believe you are buying a real car, when it is actually a model version of a car)

c) Any essential element that determined the consent, provided it has been communicated (e.g., you want to rent a fully soundproofed room)

In contrast to a simple error, there is the error resulting from fraud on the part of the other party. Fraud is defined as any word, gesture or omission made with the intention of misleading the other party. In such a case, the contract may be cancelled if the person misled proves that they would not have accepted the terms of the contract if they had been aware, or that they would have entered into the contract under different conditions. For example, the seller of a house who claims that they have never had water infiltration when this is not true may be exposed to the buyer requesting cancellation of the contract when the unpleasant surprise is discovered.

We also mentioned that consent can be vitiated by fear: the well-known “arm twisting” or “gun to the head” technique. Anyone who signs a contract under such conditions can certainly request cancellation of the contract.

Finally, injury, which is less frequent, is another ground for voiding contracts. Injury is when a party accepts a contract that is unfavourable to them and causes them harm. In principle, injury will only make it possible to cancel a contract in the case of minors or protected adults (guardianship, trusteeship or others), or where the law provides for specific remedies, as in the case of a consumer contract, for example.

Based on the foregoing, one might be inclined to think that there is a wide range of ways to get out of a contract but, in reality, these are exceptional remedies and the person who invokes grounds for the cancellation of a contract must prove it, as the validity of the contract is always assumed.

Good faith is at the heart of any contractual relationship

Good faith is central to our civil law and this holds true in contractual matters. Good faith is a concept that is sometimes difficult to define, sometimes even subjective: it is good intentions, honesty, sincere and just belief. It is to be a little lenient and flexible when something unexpected arises, rather than to hide behind a clause in the contract that provides for draconian consequences. It means not using a cause of invalidity as a pretext when in fact we have simply contracted under economically disadvantageous conditions. It is also to always give the other party a chance to make amends when, a priori, said party is in default under the terms of the contract. Even without a good understanding of the law, any human being with a reasonable mind is capable of acting in good faith at all times. For a lawyer, it is often easier to defend a person who is acting in good faith and who is wrong than a person who is acting in bad faith and who is right.

Conclusion

Each of us enters into contracts every day, several times a day. Obviously, it is not necessary to consult a lawyer every time, however, in the case of certain major contracts, it is a good idea to consult us beforehand. If not, we are also here to help you find the best solution to your contractual dispute.