Principles of Private Law (M-Z) from Università Di Torino

Global Law and Transnational Legal Studies

Prof. Vercellone - Principles of Private Law (m-z) 2024/2025
Global law and Transnational legal studies
Università di Torino
Principles of Private Law (M-Z)
Prof. Antonio Vercellone

Summary of Private Law Principles

Summary

1. OBLIGATIONS AND THEIR SOURCES
2. CONTRACT LAW

Notions of Contract

1. 1 THE NOTION (OR NOTIONS) OF CONTRACT
2. 2 PARTY AUTONOMY AND FREEDOM OF CONTRACT

Freedom of Contract Limitations

a. Freedom of choose the person with whom to contract and its limitations
b. Freedom of form
c. Freedom of content
d. Freedom to choose the applicable law
Express and Implied Terms
e. Freedom to choose jurisdiction and alternative dispute resolution in contracts

Contract Terms and Interpretation

2.3 CONTRACT TERMS AND THEIR INTERPRETATION

Good Faith in Contracts

2.4 GOOD FAITH

Formation of Contract

2.5 FORMATION OF CONTRACT
Offer.
Acceptance.

Invalidity of Contract

1.6 INVALIDITY OF CONTRACT
a. Voidness or nullity of contract
b. Avoidance

Unfair Standard Terms

1.7 UNFAIR STANDARD TERMS

Breach of Contract

1.8 BREACH OF CONTRACT
4S
a. Civil Law systems approach to remedies
c. Termination
b. Common Law systems approach to remedies

Damages and Liquidated Damages

1.9 DAMAGES AND LIQUIDATED DAMAGES
a. Liquidated damages clauses

Private Law Framework

1Prof. Vercellone - Principles of Private Law (m-z) 2024/2025
Global law and Transnational legal studies
Università di Torino
Private law serves as the framework governing relationships between individuals,
organizations, and entities, encompassing areas such as obligations, contracts, property,
torts, and family law. It provides the legal tools and principles necessary to regulate the
rights and duties that arise in everyday interactions, forming the backbone of societal and
economic order.

At the core of private law lies the concept of obligations, a legal relationship that
binds parties to perform specific acts, deliver services, or refrain from certain actions.
These obligations can arise from various sources, including contracts, torts, and statutory
provisions, each reflecting the dynamic and multifaceted nature of human and economic
relationships.

Contracts are not merely legal agreements but fundamental mechanisms through
which individuals and businesses exercise autonomy, coordinate actions, and allocate
resources. They underpin commerce, facilitate cooperation, and provide a basis for trust
and predictability in a world driven by exchange.

This part explores the foundational principles of contract law, including the
notions of freedom of contract and party autonomy, the limitations imposed by law, and
the balance between individual liberties and public policy. It also examines the formation,
validity, interpretation, and breach of contracts, comparing civil and common law
approaches to these critical issues.

Obligations and Their Sources

1. Obligations and their sources
An obligation is a legal relationship between at least two parties in which one party
(the debtor) is required to give, do, or refrain from doing something (dare, facere non
facere) for the benefit of the other party (the creditor). The creditor may claim from the
debtor the performance of the obligation, and if the debtor fails to do so, the creditor may
activate remedies for the enforcement of the performance.

Performance Categories

Performance can be classified into three categories:

• Dare (to give): for example, the obligation of the buyer to pay the price to the
  seller;
• Fare (to do): for example, paying someone to cut the grass of a backyard or a
  regular work contract;

2Prof. Vercellone - Principles of Private Law (m-z) 2024/2025
Global law and Transnational legal studies
Università di Torino

• Non facere (not to do): for example, an exclusivity clause in an employment
  contract that prevents the employee from working for other employers
  simultaneously or from working for competitors for a certain period after leaving
  the company.

Primary Sources of Obligations

In Western legal systems there are three primary sources of obligations:

1. Contracts: obligations arise from the specific agreements of the parties stated in
   the contract;
2. Torts: obligations arise from damages caused by the debtor;
3. Other (minor) sources: e.g. unjust enrichment.

It is important to understand that most of the times contracts could create a matrix of
obligations in which the parties are both debtor and creditor to one another. In other
words, each contract can give rise to more than one obligation.

e.g. In a contract of sale (the contract having as its object the transfer of the
ownership of a thing or the transfer of other rights against the payment of a
price) the contract typically entails two main obligations for the seller: to
deliver the thing to the buyer, to warrant the buyer against eviction and
defects in the thing sold. The buyer's primary obligation is to pay the price
within the time and in the place provided for the contract.

Contract Law Concepts

2. Contract law
Contracts are arguably the most pervasive legal concepts in modern society, given
their foundational role in the domains of politics, economics, and society. Common
parlance often utilizes the terms "agreement," "bargain," "undertaking," or "deal" to
denote the concept of a contract. Regardless of the specific terminology, the notion
encapsulated by the term "contract" is that of individual and collective autonomy in
shaping one's own life and in engaging in collaborative endeavours. The capacity to
establish legally binding contracts is indispensable in modern society.

These legal instruments permeate our daily lives, from buying groceries to
entering into complex business deals. Imagine a world where every interaction lacked a
clear framework for exchange - chaos would likely ensure. Contracts provide a< foundation for trust and predictability, enabling individuals and businesses to operate with
3Prof. Vercellone - Principles of Private Law (m-z) 2024/2025
Global law and Transnational legal studies
Università di Torino
a sense of security. Furthermore, contracts serve as the medium through which we express
our preferences regarding consumption in modern society: people have needs and they
determine how to value and satisfy them.

Capitalism and Contract Law

The advent of modern capitalism would be unfeasible in the absence of contract
law. In contrast, within the economic frameworks of planned economies, such as those
previously observed in the former Soviet Union and precapitalistic China, the nature of
economic transactions was not driven by contractual agreements. In these economies, the
nature of economic transactions was mostly determined by the state's planning authorities.

Functions of Contract Law

From an economic and cultural perspectives, contract law is a crucial aspect of
legal and economic systems. In An Economic Analysis of Law, Judge Richard A. Posner
(a former University of Chicago law professor) reveals three significant functions of
contract law. First, it maintains incentives for individuals to exchange goods and services
efficiently. Second, it reduces transaction costs because it ensures that parties do not need
to negotiate various rules and terms. Third, it alerts the parties to past issues, enabling
them to plan transactions more intelligently and avoid potential pitfalls.

Notion of Contract

2.1 The notion (or notions) of Contract
Contract law, a foundational component of legal systems worldwide, governs the
agreements that underpin countless economic transactions and personal interactions.
Despite its universal significance, the evolution and application of contract law differ
significantly between common law and civil law systems, shaped by their unique
historical, cultural, and legal contexts. This paragraph provides an overview of these
differences, focusing on key concepts such as consideration, interpretation, good faith,
and remedies, while highlighting the broader economic and social functions of contract
law.

Civil Law Contract Conception

In civil law systems, the conception of a contract is deeply rooted in moral and
religious principles, emphasizing the sanctity of promises. This is encapsulated in the
principle of pacta sunt servanda, which obligates parties to honour their agreements. The
merger of wills of the contracting parties is fundamental: once the wills are united, the
principle of pacta sunt servanda becomes operative, establishing the obligation to adhere
to the terms of the contract. Key provisions in civil law codes illustrate this approach:
4Prof. Vercellone - Principles of Private Law (m-z) 2024/2025
Global law and Transnational legal studies
Università di Torino

• Italian Civil Code (Art. 1321): "A contract is an agreement between two or more
  parties to establish, regulate, or extinguish their patrimonial legal relationships."
• French Civil Code (Art. 1101): "A contract is a concordance of wills of two or
  more persons intended to create, modify, transfer, or extinguish obligations."

Common Law Contract Approach

In contrast, the common law approach to contracts emerged from the pragmatic
mindset of English merchants during the Industrial Revolution. Here, a contract is seen
as a bargain, defined by the exchange of promises or obligations. The concept of
consideration-the exchange of value-is central to determining the enforceability of
agreements. For example, gratuitous promises, which are typically unenforceable in
common law without a formal deed, may form binding contracts in civil law systems.
This distinction is of fundamental importance, as it has consequences in terms of
discipline:

Civil Law vs. Common Law Contract Aspects

Aspect
Civil Law
Common Law
Interpretation
Balances objective and subjective
tests (see §2.3)
Emphasizes objective tests
Good Faith
Central to ensuring fairness (see
§2.4)
Less emphasized; legal certainty
prioritized
Remedies
Specific performance preferred (see
§ 2.8)
Monetary compensation favored

Party Autonomy and Freedom of Contract

2.2 Party Autonomy and freedom of contract
The capacity of contract law to establish legally enforceable conditions, duties,
and remedies enhances confidence and stability in transactions of all kinds. Whether in
high-stakes business dealings or basic consumer exchanges, the assurance of legal
recourse in the event of a breach fosters a favourable environment for economic and social
interaction. Furthermore, contract law champions the principle of autonomy, allowing
individuals to create legal relationships tailored to their unique requirements and
preferences. This autonomy is encapsulated in the freedom of contract doctrine, which
enables parties to structure agreements in a manner that optimizes their objectives,
provided they adhere to legal limitations.

Party autonomy, in this sense, is not merely an acknowledgment of individual and
business prerogative; it is an affirmation of the freedom to create legally binding
agreements tailored to specific needs, while ensuring compliance with fundamental legal
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