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Lesson 1

I.

Obligation and contract

A.

Definition

An obligation is a legal link between two persons : according to one becomes the debtor and a creditor.

There are two kinds of obligations:

- A binding obligation: something you need to comply with

- A non-binding obligation: you may finish the contract without any consequences.

All contracts (legal relationship) are based on the free will.

Obligation are an undertaking to give or to not give, to do or to do not do.

Contract is a legal act, which materialised the exchange of two consents.

The first thing you have to do is to check by the legal regime, which is applicable: is it the Chinese or the French law. You have to wonder what the date of effectiveness of the contract.

A contract can be materialised by any means: oral, emails.

Everything is a matter of evidence in a contractual relationship.

The consent should be clear without any reserve or without any conditions.

If you undertake to do something in a contract you are the debtor and the other party is a creditor.

If you have several creditors it can become complicated: if they are three buyers for your house. Who is the real creditor? In this case the contractors can be jointly liable by obligation. For instance if three people buy a house and one of them is doing a renovation: the three contractors are jointly liable by obligation.

B. Defining the right party

Defining the proper party is a big issue. For example when you are renting a house, you have to check who is the real landlord.

Relative effect of the contract: contract only binds the people who have signed the contract: the other people are called third party.

If you are signing a contract with a subsidiary of the holding, which has no money: the subsidiary may not be able to respect the contract. Indeed a contract with a subsidiary Creating a company in Hong Kong takes one week. You can thus create a small company (an investment vehicle) in Hong Kong to protect your interests with new contractors.

Normally third parties have no right to claim the effect of the contract, except if you ask the third party to be a co-contractor.

An other person who may be concern by a contract is a decedent.

C. Formalism of a contract

Most of the time the formalisation of a contract are not compulsory. But more and more companies ask you to sign legal agreement. You must check if there is a formalism to the contract. Indeed the issue is to prove the content of the agreement.

But writing a contract can be quite useful when you want to negotiate.

For instance you can also write down the steps of the conversation, in order to formalize the consent of the two parties. Understanding the consent of the other party can be really difficult especially in an other country. You may have a system in oder to be sure that the other party understands what you want.

Indeed you have to check that the consent of the other party has not been fooled.

You have also to check the requirements. Trading gold is regularised by special laws. A contract can be not valid the required formalism.

In some case your signature is not always enough, you need sometimes a third party. The tax regime can totally changes with a third party.

Contract between two people have several requirements: - The capacity of the contractors - The consent must be free

- In some countries there must be full awareness

A franchising contract: you can decide to create a shop of a big brand if the company agrees. You pay and in exchange the big company gives you some knowledge on how their shop work and so one.

Disclosure: doll

D. Conditions of the validity of a contract.

There are several conditions of the validity of a contract.

1) The legal capacity is a condition of the validity of a contract. The legal capacity may be a physical capacity, or mental capacity.

You are legally empowered for a company if you are the position legal representative of a company. You have the capacity to sign the contract in the name of the company.

The management by fact: in some cases even though you are not the legal

representative, you may sign the contract and the company will be forced to fulfil the

contract. For example, if the contractor could not know that you were the legal representative.

When you are signing a contract with a company the companies needs to be established.

For human the age of majority is a legal capacity.

A contract can be nul and void.

2) Define the object of the contract

Pricing: the price is not always fixed in a contract, you can ask a third party to determine the price. Sometimes it is hard to determine the price of an object, you need an expert.

In English law you need a cause for the contract.

You need to check how the consents can be expressed in a contract.

3) The object has to be legal.

4) The language of the contract is a condition of the validity of the contract.

E. Contract’s principles

Contract may not be cancelled by one party. You can terminate the contract in several cases:

- open term contract can be finished at any time by one of the party because the length of the contract is not determinate. Since the abolition of slavery, you can finish the relationship whenever you want.

Contract for life are usually nul and void apart from certain case like VIG

There are several kind of termination of the contract: - Termination of the contract for the future - Termination of the contract for the past.

F. The end of a contract

Termination of the contract for the future.

The retroactivity is the fact to put the two parties in the same position before the

signature of the party. In the case of the breach of a contract you can ask the contractor to pay you back.