International trade and validity of the contract; We provide you the General principles applicable according to the “Lex Mercatoria”. This article makes it clear that all grounds for invalidity which illustrate in the various national legal systems do not illustrate within the scope of the Principles relating to the general international trade rules. This is the case of the incapacity of the parties, the lack of power of the parties and immorality or illegality of the contract.
Their exclusion is due both to the inherent complexity of questions of legal status, representation and public order and in the extremely different way which they are dealt with in domestic law. Consequently, issues such as the power of an intermediary to bind his representative or a manager to bind his company, and immoral or unlawful content of contracts will continue to be governed by applicable law.
1-General Provisions
A contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirement. So, the mere agreement of the parties is sufficient for the valid conclusion, modification or extinction of the contract, without any further requirements.
This rule distinguishes of the French Civil Code which require, aside from the consent of the parties, additional conditions of validity of the contracts, such as a legal and possible object and the existence of “cause”, and from English Law in this point, insofar as in common law systems the mere exchange of promises is not sufficient to conclude a contract, because the intention of the parties to create a legal relationship and, particularly, the presence of consideration are conditions generally required.
2-No Requirements as to Form
No requirements as to form Contracts will be enforceable regardless of the form of conclusion. The principle of validity of the contract is regardless of the form, which is consistent with the principle that validity of contract only depends on an exchange of declarations of intention through offer and acceptance. Consequently, a contract is valid regardless of the form of conclusion and its existence is a simply a question of proof of declarations of intention.
3-Initial Impossibility
The mere fact that at the time of the conclusion of the contract the performance of the obligation was impossible does not affect its validity. However, parties may invoke the rules on impossibility (force majeure). Impossibility of contract performance and, more accurately, of the contract’s object has traditionally been considered as a reason for nullity or non-existence of the contract (impossibilium nulla obligatio est).
The Principles establish a broad notion of force majeure, which can be invoked in cases of unforeseen subsequent circumstances, but also when unforeseen circumstances existed impossible at the time of conclusion of the contract and they were not and could not be known by the parties at that time. In this sense, the Principles. introduce a distinction between initial impossibility and mistake.
If the parties are aware or should have known of the impossibility of the object or of the contract’s performance and still decide to conclude the contract, it is inferred that they assume the risk of non-performance of the contract due to impossibility and will comply with general rules on the determination of non-performance and the remedies to be applied.
Aside from the fact that this approach respects to a large extent the autonomy of parties in international commercial contracts, it also prevents the ineffectiveness of contracts that play on speculative calculations about technical developments and the evolution of circumstances foreseen at the time of conclusion of the contract.
The notion of Capacity, Illegality, Defective consent and Avoidance according to the “Lex Mercatoria” will be subject of another article. If you are in need of international trade lawyer or any questions about International trade and validity of the contract, just feel free to contact us.
