Appeal and cassation proceedings have been introduced. Laws on judicial reform and civil proceedings have not ensured everything that is necessary for courts: premises, computers and a sufficient number of judges. Therefore, courts are often reprimanded regarding slow work, as well as about quality of verdicts. The first collection reflecting work of the District Courts in — has been published also.
Also a choice of courts of arbitration located in other countries for dispute settlement has become common. When analysing the court practice in respect to fulfilment of contracts and liability it must at first be noted that Latvia, similar to other post-communist countries, experienced a so-called period of accumulation of initial capital. After independence was regained, an atmosphere of exaggerated permissiveness dominated in business when each and every individual, state enterprise and even municipality was allowed to earn money by using all possible means.
As it was discovered later, during that time many loan agreements were concluded without sufficient collateral and even with fictitious companies. Guarantees were issued also for remuneration and property, including property of state and municipality, was pledged with generosity. When the first restrictions on accepting deposits from individuals were imposed, trust investment and capital management companies boomed. A typical feature of the first decade of independence was abnormally high interest rates, often accompanied with very severe contractual fines.
Some disputes related with the aforementioned transactions are still in court hearings even in the year However, if evaluating CLA and searching for difference in comparison with law of other countries, the following few material features are worth mentioning. In the event of overdue repayment of debt, Latvian CLA provides for a possibility to require interest, as well as a contractual fine and recovery of damages CLA section The extent of contractual fine is not limited either.
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There have been rather many disputes caused by uncertain formulations used in agreements; for example, in the event of delay the respective party pays a late charge or penalty of 0. In the event of default, one party usually asserts that a contractual fine was contemplated while the opposite party understands it as interest for use of foreign capital.
On 22 December , the General Meeting of the Supreme Court adopted a decision on application of law when deciding on disputes on fulfilment of obligations, interpreting that in the event the will of parties may not be certainly determined, section of CLA must be followed providing, that in the event of doubt, a transaction should be interpreted to the detriment of the party being a creditor and therefore should have expressed itself more precisely. Disputes on guarantees and powers of representatives, as well as on rights to unilateral termination of agreement occupy a significant part of court practice.
Among the disputes heard by the court, disputes on repayment of credits, payment of purchase price and similar should be singled out. In those cases defendants often challenge the validity of the agreements, arguing that its representative was not authorised to enter into such agreements on behalf of the defendant. In some cases such arguments allowed escape from a contractual fine and the court was of the opinion that only repayment of the received money or restitution should be ensured. The amount of disputes on the aforementioned basis will decrease since the Commercial Act provides for more detailed regulation of the representation authority of the board of joint stock companies and limited liability companies.
Sections and of the Commercial Act provide as follows: a company is represented by all board members together unless a charter of the respective company provides for individual or joint representation of several members of the board. Individual or joint representation of several members of the board of a company creates binding contracts only if such representation is explicitly included in the charter of the company and registered in the commercial register.
A procuracy is a commercial authorisation which grants to a procurator the right to conclude transactions and to perform other legal activities connected with any commercial activity in the name of the entrepreneur, including all procedural activities during the course of legal proceedings motions, settlements, appeals of court judgements, etc. A procurator may alienate, pledge or encumber real estate only if he or she has been especially granted those rights section 34 of the Commercial Act.
Limitations of the extent of procuracy are invalid relative to third parties section 36 of the Commercial Act. This will reduce the amount of disputes conferred on the extent of authority. In other cases, when an attorney-in-law questions the rights to submit appeals of court judgement or participate in a court hearing, objections may not arise if the attorney-in-law is claiming for due compliance of the law.
Specific features of Latvian contract law Research into the differences of Latvian contract law in comparison to the law of other countries, revealed a few noteworthy matters. First, foreign investors should pay attention to the fact, that in Latvia an agreement between absent partners is concluded upon the moment when a party which has received an offer dispatches an acceptance even though the opposite party has not received it.
With the development of e-trade this difference becomes less important or even disappears. Besides large transactions are not usually concluded by an exchange of letters. However, in some cases a lack of knowledge of law may cause negative legal consequences. Second, foreign lawyers consider section of CLA, corresponding to the maxim of Roman law pacta sunt servanda , as an excessive manifestation of formalism. Foreign lawyers could be right unless the said principle had not been repeatedly mitigated in other section of CLA. Certainly, force majeure and accident excuses non-fulfilment of a contract.
A contract may remain unfulfilled due to the nature of the contract requiring certain activities from the opposite party for example, if a land plot for construction purposes is not allocated, a letter of credit is not issued or when it is especially provided for by the law CLA section If due to the fault of the debtor, the creditor is not interested any more in the fulfilment of the agreement, the latter may claim for cancellation of the agreement CLA section Chapters on specific types of contracts provide for various exceptions.
For example, purchase and lease contracts may be claimed to be cancelled due to excessive damages caused CLA sections , Further grounds for cancelling lease and rental agreements are listed in sections and of CLA. Third, the doctrine of Latvian law does not permit non-fulfilment of a contract if such non-fulfilment complies with the public policy.
However, even in the USA and England in such case the debtor is under an obligation to recover damages caused. There has been no attempt in Latvian courts to argue on the grounds of frustration of the purpose of the contract and there is no reference in the law on that. Supposedly, a new provision should be included in the Civil Law, similar to the one of section , Book 6 of the Civil Code of the Netherlands. Under the said section when discussing consequences of the contract, considerations on reasonability and fairness must be taken into account.
It might not be done in a hurry since the opinions of Latvian judges on reasonability and fairness may be essentially different. This legal provision is effective in cases where the dispute is subject to CISG regulation. Other consequences of default may not be forgotten. Section of CLA mentions remedies as reduction of price and repeal of contract. Consumer Protection Act provides for remedies as exchange of non-qualitative goods for qualitative or equivalent ones and elimination of deficiencies free of charge section Application of the Vienna Convention of CISG will promote Latvian lawyers to turn more to the matters of liability as well as to protection of rights in general.
However, the Civil Law allows to act similarly complying with the set sequence. In the event of delay, the purchaser must notify the contracting party that the purchaser has lost its interest in the receipt of goods since the goods were necessary immediately. Theoretically, a dispute on whether the purchaser has lost its interest may be raised.
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Therefore, section of the Civil Law should be amended to cover the aforementioned situation as well. Study of foreign law and court practice confirms more and more clearly that the same principle may be expressed in different formulations and placed in different places of the legal system. The Latvian Civil Law is constructed by following the chronology of forming and development of legal relationship: conclusion of agreement, conditions for legal validity of agreement, execution, amendments to or termination of the agreement, liability and other consequences of non-fulfilment.
In theory, it is enough that the recipient of the consideration receives a benefit, without the giver suffering a detriment. It is difficult, however, to think of practical examples of a situation of this kind, given that the traditional rule is that consideration must move from the promisee. The discussion so far has been in terms of acts constituting consideration. It is quite clear, however, that a promise to act can in itself be consideration. An act or forbearance of the one party, or the promise thereof , is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.
There is no doubt that there is a contract as soon as these promises have been exchanged, so that if on Tuesday B decides that she does not want the grain and tries to back out of the agreement, she will be in breach of contract. But where is the consideration?
On each side, the giving of the promise is the consideration. The problem is that this does not fit easily with the idea of benefit and detriment. But it will only be enforceable if it is a benefit or a detriment. The argument is circular, and cannot therefore explain why promises are accepted as good consideration. It may be that the concept simply requires the performance of, or the promise to perform, some action which the other party would like to be done. This approach ignores the actual or potential detriment. Alternatively, if it is thought that the idea of benefit and detriment is too well established to be discarded, the test must surely be restated so that consideration is provided where a person performs an act which will be a detriment to him or her or a benefit to the other party, or promises to perform such an act.
On this analysis, benefit and detriment are not so much essential elements of consideration, as necessary consequences of its performance. This issue is discussed further below. This aspect of consideration was confirmed in Thomas v Thomas. Facts: The testator, Mr Thomas, before his death, expressed a wish that his wife should have for the rest of her life the house in which they had lived. It was argued that there was no contract here, because Mrs Thomas had provided no sufficient consideration.
The parties are regarded as being entitled to make their agreement in whatever form, and on whatever terms they wish. They are presumed to be able to look after themselves, and it is only if there is some evidence of impropriety that the court will inquire further. An example of the application of this principle may perhaps be found in the case of White v Bluett. It was held that this was not an enforceable agreement, because the son had not provided any consideration. As Pollock CB explained: The courts have not been consistent in this approach, however. In the American case of Hamer v Sidway , 34 a promise not to drink alcohol, smoke tobacco or swear was held to be good consideration, and in Ward v Byham 35 it was suggested that a promise to ensure that a child was happy could be good consideration.
Even in cases which have a more obvious commercial context, the requirement of economic value does not seem to have been applied very strictly. For the purpose of the law of copyright, it was important to decide whether the chocolate wrappers were part of the consideration in the contract to buy the record. This is, however, very indirect, particularly as there was no necessity for the person who bought the chocolate to be the same as the person who sent the wrappers in.
In contrast to this decision, the House of Lords held in Lipkin Gorman v Karpnale Ltd 37 that gambling chips, given in exchange for money by a gambling club to its customers, did not constitute valuable consideration. What the club had given for the money were plastic chips which could be used for gambling, or to purchase refreshments in the club. Any chips not lost or spent could be reconverted to cash.
This was not regarded by the House of Lords as providing consideration for the money, but simply as a mechanism for enabling bets to be made without using cash. If the contract had been one for the straightforward purchase of the chips, then presumably the transfer of ownership of the chips to the member would have been good consideration, since the club presumably made such a contract when it bought the chips from the manufacturer or wholesaler.
The fact that the amount of money paid by the member far exceeded the intrinsic value of the chips that is, their value as pieces of coloured plastic, rather than as a means of gambling would have been irrelevant under the principle discussed above relating to the adequacy of consideration. The conclusion that on the facts before the court the chips themselves were not consideration must, therefore, be regarded as being governed by the situation in which they were provided.
The contractual relationship between the member and the club is probably best analysed in the way suggested by Lord Goff, who took the view that the transaction involved a unilateral contract under which the club issuing the chips agreed to accept them as bets or, indeed, in payment for other services provided by the club. The case should not be treated as giving any strong support to the view that consideration must have some economic value. An example of the lengths to which the courts will sometimes go to identify consideration is De La Bere v Pearson.
The plaintiff received and followed negligently given advice which caused him loss. Since the tort of negligent misstatement was at the time unrecognised, the plaintiff had to frame his action in contract. The purchase of the newspaper was one possibility, but there was no evidence that this was done in order to receive advice. The only other possibility, which was favoured by the court, was that the plaintiff, by submitting a letter, had provided free copy which could be published.
This was thought to be sufficient consideration for the provision of the advice, which it would be implied should be given with due care. Does this decision mean that those who run phone-in radio programmes where advice may be given should always issue disclaimers, to protect themselves from being sued by dissatisfied recipients of advice? The sufficiency of consideration has more recently been considered in a different context in Edmonds v Lawson. The problem was to identify what benefit the pupil would supply to her pupilmaster or to chambers during the pupillage.
The court noted that the pupil was not obliged to do anything which was not conducive to her own professional development. Moreover, where work of real value was done by the pupil, whether for the pupilmaster or anyone else, there was a professional obligation to remunerate the pupil. This led the court to the conclusion that there was no contract between the pupil and pupilmaster, because of lack of consideration. It came to a different view, however, as to the relationship between the pupil and her chambers.
3. Enforceability: Consideration, formalities, promissory estoppel - Law Trove
Chambers have an incentive to attract talented pupils who may compete for tenancies and thus further the development of the chambers. Even if they do not remain at the chambers for example, by moving to another set, or working in the employed bar or overseas , there may be advantages in the relationships which will have been established.
The conclusion was that: On balance, we take the view that pupils such as the claimant provide consideration for the offer made by chambers … by agreeing to enter into the close, important and potentially very productive relationship which pupillage involves. The court was therefore prepared to accept the general benefits to chambers in the operation of a pupillage system as being sufficient to amount to consideration in relation to contracts with individual pupils, without defining with any precision the economic value of such benefits.
Indeed, in the overall pattern of decisions in this area, it is the case of White v Bluett which looks increasingly out of line. If some cases do not, as a result, fit with orthodox doctrine, then it is the doctrine which needs adjusting. In addition to the requirement of economic value, which as we have seen is applied flexibly, there are two other issues which must be considered here. The second is whether the performance of, or promise to perform, an existing duty can ever amount to consideration.
Consideration must be given at the time of the contract or at some point after the contract is made. It is not generally possible to use as consideration some act or forbearance which has taken place prior to the contract. Suppose that I take pity on my poverty-stricken niece and give her my old car. English law says no, because I have provided no consideration for it.
My transfer of the car was undertaken and completed without any thought of payment, and before my niece made her promise.
A case which applies this basic principle is Roscorla v Thomas. The plaintiff was unable to sue on this promise, however, since he had provided no consideration for it. The sale was already complete before the promise was made. A more recent example of the same approach is Re McArdle. Facts: William McArdle left a house to his sons and daughter.
One of the sons was living in the house, and he and his wife carried out various improvements to it. His wife then got each of his siblings to sign a document agreeing to contribute to the costs of the work. Held: The document did not truly represent the facts. If it had done so, then, of course, it would have constituted a binding contract, but, as Jenkins LJ pointed out: The doctrine of past consideration is not an absolute one, however. The courts have always recognised certain situations where a promise made subsequent to the performance of an act may nevertheless be enforceable.
For the exception to apply, the following three conditions must be satisfied.
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This derives from the case of Lampleigh v Braithwait , 51 where the defendant had asked the plaintiff to seek a pardon for him in relation to a criminal offence which he had committed. It was held that the promise was enforceable. Second, the parties must have understood that the act was to be rewarded either by a payment or the conferment of some other benefit. They then promised him a one-third share in consideration of the work which he had done.
It was held that the plaintiff must always have assumed that his work was to be paid for in some way. Third, the payment, or conferment of other benefits, must have been legally enforceable had it been promised in advance. There is little that needs to be said about this. It simply means that the usual requirements for a binding agreement must apply.
The effect of these tests is that consideration will be valid to support a later promise, provided that all along there was an expectation of reward. It is very similar to the situation where goods or services are provided without the exact price being specified.
As we have seen, the courts will enforce the payment of a reasonable sum for what has been provided. That is, in effect, also what they are doing in situations falling within the three tests outlined above. It is an example of the courts implementing what they see as having been the intention of the parties, taking an approach based on third party objectivity.
Thus, in Re McArdle , the son did the work before any promise was made by his siblings. He did not, therefore, act in reliance on their promises. The advantage of an analysis on these lines is that it involves one general principle governing all situations, rather than stating a general rule and then making it subject to exceptions. This is not, so far, however, the approach of the English courts, which prefer to adhere to at least the form of classical theory.
Two statutory exceptions to the rule that past consideration is no consideration should be briefly noted. First, s 27 of the Bills of Exchange Act states that:. Valuable consideration for a bill [of exchange] may be constituted by a any consideration sufficient to support a simple contract, b an antecedent debt or liability. The inclusion of b indicates that an existing debt, which is not generally good consideration for a promise, 54 can be so where it is owed by a person receiving the benefit of a promise contained in a bill of exchange.
The acknowledgment must be in writing and signed by the person making it. Can the performance of, or the promise to perform, an act which the promisor is already under a legal obligation to carry out, ever amount to consideration? Three possible types of existing obligation may exist, and they need to be considered separately. These are first, where the obligation which is alleged to constitute consideration is already imposed by a separate public duty; second, where the same obligation already exists under a contract with a third party; and, third, where the same obligation already exists under a previous contract with the same party by whom the promise is now being made.
Where the promisee is doing something that is a duty imposed by some public obligation, there is a reluctance to allow this to be used as the basis of a contract. It would clearly be contrary to public policy if, for example, an official with the duty to issue licences to market traders was allowed to make enforceable agreements under which the official received personal payment for issuing such a licence.
The possibilities for corruption are obvious. It would be equally unacceptable for the householder whose house is on fire to be bound by a promise of payment in return for putting out the fire made to a member of the fire brigade. The difficulty is in discerning whether the refusal to enforce such a contract is on the basis that it is vitiated as being contrary to public policy, 58 or because the consideration which has been provided is not valid.
The case law provides no clear answer. The starting point is Collins v Godefroy. It was held that this promise was unenforceable, because there was no consideration for it. In cases where the possibilities for extortion are less obvious, there has been a greater willingness to regard performance of an existing non-contractual legal duty as being good consideration, though it must be said that the clearest statements to that effect have come from one judge, that is, Lord Denning.
In Ward v Byham , 60 the duty was that of a mother to look after her illegitimate child. The father promised to make payments, provided that the child was well looked after and happy, and was allowed to decide with whom she should live. Lord Denning had no doubt that this could, nevertheless, be good consideration: I have always thought that a promise to perform an existing duty, or the performance of it, should be regarded as good consideration, because it is a benefit to the person to whom it is given.
The other two members of the Court of Appeal were not as explicit as Lord Denning, and seem to have regarded the whole package of what the father asked for as amounting to good consideration. So, on either basis, the decision raises difficulties as regards consideration. Once again, Lord Denning commented: What this quote from Lord Denning makes clear, however, is that he regards the rule against using an existing non-contractual duty as consideration as being based on the requirements of the public interest, which would arise in the examples using government officials of one kind or another.
Where this element is not present, however, he is saying that an existing duty of this kind can provide good consideration. There does not seem to be any general hostility in English law to the argument that an existing duty can provide good consideration. It would still be necessary to exclude situations where public policy suggests that payments should not be enforceable.
This would be a question of fact, however, rather than law. Whatever the correct answer to the above situation, it is clear that if what is promised or done goes beyond the existing duty imposed by law, then it can be regarded as good consideration. This applies whatever the nature of the duty, so that even as regards public officials, consideration may be provided by exceeding their statutory or other legal obligations.
Facts: In the course of a strike at a coal mine, the owners of the mine were concerned that certain workers who had the obligation of keeping the mines safe and in good repair should not be prevented from carrying out their duties. They sought the assistance of the police in this. The police suggested the provision of a mobile group, but the owners insisted that the officers should be billeted on the premises.
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For this, the owners promised to pay. Subsequently, however, they tried to deny any obligation to pay, claiming that the police were doing no more than fulfilling their legal obligation to keep the peace. Held: The House of Lords held that the provision of the force billeted on the premises went beyond what the police were obliged to do.
Viscount Cave LC accepted that if the police were simply taking the steps which they considered necessary to keep the peace, etc. Nevertheless, if, at the request of a member of the public, the police provided services which went beyond what they the police reasonably considered necessary, this could provide good consideration for a promise of payment.