International Project Week Freedom of Contract vs. Fairness

Transcription

1 International Project Week 2014 Business Ethics Freedom of Contract vs. Fairness Prof. Dr. M. Jaensch 1

2 Fairness and Good Morals Nature: Private law Sources: Law and Equity (Common Law) Specific and general legal clauses, case law (Civil Law) Enforcement: National courts Addressee: The individual Prof. Dr. M. Jaensch 2

3 General thoughts: - The law seeks to provide a just and fair solution by general rules. - Specific exceptions to the general rule apply to avoid injustice in rare cases - Very rarely, harsh results may occur for unforeseen cases, equity (rules of fairness) will apply Prof. Dr. M. Jaensch 3

4 Conclusion: - Always consider both sides - Don t jump to equity, first look to specific exceptions - Equity is the last resort for unbearably unjust results Prof. Dr. M. Jaensch 4

5 Fairness and Good Morals General Purpose of the Principle to defend against the abuse of power, causing harm to third parties, reckless behaviour with vicious intentions Assumption existence of a generally accepted code of moral and ethical behaviour beyond codified law or existing case law Prof. Dr. M. Jaensch 5

6 Fairness and Good Morals Principle 1 To secure public order: - radar warning receiver (RWR) - agreement to provide services without invoice Prof. Dr. M. Jaensch 6

7 Principle 1 To secure public order Example: Plumper A shall fix B s pipes. The parties agree that no invoice shall be produced. Discuss! What is the interests of the parties and what of the public? Prof. Dr. M. Jaensch 7

8 Fairness and Good Morals Principle 2 To defend personal freedom: - adhesion contracts - long-term supply contracts - prohibition of competition clauses Prof. Dr. M. Jaensch 8

9 Principle 2 To defend personal freedom: Examples: 1) Brewer A gives pub owner B a favourable loan and provides him with the proper pub equipment. In consideration thereto B promises to serve only A s beer for 30 years Prof. Dr. M. Jaensch 9

10 Principle 2 To defend personal freedom: Examples: 2) Lawyer A sells his office to lawyer B and promises not to open a new office in town for the next 10 years Prof. Dr. M. Jaensch 10

11 Principle 2 To defend personal freedom: Discuss! What are the interests of the parties? How far can the freedom of one party be restricted before it becomes unfair? Prof. Dr. M. Jaensch 11

12 Fairness and Good Morals Principle 3 To defend against the abuse of power: - monopolies (dictating abnormal conditions) - landlord (terminate lease in case of childbirth) - employer (share of loss or termination) - guarantee for a close relative with no economic interest Prof. Dr. M. Jaensch 12

13 Principle 3 To defend against the abuse of power: Example: Grandson A conducts high risk financial deals. Backed up by his lawyer he gets his grandmother C who adores A and is without any independent legal advice to guarantee to Bank B a loan in the amount of for A s business. Discuss whether the guarantee is valid? Prof. Dr. M. Jaensch 13

14 Principle 3 To defend against the abuse of power: Would your answer differ, if instead of the grandmother A s wife is giving the guarantee? Why and under which circumstances? Prof. Dr. M. Jaensch 14

15 Fairness and Good Morals Principle 4 Causing harm to third parties : - collusion (between representative and third party) - inducement to breach contract - extortion Prof. Dr. M. Jaensch 15

16 Principle 4 Causing harm to third parties : Example: Collusion A shop assistant gives a client who is a dear friend a discount in the name of his principal Prof. Dr. M. Jaensch 16

17 Fairness and Good Morals Principle 5 To defend against reckless and vicious behaviour: - intentional deceit - act in mala fide Prof. Dr. M. Jaensch 17

18 Principle 5 To defend against reckless and vicious behaviour: Example: intentional deceit A manipulates the kilometre reading in his car to negotiate a higher purchase price Prof. Dr. M. Jaensch 18

19 Principle 5 To defend against reckless and vicious behaviour: Example: intentional deceit Mark: Since this is a well known problem most jurisdiction held specific rules to fight off intentional deceit. Therefore general principles of equity are not applicable Prof. Dr. M. Jaensch 19

20 Principle 6 Venire contra factum proprium (Civil law) or estoppel or clean hands principle (Common law) meaning: prohibition to act in contrary to one s own previous conduct Prof. Dr. M. Jaensch 20

21 Principle 6 Venire contra factum proprium Example: If the law requires a written deed to sell land and seller A induces buyer B to neglect the form requirement, A cannot late after changing his mind rely on the missing form requirement as an excuse not to convey the land Prof. Dr. M. Jaensch 21

22 Principle 7 Protestatio facto contraria non valet meaning: not to act in contrary to one s actual behaviour Prof. Dr. M. Jaensch 22

23 Case Study Riding without a ticket openly declaring by wearing a T-Shirt one doges the fare in order to escape the penalty fare. (true story, by the way) Prof. Dr. M. Jaensch 23