Chapter -Two Edit.pptChapter -Two Edit.ppt

Chapter – Two
Chapter – Two
Formation of contract
Formation of contract
 Essential Validity Requirements of Contract
Essential Validity Requirements of Contract
I. Capacity
I. Capacity
II. Consent
II. Consent
 Communication of Consent
Communication of Consent
 Offer
Offer
 Acceptance
Acceptance
 Defects in Consent and Available Remedies
Defects in Consent and Available Remedies
 Mistake
Mistake
 Fraud
Fraud
 False Statement
False Statement
 Lesion
Lesion

Cont…
Cont…
III. Object of Contract
III. Object of Contract
 Freedom of Contracts and its Limits
Freedom of Contracts and its Limits
 Clarity
Clarity
 Possibility
Possibility
 Morality
Morality
 Legality
Legality
IV. Form of Contract
IV. Form of Contract
 Consequences Validity Requirements
Consequences Validity Requirements

 The essential validity requirements of contract are
The essential validity requirements of contract are
not the same in every legal systems.
not the same in every legal systems.
 For instance, In common law legal system
For instance, In common law legal system
1)
1) Agreement:-
Agreement:- One party make the offer, another party
One party make the offer, another party
accepts the offer and both achieve
accepts the offer and both achieve consensus ad idem
consensus ad idem
(meeting of the minds)
(meeting of the minds)
- Offer
Offer
- Acceptance
Acceptance
2) Consideration:-
2) Consideration:- Both parties must have provided
Both parties must have provided
consideration, i.e. each side must promise to give or do
consideration, i.e. each side must promise to give or do
something for the other.
something for the other.
3) The contract must be in the
3) The contract must be in the form
form prescribed by law
prescribed by law

Cont…
Cont…
4)
4) Intention to create legal relations:-
Intention to create legal relations:- The parties must
The parties must
have intended their agreement to have legal
have intended their agreement to have legal
consequences. The law will not concern itself with
consequences. The law will not concern itself with
purely domestic or social agreements.
purely domestic or social agreements.
5) Capacity:-
5) Capacity:- The parties must be legally capable of
The parties must be legally capable of
entering into a contract.
entering into a contract.
6) Absence of Vitiating factors:-
6) Absence of Vitiating factors:- Absence of factors that
Absence of factors that
are going to invalidate a contract, i.e. duress or undue
are going to invalidate a contract, i.e. duress or undue
influence, mistake, misrepresentation, illegality
influence, mistake, misrepresentation, illegality
7) The object, which the contract purports to effect, must
7) The object, which the contract purports to effect, must
be legal
be legal

Cont…
Cont…
 Under Ethiopian law the essential elements of a
Under Ethiopian law the essential elements of a
valid contract are provided under
valid contract are provided under
Art. 1678 – Elements of contract
Art. 1678 – Elements of contract
No valid contract shall exist unless:
No valid contract shall exist unless:
(a) the parties are
(a) the parties are capable
capable of contracting and give
of contracting and give
their
their consent
consent sustainable at law;
sustainable at law;
(b) the
(b) the object
object of the contract is sufficiently defined
of the contract is sufficiently defined
and is possible and lawful;
and is possible and lawful;
(c)the contract is made in the
(c)the contract is made in the form
form prescribed by law
prescribed by law,
,
if any.
if any.

Cont…
Cont…
So the essential requirements are;
So the essential requirements are;
 Capacity
Capacity
 Consent
Consent
 Object
Object
 Form (optional) it`s only by the agreement of
Form (optional) it`s only by the agreement of
the parties or when the law say so
the parties or when the law say so
 Let us see each requirements one by one
Let us see each requirements one by one

CAPACITY TO
CAPACITY TO
CONTRACT
CONTRACT
7

Meaning & Definition
Meaning & Definition
 Unlike other essential requirement s of contract capacity is not governed
Unlike other essential requirement s of contract capacity is not governed
under rules of contract in general
under rules of contract in general
 Governed by Book I, Title II of the civil code which deals `capacity of
Governed by Book I, Title II of the civil code which deals `capacity of
persons`
persons`
Art. 192. Rule of capacity.
Art. 192. Rule of capacity.
Every physical person is capable of performing all the acts of civil life
Every physical person is capable of performing all the acts of civil life
unless he is declared incapable by the law.
unless he is declared incapable by the law.
Art. 196. - Proof of disability.
Art. 196. - Proof of disability.
(1) Capacity is presumed.
(1) Capacity is presumed.
(2) Any person who alleges the disability of a physical person shall prove
(2) Any person who alleges the disability of a physical person shall prove
that such person is under a disability.
that such person is under a disability.
• The cumulative reading of these two articles leads us to the conclusion
The cumulative reading of these two articles leads us to the conclusion
that capacity is presumed/principle / and incapacity is an exception
that capacity is presumed/principle / and incapacity is an exception
• The phrase `unless he is declared incapable by the law` shows that
The phrase `unless he is declared incapable by the law` shows that
there are certain category of persons who are declared to be incapable
there are certain category of persons who are declared to be incapable
by law
by law

Cont…
Cont…
 What are the source of disability/incapacity/ under Ethiopian law?
What are the source of disability/incapacity/ under Ethiopian law?
 It may be general or special disability
It may be general or special disability
 General disability:
General disability: this are disabilities which deepened on
this are disabilities which deepened on age
age,
, mental
mental
condition and sentences passed up on them
condition and sentences passed up on them. Art. 193.
. Art. 193.
I. Age /Minor/ Art.198 of CC—Art. 215 FRFC
I. Age /Minor/ Art.198 of CC—Art. 215 FRFC
`A minor is a person of either sex who has not attained the full age of
`A minor is a person of either sex who has not attained the full age of
eighteen years.`
eighteen years.`
-
- Under Ethiopian law Minors are incapable as rule and hence any contract that
they make with other parties is voidable
- This is because a person under 18 years of age is supposed not to posses a
mature mined and intellect to know the nature and the consequence of his
acts
- - a minor may, however, be authorized to enter in to certain types of
contracts Art. 292 and 293(acts of everyday life), 301 (good faith of the other
contracting party)

Cont…
Cont…
II.
II. Mental condition/Notoriously Insane or Infirm persons/
Insane person: Art.339
An insane person is one who, as a consequence of his being
An insane person is one who, as a consequence of his being
insufficiently developed or as a consequence of a mental disease or of
insufficiently developed or as a consequence of a mental disease or of
his senility, is not capable to understand the importance of his actions.
his senility, is not capable to understand the importance of his actions.
Infirm persons: Art. 340
Infirm persons: Art. 340
Deaf-mute, blind persons, and other persons who, as a consequence of
Deaf-mute, blind persons, and other persons who, as a consequence of
of a permanent infirmity are not capable to take care of themselves or to
of a permanent infirmity are not capable to take care of themselves or to
administer their property may invoke in their favor the provisions of the
administer their property may invoke in their favor the provisions of the
law which afford protection to those who are insane.
law which afford protection to those who are insane.
-
- Insane and infirm person must comply to the requirements of the law in
order to benefit from the protection of the law i.e. they have to beb
notorious insane(art. 347 cum. 343) or submit themselves to the
procedure for judicial interdiction(351).

Cont…
Cont…
III.
III. By judicial decision /coz of sentences passed up on them/
By judicial decision /coz of sentences passed up on them/
- legal interdicted persons Art. 380(1)
legal interdicted persons Art. 380(1)
A person interdicted by law is one from whom the law withdraws the
A person interdicted by law is one from whom the law withdraws the
administration of his property, as a consequence of a criminal
administration of his property, as a consequence of a criminal
sentence passed on him.
sentence passed on him.
- Unlike the other grounds of disabilities mentioned here in before the
incapacity here in is not based on the assumption that the legally
interdicted person doesn`t have sane mined to know the consequence
of his act rather it is to be pronounced by the criminal law as a form of
sanction for a criminal. The criminal may be deprived of his civil rights
- Art. 130 of Cri Code provides that the court may deprive the criminals
civil right; not be a witness, not to perform some juridical acts

Cont…
Cont…
 Special Disabilities:
Special Disabilities: these type of disabilities are
prescribed by law by reason of national and public interests. Art. 194(1)
Special disabilities may he prescribed by reason of the nationality
Special disabilities may he prescribed by reason of the nationality
of persons or of the functions exercised by them
of persons or of the functions exercised by them
- For the seek of protecting the national interest of the country foreigners
may be excluded from participation n public administration and running
for election and even owning an immovable properties Art. 389- 393
- The other important point is public officials may excluded in certain
types of transactions where a conflict of interest may arise.
- Hence, foreigners and public officials are in capable of concluding a
contract on the certain types of transactions
Q. What about the capacity of judicial persons

Cont…
Cont…
Source of disability of Judicial persons
Source of disability of Judicial persons
 The source of disabilities of judicial persons springs from
The source of disabilities of judicial persons springs from
their nature and object, Art. 197
their nature and object, Art. 197
The capacity of bodies corporate and property with a
The capacity of bodies corporate and property with a
specific destination shall be regulated, according to
specific destination shall be regulated, according to
their nature, by the provisions applicable to them.
their nature, by the provisions applicable to them.
Nature:
Nature: there are certain types of transaction by their own
nature that can`t be exercised by judicial persons or which
are only applicable for natural persons.
Ex. Contract of marriage, proof of paternity, making a will. So
in such type of scenarios judicial persons are totally
disabled

Cont…
Cont…
Object: it is the purpose for which the legal entity is
established, usually we found it in the law or
establishing documents.
 So judicial persons are incapable to perform acts
other the purpose for which they are established.
Ex. Political parties, trading organizations, cooperative
societies do have their own objects, hence, political
parties are totally incapable to participate in trading
activities and the business organizations are also
excluded from interfering in political issues

Brainstorm
Brainstorm
 You are participating in a race. You
You are participating in a race. You
overtake the second person. What
overtake the second person. What
position are you now in?
position are you now in?

FREE CONSENT
FREE CONSENT
TO CONTRACT
TO CONTRACT
16

Cont…
Cont…
Consent Defined:
Consent Defined:
 When two or more persons agree upon the same thing in
When two or more persons agree upon the same thing in
the same sense, they are said to consent.
the same sense, they are said to consent.
 Consent is the meeting of minds, and it constitutes
Consent is the meeting of minds, and it constitutes
the very heart and soul of contracts
the very heart and soul of contracts
 The two parties to a contract should have identity of minds.
(consensus ad idem) Or
 Parties must agree upon the same thing in the same sense.
.

Cont…
Cont…
 The possible rationales behind consent are;
The possible rationales behind consent are;
- Parties must be bound by what they have willed
Parties must be bound by what they have willed
freely to establish smooth, continuous and secured
freely to establish smooth, continuous and secured
daily business transaction
daily business transaction
- One must morally respect his promise as though it is a rule
One must morally respect his promise as though it is a rule
of law (
of law (pacta sunt servanda)
pacta sunt servanda)
- A contract without free consent is voidable contract.
A contract without free consent is voidable contract.
- Consent as a requirement is provided under Art.1679 of the
Consent as a requirement is provided under Art.1679 of the
civil code
civil code
A contract shall depend on
A contract shall depend on the consent
the consent of the parties who
of the parties who
define the object of their undertaking
define the object of their undertaking and
and agree to be
agree to be
bound thereby
bound thereby.
.

Cont…
Cont…
- From this provision we can single out the ff important
elements
i. A contract shall depend on the consent of the parties….
This re-emphasizes the paramount importance of consent
ii. `…who defines the objects of their undertakings…`
Not only the making of the contract, but also the object
(content) of the undertaking obligations must be considered
iii. `…and agree to be bound thereby…`
 The parties must not only agree, but also consent to be
bound by their agreement , Contract = [agreement (offer +
acceptance)+ enforceability]

Cont…
Cont…
 So this condition excludes simulated contracts, gentlemen's
agreement and other natural obligations
 So, if a contract is said to `… be completed where the
parties have expressed their agreement thereto.[Art1780(1)]
`other things remains constant`
Q. How do we know whether the
contracting parties have agreed on the
terms of the contract or not

Cont…
Cont…
 There are two competing arguments /theories/ in this regard
There are two competing arguments /theories/ in this regard
1. Theory of Will
1. Theory of Will
 We have to look on the intention of the parties and external
We have to look on the intention of the parties and external
manifestation of the parties is no more important
manifestation of the parties is no more important
 So in case where a conflict arise in between the intention and
So in case where a conflict arise in between the intention and
declaration of the parties in the performance of the contract we
declaration of the parties in the performance of the contract we
have to give effect for the internal intention of the parties
have to give effect for the internal intention of the parties
 Because the purpose of contract is all about meeting of the
Because the purpose of contract is all about meeting of the
real intention of the parties
real intention of the parties
 An approach of the French Code
An approach of the French Code
 It relays on moral grounds-A man shouldn’t be tied by an agr’t
It relays on moral grounds-A man shouldn’t be tied by an agr’t
he did not will
he did not will

Cont…
Cont…
2. The theory of Declaration
2. The theory of Declaration
 agreement is not a mental state but an act
 Parties should be judge not y what is in their mind but what they
have said, written or done
 Social ground- Because there can be no order nor trade if men
can`t relay on the expressed declaration
 An approach of Swiss code
Q. read Art. 1680 and 1698 of the CC and
Q. read Art. 1680 and 1698 of the CC and
tell us which theory does Ethiopia follows
tell us which theory does Ethiopia follows
The Ethiopian system is a compromise: declaration alone creates a contract, but
The Ethiopian system is a compromise: declaration alone creates a contract, but
defect in consent may invalidate them subject to damages (for mistake-1703)
defect in consent may invalidate them subject to damages (for mistake-1703)

Mechanisms of declaring consent
Mechanisms of declaring consent
 Therefore, if we say that it declaration theory the
Therefore, if we say that it declaration theory the
second question will be how consent is declared?
second question will be how consent is declared?
 Basically consent is communicated through offer and
Basically consent is communicated through offer and
acceptance
acceptance
What is Offer?
What is Offer?
 It is a
It is a firm
firm and
and precise proposal ( arts 1714 cum.1695)
precise proposal ( arts 1714 cum.1695)
to conclude a contract under specific conditions, so
to conclude a contract under specific conditions, so
that the simple acceptance is suffice for formation of
that the simple acceptance is suffice for formation of
the contract.
the contract.

Cont…
Cont…
Essential features /nature/ of an offer
Essential features /nature/ of an offer
1. Serious intentions
1. Serious intentions
- Some times it`s better to identify what is not an offer
- Some times it`s better to identify what is not an offer
 Opinions are not offers; plans, request /invitation to
Opinions are not offers; plans, request /invitation to
negotiate/
negotiate/
 Good Intentions are not offers.
Good Intentions are not offers.
 Preliminary Negotiations are not offers.
Preliminary Negotiations are not offers.
 Agreements to Agree are not offers.
Agreements to Agree are not offers.
 Auctions are not offers. Art. 1688
Auctions are not offers. Art. 1688
 catalogues, price lists, and circular letters are also not
catalogues, price lists, and circular letters are also not
offers, Art. 1687(b)
offers, Art. 1687(b)

Cont…
Cont…
2. Definiteness
2. Definiteness: Offer must have reasonably definite terms so a
: Offer must have reasonably definite terms so a
court can determine whether breach occurred. Art .1714 cum
court can determine whether breach occurred. Art .1714 cum
1695
1695
3. Communication
3. Communication: Offer must be communicated to the
: Offer must be communicated to the specific
specific
person/s
person/s-offeree/s. If an offer is not communicated to a specified
-offeree/s. If an offer is not communicated to a specified
person, it remains as a mere declaration of intention.
person, it remains as a mere declaration of intention.
 The code recognized three kinds of declaration of intention
The code recognized three kinds of declaration of intention
which does not considered as offer
which does not considered as offer
a.
a. 1687(a)- An offer failed to communicated to the beneficiary is
1687(a)- An offer failed to communicated to the beneficiary is
mere declaration of intention.
mere declaration of intention.
What about public promise of a reward?
What about public promise of a reward?
• Contract theory
Contract theory
• Unilateral act theory
Unilateral act theory

 What is the position of Ethiopian law- see art 1689
What is the position of Ethiopian law- see art 1689
 Q. what about simple oral declarations to larger groups of
Q. what about simple oral declarations to larger groups of
the society?
the society?
 Q. what if there are several simultaneous performance for a
Q. what if there are several simultaneous performance for a
single public promise for reward?
single public promise for reward?
b. 1687(b)- Non-binding communications ( e.g. catalogues,
b. 1687(b)- Non-binding communications ( e.g. catalogues,
price list circular letters …etc.) The mode of publicity is
price list circular letters …etc.) The mode of publicity is
immaterial, it may be TV, radio, newspaper, or magazine.
immaterial, it may be TV, radio, newspaper, or magazine.
c. 1688 – sale by auction
c. 1688 – sale by auction
Cont…
Cont…

Cont…
Cont…
4. Freedom of forms of an offer
4. Freedom of forms of an offer
Article 1681. - Forms of offer : It can be oral, writings, sign or conduct
Article 1681. - Forms of offer : It can be oral, writings, sign or conduct
The only requirement is
The only requirement is “there should be no doubt as to the parties
“there should be no doubt as to the parties
agreement”
agreement”
5. It has a period of time:
5. It has a period of time: with in which the offeror is bound
with in which the offeror is bound
with his offer and the offeree may exercise his power of
with his offer and the offeree may exercise his power of
acceptance.
acceptance.
I.
I. offer with time limit for acceptance- Art 1690
offer with time limit for acceptance- Art 1690
When did the duration began to count?
When did the duration began to count?

Cont…
Cont…
ii. Art. 1691 - Offer without lime limit.
ii. Art. 1691 - Offer without lime limit.
Q. What does reasonable time mean? Is it 2 sec, 2min,
Q. What does reasonable time mean? Is it 2 sec, 2min,
2Hrs, days, weeks, months, or years?
2Hrs, days, weeks, months, or years?
The reasonableness of the time should be decided on case
The reasonableness of the time should be decided on case
by case basis, taking in to account;
by case basis, taking in to account;
 The nature of the obligation
The nature of the obligation
 The pre - existing relation
The pre - existing relation
 The form of the offer and acceptance
The form of the offer and acceptance
 The common usage in the sector
The common usage in the sector
 The distance involved…etc.
The distance involved…etc.

Termination of offer
Termination of offer
 Grounds of Termination
Grounds of Termination
1. Rejection by the offeree: two instances
1. Rejection by the offeree: two instances
 Express rejection by the offeree before the expiry of the time limit. Art.
1690(2)
 Rejection by defective acceptance, Art. 1694
Rejection by defective acceptance, Art. 1694
2. Laps of Time
2. Laps of Time
 Lapse of the fixed time (for offer with time limit) or reasonable time (for
Lapse of the fixed time (for offer with time limit) or reasonable time (for
an offer without time limit), Art. 1690(1) and 1691(1)
an offer without time limit), Art. 1690(1) and 1691(1)

Cont…
Cont…
3. Withdrawal /revocation/ of an offer-Art. 1693
3. Withdrawal /revocation/ of an offer-Art. 1693
Withdrawal of offer can be;
(a):Before the offeree knows the offer; or
(b): At the time when the offeree knows the offer (simultaneously)
So, withdrawal of offer is impossible after the moment the
offeree has gained knowledge of the offer Art.1693
Q. How do we know the exact moment the offeree has
gained knowledge of the offer?
Q. What about public promise of reward? Think contract
theory ( UK, France,) and unilateral act theory( Germany,
Ethiopia)

Cont…
Cont…
Q
Q. What about incapacity, death, and bankruptcy of an
. What about incapacity, death, and bankruptcy of an
offerer?
offerer?
 The Ethiopian law doesn`t say any thing in this regard
The Ethiopian law doesn`t say any thing in this regard
 There are two important theories
There are two important theories
1.
1. Subjective Theory of contract
Subjective Theory of contract
 The fundamental aspect of a contract is the meeting of internal will of
The fundamental aspect of a contract is the meeting of internal will of
the parties
the parties
 The will of the offeree has died out with its author that makes
The will of the offeree has died out with its author that makes
impossible the meeting of the parties will
impossible the meeting of the parties will
2.
2. Objective Theory of contract
Objective Theory of contract
Meeting of minds is not the issue, rather whether it contains a personal
Meeting of minds is not the issue, rather whether it contains a personal
element or not is crucial
element or not is crucial
France, Germen, Swiss – offer which would involve a personal performance
France, Germen, Swiss – offer which would involve a personal performance
on the part of the offer, becomes void upon the death or insanity of the offeror
on the part of the offer, becomes void upon the death or insanity of the offeror

Acceptance
Acceptance
What is Acceptance?
What is Acceptance?
 It is a pure and simple agreement of the offeree to all terms of the
It is a pure and simple agreement of the offeree to all terms of the
contract. An offer can be rejected by saying
contract. An offer can be rejected by saying no
no or through
or through defective
defective
acceptance
acceptance
Important features of Acceptance
Important features of Acceptance
1. Acceptance should not be defective – Art 1694. it shall not be:
1. Acceptance should not be defective – Art 1694. it shall not be:
 With reservation
 Doesn`t exactly conform to the terms of the offer
 Defective acceptance is counter offer
 No exception for immaterial deviation, but CISG does-see art. 19(2) of
CISG
2. Freedom of forms of an acceptance- Art. 1681 (1)-principle
Art. 1681 (1)-principle
 Exception - Art. 1681(2)
Exception - Art. 1681(2)
 Do we have
Do we have

Cont…
Cont…
3. Silence of the offeree doesn`t constitute acceptance
3. Silence of the offeree doesn`t constitute acceptance
 It is total absence of any forms of expression
It is total absence of any forms of expression
Art. 1682. - Silence. - 1. Principle.
Art. 1682. - Silence. - 1. Principle.
Silence where an offer is made shall not amount to
Silence where an offer is made shall not amount to
acceptance
acceptance
Q.
Q. Discuss the difference between silence Vs. tacit acceptance
Discuss the difference between silence Vs. tacit acceptance

Cont…
Cont…
 Exceptions :
Exceptions :
1. Duty to accept, Art. 1683
1. Duty to accept, Art. 1683
The duty of the organization to accept the offer emanates from
The duty of the organization to accept the offer emanates from
the
the law
law and
and Concession
Concession granted by the authorities
granted by the authorities
- E.g. telecommunication, postal service, electricity service,
E.g. telecommunication, postal service, electricity service,
water supply…etc.
water supply…etc.
2. Preexisting business relations, art 1684
2. Preexisting business relations, art 1684
What are the requirements?
What are the requirements?

Cont…
Cont…
a.
a. An already established contractual relation (pre-existing
An already established contractual relation (pre-existing
business relation)
business relation)
b.
b. A clear proposal for making a subsidiary or complementary
A clear proposal for making a subsidiary or complementary
contract has to be made
contract has to be made
c.
c. the proposal must be made in a special document, and
the proposal must be made in a special document, and
d.
d. It shall contain a precaution: stating that the offer will be
It shall contain a precaution: stating that the offer will be
considered accepted if no rejection is made with in a
considered accepted if no rejection is made with in a
specific and reasonable period of time.
specific and reasonable period of time.

Cont…
Cont…
3. An invoices (
3. An invoices (ፋክቱር
ፋክቱር) conform to a prior agreement
) conform to a prior agreement, Art.
, Art.
1685
1685
 If the invoice conformed to the prior agreement, silence on the
part of buyer will be considered as an acceptance. Otherwise
the buyer has to expressly accept it
N.B.
N.B. Invoice is a list of goods with price and charges sent to a
Invoice is a list of goods with price and charges sent to a
purchaser from the seller to settle accounts on the bases of an
purchaser from the seller to settle accounts on the bases of an
existing contract.
existing contract.

Cont…
Cont…
4. General Terms of Business prescribed or approved by
4. General Terms of Business prescribed or approved by
the authority, art. 1686
the authority, art. 1686
 General terms and conditions that are prescribed or approved
General terms and conditions that are prescribed or approved
by the authority will be accepted by silence. However, the rest
by the authority will be accepted by silence. However, the rest
others need an
others need an acceptance
acceptance by the other party with having full
by the other party with having full
knowledge
knowledge about it.
about it.
 N.B. It is a special prewritten form prepared by one of the
N.B. It is a special prewritten form prepared by one of the
contracting party with the intention to apply on future
contracting party with the intention to apply on future
contracts. It contains limits as to liability, the tariff applicable,
contracts. It contains limits as to liability, the tariff applicable,
the conditions of delivery, rate of interest in delayed
the conditions of delivery, rate of interest in delayed
performance…etc.
performance…etc.

Withdrawal of Acceptance
Withdrawal of Acceptance
 It can be, 1693 (2) cum (1).
It can be, 1693 (2) cum (1).
 (a):Before the offeror knows the acceptance; or
(a):Before the offeror knows the acceptance; or
 (b): At the time when the offeror knows the acceptance
(b): At the time when the offeror knows the acceptance
(simultaneously)
(simultaneously)
 Contradiction: art 1692(1) contract formed when the
Contradiction: art 1692(1) contract formed when the
acceptance is sent(dispatch theory)
acceptance is sent(dispatch theory) Vs.
Vs. art.
art.1693(2)
1693(2)
withdrawal of acceptance is possible before/at the time
withdrawal of acceptance is possible before/at the time
the offeror knows the acceptance (Theory of Reception)
the offeror knows the acceptance (Theory of Reception)
Q. How do you reconcile this conflicting
Q. How do you reconcile this conflicting
provisions
provisions

Conti…
Conti…
 Battel of forms
Battel of forms
 It comes into picture when contracting parties attempt to
It comes into picture when contracting parties attempt to
incorporate its own terms and conditions in the contract
incorporate its own terms and conditions in the contract
 Approaches to resolve the problem
Approaches to resolve the problem
1.
1. The last shot rule
The last shot rule
 It is an extension of the “mirror-image rule”
It is an extension of the “mirror-image rule”
 The valid terms of the contract are those incorporated in
The valid terms of the contract are those incorporated in
the last offer submitted and fully accepted without any
the last offer submitted and fully accepted without any
reservation
reservation
2.
2. The knockout rule
The knockout rule
 Contradicting terms and conditions of the parties will be
Contradicting terms and conditions of the parties will be
knocked out and the gap will be filled by gap filling provisions
knocked out and the gap will be filled by gap filling provisions

Compilation of Contract
Compilation of Contract
 Principle:
Principle: No contract unless the parties have agreed on
No contract unless the parties have agreed on
each and every terms of the contract, art. 1695
each and every terms of the contract, art. 1695
 Exception:
Exception: The contract is deemed completed even if the
The contract is deemed completed even if the
parties have not agreed in every terms and conditions of the
parties have not agreed in every terms and conditions of the
contract
contract if the parties behavior show that they intended to
if the parties behavior show that they intended to
conclude the contract
conclude the contract Art. 1695(3) cum 1714
Art. 1695(3) cum 1714
 In such a case a law will remedy the deficiency, art. 1695(3)
In such a case a law will remedy the deficiency, art. 1695(3)
 E.g. See, Art. 1747, 1751, 1755, 1756, 1760
E.g. See, Art. 1747, 1751, 1755, 1756, 1760

Brainstorming
Brainstorming
 A beggar's brother died, But the man who
A beggar's brother died, But the man who
died had no brother. How could this be
died had no brother. How could this be
possible?
possible?

Contract in between absent parties
Contract in between absent parties
 Contract can be concluded b/n inter presents (between present parties)
Contract can be concluded b/n inter presents (between present parties)
or b/n inter absents (in between absent parties).
or b/n inter absents (in between absent parties).
 For both of them “acceptance makes the contract”
For both of them “acceptance makes the contract”
 Unlike inter presents, in inter absents there is a
Unlike inter presents, in inter absents there is a time
time and
and place
place
difference in between the sending and receiving of the acceptance.
difference in between the sending and receiving of the acceptance.
 This creates a controversy
This creates a controversy on
on the issue of
the issue of when
when and
and where
where the
the
contract is concluded.
contract is concluded.
Q. Why we should worry about the place and time of contract?
Q. Why we should worry about the place and time of contract?
 They have their own implications on;
They have their own implications on;
 Place: jurisdiction, applicable laws (in case of international contracts),
Place: jurisdiction, applicable laws (in case of international contracts),
 Time: the running of interest on loan, liability for breach, risk transfer
Time: the running of interest on loan, liability for breach, risk transfer

Conti…
Conti…
 Five theoretical possibilities are open as to the time and
Five theoretical possibilities are open as to the time and
place where the contract is concluded in inter absents .
place where the contract is concluded in inter absents .
 At the time and place where:
At the time and place where:
n The offeror makes the offer
The offeror makes the offer
n The offeree receives the offer
The offeree receives the offer
n The offeree send his acceptance
The offeree send his acceptance (theory of dispatch)
(theory of dispatch)
n The offeror receives the acceptance
The offeror receives the acceptance (theory reception)
(theory reception)
n The offeror is cognizant of the acceptance
The offeror is cognizant of the acceptance (theory of
(theory of
information)
information)
1.
1. The first two are unacceptable, but the rest three have
The first two are unacceptable, but the rest three have
theoretical background
theoretical background

Conti…
Conti…
1. The theory of Dispatch /emission/
1. The theory of Dispatch /emission/
The contracted is formed at the time when and at the place
The contracted is formed at the time when and at the place
where the offeree sends his acceptance.
where the offeree sends his acceptance.
Risk of delay and loss of acceptance relies on the offeror.
Risk of delay and loss of acceptance relies on the offeror.
E.g. UK, USA, France
E.g. UK, USA, France
2. The
2. The theory reception
theory reception
The contracted is formed at the time when and at the place
The contracted is formed at the time when and at the place
where the offeror receives the acceptance.
where the offeror receives the acceptance.
Risk of delay and loss of acceptance relies on the offeree.
Risk of delay and loss of acceptance relies on the offeree.
3. The theory of information
3. The theory of information
The contract is formed at the time when and at the place
The contract is formed at the time when and at the place
where the offeree is cognizant of the acceptance.
where the offeree is cognizant of the acceptance.

Conti…
Conti…
 What do you think are the weaknesses of each theory?
What do you think are the weaknesses of each theory?
 Dispatch? Reception? Information?
Dispatch? Reception? Information?
 Which on theory you choose and why?
Which on theory you choose and why?
 France, England and USA chooses the dispatch and Germany
France, England and USA chooses the dispatch and Germany
the reception
the reception
What about Ethiopia?
What about Ethiopia?
 Art. 1692(1)- Dispatch theory Vs. Art. 1693(2)- Reception
Art. 1692(1)- Dispatch theory Vs. Art. 1693(2)- Reception
theory?
theory?
 Art. 1691(2)?
Art. 1691(2)?
How do we reconcile these provisions?
How do we reconcile these provisions?

Conti…
Conti…
Contract made by telephone
Contract made by telephone
 These are conversational contracts between absent parties
These are conversational contracts between absent parties
 No difficulty as to the time of the contract since the time of
No difficulty as to the time of the contract since the time of
sending and receiving the acceptance is the same or no
sending and receiving the acceptance is the same or no
significant interval
significant interval
 Place, art. 1692(2)- at the place where the party was
Place, art. 1692(2)- at the place where the party was
received the call.
received the call.
Q.
Q. What about electronic contracts made by internet (mail,
What about electronic contracts made by internet (mail,
chat, video call…etc.), fax, telegram…etc?
chat, video call…etc.), fax, telegram…etc?

DEFCT IN CONSENT
DEFCT IN CONSENT
A contract without free consent is
A contract without free consent is
voidable contract.
voidable contract.
47

Cont…
Cont…
consent is when the contracting parties agree
consent is when the contracting parties agree upon
upon
the same thing in the same sense.
the same thing in the same sense. Consent shall
Consent shall
be true ( no mistake or fraud) free ( no duress,
be true ( no mistake or fraud) free ( no duress,
fear, want) and conscious (have capacity)
fear, want) and conscious (have capacity)
Therefore, whenever there is something which affect
Therefore, whenever there is something which affect
the free consent of the parties then we say there is
the free consent of the parties then we say there is
defect in consent
defect in consent
See art. 1696. - Invalidation of consent.
See art. 1696. - Invalidation of consent.

1. Mistake
1. Mistake
 What is mistake?
What is mistake?
 It a false belief; a belief in something untrue
It a false belief; a belief in something untrue
 But in the legal context only certain types of
But in the legal context only certain types of
mistakes will be admissible in order to avoid
mistakes will be admissible in order to avoid
too much contractual insecurity.
too much contractual insecurity.
 Mistake are of two type:
Mistake are of two type:
Mistake of law & (b) mistake of fact
Mistake of law & (b) mistake of fact
Mistake of fact can be: unilateral or bilateral
Mistake of fact can be: unilateral or bilateral

Cont…
Cont…
To have effect of invalidation it shall be: decisive &
To have effect of invalidation it shall be: decisive &
fundamental
fundamental
Decisive, see art 1697
Decisive, see art 1697
 The false belief must be firm and not merely a probable
The false belief must be firm and not merely a probable
assumption or supposition
assumption or supposition
 The party would not enter into the contract had he known
The party would not enter into the contract had he known
the contract
the contract
Fundamental, see art. 1698
Fundamental, see art. 1698
Two types of testes are employed under Art. 1699
Two types of testes are employed under Art. 1699
 (a): First the mistake has to related with the elements of the contract
(a): First the mistake has to related with the elements of the contract
 (b): Second it shall be fundamental in Subjective Test or Objective
(b): Second it shall be fundamental in Subjective Test or Objective
Test
Test

(a) Mistake related with the elements of
(a) Mistake related with the elements of
the contract:
the contract:
1.
1. Mistake as to the nature of the contract (error in negotio), see
Mistake as to the nature of the contract (error in negotio), see
art1699(a).
art1699(a).
e.g.
e.g. sale contract vs. donation contract
sale contract vs. donation contract
Deposit contract vs. loan contract
Deposit contract vs. loan contract
Deposit contract vs. donation contract
Deposit contract vs. donation contract
2.
2. Mistake as to the object( error in corpore) : Identity or quality, see
Mistake as to the object( error in corpore) : Identity or quality, see
art 1699(b)
art 1699(b)
e.g.
e.g. Diamond vs. artificial D.
Diamond vs. artificial D.
3.
3. Mistake as to the person (error in persona): Qualification or Identity, see art
Mistake as to the person (error in persona): Qualification or Identity, see art
1700
1700
The contract must be conclude
The contract must be conclude “intuitu personae”
“intuitu personae” ( in the
( in the
consideration of the person)
consideration of the person)
e.g.
e.g. Gratuitous contract, employment contract, partnership
Gratuitous contract, employment contract, partnership agreement
agreement

Non – fundamental Mistake
Non – fundamental Mistake
Art. 1701 Non – fundamental Mistake
Art. 1701 Non – fundamental Mistake
 (Mistake as to
Mistake as to motive
motive and
and arithmetic error
arithmetic error are classified
are classified
as non fundamental mistake under Ethiopian law
as non fundamental mistake under Ethiopian law
 Motive:- it is the driving force for the conclusion of the
Motive:- it is the driving force for the conclusion of the
contract, so it is not an element of the contract b/c it is
contract, so it is not an element of the contract b/c it is
not yet declared
not yet declared
 E.g. 1, A traveler buys an air ticket from Ethiopian
E.g. 1, A traveler buys an air ticket from Ethiopian
Airlines to fly to Dessie, because he thinks that lake
Airlines to fly to Dessie, because he thinks that lake
Tana is in Wollo.
Tana is in Wollo.
 e.g. 2, I buy a new laptop on the news that mine is
e.g. 2, I buy a new laptop on the news that mine is
damaged, which turns out to be untrue
damaged, which turns out to be untrue

Requirements to invoke mistake
Requirements to invoke mistake
1. The mistaken party shall be in good faith to invalidate the
1. The mistaken party shall be in good faith to invalidate the
contract pertaining to the mistake. See art. 1702 (1)
contract pertaining to the mistake. See art. 1702 (1)
 See also 1702(2)
See also 1702(2)
2. Reparation of damage, art. 1703
2. Reparation of damage, art. 1703
 The defense of mistake is double edged; The mistaken
The defense of mistake is double edged; The mistaken
party can have the contract invalidated, and the other party
party can have the contract invalidated, and the other party
will compensated for any damage, unless he has bad faith
will compensated for any damage, unless he has bad faith

Meaning of fraud
Meaning of fraud
 Misrepresentation of facts may be intentional or
Misrepresentation of facts may be intentional or
innocent. Intentional misrepresentation has been termed
innocent. Intentional misrepresentation has been termed
as Fraud and innocent misrepresentation has been
as Fraud and innocent misrepresentation has been
termed simply as ‘misrepresentation’
termed simply as ‘misrepresentation’

Difference between fraud and
Difference between fraud and
misrepresentation
misrepresentation
Misrepresentation
Misrepresentation fraud
fraud
There is no intention to
There is no intention to
deceive or to gain any
deceive or to gain any
undue advantage
undue advantage
The false statement is
The false statement is
made deliberately with a
made deliberately with a
clear intention of deceiving
clear intention of deceiving
the other party
the other party
It makes the other contract
It makes the other contract
only voidable at the option
only voidable at the option
of the party whose consent
of the party whose consent
has been so caused
has been so caused
The injured party besides
The injured party besides
avoiding the contract may
avoiding the contract may
also claim the damages.
also claim the damages.
57
Q. What about misrepresentation
under Ethiopian Law?

Cont…
Cont…
 In literatures fraud define as;
In literatures fraud define as;
 All deceits practiced at the time of conclusion of a juridical
All deceits practiced at the time of conclusion of a juridical
act.
act.
 In Ethiopia it is deceitful practice,. See 1704
In Ethiopia it is deceitful practice,. See 1704
 Requirements: 1704
Requirements: 1704
 Deceitful practice is needed,
Deceitful practice is needed, unlike French and Swiss, false
unlike French and Swiss, false
statement is not suffice
statement is not suffice
 It must be decisive and
It must be decisive and
 It must be done by the contracting party
It must be done by the contracting party
 What if done by 3
What if done by 3rd
rd
party? See art. 1704(2)
party? See art. 1704(2)

Conti…
Conti…
 False statement ( see art. 1705): As a principle it does
False statement ( see art. 1705): As a principle it does
not amount fraud but exceptionally does when:
not amount fraud but exceptionally does when:
a.
a. False statement ( can be through silence, see art
False statement ( can be through silence, see art
1705(2))
1705(2))
b.
b. Done with bad faith or negligently
Done with bad faith or negligently
c.
c. Special pre-existing relation b/n the parties which
Special pre-existing relation b/n the parties which
command special confidence or loyalty
command special confidence or loyalty
e.g. employee-employer, client-advocate…etc.
e.g. employee-employer, client-advocate…etc.

Conti…
Conti…
Requirements, art. 1706:
Requirements, art. 1706:
a.
a. There must be coercion-
There must be coercion- it need not be real so far as the
it need not be real so far as the
party believed it real
party believed it real
b.
b.It shall be imminent: little time left for its realization
It shall be imminent: little time left for its realization
c.
c.It must be serious
It must be serious
d.
d.It shall be targeted against himself or his ascendants, descendants,
It shall be targeted against himself or his ascendants, descendants,
spouse’s: life, person, honor or property
spouse’s: life, person, honor or property
How do we measure duress?
How do we measure duress?
i.
i. Objective standard (art. 1706(2))
Objective standard (art. 1706(2))
ii.
ii. subjective standard (art. 1706(3))
subjective standard (art. 1706(3))
Which one shall prevail: art. 1706(2) vs. art. 1706(3)
Which one shall prevail: art. 1706(2) vs. art. 1706(3)

Cont…
Cont…
Q
Q1.
1. What about brothers, sisters
What about brothers, sisters
and close friends?
and close friends?
Q2. Is Threat to commit
suicide a coercion?

Duress by third party
Duress by third party
 Art. 1707(1), duress by third party can be a ground for
Art. 1707(1), duress by third party can be a ground for
invalidation of a contract as a rule
invalidation of a contract as a rule
 It`s immaterial, whether the party who was not compelled
It`s immaterial, whether the party who was not compelled
knew or should have known of the duress, but mandatory in
knew or should have known of the duress, but mandatory in
other legal systems. The justifications are;
other legal systems. The justifications are;
 One could not require the victim of the violence to designate
One could not require the victim of the violence to designate
its author, because he often did not know his name;
its author, because he often did not know his name;
 Duress, whoever committed it is dangerous to the social
Duress, whoever committed it is dangerous to the social
order
order
 Art. 1707(2), if the benefited party did not know or should
Art. 1707(2), if the benefited party did not know or should
not have known about the duress exercised by a third party,
not have known about the duress exercised by a third party,
the victim should made good the other party for the damage
the victim should made good the other party for the damage
he suffered out of the invalidation of the contract
he suffered out of the invalidation of the contract

Cont…
Cont…
 Art. 1708. - Threat to exercise a right.
Art. 1708. - Threat to exercise a right.
 a threat to exercise a right is not a ground to invalidate a
a threat to exercise a right is not a ground to invalidate a
contract
contract
 It`s when the person uses his/her legitimate right to force
It`s when the person uses his/her legitimate right to force
the other party to conclude a contract.
the other party to conclude a contract.
 This is entirely logical because the principle is that where a
This is entirely logical because the principle is that where a
person has a right to exercise, he should be presumed to
person has a right to exercise, he should be presumed to
use it legitimately
use it legitimately
 however, if the threat is used with a view to obtain an
however, if the threat is used with a view to obtain an
excessive advantage; the threat to exercise a legal a right
excessive advantage; the threat to exercise a legal a right
can be a ground to invalidate a contract
can be a ground to invalidate a contract

3. UNDUE INFLUENCE /Referential Fear/
3. UNDUE INFLUENCE /Referential Fear/
 Undue influence is the improper use of any power possessed
Undue influence is the improper use of any power possessed
over the mind of the contracting party.
over the mind of the contracting party.
 The relations subsisting between the parties are such that
The relations subsisting between the parties are such that
one of the
one of the parties is in a position to dominate the will of other.
parties is in a position to dominate the will of other.
 Uses that position to obtain an unfair advantage over the
Uses that position to obtain an unfair advantage over the
other.
other.
 Ex. The following are parties can be affected by undue
Ex. The following are parties can be affected by undue
influence
influence
 Doctor and patient
Doctor and patient
 Lawyer and client
Lawyer and client
 Guardian and ward
Guardian and ward
 Trustee and beneficiary
Trustee and beneficiary
 Teacher and student
Teacher and student

Example of undue influence
Example of undue influence
By operation you just execute a deed of giving your
Whole property to me

Cont…
Cont…
 Art, 1709. - Reverential fear.
Art, 1709. - Reverential fear.
 (1) Fear of an ascendant or a superior & shall be a ground
(1) Fear of an ascendant or a superior & shall be a ground
for invalidating a contract where no duress was not used
for invalidating a contract where no duress was not used
 Hence, as a principle undue influence is not a ground to
Hence, as a principle undue influence is not a ground to
invalidate a contract
invalidate a contract
 But, sub-art (1) would be no more applicable, if the contract
But, sub-art (1) would be no more applicable, if the contract
was made with the person inspiring the fear and such
was made with the person inspiring the fear and such
person derived an excessive advantage from the contract,
person derived an excessive advantage from the contract,
Art. 1702(2)
Art. 1702(2)
 Fear of descendants or inferiors can`t be a ground to
Fear of descendants or inferiors can`t be a ground to
invalidate a contract, though the latter has obtained an
invalidate a contract, though the latter has obtained an
excessive advantage
excessive advantage

Difference between
Difference between
coercion and undue influence
coercion and undue influence
Coercion /Duress/
Coercion /Duress/

The consent of the aggrieved
party is taken by committing or
party is taken by committing or
threatening to commit an act
threatening to commit an act
forbidden by law.
forbidden by law.
Undue Influence /referential
Undue Influence /referential
far/
far/

party is obtained by dominating the
party is obtained by dominating the
party by taking an unfair advantage
party by taking an unfair advantage
of his position.
of his position.
68

4. Unconscionable Contracts, Art. 1710
4. Unconscionable Contracts, Art. 1710
 The rule is that a contract may not be invalidated on the
The rule is that a contract may not be invalidated on the
ground that there is a substantial disproportion in the value of
ground that there is a substantial disproportion in the value of
performance owed by the parties to each other
performance owed by the parties to each other
 the fact that the terms of the contract are more profitable to
the fact that the terms of the contract are more profitable to
one party is not considered as a cause for the invalidation of
one party is not considered as a cause for the invalidation of
the contract
the contract
 Nevertheless, the contract may be invalidated if the consent
Nevertheless, the contract may be invalidated if the consent
of the injured party was obtained by taking advantages of his;
of the injured party was obtained by taking advantages of his;
 want,
want,
 simplicity of mind,
simplicity of mind,
 senility or
senility or
 manifest business inexperience
manifest business inexperience

OBJECT OF THE
OBJECT OF THE
CONTRACT
CONTRACT
70

Cont…
Cont…
THE OBJECT MUST BE
THE OBJECT MUST BE
DEFINATE, LEGAL, POSSIBLE
DEFINATE, LEGAL, POSSIBLE
& MORAL
& MORAL

Cont…
Cont…
 No given definition of object in d/t legal systems, but they
No given definition of object in d/t legal systems, but they
simply just define it as;
simply just define it as;
 a thing which one party binds himself
a thing which one party binds himself to give, to do or not
to give, to do or not
to do
to do, things, which are objects of commerce, and things
, things, which are objects of commerce, and things
of future
of future
 Krzeczunowicz defined “object of contract “ as obligation
Krzeczunowicz defined “object of contract “ as obligation
to perform some thing.
to perform some thing.
 In other words, the object of a contract is an obligation the
In other words, the object of a contract is an obligation the
contract produces
contract produces
 Jurado
Jurado as: “… of all the requisite elements of a contract,
as: “… of all the requisite elements of a contract,
the object is, if not the most fundamental, the most
the object is, if not the most fundamental, the most
indispensable in order to have at least the shadow of a
indispensable in order to have at least the shadow of a
contract.
contract.
 without consent it is possible at least to have the
without consent it is possible at least to have the
appearance of a contract, but without an object there is
appearance of a contract, but without an object there is
nothing
nothing

Object of a contract Vs. Object of an obligation
Object of a contract Vs. Object of an obligation
 Different legal systems uses pareses like object of a
Different legal systems uses pareses like object of a
contract and object of an obligation
contract and object of an obligation
 Object of an obligation:-
Object of an obligation:- it refers the object to which an
it refers the object to which an
obligation relates
obligation relates
 Ex. the obligation to give has a
Ex. the obligation to give has a thing
thing as its object, while
as its object, while
the object of an obligation to do or not to do is
the object of an obligation to do or not to do is an
an act
act.
.
 So it`s the thing or the act which is considered as an
So it`s the thing or the act which is considered as an
object
object
 Object of a contract:-
Object of a contract:- is the obligations undertaken by
is the obligations undertaken by
the parties, not the thing or the act to which these
the parties, not the thing or the act to which these
obligations relate. It`s the obligation
obligations relate. It`s the obligation to give, to do or not
to give, to do or not
to do, Art. 1712
to do, Art. 1712
 The
The obligation to give
obligation to give includes delivery of a thing, for
includes delivery of a thing, for
the fact that one cannot liberate himself from his
the fact that one cannot liberate himself from his
obligation without delivering the thing to be given
obligation without delivering the thing to be given

Cont…
Cont…
 The obligation to do:-
The obligation to do:- includes all obligations
includes all obligations
the object of which is an act, which the debtor
the object of which is an act, which the debtor
has bound himself to perform.
has bound himself to perform.
 Obligation to do like obligation to give is a
Obligation to do like obligation to give is a
positive obligation
positive obligation
 Obligation to do may be obligation of result or
Obligation to do may be obligation of result or
obligation of means
obligation of means
 Obligation not to do:-
Obligation not to do:- includes those obligations
includes those obligations
in which the debtor is bound to abstain from
in which the debtor is bound to abstain from
doing an act, which otherwise he could have a
doing an act, which otherwise he could have a
right to do
right to do

Cont…
Cont…
- Requirements for Having a Valid Object of Contract
- Requirements for Having a Valid Object of Contract
1. The rights and liabilities given and imposed must be definite
1. The rights and liabilities given and imposed must be definite
and certain so as to enable courts to enforce the
and certain so as to enable courts to enforce the
performance of the obligation of the parties
performance of the obligation of the parties
Art. 1711 Determination of object
Art. 1711 Determination of object
 The object of a contract shall be freely determined by
The object of a contract shall be freely determined by
the parties subject to such restriction and prohibitions
the parties subject to such restriction and prohibitions
as are provided by law
as are provided by law
 contracting parties are given the right to define the object of
contracting parties are given the right to define the object of
their contract, as to its
their contract, as to its kind
kind,
, quantity and quality
quantity and quality

Cont…
Cont…
- The parties should also determine the
The parties should also determine the price of things,
price of things,
time of performance and other obligations
time of performance and other obligations
- the object of a contract should be reasonably and
the object of a contract should be reasonably and
adequately defined or should be ascertained with a
adequately defined or should be ascertained with a
sufficient precision
sufficient precision
Art. 1714. - Object must be defined.
Art. 1714. - Object must be defined.
- (1) A contract shall be of no effect where the
(1) A contract shall be of no effect where the
obligation of the parties or one of them can not be
obligation of the parties or one of them can not be
ascertained with sufficient precision.
ascertained with sufficient precision.
- Art 1713. If there is a lacuna as to the objects of a
Art 1713. If there is a lacuna as to the objects of a
contract it can be filled in through a reference made to
contract it can be filled in through a reference made to
custom, good faith, and equity.
custom, good faith, and equity.

Cont…
Cont…
2. Art 1715(1), the object of the contract must be possible for
2. Art 1715(1), the object of the contract must be possible for
execution
execution
- its performance must not be absolutely impossible
- its performance must not be absolutely impossible
- The impossibility must be considered at the time of the
The impossibility must be considered at the time of the
contract
contract
- If it is after the conclusion of the contract unilateral
If it is after the conclusion of the contract unilateral
cancellation, Art 1788 and 1790 or to implement the rules
cancellation, Art 1788 and 1790 or to implement the rules
applicable where the restoration of the previous position is
applicable where the restoration of the previous position is
impossible according to Art 1817 of the Civil Code
impossible according to Art 1817 of the Civil Code
- the impossibility must exist in itself, and not depend on a
the impossibility must exist in itself, and not depend on a
party
party
- the performance of the contract would be impossible even
the performance of the contract would be impossible even
if someone other than this particular debtor were obligated
if someone other than this particular debtor were obligated

Cont…
Cont…
 The impossibility which annuls the contract should be an
The impossibility which annuls the contract should be an
absolute and insuperable not a relative impossibility or it
absolute and insuperable not a relative impossibility or it
has to be completely impossible for anybody to overcome
has to be completely impossible for anybody to overcome
 Art 1715 (2) of the Civil Code, the absolute and
Art 1715 (2) of the Civil Code, the absolute and
insuperable impossibility may relate to a
insuperable impossibility may relate to a thing
thing or a
or a fact
fact
 contract is not void, if the obligation of one of the parties is
contract is not void, if the obligation of one of the parties is
relatively impossible
relatively impossible
3. Art. 1716, t
3. Art. 1716, the object of a contract should be lawful
he object of a contract should be lawful
 The object of the contract should not be contrary to the
The object of the contract should not be contrary to the
law or public order, such as constitutional law,
law or public order, such as constitutional law,
administrative law, criminal law, family law, and
administrative law, criminal law, family law, and
mandatory provisions of private law are lawful
mandatory provisions of private law are lawful

Cont…
Cont…
4. Art. 1716 (2) The object of the contract not be immoral
4. Art. 1716 (2) The object of the contract not be immoral
 morality does not have a general yardstick for what is
morality does not have a general yardstick for what is
moral or immoral in one place may not be in another place
moral or immoral in one place may not be in another place
 Art. 1717, In PP the motives for which the parties
entered into a contract shall not be taken into account
in determining the unlawful or immoral nature of their
obligations. Example;
 if a person buys a bus to carry illegal immigrants over the
if a person buys a bus to carry illegal immigrants over the
border, the contract of sale is valid, even if the motives of
border, the contract of sale is valid, even if the motives of
the buyer are unlawful.
the buyer are unlawful.
 if a person buys a kitchen knife to kill his neighbors, the
if a person buys a kitchen knife to kill his neighbors, the
contract will not be invalidated
contract will not be invalidated

Cont…
Cont…
 But under exceptional circumstances the contract may be
But under exceptional circumstances the contract may be
invalidated because of the unlawful or immoral nature of the
invalidated because of the unlawful or immoral nature of the
object, when conclusive proof is available as to the unlawful
object, when conclusive proof is available as to the unlawful
or immoral motive
or immoral motive
Art. 1718 - Exception.
Art. 1718 - Exception.
The court shall not order a contract to be performed
The court shall not order a contract to be performed
where:
where:
(a) the terms of the contract denote that the parties or one
(a) the terms of the contract denote that the parties or one
of them have an unlawful or immoral purpose in view;
of them have an unlawful or immoral purpose in view;
or
or
(b) the party who requires the performance of a contract
(b) the party who requires the performance of a contract
produces a document denoting such purpose.
produces a document denoting such purpose.

FORM OF THE
FORM OF THE
CONTRACT
CONTRACT
81

4. Form of Contract as a Validity Requirement
4. Form of Contract as a Validity Requirement
 Formality is defined as “the conditions, in regard to method,
Formality is defined as “the conditions, in regard to method,
order, arrangement, use of technical expressions,
order, arrangement, use of technical expressions,
performance of specific acts, etc., which are required by the
performance of specific acts, etc., which are required by the
law in the making of contracts… to ensure their validity and
law in the making of contracts… to ensure their validity and
regularity.”
regularity.”
 It does not refer to kind of contract or the requirement of
It does not refer to kind of contract or the requirement of
writing of contract for the purpose of evidence.
writing of contract for the purpose of evidence.
 Therefore, formality (form) should be understood to mean
Therefore, formality (form) should be understood to mean
conditions that are required by law for making valid contract
conditions that are required by law for making valid contract
by being attached to the agreement of parties
by being attached to the agreement of parties
 Art. 1678(c) – form is a validity requirement not for proof
Art. 1678(c) – form is a validity requirement not for proof

Sources of Forms
Sources of Forms
 As a principle there are no formal requirements for the
As a principle there are no formal requirements for the
conclusion of a contract Art 1719 cum 1678 (c) , it is only
conclusion of a contract Art 1719 cum 1678 (c) , it is only
under exceptional circumstances;
under exceptional circumstances;
- where the law requires as per Art 1719(2)
where the law requires as per Art 1719(2)
- where the parties themselves have provided as per Art.
where the parties themselves have provided as per Art.
1719 (3)
1719 (3)
 where the law requires as per Art 1719(2)
where the law requires as per Art 1719(2)
 It has to
It has to expressly
expressly provided by the law, no analogy and in
provided by the law, no analogy and in
case of doubt the freedom of contract prevails
case of doubt the freedom of contract prevails
 we are not legally obliged to apply form where the law
we are not legally obliged to apply form where the law
requires evidence of a contract be in writing, Art. 2472
requires evidence of a contract be in writing, Art. 2472

Functions of Form
Functions of Form
 evidentiary function
evidentiary function
 cautionary function
cautionary function
 form has channeling function
form has channeling function
 form promotes certainty
form promotes certainty
 form has a protective function
form has a protective function
 , form has a function of facilitation of judicial
, form has a function of facilitation of judicial
diagnosis
diagnosis

Types of Contracts to be made in Special Form
Types of Contracts to be made in Special Form
1. Art 1721 of the Civil Code preliminary contracts
1. Art 1721 of the Civil Code preliminary contracts
2. Art. 1722 variation of a contract
2. Art. 1722 variation of a contract
Q. 1.
Q. 1. what is the fate of the written subsequent
what is the fate of the written subsequent
contract, which is made by the help of preliminary
contract, which is made by the help of preliminary
contract that is made not in a special form?
contract that is made not in a special form?
Q. 2.
Q. 2. what would be the fate of the prior contract and
what would be the fate of the prior contract and
the varied contract when the variation is not made in
the varied contract when the variation is not made in
special form?
special form?
3. contracts related to immovable, Art. 1723
3. contracts related to immovable, Art. 1723
4. contracts made with public administration, Art. 1724
4. contracts made with public administration, Art. 1724
5. long term contracts, Art. 1725
5. long term contracts, Art. 1725

Formal Requirements to be fulfilled for Written
Formal Requirements to be fulfilled for Written
Contracts
Contracts
 Art 1727, contract required to be in writing needs
Art 1727, contract required to be in writing needs
satisfaction of three elements
satisfaction of three elements
 special document:- the document has to be an instrument
special document:- the document has to be an instrument
that is exclusively concerned with a single contract
that is exclusively concerned with a single contract
 signature of parties bound:- not all the contracting parties, in
signature of parties bound:- not all the contracting parties, in
case of unilateral contracts
case of unilateral contracts
 attestation by witness
attestation by witness
- Only attestation Vs. attestation + signature
Only attestation Vs. attestation + signature
- Capacity of witness
Capacity of witness
 Effects of the non – fulfillment, Art 1720(1) and Art. 1726
Effects of the non – fulfillment, Art 1720(1) and Art. 1726

Assignment I
Assignment I
Title: - The effects of non – fulfillment of
Title: - The effects of non – fulfillment of
Essential Requirements of a valid
Essential Requirements of a valid
contract under Ethiopian Law
contract under Ethiopian Law

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