Part I
In Fe
uary 2020, the world began to slow down due to a new virus spreading quickly. My
March, the number of cases had grown exponentially, and states began to take certain
measures to protect their citizens.
Newland is a small, industrialized country near Europe with a population of 12 million people.
They are mostly a homogenous society with very little of the society traveling outside the
country and limited travel into the country due to the cold weather and high cost of living. On
the 15th of March, Newland closed all non-essential and non-economic traffic going into and out
of its country. Oldland a neighboring country to Newland, is not as industrialized as Newland. It
is located to the south and is much bigger in size and population, totaling 35 million people.
Oldland and Newland are both members of the World Trade Organization but do not have any
special agreements between the two countries regarding trade.
In early April, as Newland ordered all of its businesses to close and people to shelter-in-place.
Businesses were allowed to continue on a limited basis, only performing essential services like
providing groceries and medical supplies.
ACME Ltd. is a manufacturing company from Oldland and generates 75% of its revenue from
Newland. ACME specializes in automotive parts and can produce products from metals, textiles,
and plastics. Skylar, a popular automotive company from Newland, saw its new car sales drop
95% in the month of March and the beginning half of April. It anticipated that its sales would
not pick up until August. As a result, it ordered all of its factories and dealerships to close down
until 15 July 2020.
In September 2019, Sklyar and ACME entered into a $1.5 billion-dollar contract for automotive
parts. The purpose of the contract was to provide parts for Skylar cars and trucks for the years
2020 and 2021. Under the deal, ACME would deliver a certain amount of parts per month and
Skylar would pay within 30 days of receiving the parts.
On 1 April 2020, ACME entered into a $10 million-dollar contract with Corona, the capital city of
Newland, to provide FFP3 respirator masks for medical workers and city employees. ACME
advertised that its manufacturing company could provide medical grade masks even though it
was an automotive parts company. Corona paid upfront and 8 times the normal price of similar
masks to made and delivered as soon as possible. On 21 April 2020, ACME delivered
Question 1. In April 2020, Skylar informed ACME that it would be freezing the contract due to
the pandemic sweeping the world. Discuss the legal issues that main arise between ACME and
Skylar.
Question 2. Upon inspection of the masks, Corona realized the masks were not up to the FFP3
standard and could not be used by its medical workers, perhaps only by its city employees.
Discuss the legal issues that could arise between ACME and the City of Corona.
Part II
In May, Newland decided to rebuild its own supply chains and domestic manufacturing industry
after the catastrophic deal with ACME. To meet the needs of this pandemic and future
pandemics, Newland sought to create a national stockpile of supplies. This stockpile is to be
filled by suppliers from Newland or companies located outside of Newland with plants in the
country and a minimum of 35% ownership by Newland citizens and companies. The reason for
this was twofold: first, to rebuild the manufacturing industry in Newland to protect against
future reliance on other states and their manufacturing industries, and two, pay a premium for
the contract to help the reemerging industry
ing jobs and plants to the country.
The Parliament enacted a procurement law outlining the reasons (as stated above) for creating
the national stockpile and the process to be taken. First, companies would show that it met the
outlined criteria; second, it had to present a plan to
ing a plant and jobs to the state; third, it
had to demonstrate its ability to provide high-quality products; and lastly, each item had to
meet Newland’s newly formed regulatory body’s standards and not just the equivalent
standards of other states. Selection of the contract would go through a small group of advisors
to the government, with no ability to appeal the final decision.
To date, this group of advisors have selected other contracts with ties to the governments
closest supporters. Global newspapers have documented the persons and groups who have
enefitted most.
Lastly, due to the fiasco with ACME, Newland required that all masks made in Oldland be
submitted for random testing to ensure compliance with safety standards. Supplies being sold
from other states were not submitted to the random safety testing upon entry into the
Newland. The new measures harm Oldland’s manufacturing companies whose main source of
income is in Newland. Other states are not subjected to the new measures and slowly encroach
on Oldland companies business partners and establish new deals with them.
Question 3. Discuss the legal implications of Newland’s new law to reestablish its
manufacturing industry.
Question 4. Discuss the legal implications of Newland’s treatment of Oldland companies.
Module 2 Contract ^0 Contract Law
CONTRACT &
CONTRACT LAW
MODULE 2
CONTENTS
1. Protection of the contract by
the nullity of the contract or of
clauses
2. Restoring the contractual
alance
3. Dealing with market failures
through contractual liability
Sources of Law
1.Principles of European Contract Law
2.UNIDROIT Principles of International
Commercial Contracts
3.Other sources like EU, French, or US law
Principle of Freedom to Contract
¡Based on party autonomy
¡ It is NOT absolute
¡Outlines the legal framework in which the K
exits
¡ There are default rules and ability to ove
ide
¡There are non-legal remedies to K or pseudo-K
¡Other constitutional/legal principles apply
PROTECTION
OF THE
CONTRACT BY
THE NULLITY
OF THE
CONTRACT OR
OF CLAUSES
1.Nullity resulting from the
content of the contract
2.Nullity resulting from
defects in consent
1.
Su
ff
ic
ie
nc
y
of
C
on
te
nt
PE
CL
A
t
ic
le
2
:1
03
S
uf
fic
ie
nt
A
g
ee
m
en
t Knowing when obligations arise is critical in
K law.
What is a “Contract”?
When do obligations in a K arise?
Are there exceptions to the K formation rule?
1.
Su
ff
ic
ie
nc
y
of
C
on
te
nt
PE
CL
A
t
ic
le
2
:1
03
S
uf
fic
ie
nt
A
g
ee
m
en
t Illustration
Alex and Ben are discussing computer parts.
Ben asks how much the parts cost, is he
entering into a K?
If the Alex gives a general range of prices for
a variety of goods, and Ben says, that sounds
like a good price, is a K formed?
1.
Su
ff
ic
ie
nc
y
of
C
on
te
nt
PE
CL
A
t
ic
le
2
:1
03
S
uf
fic
ie
nt
A
g
ee
m
en
t (1) There is sufficient agreement if the terms:
(a) have been sufficiently defined by the
parties so that the contract can be
enforced, o
(b) can be determined under these
Principles.
(2) However, if one of the parties refuses to
conclude a contract unless the parties have
agreed on some specific matter, there is no
contract unless agreement on that matter
has been reached.
2.
Le
gi
tim
at
e
Co
nt
en
t
PE
CL
A
ti
cl
e
1:
10
3(
2)
Illegality & Immorality in Contracts
• Can drug dealers enter into an K
for the sale of cocaine?
• Can a man and woman contract
for sex?
2.
Le
gi
tim
at
e
Co
nt
en
t
PE
CL
A
ti
cl
e
1:
10
3(
2)
(2) Effect should nevertheless be given
to those mandatory rules of national,
supranational and international law
which, according to the relevant rules
of private international law, are
applicable i
espective of the law
governing the contract.
3.
De
fe
ct
s
in
C
on
se
nt
E
o
s
There are several types of e
ors that
NEGATES consent of one or more
parties:
1. Mistakes as to fact or law
2. Inaccuracy in Communication
3. Inco
ect Information
3.
De
fe
ct
s
in
C
on
se
nt
PE
CL
A
t
ic
le
4
:1
03
M
is
ta
ke
a
s
to
L
aw
o
Fa
ct
(1) A party may avoid a contract for mistake of fact
or law existing when the contract was concluded if:
(a) (i) the mistake was caused by information given
y the other party; o
(ii) the other party knew or ought to have known of
the mistake and it was contrary to good faith and
fair dealing to leave the mistaken party in e
or; o
(iii) the other party made the same mistake, and
(b) the other party knew or ought to have known that
the mistaken party, had it known the truth, would not
have entered the contract or would have done so
only on fundamentally different terms
Pa
t
1
o
f 2
3.
De
fe
ct
s
in
C
on
se
nt
PE
CL
A
t
ic
le
4
:1
03
M
is
ta
ke
a
s
to
L
aw
o
Fa
ct
(2) However a party may not avoid the
contract if:
(a) in the circumstances its mistake was
inexcusable, o
(b) the risk of the mistake was assumed, or
in the circumstances should be borne, by it
Pa
t
2
o
f 2
3.
De
fe
ct
s
in
C
on
se
nt
PE
CL
A
t
ic
le
4
:1
03
M
is
ta
ke
a
s
to
L
aw
o
Fa
ct
Discussion:
Unilateral mistake
Mutual Mistake (by both parties)
Common initial mistake
3.
De
fe
ct
s
in
C
on
se
nt
PE
CL
A
t
ic