Lesson 03 - Contracts

If both parties wish so they may agree on termination of the contract, i.e. they voluntarily waive mutual rights and obligations, the situation being called waiver. If only one of the parties wishes to discharge the contract they may agree on accord and satisfaction. The word accord refers to the agreement to discharge and the word satisfaction means the consideration needed. This rule also applies to the situation when one of the parties wishes to change the terms of the contract, e.g. instead of giving a sum of money he/she offers the other party something of the same value.

Sometimes it happens that the contract cannot be performed because something unexpected occurs, such as a natural catastrophe, e.g. an earthquake or a flood. Such events are usually covered in contracts in clauses entitled Force Majeure (or Vis Major or Act of God) which state that if something that could not have been foreseen happens the contract is considered invalid.

It may also happen that one of the parties changes his/her mind about the contract and the parties may then agree on a change of a party, i.e. another party substitutes the original one and assumes the outstanding liabilities. This is referred to as novation.

The last way to discharge a contract is the situation when a specified period of time has elapsed. In such a situation the claim of the party that has not sought it for a certain period of time is said to be statute-barred, i.e. the law stands in its way, and the contract is said to be terminated because of limitation of action.

The parties may also stipulate in their contract that a certain amount of money will be paid in case of default, i.e. when a party has been delayed in fulfilling his/her respective obligations and not performing his/her part. This is referred to as liquidated damages.

3. Make a list of types of discharge.

4. Match the English terms to their Czech counterparts:

waiver

accord and satisfaction

Force Majeure

outstanding liabilities

novation

the obligation is statute-barred

default

liquidated damages

nevyřízené závazky

dohoda o změně závazku a uspokojení věřitele

neplnění/prodleva

prominutí povinnosti/vzdání se práva

vyšší moc

předem určená/vyčíslená náhrada škody

změna v osobě věřitele nebo dlužníka

závazek je promlčen

5. Fill in the gaps in the following summary.

A. Discharge by ____________ - both parties have fulfilled their respective obligations

B. Discharge by breach of contract

An injured (or ________) party is entitled to __________

___________________ ____________________ ____________________

(The parties may stipulate in their contract that a certain amount shall be paid in case of breach.

This is known as __________ damages.)

C. Other discharge

• Discharge by agreement or a __________ - both parties agree to terminate the contract, the parties __________ their rights.

• __________ and __________ - a party that cannot perform its obligation according to the terms of contract offers some other substitute.

• __________ - a replacement of one of the parties, the new party assumes ________ liabilities.

• Discharge by frustration – contract cannot be performed because of events that could not have been foreseen. The clause covering these events in a contract is called __________.

• __________ of action – setting out the time at which the party loses its right of action. The obligations are said to be __________ .