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Contract law in Russia and USA

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Natalie Odrinskaya

on 7 November 2013

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Transcript of Contract law in Russia and USA

What is a Contract?
Contract Law
in Russia
the U.S.

The sources of American Contract Law
The law varies from state to state; there is no nationwide Federal contract law, although transactions involving the sale of goods have become highly standardized nationwide through widespread adoption of the Uniform Commercial Code. There remains significant diversity in the interpretation of other kinds of contracts, depending upon the extent to which a given state has codified its common law of contracts or adopted portions of the Restatement (Second) of Contracts.
Remember in the beginning I had mentioned the quote: "To a United States (U.S.) lawyer, Russian contract law seems
innocently simple, occasionally baffling and culturally different."
Our today's topic is not a very easy one to discuss, so first of all I'd like to remind you
According to the American Law Institute's
Restatement 2nd:
A contract is a promise or a set of promises for the breach of which the law gives a remedy,
or the performance of which the law in some way recognizes as a duty.
Another definition comes from the Uniform Commercial Code (UCC), which specifically covers contracts for "Goods" (instead of services):
“Contract” means the total legal obligation which results from the parties’
agreement as affected by this Act and any other applicable rules of law.
Both of these definitions make clear that not all promises or agreements are contracts. The promises or agreements that are contracts are the ones the legal system will enforce. That definition certainly appears circular: which ones will the legal system enforce?

So here comes the main topic of our today's discussion!

Nice day, isn't it?:)
I'm going to speak about Russian Contract Law and then I'll explain, why Americans think we're lucky with it.
And, as for me, the best way to speak on this topic is to compare two of these Law systems, so in my talk
Briefly about the contracts...
The existence of a contract requires finding the following factual elements:
an offer
an acceptance of that offer which results in a meeting of the minds
a promise to perform
a valuable consideration (which can be a promise or payment in some form)
a time or event when performance must be made (meet commitments)
terms and conditions for performance, including fulfilling promises
A unilateral contract
is one in which there is a promise to pay or give other consideration in return for actual performance. (I will pay you $500 to fix my car by Thursday; the performance is fixing the car by that date).
A bilateral contract
is one in which a promise is exchanged for a promise. (I promise to fix your car by Thursday and you promise to pay $500 on Thursday).
Written or oral?
Contracts can be either written or oral, but oral contracts are more difficult to prove and in most jurisdictions the time to sue on the contract is shorter (such as two years for oral compared to four years for written).
There are a variety of types of contracts:
"conditional" on an event occurring;
"joint and several," in which several parties make a joint promise to perform, but each is responsible;
"implied," in which the courts will determine there is a contract based on the circumstances.
Parties can contract to supply all another's requirements, buy all the products made, or enter into an option to renew a contract. The variations are almost limitless. Contracts for illegal purposes are not enforceable at law.
An oral contract is enforceable unless its subject matter comes within the statute of frauds, an English Law adopted in the United States, that requires certain contracts to be in writing. For example, a contract to sell real property, to be enforceable, must be in writing to comply with the statute. An oral contract to sell Personal Property for an amount less than that set in the statute does not fall within its limits and, therefore, is enforceable without being reduced to a writing. The Uniform Commercial Code governs the enforceability of oral contracts in sales transactions involving merchants.
A contract of adhesion
a contract (often a signed form) so imbalanced in favor of one party over the other that there is a strong implication it was not freely bargained. Example: a rich landlord dealing with a poor tenant who has no choice and must accept all terms of a lease, no matter how restrictive or burdensome, since the tenant cannot afford to move. An adhesion contract can give the little guy the opportunity to claim in court that the contract with the big shot is invalid. This doctrine should be used and applied more often, but the same big guy-little guy inequity may apply in the ability to afford a trial or find and pay a resourceful lawyer.
Christopher Osakwe, an american, who had written a book about Russian Contract Law, said:
To a United States (U.S.) lawyer, Russian contract law seems
innocently simple, occasionally baffling and culturally different.
Russian Contract Law
General provisions for the formation of contracts are included in chapter 28 of the civil code.
In theory of Russian contract law all contracts are subdivided into two groups on the ground of moment of establishing rights and duties: consensual and real.
In consensual contracts, which take their name from Latin «consensus» (consent), rights and duties arise in that moment when parties reach agreement about all essential terms of a contract.
In real contracts, which take their name from the latin «res» (thing), both agreement of parties and an act of transferring the thing under the contract are required to create legal rights and duties.
If, in conformity with the law, the transfer of the property is also required for the conclusion of the contract, it shall be regarded as concluded from the moment of the transfer of the corresponding property (article 433 of Civil Code of Russian Federation)

Statutory Law (Grazhdanskoe Zakonodatelstvo)
The first major source of Russian contract law is the Code. It
is the most comprehensive embodiment of the governing rules of
modern Russian contract law. It is divided into two parts: Part
One contains the general law of contracts (lex generalis); and Part
Two deals with the special law of twenty-nine individual nominate
contracts (lex specialis).
Case Law (Sudebnoe Pravo)
The second major source of modem Russian contract law is
normative judicial legislation or binding case law. Normative judicial legislation takes one of four different forms:
(1) an interpretive ruling (raziasnenie)
(2) a decree (postanovlenie)
(3) an informational letter
(informatsionnoe pismo) or overview letter (obzornoe pismo)
(4) a joint decree (sovmestnoe postanovlenie)
Where statutory law is silent and the contract is not regulated
by agreement or business custom, courts may fill in gaps in the law
using two devices, "statute by analogy" and "law by analogy."
Business Custom (Obychai Delovovo Oborota)
The third major source of modern Russian contract law is business custom. It includes any general rule of conduct, such as
any traditionally accepted method of performing certain types of
obligation that is widely accepted in any sphere of business
activity, including international business custom. Where
business custom conflicts with legislation or provisions of a
contract, the latter takes precedence. Otherwise, business custom
is applicable regardless of whether it is expressly stated in any
document. To qualify as a business custom, the rule of conduct
must be specific in its contents, the practice must be widely
accepted and the practice must evolve within a specific sphere of
business activity. It may include localized business practices, but
it does not have to be geographically localized.
The principal state statute you will deal with in Contracts is the Uniform Commercial Code (UCC or Code). The Code has a number of parts, called Articles, that apply to different transactions. You will be concerned with Article 1, which contains General Provisions that apply to the whole Code, and Article 2, Sales.
The Common Law
If UCC has no rule about a particular case, there is the Common Law In a few states, notably Louisiana, which has a French Civil Code tradition, and California, which adopted the Field Code developed by law reformer David Dudley Field in the 19th century, general principles of law, including contract law, are found in statutes. These statutes, however, are often broadly stated and will not answer your question.
Federal Courts, State Courts, and the Applicable State Law
Sometimes the contracts cases you study have been decided by a federal court. In those cases, it is helpful to ask how the court got jurisdiction. Frequently (but not always) the cases are in federal court because of diversity jurisdiction; that is, the federal court takes jurisdiction when the plaintiff and the defendant are citizens of different states.
Default Rules and Freedom of Contract
The Supreme Court declared that there is in general no federal common law of contracts. Whether a case is heard in federal court or in state court, the court will apply the law of the relevant state.
Which state’s law will the court apply? That question is answered by the choice of law rules.
So, there is a lot to say about Russian Contract Law, because we have the same law for the whole country, while in U.S. there are 48 states and 2 commonwealths
One reason for this is, unlike U.S. contract law, Russian contract
theory does not view a contract exclusively as a bargained-for
exchange of promises
It doesn't require consideration for the formation of a contract
It doesn't regard legal detriment as consideration in an onerous contract
It doesn't perceive the need to resort to promissory estoppel as a gap-filler
Russian Contract Law doesn't regard a letter of intent signed by business partners at its pre-contractual phase of their negotiations as per se legally
Doesn't recognize frustration of purpose as an event that excuses performance under a contract
Doesn't permit "contract not to sue" as a method for discharging a contractual obligation
Doesn't regard a modified offer as an acceptance
Doesn't permit withdrawal of an offer
prior to the stipulated time of acceptance regardless of
Doesn't recognize option contracts or impose strict liability
for breaches of consumer contracts
It doesn't impose the burden of
proving fault on the party that alleges fault, but, instead, makes it a
rebuttable presumption
Doesn't prohibit the use of punitive liquidated damages or permit punitive damages for breach of contract
It doesn't permit damages for emotional distress for any breach of
commercial contracts;
And it doesn't subdivide contractual duties into
freely delegable and non-delegable duties yet requires, in all
situations where delegation of duty is not prohibited by law, the
prior case-by-case consent of the creditor before any duty can be
delegated to a third party.
The conceptual differences between
Russian and U.S. theories of contract are staggering and deeply
rooted in their respective philosophies of enforceability of
promises. Another explanation for these differences is the fact that
American contract law, unlike its Russian analogue, was not to any
appreciable degree influenced by Roman private law
Full transcript