National law – CZ – Contract law – chapter 2

The contract is generally understood as a will of two contracting parties, which directs to secure an investment from a jointly profitable project. The project can be understood as something as simple as buying goods, or something as complex as the construction of a skyscraper. By the treaty, the parties have the will to establish a commitment among them and to govern the content of the treaty. The performance that is the subject of the obligation must be nature of property and correspond to the interest of the creditor, even if that interest is not merely property. The obligation arises from a contract, from an act of unlawful conduct or from another legal fact that is eligible under the law. The obligation cannot be changed without the creditor and the borrower, unless the law provides otherwise. The creation and duration of an obligation shall not prevent, unless a statement is made of the basis on which the debtor is obliged to perform; the creditor is obliged to prove the reason for the commitment.

Contracts may be synallagmatic -> where the parties have mutual obligations or asyllagmatics when the obligation arises only on one side. If the parties are rational, they will want to conclude the contract only on the condition that the benefit will be in their own interest and will only agree to terms of the contract that will improve their position. In order for a contract to be effective, the essential functions of contract law must be vital, which form the basis for concluding effective contracts. It is therefore necessary to allow cooperation on the part of the parties and thus to create a legal framework that will support this cooperation (cooperation will be more profitable than breach of the obligation). It is also necessary for contract law to set up such rules (mandatory and constructive contract law standards) that effectively fill in contract gaps and thus reduce total transaction costs. Another precondition for contract law is the allocation of risk that should be allocated to the most efficient (cheapest) assurance from an economic analysis point of view. In the end, it is still necessary to mention the motivation of the parties to effectively disclose information in the contractual relationship, as only fully informed contractual the parties can effectively act, spend resources, and more accurately assess potential risks in the future.

From the point of view of the Civil Code (here and after as “CC”), it must be said that it offers more freedom to the parties. The provisions on contract law are fundamentally dispositive, and the contract applies to the principle of non-formalities, where the CC states that everyone has the right to choose arbitrary form of law if not limited by law (such as the establishment or transfer of rights in rem ) or an agreement with the other. Efficiency has a high correlation with transaction costs, which may be minimal, on the one hand, to motivate the parties to conclude the contract or, on the other hand, so high that the parties cannot enter into a commitment.

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