Contractual

Definition of the term: Contractual

The term contractual is derived from the English word “contract” and literally means “contractual”. In a legal context, “contractual” refers to all aspects, rights, and obligations that arise directly or indirectly from a contract. As an adjective, it is used primarily in international contract law, business relationships, and legal documents to indicate that a matter, claim, or relationship is conditioned upon or governed by a contract.

Origin and legal context

In the Anglo-American legal sphere, the term “contractual” is of central importance and is deeply rooted in common law. In continental European legal systems, this corresponds to the term “vertraglich” as used in §§ 145 ff. BGB (German Civil Code). However, its use goes beyond national legal systems and plays a significant role, particularly in international business law, arbitration, and multinational contractual relationships.

Contractual relationship and contractual obligations

Definition of the contractual relationship

Ein A contractual relationship is an exchange-oriented connection between at least two legal entities, established by a legally binding agreement — the contract. The obligations arising from the contract are referred to as contractual obligations (contractual obligations).

Characteristics of contractual obligations

• Binding effect: Parties are obligated to perform the agreed services.
• Legal basis: The duties and rights of the parties are determined by the contract and protected by contract law.
• Enforceability: Contractual obligations can, in case of dispute, be enforced by state or private courts (e.g., arbitral tribunals).

Distinction from statutory and quasi-contractual obligations

It is essential to distinguish between contractual obligations and other legal obligations:

• Statutory obligations (statutory obligations): Arise directly from a legal provision, regardless of any agreement between the parties.
• Quasi-contractual obligations (quasi-contractual obligations): Arise

e.g., from unjust enrichment or management of affairs without mandate.Contractual obligations are therefore characterized by their voluntary establishment by contract.

Forms of contractual rights and obligations

Right to performance (Contractual Right to Performance)

One party to a contract can demand the agreed performance from the other. This right is contractual, as it arises exclusively from the content of the contract.

Claim for damages due to breach of contract (Contractual Damages)

If a party fails to fulfil their contractual obligations , the other party regularly acquires a claim for compensation for the resulting damage, provided the prerequisites (e.g., fault, causation) are met. In many legal systems, a distinction is made between contractual damages (contractual damages) and tortious damages (tortious damages).

Right of withdrawal and termination

The right of withdrawal is a contractual remedy that allows parties to rescind the contract if certain conditions are met. Rights of termination in continuing obligations are also often contractually agreed and linked to specific deadlines or requirements.

Contractual interpretation and construction

Principles of contract interpretation

The interpretation of contractual provisions is essentially governed by the rules of contract law of the relevant country. In international trade law, principles such as “contractual interpretation in good faith” have been established. The following aspects are relevant in interpretation:

• Wording and usual meaning of the terms
• Intent of the parties, insofar as it can be objectively determined
• Trade practices and commercial customs

Significance of contract clauses

Certain contract clauses such as “Entire Agreement,” “Force Majeure,” “Confidentiality,” or “Choice of Law” precisely govern the contractual relations and minimize future disputes over interpretation.

Contractual liability: liability arising from contract

Requirements for contractual liability

Contractual liability requires that a party culpably breaches a contractual obligation and that this causes damage. In many legal systems, the following elements apply:

• Existence of a valid contract
• Violation of a contractual duty (breach of contractual duty)
• Damage
• Causal link between the breach of duty and the resulting damage (causality)

Distinction from non-contractual liability

Die Contractual liability differs from liability in tort, which is not based on a contractual relationship but on a statutory duty of care.

Contractual structuring options (Contractual Arrangements)

Types of contractual arrangements

In international commercial transactions, various forms of contractual commitments arise, including:

• Sales contract (Sales Contract)
• Supply agreement (Supply Agreement)
• Service agreement (Service Agreement)
• License agreement (License Agreement)
• Non-disclosure agreement (Non-Disclosure Agreement)

Each of these contracts regulates the contractual rights and obligations individually and tailored to the respective needs.

Individually negotiated contract terms and general terms and conditions (GTC)

In addition to individually negotiated contract terms, standard form provisions are frequently used. These are also considered contractual termsif they have been validly incorporated into the contract and do not violate mandatory law.

International dimensions of the contractual concept

Applicable law and jurisdiction

The determination of applicable law and jurisdiction is decisive for the interpretation and enforcement of contractual rights. These aspects are often governed by choice of law clauses und dispute resolution clauses .

Relevance in European and international law

In the context of international contracts, for example, based on UN sales law (CISG), terms such as contractual obligation und Contractual liability are used as binding reference points and form a central part of international dispute resolution.

Conclusion and distinction

The definition of the term contractual is comprehensive and multifaceted in the law. It forms the basis for almost all issues arising from contracts and agreements. Understanding contractual rights, obligations, liability issues, and principles of interpretation is therefore essential for contract drafting and enforcement of contractual interests in both national and international contexts.

Overall, “contractual” refers to all matters that are based on a contract and can thus be distinguished from statutory or non-contractual rules and obligations.

Frequently asked questions

What legal requirements must be mandatorily observed when concluding a contract (contractual)?

The conclusion of a contract is generally subject to the principle of private autonomy, according to which parties are free to determine the content and form of their contracts. Certain legal requirements, however, must be strictly observed. These include, first and foremost, the legal capacity of all contracting parties, since minors or incapacitated persons may only very limitedly enter into binding contracts. Furthermore, the subject matter and parties to the contract must be clearly defined. The contract must not pursue an illegal or immoral purpose, otherwise it is void pursuant to § 134 or § 138 BGB. In some cases, a special form is required, such as notarization for real estate transactions (§ 311b BGB) or for certain gifts (§ 518 BGB). If the required form is missing, the contract is generally void or at least provisionally unenforceable. In addition, substantial mistakes or deception at the time of contracting are not permitted, as this enables rescission and can retroactively render the contract invalid. Compliance with these fundamental requirements ensures legal certainty and protects against abusive contract design.

How can a contract be legally terminated?

A contract can be legally terminated in various ways. The most common means are ordinary termination, extraordinary (immediate) termination, withdrawal, rescission, or by performance of the contractual obligations (fulfillment). Ordinary termination usually takes place with a contractually or legally determined notice period; the requirements and terms depend on the contract type (e.g., leases, employment contracts). Extraordinary termination, on the other hand, requires an important reason that makes continuation of the contract unreasonable. Withdrawal is particularly relevant for performance disruptions, for example, when one party fails to perform despite a grace period (§ 323 BGB). Rescission can be declared in cases of mistake, deception, or duress and leads to the unwinding of the contract. Furthermore, a contract can be mutually terminated by a cancellation agreement or settlement. Finally, a contract becomes obsolete when both sides have completely fulfilled their primary obligations.

What is the significance of general terms and conditions (GTC) in contracts?

General terms and conditions (GTC) are pre-formulated contract terms that one party presents to the other when concluding a contract. From a legal perspective, it must be ensured that GTCs are effectively incorporated into the contract; this is achieved by explicit reference to the applicability of the GTCs and the opportunity for the other party to take note thereof (§ 305 BGB). GTCs may not contain surprising or unreasonable disadvantages and are subject to content control under §§ 307-309 BGB. Clauses that violate mandatory law or the principles of good faith are invalid. If individual provisions of the GTC are invalid, the rest of the contract remains generally valid unless upholding it would be unreasonable. Especially in consumer protection, GTCs are subject to strict scrutiny and do not fully replace individual contract negotiations.

What legal steps must be observed in case of a performance disruption within a contract?

If a performance disruption occurs (e.g., delayed, defective, or non-performance), the law provides the disadvantaged party with various legal remedies and claims. Primarily, they may demand performance of the owed obligation. In cases of non-performance or delay, a reasonable grace period for performance can often be set. If the breach persists, secondary rights such as withdrawal, damages in lieu of or in addition to performance, and reimbursement of futile expenses may be asserted. In purchase and contract-for-work agreements, there is also a warranty right: removal of defects, replacement, withdrawal or reduction of the purchase price, and damages. A necessary condition for these rights is often that the performance disruption is not insignificant and that requirements such as setting a grace period are met. The detailed procedure should therefore always be determined in view of the respective contract type and the applicable statutory provisions.

What is the significance of the written form for concluding or amending contracts?

The written form is in many cases a statutory requirement, for example, for guarantees (§ 766 BGB) or in tenancy law (§ 550 BGB). If the required written form is lacking, the contract is either void or invalid for want of form. In numerous instances, the written form is also contractually agreed upon (“written form clause”) to provide better evidence of the contract content and its changes. Contractual written form clauses can prevent oral or implied agreements from being effective. However, even written form clauses can, under certain circumstances, be modified by implied conduct, especially in commercial transactions. Electronic form (with qualified electronic signature) can be equated with the written form by law (§ 126a BGB). To avoid later disputes, it is always recommended to adhere to the agreed form and to clearly document any changes to the contract.

How is a contract legally interpreted when there are uncertainties or gaps?

Where there are uncertainties or gaps in the contract, the so-called contract interpretation applies. The starting point is the real intention of the contracting parties (§§ 133, 157 BGB). The aim is to determine, in accordance with good faith and taking into account trade practice, what the parties intended to agree. Here, not only the wording of the clauses is considered, but also their objective sense in view of all relevant circumstances. If there are gaps that cannot be filled even by supplementary interpretation, dispositive legal provisions may apply. In consumer contracts, uncertainties are often interpreted to the detriment of the user (§ 305c (2) BGB). The exact procedure depends on the contract type, the circumstances of the individual case, and, if applicable, on customary trade practices.

What special considerations apply to international contracts in relation to applicable law and jurisdiction?

International contracts are often faced with the problem of differing legal systems. The parties generally have the possibility to expressly determine the law applicable to the contract (choice of law, Art. 3 Rome I Regulation within the EU). In the absence of such regulation, the law most closely connected to the contract applies according to objective criteria (Art. 4 Rome I Regulation). The place of jurisdiction may be determined by a jurisdiction agreement, specifying which national court has jurisdiction in the event of a dispute (Art. 25 Brussels I Regulation (recast)). If no agreement is reached, statutory or international jurisdiction rules apply, such as under the Brussels Ia Regulation for EU states. In international legal transactions, mandatory consumer protection provisions as well as the recognition and enforcement of foreign judgments must be observed in particular. In case of uncertainty, legal advice is always recommended to minimize risks associated with cross-border contract execution.