Chapter 4: LAW OF CONTRACTS

I. Definition

A contract is an "agreement by which one or more persons bind

themselves in favor of one or more persons to give, to do or not to do
something".(‫)القيام بعمل واإلمتناع عن عمل ما‬

It follows from the terms of this definition that a contract is a

legally binding agreement between two or more persons which creates
rights and obligations for them. These contracts have several
characteristics.

1. Legally Binding Agreement (‫)إلزامّية العقد‬

A contract is not an engagement purely based on the moral sense

of the obligor, like a "gentleman's agreement". It is legally binding for
the parties, and enforceable by public authorities.

That's why a valid contract, following the general rules of the

states, benefits from the support of its legal enforcement system; it
becomes able to the basis of a judicial decision and then of an
enforcement by public authorities. Therefore, if the debtor (‫ )مدين‬in a
contract refuses to execute willingly its obligations, the creditor (‫)الدائن‬
may ask the authorities of the state (judge and enforcement authorities)
to force the debtor to execute.
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 A contract is a personal norm, only binding for the persons who
consented to it (‫( )وافق عليه‬principal of relativity of contracts-‫مبدأ نسبية‬
‫)العقود‬, while a general rule is binding for a category of persons; that's
why we say that the contract is the law of the parties ‫)العقد شريعة المتعاقدين‬.
Nevertheless, the legal effect of a contract is not only based on the
consent of the parties, but also on the general rule which recognizes it.

2. Obligations (‫ )الموجبات‬and Rights (‫)الحقوق‬

An obligation (which can be positive or negative) is defined as a

bond of legal necessity which binds together two or more persons. It is
what a person has promised to perform in a contract concluded with
another party (ex, paying the price, delivering goods, guaranteeing
someone…)

3. Intention to be bound (‫)نّية التعاقد‬

The intention of the contract to be bound is essential for the

existence of the contract: when a person concludes a contract with
another person, they are, both, supposed to want to be bound by it.
Contracts are not necessary written, but writings are a good proof for the
intention to be bound.

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4. Meeting of Minds (‫)تالقي اإلرادات‬

The meeting of minds between the parties, upon the same object,
and the same nature of the contractual relationship is very important.

The meeting of minds supposes that the essential characteristics of

the contract are accepted by both parties. They must not speak about two
different objects (different cars, or a motorcycle…) or two different
kinds of contracts (sales, lease, donation….)

5. Contractual Freedom (‫)حرّية التعاقد‬

The principle in most of the countries is that persons are free to

contract as they want; they can conclude the contract that they want with
the persons that they want (article 166 of the Lebanese Code of
Obligations and Contracts). But when a person signs a contract, he is
bound by it and must execute it.

II. Types of Contracts

A. Express (‫ )صريح سواء خطي أو شفهي‬and Implied Contracts (

‫)ضمني‬

The express contract is the one formed by language (oral or

written). The implied contract is the one formed by manifestations of
assent, other than oral or written language (when somebody uses public
transportation such as buses). It is formed by a way of behavior.
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B. Unilateral (‫ )غير متبادل‬and Bilateral Contracts (‫)متبادل‬

Unilateral contracts are those where only one party at the contract
is obliged towards the other parties, with no reciprocity, in a way that
one of the parties is only a creditor and the others are only debtors
(contract of guarantee, donation, etc.…)

Bilateral contracts are contracts where all parties to a contract are

obliged towards each other with reciprocity (ex. sale contract, where one
of the parties "the buyer" receives the object and pays the price, while
the other party "the seller" delivers the object and receives the price).

C. Simple (‫ )العقد العادي‬and Formal Contracts (‫مي أو‬cc‫العقد الرس‬

‫)الشكلي‬

Simple contracts are those in which the formation is not bound by

an external condition concerning the form or any particular act.

On the contrary, formal contracts are those in which the

formation depends upon the accomplishment of certain requirements
imposed by law, such as the ratification (‫ )مصادقة‬of a Notary Public (
‫( )الكاتب العدل‬ex, the contract for the establishment of a Joint Stock
Company, or real estate contracts).

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D. Collective (‫اعي‬cc‫د الجم‬cc‫ )العق‬and Individual Contracts (‫د‬cc‫العق‬
‫)الفردي‬

Individual contracts are those in which the consent of all the

parties is required for the conclusions of the contract, even though there
are a big number of persons, human or juristic (ex, companies who have
the form of the Unlimited Partnership)

Collective contracts are those in which the consent of the majority

overrides the consent of the minority (ex. collective labor contracts – ‫عقد‬
‫العمل الجماعي‬- and contracts concluded by the General Assembly of a Joint
Stock Company).

E. There are also some other types of contracts such as

nominated contracts (‫ )عقود مسّم اة‬and Non- Nominated contracts (‫غير‬
‫)مسّم اة‬.

III. Formation of Contracts

A contract is formed by an agreement between two or more parties,

and the said agreement must appear in their declarations. Thus every
contract must include three major elements which are consent (‫)الرضى‬,
object (‫)الموضوع‬, and cause (‫)السبب‬. Another major element, which is
special for a sales contract, is the price (‫)الثمن‬.

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A. The Consent (‫)الرضى‬

The process by which the parties reach the meeting of minds is

generally a negotiations, which either proceeds piece by piece, or
through an exchange of a global proposal (an offer) and an agreement of
the other party (an acceptance), which may also lead to the "piece by
piece" negotiation procedure.

The consent is formed between two or more persons or legal

entities, who are qualified to do it and who have their legal capacity.

a) Offer (‫ )العرض‬and Acceptance (‫)القبول‬

The Offer (the offeror:‫العارض‬, the offeree:‫)متلّقي العرض‬

The offer is a proposal to make a contract; it is an undertaking by

the offeror to be contractually bound in the event of a proper acceptance
being made by the offeree. An offer creates a power of acceptance in the
offeree and a corresponding liability on the part of the offeror.

The offer could be oral or written, expressed or implied. In all

circumstances, the offer must be definite, complete, and precise, not
vague (it should include the object of the proposed contract, the price
and all relevant details). It must be a final proposal that is to say with the
view of making acceptance. The offer must be communicated to the
offeree before it can be accepted.

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 The offer remains valid as long as it has not been rejected by the
offeree or withdrawn by the offeror. Such rejection should be expressed
clearly, otherwise it could be considered as a counteroffer.

The offer could be, sometimes, opened for a limited period of time
in such a case, the offeror, could not withdraw it before the end of the
specified period. At the end of the specified period, if the offeree has not
accepted it, the offer falls automatically and the offeror becomes free.

An offer should be distinguished from the “mere invitation to

negotiate” (‫( )عرض التفاوض‬for ex. an advertisement in the newspaper).

The Acceptance

Acceptance is a manifestation of assent (‫ )تعبير عن الموافقة‬according

to the terms of an offer, in the manner authorized in the offer. If the
offeree makes any changes to the terms of the offer, this will be
considered as a counter offer (‫)عرض مقابل‬.

In accordance, the acceptance must correspond in every detail

with the detail of the offer.

The acceptance is ineffective unless and until it is communicated

to the offeror. That's why, as a rule, silence does not constitute
acceptance. But there are cases in which silence may imply acceptance
and consent. These cases are found when there is similar relation
between the parties, especially in commercial activities (ex when an
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industrial delivers ink every week to a printing company), or when the
usages and the customs of the profession could imply such acceptance
(ex when a general distributor delivers merchandise to a supermarket
with an invoice to the director who takes it with no comment, or when
newspaper is delivered every day at the door of your house and an
invoice is sent to you at the end of the month).

Only the person to whom the offer is addressed could accept it.
The contract is complete as soon as the offeree declares his
acceptance to the offer.

b) Vices of Consent (‫)عيوب الرضى‬

Those are the factors which make the consent ill and weak. These
factors are: Mistake or Error, Fraud or Misrepresentation, Duress or
Violence, Lesion or Exploitation and Incapacity.

In such cases, the victim of the vice, and only the victim, could ask
the court to void (‫ )تبطل‬the contract. That's why we qualify contracts
which have some vices of consent as voidable (able to be void). The
nullity of such contracts is called relative nullity (‫)بطالن نسبي‬. Such
contracts may be annulled only by the judge, if the victim asks him
to do it.

It must be noticed that when the nullity of the contract is motivated

by the protection of one of the parties (in vices of consent), only the

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victim could ask the judge to void the contract. This nullity is called
relative nullity.

But when the nullity of the contract is motivated by the protection

of the society (ex when there is an illegal object or illegal cause),
anybody could ask the judge to void the contract. This nullity is called
absolute nullity (‫)بطالن مطلق‬.

Mistake (Error) ‫الغلط‬

The mistake could be related to the substance of the object ( ‫موضوع‬

‫)الشيء‬, when it is related to some qualities which the parties showed that
they regarded as essential (ex, when a person buys a ring thinking that it
is made from gold, but it turns out to be made from copper), or on the
identity of the person contracted with mistake (‫)صفة جوهرية في الشخص‬.
For example a contract with an artist to do an artistic work.

Yet for the mistake to be considered as vice of consent, it should

be essential for the consent of the victim in a way that without this
mistake or error, the other party would not have contracted.

Fraud ‫الخداع‬

Fraud is a conduct of the contracting party which provokes

intentionally the mistake to the other party. It could be a lie relative
to the object or to the identity of the person (like when a merchant paints
a piece of iron with a golden color and sells it as if it is a piece of gold).

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There must be some maneuver (‫ )مناورات خداعّية‬with the intention to
mislead the other person.

Duress ‫ الخوف‬-‫اإلكراه‬

The contract is void because of duress, if one of the parties has

contracted under founded fear which the other party would, illegally,
inspire to him (ex, when you point your gun to somebody, ordering him
to sign a contract). This fear is considered to be founded when the party,
who is pushed under these circumstances, to believe that a serious
danger is going to threaten him, or others in his life. It must be noted that
violence does not need to be executed immediately; a threat is enough to
do the job.

Lesion ‫ عدم التوازن بين الموجبات‬-‫الغبن‬

Lesion is disequilibrium between the obligations of the parties;

thus the obligations of one party are not equivalent with the advantages
which she/he has obtained from the contract, or with the obligations of
the other party.

Article 214 of the Code of Obligations and Contracts, differentiates

between the cases when the victim is a minor (‫ )الضحية قاصر‬and when he
is an adult (‫)راشد‬.

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 When the victim is a minor any differences between the real price
and the chosen price would render the contract voidable; she has the
right when she reaches 18, to ask the court to void the contract.

If the victim is an adult, three conditions are required to make a

contract voidable because of lesion.
1. The objective element (‫)العنصر المعنوي‬: there must be a major
disequilibrium between the obligations (price less than half of the
price of the market, or more than double of the price of the market)
2. The subjective element (‫)العنصر المادي‬: the weakness of the
contracting party due to inexperience (‫)عدم خبرة‬, stupidity (‫…)طيش‬
3. The exploitations of the weakness of the victim by the other party (
‫)إستغالل الضعف‬.

As a result of lesion, the victim could ask the judge either to

declare the contract void or to order the other contracting party to
pay the difference of the price.

Incapacity ‫عدم أهلّية‬

Each person who has reached the age of 18 is considered capable

to be obliged and to conclude legal acts, unless stipulated otherwise in a
text of law (ex. voting right in Lebanon).

Legal acts made by incapable persons whom are totally unable to

distinguish (persons below 16) are considered as inexistent. (‫)منعدم‬

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 Legal acts made by incapable persons, but whom are able to
distinguish (between 16 and 18), are simply voidable (if all formalities
requested in the contract are respected, nullity cannot be demanded
unless with the proof of the lesion). Nullity could only be evoked by the
incapable himself, by his legal representative or by his heirs.

There is incapacity also when the contracting party is insane (

‫)مجنون‬, prodigal (‫)معتوه‬, lunatic (‫)سفيه‬, or drunkard (‫)سّك ير‬.

B. The Object ‫موضوع العقد‬

We must differentiate here between the object of the contract and

the object of the obligation (‫)موضوع الموجب‬.

The object of the contract is the main purpose that the parties have
contracted for (to build a hotel, to buy a car…).

On the other hand, each obligation in the contract should have an

object, which is the performance required from the debtor in favor of the
creditor (ex in sale contract, the object of the obligation of the buyer is to
pay the price, while the object of the obligation of the seller is to transfer
the ownership and the possession of the object).

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 Specifications of the object (‫)مواصفات الموضوع‬:

a) The Object must exist (‫)موجود‬

The existence of the object supposes two things: the object must be
possible to perform (‫)قابل للتحقيق‬, and must be determined or able to be
determined (‫)محّد د أو قابل للتحديد‬.

For example selling a hotel that was burned before the contract.

If the object is inexistent, impossible or undetermined, then the

contract is void (‫ )باطل‬and inexistent (‫)غير موجود‬.

b) The Object must be Legal ‫قانوني‬

Illegal objects are the ones that are against ethics, laws, public
policy (‫( )النظام العام‬ex. contract concerning the sale of drugs, or killing,
kidnapping….). These contracts are void with absolute nullity.

It must be noted that you don't need a written rule for defining the
illegality of the objects; the judges may use flexible criteria for defining
them, such as public policy (when the essential interests of the society
may be harmed, the judge may estimate the intensity (‫ )قوة‬of the public
policy).

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C. The Cause ‫السبب‬

We must distinguish between the cause of the contract (‫)سبب العقد‬

and the cause of the obligation (‫)سبب الموجب‬.

The cause of the contract is the real reason for what the parties
have contracted (you buy a car for personal use……)

The cause of the obligation is the direct result wanted from the
contract (to receive the price of the car with respect to the seller-to
receive the car with respect to the buyer….)

In bilateral contracts, the cause of your obligation is the

performance of the obligation of the other party; or in fact, the cause of
the obligation of one party is the cause of the obligation of the other
party.

The cause of the contract and of the obligation must exist; even in
donation, the cause of the contract exists; it is the will to give or the
desire to be generous with somebody.

The cause of the contract should be legal, within the rules of the
law and the public policy. If the cause is illegal, the contract is void with
absolute nullity.

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D. The Price ‫الثمن في عقد البيع‬

The price is considered to be one of the major elements in the sales

contract; it is considered as the cause of the obligation of the seller and
the object of the obligation of the buyer.

The Lebanese law stipulates, in article 388 of the Code of

Commerce, that a sale contract cannot be concluded without a
determined or an able to be determined price (‫)قابل للتحديد‬.for ex. we set a
criterion such as the price of the market.

It should be noted also, that the price should be a sum of money (

‫)مبلغ من المال‬, otherwise the contract won't be qualified as a sales contract,
but as an exchange contract (‫ )عقد مقايضة‬or another type of non-
nominated contracts.

IV- Execution of Contracts ‫تنفيذ العقد‬

The legal value and the efficiency of contracts are ultimately based
on the rule which obliges citizens to respect the contract they agreed to
and which, in case of non-execution, allows the enforcement (‫)التنفيذ جبرًا‬
of the contracts in many ways.

That's why when one party does not perform its obligations; the
other party has three possibilities:

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1. He/she could ask the judge to resolve the contract with payment of
damages. (‫)تعويض عن عدم التنفيذ‬.
2. He/she could choose to refrain from executing her own obligation,
according to the principle which says that in bilateral contracts,
where one party does not perform its obligations, he/she cannot
enforce the other party to perform its obligations.
3. He/she could ask the judge to order the other party to perform its
obligations with the payment of damages. ( ‫تعويض عن التأخير في‬
‫)التنفيذ‬.
It must be noted that the execution of the contract cannot be
enforced due to the coming of a strong event (force majeure- ‫قوة‬
‫)قاهرة‬. In this case the debtor (‫ )المدين‬is discharged (‫ )يعفى‬from
execution.

V. Termination of Contracts ‫انتهاء العقد‬

A. The Normal Termination of Contracts

The termination could be done either by:

- The full performance of the obligations (ex. sale contract) –‫التنفيذ‬-
- the end of the fixed term of the contract (ex. employment
contract)-‫حلول األجل‬-

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B. The Special Termination of Contracts

This termination could be done either by voidance (‫)إبطال‬,

resolution (‫ )إلغاء‬or resiliation(‫)فسخ‬. It could be done also by an
agreement between both parties to end up their contracts or to replace it
with a new one.

1. The voidance of the Contract ‫اإلبطال‬

Voiding a contract is always determined by an original vice

incoming with the birth of the contract (ex. vice of consent) ( ‫عيب أصاب‬
‫)العقد عند إنشائه‬. The voidance is covered by the principle of relative
nullity; unless the damaged party accepted it (this acceptance is called
affirmation) –‫التأييد‬-.

It must be also noted that voidance could only be pronounced by

the court. It has a retroactive effect (‫)مفعول رجعي‬.

2. Resolution of the Contract ‫إلغاء العقد لعدم التنفيذ‬

Resolution is dissolution of a contract because of events occurring

after the formation of the contract ( ‫هنا العقد نشأ صحيحًا لكن العيب أصابه فيما‬
‫)بعد‬. Resolution has a retro-active effect; it erases the contract from the
beginning and then should be returned, as they were before the
conclusion of the contract. It must be noted that the resolution of the
contract occurs without the decision of the court, but it must be

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announced by the court in the case of the non-execution of all or some of
the obligations.

3. Resiliation of the Contract ‫فسخ العقد‬

Resiliation of the contract is the dissolution of the contract for the

future; it has no retroactive effect. This resiliation happens with the
consent of all the parties, except in lease (‫)عقد اإليجار‬, mandate (‫)عقد الوكالة‬,
and partnership contracts (‫)عقد الشركة‬.

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