206 the enforceabilit y of promises

interpretation to be justified, however, there would have to be indications that the contract was based on the assumption that Motor Works buys steel only for its own production. Absent such indications, the contract would be interpreted according to its wording which does not limit the amount of steel Motor Works may order.

Case 8(c) can be analysed in the same way. According to its wording, the contract does not provide for a minimum amount of steel Motor Works has to order. It therefore would be necessary to find circumstances outside the contract which could indicate an intention of the parties that Motor Works should buy a certain minimum of steel. Absent such indications, the contract again would be interpreted according to its terms which do not provide for such a minimum.

germany

If the parties agree upon a fixed price, the debtor bears the risk that prices will rise.43 In our case the very purpose of the contract was probably that Motor Works did not want to bear that risk itself. Therefore, in Case 8(a), the promise is binding.

In Case 8(b), if Motor Works wants to use the steel for its own production, the promise is binding unless the contract is interpreted to mean that the usual amount should be the limit. But very specific circumstances would be necessary to support such an interpretation. If Motor Works wants to resell the additional steel, their right to do so again depends on how the contract is interpreted: should the promise be binding only for Motor Works’ own needs or also for additional amounts which can be used for resale? All the circumstances, including the price and the previous negotiations, would be relevant to this question. Previous contracts between the parties could also give hints.

Questions of interpretation aside, however, there are limits to what terms the contract can contain and how Motor Works can exercise its rights under the contract. It would be a violation of good faith (§ 242 of the Civil Code) for the contract to place Alloy at Motor Works’ mercy or for Motor Works to abuse its position excessively. For there to be a violation of good faith in our case, however, the circumstances would have to be exceptional. Alloy consented to the contract, and it is even possible that Alloy demanded a higher price for its consent to the provisions in question. Nevertheless, the limits of good faith may have been reached here.

43 BGH WM 1979, 582.

The price is 20 per cent higher, the quantity ordered is double the usual one, and the excess amount is ordered for resale. A court would be especially likely to find a violation of good faith if the result of the deal would cause serious problems for Alloy. Again, however, the outcome here depends upon all the circumstances.

In Case 8(c), Motor Works is entitled to buy its steel wherever it wants as long as the contract is not interpreted to require it to deal with Alloy exclusively. If it were, then Motor Works would have to buy Alloy’s steel but even then Alloy could not claim it had to buy a certain amount. In the absence of any indications otherwise, the contract would be interpreted as not exclusive simply because that is more usual. Motor Works would not have to buy Alloy’s steel.

greece

In this case the parties concluded a sales agreement without specifying the amount of steel that Motor Works will order. The problem that arises here is that the performance is undetermined, and its determination is left to the sole judgment of Motor Works. The performance must be determined or at least determinable by the time of performance.44 If the performance cannot be determined by interpreting the declaration of will of the parties (art. 200 of the Civil Code), then arts. 371–3 of the Civil Code apply. Article 371 of the Civil Code provides that: ‘If the determination of a performance has been entrusted to one of the contracting parties or to a third party it is in case of doubt considered that the determination must be made by reference to equitable criteria. If the determination was not based on equitable criteria or has been delayed it shall be made by the Court.’ And art. 372 of the Civil Code provides that: ‘A contract whereby the determination of a performance has been left to the absolute discretion of one of the contracting parties shall be void.’

In principle, a contract is void if the failure to determine the performance interferes excessively with the liberty of one of the parties or exceeds the limits set by good faith (art. 288 of the Civil Code). Otherwise, art. 371 of the Civil Code applies, which means that the performance should be determined by ‘fair’ judgment. The criteria for a ‘fair’ judgment will be based on arts. 200, 288 (good faith), and 281 (morality) of the Civil Code.45

A further question is whether the parties will still be bound by their

bound by their original agreement, and Alloy would not be able to demand a higher price.

In Case 8(b), the performance is not determined according to equitable criteria. Twice the amount of steel that Motor Works usually needs is too much. The quantity demanded must therefore be reduced to accord with good faith and morality. Moreover, Case 8(b) meets the requirement of art. 388 of the Civil Code of the material disturbance of performance and counter-performance.51 Therefore, Alloy can ask the court for an amount of money that is reasonable and corresponds to the increase in the market price.

In Case 8(c), Motor Works does not perform the contract, thus art. 388 of the Civil Code does not apply. This issue will be judged according to the general principles that govern non-performance. Thus, Alloy can invoke its rights under arts. 382 and 380 of the Civil Code.

scotland

It is submitted that the promise is non-gratuitous and does not therefore require to be constituted in a written document subscribed by Alloy. Even if writing were required, as Alloy clearly made the promise in the course of their business, Motor Works may be able to take advantage of the exception contained in s. 1(2)(a)(ii) of the Requirements of Writing (Scotland) Act 1995.52 Any fluctuations in the market price and in the amount of steel ordered are prima facie irrelevant in Scots law. It could perhaps be argued that the promise is not valid due to lack of certainty. However, such an argument was dismissed in the case of Dempster (R and J) Ltd v. Motherwell Bridge and Engineering Co.53 in which the Lord President (Clyde) noted that ‘when a court of law is asked to construe a commercial arrangement couched in terms which are prima facie obligatory . . . the courts will prefer a construction which gives the contract binding effect’. This case is directly in point in the present problem.

In Case 8(a), it is thought that as a matter of construction, Alloy is bound to deliver the same amount of steel to Motor Works as it usually needs: Alloy undertook the risk of the rise in the market price.

In Case 8(b), in ordering twice the amount it usually needs, Motor Works is clearly taking advantage of Alloy’s ‘bad’ bargain. As a matter of

51The basic principle of the Greek Civil Code, namely the binding nature of contracts (pacta sunt servanda) justifies the refusal of the courts to apply art. 388 so as to alter the

terms originally agreed in a contract unless there is a material disturbance of the balance between performance and counter-performance. Papanikolaou, ‘The Measure of the Harshness’, 483. 52 See Case 1. 53 [1964] SC 308 at 327–8.