.

E-Book Series 2

Andrs Petz

Contracts and parties

Agency-type contracts
Contracts for building construction
Contracts for services
Contracts for various leases

Intro | Theory

Table of Contents
CONTRACTS AND PARTIES 3
Contracts involving property transactions 3
Contracts for sale 3
Sales Contract 3
Supply Contract 3
Escrow Contract 3
Lease Contract 3
Contracts for work and services 3
Works Contracts 4
Contracts for services 4
Agency contracts 4
Employment related documents 4
Employment Contract 4
Collective bargaining agreement 4
Job description 5
Documents related to lending transactions
5
Loan Agreement 5
Credit Agreement 5
Mortgage Contract 5
Security Agreement 5
PARTIES TO CONTRACTS 6
Exercise 1 7
Exercise 2 7
Exercise 3 8
Exercise 4 9
Exercise 5 9
Exercise 6 10
Exercise 7 10
Exercise 8 11
Key to exercise 12

2 | The civil law tradition

Theory | Intro

Contracts and Parties 2.

Agency-type contracts

Agency is a basic legal concept whereby the agent represents the principal in
various relations. Though it is originally between principal and agent, the concept
is applied in various legal arrangements between parties, where one acts in advancement of the interest of the other.

Agency contract

This is the basic legal document used generally for situations where the agent is
authorised and instructed to directly affect the legal position of the principal in
relation to a third party, typically by concluding a contract between the principal
and the third party.

Franchise Contract

A contract under which one party (the franchisor) grants the other party (the franchisee), in exchange for a consideration, the right to conduct a business (franchise business) within the franchisors network for the purposes of supplying certain products on the franchisees behalf and in the franchisees name, and under
which the franchisee has the right and the obligation to use the franchisors trade
name or trademark or other intellectual property rights, know-how and business
method along with business experience.

Distribution Contract

A contract under which one party, the supplier, agrees to supply the other party,
the distributor, with products on a continuing basis, and the distributor agrees
to purchase them, or to take and pay for them, and to supply them to others in
the distributors name and on the distributors behalf. The distribution contract
regulates the conditions of such supply.

Dealership Contract

A contract under which one party, generally called dealer, agrees to act on a
continuing basis as a self-employed intermediary to negotiate or to conclude
contracts on behalf of another party, the principal, and the principal agrees to remunerate the dealer for those activities. The dealer in this respect is a commercial
agent, who acts as an intermediary between the producer/manufacturer (that is
the principal) and the individual buyer.

Consignment Contract

Consignment is a combination of a type of agency and sales contract, whereby

the consignor delivers certain goods or products to the agent, and the agent
agrees to sell them. The consignor usually pays commission to the agent for the
services rendered under the consignment contract. The unsold goods or products will be returned by the agent to the consignor. The consignment contract is
also called a contract for sale or return.

The civil law tradition | 3

Intro | Theory
Contracts for building construction
Construction contract

Construction contract is the most general title of a contract for performing building construction activity. As the construction works will result in a building or other
structure that people will live in or otherwise use on a permanent basis, in most
countries this activity is heavily regulated by the law. Non-compliance with such
requirements may result in the withdrawal of the licences to perform building
construction activity.

Turnkey contract

A contract for home building which provides for a degree of readiness that the
client is able to move in. The building process is completely in the hands of one
contractor, who is responsible for the entire process. The building so erected is
ready to be used from the moment of delivery. It can be used for projects ranging
from single buildings to large-scale developments.

Cost-plus Contract

An arrangement under which the contractor is paid for the actual cost of materials and labour, plus a fee covering the costs of the contractor and the profit. Such
fee can be calculated either as a lump sum or percentage of the total costs. This
arrangement allows a much higher degree of flexibility in contrast to a lump sum
contract.

Unit price Contract

A contract in which the contractor charges a fixed sum for each completed unit
of work. This type of construction contract can be used when the requirements
of the client for the services are known but the volume is not clearly defined at
the time of making a contract. The unit price contract guarantees that the price
of labour and materials can be precisely budgeted and will not be subject to
fluctuation. A unit price contract is also referred to as fixed price contract.

Design/Build Contract

A type of construction contract in which the design and construction services are
contracted by a single entity called designbuild contractor. In fact, it is a combination of a construction contract and a design contract. It is often used to vest
all responsibility in one entity in order to minimize risks for the client. The control
over the entire process of design and construction will result in less problems
arising therefrom.

Lump Sum Contract

It is a type of contract whereby the contractor carries out work for a stated
amount of money. In this case the contractor bears all risks arising from the construction. In exchange for a higher level of responsibility, the contractor usually
receives a higher contract sum. Additional works may be ordered by the client,
where the extra costs will be added to the contract sum. The costs of the work
which were not originally planned but required for the implementation of the
work will be born by the contractor.

4 | The civil law tradition

Theory | Intro
Contracts for building construction
Independent contracting agreement

A basic document used in various industries for situations where a contractor

agrees to perform some work ordered by the client. The work may range from
construction and repair to more sophisticated activities. The nature of this contract
focuses on the independent status of the contractor, namely that the contractor
will under no circumstances be considered a partner or employee of the client.

Main contract

A contract concluded between a contracting entity and a client, usually following

the award of a tender, for the completion of a project. The main contractor is
often a reputable and financially strong company with good references. However,
these contractors often lack the capacity to implement all the projects undertaken in tender processes. In this case, the main contractor often involves a general contractor with overall responsibility for the implementation of a construction
project.

General contract

A general contract may be used in complex construction projects, where a

contract has been awarded to a company or group of companies forming a
so called consortium, and the organization of the activities are assigned to a
company specialised in such activity. Do not confuse this contract with the legal document referred to as "general conditions", which set forth the condition
generally applicable provided that no deviations are specifically agreed in the
special conditions.

Subcontract

A contract made between the contractor and the subcontractor, under

which the subcontractor will be assigned certain activities that the main contractor or the subcontractor wishes to outsource. Subcontractors are often
specialists of a certain field in which they are capable of providing services
at a high quality. Subcontractors are engaged by several main or general
contractors.

Project management contract

A contract between a client and a service provider to determine the conditions

of the services rendered in different phases of a construction or design project. It
specifies the scope of services and the compensation therefore. It is useful when
the client needs to involve an independent project management for development
and construction. Entities in the public or private sector with limited capacity to
coordinate large scale projects often enter into project management agreements
to ensure appropriate control over the construction process.

Build to suit contract

A contract between the owner and the contractor, where the owner specifies
unusual or unique features. It is usually used for commercial purposes, where
the specific requirements of the future tenants are of key importance. The owner
complies with those requirements, and the tenant will then lease the property for
a certain period of time. It is used in situations where the tenant does not wish to
own the property for tax or accounting purposes.

The civil law tradition | 5

Intro | Theory

Contracts for services

For the purposes of this category, any type of service can be the subject of a contract. It includes services to act in a certain way and to bring about a result. The
number of possible variation of contracts for services are infinite. The list below is
merely an attempt to collect the contract types that lawyers will most frequently
encounter in their practice.

Contract for accounting services

A contract under which an accountant provides accounting services to a client.

The accountant performs the bookkeeping activities, including the recording of
financial transactions, preparing the sub-ledgers and the general ledger, and
compiling documents related to the annual report, including the balance sheet
and the profit and loss statement. The contract regulates the most important conditions, including the scope, liability and compensation.

Contract for providing internet content

A contract in which the provider creates various types of internet content to be

used on the websites and other electronic materials of the client for a one time or
regular fee. The scope of the services may be either a one time development of a
website content or the provision of content on a regular basis to secure a stable
advantage to the client in terms of search engine optimization, too.

Contract for market research services

A contract between a client and a researcher whereby the latter conducts complex market analysis in subjects specified by the client for a mutually agreed fee..
The exact content of the market research may vary from simply gathering information about a subject to a complex research work aimed at, for example, launching
a new product into the market.

Contract for creative services

A contract in which a creative person or agency provides assistance in creating

a new design, product or type of service. The creative work may be performed
manually, as it was the practice for many years, or on an electronic platform, which
is becoming the generally accepted method of performing this type of services.
The term "creative" in this context often refers to the person who performs the
creative services.

Contract for advertisement services

A contract between an advertising agency or media and a client promoting its

goods or services by advertising through the printed or electronic media. The
contract must specify the expectations of the client which is often presented in
the form of a brief.

Contract for the sale of advertising space

A contract in which the client buys advertising space in electronic or printed media either directly from it or indirectly from an agency. The contract specifies the
price which is often based on the list price and a discount expressed in percentage. The exact method of submitting the advertisement must clearly be specified,
as well as the means of eventual modification thereof. Liability for the content and
any intellectual property right issues should be clearly regulated in the contract.

6 | The civil law tradition

Theory | Intro

Contract for PR services

A contract between a PR service provider and a client, regulating the scope

of the public relation services, which may range from simply organizing a press
conference to performing more complex activities such as rolling out a communication campaign or performing all communication activities of a company.

Contract for database management services

A contract which regulates the conditions of various activities related to managing a database owned by the client. The contract determines the exact scope of
the services. Special focus is paid on the provisions related to data protection, as
well as issues pertaining to data security and the liability for the eventual errors of
database management.

Contract for consulting services

Also called consultancy agreement, it is an agreement between the client and the
consultant or expert to provide professional consulting services. Consultancy
services are used in many different situations where some type of special knowledge or expertise is to be involved in a process. On the one hand, the engagement of a consultant may help the client avoid pitfalls that inexperienced clients
would likely fall into. Additionally, the expert advice of the consultant is likely to
reduce costs. The consultancy agreement regulates the scope of such services in
detail, as well as the liability for the consequences of inapt advice.

Contract for training services

A contract between a training service provider and a client regulating the conditions of the training programme, including the duration and the schedule, the
exact programme, the tuition fee and other issues, like methodology, level of difficulty, exact description of the qualification that may be obtained after the successful completion of the training programme.

Contract for translation services

A contract made between a client and a provider for providing translation services into a foreign language. The contract regulates the translation process of delivering the source and the target material, the quality assurance process aimed
at maintaining consistently high quality, the various types of translations and the
fees in function of the completion deadline.

Contract for call centre services

A contract under which the service provider operates a call centre to manage
customer service calls. The contract determines level of services to be provided
based on certain parameters, as well as the various other aspects of the work, like
the provisions for bearing various costs and liability for eventual failures.

Contract for IT services

A contract for providing various types of services in the field of information technology. Since IT is a relatively new field, the contract is formulated not only by legal requirements but also the generally accepted practices of the field. Contracts
for IT services focus a lot on the exact scope of the services, as well as handling
issues related to intellectual property rights. Sometimes a framework contract is
concluded and the individual orders are placed in a statement of work.

The civil law tradition | 7

Intro | Theory
Contracts for various leases
Operating lease

Operating lease is the traditional lease arrangement, whereby the lessor has no
other right than to use the property in question for a certain term in exchange
for the payment of rent. The term "operating lease" is often used to differentiate
this from a "financial lease" arrangement, which is basically used for financing the
purchase of assets.

Financial lease

A lease arrangement used for financing the purchase of assets. This arrangement
sometimes involves three parties, whereby the funds are provided by an additional party referred to as financing party, which is typically a bank or other credit institution. The financing party provides the fund for purchasing the property, which
is usually owned by the lessor. The property is used by the lessee, while the title
of ownership to the property is retained by the lessor, or, if no lessor is involved in
the transaction, by the financing party.

Property lease contract

A lease contract typically concluded between landlord and tenant for obtaining
the use of real property in exchange for regular payments called rent. Since this
is often a means of ensuring the habitation of people, many jurisdictions require
that property lease contracts, as well as leases in excess of a certain sum, be in
writing.

Equipment lease

A lease agreement between the lessor and the lessee, in which lessee may use
certain fixed assets for a sum payable at regular intervals. The items to be leased
may range from computers through office equipment to production machinery.
The additional advantage of equipment lease is that the cost can be accounted
every month instead of depreciating fixed assets over the lifetime of the assets.

Manpower lease

The temporary placement of manpower from a company specialised in such services to another in case of the temporary shortage of human resources. The advantage from a company's perspective is that it does not have to employ a large
number of employees, but may use the services of persons not on the payroll,
with much more flexibility.

Synthetic lease

A financing arrangement under which the assets in question are purchased by a

financing party and then leased to the lessee under operating lease. As a result
of the synthetic lease, a company will not have the assets in its balance sheet but
will still have control over them.

Car lease

The legal term for a car rental provided by agencies specialized in this type of
activity. It is a typical lease for personal property, usually based on a simplified
contract reduced to a form to comply with the benefit of convenience.

8 | The civil law tradition

Terminology | Intro
EXERCISE I.
Determine which contract they are parties to.

EXERCISE II.
Determine which contract they are parties to.

1. principal & agent

1. principal &. distributor

a.
b.
c.
d.

agreement in principle
principal agreement
agency agreement
contract to sell

a.
b.
c.
d.

2.
a.
b.
c.
d.

client & builder

dealership agreement
turnkey contract
franchise contract
financial lease

2. client & consultant

a. build to suit contract
b. design/build contract
c. consulting agreement
d. franchise agreeement

3.
a.
b.
c.
d.

lessor & lessee

operating lease
build to suit
contract for accounting services
main contract

3. client & selected contractor

a. main contract
b. subcontract
c. sublease
d. financial lease

4.
a.
b.
c.
d.

client & main contractor

project management contract
lump sum contract
consignment contract
agency contract

4. client & dealer

a. consignment contract
b. contract for services
c. dealership agreement
d. lump sum contract

5.
a.
b.
c.
d.

provider & client

distribution contract
contract for translation services
property lease contract
subcontract

5. client & placement agency

a. synthetic lease
b. manpower lease
c. operating lease
d. financial lease

distribution contract
franchise contract
project management contract
contracting agreement

6. lessor & lessee

a. property lease contract
b. property sales contract
c. distribution contract
d. consignment contract

6. client & contractor

a. services agreement
b. project management contract
c. consultation agreement
d. construction agreement

7. provider & client

a. contract for the sale of advertising space
b. sales contract
c. distribution contract
d. consignment contract

7. lessee & financing party

a. financial lease
b. operating lease
c. manpower lease
d. car lease

8. consignor & agent

a. contract for services
b. turnkey contract
c. consignment contract
d. subcontract

8. producer & reseller

a. distribution contract
b. consultation contract
c. construction contract
d. building contract

The civil law tradition | 9

Intro | Terminology
EXERCISE III.
Choose the counterparty of the following parties.
Please note that you have TWO correct choices.

EXERCISE IV.
Find the synonym of the following terms.
In this exercise you only have ONE choice.

1. client

1. consultation

a. buyer
b. provider
c. lessee
d. consultant

a. consultancy
b. consolation
c. consulency
d. consummation

2. contractor
a. client
b. provider
c. agent
d. owner

2. dealership
a. commercial agency
b. drug services
c. manpower lease
d. build to suit

3. subcontractor
a. main contractor
b. owner
c. general contractor
d. client

3. construction
a. building
b. project management
c. consulting
d. disposal

4. principal
a. agent
b. consignee
c. buyer
d. owner

4. accounting
a. bookkeeping
b. charging
c. registration
d. auditing

5. lessee
a. financing party
b. tenant
c. buyer
d. lessor

5. lump sum
a. unit price
b. variable rate
c. ballon payment
d. fixed price

6. client
a. buyer
b. specialist
c. contractor
d. accountant

6. consignment
a. contract to make a will
b. contract to sell
c. contract for sale
d. contract for sale or return

7. supplier
a. lessee
b. distributor
c. buyer
d. franchisor

7. Independent contractor's agreement

a. general contract
b. contracting agreemeent
c. manpower lease
d. subcontract

8. agent
a. principal
b. provider
c. consignor
d. seller

8. distribution
a. reselling
b. franchise
c. consultation
d. consignment

10 | The civil law tradition

Terminology | Intro
EXERCISE V.
Is it true that the following contracts are the same?

EXERCISE VI.
What do the following definitions stand for?

1. consignment contract - contract for sale or return

1. A contract concluded between a contracting entity and a client, usually following the award of a
tender, for the completion of a project.

a. True
b. False
2. financial lease - operating lease
a. True
b. False
3. independent contractor's agreement - contracting agreement
a. True
b. False
4. lump sum contract - fixed price contract
a. True
b. False
5. general contract - general conditions
a. True
b. False
6. distribution contract - reselling agreement
a. True
b. False

a.
b.
c.
d.

subcontract
main contract
agency contract
consignment contract

2. A contract for home building which provides for

a degree of readiness that the client is able to move
in immediately after completion
a. turnkey contract
b. project management contract
c. consultation contract
d. subcontract
3.A contract under which the principal delivers certain goods or products to the agent, and the agent
agrees to sell them.
a. contract to sell
b. consulting contract
c. consignment contract
d. franchise contract
4. A lease contract typically concluded between
landlord and tenant for obtaining the use of real
property in exchange for the rent.
a. property sales contract
b. consignment contract
c. property lease contract
d. contract to sell

7. construction contract - building contract

a. True
b. False
8. unit price contract - cost-plus contract
a. True
b. False
9. subcontract - subcontracting agreement
a. True
b. False
10. design/build Contract - build to suit contract

5. A type of construction contract whereby the contractor charges a fixed sum for each completed unit
of work ordered by the client
a. unit price contract
b. project management contract
c. subcontract
d. general contract
6. A contract under which one party grants the other party in exchange for a consideration, the right
to conduct a business within the others network.
a. contracting agreement
b. franchise contract
c. consuling agreement
d. agency contract

a. True
b. False

The civil law tradition | 11

Intro | Terminology
KEY TO EXERCISES

We hope you have found our e-book useful and

managed to improve your knowledge of the
different contract types and the parties thereto.

If you would like to learn more, but you are

too busy to attend classroom trainings, our
E-LEARNING COURSE on the terminology of
contracts for sale and work might just be perfect for you.

EXCERCISE I.
1 c, 2 b,3 a, 4 b, 5 b, 6 a, 7 a, 8 c

EXCERCISE II.
1 a, 2 c, 3 a, 4 c, 5 b, 6 d, 7 a, 8 a

EXCERCISE III.
1 b,d
2 a,d
3 a,c
4 a,b
5 a,d
6 c,d
7 b,c
8 a,c

EXCERCISE IV.
1a
2a
3a
4a
5d
6d
7b
8a

EXCERCISE V.
1. True
2. False
3. True
4. True
5. False
6. True
7. True
8. False
9. True
10. False

Exercise VI.
1. b
2. a
3. c
4. c
5. a
6. b

12 | The civil law tradition

If you would like to take your knowledge to an

advanced level, order our book on the "Terminology of Civil Law" and learn everything there
is to know about legal terminology. Click HERE
to place your order now!